B.

CATEGORIES OF JURISDICTION

1. Definition

2. Jurisdiction Over the Person

a. Service of summons as requirement of procedural due process

b. Jurisdictional issues under conflicts of law cases as a question of due process
c. Governing law – lex fori - law of the forum;
d. Foreign corporations

cf. Doing business Rules on service of summons on foreign corporations

See : Sec. 123, 127, 128 and 133, Corporation Code of the Philippines;

See : Rule 1, Sec. 1 (f) of the Implementing Rules and Regulations of the Foreign
Investments Act see :

Sec. 12, Rule 14, Rules of Court; see :

A.M. No. 11-3-6 (New Rules on Service of Summons on Foreign Juridical Entities)

G.R. No. 107314 September 17, 1998

PATRICIA S. VILLAREAL, for herself and as guardian of her minor children, CLAIRE HOPE
and TRICIA, both surnamed VILLAREAL, petitioners,
vs.
THE COURT OF APPEALS, ELISEO SEVILLA, and ERNA SEVILLA, respondents.

MENDOZA, J.:

Petitioners seek a review of the decision,1 dated December 23, 1991, of the Court of Appeals
nullifying the decision and orders of the Regional Trial Court in Civil Case No. 16194 and remanding
the said case to the court a quo for further proceedings as well as the resolution of the Court of
Appeals denying reconsideration of its decision.

The complaint in this case was filed by petitioner Patricia Villareal to recover damages in the total
amount of P1,944,000.00 from private respondents Eliseo and Erna Sevilla and certain John Does
for the killing on June 6, 1986 of petitioner's husband Jose Villareal. The complaint, docketed as Civil
Case No. 16194, was filed with the Regional Trial Court of Makati, Metro Manila. It was found that
prior to the filing of the complaint on March 2, 1987, the Sevillas had abruptly left the country (at
least two months after the murder) and had started disposing of their properties in the Philippines. 2

On March 11, 1987, after a hearing, during which witness Deborah Alamares gave private
respondents' address in the United States as allegedly divulged to her by private respondent Erna
Sevilla herself,3 the trial court ordered the Sevillas' properties in the Philippines attached,4 upon the
posting of a bond in the amount of P500,000.00. Pursuant to this, Deputy Sheriff Eulalio C. Juanson
attached private respondents' personal and real properties on March 17, 18, and 19, 1987. 5

On July 21, 1987, petitioners filed a Motion for Leave for Extraterritorial Service pursuant to Rule 14,
§ 17 alleging that private respondents were non-residents. The judge granted the motion6 and
authorized the service of summons by registered mail at private respondents' address in California,
U.S.A. This mail was received on August 17, 1987 by a certain "D. Pyle," whose signature appears
on the registry return card. 7

Petitioners then moved to declare private respondents in default for failure to answer
notwithstanding service of summons. However, petitioners' motion was denied8 on October 12, 1987
by the judge for the reason that "perhaps the address given by the plaintiff (petitioners herein) is not
the correct address of the defendants (private respondents herein) or that they have already moved
out.

On October 13, 1987, the trial court motu proprio set aside its order of March 11, 19879 on the
ground that the attachment of property was improper because petitioners' claims were unliquidated.
Accordingly, all properties garnished and attached pursuant to the writ of attachment were ordered
released. Petitioners moved for reconsideration of the court's order. On December 21, 1987, the trial
court modified its order 10 by allowing attachment in the amount of P30,000.00 to answer for actual
damages for the death of Jose Villareal. The amount represents the value of human life as then fixed
by this Court.

On August 39, 1988, petitioners filed a Motion for Leave to Serve Summons by Publication which
was granted by the trial court in an order dated August 31, 1988. 11

Accordingly, copies of the order, summons, complaint, and the affidavit of merit were published in
the Manila Times on November 29, December 6, and 13, 1988. 12 In addition, copies of the aforesaid
order, summons, complaint, and affidavit of merit were sent by registered mail to the last known
address of private respondents in the United States. 13 On January 17, 1989, the mail matter were
returned to the Branch Clerk of Court with a notation which said "Moved, left no address." 14

Meanwhile, at the instance of petitioner Patricia Villareal, an Information 15 charging private

respondents with murder was filed on October 10, 1988 with the Regional Trial Court of Makati,
where it was docketed as Criminal Case No. 555.

On March 7, 1989, petitioners filed a Motion to Declare Defendants in Default for failure to file their
Answer within the 60-day period counted from the last day of publication. Private respondents were
declared in default on April 11, 1989, and petitioners were then allowed to present evidence
ex-parte. 16

After presenting their evidence, petitioners amended their complaint to make it conform to the
evidence. 17 On the supposition that they had proven damages in a much bigger amount than that
prayed for in the original complaint, they increased the amount of damages prayed for to
P13,082,888.00 plus 50% of this amount as attorney's fees. In addition, Patricia Villareal's children
were included as plaintiffs.

On August 29, 1989, the trial court admitted the Amended Complaint and granted petitioners' Motion
for Extra-territorial Service of Summons. 18 Accordingly, summons were published once a week 19 for
three consecutive weeks in the newspaper Abante. Copies of the Amended Complaint, the
summons, and the order were sent by registered mail to the last known addresses of private
respondents at Parañaque, Metro Manila and the United States. However, the summons and the
accompanying papers mailed were returned to the court with the notation "MOVED" for the letter
addressed to the Parañaque residence, and "REFUSED TO RECEIVE" for the letter addressed to
the United States residence. 20

On December 27, 1989, Attorney Teresita Marbibi filed a formal request in court seeking
photocopies of all the pleadings and orders pertinent to the case, including the summons and the
Amended Complaint. 21 In her letter, she stated that she was making the request "for the purpose of
protecting the interest of the defendants whose sister contracted our services." 22

On January 24, 1990, upon motion of the petitioners, the trial court declared the private respondents
in default for the second time 23 for having failed to file their Answer to the Amended Complaint within
60 days after publication of the summons. It also declared the case submitted for decision, upon
being informed by the petitioners that the very same evidence earlier presented would be
reproduced and adopted in support of the Amended Complaint. 24

On February 7, 1990, counsel for private respondents. Teresita Marbibi, filed a Notice of
Appearance 25 on their behalf.

On February 14, 1990, again through counsel, private respondents filed a verified Motion to Lift
Order of Default with Motion for Reconsideration 26 claiming that they were totally unaware of the
existence of the case at bar; that their inability to come forth promptly with responsive pleading was
due to accident, mistake, or excusable neglect; and, that the allegation of petitioners that they were
the killers of Jose Villareal was not true. Petitioners filed an Opposition to the Motion, to which
private respondents filed a Reply.

On March 27, 1990, the trial court issued an order 27 denying the Motion to Lift Order of Default with
Motion for Reconsideration, on the ground that private respondents herein failed to comply with the
requirements of Rule 18, §3.

On April 2, 1990, the trial court rendered a decision 28 finding private respondents liable for the killing
of Jose Villareal and ordering them jointly and severally to pay petitioners more than P10 million in
damages. The trial court found that private respondent Erna Sevilla and the victim Jose Villareal
were lovers; that private respondent Eliseo Sevilla, Erna's husband, is a very jealous husband who
inflicts physical injuries upon his wife; that apparently, private respondent Eliseo discovered his
wife's infidelity; and, that in conspiracy with several other persons, including his wife Erna whom he
seemed to have threatened, private respondent Eliseo hatched a plan whereby Erna was to lure
Jose Villareal to a carpark near the latter's office where Eliseo and his companions were to attack
and kill Jose. The trial court found that after the killing, private respondents lost no time in disposing
of their properties in the Philippines, pulling out their children from school, and escaping to the
United States.

Copies of the order dated March 27, 1990 denying the Motion to Lift Order of Default with Motion for
Reconsideration and the decision dated April 2, 1990 were received by private respondents on the
same day, April 7, 1990. Private respondents filed a Motion for Reconsideration with Motion to Set
Aside Decision asking the court to reconsider and/or set aside the decision dated April 2, 1990 and
the order of March 27, 1990. 29 On May 17, 1990, they filed a Supplemental Motion for
Reconsideration with Reply of the order dated March 27, 1990 and the decision dated April 2, 1990,
asserting for the first time that the court did not acquire jurisdiction over their persons. On July 16,
1990, they filed a Consolidated Memorandum 30 in support of their aforesaid Motion for
Reconsideration with Reply.
On August 10, 1990, the trial court issued an order 31 denying private respondents' Motion for
Reconsideration with Motion to Set Aside Decision and the Supplemental Motion for
Reconsideration with Reply. The trial court simultaneously granted petitioners' Motion for Execution
Pending Appeal. Consequently, on August 14, 1990, a Writ of Execution Pending Appeal was
issued. 23

On August 15, 1990, the Deputy Sheriff of the court served and registered with the Register of
Deeds of Parañaque a Notice of Levy over the properties said to be owned by private respondents
and covered by TCT Nos. 36350 (now 41338) and 36351 (now 41335) in their names. 33 On August
16, 1990, the Deputy Sheriff served upon private respondents' counsel the Notice of Levy with
supporting papers, one of which was a photocopy of the denial order dated August 10, 1990. 34

On August 21, 1990, private respondents' counsel received by mail a duplicate original copy of the
denial order of August 10, 1990. 35 On the same date, counsel filed a Notice of Appeal of the denial
order dated August 10, 1990 and the decision dated April 2, 1990. 36

Petitioners filed a Motion to Dismiss Notice of Appeal, contending that the Notice was filed out of
time, which private respondents opposed. Petitioners then filed a Supplemental Comment to Motion
to Dismiss dated October 4, 1990.

On October 2, 1990, the trial court issued an order 37 denying due course to the Notice of Appeal on
the ground that private respondents had only a day from August 16, 1990 (the day they received a
photocopy of the order denying their Motion for Reconsideration with Motion to Set Aside Decision
and their Supplemental Motion for Reconsideration with Reply), not from August 21, 1990 (the day
on which they received the duplicate original of the said order) to perfect their appeal. As the Notice
of Appeal was filed only on August 21, 1990, the trial court ruled that it was late. This order was
received by private respondents' counsel on October 18, 1990.

On October 25, 1990, private respondents, through counsel, filed a Motion to Set Aside/Reconsider
Order Dated October 2, 1990. 38

This was denied by the trial court in its order dated December 17,
1990, 39 a copy of which was received by private respondents' counsel on January 16, 1991. 40

On January 16, 1991, private respondents then filed a Notice of

Appeal. 41 from the orders dated December 17, 1990 and October 2, 1990 and again from the order
dated August 10, 1990.

On January 29, 1991, the trial court issued an Entry of Judgment, 42 a copy of which was received by
counsel for private respondents on February 13, 1991. On February 15, 1991, the private
respondents filed a Motion for Reconsideration with Motion to Elevate Records to the Court of
Appeals and Motion to Quash Entry of Judgment, 43 but the motions were denied by the trial court in
its order of August 1, 1991. 44

On September 11, 1991, private respondents filed in the Court of Appeals a petition for certiorari,
prohibition, and mandamus with preliminary injunction, 45 alleging that the trial court had acted
without or in excess of jurisdiction and with grave abuse of discretion in issuing the aforesaid orders
and decisions and that there was neither appeal nor any plain, speedy and adequate remedy open
to them in the ordinary course of law. Private respondents contended (1) that the trial court never
acquired jurisdiction over them since they are non-resident defendants and petitioners' action is
purely in personam and (2) that they were denied due process of law. 46
On December 23, 1991, 47 the Court of Appeals granted the petition, ruling that the trial court was
guilty of grave abuse of discretion. The dispositive portion of its decision reads:

WHEREFORE, the writs prayed for in the petition are GRANTED. The orders of
default, the hearing ex-parte, the default judgment, the execution pending appeal, the
respective orders denying the motions for reconsideration, and all subsequent orders
related thereto are hereby declared null and void and are set aside. The attachment
on the properties of petitioners [private respondents here] shall remain in force. The
trial court is ordered to require petitioners to file their answer within fifteen (15) days
from notice, and thence to proceed in the disposition of the case in accordance with
the ordinary civil procedure.

Petitioners moved for a reconsideration, 48 but their motion was denied 49 by the appellate court in a
resolution dated September 30, 1992. Hence, this petition for review.

First. The Court of Appeals nullified the several orders and the decision rendered by the trial court
against private respondents on the ground that the trial court did not acquire jurisdiction over them. It
ruled that the extraterritorial service of summons did not confer on the trial court jurisdiction to render
and enforce a money judgment against the private respondents who are non-residents. On the
authority of Banco Español-Filipino v. Palanca, 50 it held that the only effect of the conversion of an
action in personam filed against non-resident defendants into one quasi-in rem by virtue of the
attachment of their properties in the country was to subject such properties to the payment of the
demand which the court might find to be due petitioners, the plaintiffs below. Otherwise, the trial
court could not render a personal judgment against the private respondents, as it did in this case,
and enforce it against them. The Court of Appeals concluded that in doing so, the trial court
committed grave abuse of discretion. 51

It is true that where the defendant in an action in personam is a non-resident, as in this case, and
refuses to appear and submit to the jurisdiction of the court, the jurisdiction of the latter is limited to
the property within the country which the court may have ordered attached. In such a case, the
property itself is "the sole thing which is impleaded and is the responsible object which is the subject
of the judicial power." 52 Accordingly, "the relief must be confined to the res, and the court cannot
lawfully render a personal judgment against him." 53

But this Court also acknowledged in Banco Español-Filipino that if property is attached and later the
defendant appears, "the cause becomes mainly a suit in personam, with the added incident that the
property attached remains liable, under the control of the court, to answer to any demand which may
be established against the defendant by the final judgment of the court." 54 This rule was affirmed
in Mabanag v. Gallemore 55 in which it was held:

The main action in an attachment or garnishment suit is in rem until jurisdiction of the
defendant is secured. Thereafter, it is in personam and also in rem, unless
jurisdiction of the res is lost as by dissolution of the attachment. If jurisdiction of the
defendant is acquired but jurisdiction of the res is lost, it is then purely in personam. .
. . a proceeding against property without jurisdiction of the person of the defendant is
in substance a proceeding in rem; and where there is jurisdiction of the defendant,
but the proceeding against the property continues, that proceeding is none the less
necessarily in rem, although in form there is but a single proceeding. (4 Am. Jur.,
556-557.)

As the remedy is administered in some states, the theory of an attachment, whether

it is by process against or to subject the property or effects of a resident or non-
 resident of the state, is that it partakes essentially of the nature and character of a
proceeding in personam and not a proceeding in rem. And if the defendant appears
the action proceeds in accordance with the practice governing proceedings in
personam. But where the defendant fails to appear in the action, the proceeding is to
be considered as one in the nature of a proceeding in rem. And where the court acts
directly on the property, the title thereof being charged by the court without the
intervention of the party, the proceeding unquestionably is one in rem in the fullest
meaning of the term.

In attachment proceedings against a non-resident defendant where personal service

on him is lacking, it is elementary that the court must obtain jurisdiction of the
property of the defendant. If no steps have been taken to acquire jurisdiction of the
defendant's person, and he has not appeared and answered or otherwise submitted
himself to the jurisdiction of the court, the court is without jurisdiction to render
judgment until there has been a lawful seizure of property owned by him within the
jurisdiction of the court. (2 R.C.L., 800-804.) 56

In this case, not only was property in the Philippines of private respondents attached, but, what is
more, private respondents subsequently appeared in the trial court and submitted to its jurisdiction.
Consequently, the jurisdiction of the trial court to render a judgment in personam against them is
undoubted.

Private respondents contend that the claims for which their property was attached are unliquidated
and, therefore, the attachment is totally invalid. While below they conceded that the attachment was
valid at least to the extent of P30,000.00 (then considered the value of human life), they now
contend that even this amount is unliquidated.

As private respondents thus admit, this point was not raised in the Court of Appeals by them. It is
only now that it is being urged. However, this point is now largely immaterial inasmuch as the
jurisdiction of the trial court to render a personal judgment against private respondents derived not
so much from the validity of the attachment as from the voluntary submission of private respondents
to its authority.

There can be no question regarding the trial court's acquisition of jurisdiction over the persons of
respondents when the latter's counsel entered her appearance on their behalf on February 7, 1990.
Through counsel, private respondents voluntarily appeared by filing a Notice of Appearance without
qualification and a Motion to Lift Order of Default with Motion for Reconsideration, in which they
prayed for affirmative reliefs, thus submitting to the jurisdiction of the court. The following instances
have been considered voluntary submission to the jurisdiction of the court: the filing by defendant of
a motion to admit answer; 57 the filing of a motion for reconsideration of the judgment by
default; 58 and the filing of a petition to set aside the judgment of default. 59

Not only did private respondents voluntarily submit themselves to the jurisdiction of the trial court,
they never questioned the validity of the mode of service of summons, that is, by extraterritorial
service upon them. As already stated, private respondents filed a notice of appearance without
qualification.

In Flores v. Zurbito, it was held: 60

He may appear by presenting a motion, for example, and unless by such appearance
he specifically objects to the jurisdiction of the court, he thereby gives his assent to
the jurisdiction of the court over his person. When the appearance is by motion
 objecting to the jurisdiction of the court over his person, it must be for
the sole and separate purpose of objecting to the jurisdiction of the court. If his
motion is for any other purpose than to object to the jurisdiction of the court over his
person, he thereby submits himself to the jurisdiction of the court. (Handy vs.
Insurance Co., 37 Ohio St., 366; Elliott vs. Lawhead, 43 Ohio St., 171; New Jersey
vs. New York, 6 Peters [U.S.], 323 Livingston vs. Gibbons, 4 Johnson's Chancery
[N.Y.], 94; . . . ). An appearance in court, either in person or by counsel, for any
purpose other than to expressly object to the jurisdiction of the court over the person,
waives want of process and service of notice. Such an appearance gives the court
jurisdiction over the person. (Henderson vs. Carbondale etc., Co., 140 U.S., 25;
Rhode Island vs Massachusetts, 12 Peters, [U.S.], 657.). . . . His appearance without
objecting to the jurisdiction of the court waives all objections to the form and manner
of service of notice. (Provident etc. Association v. Ford, 114 U.S., 635, 639.)

In La Naval Drug Corp. v. court of Appeals, 61 it was held:

Jurisdiction over the person must be seasonably raised, i.e., that it is pleaded in a
motion to dismiss or by way of an affirmative defense in an answer. Voluntary
appearance shall be deemed a waiver of this defense.

In Boticano v. Chu, Jr., 62 it was stated:

. . . one of the circumstances considered by the Court as indicative of waiver by the

defendant-appellant of any alleged defect of jurisdiction over his person arising from
defective or even want of process, is his failure to raise the question of jurisdiction in
the Court of First Instance and at the first opportunity. It has been held that upon
general principles, defects in jurisdiction arising from irregularities in the
commencement of the proceedings, defective process or even absence of process
may be waived by a failure to make seasonable objections. (Castro v. Cebu Portland
Cement Co., 71 Phil. 481 [1941] citing Machan v. De la Trinidad, 3 Phil. 684; Vergara
v. Laciapag, 28 Phil. 439; U.S. v. Inductivo, 40 Phil. 84; Soriano v. Ramirez, 44 Phil.
519).

Private respondents thus waived any defect in service of summons or even want of process because
for the court to validly decide their plea, it necessarily had to acquire jurisdiction upon their
persons. 63

Second. The Court of Appeals found the trial court to have committed grave abuse of discretion in
denying private respondents' Motion to Lift Order of Default with Motion for Reconsideration for the
following reasons: Private respondents resided in the United States which local newspapers do not
reach and they came to know of the case against them only on January 5, 1990 from well-meaning
friends. These circumstances, it was held, constituted accident, mistake, or excusable neglect
excusing private respondents' failure to answer the complaint and justifying the lifting of the default
order under Rule 18, §3.

In addition, the appellate court maintains that the trial court's observation that the Motion contains no
specific facts or statements showing petitioner's meritorious defense is not accurate. It points out
that it is clearly stated in the said Motion that they did not kill petitioner's husband. Indeed, according
to the Court of Appeals, the defense is meritorious because if proved, such circumstance will defeat
petitioner's claim for damages. 64
Under Rule 18, §3, a motion to lift an order of default must allege with particularity the facts
constituting the fraud, accident, mistake, or excusable neglect which caused his failure to
answer. 65 In this case, the private respondents' motion merely alleged that private respondents were
residents of the United States which local newspapers do not reach and that they did not know about
the case filed against them until January 5, 1990 when well-meaning friends informed them about
the matter. 66

There are factual considerations in this case which belie private respondents' allegations of good
faith. In his Special Power of Attorney, 67 which was submitted to the trial court as an annex of private
respondents' Supplemental Motion for Reconsideration with Reply, private respondent Eliseo Sevilla
gave as their residential address in the United States the same address to which summons had
been sent three times before by the trial court. 68 The last summons sent to private respondents by
registered mail was returned to the court with the notation "REFUSED TO RECEIVE." This was long
before January 5, 1990 when, according to private respondents, they were informed by friends of the
case pending against them. That private respondents refused to receive the summons is of no
moment. As has been held, the refusal of a defendant (in this case private respondents) to receive
summons is a technicality resorted to by those who attempt to frustrate the service upon them. 69 The
trial court was justified in thinking that private respondents were trying to deceive it by claiming that
they did not know about the case until they were told about it on January 5, 1990 by well-meaning
friends.

Indeed, private respondents did not dispute the trial court's finding of deception on their part, nor did
they ever offer any explanation for this in any of their numerous pleadings. For as early as
December 27, 1989 and thus prior to the second declaration of default, private respondents' counsel,
Atty. Marbibi, made a formal written request to the trial court for permission to photocopy all
pleadings and orders relating to the case "for the purpose of protecting the interest of the defendants
whose sister contracted our services." Among the papers photocopied were the Amended Complaint
and Summons pursuant thereto. 70 This fact gives the lie to the allegation in the Motion to Set Aside
the Order of Default that private respondents did not know of the case against them until January 5,
1990. Private respondents could have at least asked for an extension of time to file their answer
before they were declared in default for the second time if it was really their intention in good faith to
participate in the case. They cannot claim that the reason they could not do so was because they
had appeared only to question jurisdiction over their persons because they had already asked for
affirmative reliefs prior to their raising the issue of jurisdiction over their persons.

Private respondents have thus failed to show good faith which is central to the concept of "excusable
neglect" justifying failure to answer.

[W]hat must be shown is that the failure to respond was attributable to mishap and
not indifference or deliberate disregard of the notice. In the case of ordinary
individuals, the test is in essence one of good faith. 71

In our opinion, the trial court correctly slammed the blatant attempt of private respondents to foist a
falsehood upon it.

The motion to lift order of default, aside from the requirements in Rule 18, §3, must show that the
defendant has a meritorious defense or that something would be gained by having the order of
default set aside. 72 Otherwise, and if the motion is not accompanied by affidavits of merits, it may
properly be denied. 73

As regards this requirement, private respondents contented themselves with just one statement that
they "have absolutely no knowledge, much less any hand, in the incident falsely imputed to
them." 74 Such allegation is a conclusion rather than a statement of facts showing a meritorious
defense. The affidavit must controvert the facts alleged by the petitioners.

[The term meritorious defense] may imply that the applicant has the burden of
proving such a defense in order to have the judgment set aside. The cases usually
do not require such a strong showing. The test employed appears to be essentially
the same as used in considering summary judgment, i.e., whether there is enough
evidence to present an issue for submission to the trier of fact, or a showing that on
the undisputed facts it is not clear that the judgment is warranted as a matter of
law. 75

. . . The defendant must show that she has a meritorious defense otherwise the grant
of her motion will prove to be a useless exercise. Thus, her motion must be
accompanied by a statement of the evidence which she intends to present if the
motion is granted and which is such as to warrant a reasonable belief that the result
of the case would probably be otherwise if a new trial is granted. 76

Since private respondents' failure to file an answer or any other responsive pleading was not due to
fraud, accident, mistake, or excusable neglect and they failed to show they had a valid and
meritorious defense, we think the trial court did not commit an abuse of discretion in refusing to lift its
order of default. "Grave abuse of discretion," it bears repeating, means capricious, arbitrary,
despotic, and whimsical exercise of judgment and is rightly treated as equivalent to lack of
jurisdiction. 77 Here, it cannot justly be said that, in issuing its disputed order denying private
respondents' Motion to Lift the Order of Default and Motion for Reconsideration, the trial court acted
in this fashion so as to call for the annulment of its orders and its decision. The Court of Appeals
seriously erred in holding otherwise and setting aside the order of the trial court.

Third. We agree with the Court of Appeals, however, that the trial court is guilty of grave abuse of
discretion in denying due course to private respondents' appeal. The trial court held that its decision
had become final on the basis of the following facts: 78 that the private respondents received the
judgment by default on April 7, 1990, one day later than the petitioners; that on April 21, 1990, they
filed a Motion for Reconsideration with Motion to Set Aside Decision through registered mail; that on
August 10, 1990, the trial court issued an order denying said Motion; that on August 16, 1990, a
photocopy of the said order was served along with the Writ of Execution Pending Appeal (granted
upon Motion for Execution Pending Appeal) and Notice of Levy of Real Properties by its Sheriff; that
on August 21, 1990, the duplicate original copy of the order of August 10, 1990 sent by registered
mail to the private respondents' counsel was received; and, that on the same day, August 21, 1990,
said counsel filed a Notice of Appeal. On the basis of these findings, the trial court concluded: 79

. . . While it may be true that they received copy of the August 10 order which was
sent to their counsel thru registered mail on August 13, 1990 only on August 21,
1990 as they claimed in the opposition to motion to dismiss appeal, however
defendants forgot the fact that on August 16, 1990, the Sheriff of this Court served
upon them, thru counsel, a copy of said August 10 order, together with the Writ of
Execution Pending Appeal and Notice of Levy. This is certified to by the Sheriff in his
"Report."

When the defendants therefore filed their Notice of Appeal on August 21, 1990, they
were already late and the period to appeal had expired as the period started to run
again on the 17th day of August and it is the last day to perfect appeal.
The question is from which date the period for filing an appeal should be counted: from August 16,
1990, when private respondents received a photocopy of the order denying their Motion for
Reconsideration of the decision, or from August 21, 1990, when they received by registered mail
the duplicate original of the same order? It is to be recalled that the photocopy of the order was
given to private respondents by the sheriff in connection with his service of the Writ of Execution and
Notice of Levy on Real Properties. It was one of the supporting documents attached to the Notice of
Levy on Real Properties.

We hold that the period for filing an appeal commenced to run again — after it had been interrupted
by the filing of private respondents' Motion for Reconsideration of the decision — only on August 21,
1990. It cannot be from August 16, 1990 when private respondents' counsel was given a mere
photocopy of the court's order. Such copy lacks assurance of its genuineness, considering that
photocopies can easily be tampered with, for the purpose of enabling private respondents to
determine whether or not to appeal and, in the event they choose to do so, what issues to raise on
appeal. It was not in fact intended to be a substitute for the copy of the order which was served only
on August 21, 1990. The trial court, therefore, should have given due course to private respondents'
appeal. Denied the right to appeal, private respondents perforce had to resort to a petition
for certiorari, prohibition, and mandamus.

Petitioners contend, however, that private respondents' petition for certiorari in the Court of Appeals
was not filed within a reasonable time and therefore should have been denied. They claim that
private respondents received the trial court's order denying their motion for a reconsideration of the
court's refusal to give due course to the first Notice of Appeal on January 16, 1991 and that from
such date until September 11, 1991 when the petition for certiorari was filed, almost eight months
had already elapsed, clearly exceeding the benchmark of 90 days considered as "reasonable time"
for filing petitions of this nature.

This contention has no merit. The relevant date for purposes of determining whether the petition
for certiorari was filed within a reasonable time is August 13, 1991, when private respondents
received the trial court's order denying their motion to quash the entry of judgment which the trial
court had issued earlier. It is to be noted that the trial court did not act on the second Notice of
Appeal. It simply entered judgment on January 29, 1991. The private respondent had a right to be
notified of the action on their second Notice of Appeal. They were not guilty of dilatory tactics.
Indeed, the moment the trial court entered judgment, they immediately moved to quash the entry of
judgment. When their Motion to Quash was denied in an order which also commented on their
second Notice of Appeal, they filed the petition for certiorari. From August 13, 1991 to September
11, 1991 is a period of only 29 days.

It is also important to note that petitioners questioned the timeliness of private respondents' action
(their filing of the petition for certiorari, prohibition, and mandamus) only after the Court of Appeals
had rendered a decision. They filed a comment on private respondents' petition, but they did not
question the timeliness of its filing by alleging that the petition was filed more than 90 days then
considered to be a "reasonable time" for filing petitions for certiorari (It is now 60 days under Rule
65, §4 of the Rules of Civil Procedure). It was only after the Court of Appeals rendered judgment
against them that petitioners raised the question in their Motion for Reconsideration. Petitioners thus
waived their objection to the timeliness of the filing of the petition in the Court of Appeals.

To recapitulate, we hold: (1) that the trial court acquired jurisdiction over the persons of private
respondents; (2) that it validly declared them in default; (3) that consequently, its decision is valid
and private respondents' remedy was to appeal from the decision; (4) that private respondents'
appeal was timely and therefore it was grave abuse of discretion for the trial court to hold that private
respondents' notice of appeal was filed late and for that reason deny due course to it.
WHEREFORE, the decision of the Court of Appeals is REVERSED insofar as it nullified and set
aside the orders of default, the hearing ex-parte the default judgment, the execution pending appeal,
and all other orders related thereto issued prior to the order refusing to give due course to the appeal
of private respondents of the Regional Trial Court of Makati, Branch 132, and AFFIRMED insofar as
it set aside the orders refusing to five due course to private respondents' appeal and ordering the
entry of the judgment by default and insofar as it ordered that the attachment on the properties of
private respondents be maintained. The Regional Trial Court of Makati, Branch 132, is hereby
ORDERED to give due course to the appeal of private respondents.

SO ORDERED.

U.S. Supreme Court

International Shoe v. State of Washington, 326 U.S. 310 (1945)

International Shoe v. State of Washington

No. 107

Argued November 14, 1945

Decided December 3, 1945

326 U.S. 310

APPEAL FROM THE SUPREME COURT OF WASHINGTON

Syllabus

Activities within a State of salesmen in the employ of a foreign corporation, exhibiting

samples of merchandise and soliciting orders from prospective buyers to be accepted or
rejected by the corporation at a point outside the State, were systematic and
continuous, and resulted in a large volume of interstate business. A statute of the State
requires employers to pay into the state unemployment compensation fund a specified
percentage of the wages paid for the services of employees within the State.

Held:

1. In view of 26 U.S.C. § 1606(a) , providing that no person shall be relieved from

compliance with a state law requiring payments to an unemployment fund on the ground
that he is engaged in interstate commerce, the fact that the corporation is engaged in
interstate commerce does not relieve it from liability for payments to the state
unemployment compensation fund. P. 326 U. S. 315.

2. The activities in behalf of the corporation render it amenable to suit in courts of the
State to recover payments due to the state unemployment compensation fund. P. 326
U. S. 320.
(a) The activities in question established between the State and the corporation
sufficient contacts or ties to make it reasonable and just, and in conformity to the due
process requirements of the Fourteenth Amendment, for the State to enforce against
the corporation an obligation arising out of such activities. P. 326 U. S. 320.

(b) In such a suit to recover payments due to the unemployment compensation fund,
service of process upon one of the corporation's salesmen within the State, and notice
sent by registered mail to the corporation at its home office, satisfies the requirements
of due process. P. 326 U. S. 320.

Page 326 U. S. 311

3. The tax imposed by the state unemployment compensation statute -- construed by

the state court, in its application to the corporation, as a tax on the privilege of
employing salesmen within the State -- does not violate the due process clause of the
Fourteenth Amendment. P. 326 U. S. 321.

22 Wash. 2d 146, 154 P.2d 801, affirmed.

APPEAL from a judgment upholding the constitutionality of a state unemployment

compensation statute as applied to the appellant corporation.

MR. CHIEF JUSTICE STONE delivered the opinion of the Court.

The questions for decision are (1) whether, within the limitations of the due process
clause of the Fourteenth Amendment, appellant, a Delaware corporation, has, by its
activities in the State of Washington, rendered itself amenable to proceedings in the
courts of that state to recover unpaid contributions to the state unemployment
compensation fund exacted by state statutes, Washington Unemployment
Compensation Act, Washington Revised Statutes, § 9998-103a through § 9998-123a,
1941 Supp., and (2) whether the state can exact those contributions consistently with
the due process clause of the Fourteenth Amendment.

The statutes in question set up a comprehensive scheme of unemployment

compensation, the costs of which are defrayed by contributions required to be made by
employers to a state unemployment compensation fund.

Page 326 U. S. 312

The contributions are a specified percentage of the wages payable annually by each
employer for his employees' services in the state. The assessment and collection of the
contributions and the fund are administered by appellees. Section 14(c) of the Act
(Wash.Rev.Stat., 1941 Supp., § 9998-114c) authorizes appellee Commissioner to issue
an order and notice of assessment of delinquent contributions upon prescribed personal
service of the notice upon the employer if found within the state, or, if not so found, by
mailing the notice to the employer by registered mail at his last known address. That
section also authorizes the Commissioner to collect the assessment by distraint if it is
not paid within ten days after service of the notice. By §§ 14e and 6b, the order of
assessment may be administratively reviewed by an appeal tribunal within the office of
unemployment upon petition of the employer, and this determination is, by § 6i, made
subject to judicial review on questions of law by the state Superior Court, with further
right of appeal in the state Supreme Court, as in other civil cases.

In this case, notice of assessment for the years in question was personally served upon
a sales solicitor employed by appellant in the State of Washington, and a copy of the
notice was mailed by registered mail to appellant at its address in St. Louis, Missouri.
Appellant appeared specially before the office of unemployment, and moved to set
aside the order and notice of assessment on the ground that the service upon
appellant's salesman was not proper service upon appellant; that appellant was not a
corporation of the State of Washington, and was not doing business within the state;
that it had no agent within the state upon whom service could be made; and that
appellant is not an employer, and does not furnish employment within the meaning of
the statute.

The motion was heard on evidence and a stipulation of facts by the appeal tribunal,
which denied the motion

Page 326 U. S. 313

and ruled that appellee Commissioner was entitled to recover the unpaid contributions.
That action was affirmed by the Commissioner; both the Superior Court and the
Supreme Court affirmed. 22 Wash. 2d 146, 154 P.2d 801. Appellant in each of these
courts assailed the statute as applied, as a violation of the due process clause of the
Fourteenth Amendment, and as imposing a constitutionally prohibited burden on
interstate commerce. The cause comes here on appeal under § 237(a) of the Judicial
Code, 28 U.S.C. § 344(a), appellant assigning as error that the challenged statutes, as
applied, infringe the due process clause of the Fourteenth Amendment and the
commerce clause.

The facts, as found by the appeal tribunal and accepted by the state Superior Court and
Supreme Court, are not in dispute. Appellant is a Delaware corporation, having its
principal place of business in St. Louis, Missouri, and is engaged in the manufacture
and sale of shoes and other footwear. It maintains places of business in several states
other than Washington, at which its manufacturing is carried on and from which its
merchandise is distributed interstate through several sales units or branches located
outside the State of Washington.

Appellant has no office in Washington, and makes no contracts either for sale or
purchase of merchandise there. It maintains no stock of merchandise in that state, and
makes there no deliveries of goods in intrastate commerce. During the years from 1937
to 1940, now in question, appellant employed eleven to thirteen salesmen under direct
supervision and control of sales managers located in St. Louis. These salesmen resided
in Washington; their principal activities were confined to that state, and they were
compensated by commissions based upon the amount of their sales. The commissions
for each year totaled more than $31,000. Appellant supplies its salesmen with a line of
samples, each consisting of one shoe of a pair, which

Page 326 U. S. 314

they display to prospective purchasers. On occasion, they rent permanent sample

rooms, for exhibiting samples, in business buildings, or rent rooms in hotels or business
buildings temporarily for that purpose. The cost of such rentals is reimbursed by
appellant.

The authority of the salesmen is limited to exhibiting their samples and soliciting orders
from prospective buyers, at prices and on terms fixed by appellant. The salesmen
transmit the orders to appellant's office in St. Louis for acceptance or rejection, and,
when accepted, the merchandise for filling the orders is shipped f.o.b. from points
outside Washington to the purchasers within the state. All the merchandise shipped into
Washington is invoiced at the place of shipment, from which collections are made. No
salesman has authority to enter into contracts or to make collections.

The Supreme Court of Washington was of opinion that the regular and systematic
solicitation of orders in the state by appellant's salesmen, resulting in a continuous flow
of appellant's product into the state, was sufficient to constitute doing business in the
state so as to make appellant amenable to suit in its courts. But it was also of opinion
that there were sufficient additional activities shown to bring the case within the rule,
frequently stated, that solicitation within a state by the agents of a foreign corporation
plus some additional activities there are sufficient to render the corporation amenable to
suit brought in the courts of the state to enforce an obligation arising out of its activities
there. International Harvester Co. v. Kentucky, 234 U. S. 579, 234 U. S. 587; People's
Tobacco Co. v. American Tobacco Co., 246 U. S. 79, 246 U. S. 87; Frene v. Louisville
Cement Co., 77 U.S.App.D.C. 129, 134 F.2d 511, 516. The court found such additional
activities in the salesmen's display of samples sometimes in permanent display rooms,
and the salesmen's residence within the state, continued over a period of years, all
resulting in a

Page 326 U. S. 315

substantial volume of merchandise regularly shipped by appellant to purchasers within

the state. The court also held that the statute, as applied, did not invade the
constitutional power of Congress to regulate interstate commerce, and did not impose a
prohibited burden on such commerce.

Appellant's argument, renewed here, that the statute imposes an unconstitutional

burden on interstate commerce need not detain us. For 53 Stat. 1391, 26 U.S.C. §
1606(a) provides that
"No person required under a State law to make payments to an unemployment fund
shall be relieved from compliance therewith on the ground that he is engaged in
interstate or foreign commerce, or that the State law does not distinguish between
employees engaged in interstate or foreign commerce and those engaged in intrastate
commerce."

It is no longer debatable that Congress, in the exercise of the commerce power, may
authorize the states, in specified ways, to regulate interstate commerce or impose
burdens upon it. Kentucky Whip & Collar Co. v. Illinois Central R. Co., 299 U. S.
334; Perkins v. Pennsylvania, 314 U.S. 586; Standard Dredging Corp. v. Murphy, 319
U. S. 306, 319 U. S. 308; Hooven & Allison Co. v. Evatt, 324 U. S. 652, 324 U. S.
679; Southern Pacific Co. v. Arizona, 325 U. S. 761, 325 U. S. 769.

Appellant also insists that its activities within the state were not sufficient to manifest its
"presence" there, and that, in its absence, the state courts were without jurisdiction,
that, consequently, it was a denial of due process for the state to subject appellant to
suit. It refers to those cases in which it was said that the mere solicitation of orders for
the purchase of goods within a state, to be accepted without the state and filled by
shipment of the purchased goods interstate, does not render the corporation seller
amenable to suit within the state. See Green v. Chicago, B. & Q. R. Co., 205 U. S.
530, 205 U. S. 533; International Harvester Co. v. Kentucky, supra, 234 U. S. 586-
587; Philadelphia

Page 326 U. S. 316

& Reading R. Co. v. McKibbin, 243 U. S. 264, 243 U. S. 268; People's Tobacco Co. v.
American Tobacco Co., supra, 246 U. S. 87. And appellant further argues that, since it
was not present within the state, it is a denial of due process to subject it to taxation or
other money exaction. It thus denies the power of the state to lay the tax or to subject
appellant to a suit for its collection.

Historically, the jurisdiction of courts to render judgment in personam is grounded on

their de facto power over the defendant's person. Hence, his presence within the
territorial jurisdiction of a court was prerequisite to its rendition of a judgment personally
binding him. Pennoyer v. Neff, 95 U. S. 714, 95 U. S. 733. But now that the capias ad
respondendum has given way to personal service of summons or other form of notice,
due process requires only that, in order to subject a defendant to a judgment in
personam, if he be not present within the territory of the forum, he have certain
minimum contacts with it such that the maintenance of the suit does not offend
"traditional notions of fair play and substantial justice." Milliken v. Meyer, 311 U. S.
457, 311 U. S. 463. See Holmes, J., in McDonald v. Mabee, 243 U. S. 90, 243 U. S.
91. Compare Hoopeston Canning Co. v. Cullen, 318 U. S. 313, 318 U. S. 316, 318 U. S.
319. See Blackmer v. United States, 284 U. S. 421; Hess v. Pawloski, 274 U. S.
352; Young v. Masci, 289 U. S. 253. ,
Since the corporate personality is a fiction, although a fiction intended to be acted upon
as though it were a fact, Klein v. Board of Supervisors, 282 U. S. 19, 282 U. S. 24, it is
clear that, unlike an individual, its "presence" without, as well as within, the state of its
origin can be manifested only by activities carried on in its behalf by those who are
authorized to act for it. To say that the corporation is so far "present" there as to satisfy
due process requirements, for purposes of taxation or the maintenance of suits against
it in the courts of the state, is to beg the question to be decided. For the terms "present"
or "presence" are

Page 326 U. S. 317

used merely to symbolize those activities of the corporation's agent within the state
which courts will deem to be sufficient to satisfy the demands of due process. L. Hand,
J., in Hutchinson v. Chase & Gilbert, 45 F.2d 139, 141. Those demands may be met by
such contacts of the corporation with the state of the forum as make it reasonable, in
the context of our federal system of government, to require the corporation to defend
the particular suit which is brought there. An "estimate of the inconveniences" which
would result to the corporation from a trial away from its "home" or principal place of
business is relevant in this connection. Hutchinson v. Chase & Gilbert, supra, 141.

"Presence" in the state in this sense has never been doubted when the activities of the
corporation there have not only been continuous and systematic, but also give rise to
the liabilities sued on, even though no consent to be sued or authorization to an agent
to accept service of process has been given. St. Clair v. Cox, 106 U. S. 350, 106 U. S.
355; Connecticut Mutual Co. v. Spratley, 172 U. S. 602, 172 U. S. 610-
611; Pennsylvania Lumbermen's Ins. Co. v. Meyer, 197 U. S. 407, 197 U. S. 414-
415; Commercial Mutual Co. v. Davis, 213 U. S. 245, 213 U. S. 255-256; International
Harvester Co. v. Kentucky, supra; cf. St. Louis S.W. R. Co. v. Alexander, 227 U. S. 218.
Conversely, it has been generally recognized that the casual presence of the corporate
agent, or even his conduct of single or isolated items of activities in a state in the
corporation's behalf, are not enough to subject it to suit on causes of action
unconnected with the activities there. St. Clair v. Cox, supra, 106 U. S. 359, 106 U. S.
360; Old Wayne Life Assn. v. McDonough, 204 U. S. 8, 204 U. S. 21; Frene v. Louisville
Cement Co., supra, 515, and cases cited. To require the corporation in such
circumstances to defend the suit away from its home or other jurisdiction where it
carries on more substantial activities has been thought to lay too great and
unreasonable a burden on the corporation to comport with due process.

Page 326 U. S. 318

While it has been held, in cases on which appellant relies, that continuous activity of
some sorts within a state is not enough to support the demand that the corporation be
amenable to suits unrelated to that activity, Old Wayne Life Assn. v. McDonough, supra;
Green v. Chicago, B. & Q. R. Co., supra; Simon v. Southern R. Co., 236 U. S.
115; People's Tobacco Co. v. American Tobacco Co., supra; cf. Davis v. Farmers Co-
operative Co., 262 U. S. 312, 262 U. S. 317, there have been instances in which the
continuous corporate operations within a state were thought so substantial and of such
a nature as to justify suit against it on causes of action arising from dealings entirely
distinct from those activities. See Missouri, K. & T. R. Co. v. Reynolds, 255 U.S.
565; Tauza v. Susquehanna Coal Co., 220 N.Y. 259, 115 N.E. 915; cf. St. Louis S.W. R.
Co. v. Alexander, supra.

Finally, although the commission of some single or occasional acts of the corporate
agent in a state sufficient to impose an obligation or liability on the corporation has not
been thought to confer upon the state authority to enforce it, Rosenberg Bros. & Co. v.
Curtis Brown Co., 260 U. S. 516, other such acts, because of their nature and quality
and the circumstances of their commission, may be deemed sufficient to render the
corporation liable to suit. Cf. Kane v. New Jersey, 242 U. S. 160; Hess v. Pawloski,
supra; Young v. Masci, supra. True, some of the decisions holding the corporation
amenable to suit have been supported by resort to the legal fiction that it has given its
consent to service and suit, consent being implied from its presence in the state through
the acts of its authorized agents. Lafayette Insurance Co. v. French, 18 How. 404, 59 U.
S. 407; St. Clair v. Cox, supra, 106 U. S. 356; Commercial Mutual Co. v. Davis,
supra, 213 U. S. 254; Washington v. Superior Court, 289 U. S. 361, 289 U. S. 364-365.
But, more realistically, it may be said that those authorized acts were of such a nature
as to justify the fiction. Smolik v. Philadelphia &

Page 326 U. S. 319

Reading Co., 222 F. 148, 151. Henderson, The Position of Foreign Corporations in
American Constitutional Law, 94-95.

It is evident that the criteria by which we mark the boundary line between those
activities which justify the subjection of a corporation to suit and those which do not
cannot be simply mechanical or quantitative. The test is not merely, as has sometimes
been suggested, whether the activity, which the corporation has seen fit to procure
through its agents in another state, is a little more or a little less. St. Louis S.W. R. Co.
v. Alexander, supra, 227 U. S. 228; International Harvester Co. v. Kentucky, supra, 234
U. S. 587. Whether due process is satisfied must depend, rather, upon the quality and
nature of the activity in relation to the fair and orderly administration of the laws which it
was the purpose of the due process clause to insure. That clause does not contemplate
that a state may make binding a judgment in personam against an individual or
corporate defendant with which the state has no contacts, ties, or relations. Cf.
Pennoyer v. Neff, supra; Minnesota Commercial Assn. v. Benn, 261 U. S. 140.

But, to the extent that a corporation exercises the privilege of conducting activities within
a state, it enjoys the benefits and protection of the laws of that state. The exercise of
that privilege may give rise to obligations, and, so far as those obligations arise out of or
are connected with the activities within the state, a procedure which requires the
corporation to respond to a suit brought to enforce them can, in most instances, hardly
be said to be undue. Compare International Harvester Co. v. Kentucky, supra, with
Green v. Chicago, B. & Q. R. Co., supra, and People's Tobacco Co. v. American
Tobacco Co., supra. Compare Connecticut Mutual Co. v. Spratley, supra, 172 U. S.
619, 172 U. S. 620, and Commercial Mutual Co. v. Davis, supra, with Old Wayne Life
Assn. v. McDonough, supra. See 29 Columbia Law Review, 187-195.

Page 326 U. S. 320

Applying these standards, the activities carried on in behalf of appellant in the State of
Washington were neither irregular nor casual. They were systematic and continuous
throughout the years in question. They resulted in a large volume of interstate business,
in the course of which appellant received the benefits and protection of the laws of the
state, including the right to resort to the courts for the enforcement of its rights. The
obligation which is here sued upon arose out of those very activities. It is evident that
these operations establish sufficient contacts or ties with the state of the forum to make
it reasonable and just, according to our traditional conception of fair play and substantial
justice, to permit the state to enforce the obligations which appellant has incurred there.
Hence, we cannot say that the maintenance of the present suit in the State of
Washington involves an unreasonable or undue procedure.

We are likewise unable to conclude that the service of the process within the state upon
an agent whose activities establish appellant's "presence" there was not sufficient notice
of the suit, or that the suit was so unrelated to those activities as to make the agent an
inappropriate vehicle for communicating the notice. It is enough that appellant has
established such contacts with the state that the particular form of substituted service
adopted there gives reasonable assurance that the notice will be actual. Connecticut
Mutual Co. v. Spratley, supra, 172 U. S. 618, 172 U. S. 619; Board of Trade v.
Hammond Elevator Co., 198 U. S. 424, 198 U. S. 437-438; Commercial Mutual Co. v.
Davis, supra, 213 U. S. 254-255. Cf. Riverside Mills v. Menefee, 237 U. S. 189, 237 U.
S. 194, 237 U. S. 195; See Knowles v. Gaslight & Coke Co., 19 Wall. 58, 86 U. S.
61; McDonald v. Mabee, supra; Milliken v. Meyer, supra. Nor can we say that the
mailing of the notice of suit to appellant by registered mail at its home office was not
reasonably calculated to apprise appellant of the suit. Compare Hess v. Pawloski,
supra, with McDonald v. Mabee, supra,

Page 326 U. S. 321

243 U. S. 92, and Wuchter v. Pizzutti, 276 U. S. 13, 276 U. S. 19, 276 U. S. 24; cf.
Becquet v. MacCarthy, 2 B. & Ad. 951; Maubourquet v. Wyse, 1 Ir.Rep.C.L. 471. See
Washington v. Superior Court, supra, 289 U. S. 365.

Only a word need be said of appellant's liability for the demanded contributions to the
state unemployment fund. The Supreme Court of Washington, construing and applying
the statute, has held that it imposes a tax on the privilege of employing appellant's
salesmen within the state measured by a percentage of the wages, here, the
commissions payable to the salesmen. This construction we accept for purposes of
determining the constitutional validity of the statute. The right to employ labor has been
deemed an appropriate subject of taxation in this country and England, both before and
since the adoption of the Constitution. Steward Machine Co. v. Davis, 301 U. S.
548, 301 U. S. 579, et seq. And such a tax imposed upon the employer for
unemployment benefits is within the constitutional power of the states. Carmichael v.
Southern Coal Co., 301 U. S. 495, 301 U. S. 508, et seq.

Appellant having rendered itself amenable to suit upon obligations arising out of the
activities of its salesmen in Washington, the state may maintain the present suit in
personam to collect the tax laid upon the exercise of the privilege of employing
appellant's salesmen within the state. For Washington has made one of those activities
which, taken together, establish appellant's "presence" there for purposes of suit the
taxable event by which the state brings appellant within the reach of its taxing power.
The state thus has constitutional power to lay the tax and to subject appellant to a suit
to recover it. The activities which establish its "presence" subject it alike to taxation by
the state and to suit to recover the tax. Equitable Life Society v. Pennsylvania, 238 U. S.
143, 238 U. S. 146; cf. International Harvester Co. v. Department of Taxation, 322 U. S.
435, 322 U. S. 442, et seq.; Hoopeston Canning Co. v. Cullen,

Page 326 U. S. 322

supra, 318 U. S. 316-319; see General Trading Co. v. Tax Comm'n, 322 U. S. 335.

Affirmed.

MR. JUSTICE JACKSON took no part in the consideration or decision of this case.

MR. JUSTICE BLACK delivered the following opinion.

Congress, pursuant to its constitutional power to regulate commerce, has expressly

provided that a State shall not be prohibited from levying the kind of unemployment
compensation tax here challenged. 26 U.S.C. 1600. We have twice decided that this
Congressional consent is an adequate answer to a claim that imposition of the tax
violates the Commerce Clause. Perkins v. Pennsylvania, 314 U.S. 586, affirming 342
Pa. 529; Standard Dredging Corp. v. Murphy, 319 U. S. 306, 319 U. S. 308. Two
determinations by this Court of an issue so palpably without merit are sufficient.
Consequently, that part of this appeal which again seeks to raise the question seems so
patently frivolous as to make the case a fit candidate for dismissal. Fay v. Crozer, 217
U. S. 455. Nor is the further ground advanced on this appeal, that the State of
Washington has denied appellant due process of law, any less devoid of substance. It is
my view, therefore, that we should dismiss the appeal as unsubstantial, [Footnote
1] Seaboard Air Line R. Co. v. Watson, 287 U. S. 86, 287 U. S. 90, 287 U. S. 92, and
decline the invitation to formulate broad rules as to the meaning of due process, which
here would amount to deciding a constitutional question "in advance of the necessity for
its decision." Federation of Labor v. McAdory, 325 U. S. 450, 325 U. S. 461.

Page 326 U. S. 323

Certainly appellant cannot, in the light of our past decisions, meritoriously claim that
notice by registered mail and by personal service on its sales solicitors in Washington
did not meet the requirements of procedural due process. And the due process clause
is not brought in issue any more by appellant's further conceptualistic contention that
Washington could not levy a tax or bring suit against the corporation because it did not
honor that State with its mystical "presence." For it is unthinkable that the vague due
process clause was ever intended to prohibit a State from regulating or taxing a
business carried on within its boundaries simply because this is done by agents of a
corporation organized and having its headquarters elsewhere. To read this into the due
process clause would, in fact, result in depriving a State's citizens of due process by
taking from the State the power to protect them in their business dealings within its
boundaries with representatives of a foreign corporation. Nothing could be more
irrational, or more designed to defeat the function of our federative system of
government. Certainly a State, at the very least, has power to tax and sue those dealing
with its citizens within its boundaries, as we have held before. Hoopeston Canning Co.
v. Cullen, 318 U. S. 313. Were the Court to follow this principle, it would provide a
workable standard for cases where, as here, no other questions are involved. The Court
has not chosen to do so, but instead has engaged in an unnecessary discussion, in the
course of which it has announced vague Constitutional criteria applied for the first time
to the issue before us. It has thus introduced uncertain elements confusing the simple
pattern and tending to curtail the exercise of State powers to an extent not justified by
the Constitution.

The criteria adopted, insofar as they can be identified, read as follows: Due Process
does permit State courts to "enforce the obligations which appellant has incurred" if

Page 326 U. S. 324

it be found "reasonable and just according to our traditional conception of fair play and
substantial justice." And this, in turn, means that we will "permit" the State to act if, upon

"an 'estimate of the inconveniences' which would result to the corporation from a trial
away from its 'home' or principal place of business,"

we conclude that it is "reasonable" to subject it to suit in a State where it is doing

business.

It is true that this Court did use the terms "fair play" and "substantial justice" in
explaining the philosophy underlying the holding that it could not be "due process of
law" to render a personal judgment against a defendant without notice and an
opportunity to be heard. Milliken v. Meyer, 311 U. S. 457. In McDonald v. Mabee, 243
U. S. 90, 243 U. S. 91, cited in the Milliken, case, Mr. Justice Holmes, speaking for the
Court, warned against judicial curtailment of this opportunity to be heard, and referred to
such a curtailment as a denial of "fair play," which even the common law would have
deemed "contrary to natural justice." And previous cases had indicated that the ancient
rule against judgments without notice had stemmed from "natural justice" concepts.
These cases, while giving additional reasons why notice under particular circumstances
is inadequate, did not mean thereby that all legislative enactments which this Court
might deem to be contrary to natural justice ought to be held invalid under the due
process clause. None of the cases purport to support or could support a holding that a
State can tax and sue corporations only if its action comports with this Court's notions of
"natural justice." I should have thought the Tenth Amendment settled that.

I believe that the Federal Constitution leaves to each State, without any "ifs" or "buts," a
power to tax and to open the doors of its courts for its citizens to sue corporations
whose agents do business in those States. Believing that the Constitution gave the
States that power, I think it a judicial deprivation to condition its exercise upon this

Page 326 U. S. 325

Court's notion of "fair play," however appealing that term may be. Nor can I stretch the
meaning of due process so far as to authorize this Court to deprive a State of the right
to afford judicial protection to its citizens on the ground that it would be more
"convenient" for the corporation to be sued somewhere else.

There is a strong emotional appeal in the words "fair play," "justice," and
"reasonableness." But they were not chosen by those who wrote the original
Constitution or the Fourteenth Amendment as a measuring rod for this Court to use in
invalidating State or Federal laws passed by elected legislative representatives. No one,
not even those who most feared a democratic government, ever formally proposed that
courts should be given power to invalidate legislation under any such elastic standards.
Express prohibitions against certain types of legislation are found in the Constitution,
and, under the long-settled practice, courts invalidate laws found to conflict with them.
This requires interpretation, and interpretation, it is true, may result in extension of the
Constitution's purpose. But that is no reason for reading the due process clause so as to
restrict a State's power to tax and sue those whose activities affect persons and
businesses within the State, provided proper service can be had. Superimposing the
natural justice concept on the Constitution's specific prohibitions could operate as a
drastic abridgment of democratic safeguards they embody, such as freedom of speech,
press and religion, [Footnote 2] and the right to counsel. This

Page 326 U. S. 326

has already happened. Betts v. Brady, 316 U. S. 455. Compare Feldman v. United
States, 322 U. S. 487, 322 U. S. 494-503. For application of this natural law concept,
whether under the terms "reasonableness," "justice," or "fair play," makes judges the
supreme arbiters of the country's laws and practices. Polk Co. v. Glover, 305 U. S.
5, 305 U. S. 17-18; Federal Power Commission v. Natural Gas Pipeline Co., 315 U. S.
575, 315 U. S. 600, n. 4. This result, I believe, alters the form of government our
Constitution provides. I cannot agree.
True, the State's power is here upheld. But the rule announced means that tomorrow's
judgment may strike down a State or Federal enactment on the ground that it does not
conform to this Court's idea of natural justice. I therefore find myself moved by the same
fears that caused Mr. Justice Holmes to say in 1930:

"I have not yet adequately expressed the more than anxiety that I feel at the ever-
increasing scope given to the Fourteenth Amendment in cutting down what I believe to
be the constitutional rights of the States. As the decisions now stand, I see hardly any
limit but the sky to the invalidating of those rights if they happen to strike a majority of
this Court as for any reason undesirable."

Baldwin v. Missouri, 281 U. S. 586, 281 U. S. 595.

[Footnote 1]

This Court has, on several occasions, pointed out the undesirable consequences of a
failure to dismiss frivolous appeals. Salinger v. United States, 272 U. S. 542, 272 U. S.
544; United Surety Co. v. American Fruit Product Co., 238 U. S. 140; De Bearn v. Safe
Deposit & Trust Co., 233 U. S. 24, 233 U. S. 33-34.

[Footnote 2]

These First Amendment liberties -- freedom of speech, press and religion -- provide a
graphic illustration of the potential restrictive capacity of a rule under which they are
protected at a particular time only because the Court, as then constituted, believes them
to be a requirement of fundamental justice. Consequently, under the same rule, another
Court, with a different belief as to fundamental justice, could, at least as against State
action, completely or partially withdraw Constitutional protection from these basic
freedoms, just as though the First Amendment had never been written.

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G.R. No. 112573 February 9, 1995

NORTHWEST ORIENT AIRLINES, INC. petitioner,
vs.
COURT OF APPEALS and C.F. SHARP & COMPANY INC., respondents.

PADILLA, JR., J.:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals affirming
the dismissal of the petitioner's complaint to enforce the judgment of a Japanese court. The principal
issue here is whether a Japanese court can acquire jurisdiction over a Philippine corporation doing
business in Japan by serving summons through diplomatic channels on the Philippine corporation at
its principal office in Manila after prior attempts to serve summons in Japan had failed.

Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a corporation organized under
the laws of the 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 judgment rendered in its favor by a Japanese court
against private respondent C.F. Sharp & Company, Inc., (hereinafter SHARP), a corporation
incorporated under Philippine laws.

As found by the Court of Appeals in the challenged decision of 10 November 1993, 1 the following
are the factual and procedural antecedents of this controversy:

On May 9, 1974, plaintiff Northwest Airlines and defendant C.F. Sharp & Company,
through its Japan branch, entered into an International Passenger Sales Agency
Agreement, whereby the former authorized the latter to sell its air transportation
tickets. Unable to remit the proceeds of the ticket sales made by defendant on behalf
of the plaintiff under the said agreement, plaintiff on March 25, 1980 sued defendant
in Tokyo, Japan, for collection of the unremitted proceeds of the ticket sales, with
claim for damages.

On April 11, 1980, a writ of summons was issued by the 36th Civil Department,
Tokyo District Court of Japan against defendant at its office at the Taiheiyo Building,
3rd floor, 132, Yamashita-cho, Naka-ku, Yokohoma, Kanagawa Prefecture. The
attempt to serve the summons was unsuccessful because the bailiff was advised by
a person in the office that Mr. Dinozo, the person believed to be authorized to receive
court processes was in Manila and would be back on April 24, 1980.

On April 24, 1980, bailiff returned to the defendant's office to serve the summons. Mr.
Dinozo refused to accept the same claiming that he was no longer an employee of
the defendant.

After the two attempts of service were unsuccessful, the judge of the Tokyo District
Court decided to have the complaint and the writs of summons served at the head
office of the defendant in Manila. On July 11, 1980, the Director of the Tokyo District
Court requested the Supreme Court of Japan to serve the summons through
diplomatic channels upon the defendant's head office in Manila.

On August 28, 1980, defendant received from Deputy Sheriff Rolando Balingit the
writ of summons (p. 276, Records). Despite receipt of the same, defendant failed to
appear at the scheduled hearing. Thus, the Tokyo Court proceeded to hear the
plaintiff's complaint and on [January 29, 1981], rendered judgment ordering the
defendant to pay the plaintiff the sum of 83,158,195 Yen and damages for delay at
the rate of 6% per annum from August 28, 1980 up to and until payment is completed
(pp. 12-14, Records).

On March 24, 1981, defendant received from Deputy Sheriff Balingit copy of the
judgment. Defendant not having appealed the judgment, the same became final and
executory.

Plaintiff was unable to execute the decision in Japan, hence, on May 20, 1983, a suit
for enforcement of the judgment was filed by plaintiff before the Regional Trial Court
of Manila Branch 54.2

On July 16, 1983, defendant filed its answer averring that the judgment of the
Japanese Court sought to be enforced is null and void and unenforceable in this
jurisdiction having been rendered without due and proper notice to the defendant
and/or with collusion or fraud and/or upon a clear mistake of law and fact (pp. 41-45,
Rec.).

Unable to settle the case amicably, the case was tried on the merits. After the plaintiff
rested its case, defendant on April 21, 1989, filed a Motion for Judgment on a
Demurrer to Evidence based on two grounds:
(1) the foreign judgment sought to be enforced is null and void for want of jurisdiction
and (2) the said judgment is contrary to Philippine law and public policy and rendered
without due process of law. Plaintiff filed its opposition after which the court a
quo rendered the now assailed decision dated June 21, 1989 granting the demurrer
motion and dismissing the complaint (Decision, pp. 376-378, Records). In granting
the demurrer motion, the trial court held that:

The foreign judgment in the Japanese Court sought in this action is

null and void for want of jurisdiction over the person of the defendant
considering that this is an action in personam; the Japanese Court
did not acquire jurisdiction over the person of the defendant because
jurisprudence requires that the defendant be served with summons in
Japan in order for the Japanese Court to acquire jurisdiction over it,
the process of the Court in Japan sent to the Philippines which is
outside Japanese jurisdiction cannot confer jurisdiction over the
defendant in the case before the Japanese Court of the case at
bar. Boudard versus Tait 67 Phil. 170. The plaintiff contends that the
Japanese Court acquired jurisdiction because the defendant is a
resident of Japan, having four (4) branches doing business therein
and in fact had a permit from the Japanese government to conduct
business in Japan (citing the exhibits presented by the plaintiff); if this
is so then service of summons should have been made upon the
defendant in Japan in any of these alleged four branches; as
admitted by the plaintiff the service of the summons issued by the
Japanese Court was made in the Philippines thru a Philippine Sheriff.
This Court agrees that if the defendant in a foreign court is a resident
in the court of that foreign court such court could acquire jurisdiction
over the person of the defendant but it must be served upon the
defendant in the territorial jurisdiction of the foreign court. Such is not
the case here because the defendant was served with summons in
the Philippines and not in Japan.
 Unable to accept the said decision, plaintiff on July 11, 1989 moved for
reconsideration of the decision, filing at the same time a conditional Notice of Appeal,
asking the court to treat the said notice of appeal "as in effect after and upon
issuance of the court's denial of the motion for reconsideration."

Defendant opposed the motion for reconsideration to which a Reply dated August 28,
1989 was filed by the plaintiff.

On October 16, 1989, the lower court disregarded the Motion for Reconsideration
and gave due course to the plaintiff's Notice of Appeal. 3

In its decision, the Court of Appeals sustained the trial court. It agreed with the latter in its reliance
upon Boudard vs. Tait 4 wherein it was held that "the process of the court has no extraterritorial effect
and no jurisdiction is acquired over the person of the defendant by serving him beyond the
boundaries of the state." To support its position, the Court of Appeals further stated:

In an action strictly in personam, such as the instant case, personal service of

summons within the forum is required for the court to acquire jurisdiction over the
defendant (Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer jurisdiction
on the court, personal or substituted service of summons on the defendant not
extraterritorial service is necessary (Dial Corp vs. Soriano, 161 SCRA 739).

But while plaintiff-appellant concedes that the collection suit filed is an action in
personam, it is its theory that a distinction must be made between an action in
personam against a resident defendant and an action in personam against a non-
resident defendant. Jurisdiction is acquired over a non-resident defendant only if he
is served personally within the jurisdiction of the court and over a resident defendant
if by personal, substituted or constructive service conformably to statutory
authorization. Plaintiff-appellant argues that since the defendant-appellee maintains
branches in Japan it is considered a resident defendant. Corollarily, personal,
substituted or constructive service of summons when made in compliance with the
procedural rules is sufficient to give the court jurisdiction to render judgment in
personam.

Such an argument does not persuade.

It is a general rule that processes of the court cannot lawfully be served outside the
territorial limits of the jurisdiction of the court from which it issues (Carter vs. Carter;
41 S.E. 2d 532, 201) and this is regardless of the residence or citizenship of the party
thus served (Iowa-Rahr vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC, NS, 292, Am.
Case 1912 D680). There must be actual service within the proper territorial limits on
defendant or someone authorized to accept service for him. Thus, a defendant,
whether a resident or not in the forum where the action is filed, must be served with
summons within that forum.

But even assuming a distinction between a resident defendant and non-resident

defendant were to be adopted, such distinction applies only to natural persons and
not in the corporations. This finds support in the concept that "a corporation has no
home or residence in the sense in which those terms are applied to natural persons"
(Claude Neon Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as cited by the
defendant-appellee in its brief:
 Residence is said to be an attribute of a natural person, and can be predicated on an
artificial being only by more or less imperfect analogy. Strictly speaking, therefore, a
corporation can have no local residence or habitation. It has been said that a
corporation is a mere ideal existence, subsisting only in contemplation of law — an
invisible being which can have, in fact, no locality and can occupy no space, and
therefore cannot have a dwelling place. (18 Am. Jur. 2d, p. 693 citing Kimmerle v.
Topeka, 88 370, 128 p. 367; Wood v. Hartfold F. Ins. Co., 13 Conn 202)

Jurisprudence so holds that the foreign or domestic character of a corporation is to

be determined by the place of its origin where its charter was granted and not by the
location of its business activities (Jennings v. Idaho Rail Light & P. Co., 26 Idaho
703, 146 p. 101), A corporation is a "resident" and an inhabitant of the state in which
it is incorporated and no other (36 Am. Jur. 2d, p. 49).

Defendant-appellee is a Philippine Corporation duly organized under the Philippine

laws. Clearly, its residence is the Philippines, the place of its incorporation, and not
Japan. While defendant-appellee maintains branches in Japan, this will not make it a
resident of Japan. A corporation does not become a resident of another by engaging
in business there even though licensed by that state and in terms given all the rights
and privileges of a domestic corporation (Galveston H. & S.A.R. Co. vs. Gonzales,
151 US 496, 38 L ed. 248, 4 S Ct. 401).

On this premise, defendant appellee is a non-resident corporation. As such, court

processes must be served upon it at a place within the state in which the action is
brought and not elsewhere (St. Clair vs. Cox, 106 US 350, 27 L ed. 222, 1 S. Ct.
354).5

It then concluded that the service of summons effected in Manila or beyond the territorial boundaries
of Japan was null and did not confer jurisdiction upon the Tokyo District Court over the person of
SHARP; hence, its decision was void.

Unable to obtain a reconsideration of the decision, NORTHWEST elevated the case to this Court
contending that the respondent court erred in holding that SHARP was not a resident of Japan and
that summons on SHARP could only be validly served within that country.

A foreign judgment is presumed to be valid and binding in the country from which it comes, until the
contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of
due notice therein.6

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of
a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as
between the parties and their successors-in-interest by a subsequent title. The judgment may,
however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud,
or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines
or elsewhere, enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has
regularly performed its official duty.

Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption
of its validity.7 Being the party challenging the judgment rendered by the Japanese court, SHARP
had the duty to demonstrate the invalidity of such judgment. In an attempt to discharge that burden,
it contends that the extraterritorial service of summons effected at its home office in the Philippines
was not only ineffectual but also void, and the Japanese Court did not, therefore acquire jurisdiction
over it.

It is settled that matters of remedy and procedure such as those relating to the service of process
upon a defendant are governed by the lex fori or the internal law of the forum.8 In this case, it is the
procedural law of Japan where the judgment was rendered that determines the validity of the
extraterritorial service of process on SHARP. As to what this law is is a question of fact, not of law. It
may not be taken judicial notice of and must be pleaded and proved like any other fact.9 Sections 24
and 25, Rule 132 of the Rules of Court provide that it may be evidenced by an official publication or
by a duly attested or authenticated copy thereof. It was then incumbent upon SHARP to present
evidence as to what that Japanese procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the presumption of validity and regularity of
the service of summons and the decision thereafter rendered by the Japanese court must stand.

Alternatively in the light of the absence of proof regarding Japanese

law, the presumption of identity or similarity or the so-called processual presumption 10 may be
invoked. Applying it, the Japanese law on the matter is presumed to be similar with the Philippine
law on service of summons on a private foreign corporation doing business in the Philippines.
Section 14, Rule 14 of the Rules of Court provides that if the defendant is a foreign corporation doing
business in the Philippines, service may be made: (1) on its resident agent designated in
accordance with law for that purpose, or, (2) if there is no such resident agent, on the government
official designated by law to that effect; or (3) on any of its officers or agents within the Philippines.

If the foreign corporation has designated an agent to receive summons, the designation is exclusive,
and service of summons is without force and gives the court no jurisdiction unless made upon him. 11

Where the corporation has no such agent, service shall be made on the government official
designated by law, to wit: (a) the Insurance Commissioner in the case of a foreign insurance
company; (b) the Superintendent of Banks, in the case of a foreign banking corporation; and (c) the
Securities and Exchange Commission, in the case of other foreign corporations duly licensed to do
business in the Philippines. Whenever service of 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 copy is a necessary part of the
service. 12

SHARP contends that the laws authorizing service of process upon the Securities and Exchange
Commission, the Superintendent of Banks, and the Insurance Commissioner, as the case may be,
presuppose a situation wherein the foreign corporation doing business in the country no longer has
any branches or offices 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 contemplate two situations: (1) if the corporation had left the Philippines or had
ceased to transact business therein, and (2) if the corporation has no designated agent. Section 17
of the General Banking Act 15 does not even speak a corporation which had ceased to transact
business in the Philippines.

Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive
court processes in Japan. This silence could only mean, or least create an impression, that it had
none. Hence, service on the designated government official or on any of SHARP's officers or agents
in Japan could be availed of. The respondent, however, insists that only service of any of its officers
or employees in its branches in Japan could be resorted to. We do not agree. As found by the
respondent court, two attempts at service were made at SHARP's Yokohama branch. Both were
unsuccessful. On the first attempt, Mr. Dinozo, who was believed to be the person authorized to
accept court process, was in Manila. On the second, Mr. Dinozo was present, but to accept the
summons because, according to him, he was no longer an employee of SHARP. While it may be
true that service could have been made upon any of the officers or agents of SHARP at its three
other branches in Japan, the availability of such a recourse would not preclude service upon the
proper government official, as stated above.

As found by the Court of Appeals, it was the Tokyo District Court which ordered that summons for
SHARP be served at its head office in the Philippine's after the two attempts of service had
failed. 16 The Tokyo District Court requested the Supreme Court of Japan to cause the delivery of the
summons and other legal documents to the Philippines. Acting on that request, the Supreme Court
of Japan sent the summons together with the other legal documents to the Ministry of Foreign Affairs
of Japan which, in turn, forwarded the same to the Japanese Embassy in Manila . Thereafter, the
court processes were delivered to the Ministry (now Department) of Foreign Affairs of the
Philippines, then to the Executive Judge of the Court of First Instance (now Regional Trial Court) of
Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to serve the same on SHARP at its
principal office in Manila. This service is equivalent to service on the proper government official
under Section 14, Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation Code.
Hence, SHARP's contention that such manner of service is not valid under Philippine laws holds no
water.17

In deciding against the petitioner, the respondent court sustained the trial court's reliance
on Boudard vs. Tait 18 where this Court held:

The fundamental rule is that jurisdiction in personam over nonresidents, so as to

sustain a money judgment, must be based upon personal service within the state
which renders the judgment.

xxx xxx xxx

The process of a court, has no extraterritorial 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 of a court of a foreign country against a resident of this country
having no property in such foreign country based on process served here, any effect
here against either the defendant personally or his property situated here.

Process issuing from the courts of one state or country cannot run into another, and
although a nonresident defendant may have been personally served with such
process in the state or country of his domicile, it will not give such jurisdiction as to
authorize a personal judgment against him.

It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto 19 and Dial Corp. vs. Soriano, 20 as
well as the principle laid down by the Iowa Supreme Court in the 1911 case of Raher vs. Raher. 21

The first three cases are, however, inapplicable. Boudard involved the enforcement of a judgment of
the civil division of the Court of First Instance of Hanoi, French Indo-China. The trial court dismissed
the case because the Hanoi court never acquired jurisdiction over the person of the defendant
considering that "[t]he, evidence adduced at the trial conclusively proves that neither the appellee
[the defendant] nor his agent or employees were ever in Hanoi, French Indo-China; and that the
deceased Marie Theodore Jerome Boudard had never, at any time, been his employee."
In Magdalena Estate, what was declared invalid resulting in the failure of the court to acquire
jurisdiction over the person of the defendants in an action in personam was the service of summons
through publication against non-appearing resident defendants. It was claimed that the latter
concealed themselves to avoid personal service of summons upon them. In Dial, the defendants
were foreign corporations which were not, domiciled and licensed to engage in business in the
Philippines and which did not have officers or agents, places of business, or properties here. On the
other hand, in the instant case, SHARP was doing business in Japan and was maintaining four
branches therein.

Insofar as to the Philippines is concerned, Raher is a thing of the past. In that case, a divided
Supreme Court of Iowa declared that the principle that there can be no jurisdiction in a court of a
territory to render a personal judgment against anyone upon service made outside its limits was
applicable alike to cases of residents and non-residents. The principle was put at rest by the United
States Supreme Court when it ruled in the 1940 case of Milliken vs. Meyer 22 that domicile in the
state is alone sufficient to bring an absent defendant within the reach of the state's jurisdiction for
purposes of a personal judgment by means of appropriate substituted service or personal service
without the state. This principle is embodied in section 18, Rule 14 of the Rules of Court which
allows service of summons on residents temporarily out of the Philippines to be made out of the
country. The rationale for this rule was explained in Milliken as follows:

[T]he authority of a state over one of its citizens is not terminated by the mere fact of
his absence from the state. The state which accords him privileges and affords
protection to him and his property by virtue of his domicile may also exact reciprocal
duties. "Enjoyment of the privileges of residence within the state, and the attendant
right to invoke the protection of its laws, are inseparable" from the various incidences
of state citizenship. The responsibilities of that citizenship arise out of the relationship
to the state which domicile creates. That relationship is not dissolved by mere
absence from the state. The attendant duties, like the rights and privileges incident to
domicile, are not dependent on continuous presence in the state. One such incident
of domicile is amenability to suit within the state even during sojourns without the
state, where the state has provided and employed a reasonable method for apprising
such an absent party of the proceedings against him. 23

The domicile of a corporation belongs to the state where it was incorporated. 24 In a strict technical
sense, such domicile as a corporation may have is single in its essence and a corporation can have
only one domicile which is the state of its creation. 25

Nonetheless, a corporation formed in one-state may, for certain purposes, be regarded a resident in
another state in which it has offices and transacts business. This is the rule in our jurisdiction
and apropos thereto, it may be necessery to quote what we stated in State Investment House,
Inc, vs. Citibank, N.A., 26 to wit:

The issue is whether these Philippine branches or units may be considered

"residents of the Philippine Islands" as that term is used in Section 20 of the
Insolvency Law . . . or residents of the state under the laws of which they were
respectively incorporated. The answer cannot be found in the Insolvency Law itself,
which contains no definition of the term, resident, or any clear indication of its
meaning. There are however other statutes, albeit of subsequent enactment and
effectivity, from which enlightening notions of the term may be derived.

The National Internal Revenue Code declares that the term "'resident foreign
corporation' applies to a foreign corporation engaged in trade or business within the
Philippines," as distinguished from a "'non-resident foreign corporation' . . . (which is
one) not engaged in trade or bussiness within the Philippines." [Sec. 20, pars. (h)
and (i)].
The Offshore Banking Law, Presidential Decree No. 1034, states "that branches,
subsidiaries, affiliation, extension offices or any other units of corporation or juridical
person organized under the laws of any foreign country operating in the Philippines
shall be considered residents of the Philippines. [Sec. 1(e)].

The General Banking Act, Republic Act No. 337, places "branches and agencies in
the Philippines of foreign banks . . . (which are) called Philippine branches," in the
same category as "commercial banks, savings associations, mortgage banks,
development banks, rural banks, stock savings and loan associations" (which have
been formed and organized under Philippine laws), making no distinction between
the former and the latter in so far as the terms "banking institutions" and "bank" are
used in the Act [Sec. 2], declaring on the contrary that in "all matters not specifically
covered by special provisions applicable only to foreign banks, or their branches and
agencies in the Philippines, said foreign banks or their branches and agencies
lawfully doing business in the Philippines "shall be bound by all laws, rules, and
regulations applicable to domestic banking corporations of the same class, except
such laws, rules and regulations as provided for the creation, formation, organization,
or dissolution of corporations or as fix the relation, liabilities, responsibilities, or duties
of members, stockholders or officers of corporation. [Sec. 18].

This court itself has already had occasion to hold [Claude Neon Lights, Fed. Inc. vs.
Philippine Advertising Corp., 57 Phil. 607] that a foreign corporation licitly doing
business in the Philippines, which is a defendant in a civil suit, may not be
considered a non-resident within the scope of the legal provision authorizing
attachment against a defendant not residing in 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 1940, Sec. 1(f), Rule 57, Rules of 1964] in other words, a preliminary
attachment may not be applied for and granted solely on the asserted fact that the
defendant is a foreign corporation authorized to do business in the Philippines — and
is consequently and necessarily, "a party who resides out of the Philippines."
Parenthetically, if it may not be considered as a party not residing in the Philippines,
or as a party who resides out of the country, then, logically, it must be considered a
party who does reside in the Philippines, who is a resident of the country. Be this as
it may, this Court pointed out that:

. . . Our laws and jurisprudence indicate a purpose to assimilate

foreign corporations, duly licensed to do business here, to the status
of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall
Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu Cong Eng vs.
Trinidad, 47 Phil. 385, 411) We think it would be entirely out of line
with this policy should we make a discrimination against a foreign
corporation, like the petitioner, and subject its property to the harsh
writ of seizure by attachment when it has complied not only with
every requirement of law made specially of foreign corporations, but
in addition with every requirement of law made of domestic
corporations. . . .

Obviously, the assimilation of foreign corporations authorized to do business in the

Philippines "to the status of domestic corporations, subsumes their being found and
operating as corporations, hence, residing, in the country.
 The same principle is recognized in American law: that the residence of a
corporation, if it can be said to have a residence, is necessarily where it exercises
corporate functions . . .;" that it is considered as dwelling "in the place where its
business is done . . .," as being "located where its franchises are exercised . . .," and
as being "present where it is engaged in the prosecution of the corporate enterprise;"
that a "foreign corporation licensed to do business in a state is a resident of any
country where it maintains an office or agent for transaction of its usual and
customary business for venue purposes;" and that the "necessary element in its
signification is locality of existence." [Words and Phrases, Permanent Ed., vol. 37,
pp. 394, 412, 493].

In as much as SHARP was admittedly doing business in Japan through its four duly registered
branches at the time the collection suit against it was filed, then in the light of the processual
presumption, SHARP may be deemed a resident of Japan, and, as such, was amenable to the
jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful
methods of serving process. 27

Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only
under the processual presumption but also because of the presumption of regularity of performance
of official duty.

We find NORTHWEST's claim for attorney's fees, litigation expenses, and exemplary damages to be
without merit. We find no evidence that would justify an award for attorney's fees and litigation
expenses under Article 2208 of the Civil Code of the Philippines. Nor is an award for exemplary
damages warranted. Under Article 2234 of the Civil Code, before the court may consider the
question of whether or not exemplary damages should be awarded, the plaintiff must show that he is
entitled to moral, temperate, or compensatory damaged. There being no such proof presented by
NORTHWEST, no exemplary damages may be adjudged in its favor.

WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED
insofar as it denied 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 No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and
another in its stead is hereby rendered ORDERING private respondent C.F. SHARP L COMPANY,
INC. to pay to NORTHWEST the amounts adjudged in the foreign judgment subject of said case,
with interest thereon at the legal rate from the filing of the complaint therein until the said foreign
judgment is fully satisfied.

Costs against the private respondent.

SO ORDERED.

G.R. No. L-34382 July 20, 1983

THE HOME INSURANCE COMPANY, petitioner,

vs.
EASTERN SHIPPING LINES and/or ANGEL JOSE TRANSPORTATION, INC. and HON. A.
MELENCIO-HERRERA, Presiding Judge of the Manila Court of First Instance, Branch
XVII, respondents.

G.R. No. L-34383 July 20, 1983

THE HOME INSURANCE COMPANY, petitioner,
vs.
N. V. NEDLLOYD LIJNEN; COLUMBIAN PHILIPPINES, INC., and/or GUACODS, INC., and HON.
A. MELENCIO-HERRERA, Presiding Judge of the Manila Court of First Instance, Branch
XVII, respondents.

No. L-34382.

Zapa Law Office for petitioner.

Bito, Misa & Lozada Law Office for respondents.

No. L-34383.

Zapa Law Office for petitioner.

Ross, Salcedo, Del Rosario, Bito & Misa Law office for respondents.

GUTIERREZ, JR., J.:

Questioned in these consolidated petitions for review on certiorari are the decisions of the Court of
First Instance of Manila, Branch XVII, dismissing the complaints in Civil Case No. 71923 and in Civil
Case No. 71694, on the ground that plaintiff therein, now appellant, had failed to prove its capacity to
sue.

There is no dispute over the facts of these cases for recovery of maritime damages. In L-34382, the
facts are found in the decision of the respondent court which stated:

On or about January 13, 1967, S. Kajita & Co., on behalf of Atlas Consolidated
Mining & Development Corporation, shipped on board the SS "Eastern Jupiter' from
Osaka, Japan, 2,361 coils of "Black Hot Rolled Copper Wire Rods." The said
VESSEL is owned and operated by defendant Eastern Shipping Lines (CARRIER).
The shipment was covered by Bill of Lading No. O-MA-9, with arrival notice to Phelps
Dodge Copper Products Corporation of the Philippines (CONSIGNEE) at Manila. The
shipment was insured with plaintiff against all risks in the amount of P1,580,105.06
under its Insurance Policy No. AS-73633.

xxx xxx xxx

The coils discharged from the VESSEL numbered 2,361, of which 53 were in bad
order. What the CONSIGNEE ultimately received at its warehouse was the same
number of 2,361 coils with 73 coils loose and partly cut, and 28 coils entangled,
partly cut, and which had to be considered as scrap. Upon weighing at
CONSIGNEE's warehouse, the 2,361 coils were found to weight 263,940.85 kilos as
against its invoiced weight of 264,534.00 kilos or a net loss/shortage of 593.15 kilos,
according to Exhibit "A", or 1,209,56 lbs., according to the claims presented by the
consignee against the plaintiff (Exhibit "D-1"), the CARRIER (Exhibit "J-1"), and the
TRANSPORTATION COMPANY (Exhibit "K- l").
 For the loss/damage suffered by the cargo, plaintiff paid the consignee under its
insurance policy the amount of P3,260.44, by virtue of which plaintiff became
subrogated to the rights and actions of the CONSIGNEE. Plaintiff made demands for
payment against the CARRIER and the TRANSPORTATION COMPANY for
reimbursement of the aforesaid amount but each refused to pay the same. ...

The facts of L-34383 are found in the decision of the lower court as follows:

On or about December 22, 1966, the Hansa Transport Kontor shipped from Bremen,
Germany, 30 packages of Service Parts of Farm Equipment and Implements on
board the VESSEL, SS "NEDER RIJN" owned by the defendant, N. V. Nedlloyd
Lijnen, and represented in the Philippines by its local agent, the defendant
Columbian Philippines, Inc. (CARRIER). The shipment was covered by Bill of Lading
No. 22 for transportation to, and delivery at, Manila, in favor of the consignee,
international Harvester Macleod, Inc. (CONSIGNEE). The shipment was insured with
plaintiff company under its Cargo Policy No. AS-73735 "with average terms" for
P98,567.79.

xxx xxx xxx

The packages discharged from the VESSEL numbered 29, of which seven packages
were found to be in bad order. What the CONSIGNEE ultimately received at its
warehouse was the same number of 29 packages with 9 packages in bad order. Out
of these 9 packages, 1 package was accepted by the CONSIGNEE in good order
due to the negligible damages sustained. Upon inspection at the consignee's
warehouse, the contents of 3 out of the 8 cases were also found to be complete and
intact, leaving 5 cases in bad order. The contents of these 5 packages showed
several items missing in the total amount of $131.14; while the contents of the
undelivered 1 package were valued at $394.66, or a total of $525.80 or P2,426.98.

For the short-delivery of 1 package and the missing items in 5 other packages,
plaintiff paid the CONSIGNEE under its Insurance Cargo Policy the amount of
P2,426.98, by virtue of which plaintiff became subrogated to the rights and actions of
the CONSIGNEE. Demands were made on defendants CARRIER and CONSIGNEE
for reimbursement thereof but they failed and refused to pay the same.

In both cases, the petitioner-appellant made the following averment regarding its capacity to sue:

The plaintiff is a foreign insurance company duly authorized to do business in the Philippines
through its agent, Mr. VICTOR H. BELLO, of legal age and with office address at Oledan Building,
Ayala Avenue, Makati, Rizal.

In L-34382, the respondent-appellee Eastern Shipping Lines, Inc., filed its answer and alleged that it:

Denies the allegations of Paragraph I which refer to plaintiff's capacity to sue for lack of knowledge
or information sufficient to form a belief as to the truth thereof.

Respondent-appellee, Angel Jose Transportation, Inc., in turn filed its answer admitting the
allegations of the complaint, regarding the capacity of plaintiff-appellant. The pertinent paragraph of
this answer reads as follows:
Angel Jose Admits the jurisdictional averments in paragraphs 1, 2, and 3 of the heading Parties.

In L-34383, the respondents-appellees N. V. Nedlloyd Lijhen, Columbian Philippines, Inc. and

Guacods, Inc., filed their answers. They denied the petitioner-appellant's capacity to sue for lack of
knowledge or information sufficient to form a belief as to the truth thereof.

As earlier stated, the respondent court dismissed the complaints in the two cases on the same
ground, that the plaintiff failed to prove its capacity to sue. The court reasoned as follows:

In the opinion of the Court, if plaintiff had the capacity to sue, the Court should hold
that a) defendant Eastern Shipping Lines should pay plaintiff the sum of P1,630.22
with interest at the legal rate from January 5, 1968, the date of the institution of the
Complaint, until fully paid; b) defendant Angel Jose Transportation, Inc. should pay
plaintiff the sum of P1,630.22 also with interest at the legal rate from January 5, 1968
until fully paid; c) the counterclaim of defendant Angel Jose transportation, Inc.
should be ordered dismissed; and d) each defendant to pay one-half of the costs.

The Court is of the opinion that Section 68 of the Corporation Law reflects a policy
designed to protect the public interest. Hence, although defendants have not raised
the question of plaintiff's compliance with that provision of law, the Court has
resolved to take the matter into account.

A suing foreign corporation, like plaintiff, has to plead affirmatively and prove either
that the transaction upon which it bases its complaint is an isolated one, or that it is
licensed to transact business in this country, failing which, it will be deemed that it
has no valid cause of action (Atlantic Mutual Ins. Co. vs. Cebu Stevedoring Co., Inc.,
17 SCRA 1037). In view of the number of cases filed by plaintiff before this Court, of
which judicial cognizance can be taken, and under the ruling in Far East International
Import and Export Corporation vs. Hankai Koayo Co., 6 SCRA 725, it has to be held
that plaintiff is doing business in the Philippines. Consequently, it must have a
license under Section 68 of the Corporation Law before it can be allowed to sue.

The situation of plaintiff under said Section 68 has been described as follows in Civil
Case No. 71923 of this Court, entitled 'Home Insurance Co. vs. N. V. Nedlloyd
Lijnen, of which judicial cognizance can also be taken:

Exhibit "R",presented by plaintiff is a certified copy of a license, dated

July 1, 1967, issued by the Office of the Insurance Commissioner
authorizing plaintiff to transact insurance business in this country. By
virtue of Section 176 of the Insurance Law, it has to be presumed that
a license to transact business under Section 68 of the Corporation
Law had previously been issued to plaintiff. No copy thereof,
however, was submitted for a reason unknown. The date of that
license must not have been much anterior to July 1, 1967. The
preponderance of the evidence would therefore call for the finding
that the insurance contract involved in this case, which was executed
at Makati, Rizal, on February 8, 1967, was contracted before plaintiff
was licensed to transact business in the Philippines.

This Court views Section 68 of the Corporation Law as reflective of a

basic public policy. Hence, it is of the opinion that, in the eyes of
Philippine law, the insurance contract involved in this case must be
 held void under the provisions of Article 1409 (1) of the Civil Code,
and could not be validated by subsequent procurement of the license.
That view of the Court finds support in the following citation:

According to many authorities, a constitutional or

statutory prohibition against a foreign corporation
doing business in the state, unless such corporation
has complied with conditions prescribed, is effective
to make the contracts of such corporation void, or at
least unenforceable, and prevents the maintenance
by the corporation of any action on such contracts.
Although the usual construction is to the contrary, and
to the effect that only the remedy for enforcement is
affected thereby, a statute prohibiting a non-
complying corporation from suing in the state courts
on any contract has been held by some courts to
render the contract void and unenforceable by the
corporation, even after its has complied with the
statute." (36 Am. Jur. 2d 299-300).

xxx xxx xxx

The said Civil Case No. 71923 was dismissed by this Court. As the insurance
contract involved herein was executed on January 20, 1967, the instant case should
also be dismissed.

We resolved to consolidate the two cases when we gave due course to the petition.

The petitioner raised the following assignments of errors:

First Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN CONSIDERING AS AN ISSUE THE

LEGAL EXISTENCE OR CAPACITY OF PLAINTIFF-APPELLANT.

Second Assignment of Error

THE HONORABLE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON

THE FINDING THAT PLAINTIFF-APPELLANT HAS NO CAPACITY TO SUE.

On the basis of factual and equitable considerations, there is no question that the private
respondents should pay the obligations found by the trial court as owing to the petitioner. Only the
question of validity of the contracts in relation to lack of capacity to sue stands in the way of the
petitioner being given the affirmative relief it seeks. Whether or not the petitioner was engaged in
single acts or solitary transactions and not engaged in business is likewise not in issue. The
petitioner was engaged in business without a license. The private respondents' obligation to pay
under the terms of the contracts has been proved.

When the complaints in these two cases were filed, the petitioner had already secured the
necessary license to conduct its insurance business in the Philippines. It could already filed suits.
Petitioner was, therefore, telling the truth when it averred in its complaints that it was a foreign
insurance company duly authorized to do business in the Philippines through its agent Mr. Victor H.
Bello. However, when the insurance contracts which formed the basis of these cases were
executed, the petitioner had not yet secured the necessary licenses and authority. The lower court,
therefore, declared that pursuant to the basic public policy reflected in the Corporation Law, the
insurance contracts executed before a license was secured must be held null and void. The court
ruled that the contracts could not be validated by the subsequent procurement of the license.

The applicable provisions of the old Corporation Law, Act 1459, as amended are:

Sec. 68. No foreign corporation or corporations formed, organized, or existing under

any laws other than those of the Philippine Islands shall be permitted to transact
business in the Philippine Islands until after it shall have obtained a license for that
purpose from the chief of the Mercantile Register of the Bureau of Commerce and
Industry, (Now Securities and Exchange Commission. See RA 5455) upon order of
the Secretary of Finance (Now Monetary Board) in case of banks, savings, and loan
banks, trust corporations, and banking institutions of all kinds, and upon order of the
Secretary of Commerce and Communications (Now Secretary of Trade. See 5455,
section 4 for other requirements) in case of all other foreign corporations. ...

xxx xxx xxx

Sec. 69. No foreign corporation or corporation formed, organized, or existing under

any laws other than those of the Philippine Islands shall be permitted to transact
business in the Philippine Islands or maintain by itself or assignee any suit for the
recovery of any debt, claim, or demand whatever, unless it shall have the license
prescribed in the section immediately preceding. Any officer, director, or agent of the
corporation or any person transacting business for any foreign corporation not having
the license prescribed shag be punished by imprisonment for not less than six
months nor more than two years or by a fine of not less than two hundred pesos nor
more than one thousand pesos, or by both such imprisonment and fine, in the
discretion of the court.

As early as 1924, this Court ruled in the leading case of Marshall Wells Co. v. Henry W. Elser &
Co. (46 Phil. 70) that the object of Sections 68 and 69 of the Corporation Law was to subject the
foreign corporation doing business in the Philippines to the jurisdiction of our courts. The Marshall
Wells Co. decision referred to a litigation over an isolated act for the unpaid balance on a bill of
goods but the philosophy behind the law applies to the factual circumstances of these cases. The
Court stated:

xxx xxx xxx

Defendant isolates a portion of one sentence of section 69 of the Corporation Law

and asks the court to give it a literal meaning Counsel would have the law read thus:
"No foreign corporation shall be permitted to maintain by itself or assignee any suit
for the recovery of any debt, claim, or demand whatever, unless it shall have the
license prescribed in section 68 of the law." Plaintiff, on the contrary, desires for the
court to consider the particular point under discussion with reference to all the law,
and thereafter to give the law a common sense interpretation.

The object of the statute was to subject the foreign corporation doing business in the
Philippines to the jurisdiction of its courts. The object of the statute was not to
 prevent the foreign corporation from performing single acts, but to prevent it from
acquiring a domicile for the purpose of business without taking the steps necessary
to render it amenable to suit in the local courts. The implication of the law is that it
was never the purpose of the Legislature to exclude a foreign corporation which
happens to obtain an isolated order for business from the Philippines, from securing
redress in the Philippine courts, and thus, in effect, to permit persons to avoid their
contracts made with such foreign corporations. The effect of the statute preventing
foreign corporations from doing business and from bringing actions in the local
courts, except on compliance with elaborate requirements, must not be unduly
extended or improperly applied. It should not be construed to extend beyond the
plain meaning of its terms, considered in connection with its object, and in connection
with the spirit of the entire law. (State vs. American Book Co. [1904], 69 Kan, 1;
American De Forest Wireless Telegraph Co. vs. Superior Court of City & Country of
San Francisco and Hebbard [1908], 153 Cal., 533; 5 Thompson on Corporations, 2d
ed., chap. 184.)

Confronted with the option of giving to the Corporation Law a harsh interpretation,
which would disastrously embarrass trade, or of giving to the law a reasonable
interpretation, which would markedly help in the development of trade; confronted
with the option of barring from the courts foreign litigants with good causes of action
or of assuming jurisdiction of their cases; confronted with the option of construing the
law to mean that any corporation in the United States, which might want to sell to a
person in the Philippines must send some representative to the Islands before the
sale, and go through the complicated formulae provided by the Corporation Law with
regard to the obtaining of the license, before the sale was made, in order to avoid
being swindled by Philippine citizens, or of construing the law to mean that no foreign
corporation doing business in the Philippines can maintain any suit until it shall
possess the necessary license;-confronted with these options, can anyone doubt
what our decision will be? The law simply means that no foreign corporation shall be
permitted "to transact business in the Philippine Islands," as this phrase is known in
corporation law, unless it shall have the license required by law, and, until it complies
with the law, shall not be permitted to maintain any suit in the local courts. A contrary
holding would bring the law to the verge of unconstitutionality, a result which should
be and can be easily avoided. (Sioux Remedy Co. vs. Cope and
Cope, supra; Perkins, Philippine Business Law, p. 264.)

To repeat, the objective of the law was to subject the foreign corporation to the jurisdiction of our
courts. The Corporation Law must be given a reasonable, not an unduly harsh, interpretation which
does not hamper the development of trade relations and which fosters friendly commercial
intercourse among countries.

The objectives enunciated in the 1924 decision are even more relevant today when we view
commercial relations in terms of a world economy, when the tendency is to re-examine the political
boundaries separating one nation from another insofar as they define business requirements or
restrict marketing conditions.

We distinguish between the denial of a right to take remedial action and the penal sanction for non-
registration.

Insofar as transacting business without a license is concerned, Section 69 of the Corporation Law
imposed a penal sanction-imprisonment for not less than six months nor more than two years or
payment of a fine not less than P200.00 nor more than P1,000.00 or both in the discretion of the
court. There is a penalty for transacting business without registration.

And insofar as litigation is concerned, the foreign corporation or its assignee may not maintain any
suit for the recovery of any debt, claim, or demand whatever. The Corporation Law is silent on
whether or not the contract executed by a foreign corporation with no capacity to sue is null and void
ab initio.

We are not unaware of the conflicting schools of thought both here and abroad which are divided on
whether such contracts are void or merely voidable. Professor Sulpicio Guevarra in his
book Corporation Law (Philippine Jurisprudence Series, U.P. Law Center, pp. 233-234) cites an
Illinois decision which holds the contracts void and a Michigan statute and decision declaring them
merely voidable:

xxx xxx xxx

Where a contract which is entered into by a foreign corporation without complying

with the local requirements of doing business is rendered void either by the express
terms of a statute or by statutory construction, a subsequent compliance with the
statute by the corporation will not enable it to maintain an action on the contract.
(Perkins Mfg. Co. v. Clinton Const. Co., 295 P. 1 [1930]. See also Diamond Glue Co.
v. U.S. Glue Co., supra see note 18.) But where the statute merely prohibits the
maintenance of a suit on such contract (without expressly declaring the contract
"void"), it was held that a failure to comply with the statute rendered the
contract voidable and not void, and compliance at any time before suit was sufficient.
(Perkins Mfg. Co. v. Clinton Const. Co., supra.) Notwithstanding the above decision,
the Illinois statute provides, among other things that a foreign corporation that fails to
comply with the conditions of doing business in that state cannot maintain a suit or
action, etc. The court said: 'The contract upon which this suit was brought, having
been entered into in this state when appellant was not permitted to transact business
in this state, is in violation of the plain provisions of the statute, and is therefore null
and void, and no action can be maintained thereon at any time, even if the
corporation shall, at some time after the making of the contract, qualify itself to
transact business in this state by a compliance with our laws in reference to foreign
corporations that desire to engage in business here. (United Lead Co. v. J.M. Ready
Elevator Mfg. Co., 222 Ill. 199, 73 N.N. 567 [1906].)

A Michigan statute provides: "No foreign corporation subject to the provisions of this
Act, shall maintain any action in this state upon any contract made by it in this state
after the taking effect of this Act, until it shall have fully complied with the requirement
of this Act, and procured a certificate to that effect from the Secretary of State," It
was held that the above statute does not render contracts of a foreign corporation
that fails to comply with the statute void, but they may be enforced only after
compliance therewith. (Hastings Industrial Co. v. Moral, 143 Mich. 679,107 N.E. 706
[1906]; Kuennan v. U.S. Fidelity & G. Co., Mich. 122; 123 N.W. 799 [1909]; Despres,
Bridges & Noel v. Zierleyn, 163 Mich. 399, 128 N.W. 769 [1910]).

It has also been held that where the law provided that a corporation which has not
complied with the statutory requirements "shall not maintain an action until such
compliance". "At the commencement of this action the plaintiff had not filed the
certified copy with the country clerk of Madera County, but it did file with the officer
several months before the defendant filed his amended answer, setting up this
 defense, as that at the time this defense was pleaded by the defendant the plaintiff
had complied with the statute. The defense pleaded by the defendant was therefore
unavailable to him to prevent the plaintiff from thereafter maintaining the action.
Section 299 does not declare that the plaintiff shall not commence an action in any
county unless it has filed a certified copy in the office of the county clerk, but merely
declares that it shall not maintain an action until it has filled it. To maintain an action
is not the same as to commence an action, but implies that the action has already
been commenced." (See also Kendrick & Roberts Inc. v. Warren Bros. Co., 110 Md.
47, 72 A. 461 [1909]).

In another case, the court said: "The very fact that the prohibition against maintaining
an action in the courts of the state was inserted in the statute ought to be conclusive
proof that the legislature did not intend or understand that contracts made without
compliance with the law were void. The statute does not fix any time within which
foreign corporations shall comply with the Act. If such contracts were void, no suits
could be prosecuted on them in any court. ... The primary purpose of our statute is to
compel a foreign corporation desiring to do business within the state to submit itself
to the jurisdiction of the courts of this state. The statute was not intended to exclude
foreign corporations from the state. It does not, in terms, render invalid contracts
made in this state by non-complying corporations. The better reason, the wiser and
fairer policy, and the greater weight lie with those decisions which hold that where, as
here, there is a prohibition with a penalty, with no express or implied declarations
respecting the validity of enforceability of contracts made by qualified foreign
corporations, the contracts ... are enforceable ... upon compliance with the law."
(Peter & Burghard Stone Co. v. Carper, 172 N.E. 319 [1930].)

Our jurisprudence leans towards the later view. Apart from the objectives earlier cited from Marshall
Wells Co. v. Henry W. Elser & Co (supra), it has long been the rule that a foreign corporation
actually doing business in the Philippines without license to do so may be sued in our courts. The
defendant American corporation in General Corporation of the Philippines v. Union Insurance
Society of Canton Ltd et al. (87 Phil. 313) entered into insurance contracts without the necessary
license or authority. When summons was served on the agent, the defendant had not yet been
registered and authorized to do business. The registration and authority came a little less than two
months later. This Court ruled:

Counsel for appellant contends that at the time of the service of summons, the
appellant had not yet been authorized to do business. But, as already stated, section
14, Rule 7 of the Rules of Court makes no distinction as to corporations with or
without authority to do business in the Philippines. The test is whether a foreign
corporation was actually doing business here. Otherwise, a foreign corporation
illegally doing business here because of its refusal or neglect to obtain the
corresponding license and authority to do business may successfully though unfairly
plead such neglect or illegal act so as to avoid service and thereby impugn the
jurisdiction of the local courts. It would indeed be anomalous and quite prejudicial,
even disastrous, to the citizens in this jurisdiction who in all good faith and in the
regular course of business accept and pay for shipments of goods from America,
relying for their protection on duly executed foreign marine insurance policies made
payable in Manila and duly endorsed and delivered to them, that when they go to
court to enforce said policies, the insurer who all along has been engaging in this
business of issuing similar marine policies, serenely pleads immunity to local
jurisdiction because of its refusal or neglect to obtain the corresponding license to do
business here thereby compelling the consignees or purchasers of the goods insured
to go to America and sue in its courts for redress.
There is no question that the contracts are enforceable. The requirement of registration affects only
the remedy.

Significantly, Batas Pambansa Blg. 68, the Corporation Code of the Philippines has corrected the
ambiguity caused by the wording of Section 69 of the old Corporation Law.

Section 133 of the present Corporation Code provides:

SEC. 133. Doing business without a license.-No foreign corporation transacting

business in the Philippines without a license, or its successors or assigns, shag be
permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency in the Philippines; but such corporation may be sued or
proceeded against before Philippine courts or administrative tribunals on any valid
cause of action recognized under Philippine laws.

The old Section 69 has been reworded in terms of non-access to courts and administrative agencies
in order to maintain or intervene in any action or proceeding.

The prohibition against doing business without first securing a license is now given penal sanction
which is also applicable to other violations of the Corporation Code under the general provisions of
Section 144 of the Code.

It is, therefore, not necessary to declare the contract nun and void even as against the erring foreign
corporation. The penal sanction for the violation and the denial of access to our courts and
administrative bodies are sufficient from the viewpoint of legislative policy.

Our ruling that the lack of capacity at the time of the execution of the contracts was cured by the
subsequent registration is also strengthened by the procedural aspects of these cases.

The petitioner averred in its complaints that it is a foreign insurance company, that it is authorized to
do business in the Philippines, that its agent is Mr. Victor H. Bello, and that its office address is the
Oledan Building at Ayala Avenue, Makati. These are all the averments required by Section 4, Rule 8
of the Rules of Court. The petitioner sufficiently alleged its capacity to sue. The private respondents
countered either with an admission of the plaintiff's jurisdictional averments or with a general denial
based on lack of knowledge or information sufficient to form a belief as to the truth of the averments.

We find the general denials inadequate to attack the foreign corporations lack of capacity to sue in
the light of its positive averment that it is authorized to do so. Section 4, Rule 8 requires that "a party
desiring to raise an issue as to the legal existence of any party or the capacity of any party to sue or
be sued in a representative capacity shall do so by specific denial, which shag include such
supporting particulars as are particularly within the pleader's knowledge. At the very least, the private
respondents should have stated particulars in their answers upon which a specific denial of the
petitioner's capacity to sue could have been based or which could have supported its denial for lack
of knowledge. And yet, even if the plaintiff's lack of capacity to sue was not properly raised as an
issue by the answers, the petitioner introduced documentary evidence that it had the authority to
engage in the insurance business at the time it filed the complaints.

WHEREFORE, the petitions are hereby granted. The decisions of the respondent court are reversed
and set aside.
In L-34382, respondent Eastern Shipping Lines is ordered to pay the petitioner the sum of P1,630.22
with interest at the legal rate from January 5, 1968 until fully paid and respondent Angel Jose
Transportation Inc. is ordered to pay the petitioner the sum of P1,630.22 also with interest at the
legal rate from January 5, 1968 until fully paid. Each respondent shall pay one-half of the costs. The
counterclaim of Angel Jose Transportation Inc. is dismissed.

In L-34383, respondent N. V. Nedlloyd Lijnen, or its agent Columbian Phil. Inc. is ordered to pay the
petitioner the sum of P2,426.98 with interest at the legal rate from February 1, 1968 until fully paid,
the sum of P500.00 attorney's fees, and costs, The complaint against Guacods, Inc. is dismissed.

SO ORDERED.

G.R. No. 159586 July 26, 2004

EUROPEAN RESOURCES AND TECHNOLOGIES, INC. and DELFIN J.

WENCESLAO, petitioners,
vs.
INGENIEUBURO BIRKHAHN + NOLTE, Ingeniurgesellschaft mbh and HEERS &
BROCKSTEDT GMBH & CO., respondents.

DECISION

YNARES-SANTIAGO, J.:

Assailed in this Petition for Review under Rule 45 of the Rules of Court is the Decision1 of the Court
of Appeals dated May 15, 2003, which sustained the Order of the Regional Trial Court of Angeles
City, Branch 61, dated June 28, 2001, and its subsequent Resolution dated August 3, 2003 denying
petitioner‘s motion for reconsideration.

European Resources and Technologies Inc. (hereinafter "ERTI"), a corporation organized and
existing under the laws of the Republic of the Philippines, is joined by Delfin J. Wenceslao as
petitioner in this case. Ingenieuburo Birkhan + Nolte Ingiurgesellschaft mbh and Heers & Brockstedt
Gmbh & Co. are German corporations who are respondents in this case and shall be collectively
referred to as the "German Consortium".

The German Consortium tendered and submitted its bid to the Clark Development Corporation
("CDC") to construct, operate and manage the Integrated Waste Management Center at the Clark
Special Economic Zone ("CSEZ"). CDC accepted the German Consortium‘s bid and awarded the
contract to it. On October 6, 1999, CDC and the German Consortium executed the Contract for
Services2 which embodies the terms and conditions of their agreement.

The Contract for Services provides that the German Consortium shall be empowered to enter into a
contract or agreement for the use of the integrated waste management center by corporations, local
government units, entities, and persons not only within the CSEZ but also outside. For waste
collected within the CSEZ, the German Consortium may impose a "tipping fee" per ton of waste
collected from locators and residents of the CSEZ, which fees shall be subject to the schedule
agreed upon by the parties and specified in the Contract for Services. For its operations outside of
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 per year
of solid waste volume shall be collected from inside and outside the CSEZ.4 The contract has a term
of twenty-five (25) years,5 during which time the German Consortium shall operate the waste
management center on a day-to-day basis.6

Article VIII, Section 7 of the Contract for Services provides that the German Consortium shall
undertake to organize a local corporation as its representative for this project. On April 18, 2000, the
German Consortium entered into a Joint Venture with D.M. Wenceslao and Associates, Inc.
("DMWAI") and Ma. Elena B. Villarama (doing business as LBV and Associates), embodied in a
Memorandum of Understanding7 ("MOU") signed by the parties. Under the MOU, the parties agreed
to jointly form a local corporation to which the German Consortium shall assign its rights 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
Shareholders‘ Agreement within one (1) month from the execution of the MOU, which shall provide
that the German Consortium shall own fifteen percent (15%) of the equity in the joint venture
corporation, DMWAI shall own seventy percent (70%) and LBV&A shall own fifteen percent (15%).
In the event that the parties fail to execute the Shareholders‘ Agreement, the MOU shall be
considered null and void.8

On August 1, 2000, without the Shareholders‘ Agreement having 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 Contract for Services in favor of ERTI
and assigned unto ERTI, among others, "its license from CDC to engage in the business of providing
environmental services needed in the CSEZ in connection with the waste management within the
CSEZ and other areas."10 Likewise, the parties agreed that should there be a disagreement between
or among them relative to the interpretation or implementation of the MOA and the collateral
documents including but not limited to the Contract for Services between the German Consortium
and CDC, the dispute shall be referred to a panel of arbitrators.11

On December 11, 2000, ERTI received a letter from BN Consultants Philippines, Inc., signed by Mr.
Holger Holst for and on behalf of the German Consortium,12 stating that the German Consortium‘s
contract with DMWAI, LBV&A and ERTI has been terminated or extinguished on the following
grounds: (a) the CDC did not give its approval to the Consortium‘s request for the approval of the
assignment or transfer by the German Consortium in favor of ERTI of its rights and interests under
the Contract for Services; (b) the parties failed to prepare and finalize the Shareholders‘ Agreement
pursuant to the provision of the MOU; (c) there is no more factual or legal basis for the joint venture
to continue; and (d) with the termination of the MOU, the MOA is also deemed terminated or
extinguished.

Attached to the letter was a copy of the letter of the CDC,13 stating that the German Consortium‘s
assignment of an eighty-five percent (85%) majority interest to another party violated its
representation to undertake both the financial and technical aspects of the project. The dilution of the
Consortium‘s interest in ERTI is a substantial modification of the Consortium‘s representations which
were used as bases for the award of the project to it.

On February 20, 2001, petitioner ERTI, through counsel, sent a letter to CDC requesting for the
reconsideration of its disapproval of the agreement between ERTI and the German Consortium.
Before CDC could act upon petitioner ERTI‘s letter, the German Consortium filed a complaint for
injunction against herein petitioners before the Regional Trial Court of Angeles City, Branch 61,
docketed as Civil Case No. 10049. The German Consortium claimed that petitioner ERTI‘s
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 the Consortium and its exclusive
right to operate the waste management center at the CSEZ. Moreover, petitioner ERTI‘s acts
destroy the Consortium‘s credibility and undermine customer confidence in it. Hence, the German
Consortium prayed that a writ of temporary restraining order be issued against petitioner ERTI and,
after hearing, a writ of preliminary injunction be likewise issued ordering petitioner ERTI to cease
and desist from misrepresenting to third parties or the public that it has any right or interest in the
waste management center at CSEZ.14

Petitioners filed their Opposition to the application for preliminary injunction on February 7, 2001.
The following day, February 8, 2001, petitioners sent respondents, through Mr. Holger Holst, a letter
demanding that the parties proceed to arbitration in accordance with Section 17 of the MOA. At the
hearings on the application for injunction, petitioners objected to the presentation of evidence on the
ground that the trial court had no jurisdiction over 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 should be referred to arbitration.

The trial court overruled the objection and proceeded with the hearing. On June 28, 2001, the trial
court issued an Order granting the writ of preliminary injunction.15 Petitioners filed a motion for
reconsideration, which was denied in a Resolution dated November 21, 2001.

On January 17, 2002, petitioners filed a petition for certiorari and prohibition under Rule 65 of the
Rules of Court before the Court of Appeals, assailing the trial court‘s Orders dated June 28, 2001
and November 21, 2001.

Meanwhile, on February 11, 2002, the temporary restraining order issued was lifted in view of
respondents‘ failure to file sufficient bond.16 On September 6, 2002, all proceedings in Civil Case No.
10049 were suspended until the petition for certiorari pending before the Court of Appeals shall have
been resolved.17

On May 15, 2003, the Court of Appeals dismissed the petition for certiorari. Petitioners‘ Motion for
Reconsideration was denied in a Resolution dated August 25, 2003.

Hence, this petition arguing that the Court of Appeals committed reversible error in:

(a) Ruling that petitioners are estopped from assailing the capacity of the respondents to
institute the suit for injunction

(b) Ruling that respondents are entitled to an injunctive writ.

(c) Not holding that the dispute is covered by the arbitration clause in the memorandum of
agreement.

(d) Issuing the writ of preliminary injunction that is tantamount to a decision of the case on
the merits.18

The petition is partly meritorious.

There is no general rule or governing principle laid down as to what constitutes "doing" or "engaging
in" or "transacting" business in the Philippines. Thus, it has often been held that a single act or
transaction may be considered as "doing business" when a corporation performs acts for which it
was created or exercises some of the functions for which it was organized.19 We have held that the
act of participating in a bidding process constitutes "doing business" because it shows the foreign
corporation‘s intention to engage in business in the Philippines. In this regard, it is the performance
by a foreign corporation of the acts for which it was created, regardless of volume of business, that
determines whether a foreign corporation needs a license or not.20

Consequently, the German Consortium is doing business in the Philippines without the appropriate
license as required by our laws. By participating in the bidding conducted by the CDC for the
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 establishment of a
local corporation to serve as respondents‘ representative, it is clear from the other provisions of the
Contract for Services as well as the letter by the CDC containing the disapproval that it will be the
German Consortium which shall manage and conduct the operations of the waste management
center for at least twenty-five years. Moreover, the German Consortium was allowed to transact with
other entities outside the CSEZ for solid waste collection. Thus, it is clear that the local corporation
to be established will merely act as a conduit or extension of the German Consortium.

As a general rule, unlicensed foreign non-resident corporations cannot file suits in the Philippines.
Section 133 of the Corporation Code specifically provides:

SECTION 133. No foreign corporation transacting business in the Philippines without a

license, or its successors or assigns, shall be permitted to maintain or intervene in any
action, suit or proceeding in any court or administrative agency of the Philippines, but such
corporation may be sued or proceeded against before Philippine courts or administrative
tribunals on any valid cause of action recognized under Philippine laws.

A corporation has legal status only within the state or territory in which it was organized. For this
reason, a corporation organized in another country has no 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 Securities and Exchange Commission (SEC) and appoint
an agent for service of process. Without such license, it cannot institute a suit in the Philippines.21

However, there are exceptions to this rule. In a number of 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 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", from using its corporate name, letter
heads, envelopes, sign boards and business dealings as well as the foreign corporation‘s trademark.
The case arose when the foreign corporation discovered that the local corporation has violated
certain contractual commitments as stipulated in their agreement. In said case, we held that a
foreign corporation doing business in the Philippines without license may sue in Philippine Courts a
Philippine citizen or entity that had contracted with and benefited from it.

Hence, the party is estopped from questioning the capacity of a foreign corporation to institute an
action in our courts where it had obtained benefits from its dealings with such foreign corporation
and thereafter committed a breach of or sought to renege on its obligations. The rule relating to
estoppel is deeply rooted in the axiom of commodum ex injuria sua non habere debet—no person
ought to derive any advantage from his own wrong.
In the case at bar, petitioners have clearly not received any benefit from its transactions with the
German Consortium. In fact, there is no question that petitioners were the ones who have expended
a 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
challenging respondents‘ capacity to sue. The reverse could not be any more accurate. Petitioners
are insisting on the full validity and implementation of their agreements with the German Consortium.

To rule that the German Consortium has the capacity to institute an action against petitioners even
when the latter have not committed any breach of its obligation would be tantamount to an
unlicensed foreign corporation gaining access to our courts for protection and redress. We cannot
allow this without violating the very rationale for the law prohibiting a foreign corporation not licensed
to do business in the Philippines from suing or maintaining an action in Philippine courts. The object
of requiring a license is not to prevent the foreign corporation from performing single acts, but to
prevent it from acquiring domicile for the 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 where it takes the good without accepting the bad.

On the issue of whether the respondents were entitled to the injunctive writ, the petitioners claim that
respondents‘ right is not in esse but is rather a future right which is contingent upon a judicial
declaration that the MOA has been validly rescinded. The Court of Appeals, in its decision, held that
the MOA should be deemed subject to a suspensive condition, that is, that CDC‘s prior written
consent must be obtained for the validity of the assignment.

This issue must be resolved in a separate proceeding. It must be noted that the hearing conducted
in the trial court was merely a preliminary hearing relating to the issuance of the injunctive writ. In
order to fully appreciate the facts of this case and the surrounding circumstances relating to the
agreements and contract involved, further proof should be presented for consideration of the court.
Likewise, corollary matters, such as whether either of the parties is liable for damages and to what
extent, cannot be resolved with absolute certainty, thus rendering any decision we might make
incomplete as to fully dispose of this case.

More importantly, it is evident that CDC must be made a proper party in any case which seeks to
resolve the effectivity or ineffectivity of its disapproval of the assignment made between petitioners
and respondent German Consortium. Where, as in the instant case, CDC is not impleaded as a
party, any decision of the court which will inevitably affect or involve CDC cannot be deemed binding
on it.

For the same reason, petitioners‘ assertion that the instant case should be referred to arbitration
pursuant to the provision of the MOA is untenable.

We have ruled in several cases that arbitration agreements are valid, binding, enforceable and not
contrary to public policy such that when there obtains a written provision for arbitration which is not
complied with, the trial court should suspend the proceedings and order the parties to proceed to
arbitration in accordance with the terms of their agreement.25 In the case at bar, the MOA between
petitioner ERTI and respondent German Consortium provided:

17. Should there be a disagreement between or among the Parties relative to the
interpretation or implementation of this Agreement and the collateral documents including but
not limited to the Contract for Services between GERMAN CONSORTIUM and CDC and the
Parties cannot resolve the same by themselves, the same shall be endorsed to a panel of
arbitrators which shall be convened in accordance with the process ordained under the
Arbitration Law of the Republic of the Philippines.26
Indeed, to brush aside a contractual agreement calling for arbitration in case of disagreement
between parties would be a step backward.27 But there are exceptions to this rule. Even if there is an
arbitration clause, there are instances when referral to 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 efficiently resolved in its entirety if we allow
simultaneous arbitration proceedings and trial, or suspension of trial pending arbitration.28

As discussed earlier, the dispute between respondent German Consortium and petitioners involves
the disapproval by the CDC of the assignment by the German Consortium of its rights under the
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 brought
before an arbitration panel, the decision will not be binding upon CDC who is a non-party to the
arbitration agreement. What is more, the arbitration panel will not be able to completely dispose of all
the issues of this case without including CDC in its proceedings. Accordingly, the interest of justice
would only be served if the trial court hears and adjudicates the case in a single and complete
proceeding.

Lastly, petitioners question the propriety of the issuance of writ of preliminary injunction claiming that
such is already tantamount to granting the main prayer of respondents‘ complaint without the benefit
of a trial. Petitioners point out that the purpose of a preliminary injunction is to prevent threatened or
continuous irremediable injury to some of the parties before their claims can be thoroughly studied
and decided. It cannot be used to railroad the main case and seek a judgment without a full-blown
trial as in the instant case.

The Court of Appeals ruled that since petitioners did not raise this issue during the hearing on the
application for preliminary injunction before the trial court, the same cannot be raised for the first
time on appeal and even in special civil actions for certiorari as in this case.

At the outset, it must be noted that with the finding that the German Consortium is without any
personality to file the petition with the trial court, the propriety of the injunction writ issued is already
moot and academic. Even assuming for the sake of argument that respondents have the capacity to
file the petition, we find merit in the issue raised by petitioners against the injunction writ issued.

Before an injunctive writ can be issued, it is essential that the following requisites are present: (1)
there must be a right in esse or the existence of a right to be protected; and (2) the act against which
injunction to be directed is a violation of such right.29 The onus probandi is on movant to show that
there exists a right to be protected, which is directly threatened by the act sought to be enjoined.
Further, there must be a showing that the invasion of the right is material and substantial and that
there is an urgent and paramount necessity for the writ to prevent a serious damage.30

Thus, it is clear that for the issuance of the writ of preliminary injunction to be proper, it must be
shown that the invasion of the right sought to be protected is material and substantial, that the right
of complainant is clear and unmistakable and that there is an urgent and paramount necessity for
the writ to prevent serious damage.31 At the time of its application for an injunctive writ, respondents‘
right to operate and manage the waste management center, to the exclusion of or without any
participation by petitioner ERTI, cannot be said to be clear and unmistakable. The MOA executed
between respondents and petitioner ERTI has not yet been judicially declared as rescinded when
the complaint was lodged in court.32 Hence, a cloud of doubt exists over respondent German
Consortium‘s exclusive right relating to the waste management center.

WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 68923 dated May 15, 2003
is REVERSED and SET ASIDE. The Orders of the trial court dated June 28, 2001 and November
21, 2001 are ANNULLED and SET ASIDE and Civil Case No. 10049 is DISMISSED for lack of legal
capacity of respondents to institute the action. Costs against respondents.

SO ORDERED.

G.R. No. 154618 April 14, 2004

AGILENT TECHNOLOGIES SINGAPORE (PTE) LTD., petitioner,

vs.
INTEGRATED SILICON TECHNOLOGY PHILIPPINES CORPORATION, TEOH KIANG HONG,
TEOH KIANG SENG, ANTHONY CHOO, JOANNE KATE M. DELA CRUZ, JEAN KAY M. DELA
CRUZ and ROLANDO T. NACILLA, respondents.

DECISION

YNARES-SANTIAGO, J.:

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 Civil Case No. 3123-2001-C and annulled and set aside the
Order dated September 4, 2001 issued by the Regional Trial Court of Calamba, Laguna, Branch 92.

Petitioner Agilent Technologies Singapore (Pte.), Ltd. ("Agilent") is a foreign corporation, which, by
its own admission, is not licensed to do business in the Philippines.1 Respondent Integrated Silicon
Technology Philippines Corporation ("Integrated Silicon") is a private domestic corporation, 100%
foreign owned, which is engaged in the business of manufacturing and assembling electronics
components.2 Respondents Teoh Kiang Hong, Teoh Kiang Seng and Anthony Choo, Malaysian
nationals, are current members of Integrated Silicon‘s board of directors, while Joanne Kate M. dela
Cruz, Jean Kay M. dela Cruz, and Rolando T. Nacilla are its former members.3

The juridical relation among the various parties in this case can be traced to a 5-year Value Added
Assembly Services Agreement ("VAASA"), entered into on April 2, 1996 between Integrated Silicon
and the Hewlett-Packard Singapore (Pte.) Ltd., Singapore 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, for its part, was to consign raw
materials to Integrated Silicon; transport machinery to the plant of Integrated Silicon; and pay
Integrated Silicon the purchase price of the finished products.5 The VAASA had a five-year term,
beginning on April 2, 1996, with a provision for annual renewal by mutual written consent.6 On
September 19, 1999, with the consent of Integrated Silicon,7 HP-Singapore assigned all its rights
and obligations in the VAASA to Agilent.8

On May 25, 2001, Integrated Silicon filed a complaint for "Specific Performance and Damages"
against Agilent and its officers Tan Bian Ee, Lim Chin Hong, Tey Boon Teck and Francis Khor,
docketed as Civil Case No. 3110-01-C. It alleged that Agilent breached the parties‘ oral agreement
to extend the VAASA. Integrated Silicon thus prayed that defendant be ordered to execute a written
extension of the VAASA for a period of five years as earlier assured and promised; to comply with
the extended VAASA; and to pay actual, moral, exemplary damages and attorney‘s fees.9

On June 1, 2001, summons and a copy of the complaint were served on Atty. Ramon Quisumbing,
who returned these processes on the claim that he was not the registered agent of Agilent. Later, he
entered a special appearance to assail the court‘s jurisdiction over the person of Agilent.
On July 2, 2001, Agilent filed a separate complaint against 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 Possession, and Sum of Money with Replevin,
Preliminary Mandatory Injunction, and Damages", before the Regional Trial Court, Calamba,
Laguna, Branch 92, docketed as Civil Case No. 3123-2001-C. Agilent prayed that a writ of replevin
or, in the alternative, a writ of preliminary mandatory injunction, be issued ordering defendants to
immediately return and deliver to plaintiff its equipment, machineries and the materials to be used for
fiber-optic components which were left in the plant of Integrated Silicon. It further prayed that
defendants be ordered to pay actual and exemplary damages and attorney‘s fees.11

Respondents filed a Motion to Dismiss in Civil Case No. 3123-2001-C,12 on the grounds of lack of
Agilent‘s legal capacity to sue;13 litis pendentia;14 forum shopping;15 and failure to state a cause of
action.16

On September 4, 2001, the trial court denied the Motion to Dismiss and granted petitioner Agilent‘s
application for a writ of replevin.17

Without filing a motion for reconsideration, respondents filed a petition for certiorari with the Court of
Appeals.18

In the meantime, upon motion filed by respondents, Judge Antonio S. Pozas of Branch 92 voluntarily
inhibited himself in Civil Case No. 3123-2001-C. The case was re-raffled and assigned to Branch 35,
the same branch where Civil Case No. 3110-2001-C is pending.

On August 12, 2002, the Court of Appeals granted respondents‘ petition for certiorari, set aside the
assailed Order of the trial court dated September 4, 2001, and ordered the dismissal of Civil Case
No. 3123-2001-C.

Hence, the instant petition raising the following errors:

I.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT DISMISSING

RESPONDENTS‘ PETITION FOR CERTIORARI FOR RESPONDENTS‘ FAILURE TO FILE A
MOTION FOR RECONSIDERATION BEFORE RESORTING TO THE REMEDY OF CERTIORARI.

II.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND SETTING

ASIDE THE TRIAL COURT‘S ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE
DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE GROUND OF LITIS PENDENTIA,
ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.

III.

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ANNULLING AND SETTING

ASIDE THE TRIAL COURT‘S ORDER DATED 4 SEPTEMBER 2001 AND ORDERING THE
DISMISSAL OF CIVIL CASE NO. 3123-2001-C BELOW ON THE GROUND OF FORUM
SHOPPING, ON ACCOUNT OF THE PENDENCY OF CIVIL CASE NO. 3110-2001-C.

IV.
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN ORDERING THE DISMISSAL
OF CIVIL CASE NO. 323-2001-C BELOW INSTEAD OF ORDERING IT CONSOLIDATED WITH
CIVIL CASE NO. 3110-2001-C.19

The two primary issues raised in this petition: (1) whether or not the Court of Appeals committed
reversible error in giving due course to respondents‘ petition, notwithstanding the failure to file a
Motion for Reconsideration of the September 4, 2001 Order; and (2) whether or not the Court of
Appeals committed reversible error in dismissing Civil Case No. 3123-2001-C.

We find merit in the petition.

The Court of Appeals, citing the case of Malayang Manggagawa sa ESSO v. ESSO Standard
Eastern, Inc.,20 held that the lower court had no jurisdiction over Civil Case No. 3123-2001-C
because of the pendency of Civil Case No. 3110-2001-C and, therefore, a motion for reconsideration
was not necessary before resort to a petition for certiorari. This was error.

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

The Court of Appeals‘ ruling that the assailed Order issued by the RTC of Calamba, Branch 92, was
a nullity for lack of jurisdiction due to litis pendentia and forum shopping, has no legal basis. The
pendency of another action does not strip a court of the jurisdiction granted by law.

The Court of Appeals further ruled that a Motion for Reconsideration was not necessary in view of
the urgent necessity in this case. We are not convinced. In the case of Bache and Co. (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 Internal Revenue
against petitioner corporation, on account of which immediate and more direct action becomes
necessary." Tax assessments in that case were based on documents seized by virtue of an illegal
search, and the deprivation of the right to due process tainted the entire proceedings with illegality.
Hence, the urgent necessity of preventing the enforcement of the tax assessments was patent.
Respondents, on the other hand, cite the case of Geronimo v. Commission on Elections,23 where the
urgent necessity of resolving a disqualification case for a position in local government warranted the
expeditious resort to certiorari. In the case at bar, there is no analogously urgent circumstance which
would necessitate the relaxation of the rule on a Motion for Reconsideration.

Indeed, none of the exceptions for dispensing with a Motion for Reconsideration is present here.
None of the following cases cited by respondents serves as adequate basis for their procedural
lapse.

In Vigan Electric Light Co., Inc. v. Public Service Commission,24 the questioned order was null and
void for failure of respondent tribunal to comply with due process requirements; in Matanguihan v.
Tengco,25 the questioned order was a patent nullity for failure to acquire jurisdiction over the
defendants, which fact the records plainly disclosed; and in National Electrification Administration v.
Court of Appeals,26 the questioned orders were void for 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 for
dispensing with a Motion for Reconsideration, in the case of Vivo v. Cloribel,27 cited by respondents,
the slow progress of the case would have rendered the issues moot had a motion for reconsideration
been availed of. We find no such urgent circumstance in the case at bar.
Respondents, therefore, availed of a premature remedy when they immediately raised the matter to
the Court of Appeals on certiorari; and the appellate court committed reversible error when it took
cognizance of respondents‘ petition instead of dismissing the same outright.

We come now to the substantive issues of the petition.

Litis pendentia is a Latin term which literally means "a pending suit." It is variously referred to in
some decisions as lis pendens and auter action pendant. While it is normally connected with the
control which the court has on a property involved in a suit during the continuance proceedings, it is
more interposed as a ground for the dismissal of a civil action pending in court.

Litis pendentia as a ground for the dismissal of a civil action refers to that situation wherein another
action is pending between the same parties for the same cause of action, such that the second
action becomes unnecessary and vexatious. For litis pendentia to be invoked, the concurrence of
the following requisites is necessary:

(a) identity of parties or at least such as represent the same interest in both actions;

(b) identity of rights asserted and reliefs prayed for, the reliefs being founded on the same
facts; and

(c) the identity in the two cases should be such that the judgment that may be rendered in
one would, regardless of which party is successful, amount to res judicata in the other.28

The Court of Appeals correctly appreciated the identity of parties in Civil Cases No. 3123-2001-C
and 3110-2001-C. Well-settled is the rule that lis pendens requires only substantial, and not
absolute, identity of parties.29 There is substantial identity of parties when there is a community of
interest between a party in the first case and a party in the second case, even if the latter was not
impleaded in the first case.30 The parties in these cases are vying over the interests of the two
opposing corporations; the individuals are only incidentally impleaded, being the natural persons
purportedly accused of violating these corporations‘ rights.

Likewise, the fact that the positions of the parties are reversed, i.e., the plaintiffs in the first case are
the defendants in the second case or vice versa, does not negate the identity of parties for purposes
of determining whether the case is dismissible on the ground of litis pendentia.31

The identity of parties notwithstanding, litis pendentia does not obtain in this case because of the
absence of the second and third requisites. The rights asserted in each of the cases involved are
separate and distinct; there are two subjects of controversy presented for adjudication; and two
causes of action are clearly involved. The fact that respondents instituted a prior action for "Specific
Performance and Damages" is not a ground for defeating the petitioners‘ action for "Specific
Performance, Recovery of Possession, and Sum of Money with Replevin, Preliminary Mandatory
Injunction, and Damages."

In Civil Case No. 3110-2001-C filed by respondents, the issue is whether or not there was a breach
of an oral promise to renew of the VAASA. The issue in Civil Case No. 3123-2001-C, filed by
petitioner, is whether petitioner has the right to take possession of the subject properties. Petitioner‘s
right of possession is founded on the ownership of the subject goods, which ownership is not
disputed and is not contingent on the extension or non-extension of the VAASA. Hence, the replevin
suit can validly be tried even while the prior suit is being litigated in the Regional Trial Court.
Possession of the subject properties is not an issue in Civil Case No. 3110-2001-C. The reliefs
sought by respondent Integrated Silicon therein are as follows: (1) execution of a written extension
or renewal of the VAASA; (2) compliance with the extended VAASA; and (3) payment of overdue
accounts, damages, and attorney‘s fees. The reliefs sought by petitioner Agilent in Civil Case No.
3123-2001-C, on the other hand, are as follows: (1) issuance of a Writ of Replevin or Writ of
Preliminary Mandatory Injunction; (2) recovery of possession of the subject properties; (3) damages
and attorney‘s fees.

Concededly, some items or pieces of evidence may be admissible in both actions. It cannot be said,
however, that exactly the same evidence will support the decisions in both, since the legally
significant and controlling facts in each case are entirely different. Although the VAASA figures
prominently in both suits, Civil Case No. 3110-2001-C is premised on a purported breach of an oral
obligation to extend the VAASA, and damages arising out of Agilent‘s alleged failure to comply with
such purported extension. Civil Case No. 3123-2001-C, on the other hand, is premised on a breach
of the VAASA itself, and damages arising to Agilent out of that purported breach.

It necessarily follows that the third requisite for litis pendentia is also absent. The following are the
elements of res judicata:

(a) The former judgment must be final;

(b) The court which rendered judgment must have jurisdiction over the parties and the
subject matter;

(c) It must be a judgment on the merits; and

(d) There must be between the first and second actions identity of parties, subject matter,
and cause of action.32

In this case, any judgment rendered in one of the actions will not amount to res judicata in the other
action. There being different causes of action, the decision in one case will not constitute res judicata
as to the other.

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 identity of the causes of action. Whatever difficulties or inconvenience
may be entailed if both causes of action are 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 discovery, may well be considered by the court below to
subserve not only procedural expedience but, more important, the ends of justice.33

We now proceed to the issue of forum shopping.

The test for determining whether a party violated the rule against forum-shopping was laid down in
the case of Buan v. Lopez.34 Forum shopping exists where the elements of litis pendentia are
present, or where a final judgment in one case will amount to res judicata in the final other. There
being no litis pendentia in this 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 shopping must likewise fail.

We are not unmindful of the afflictive consequences that may be suffered by both petitioner and
respondents if replevin is granted by the trial court in Civil Case No. 3123-2001-C. If respondent
Integrated Silicon eventually wins Civil Case No. 3110-2001-C, and the VAASA‘s terms are
extended, petitioner corporation will have to comply with its obligations thereunder, which would
include the consignment of properties similar to those it may recover by way of replevin in Civil Case
No. 3123-2001-C. However, petitioner will also suffer an injustice if denied the remedy of replevin,
resort to which is not only allowed but encouraged by law.

Respondents argue that since Agilent is an unlicensed foreign corporation doing business in the
Philippines, it lacks the legal capacity to file suit.35 The assailed acts of petitioner Agilent, purportedly
in the nature of "doing business" in the Philippines, are the following: (1) mere entering into the
VAASA, which is a "service contract";36 (2) appointment of a full-time representative in Integrated
Silicon, to "oversee and supervise the production" of Agilent‘s products;37 (3) the appointment by
Agilent of six full-time staff members, who were permanently stationed at Integrated Silicon‘s
facilities in order to inspect the finished goods for Agilent;38 and (4) Agilent‘s participation in the
management, supervision and control of Integrated Silicon,39 including instructing Integrated Silicon
to hire more employees to meet Agilent‘s increasing production needs,40 regularly performing quality
audit, evaluation and supervision of Integrated Silicon‘s employees,41 regularly performing inventory
audit of raw 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, volume and models of the products to manufacture and ship for Agilent.43

A foreign corporation without a license is not ipso facto incapacitated from bringing an action in
Philippine courts. A license is necessary only if a foreign corporation is "transacting" or "doing
business" in the country. The Corporation Code provides:

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 any action, suit or proceeding in any court or administrative agency
of the Philippines; but such corporation may be sued or proceeded against before Philippine
courts or administrative tribunals on any valid cause of action recognized under Philippine
laws.

The aforementioned provision prevents an unlicensed foreign corporation "doing business" in the
Philippines from accessing our courts.

In a number of cases, however, we have held that an unlicensed foreign corporation doing business
in the Philippines may bring suit in Philippine courts against a Philippine citizen or entity who had
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
acknowledged the same by entering into a contract with it. This doctrine of estoppel to deny
corporate existence and capacity applies to foreign as well as domestic corporations.45 The
application of this principle prevents 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.46

The principles regarding the right of a foreign corporation to bring suit in Philippine courts may thus
be condensed in four statements: (1) if a foreign corporation does business in the Philippines without
a license, it cannot sue before the Philippine courts;47 (2) if a foreign corporation is not doing
business in the Philippines, it needs no license to sue before Philippine courts on an isolated
transaction or on a cause of action entirely independent of any business transaction48; (3) if a foreign
corporation does business in the Philippines without a license, a Philippine citizen or entity which
has contracted with said corporation may be estopped from challenging the foreign corporation‘s
corporate personality in a suit brought before Philippine courts;49 and (4) if a foreign corporation does
business in the Philippines with the required license, it can sue before Philippine courts on any
transaction.

The challenge to Agilent‘s legal capacity to file suit hinges on whether or not it is doing business in
the Philippines. However, there is no definitive rule on what constitutes "doing", "engaging in", or
"transacting" business in the Philippines, as this Court observed in the case of Mentholatum v.
Mangaliman.50 The Corporation Code itself is silent as to what acts constitute doing or transacting
business in the Philippines.

Jurisprudence has it, however, that the term "implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of
some of the functions normally incident to or in progressive prosecution of the purpose and subject
of its organization."51

In Mentholatum,52 this Court discoursed on the two general tests to determine whether or not a
foreign corporation can be considered as "doing business" in the Philippines. The first of these is
the substance test, thus:53

The true test [for doing business], however, seems to be whether the foreign corporation is
continuing the body of the business or enterprise for which it was organized or whether it has
substantially retired from it and turned it over to another.

The second test is the continuity test, expressed thus:54

The term [doing business] implies a continuity of commercial dealings and arrangements,
and contemplates, to that extent, the performance of acts or works or the exercise of some of
the functions normally incident to, and in the progressive prosecution of, the purpose and
object of its organization.

Although each case must be judged in light of its attendant circumstances, jurisprudence has
evolved several guiding principles for the application of these tests. For instance, considering that it
transacted with its Philippine counterpart for 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 Philippines. In Commissioner of Internal Revenue v. Japan Airlines
("JAL"),56 the Court held that JAL was doing business in the Philippines, i.e., its commercial dealings
in the country were continuous – despite the fact that no JAL aircraft landed in the country – as it
sold tickets in the Philippines through a general sales agent, and opened a promotions office here as
well.

In General Corp. of the Phils. v. Union Insurance Society of Canton and Fireman’s Fund
Insurance,57 a foreign insurance corporation was held to be doing business in the Philippines, as it
appointed a settling agent here, and issued 12 marine insurance policies. We held that these
transactions were not isolated or casual, but manifested the continuity of the foreign corporation‘s
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 corporation sold its products to a Filipino buyer who ordered the
goods 16 times within an eight-month period. Accordingly, this Court ruled that the corporation was
doing business in the 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. Court of Appeals, ITEC, et al.59 and Top-Weld Manufacturing v. ECED, IRTI, et
al.60 both involved the License and Technical Agreement and Distributor Agreement of foreign
corporations with their respective local counterparts that were the primary bases for the Court‘s
ruling that the foreign corporations were doing business in the Philippines.61 In particular, the Court
cited the highly restrictive nature of certain provisions in the agreements involved, 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 deemed
the "No Competing Product" provision of the Representative Agreement therein restrictive.62

The case law definition has evolved into a statutory definition, having been adopted with some
qualifications in various pieces of legislation. The Foreign Investments Act of 1991 (the "FIA";
Republic Act No. 7042, as amended), defines "doing business" as follows:

Sec. 3, par. (d). The phrase "doing business" shall include soliciting orders, service
contracts, opening offices, whether called "liaison" offices or branches; appointing
representatives or distributors domiciled in the Philippines or who in any calendar year stay
in the country for a period or periods totaling one hundred eighty (180) days or more;
participating in the management, supervision or control of any domestic business, firm,
entity, or corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the performance of
acts or works, or the exercise of some of the functions normally incident to, and in the
progressive prosecution of, commercial gain or of the purpose and object of the business
organization.

An analysis of the relevant case law, in conjunction with Section 1 of the Implementing Rules
and Regulations of the FIA (as amended by Republic Act No. 8179), would demonstrate that
the acts enumerated in the VAASA do not constitute "doing business" in the Philippines.

Section 1 of the Implementing Rules and Regulations of the FIA (as amended by Republic
Act No. 8179) provides that the following shall not be deemed "doing business":

(1) Mere investment as a shareholder by a foreign entity in domestic corporations

duly registered to do business, and/or the exercise of rights as such investor;

(2) Having a nominee director or officer to represent its interest in such corporation;

(3) Appointing a representative or distributor domiciled in the Philippines which

transacts business in the representative‘s or distributor‘s own name and account;

(4) The publication of a general advertisement through any print or broadcast media;

(5) Maintaining a stock of goods in the Philippines solely for the purpose of having
the same processed by another entity in the Philippines;

(6) Consignment by a foreign entity of equipment with a local company to be used in

the processing of products for export;

(7) Collecting information in the Philippines; and

(8) Performing services auxiliary to an existing isolated contract of sale which are not
on a continuing basis, such as installing in the Philippines machinery it has
manufactured or exported to the Philippines, servicing the same, training domestic
workers to operate it, and similar incidental services.
 By and large, to constitute "doing business", the activity to be undertaken in the Philippines is
one that is for profit-making.63

By the clear terms of the VAASA, Agilent‘s activities in the Philippines were confined to (1)
maintaining a stock of goods in the 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 export. As such, we hold that, based on the evidence presented thus far,
Agilent cannot be deemed to be "doing business" in the Philippines. Respondents‘ contention that
Agilent lacks the legal capacity to file suit is therefore devoid of merit. As a foreign corporation not
doing business in the Philippines, it needed no license before it can sue before our courts.

Finally, as to Agilent‘s purported failure to state a cause of action against the individual respondents,
we likewise rule in favor of petitioner. A Motion to Dismiss hypothetically admits all the allegations in
the Complaint, which plainly alleges that these individual respondents had committed or permitted
the commission of acts prejudicial to Agilent. Whether or not these individuals had divested
themselves of their interests in Integrated Silicon, or are no longer members of Integrated Silicon‘s
Board of Directors, is a matter of defense best threshed out during trial.

WHEREFORE, PREMISES CONSIDERED, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. SP No. 66574 dated August 12, 2002, which dismissed Civil Case No. 3123-
2001-C,

is REVERSED and SET ASIDE. The Order dated September 4, 2001 issued by the Regional Trial
Court of Calamba, Laguna, Branch 92, in Civil Case No. 3123-2001-C, is REINSTATED. Agilent‘s
application for a Writ of Replevin is GRANTED.

No pronouncement as to costs.

SO ORDERED.

National Equipment Rental, Ltd. v. Szukhent, 375 U.S. 311 (1964)

National Equipment Rental, Ltd. v. Szukhent

No. 81

Argued November 20, 1963

Decided January 6, 1964

375 U.S. 311

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus
Petitioner, a corporation with its principal place of business in New York, sued
respondents, residents of Michigan, in a federal court in New York, claiming that
respondents had defaulted in payments due under a farm equipment lease. The lease
was on a printed form, 1 1/2 pages in length, and consisted of 18 numbered
paragraphs. The last paragraph, appearing just above respondents' signatures,
provided that

"the Lessee hereby designates Florence Weinberg, 47-21 Forty-First Street, Long
Island City, N. Y., as agent for the purpose of accepting service of any process within
the State of New York."

The respondents were not acquainted with Florence Weinberg, and she had not
expressly undertaken to transmit notice to them. The Marshal delivered two copies of
the summons and complaint to Florence Weinberg. That same day, she mailed the
summons and complaint to the respondents, together with a letter stating that the
documents had been served upon her as the respondents' agent for the purpose of
accepting service of process in New York, in accordance with the agreement contained
in the lease. The petitioner itself also notified the respondents by certified mail of the
service of process upon Florence Weinberg.

Held: prompt notice to the respondents having been given, Florence Weinberg was their
"agent authorized by appointment" to receive process within the meaning of Federal
Rule of Civil Procedure 4(d)(1). Pp. 375 U. S. 316-318.

(a) No questions of subject matter jurisdiction or of venue are here presented. Federal
jurisdiction existed by reason of diversity of citizenship. 28 U.S.C. § 1332. P. 375 U. S.
313, n. 2.

(b) Since the respondents did in fact receive complete and timely notice of the lawsuit
pending against them, no question of due process is reached or decided. P. 375 U. S.
315.

(c) Parties to a contract may agree in advance to submit to the jurisdiction of a given
court, to permit notice to be served by the opposing party, or even to waive notice
altogether. P. 375 U. S. 315.

(d) Florence Weinberg's prompt acceptance and transmittal to the respondents of the
summons and complaint pursuant to the

Page 375 U. S. 312

authorization was itself sufficient to validate the agency, even though there was no
explicit previous promise on her part to do so. P. 375 U. S. 310.

(e) There is no relevant concept of state law which would invalidate the agency here at
issue. P. 375 U. S. 316.
(f) The fact that the designated agent was not personally known to the respondents at
the time of her appointment, and that she may be related to an officer of the petitioner
corporation, did not invalidate the agency. P. 375 U. S. 317.

(g) The case of Rosenthal v. United Transp. Co., 196 App. Div. 540, 188 N.Y.S. 154, is
inapposite. P. 375 U. S. 317, n. 8.

311 F.2d 79, reversed.

MR. JUSTICE STEWART delivered the opinion of the Court.

The Federal Rules of Civil Procedure provide that service of process upon an individual
may be made "by delivering a copy of the summons and of the complaint to an agent
authorized by appointment . . . to receive service of process." [Footnote 1] The
petitioner is a corporation with

Page 375 U. S. 313

its principal place of business in New York. It sued the respondents, residents of
Michigan, in a New York federal court, claiming that the respondents had defaulted
under a farm equipment lease. The only question now before us is whether the person
upon whom the summons and complaint were served was "an agent authorized by
appointment" to receive the same, so as to subject the respondents to the jurisdiction of
the federal court in New York. [Footnote 2]

The respondents obtained certain farm equipment from the petitioner under a lease
executed in 1961. The lease was on a printed form less than a page and a half in
length, and consisted of 18 numbered paragraphs. The last numbered paragraph,
appearing just above the respondents' signatures and printed in the same type used in
the remainder of the instrument, provided that

"the Lessee hereby designates Florence Weinberg, 47-21 Forty-first Street, Long Island
City, N.Y., as agent for the purpose of accepting service of any process within the State
of New York. [Footnote 3]"

The respondents were not acquainted with Florence Weinberg.

Page 375 U. S. 314

In 1962, the petitioner commenced the present action by filing in the federal court in
New York a complaint which alleged that the respondents had failed to make any of the
periodic payments specified by the lease. The Marshal delivered two copies of the
summons and complaint to Florence Weinberg. That same day, she mailed the
summons and complaint to the respondents, together with a letter stating that the
documents had been served upon her as the respondents' agent for the purpose of
accepting service of process in New York, in accordance with the agreement contained
in the lease. [Footnote 4] The petitioner itself also notified the respondents by certified
mail of the service of process upon Florence Weinberg.

Upon motion of the respondents, the District Court quashed service of the summons
and complaint, holding that, although Florence Weinberg had promptly notified the
respondents of the service of process and mailed copies of the summons and complaint
to them, the lease agreement itself had not explicitly required her to do so, and there
was therefore a "failure of the agency arrangement to achieve intrinsic and continuing
reality." 30 F.R.D. 3, 5. The Court of Appeals affirmed, 311 F.2d 79, and we granted
certiorari, 372 U.S. 974. For the reasons stated in this opinion, we have concluded that
Florence Weinberg was "an agent authorized by appointment . . . to receive service of
process," and accordingly we reverse the judgment before us.

Page 375 U. S. 315

We need not and do not in this case reach the situation where no personal notice has
been given to the defendant. Since the respondents did in fact receive complete and
timely notice of the lawsuit pending against them, no due process claim has been made.
The case before us is therefore quite different from cases where there was no actual
notice, such as Schroeder v. City of New York, 371 U. S. 208; Walker v. Hutchinson
City, 352 U. S. 112; and Mullane v. Central Hanover Tr. Co., 339 U. S. 306. Similarly, as
the Court of Appeals recognized, this Court's decision in Wuchter v. Pizzutti, 276 U. S.
13, is inapposite here. In that case, a state nonresident motorist statute which failed to
provide explicitly for communication of notice was held unconstitutional, despite the fact
that notice had been given to the defendant in that particular case. Wuchter dealt with
the limitations imposed by the Fourteenth Amendment upon a statutory scheme by
which a State attempts to subject nonresident individuals to the jurisdiction of its courts.
The question presented here, on the other hand, is whether a party to a private contract
may appoint an agent to receive service of process within the meaning of Federal Rule
of Civil Procedure 4(d)(1), where the agent is not personally known to the party and
where the agent has not expressly undertaken to transmit notice to the party.

The purpose underlying the contractual provision here at issue seems clear. The clause
was inserted by the petitioner and agreed to by the respondents in order to assure that
any litigation under the lease should be conducted in the State of New York. The
contract specifically provided that

"This agreement shall be deemed to have been made in Nassau County, New York,
regardless of the order in which the signatures of the parties shall be affixed hereto, and
shall be interpreted, and the rights and liabilities of the parties here determined, in
accordance with the laws of the State of New York."

And it is settled,

Page 375 U. S. 316

as the courts below recognized, that parties to a contract may agree in advance to
submit to the jurisdiction of a given court, to permit notice to be served by the opposing
party, or even to waive notice altogether. See, e.g., Kenny Construction Co. v.
Allen, 101 U.S.App.D.C. 334, 248 F.2d 656 (1957); Bowles v. J. J. Schmitt & Co.,
Inc., 170 F.2d 617 (C.A.2d Cir. 1948); Gilbert v. Burnstine, 255 N.Y. 348, 174 N.E. 706
(1931).

Under well settled general principles of the law of agency, Florence Weinberg's prompt
acceptance and transmittal to the respondents of the summons and complaint pursuant
to the authorization was itself sufficient to validate the agency, even though there was
no explicit previous promise on her part to do so.

"The principal's authorization may neither expressly nor impliedly request any
expression of assent by the agent as a condition of the authority, and in such a case
any exercise of power by the agent within the scope of the authorization, during the
term for which it was given, or within a reasonable time if no fixed term was mentioned,
will bind the principal."

2 Williston on Contracts (3d ed. 1959), § 274.

We deal here with a Federal Rule, applicable to federal courts in all 50 States. But even
if we were to assume that this uniform federal standard should give way to contrary
local policies, there is no relevant concept of state law which would invalidate the
agency here at issue. In Michigan, where the respondents reside, the statute which
validates service of process under the circumstances present in this case contains no
provision requiring that the appointed agent expressly undertake to notify the principal
of the service of process. [Footnote 5] Similarly, New York law, which it was agreed
should be applicable to the lease provisions, does not require any such express
promise by the agent in order to create a valid agency for receipt of

Page 375 U. S. 317

process. The New York statutory short form of general power of attorney, which
specifically includes the power to accept service of process, [Footnote 6] is entirely
silent as to any such requirement. [Footnote 7] Indeed, the identical contractual
provision at issue here has been held by a New York court to create a valid agency for
service of process under the law of that State. National Equipment Rental, Ltd. v.
Graphic Art Designers, Inc., 36 Misc.2d 442, 234 N.Y.S.2d 61. [Footnote 8]

It is argued, finally, that the agency sought to be created in this case was invalid
because Florence Weinberg may have had a conflict of interest. This argument is based
upon the fact that she was not personally known to the respondents at the time of her
appointment, and upon a suggestion in the record that she may be related to an officer
of the petitioner corporation. But such a contention ignores the narrowly limited nature
of the agency here involved. Florence Weinberg was appointed the respondents' agent
for the single purpose of receiving service of process. An agent with authority so limited
can in no meaningful sense be deemed to have had an interest antagonistic to the
respondents, since both the

Page 375 U. S. 318

petitioner and the respondents had an equal interest in assuring that, in the event of
litigation, the latter be given that adequate and timely notice which is a prerequisite to a
valid judgment. [Footnote 9]

A different case would be presented if Florence Weinberg had not given prompt notice
to the respondents, for then the claim might well be made that her failure to do so had
operated to invalidate the agency. We hold only that, prompt notice to the respondents
having been given, Florence Weinberg was their "agent authorized by appointment" to
receive process within the meaning of Federal Rule of Civil Procedure 4(d)(1).

The judgment of the Court of Appeals is reversed, and the case is remanded for further
proceedings consistent with this opinion.

It is so ordered.

[Footnote 1]

Federal Rule of Civil Procedure 4(d) provides, in pertinent part:

"(d) SUMMONS: PERSONAL SERVICE. The summons and complaint shall be served
together. The plaintiff shall furnish the person making service with such copies as are
necessary. Service shall be made as follows:"

"(1) Upon an individual other than an infant or an incompetent person, by delivering a

copy of the summons and of the complaint to him personally or by leaving copies
thereof at his dwelling house or usual place of abode with some person of suitable age
and discretion then residing therein or by delivering a copy of the summons and of the
complaint to an agent authorized by appointment or by law to receive service of
process."

[Footnote 2]

No questions of subject matter jurisdiction or of venue are presented. Federal

jurisdiction exists by reason of diversity of citizenship. 28 U.S.C. § 1332. Venue in the
United States District Court for the Eastern District of New York has not been contested.
28 U.S.C. § 1391.

[Footnote 3]

The paragraph in its entirety read as follows:

"This agreement shall be deemed to have been made in Nassau County, New York,
regardless of the order in which the signatures of the parties shall be affixed hereto, and
shall be interpreted, and the rights and liabilities of the parties here determined, in
accordance with the laws of the State of New York; and the Lessee hereby designates
Florence Weinberg, 47-21 Forty-first Street, Long Island City, N.Y., as agent for the
purpose of accepting service of any process within the State of New York."

[Footnote 4]

The complaint, summons, and covering letter were sent by certified mail, and the letter
read as follows:

"Gentlemen:"

"Please take notice that the enclosed Summons and Complaint was duly served upon
me this day by the United States Marshal, as your agent for the purpose of accepting
service of process within the State of New York, in accordance with your contract with
National Equipment Rental, Ltd."

Very truly yours,

Florence Weinberg

[Footnote 5]

Mich.Stat.Ann.1962, § 27 A. 1930, Comp.Laws 1948, § 600.1930 (Pub.Acts 1961, No.

236).

[Footnote 6]

McKinney's N.Y.Consol.Laws c. 20, General Business Law, § 229(6).

[Footnote 7]

McKinney's N.Y.Consol.Laws c. 20, General Business Law, § 220.

[Footnote 8]

It is argued that the state court decisions upholding the agency designation here at
issue would have been different if the case of Rosenthal v. United Transp. Co., 196
App.Div. 540, 188 N.Y.S. 154, had been brought to the attention of the
courts. Rosenthal interpreted the forerunner of § 227 of the Civil Practice Act, Gilbert-
Bliss' N.Y.Civ.Prac., Vol. 3A, 1942, § 227 (1963 Supp.), which creates a procedure
whereby a resident of New York may appoint an agent for the receipt of process by
designation of a person to receive service and the filing thereof with the County Clerk.
The Rosenthal case is entirely inapposite, because § 227 clearly applies only to
residents of New York who leave the State, and, even as to them, the provision is
permissive, rather than exclusive. Phillips v. Garramone, 36 Misc.2d 1041, 233
N.Y.S.2d 842; Torre v. Grasso, 11 Misc.2d 275, 173 N.Y.S.2d 828.

[Footnote 9]

There is no allegation that Weinberg had any pecuniary interest in the subject matter of
the litigation. Nor is the issue here the applicability of a statute which permits service on
a foreign corporation by service on persons who are generally authorized to act as
agents of the corporation, when the agent upon whom service is made has a personal
interest in suppressing notice of service; see, e.g., John W. Masury & Son v.
Lowther, 299 Mich. 516, 300 N.W. 866 (1941) (involving a garnishment proceeding in
which service under such a statute was attempted upon that employee of the foreign
corporation who had incurred the debt on which the suit was based, who therefore had
a personal interest in concealing from his employer the fact of service, and who did not
notify the employer that service had been made). See Hartsock v. Commodity Credit
Corp., 10 F.R.D. 181, also involving a situation where the agent "sustains such a
relation to plaintiff or the claim in suit as to make it to his interest to suppress the fact of
service. . . ." 10 F.R.D. at 184.

MR. JUSTICE BLACK, dissenting.

The petitioner, National Equipment Rental, Ltd., is a Delaware corporation with its
principal place of business in greater New York City. From that location, it does a
nationwide equipment rental business. The respondents,

Page 375 U. S. 319

Steve and Robert Szukhent, father and son farming in Michigan, leased from National
two incubators for their farm, signing in Michigan a lease contract which was a standard
printed form obviously prepared by the New York company's lawyers. Included in the 18
paragraphs of fine print was the following provision:

". . . the Lessee hereby designates Florence Weinberg, 47-21 Forty-first Street, Long
Island City, N.Y., as agent for the purpose of accepting service of any process within the
State of New York."

The New York company later brought this suit for breach of the lease in the United
States District Court for the Eastern District of New York. Rule 4(d)(1) of the Federal
Rules of Civil Procedure authorizes service of process for suits in federal courts to be
made on an "agent authorized by appointment or by law to receive service of process."
Process was served on Mrs. Weinberg as "agent" of the Michigan farmers. She mailed
notice of this service to the Szukhents. A New York lawyer appeared especially for them
and moved to quash the service on the ground that Mrs. Weinberg was not their agent,
but was in reality the agent of the New York company.
The record on the motion to quash shows that the Szukhents had never had any
dealings with Mrs. Weinberg, their supposed agent. They had never met, seen, or heard
of her. She did not sign the lease, was not a party to it, received no compensation from
the Szukhents, and undertook no obligation to them. In fact, she was handpicked by the
New York company to accept service of process in any suits that might thereafter be
filed by the company. Only after this suit was brought was it reluctantly revealed that
Mrs. Weinberg was, in truth, the wife of one of the company's officers. The district judge,
applying New York law to these facts, held that there had been no effective appointment
of Mrs. Weinberg as agent of the Szukhents, that the service on her as their

Page 375 U. S. 320

"agent" was therefore invalid, and that the service should be quashed. 30 F.R.D. 3
(D.C.E.D.N.Y.). The Court of Appeals, one judge dissenting, affirmed, agreeing that no
valid agency had been created. 311 F.2d 79 (C.A.2d Cir.). [Footnote 2/1] This Court
now reverses both courts below and holds that the contractual provision purporting to
appoint Mrs. Weinberg as agent is valid, and that service of process on her as agent
was therefore valid and effective under Rule 4(d)(1) as on an "agent authorized by
appointment . . . to receive service of process." I disagree with that holding, believing
that (1) whether Mrs. Weinberg was a valid agent upon whom service could validly be
effected under Rule 4(d)(1) should be determined under New York law, and that we
should accept the holdings of the federal district judge and the Court of Appeals sitting
in New York that under that State's law the purported appointment of Mrs. Weinberg
was invalid and ineffective; (2) if however, Rule 4(d)(1) is to be read as calling upon us
to formulate a new federal definition of agency for purposes of service of process, I think
our formulation should exclude Mrs. Weinberg from the category of an "agent
authorized by appointment . . . to receive service of process"; and (3) upholding service
of process in this case raises serious questions as to whether these Michigan farmers
have been denied due process of law in violation of the Fifth and Fourteenth
Amendments.

No federal statute has undertaken to regulate the sort of agency transaction here
involved. [Footnote 2/2] There is only Rule 4(d)(1), which says nothing more than that in
federal

Page 375 U. S. 321

courts personal jurisdiction may be obtained by service on an "agent." The Rule does
not attempt to define who is an "agent." To me it is evident that the draftsmen of the
Rules did not, by using the word "agent," show any intention of throwing out the
traditional body of state law and creating a new and different federal doctrine in this
branch of the law of agency. Therefore, it is to the law of New York -- the State where
this action was brought in federal court, the place where the contract was deemed by
the parties to have been made, and the State the law of which was specified as
determining rights and liabilities under the contract [Footnote 2/3] -- that we should turn
to test the validity of the appointment. [Footnote 2/4]

I agree with the district judge that this agency is invalid under the laws of New York. The
highest state court that has passed on the question has held that, because of New York
statutes, the designation by a nonresident of New York of an agent to receive service of
process is ineffective; the court, in denying an order for interpleader, held that only
residents of New York can make such an appointment, and even then only in
compliance with the terms of the controlling statute. Rosenthal v. United Transp.
Co., 196 App.Div. 540, 188 N.Y.S. 154. Even the dissenting judge in the Court of
Appeals in the present case acknowledged that the purported appointment of

Page 375 U. S. 322

Mrs. Weinberg "would not subject the defendants to the jurisdiction of the courts of the
State of New York." The company cites three decisions of trial judges in two of New
York's 62 counties which have upheld service upon purported agents in circumstances
like these. [Footnote 2/5] In fact, two of those cases, both decided in Nassau County,
where the company does business, upheld service on this same Mrs. Weinberg as
"agent" in suits brought for breach of contract by this same company, one against a
defendant living in the distant State of California. But these trial courts did not even
mention the Rosenthal case, decided by a higher court, and in fact cited no higher court
opinions at all which dealt with the question here raised. In seeking to apply New York's
definition of "agent," we should follow the considered opinions of the highest appellate
courts which have passed upon the question, not unexamined decisions of trial courts.
In so doing, we see that, under New York law, this service of process is invalid. Also, we
should accept the view of the question taken by the federal courts sitting in the State
whose law is being applied unless we are shown "clearly and convincingly" that these
courts erred. [Footnote 2/6] Here, there is no showing that the Court of Appeals -- where
neither the majority nor the dissenter disputed the District Court's view of New York law
-- has erred. [Footnote 2/7]

Page 375 U. S. 323

II

If Rule 4(d)(1) is to be read as requiring this Court to formulate new federal standards of
agency to be resolved in each case as a federal question, rather than as leaving the
question to state law, I think the standards we formulate should clearly and
unequivocally denounce as invalid any alleged service of process on nonresidents
based on purported agency contracts having no more substance than that naming Mrs.
Weinberg.

A. In the first place, we should interpret the federal rule as contemplating a genuine
agent, not a sham. [Footnote 2/8] Here the "agent," Mrs. Weinberg, was unknown to
respondents. She was chosen by the New York company, was under its supervision,
and, indeed, was the wife of one of its officers -- facts no one ever told these farmers.
[Footnote 2/9] State courts in general quite properly refuse to uphold service of process
on an agent who, though otherwise competent, has interests antagonistic to those of the
person he is meant to represent. [Footnote 2/10] In Michigan, the place where the
contract here involved was signed and where the machinery was delivered, the State
Supreme Court has said that to hold otherwise would open "wide the door for the
perpetration of fraud and maladministration of justice." [Footnote 2/11] There is no
reason for a federal rule to tolerate a less punctilious regard for fair dealing in a matter
so very important to a person being sued. I cannot believe that Rule 4(d)(1), which may
under some circumstances

Page 375 U. S. 324

be used to subject people to jurisdiction thousands of miles from home, was ever meant
to bring a defendant into court by allowing service on an "agent" whose true loyalty is
not to the person being sued but to the one bringing suit. The Canons of Ethics forbid a
lawyer to serve conflicting parties, at least without express consent given after full
disclosure. [Footnote 2/12] If we are to create a federal standard, I would hold a 4(d)(1)
agent to a like duty. Furthermore, as the courts below pointed out, there was no
provision in the contract assuring the defendants of notice of any action brought against
them in New York, and no undertaking by their purported agent or anyone else to notify
them. It is true that actual notice was given. But there is a prophylactic value, especially
where contracts of this kind can in future cases be used to impose on a nonresident
defendant, in requiring that the contract provide for notice in the first place. We have, on
due process grounds, required as much of state statutes which declare a statutory
agent for substituted service on nonresidents. Wuchter v. Pizzutti, 276 U. S. 13.

B. But even if this contract had named a disinterested agent and required that notice of
service be given to the Szukhents, I think that any federal standards we formulate under
Rule 4(d)(1) should invalidate purported service of process in the circumstances of
cases like this one. To give effect to the clause about service of process in this
standardized form contract amounts to a holding that, when the Szukhents leased these
incubators, they then and there, long in advance of any existing justiciable dispute or
controversy, effectively waived all objection to the jurisdiction of a court in a distant
State the process of which could not otherwise reach them. Both the nature of the right
given up and the nature of the contractual

Page 375 U. S. 325

relation here make such an application of the contract impossible to square with the
context of American law in which Rule 4(d)(1) was written. The right to have a case tried
locally and be spared the likely injustice of having to litigate in a distant or burdensome
forum is as ancient as the Magna Charta. [Footnote 2/13] States generally have refused
to enforce agreements in notes purporting to consent to foreign jurisdiction along with
consent to confession of judgment, sometimes because such provisions are outlawed
by statutes [Footnote 2/14] and sometimes because they are outlawed by courts in the
absence of specific statutory prohibitions. [Footnote 2/15] In countless cases courts
have refused to allow insurance companies to arrange that suits against them on their
policies may be brought only at the home office of the company. [Footnote 2/16] And
prior decisions of our own

Page 375 U. S. 326

Court have gone to great lengths to avoid giving enforcement to such

provisions. Compare National Exchange Bank v. Wiley, 195 U. S. 257; Grover & Baker
Sewing Machine Co. v. Radcliffe, 137 U. S. 287.

C. Where one party, at its leisure and drawing upon expert legal advice, drafts a form
contract, complete with waivers of rights and privileges by the other, it seems to me to
defy common sense for this Court to formulate a federal rule designed to treat this as an
agreement coolly negotiated and hammered out by equals. With respect to insurance
contracts drawn this way this Court long ago said:

"The phraseology of contracts of insurance is that chosen by the insurer and the
contract in fixed form is tendered to the prospective policy holder who is often without
technical training, and who rarely accepts it with a lawyer at his elbow."

Aschenbrenner v. United States Fidelity & Guaranty Co., 292 U. S. 80, 292 U. S. 84-85.
[Footnote 2/17]

It is hardly likely that these Michigan farmers, hiring farm equipment, were in any
position to dicker over what terms went into the contract they signed. Yet holding this
service effective inevitably will mean that the Szukhents must go nearly a thousand
miles to a strange city, hire New York counsel, pay witnesses to travel there, pay their
own and their witnesses' hotel bills, try to explain a dispute over a farm equipment lease
to a New York judge or jury, and in other ways bear the burdens of litigation in a distant,
and likely a strange, city. The company, of course, must have had this in mind when it
put the clause in the contract. It doubtless hoped, by easing into its contract this
innocent-looking provision for service of process in New York, to succeed in making it

Page 375 U. S. 327

as burdensome, disadvantageous, and expensive as possible for lessees to contest

actions brought against them. This Court, in applying the doctrine of forum non
conveniens, has suggested that "[a] plaintiff sometimes is under temptation to resort to
a strategy of forcing the trial at a most inconvenient place for an adversary." Gulf Oil
Corp. v. Gilbert, 330 U. S. 501, 330 U. S. 507. What was there deemed to be a very
unjust result is greatly aggravated, I think, by today's holding that a man can, by a
cleverly drafted form, be successfully inveigled into giving up in advance of any
controversy his traditional right to be served with process and sued at home. Rule
4(d)(1), designed in part to preserve the right to have a case tried in a convenient
tribunal, should not be used to formulate federal standards of agency that defeat this
purpose.

It should be understood that the effect of the Court's holding is not simply to give courts
sitting in New York jurisdiction over these Michigan farmers. It is also, as a practical
matter, to guarantee that whenever the company wishes to sue someone who has
contracted with it, it can, by force of this clause, confine all such suits to courts sitting in
New York. This Court and others have frequently refused to hold valid a contract which,
before any controversy has arisen, attempts to restrict jurisdiction to a single court or
courts. See Doyle v. Continental Ins. Co., 94 U. S. 535; Insurance Co. v. Morse, 20
Wall. 445, 87 U. S. 451; Nute v. Hamilton Mut. Ins. Co., 6 Gray (72 Mass.) 174; 6A
Corbin, Contracts § 1445. Here, this contract as effectively ousts the Michigan courts of
jurisdiction as if it had said so. Today's holding disregards Michigan's interest in
supervising the protection of rights of its citizens who never leave the State but are sued
by foreign companies with which they have done business. Cf. Travelers Health Assn.
v. Virginia ex rel. State Corp. Comm'n, 339 U. S. 643; McGee v. International Life Ins.
Co., 355 U. S. 220.

Page 375 U. S. 328

D. To formulate standards of agency under Rule 4(d)(1) which allow a plaintiff with a
form contract to extend a District Court's service of process for suits on that contract
anywhere in the country (or, presumably, the world) is to do something which Congress
has never done. Years ago, Mr. Justice Brandeis, speaking for the Court, emphasized
that Congress had always been reluctant to grant power to Federal District Courts to
serve process outside the territorial borders of the State in which a District Court sits,
saying:

"[N]o act has come to our attention in which such power has been conferred in a
proceeding in a circuit or District Court where a private citizen is the sole defendant and
where the plaintiff is at liberty to commence the suit in the district of which the defendant
is an inhabitant or in which he can be found."

Robertson v. Railroad Labor Board, 268 U. S. 619, 268 U. S. 624-625. (Footnotes

omitted.) This Court should reject any construction of Rule 4(d)(1) or formulation of
federal standards under it to help powerful litigants to achieve by unbargained "take it or
leave it" contracts what Congress has consistently refused to permit by legislation.

The end result of today's holding is not difficult to foresee. Clauses like the one used
against the Szukhents -- clauses which companies have not inserted, I suspect,
because they never dreamed a court would uphold them -- will soon find their way into
the "boilerplate" of everything from an equipment lease to a conditional sales contract.
Today's holding gives a green light to every large company in this country to contrive
contracts which declare with force of law that when such a company wants to sue
someone with whom it does business, that individual must go and try to defend himself
in some place, no matter how distant, where big business enterprises are
Page 375 U. S. 329

concentrated, like, for example, New York Connecticut, or, Illinois, or else suffer a
default judgment. In this very case, the Court holds that by this company's carefully
prepared contractual clause the Szukhents must, to avoid a judgment rendered without
a fair and full hearing, travel hundreds of miles across the continent, probably crippling
their defense and certainly depleting what savings they may have, to try to defend
themselves in a court sitting in New York City. I simply cannot believe that Congress,
when, by its silence, it let Rule 4(d)(1) go into effect, meant for that rule to be used as a
means to achieve such a far-reaching, burdensome, and unjust result. Heretofore,
judicial good common sense has, on one ground or another, disregarded contractual
provisions like this one, not encouraged them. It is a long trip from San Francisco -- or
from Honolulu or Anchorage -- to New York, Boston, or Wilmington. And the trip can be
very expensive, often costing more than it would simply to pay what is demanded. The
very threat of such a suit can be used to force payment of alleged claims, even though
they be wholly without merit. This fact will not be news to companies exerting their
economic power to wangle such contracts. No statute and no rule requires this Court to
place its imprimatur upon them. I would not.

III

The Court's holding that these Michigan residents are compelled to go to New York to
defend themselves in a New York court brings sharply into focus constitutional
questions as to whether they will thereby be denied due process of law in violation of
the Fifth and Fourteenth Amendments. While implicit in much of the oral arguments and
in the briefs, these questions have not been adequately discussed. The questions are
serious and involve matters of both historical and practical importance. These things
lead me to believe that this case should be

Page 375 U. S. 330

set down for reargument on these constitutional questions. Moreover, this Court might,
after such arguments, conclude that these constitutional questions are so substantial
and weighty that the nonconstitutional issues should be decided in favor of the Michigan
defendants, thereby making a constitutional decision unnecessary. While I would prefer
to await more informative constitutional discussions before deciding these due process
questions, the Court rules against a reargument. In this situation I am compelled now to
reach, consider, and decide the constitutional questions. My view is that the Court's
holding denies the Szukhents due process of law for the following, among other,
reasons.

It has been established constitutional doctrine since Pennoyer v. Neff, 95 U. S. 714,

was decided in 1878, that a state court is without power to serve its process outside the
State's boundaries so as to compel a resident of another State against his will to appear
as a defendant in a case where a personal judgment is sought against him. This rule
means that an individual has a constitutional right not to be sued on such claims in the
courts of any State except his own without his consent. The prime value of this
constitutional right has not diminished since Pennoyer v. Neff was decided. Our States
have increased from 38 to 50. Although improved methods of travel have increased its
speed and ameliorated its discomforts, it can hardly be said that these almost
miraculous improvements would make more palatable or constitutional now than in
1878 a system of law that would compel a man or woman from Hawaii, Alaska, or even
Michigan to travel to New York to defend against civil lawsuits claiming a few hundred
or thousand dollars growing out of an ordinary commercial contract.

It can, of course, be argued with plausibility that the Pennoyer constitutional rule has no
applicability here because the process served on the Szukhents ran from a

Page 375 U. S. 331

federal, not a state, court. But this case was in federal court solely because of the
District Court's diversity jurisdiction. And, in the absence of any overriding constitutional
or congressional requirements, the rights of the parties were to be preserved there as
they would have been preserved in state courts. [Footnote 2/18] Neither the Federal
Constitution nor any federal statute requires that a person who could not constitutionally
be compelled to submit himself to a state court's jurisdiction forfeits that constitutional
right because he is sued in a Federal District Court acting for a state court solely by
reason of the happenstance of diversity jurisdiction. The constant aim of federal courts,
at least since Erie R. Co. v. Tompkins, 304 U. S. 64, has been, so far as possible, to
protect all the substantial rights of litigants in both courts alike. And surely the right of a
person not to be dragged into the courts of a distant State to defend himself against a
civil lawsuit cannot be dismissed as insubstantial. Happily, in considering this question,
we are not confronted with any congressional enactment designed to bring nonstate
residents into a Federal District Court passed pursuant to congressional power to
establish a judicial system to hear federal questions under Article III of the Constitution,
or its power to regulate commerce under Art. I, § 8, or any of the other constitutionally
granted congressional powers; we are dealing only with its power to let federal courts
try lawsuits when the litigants reside in different States. Whatever power Congress
might have in these other areas to extend a District Court's power to serve process
across state lines, such power does not, I think, provide sound argument to justify
reliance upon diversity jurisdiction to destroy a man's constitutional right to have his civil
lawsuit tried in his own State. The protection of such a right in cases growing out of local

Page 375 U. S. 332

state lawsuits is the reason for and the heart of the Pennoyer constitutional doctrine
relevant here.

The Court relies on the printed provision of the contract as a consent of the Szukhents
to be sued in New York, making the Pennoyer rule inapplicable. In effect, the Court
treats the provision as a waiver of the Szukhents' constitutional right not to be
compelled to go to a New York court to defend themselves against the company's
claims. [Footnote 2/19] This printed form provision buried in a multitude of words is too
weak an imitation of a genuine agreement to be treated as a waiver of so important a
constitutional safeguard as is the right to be sued at home. Waivers of constitutional
rights, to be effective, this Court has said, must be deliberately and understandingly
made, and can be established only by clear, unequivocal, and unambiguous language.
[Footnote 2/20] It strains credulity to suggest that these Michigan farmers ever read this
contractual provision about Mrs. Weinberg and about "accepting service of any process
within the State of New York." And it exhausts credulity to think that they or any other
laymen reading these legalistic words would have known

Page 375 U. S. 333

or even suspected that they amounted to an agreement of the Szukhents to let the
company sue them in New York should any controversy arise. This Court should not
permit valuable constitutional rights to be destroyed by any such sharp contractual
practices. The idea that there was a knowing consent of the Szukhents to be sued in the
courts of New York is no more than a fiction-not even an amiable one at that.

I would affirm the judgment.

342 U.S. 437

72 S.Ct. 413
96 L.Ed. 485
PERKINS
v.
BENGUET CONSOLIDATED MINING CO. et al.
No. 85.
Argued Nov. 27, 28, 1951.
Decided March 3, 1952.
Rehearing Denied March 31, 1952.
See 343 U.S. 917, 72 S.Ct. 645.
Mr. Robert N. Gorman, Cincinnati, Ohio, for petitioner.
Mr. Lucien H. Mercier, Washington, D.C., for respondent.
Mr. Justice BURTON delivered the opinion of the Court.
1
This case calls for an answer to the question whether the Due Process Clause
of the Fourteenth Amendment to the Constitution of the United States
precludes Ohio from subjecting a foreign corporation to the jurisdiction of its
courts in this action in personam. The corporation has been carrying on in
Ohio a continuous and systematic, but limited, part of its general business.
Its president, while engaged in doing such business in Ohio, has been served
with summons in this proceeding. The cause of action sued upon did not
arise in Ohio and does not relate to the corporation's activities there. For the
reasons hereafter stated, we hold that the Fourteenth Amendment leaves
Ohio free to take or decline jurisdiction over the corporation.
2
After extended litigation elsewhere1 petitioner, Idonah Slade Perkins, a
nonresident of Ohio, filed two actions in personam in the Court of Common
Pleas of Clermont County, Ohio, against the several respondents. Among
those sued is the Benguet Consolidated Mining Company, here called the
mining company. It is styled a 'sociedad anonima' under the laws of the
Philippine Islands, where it owns and has operated profitable gold and silver
mines. In one action petitioner seeks approximately $68,400 in dividends
claimed to be due her as a stockholder. In the other she claims $2,500,000
damages largely because of the company's failure to issue to her certificates
for 120,000 shares of its stock.
3
In each case the trial court sustained a motion to quash the service of
summons on the mining company. Ohio Com.Pl., 99 N.E.2d 515. The Court
of Appeals of Ohio affirmed that decision, 88 Ohio App. 118, 95 N.E.2d 5, as
did the Supreme Court of Ohio, 155 Ohio St. 116, 98 N.E.2d 33. The cases
were consolidated and we granted certiorari in order to pass upon the
conclusion voiced within the court below that federal due process required
the result there reached. 342 U.S. 808, 72 S.Ct. 33, 96 L.Ed. —-.
4
We start with the holding of the Supreme Court of Ohio, not contested here,
that, under Ohio law, the mining company is to be treated as a foreign
corporation.2 Actual notice of the proceeding was given to the corporation in
the instant case through regular service of summons upon its president
while he was in Ohio acting in that capacity. Accordingly, there can be no
jurisdictional objection based upon a lack of notice to a responsible
representative of the corporation.
5
The answer to the question of whether the state courts of Ohio are open to a
proceeding in personam, against an amply notified foreign corporation, to
enforce a cause of action not arising in Ohio and not related to the business
or activities of the corporation in that State rests entirely upon the law of
Ohio, unless the Due Process Clause of the Fourteenth Amendment compels
a decision either way.
6
The suggestion that federal due process compels the State to open its courts
to such a case has no substance.
7
'Provisions for making foreign corporations subject to service in the state is a
matter of legislative discretion, and a failure to provide for such service is
not a denial of due process. Still less is it incumbent upon a state in
furnishing such process to make the jurisdiction over the foreign corporation
wide enough to include the adjudication of transitory actions not arising in
the state.' Missouri P.R. Co. v. Clarendon Co., 257 U.S. 533, 535, 42 S.Ct.
210, 211, 66 L.Ed. 354.
8
Also without merit is the argument that merely because Ohio permits a
complainant to maintain a proceeding in personam in its courts against a
properly served nonresident natural person to enforce a cause of action
which does not arise out of anything done in Ohio, therefore, the
Constitution of the United States compels Ohio to provide like relief against a
foreign corporation.
9
A more serious question is presented by the claim that the Due Process
Clause of the Fourteenth Amendment prohibits Ohio from granting such
relief against a foreign corporation. The syllabus in the report of the case
below, while denying the relief sought, does not indicate whether the
Supreme Court of Ohio rested its decision on Ohio law or on the Fourteenth
Amendment. The first paragraph of that syllabus is as follows:
10
'1. The doing of business in this state by a foreign corporation, which has not
appointed a statutory agent upon whom service of process against the
corporation can be made in this state or otherwise consented to service of
summons upon it in actions brought in this state, will not make the
corporation subject to service of summons in an action in personam brought
in the courts of this state to enforce a cause of action not arising in this state
and in no way related to the business or activities of the corporation in this
state.' 155 Ohio St. 116, 117, 98 N.E.2d 33, 34.
11
If the above statement stood alone, it might mean that the decision rested
solely upon the law of Ohio. In support of that possibility we are told that,
under the rules and practice of the Supreme Court of Ohio, only the syllabus
necessarily carries the approval of that court.3 As we understand the Ohio
practice, the syllabus of its Supreme Court constitutes the official opinion of
that court but it must be read in the light of the facts and issues of the case.
12
The only opinion accompanying the syllabus of the court below places the
concurrence of its author unequivocally upon the ground that the Due
Process Clause of the Fourteenth Amendment prohibits the Ohio courts from
exercising jurisdiction over the respondent corporation in this
proceeding.4 That opinion is an official part of the report of the case. The
report, however, does not disclose to what extent, if any, the other
members of the court may have shared the view expressed in that opinion.
Accordingly, for us to allow the judgment to stand as it is would risk an
affirmance of a decision which might have been decided differently if the
court below had felt free, under our decisions, to do so.
13
The cases primarily relied on by the author of the opinion accompanying the
syllabus below are Old Wayne Life Ass'n v. McDonough, 204 U.S. 8, 27 S.Ct.
236, 51 L.Ed. 345, and Simon v. Southern R. Co., 236 U.S. 115, 35 S.Ct.
255, 59 L.Ed. 492. Unlike the case at bar, no actual notice of the
proceedings was received in those cases by a responsible representative of
the foreign corporation. In each case, the public official who was served with
process in an attempt to bind the foreign corporation was held to lack the
necessary authority to accept service so as to bind it in a proceeding to
enforce a cause of action arising outside of the state of the forum. See 204
U.S. at pages 22—23, 27 S.Ct. at pages 240—241, and 236 U.S. at page
130, 35 S.Ct. at page 260. The necessary result was a finding of inadequate
service in each case and a conclusion that the foreign corporation was not
bound by it. The same would be true today in a like proceeding where the
only service had and the only notice given was that directed to a public
official who had no authority, by statute or otherwise, to accept it in that
kind of a proceeding. At the time of rendering the above decisions this Court
was aided, in reaching its conclusion as to the limited scope of the statutory
authority of the public officials, by this Court's conception that the Due
Process Clause of the Fourteenth Amendment precluded a state from giving
its public officials authority to accept service in terms broad enough to bind a
foreign corporation in proceedings against it to enforce an obligation arising
outside of the state of the forum. That conception now has been modified by
the rationale adopted in later decisions and particularly in International Shoe
Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95.
14
Today if an authorized representative of a foreign corporation be physically
present in the state of the forum and be there engaged in activities
appropriate to accepting service or receiving notice on its behalf, we
recognize that there is no unfairness in subjecting that corporation to the
jurisdiction of the courts of that state through such service of process upon
that representative. This has been squarely held to be so in a proceeding in
personam against such a corporation, at least in relation to a cause of action
arising out of the corporation's activities within the state of the forum.5
15
The essence of the issue here, at the constitutional level, is a like one of
general fairness to the corporation. Appropriate tests for that are discussed
in International Shoe Co. v. Washington, supra, 326 U.S. at pages 317—
320, 66 S.Ct. at pages 158, 160. The amount and kind of activities which
must be carried on by the foreign corporation in the state of the forum so as
to make it reasonable and just to subject the corporation to the jurisdiction
of that state are to be determined in each case. The corporate activities of a
foreign corporation which, under state statute, make it necessary for it to
secure a license and to designate a statutory agent upon whom process may
be served provide a helpful but not a conclusive test. For example, the state
of the forum may by statute require a foreign mining corporation to secure a
license in order lawfully to carry on there such functional intrastate
operations as those of mining or refining ore. On the other hand, if the same
corporation carries on, in that state, other continuous and systematic
corporate activities as it did here—consisting of directors' meetings, business
correspondence, banking, stock transfers, payment of salaries, purchasing of
machinery, etc.—those activities are enough to make it fair and reasonable
to subject that corporation to proceedings in personam in that state, at least
insofar as the proceedings in personam seek to enforce causes of action
relating to those very activities or to other activities of the corporation within
the state.
16
The instant case takes us one step further to a proceeding in personam to
enforce a cause of action not arising out of the corporation's activities in the
state of the forum. Using the tests mentioned above we find no requirement
of federal due process that either prohibits Ohio from opening its courts to
the cause of action here presented or compels Ohio to do so. This conforms
to the realistic reasoning in International Shoe Co. v. Washington, supra,
326 U.S. at pages 318—319, 66 S.Ct. at pages 159—160:
17
'* * * there have been instances in which the continuous corporate
operations within a state were thought so substantial and of such a nature
as to justify suit against it on causes of action arising from dealings entirely
distinct from those activities. See Missouri, K. & T.R. Co. v. Reynolds, 255
U.S. 565, 41 S.Ct. 446, 65 L.Ed. 788;6 Tauza v. Susquehanna Coal Co., 220
N.Y. 259, 115 N.E. 915; cf. St. Louis S.W.R. Co. v. Alexander, supra (227
U.S. 218, 33 S.Ct. 245, 57 L.Ed. 486).
18
'* * * some of the decisions holding the corporation amenable to suit have
been supported by resort to the legal fiction that it has given its consent to
service and suit, consent being implied from its presence in the state
through the acts of its authorized agents. Lafayette Insurance Co. v. French,
18 How. 404, 407; St. Clair v. Cox, supra, 106 U.S. (350) 356, 1 S.Ct. (354)
359, 27 L.Ed. 222; Commercial Mutual Accident Co. v. Davis, supra, 213
U.S. (245) 254, 29 S.Ct. (445) 447, 53 L.Ed. 782; State of Washington v.
Superior Court, 289 U.S. 361, 364, 365, 53 S.Ct. 624, 626, 627, 77 L.Ed.
1256. But more realistically it may be said that those authorized acts were
of such a nature as to justify the fiction. Smolik v. Philadelphia & Reading
Co., D.C., 222 F. 148, 151. Henderson, The Position of Foreign Corporations
in American Constitutional Law, 94, 95.
19
'* * * Whether due process is satisfied must depend rather upon the quality
and nature of the activity in relation to the fair and orderly administration of
the laws which it was the purpose of the due process clause to insure. That
clause does not contemplate that a state may make binding a judgment in
personam against an individual or corporate defendant with which the state
has no contacts, ties, or relations. Cf. Pennoyer v. Neff, supra (95 U.S.
714, 24 L.Ed. 565); Minnesota Commercial Assn. v. Benn, 261 U.S.
140, 43 S.Ct. 293, 67 L.Ed. 573.'
20
It remains only to consider, in more detail, the issue of whether, as a matter
of federal due process, the business done in Ohio by the respondent mining
company was sufficiently substantial and of such a nature as to permit Ohio
to entertain a cause of action against a foreign corporation, where the cause
of action arose from activities entirely distinct from its activities in Ohio. See
International Shoe Co. v. Washington, supra, 326 U.S. at page 318, 66 S.Ct.
at page 159.
21
The Ohio Court of Appeals summarized the evidence on the subject. 88 Ohio
App. at pages 119—125, 95 N.E.2d at pages 6—9. From that summary the
following facts are substantially beyond controversy: The company's mining
properties were in the Philippine Islands. Its operations there were
completely halted during the occupation of the Islands by the Japanese.
During that interim the president, who was also the general manager and
principal stockholder of the company, returned to his home in Clermont
County, Ohio. There he maintained an office in which he conducted his
personal affairs and did many things on behalf of the company. He kept
there office files of the company. He carried on there correspondence
relating to the business of the company and to its employees. He drew and
distributed there salary checks on behalf of the company, both in his own
favor as president and in favor of two company secretaries who worked
there with him. He used and maintained in Clermont County, Ohio, two
active bank accounts carrying substantial balances of company funds. A
bank in Hamilton County, Ohio, acted as transfer agent for the stock of the
company. Several directors' meetings were held at his office or home in
Clermont County. From that office he supervised policies dealing with the
rehabilitation of the corporation's properties in the Philippines and he
dispatched funds to cover purchases of machinery for such rehabilitation.
Thus he carried on in Ohio a continuous and systematic supervision of the
necessarily limited wartime activities of the company. He there discharged
his duties as president and general manager, both during the occupation of
the company's properties by the Japanese and immediately thereafter. While
no mining properties in Ohio were owned or operated by the company, many
of its wartime activities were directed from Ohio and were being given the
personal attention of its president in that State at the time he was served
with summons. Consideration of the circumstances which, under the law of
Ohio, ultimately will determine whether the courts of that State will choose
to take jurisdiction over the corporation is reserved for the courts of that
State. Without reaching that issue of state policy, we conclude that, under
the circumstances above recited, it would not violate federal due process for
Ohio either to take or decline jurisdiction of the corporation in this
proceeding. This relieves the Ohio courts of the restriction relied upon in the
opinion accompanying the syllabus below and which may have influenced
the judgment of the court below.
22
Accordingly, the judgment of the Supreme Court of Ohio is vacated and the
cause is remanded to that court for further proceedings in the light of this
opinion.7
23
It is so ordered.
24
Judgment vacated and cause remanded for further proceedings.
25
Mr. Justice BLACK concurs in the result.
26
Mr. Justice MINTON, with whom the CHIEF JUSTICE joins, dissenting.
27
As I understand the practice in Ohio, the law as agreed to by the court is
stated in the syllabus. If an opinion is filed, it expresses the views of the
writer of the opinion and of those who may join him as to why the law was
so declared in the syllabus. Judge Taft alone filed an opinion in the instant
case.
28
The law as declared in the syllabus, which is the whole court speaking, is
clearly based upon adequate state grounds. Judge Taft in his opinion
expresses the view that the opinions of this Court on due process grounds
require the court to declare the law as stated in the syllabus. As the majority
opinion of this Court points out, this is an erroneous view of this Court's
decisions. 'This brings the situation clearly within the settled rule whereby
this Court will not review a State court decision resting on an adequate and
independent nonfederal ground even though the State court may have also
summoned to its support an erroneous view of federal law.' Radio Station
WOW v. Johnson, 326 U.S. 120, 129, 65 S.Ct. 1475, 1480, 89 L.Ed. 2092.
29
The case of State Tax Comm'n v. Van Cott, 306 U.S. 511, 59 S.Ct. 605, 83
L.Ed. 950, is not this case. There the case was not clearly decided on an
adequate state ground, but the state ground and the federal ground were so
interwoven that this Court was 'unable to conclude that the judgment rests
upon an independent interpretation of the state law.' 306 U.S. at page 514,
59 S.Ct. at page 606. In the instant case, a clear statement of the state law
is made by the court in the syllabus. Only Judge Taft has summoned the
erroneous view of this Court's decisions to his support of the adequate state
ground approved by the whole court.
30
What we are saying to Ohio is: 'You have decided this case on an adequate
state ground, denying service, which you had a right to do, but you don't
have to do it if you don't want to, as far as the decisions of this Court are
concerned.' I think what we are doing is giving gratuitously an advisory
opinion to the Ohio Supreme Court. I would dismiss the writ as
improvidently granted.
1
See Perkins v. Perkins, 57 Phil.R. 205; Harden v. Benguet Consolidated
Mining Co., 58 Phil.R. 141; Perkins v. Guaranty Trust Co., 274 N.Y. 250, 8
N.E.2d 849; Perkins v. Beneguet Consolidated Mining Co., 55 Cal.App.2d
720, 132 P.2d 70, rehearing denied, 55 Cal.App.2d 774, 132 P.2d 102,
certiorari denied, 319 U.S. 774, 63 S.Ct. 1435, 37 L.Ed. 1721; 60
Cal.App.2d 845, 141 P.2d 19, certiorari denied, 320 U.S. 803, 815, 64 S.Ct.
429, 88 L.Ed. 485; Perkins v. First National Bank of Cincinnati, Com.Pl.,
Hamilton County, Ohio, 79 N.E.2d 159.
2
Ohio requires a foreign corporation to secure a license to transact 'business'
in that State, Throckmorton's Ohio Code, 1940, § 8625—4, and to appoint a
'designated agent' upon whom process may be served, §§ 8625—2, 8625—
5. The mining company has neither secured such a license nor designated
such an agent. While this may make it subject to penalties and handicaps,
this does not prevent it from transacting business or being sued. § 8625—
25. If it has a 'managing agent' in Ohio, service may be made upon him. §
11290. Such service is a permissive alternative to service on the corporation
through its president or other chief officer. § 11288. Lively v. Picton, 6 Cir.,
218 F. 401, 406—407. The evidence as to the business activities of the
corporation in Ohio is summarized by the Ohio Court of Appeals. 88 Ohio
App. 118, 119—125, 95 N.E.2d 5, 6—9. That court held that such activities
did not constitute the transaction of business referred to in the Code. In its
syllabus, however, the Supreme Court of Ohio, without passing upon the
sufficiency of such acts for the above statutory purpose, and without
defining its use of the term, affirmed the judgment dismissing the complaint
and assumed that what the corporation had done in Ohio constituted 'doing
business' to an extent sufficient to be recognized in reaching its decision.
3
In 1858 the Supreme Court of Ohio promulgated the following rule:
'A syllabus of the points decided by the Court in each case, shall be stated,
in writing, by the Judge assigned to deliver the opinion of
the Court, which shall be confined to the points of law, arising from the facts
of the case, that have been determined by the Court. And the syllabus shall
be submitted to the Judges concurring therein, for revisal, before publication
thereof; and it shall be inserted in the book of reports without alteration,
unless by the consent of the Judges concurring therein.' 5 Ohio St. vii.
This policy has been recognized by statute. Bates Ohio R.S. § 427, as
amended, 103 Ohio Laws 1913, § 1483, and 108 Ohio Laws 1919, § 1483. It
appears now in Throckmorton's Ohio Code, 1940, § 1483, as follows:
'Whenever it has been thus decided to report a case for publication the
syllabus thereof shall be prepared by the judge delivering the opinion, and
approved by a majority of the members of the court; and the report may be
per curiam, or if an opinion be reported, the same shall be written in as brief
and concise form as may be consistent with a clear presentation of the law
of the case. * * * Only such cases as are hereafter reported in accordance
with the provisions of this section shall be recognized by and receive the
official sanction of any court within the state.'
There are many references to this practice, both in the syllabi and opinions
written for the Supreme Court of Ohio. Typical of these is the following:
'It has long been the rule of this court that the syllabus contains the law of
the case. It is the only part of the opinion requiring the approval of all the
members concurring in the judgment. Where the judge writing an opinion
discusses matters or gives expression to his views on questions not
contained in the syllabus, it is merely the personal opinion of that judge.'
State ex rel. Donahey v. Edmondson, 89 Ohio St. 93, 107—108, 105 N.E.
269, 273, 52 L.R.A.,N.S., 305.
See also, Williamson Heater Co. v. Radich, 128 Ohio St. 124, 190 N.E. 403;
Baltimore & O.R. Co. v. Baillie, 112 Ohio St. 567, 148 N.E. 233. A syllabus
must be read in the light of the facts in the case, even where brought out in
the accompanying opinion rather than in the syllabus itself. See Williamson
Heater Co. v. Radich, supra; Perkins v. Bright, 109 Ohio St. 14, 19—20, 141
N.E. 689, 690—691; In re Poage, 87 Ohio St. 72, 82—83, 100 N.E. 125,
127—128.
4
'However, the doing of business in a state by a foreign corporation, which
has not appointed a statutory agent upon whom service of process against
the corporation can be made in that state or otherwise consented to service
of summons upon it in actions brought in that state, will not make the
corporation subject to service of summons in an action in personam brought
in the courts of that state to enforce a cause of action in no way related to
the business or activities of the corporation in that state. Old Wayne Mutual
Life Ass'n of Indianapolis v. McDonough, 204 U.S. 8, 22, 23, 27 S.Ct. 236,
51 L.Ed. 345; Simon v. Southern Ry. Co., 236 U.S. 115, 129, 130 and 132,
35 S.Ct. 255, 59 L.Ed. 492. See, also, Pennsylvania Fire Ins. Co. of
Philadelphia v. Gold Issue Mining & Milling Co., 243 U.S. 93, 95 and 96, 37
S.Ct. 344, 61 L.Ed. 610; Robert Mitchell Furniture Co. v. Selden Breck
Construction Co., 257 U.S. 213, 215 and 216, 42 S.Ct. 84, 66 L.Ed. 201;
International Shoe Co. v. Washington, 326 U.S. 310, 319 and 320, 66 S.Ct.
154, 90 L.Ed. 95.
'An examination of the opinions of the Supreme Court of the United States in
the foregoing cases will clearly disclose that service of summons in such an
instance would be void as wanting in due process of law.' 155 Ohio St. 116,
119—120, 98 N.E.2d 33, 35.
5
'* * * The obligation which is here sued upon arose out of those very
activities. It is evident that these operations establish sufficient contacts or
ties with the state of the forum to make it reasonable and just according to
our traditional conception of fair play and substantial justice to permit the
state to enforce the obligations which appellant has incurred there. Hence
we cannot say that the maintenance of the present suit in the State of
Washington involves an unreasonable or undue procedure.' International
Shoe Co. v. Washington, supra, 326 U.S. at page 320, 66 S.Ct. at page 160.
6
This citation does not disclose the significance of this decision but light is
thrown upon it by the opinions of the state court below. Reynolds v.
Missouri, K. & T.R. Co., 224 Mass. 379, 113 N.E. 413; 228 Mass. 584, 117
N.E. 913. In addition to the cases cited in the text see Barrow S.S. Co. v.
Kane, 170 U.S. 100, 18 S.Ct. 526, 42 L.Ed. 964; Pennsylvania Fire
Insurance Co. v. Gold Issue Mining Co., 243 U.S. 93, 37 S.Ct. 344, 61 L.Ed.
610 (statutory agent appointed); Philadelphia & Reading R. Co. v.
McKibbin, 243 U.S. 264, 268—269, 37 S.Ct. 280, 281, 282, 61 L.Ed. 710
(question left open).
7
For like procedure followed under somewhat comparable circumstances see
State Tax Comm'n v. Van Cott, 306 U.S. 511, 59 S.Ct. 605, 83 L.Ed. 950.

McGEE
v.
INTERNATIONAL LIFE INSURANCE CO.
No. 50.

Supreme Court of United States.

Argued November 20, 1957.

Decided December 16, 1957.

CERTIORARI TO THE COURT OF CIVIL APPEALS OF TEXAS, FIRST SUPREME

JUDICIAL DISTRICT.

Arthur J. Mandell argued the cause and filed a brief for petitioner.
Stanley Hornsby argued the cause and filed a brief for respondent.
*221 Opinion of the Court by MR. JUSTICE BLACK, announced by MR. JUSTICE
DOUGLAS.
Petitioner, Lulu B. McGee, recovered a judgment in a California state court against
respondent, International Life Insurance Company, on a contract of insurance.
Respondent was not served with process in California but by registered mail at its
principal place of business in Texas. The California court based its jurisdiction on a state
statute which subjects foreign corporations to suit in California on insurance contracts
with residents of that State even though such corporations cannot be served with process
within its borders.[1]
Unable to collect the judgment in California petitioner went to Texas where she filed suit
on the judgment in a Texas court. But the Texas courts refused to enforce her judgment
holding it was void under the Fourteenth Amendment because service of process outside
California could not give the courts of that State jurisdiction over
respondent. 288 S.W.2d 579. Since the case raised important questions, not only to
California but to other States which have similar laws, we granted
certiorari. 352 U.S. 924. It is not controverted that if the California court properly
exercised jurisdiction over respondent the Texas courts erred in refusing to give its
judgment full faith and credit. 28 U.S. C. § 1738.
The material facts are relatively simple. In 1944, Lowell Franklin, a resident of California,
purchased a life insurance policy from the Empire Mutual Insurance Company, an
Arizona corporation. In 1948 the respondent agreed with Empire Mutual to assume its
insurance obligations. Respondent then mailed a reinsurance certificate to Franklin in
California offering to insure him in accordance with the terms of the policy he held with
Empire Mutual. He accepted this offer and from that *222 time until his death in 1950
paid premiums by mail from his California home to respondent's Texas office. Petitioner,
Franklin's mother, was the beneficiary under the policy. She sent proofs of his death to
the respondent but it refused to pay claiming that he had committed suicide. It appears
that neither Empire Mutual nor respondent has ever had any office or agent in California.
And so far as the record before us shows, respondent has never solicited or done any
insurance business in California apart from the policy involved here.
Since Pennoyer v. Neff, 95 U.S. 714, this Court has held that the Due Process Clause of
the Fourteenth Amendment places some limit on the power of state courts to enter
binding judgments against persons not served with process within their boundaries. But
just where this line of limitation falls has been the subject of prolific controversy,
particularly with respect to foreign corporations. In a continuing process of evolution this
Court accepted and then abandoned "consent," "doing business," and "presence" as the
standard for measuring the extent of state judicial power over such corporations. See
Henderson, The Position of Foreign Corporations in American Constitutional Law, c. V.
More recently in International Shoe Co. v. Washington, 326 U.S. 310, the Court decided
that "due process requires only that in order to subject a defendant to a judgment in
personam, if he be not present within the territory of the forum, he have certain
minimum contacts with it such that the maintenance of the suit does not offend
`traditional notions of fair play and substantial justice.' " Id., at 316.
Looking back over this long history of litigation a trend is clearly discernible toward
expanding the permissible scope of state jurisdiction over foreign corp orations and other
nonresidents. In part this is attributable to the fundamental transformation of our
national economy over the years. Today many commercial transactions *223 touch two or
more States and may involve parties separated by the full continent. With this increasing
nationalization of commerce has come a great increase in the amount of business
conducted by mail across state lines. At the same time modern transportation and
communication have made it much less burdensome for a party sued to defend himself in
a State where he engages in economic activity.
Turning to this case we think it apparent that the Due Process Clause did not preclude the
California court from entering a judgment binding on respondent. It is sufficient for
purposes of due process that the suit was based on a contract which had substantial
connection with that State. Cf. Hess v. Pawloski, 274 U.S. 352; Henry L. Doherty &
Co. v. Goodman, 294 U.S. 623; Pennoyer v. Neff, 95 U.S. 714, 735.[2] The contract was
delivered in California, the premiums were mailed from there and the insured was a
resident of that State when he died. It cannot be denied that California has a manifest
interest in providing effective means of redress for its residents when their insurers
refuse to pay claims. These residents would be at a severe disadvantage if they were
forced to follow the insurance company to a distant State in order to hold it legally
accountable. When claims were small or moderate individual claimants frequently could
not afford the cost of bringing an action in a foreign forum— thus in effect making the
company judgment proof. Often the crucial witnesses—as here on the company's defense
of suicide—will be found in the insured's locality. *224 Of course there may be
inconvenience to the insurer if it is held amenable to suit in California where it had this
contract but certainly nothing which amounts to a denial of due process. Cf. Travelers
Health Assn. v. Virginia ex rel. State Corporation Comm'n, 339 U.S. 643. There is no
contention that respondent did not have adequate notice of the suit or sufficient time to
prepare its defenses and appear.
The California statute became law in 1949, after respondent had entered into the
agreement with Franklin to assume Empire Mutual's obligation to him. Respondent
contends that application of the statute to this existing contract improperly impairs the
obligation of the contract. We believe that contention is devoid of merit. The statute was
remedial, in the purest sense of that term, and neither enlarged nor impaired
respondent's substantive rights or obligations under the contract. It did nothing more
than to provide petitioner with a California forum to enforce whatever substantive rights
she might have against respondent. At the same time respondent was given a reasonable
time to appear and defend on the merits after being notified of the suit. Under such
circumstances it had no vested right not to be sued in California.
Cf. Bernheimer v. Converse, 206 U.S. 516; National Surety Co. v. Architectural
Decorating Co., 226 U.S. 276; Funkhouser v. J. B. Preston Co., 290 U.S. 163.
The judgment is reversed and the cause is remanded to the Court of Civil Appeals of the
State of Texas, First Supreme Judicial District, for further proceedings not inconsistent
with this opinion.
It is so ordered.
THE CHIEF JUSTICE took no part in the consideration or decision of this case.

G.R. No. 103493 June 19, 1997

PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and

ATHONA HOLDINGS, N.V., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT,
PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents.

MENDOZA, J.:

This case presents for determination the conclusiveness of a foreign judgment upon the rights of the
parties under the same cause of action asserted in a case in our local court. Petitioners brought this
case in the Regional Trial Court of Makati, Branch 56, which, in view of the pendency at the time of
the foreign action, dismissed Civil Case No. 16563 on the ground of litis pendentia, in addition
to forum non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for review
on certiorari.

The facts are as follows:

On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners
Ayala International Finance Limited (hereafter called AYALA) 1 and Philsec Investment Corporation
(hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock owned by
Ducat with a market value of P14,088,995.00. In order to facilitate the payment of the loans, private
respondent 1488, Inc., through its president, private respondent Drago Daic, assumed Ducat's
obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a Warranty
Deed with Vendor's Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter called
ATHONA) a parcel of land in Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC
and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the
purchase price. The balance of US$307,209.02 was to be paid by means of a promissory note
executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the
US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and
delivered to 1488, Inc. all the shares of stock in their possession belonging to Ducat.

As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered
by the note became due and demandable. Accordingly, on October 17, 1985, private respondent
1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of the
balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly
perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to
1488, Inc. under the Agreement. Originally instituted in the United States District Court of Texas,
165th Judicial District, where it was docketed as Case No. 85-57746, the venue of the action was
later transferred to the United States District Court for the Southern District of Texas, where 1488,
Inc. filed an amended complaint, reiterating its allegations in the original complaint. ATHONA filed an
answer with counterclaim, impleading private respondents herein as counterdefendants, for
allegedly conspiring in selling the property at a price over its market value. Private respondent
Perlas, who had allegedly appraised the property, was later dropped as counterdefendant. ATHONA
sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the
alternative, the rescission of sale of the property. For their part, PHILSEC and AYALA filed a motion
to dismiss on the ground of lack of jurisdiction over their person, but, as their motion was denied,
they later filed a joint answer with counterclaim against private respondents and Edgardo V.
Guevarra, PHILSEC's own former president, for the rescission of the sale on the ground that the
property had been overvalued. On March 13, 1990, the United States District Court for the Southern
District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was
"frivolous and [was] brought against him simply to humiliate and embarrass him." For this reason, the
U.S. court imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay
damages to Guevarra.

On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners filed
a complaint "For Sum of Money with Damages and Writ of Preliminary Attachment" against private
respondents in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 16563.
The complaint reiterated the allegation of petitioners in their respective counterclaims in Civil Action
No. H-86-440 of the United States District Court of Southern Texas that private respondents
committed fraud by selling the property at a price 400 percent more than its true value of
US$800,000.00. Petitioners claimed that, as a result of private respondents' fraudulent
misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement and
to purchase the Houston property. Petitioners prayed that private respondents be ordered to return
to ATHONA the excess payment of US$1,700,000.00 and to pay damages. On April 20, 1987, the
trial court issued a writ of preliminary attachment against the real and personal properties of private
respondents. 2

Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis
pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non
conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat
contended that the alleged overpricing of the property prejudiced only petitioner ATHONA, as buyer,
but not PHILSEC and BPI-IFL which were not parties to the sale and whose only participation was to
extend financial accommodation to ATHONA under a separate loan agreement. On the other hand,
private respondents 1488, Inc. and its president Daic filed a joint "Special Appearance and Qualified
Motion to Dismiss," contending that the action being in personam, extraterritorial service of
summons by publication was ineffectual and did not vest the court with jurisdiction over 1488, Inc.,
which is a non-resident foreign corporation, and Daic, who is a non-resident alien.

On January 26, 1988, the trial court granted Ducat's motion to dismiss, stating that "the evidentiary
requirements of the controversy may be more suitably tried before the forum of the litis pendentia in
the U.S., under the principle in private international law of forum non conveniens," even as it noted
that Ducat was not a party in the U.S. case.

A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. On March 9,
1988, the trial court 3 granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of litis
pendentia considering that

the "main factual element" of the cause of action in this case which is the validity of
the sale of real property in the United States between defendant 1488 and plaintiff
ATHONA is the subject matter of the pending case in the United States District Court
which, under the doctrine of forum non conveniens, is the better (if not exclusive)
forum to litigate matters needed to determine the assessment and/or fluctuations of
the fair market value of real estate situated in Houston, Texas, U.S.A. from the date
of the transaction in 1983 up to the present and verily, . . . (emphasis by trial court)

The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were
non-residents and the action was not an action in rem or quasi in rem, so that extraterritorial
service of summons was ineffective. The trial court subsequently lifted the writ of attachment
it had earlier issued against the shares of stocks of 1488, Inc. and Daic.

Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the
principle of litis pendentia and forum non conveniens and in ruling that it had no jurisdiction over the
defendants, despite the previous attachment of shares of stocks belonging to 1488, Inc. and Daic.

On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil Case No. 16563 against
Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus:

The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants
are Philsec, the Ayala International Finance Ltd. (BPI-IFL's former name) and the
Athona Holdings, NV. The case at bar involves the same parties. The transaction
sued upon by the parties, in both cases is the Warranty Deed executed by and
between Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the
promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed
by herein appellants, on the marketability of Ducat's securities given in exchange for
the Texas property. The recovery of a sum of money and damages, for fraud
purportedly committed by appellees, in overpricing the Texas land, constitute the
action before the Philippine court, which likewise stems from the same Warranty
Deed.

The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the
recovery of a sum of money for alleged tortious acts, so that service of summons by
publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic. The
 dismissal of Civil Case No. 16563 on the ground of forum non conveniens was likewise
affirmed by the Court of Appeals on the ground that the case can be better tried and decided
by the U.S. court:

The U.S. case and the case at bar arose from only one main transaction, and involve
foreign elements, to wit: 1) the property subject matter of the sale is situated in
Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3)
although the buyer, Athona Holdings, a foreign corporation which does not claim to
be doing business in the Philippines, is wholly owned by Philsec, a domestic
corporation, Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4)
the Warranty Deed was executed in Texas, U.S.A.

In their present appeal, petitioners contend that:

1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME

PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE
COURT OF APPEALS IN AFFIRMING THE TRIAL COURT'S DISMISSAL OF THE
CIVIL ACTION IS NOT APPLICABLE.

2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE

COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF
THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.

3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF

APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY
REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL
COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS
EVERY REASON TO PROTECT AND VINDICATE PETITIONERS' RIGHTS FOR
TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE RESPONDENTS
(WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE IN
THE PHILIPPINES.

We will deal with these contentions in the order in which they are made.

First. It is important to note in connection with the first point that while the present case was pending
in the Court of Appeals, the United States District Court for the Southern District of Texas rendered
judgment 5 in the case before it. The judgment, which was in favor of private respondents, was
affirmed on appeal by the Circuit Court of Appeals. 6 Thus, the principal issue to be resolved in this
case is whether Civil Case No. 16536 is barred by the judgment of the U.S. court.

Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment
admitting the foreign decision is not necessary. On the other hand, petitioners argue that the foreign
judgment cannot be given the effect of res judicata without giving them an opportunity to impeach it
on grounds stated in Rule 39, §50 of the Rules of Court, to wit: "want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact."

Petitioners' contention is meritorious. While this Court has given the effect of res judicata to foreign
judgments in several cases, 7 it was after the parties opposed to the judgment had been given ample
opportunity to repel them on grounds allowed under the law. 8 It is not necessary for this purpose to
initiate a separate action or proceeding for enforcement of the foreign judgment. What is essential is
that there is opportunity to challenge the foreign judgment, in order for the court to properly
determine its efficacy. This is because in this jurisdiction, with respect to actions in personam, as
distinguished from actions in rem, a foreign judgment merely constitutes prima facie evidence of
the justness of the claim of a party and, as such, is subject to proof to the contrary. 9 Rule 39, §50
provides:

Sec. 50. Effect of foreign judgments. — The effect of a judgment of a tribunal of a

foreign country, having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the
title to the thing;

(b) In case of a judgment against a person, the judgment is presumptive evidence of

a right as between the parties and their successors in interest by a subsequent title;
but the judgment may be repelled by evidence of a want of jurisdiction, want of notice
to the party, collusion, fraud, or clear mistake of law or fact.

Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton,
Ltd., 10 which private respondents invoke for claiming conclusive effect for the foreign judgment in
their favor, the foreign judgment was considered res judicata because this Court found "from the
evidence as well as from appellant's own pleadings" 11 that the foreign court did not make a "clear
mistake of law or fact" or that its judgment was void for want of jurisdiction or because of fraud or
collusion by the defendants. Trial had been previously held in the lower court and only afterward was
a decision rendered, declaring the judgment of the Supreme Court of the State of Washington to
have the effect of res judicata in the case before the lower court. In the same vein, in Philippines
International Shipping Corp. v. Court of Appeals, 12 this Court held that the foreign judgment was
valid and enforceable in the Philippines there being no showing that it was vitiated by want of notice
to the party, collusion, fraud or clear mistake of law or fact. The prima facie presumption under the
Rule had not been rebutted.

In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the
judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of private
respondents. The proceedings in the trial court were summary. Neither the trial court nor the
appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the
evidence presented thereat, to assure a proper determination of whether the issues then being
litigated in the U.S. court were exactly the issues raised in this case such that the judgment that
might be rendered would constitute res judicata. As the trial court stated in its disputed order dated
March 9, 1988.

On the plaintiff's claim in its Opposition that the causes of action of this case and the
pending case in the United States are not identical, precisely the Order of January
26, 1988 never found that the causes of action of this case and the case pending
before the USA Court, were identical. (emphasis added)

It was error therefore for the Court of Appeals to summarily rule that petitioners' action is
barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction of the
U.S. court over their persons, but their claim was brushed aside by both the trial court and
the Court of Appeals. 13

Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the
enforcement of judgment in the Regional Trial Court of Makati, where it was docketed as Civil Case
No. 92-1070 and assigned to Branch 134, although the proceedings were suspended because of the
pendency of this case. To sustain the appellate court's ruling that the foreign judgment constitutes
res judicata and is a bar to the claim of petitioners would effectively preclude petitioners from
repelling the judgment in the case for enforcement. An absurdity could then arise: a foreign judgment
is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to resist a claim
as in this case, but it may be opposed by the defendant if the foreign judgment is sought to be
enforced against him in a separate proceeding. This is plainly untenable. It has been held therefore
that:

[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction
where affirmative relief is being sought. Hence, in the interest of justice, the
complaint should be considered as a petition for the recognition of the Hongkong
judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the
defendant, private respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if applicable. 14

Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070
should be consolidated. 15 After all, the two have been filed in the Regional Trial Court of Makati,
albeit in different salas, this case being assigned to Branch 56 (Judge Fernando V. Gorospe), while
Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such proceedings,
petitioners should have the burden of impeaching the foreign judgment and only in the event they
succeed in doing so may they proceed with their action against private respondents.

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

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

Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over
1488, Inc. and Daic could not be obtained because this is an action in personam and summons were
served by extraterritorial service. Rule 14, §17 on extraterritorial service provides that service of
summons on a non-resident defendant may be effected out of the Philippines by leave of Court
where, among others, "the property of the defendant has been attached within the Philippines." 18 It is
not disputed that the properties, real and personal, of the private respondents had been attached
prior to service of summons under the Order of the trial court dated April 20, 1987. 19

Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the
proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11
sanctions imposed on the petitioners by the U.S. court, the Court finds that the judgment sought to
be enforced is severable from the main judgment under consideration in Civil Case No. 16563. The
separability of Guevara's claim is not only admitted by petitioners, 20 it appears from the pleadings
that petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563. 21 Hence,
the TRO should be lifted and Civil Case No. 92-1445 allowed to proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is
REMANDED to the Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070 and
for further proceedings in accordance with this decision. The temporary restraining order issued on
June 29, 1994 is hereby LIFTED.

SO ORDERED.

U.S. Supreme Court

World-Wide Volkwagen Corp. v. Woodson, 444 U.S. 286 (1980)

World-Wide Volkwagen Corp. v. Woodson

No. 78-1078

Argued October 3, 1979

Decided January 21, 1980

444 U.S. 286

CERTIORARI TO THE SUPREME COURT OF OKLAHOMA

Syllabus

A products liability action was instituted in an Oklahoma st,ate court by respondents

husband and wife to recover for personal injuries sustained in Oklahoma in an accident
involving an automobile that had been purchased by them in New York while they were
New York residents and that was being driven through Oklahoma at the time of the
accident. The defendants included the automobile retailer and its wholesaler
(petitioners), New York corporations that did no business in Oklahoma. Petitioners
entered special appearances, claiming that Oklahoma's exercise of jurisdiction over
them would offend limitations on the State's jurisdiction imposed by the Due Process
Clause of the Fourteenth Amendment. The trial court rejected petitioners' claims, and
they then sought, but were denied, a writ of prohibition in the Oklahoma Supreme Court
to restrain respondent trial judge from exercising in personam jurisdiction over them.

Held: Consistently with the Due Process Clause, the Oklahoma trial court may not
exercise in personam jurisdiction over petitioners. Pp. 444 U. S. 291-299.

(a) A state court may exercise personal jurisdiction over a nonresident defendant only
so long as there exist "minimum contacts" between the defendant and the forum
State. International Shoe Co. v. Washington, 326 U. S. 310. The defendant's contacts
with the forum State must be such that maintenance of the suit does not offend
traditional notions of fair play and substantial justice, id. at 326 U. S. 316, and the
relationship between the defendant and the forum must be such that it is "reasonable . .
. to require the corporation to defend the particular suit which is brought
there," id. at 326 U. S. 317. The Due Process Clause

"does not contemplate that a state may make binding a judgment in personam against
an individual or corporate defendant with which the state has no contacts, ties, or
relations."

Id. at 326 U. S. 319. Pp. 444 U. S. 291-294.

(b) Here, there is a total absence in the record of those affiliating circumstances that are
a necessary predicate to any exercise of state court jurisdiction. Petitioners carry on no
activity whatsoever in Oklahoma; they close no sales and perform no services there,
avail

Page 444 U. S. 287

themselves of none of the benefits of Oklahoma law, and solicit no business there either
through salespersons or through advertising reasonably calculated to reach that State.
Nor does the record show that they regularly sell cars to Oklahoma residents, or that
they indirectly, through others, serve or seek to serve the Oklahoma market. Although it
is foreseeable that automobiles sold by petitioners would travel to Oklahoma and that
the automobile here might cause injury in Oklahoma, "foreseeability" alone is not a
sufficient benchmark for personal jurisdiction under the Due Process Clause. The
foreseeability that is critical to due process analysis is not the mere likelihood that a
product will find its way into the forum State, but rather is that the defendant's conduct
and connection with the forum are such that he should reasonably anticipate being
haled into court there. Nor can jurisdiction be supported on the theory that petitioners
earn substantial revenue from goods used in Oklahoma. Pp. 444 U. S. 295-299.

585 P.2d 351, reversed.

WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART,
POWELL, REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting
opinion, post, p. 444 U. S. 299. MARSHALL, J., filed a dissenting opinion, in which
BLACKMUN, J., joined, post, p. 444 U. S. 313. BLACKMUN, J., filed a dissenting
opinion, post, p. 444 U. S. 317.

MR. JUSTICE WHITE delivered the opinion of the Court.

The issue before us is whether, consistently with the Due Process Clause of the
Fourteenth Amendment, an Oklahoma court may exercise in personam jurisdiction over
a nonresident automobile retailer and its wholesale distributor in a products liability
action, when the defendants' only connection with Oklahoma is the fact that an
automobile sold in New York to New York residents became involved in an accident in
Oklahoma.
Page 444 U. S. 288

Respondents Harry and Kay Robinson purchased a new Audi automobile from
petitioner Seaway Volkswagen, Inc. (Seaway), in Massena, N.Y. in 1976. The following
year, the Robinson family, who resided in New York, left that State for a new home in
Arizona. As they passed through the State of Oklahoma, another car struck their Audi in
the rear, causing a fire which severely burned Kay Robinson and her two children.
[Footnote 1]

The Robinsons [Footnote 2] subsequently brought a products liability action in the

District Court for Creek County, Okla., claiming that their injuries resulted from defective
design and placement of the Audi's gas tank and fuel system. They joined as
defendants the automobile's manufacturer, Audi NSU Auto Union Aktiengesellschaft
(Audi); its importer, Volkswagen of America, Inc. (Volkswagen); its regional distributor,
petitioner World-Wide Volkswagen Corp. (World-Wide); and its retail dealer, petitioner
Seaway. Seaway and World-Wide entered special appearances, [Footnote 3] claiming
that Oklahoma's exercise of jurisdiction over them would offend the limitations on the
State's jurisdiction imposed by the Due Process Clause of the Fourteenth Amendment.
[Footnote 4]

The facts presented to the District Court showed that World-Wide is incorporated and
has its business office in New

Page 444 U. S. 289

York. It distributes vehicles, parts, and accessories, under contract with Volkswagen, to
retail dealers in New York, New Jersey, and Connecticut. Seaway, one of these retail
dealers, is incorporated and has its place of business in New York. Insofar as the record
reveals, Seaway and World-Wide are fully independent corporations whose relations
with each other and with Volkswagen and Audi are contractual only. Respondents
adduced no evidence that either World-Wide or Seaway does any business in
Oklahoma, ships or sells any products to or in that State, has an agent to receive
process there, or purchases advertisements in any media calculated to reach
Oklahoma. In fact, as respondents' counsel conceded at oral argument, Tr. of Oral Arg
32, there was no showing that any automobile sold by World-Wide or Seaway has ever
entered Oklahoma, with the single exception of the vehicle involved in the present case.

Despite the apparent paucity of contacts between petitioners and Oklahoma, the District
Court rejected their constitutional claim and reaffirmed that ruling in denying petitioners'
motion for reconsideration. [Footnote 5] Petitioners then sought a writ of prohibition in
the Supreme Court of Oklahoma to restrain the District Judge, respondent Charles S.
Woodson, from exercising in personam jurisdiction over them. They renewed their
contention that, because they had no "minimal contacts," App. 32, with the State of
Oklahoma, the actions of the District Judge were in violation of their rights under the
Due Process Clause.

The Supreme Court of Oklahoma denied the writ, 585 P.2d 351 (1978), [Footnote 6]
holding that personal jurisdiction over petitioners was authorized by Oklahoma's "long-
arm" statute,

Page 444 U. S. 290

Okla.Stat., Tit. 12, § 1701.03(a)(4) (1971). [Footnote 7] Although the court noted that
the proper approach was to test jurisdiction against both statutory and constitutional
standards, its analysis did not distinguish these questions, probably because §
1701.03(a)(4) has been interpreted as conferring jurisdiction to the limits permitted by
the United States Constitution. [Footnote 8] The court's rationale was contained in the
following paragraph, 585 P.2d at 354:

"In the case before us, the product being sold and distributed by the petitioners is, by its
very design and purpose, so mobile that petitioners can foresee its possible use in
Oklahoma. This is especially true of the distributor, who has the exclusive right to
distribute such automobile in New York, New Jersey and Connecticut. The evidence
presented below demonstrated that goods sold and distributed by the petitioners were
used in the State of Oklahoma, and, under the facts, we believe it reasonable to infer,
given the retail value of the automobile, that the petitioners derive substantial income
from automobiles which from time to time are used in the State of Oklahoma. This being
the case, we hold that, under the facts presented, the trial court was justified in
concluding

Page 444 U. S. 291

that the petitioners derive substantial revenue from goods used or consumed in this
State."

We granted certiorari, 440 U.S. 907 (1979), to consider an important constitutional

question with respect to state court jurisdiction and to resolve a conflict between the
Supreme Court of Oklahoma and the highest courts of at least four other States.
[Footnote 9] We reverse.

II

The Due Process Clause of the Fourteenth Amendment limits the power of a state court
to render a valid personal judgment against a nonresident defendant. Kulko v. California
Superior Court, 436 U. S. 84, 436 U. S. 91 (1978). A judgment rendered in violation of
due process is void in the rendering State and is not entitled to full faith and credit
elsewhere. Pennoyer v. Neff, 95 U. S. 714, 95 U. S. 732-733 (1878). Due process
requires that the defendant be given adequate notice of the suit, Mullane v. Central
Hanover Trust Co., 339 U. S. 306, 339 U. S. 313-314 (1950), and be subject to the
personal jurisdiction of the court, International Shoe Co. v. Washington, 326 U. S.
310 (1945). In the present case, it is not contended that notice was inadequate; the only
question is whether these particular petitioners were subject to the jurisdiction of the
Oklahoma courts.

As has long been settled, and as we reaffirm today, a state court may exercise personal
jurisdiction over a nonresident defendant only so long as there exist "minimum contacts"
between the defendant and the forum State. International Shoe Co. v. Washington,
supra at 326 U. S. 316. The concept of minimum contacts, in turn, can be seen to
perform two related, but

Page 444 U. S. 292

distinguishable, functions. It protects the defendant against the burdens of litigating in a

distant or inconvenient forum. And it acts to ensure that the States, through their courts,
do not reach out beyond the limits imposed on them by their status as coequal
sovereigns in a federal system.

The protection against inconvenient litigation is typically described in terms of

"reasonableness" or "fairness." We have said that the defendant's contacts with the
forum State must be such that maintenance of the suit "does not offend traditional
notions of fair play and substantial justice.'" International Shoe Co. v. Washington,
supra at 326 U. S. 316, quoting Milliken v. Meyer, 311 U. S. 457, 311 U. S. 463 (1940).
The relationship between the defendant and the forum must be such that it is
"reasonable . . . to require the corporation to defend the particular suit which is brought
there." 326 U.S. at 326 U. S. 317. Implicit in this emphasis on reasonableness is the
understanding that the burden on the defendant, while always a primary concern, will in
an appropriate case be considered in light of other relevant factors, including the forum
State's interest in adjudicating the dispute, see McGee v. International Life Ins. Co., 355
U. S. 220, 355 U. S. 223 (1957); the plaintiff's interest in obtaining convenient and
effective relief, see Kulko v. California Superior Court, supra at 436 U. S. 92, at least
when that interest is not adequately protected by the plaintiff's power to choose the
forum, cf. Shaffer v. Heitner, 433 U. S. 186, 433 U. S. 211, n. 37 (1977); the interstate
judicial system's interest in obtaining the most efficient resolution of controversies; and
the shared interest of the several States in furthering fundamental substantive social
policies, see Kulko v. California Superior Court, supra at 436 U. S. 93, 436 U. S. 98.

The limits imposed on state jurisdiction by the Due Process Clause, in its role as a
guarantor against inconvenient litigation, have been substantially relaxed over the
years. As we noted in McGee v. International Life Ins. Co., supra at 355 U. S. 222-223,

Page 444 U. S. 293

this trend is largely attributable to a fundamental transformation in the American

economy:
"Today many commercial transactions touch two or more States, and may involve
parties separated by the full continent. With this increasing nationalization of commerce
has come a great increase in the amount of business conducted by mail across state
lines. At the same time, modern transportation and communication have made it much
less burdensome for a party sued to defend himself in a State where he engages in
economic activity."

The historical developments noted in McGee, of course, have only accelerated in the
generation since that case was decided.

Nevertheless, we have never accepted the proposition that state lines are irrelevant for
jurisdictional purposes, nor could we and remain faithful to the principles of interstate
federalism embodied in the Constitution. The economic interdependence of the States
was foreseen and desired by the Framers. In the Commerce Clause, they provided that
the Nation was to be a common market, a "free trade unit" in which the States are
debarred from acting as separable economic entities. H. P. Hood Sons, Inc. v. Du
Mond, 336 U. S. 525, 336 U. S. 538 (1949). But the Framers also intended that the
States retain many essential attributes of sovereignty, including, in particular, the
sovereign power to try causes in their courts. The sovereignty of each State, in turn,
implied a limitation on the sovereignty of all of its sister States -- a limitation express or
implicit in both the original scheme of the Constitution and the Fourteenth Amendment.

Hence, even while abandoning the shibboleth that "[t]he authority of every tribunal is
necessarily restricted by the territorial limits of the State in which it is
established," Pennoyer v. Neff, supra, at 95 U. S. 720, we emphasized that the
reasonableness of asserting jurisdiction over the defendant must be assessed "in the
context of our federal system of government,"

Page 444 U. S. 294

International Shoe Co. v. Washington, 326 U.S. at 326 U. S. 317, and stressed that the
Due Process Clause ensures not only fairness, but also the "orderly administration of
the laws," id. at 326 U. S. 319. As we noted in Hanson v. Denckla, 357 U. S. 235, 357
U. S. 250-251 (1958):

"As technological progress has increased the flow of commerce between the States, the
need for jurisdiction over nonresidents has undergone a similar increase. At the same
time, progress in communications and transportation has made the defense of a suit in
a foreign tribunal less burdensome. In response to these changes, the requirements for
personal jurisdiction over nonresidents have evolved from the rigid rule of Pennoyer v.
Neff, 95 U. S. 714, to the flexible standard of International Shoe Co. v. Washington, 326
U. S. 310. But it is a mistake to assume that this trend heralds the eventual demise of all
restrictions on the personal jurisdiction of state courts. [Citation omitted.] Those
restrictions are more than a guarantee of immunity from inconvenient or distant
litigation. They are a consequence of territorial limitations on the power of the respective
States."
Thus, the Due Process Clause

"does not contemplate that a state may make binding a judgment in personam against
an individual or corporate defendant with which the state has no contacts, ties, or
relations."

International Shoe Co. v. Washington, supra at 326 U. S. 319. Even if the defendant
would suffer minimal or no inconvenience from being forced to litigate before the
tribunals of another State; even if the forum State has a strong interest in applying its
law to the controversy; even if the forum State is the most convenient location for
litigation, the Due Process Clause, acting as an instrument of interstate federalism, may
sometimes act to divest the State of its power to render a valid judgment. Hanson v.
Denckla, supra at 357 U. S. 251, 357 U. S. 254.

Page 444 U. S. 295

III

Applying these principles to the case at hand, [Footnote 10] we find in the record before
us a total absence of those affiliating circumstances that are a necessary predicate to
any exercise of state court jurisdiction. Petitioners carry on no activity whatsoever in
Oklahoma. They close no sales and perform no services there. They avail themselves
of none of the privileges and benefits of Oklahoma law. They solicit no business there
either through salespersons or through advertising reasonably calculated to reach the
State. Nor does the record show that they regularly sell cars at wholesale or retail to
Oklahoma customers or residents, or that they indirectly, through others, serve or seek
to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one,
isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous
circumstance that a single Audi automobile, sold in New York to New York residents,
happened to suffer an accident while passing through Oklahoma.

It is argued, however, that, because an automobile is mobile by its very design and
purpose, it was "foreseeable" that the Robinsons' Audi would cause injury in Oklahoma.
Yet "foreseeability" alone has never been a sufficient benchmark for personal
jurisdiction under the Due Process Clause. In Hanson v. Denckla, supra, it was no
doubt foreseeable that the settlor of a Delaware trust would subsequently move to
Florida and seek to exercise a power of appointment there; yet we held that Florida
courts could not constitutionally

Page 444 U. S. 296

exercise jurisdiction over a Delaware trustee that had no other contacts with the forum
State. In Kulko v. California Superior Court, 436 U. S. 84 (1978), it was surely
"foreseeable" that a divorced wife would move to California from New York, the domicile
of the marriage, and that a minor daughter would live with the mother. Yet we held that
California could not exercise jurisdiction in a child support action over the former
husband, who had remained in New York.

If foreseeability were the criterion, a local California tire retailer could be forced to
defend in Pennsylvania when a blowout occurs there, see Erlanger Mills, Inc. v. Cohoes
Fibre Mills, Inc., 239 F.2d 502, 507 (CA4 1956); a Wisconsin seller of a defective
automobile jack could be haled before a distant court for damage caused in New
Jersey, Reilly v. Phil Tolkan Pontiac, Inc., 372 F. Supp. 1205 (NJ 1974); or a Florida
soft-drink concessionaire could be summoned to Alaska to account for injuries
happening there, see Uppgren v. Executive Aviation Services, Inc., 304 F. Supp. 165,
170-171 (Minn.1969). Every seller of chattels would, in effect, appoint the chattel his
agent for service of process. His amenability to suit would travel with the chattel. We
recently abandoned the outworn rule of Harris v. Balk, 198 U. S. 215 (1905), that the
interest of a creditor in a debt could be extinguished or otherwise affected by any State
having transitory jurisdiction over the debtor. Shaffer v. Heitner, 433 U. S. 186 (1977).
Having interred the mechanical rule that a creditor's amenability to a quasi in rem action
travels with his debtor, we are unwilling to endorse an analogous principle in the present
case. [Footnote 11]

Page 444 U. S. 297

This is not to say, of course, that foreseeability is wholly irrelevant. But the foreseeability
that is critical to due process analysis is not the mere likelihood that a product will find
its way into the forum State. Rather, it is that the defendant's conduct and connection
with the forum State are such that he should reasonably anticipate being haled into
court there. See Kulko v. California Superior Court, supra at 436 U. S. 97-98; Shaffer v.
Heitner, 433 U.S. at 433 U. S. 216; and see id. at 433 U. S. 217-219 (STEVENS, J.,
concurring in judgment). The Due Process Clause, by ensuring the "orderly
administration of the laws," International Shoe Co. v. Washington, 326 U.S. at 326 U. S.
319, gives a degree of predictability to the legal system that allows potential defendants
to structure their primary conduct with some minimum assurance as to where that
conduct will and will not render them liable to suit.

When a corporation "purposefully avails itself of the privilege of conducting activities

within the forum State," Hanson v. Denckla, 357 U.S. at 357 U.S. 253, it has clear notice
that it is subject to suit there, and can act to alleviate the risk of burdensome litigation by
procuring insurance, passing the expected costs on to customers, or, if the risks are too
great, severing its connection with the State. Hence if the sale of a product of a
manufacturer or distributor such as Audi or Volkswagen is not simply an isolated
occurrence, but arises from the efforts of the manufacturer or distributor to serve,
directly or indirectly, the market for its product in other States, it is not unreasonable to
subject it to suit in one of those States if its allegedly defective merchandise has there
been the source of injury to its owner or to others. The forum State does not

Page 444 U. S. 298

exceed its powers under the Due Process Clause if it asserts personal jurisdiction over
a corporation that delivers its products into the stream of commerce with the expectation
that they will be purchased by consumers in the forum State. Cf. Gray v. American
Radiator & Standard Sanitary Corp., 22 Ill. 2d 432, 176 N.E.2d 761 (1961).

But there is no such or similar basis for Oklahoma jurisdiction over World-Wide or
Seaway in this case. Seaway's sales are made in Massena, N. Y. World-Wide's market,
although substantially larger, is limited to dealers in New York, New Jersey, and
Connecticut. There is no evidence of record that any automobiles distributed by World-
Wide are sold to retail customers outside this tristate area. It is foreseeable that the
purchasers of automobiles sold by World-Wide and Seaway may take them to
Oklahoma. But the mere "unilateral activity of those who claim some relationship with a
nonresident defendant cannot satisfy the requirement of contact with the forum
State." Hanson v. Denckla, supra, at 357 U.S. 253.

In a variant on the previous argument, it is contended that jurisdiction can be supported

by the fact that petitioners earn substantial revenue from goods used in Oklahoma. The
Oklahoma Supreme Court so found, 585 P.2d at 354-355, drawing the inference that,
because one automobile sold by petitioners had been used in Oklahoma, others might
have been used there also. While this inference seems less than compelling on the
facts of the instant case, we need not question the court's factual findings in order to
reject its reasoning.

This argument seems to make the point that the purchase of automobiles in New York,
from which the petitioners earn substantial revenue, would not occur but for the fact that
the automobiles are capable of use in distant States like Oklahoma. Respondents
observe that the very purpose of an automobile is to travel, and that travel of
automobiles sold by petitioners is facilitated by an extensive chain of Volkswagen
service centers throughout the country, including some in Oklahoma. [Footnote 12]

Page 444 U. S. 299

However, financial benefits accruing to the defendant from a collateral relation to the
forum State will not support jurisdiction if they do not stem from a constitutionally
cognizable contact with that State. See Kulko v. California Superior Court, 436 U.S.
at 436 U. S. 94-95. In our view, whatever marginal revenues petitioners may receive by
virtue of the fact that their products are capable of use in Oklahoma is far too attenuated
a contact to justify that State's exercise of in personam jurisdiction over them.

Because we find that petitioners have no "contacts, ties, or relations" with the State of
Oklahoma, International Shoe Co. v. Washington, supra, at 326 U. S. 319, the judgment
of the Supreme Court of Oklahoma is

Reversed.

G.R. No. L-13141 May 22, 1959

VICENTA PANTALEON, plaintiff-appellee,
vs.
HONORATO ASUNCION, defendant-appellant.

Feliciano R. Bautista for appellee.

Servando Cleto for appellant.

CONCEPCION, J.:

This is an appeal, taken by defendant Honorato Asuncion from an order denying a petition for relief
from an order declaring him in default and a judgment by default.

On June 12, 1953, plaintiff, Vicenta Pantaleon, instituted this action, in the Court of First Instance of
Nueva Ecija, to recover from said Asuncion, the sum of P2,000.00, with interest thereon, in addition
to attorney's fees. The summons originally issued was returned by the sheriff of Nueva Ecija
unserved, with the statement that, according to reliable information, Asuncion was residing in B-24
Tala Estate, Caloocan, Rizal. An alias summons was issued, therefore, for service in the place last
mentioned. However, the provincial sheriff of Rizal returned it unserved, with information that
Asuncion had left the Tala Estate since February 18, 1952, and that diligent efforts to locate him
proved to no avail. On plaintiff's motion, the court ordered, on March 9, 1955, that defendant be
summoned by publication, and the summons was published on March 21 and 28, and April 4, 1955,
in the "Examiner", said to be a newspaper of general circulation in Nueva Ecija. Having failed to
appear or answer the complaint within the period stated in the summons, defendant was, by an
order dated July 12, 1955, declared in default. Subsequently, or on September 8, 1955, after a
hearing held in the absence of the defendant and without notice to him, the court rendered judgment
for the plaintiff and against said defendant, for the sum of P2,300.00, with interest thereon at the
legal rate, from October 28, 1948, and costs.

About forty-six (46) days later, or on October 24, 1955, the defendant filed a petition for relief from
said order of July 12, 1955, and from said judgment, dated September 8, 1955, and upon the ground
of mistake and excusable negligence. Annexed to said petition were defendant's affidavit and his
verified answer. In the affidavit, Asuncion stated that, on September 26, 1955, at 34 Pitimine Street,
San Francisco del Monte Quezon City, which is his residence, he received notice of a registered
letter at the Post Office in San Jose, Nueva Ecija, his old family residence; that he proceeded
immediately to the latter municipality to claim said letter, which he received on September 28, 1955;
that the letter contained copy of said order of July 12, 1955, and of the judgment of September 8,
1955, much to his surprise, for he had not been summoned or notified of the hearing of this case;
that had copy of the summons and of the order for its publication been sent to him by mail, as
provided in Rule 7, section 21, of the Rules of Court said summons and order would have reached
him, "as the judgment herein had"; and that his failure to appear before the court is excusable it
being due to the mistake of the authorities concerned in not complying with the provisions of said
section. Upon denial of said petition for relief, defendant perfected his present appeal, which is
predicated upon the theory that the aforementioned summons by publication had not been made in
conformity with the Rules of Court.

More specifically, defendant maintains that copy of the summons and of the order for the publication
thereof were not deposited "in the post office, postage prepaid, directed to the defendant by ordinary
mail to his last known address", in violation of Rule 7, section 21, of the Rules of Court, and that, had
this provision been complied with, said summons and order of publication would have reached him,
as had the decision appealed from. Said section 21 reads:
 If the service has been made by publication, service may be proved by the affidavit of the
printer, his foreman or principal clerk, or of the editor, business or advertising manager, to
which affidavit a copy of the publication shall be attached, and by an affidavit showing the
deposit of a copy of the summons and order for publication in the post office, postage
prepaid, directed to the defendant by ordinary mail to his last known address. (Emphasis
supplied.).

Plaintiff alleges, however, that the provision applicable to the case at bar is not this section 21, but
section 16, of Rule 7, of the Rules of Court, which provides:

Whenever the defendant is designated as an unknown owner, or the like, or whenever the
address of a defendant is unknown and cannot be ascertained by diligent inquiry, service
may, by leave of court, be effect upon him by publication in such places and for such times
as the court may order.

It is, moreover, urged by the plaintiff that the requirement, in said section 21, of an affidavit showing
that copy of the summons and of the order for its publication had been sent by mail to defendant's
last known address, refers to the extraterritorial service of summons, provided for in section 17 of
said Rule 7, pursuant to which:

When the defendant does not reside and is not found in the Philippines and the action affects
the personal status of the plaintiff or 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 contingent, or in
which the relief demanded consists, wholly or in part, in excluding the defendant from any
interest therein, or the property of the defendant has been attached within the Philippines,
service may, by leave of court, be effected out of the Philippines by personal service as
under section 7; or by registered mail; or by publication 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 be
sent by ordinary mail to the last known address of the defendant; or in any other manner the
court may deem sufficient. Any order granting such leave shall specify a reasonable time,
which shall not be less than sixty (60) days after notice, within which the defendant must
answer.

Said section 21, however, is unqualified. It prescribes the "proof of service by publication",
regardless of whether the defendant is a resident of the Philippines or not. Section 16 must be read
in relation to section 21, which complements it. Then, too, we conceive of no reason, and plaintiff
has suggested none, why copy of the summons and of the order for its publication should be mailed
to non-resident defendants, but not to resident defendants. We can not even say that defendant
herein, who, according to the return of the Sheriff of Nueva Ecija, was reportedly residing in Rizal —
where he, in fact (San Francisco del Monte and Quezon City used to be part of Rizal), was residing
— could reasonably be expected to read the summons published in a newspaper said to be a
general circulation in Nueva Ecija.

Considering that strict compliance with the terms of the statute is necessary to confer jurisdiction
through service by publication (Bachrach Garage and Taxi Co. vs. Hotchkiss and Co., 34 Phil., 506;
Banco Español-Filipino vs. Palanca, 37 Phil., 921; Mills vs. Smiley, 9 Idaho 317, 325, 76 Pac. 785;
Charles vs. Marrow, 99 Mo. 638; Sunderland, Cases on Procedure, Annotated, Trial Practice, p. 51),
the conclusion is inescapable that the lower court had no authority whatsoever to issue the order of
July 12, 1955, declaring the defendant in default and to render the decision of September 8, 1955,
and that both are null and void ad initio.
Apart from the foregoing, it is a well-settled principle of Constitutional Law that, in an action strictly in
personam, like the one at bar, personal service of summons, within the forum, is essential to the
acquisition of jurisdiction over the person of the defendant, who does not voluntarily submit himself
to the authority of the court. In other words, summons by publication cannot — consistently with the
due process clause in the Bill of Rights — confer upon the court jurisdiction over said defendant.

Due process of law requires personal service to support a personal judgment, and, when the
proceeding is strictly in personam brought to determine the personal rights and obligations of
the parties, personal service within the state or a voluntary appearance in the case
is essential to the acquisition of jurisdiction so as to constitute compliance with the
constitutional requirement of due process. . . .

Although a state legislature has more control over the form of service on its own residents
than nonresidents, it has been held that in action in personam . . . service by publication on
resident defendants, who are personally within the state and can be found therein is not "due
process of law", and a statute allowing it is unconstitutional. (16A C.J.S., pp. 786, 789;
Emphasis ours.)

Lastly, from the viewpoint of substantial justice and equity, we are of the opinion that defendant's
petition for relief should have been granted. To begin with, it was filed well within the periods
provided in the Rules of Court. Secondly, and, this is more important, defendant's verified answer,
which was attached to said petition, contains allegations which, if true, constitute a good defense.
Thus, for instance, in paragraph (2) of the "special denials" therein, he alleged:

That it is not true that he failed to pay the said indebtedness of his said wife, as alleged in
paragraph 3 of the complaint, for as a matter of fact, plaintiff and defendant agreed upon a
settlement of the said indebtedness of the latter's deceased wife on December 5, 1948,
whereby defendant was allowed to pay it out of his monthly salary by instalment of P10.00
monthly beginning January, 1949, and in accordance therewith, defendant paid unto plaintiff
the following sums:

Instalment for January-February, 1948

March 1949— P30.00 paid personally

April 2, 1949— 10.00 by money order 7488
May 11, 1949— 10.00 by money order 7921
June 10, 1949— 10.00 by money order 8230
July 11, 1949— 10.00 by money order 8595
August 10, 1949— 10.00 by money order 8943
September 1949— 10.00 paid personally
October 1949— 10.00 paid personally
November 14, 1949— 10.00 by money order 9776
December 13, 1949— 10.00 by money order 0076
January 10, 1950— 10.00 by money order 0445
February 9, 1950— 10.00 by money order 0731
March 10, 1950— 10.00 by money order 1149
April 10, 1950— 10.00 by money order 1387
May 11, 1950— 10.00 by money order 1990
June 12, 1950— 10.00 by money order 1055
July 11, 1950— 10.00 by money order 8850
August 11, 1950— 10.00 by money order 9293
September 6, 1950— 10.00 by money order 9618
 October 10, 1950— 10.00 by money order 0008
November 8, 1950— 10.00 by money order 0369
December 1950— 10.00 paid personally
January 2, 1951— 10.00 paid personally
February 10, 1951— 10.00 paid personally
March 12, 1951— 10.00 paid personally
April 1951— 10.00 paid personally
May 1951— 10.00 paid personally
June 1951— 10.00 paid personally
July 1951— 10.00 paid personally
August 1951— 10.00 paid personally
September 1951— 10.00 paid personally
November 1951— 10.00 paid personally
December 1951— 10.00 paid personally
September 1952— 30.00 paid personally
December 1952— 20.00 paid personally
January 1953— 10.00 paid personally
February 1953— 10.00 paid personally
March 1953— 10.00 paid personally
April 1953— 10.00 paid personally
May 1953— 10.00
Total paid — P460.00

The specification of the dates of payment, of the amounts paid each time, of the manner in which
each payment was made, and of the number of the money orders in which eighteen (18) payments
had been effected, constitutes a strong indication of the probable veracity of said allegation, fully
justifying the grant of an opportunity to prove the same.

Wherefore, said order of July 12, 1955, and the aforementioned decision of September 8, 1955, are
hereby set aside and annulled, and let the record of this case be remanded to the lower court for
further proceedings with costs against plaintiff-appellee. It is so ordered.

[G.R. NO. 170943, September 23, 2008]

PEDRO T. SANTOS, JR., Petitioner, v. PNOC EXPLORATION

CORPORATION, Respondent.

DECISION

CORONA, J.:

This is a petition for review1 of the September 22, 2005

decision2 and December 29, 2005 resolution3 of the Court of
Appeals in CA-G.R. SP No. 82482.

On December 23, 2002, respondent PNOC Exploration Corporation

filed a complaint for a sum of money against petitioner Pedro T.
Santos, Jr. in the Regional Trial Court of Pasig City, Branch 167. The
complaint, docketed as Civil Case No. 69262, sought to collect the
amount of P698,502.10 representing petitioner's unpaid balance of
the car loan4 advanced to him by respondent when he was still a
member of its board of directors.

Personal service of summons to petitioner failed because he could

not be located in his last known address despite earnest efforts to
do so. Subsequently, on respondent's motion, the trial court allowed
service of summons by publication.

Respondent caused the publication of the summons in Remate, a

newspaper of general circulation in the Philippines, on May 20,
2003. Thereafter, respondent submitted the affidavit of publication
of the advertising manager of Remate5 and an affidavit of service of
respondent's employee6 to the effect that he sent a copy of the
summons by registered mail to petitioner's last known address.

When petitioner failed to file his answer within the prescribed

period, respondent moved that the case be set for the reception of
its evidence ex parte. The trial court granted the motion in an order
dated September 11, 2003.

Respondent proceeded with the ex parte presentation and formal

offer of its evidence. Thereafter, the case was deemed submitted for
decision on October 15, 2003.

On October 28, 2003, petitioner filed an "Omnibus Motion for

Reconsideration and to Admit Attached Answer." He sought
reconsideration of the September 11, 2003 order, alleging that the
affidavit of service submitted by respondent failed to comply with
Section 19, Rule 14 of the Rules of Court as it was not executed by
the clerk of court. He also claimed that he was denied due process
as he was not notified of the September 11, 2003 order. He prayed
that respondent's evidence ex parte be stricken off the records and
that his answer be admitted.

Respondent naturally opposed the motion. It insisted that it

complied with the rules on service by publication. Moreover,
pursuant to the September 11, 2003 order, petitioner was already
deemed in default for failure to file an answer within the prescribed
period.

In an order dated February 6, 2004, the trial court denied

petitioner's motion for reconsideration of the September 11, 2003
order. It held that the rules did not require the affidavit of
complementary service by registered mail to be executed by the
clerk of court. It also ruled that due process was observed as a copy
of the September 11, 2003 order was actually mailed to petitioner
at his last known address. It also denied the motion to admit
petitioner's answer because the same was filed way beyond the
reglementary period.

Aggrieved, petitioner assailed the September 11, 2003 and

February 6, 2004 orders of the trial court in the Court of Appeals via
a petition for certiorari . He contended that the orders were issued
with grave abuse of discretion. He imputed the following errors to
the trial court: taking cognizance of the case despite lack of
jurisdiction due to improper service of summons; failing to furnish
him with copies of its orders and processes, particularly the
September 11, 2003 order, and upholding technicality over equity
and justice.

During the pendency of the petition in the Court of Appeals, the trial
court rendered its decision in Civil Case No. 69262. It ordered
petitioner to pay P698,502.10 plus legal interest and costs of suit.7

Meanwhile, on September 22, 2005, the Court of Appeals rendered

its decision8 sustaining the September 11, 2003 and February 6,
2004 orders of the trial court and dismissing the petition. It denied
reconsideration.9 Thus, this petition.

Petitioner essentially reiterates the grounds he raised in the Court of

Appeals, namely, lack of jurisdiction over his person due to
improper service of summons, failure of the trial court to furnish
him with copies of its orders and processes including the September
11, 2003 order and preference for technicality rather than justice
and equity. In particular, he claims that the rule on service by
publication under Section 14, Rule 14 of the Rules of Court applies
only to actions in rem, not actions in personam like a complaint for
a sum of money. He also contends that the affidavit of service of a
copy of the summons should have been prepared by the clerk of
court, not respondent's messenger.

The petition lacks merit.

Propriety Of
Service By Publication

Section 14, Rule 14 (on Summons) of the Rules of Court provides:

SEC. 14. Service upon defendant whose identity or whereabouts are
unknown. - In any action where the defendant is designated as an
unknown owner, or the like, or whenever his whereabouts are
unknown and cannot be ascertained by diligent inquiry,
service may, by leave of court, be effected upon him by
publication in a newspaper of general circulation and in such
places and for such times as the court may order. (emphasis
supplied)
Since petitioner could not be personally served with summons
despite diligent efforts to locate his whereabouts, respondent
sought and was granted leave of court to effect service of summons
upon him by publication in a newspaper of general circulation. Thus,
petitioner was properly served with summons by publication.

Petitioner invokes the distinction between an action in rem and an

action in personam and claims that substituted service may be
availed of only in an action in rem. Petitioner is wrong. The in
rem/in personam distinction was significant under the old rule
because it was silent as to the kind of action to which the rule was
applicable.10 Because of this silence, the Court limited the
application of the old rule to in rem actions only.11

This has been changed. The present rule expressly states that it
applies "[i]n any action where the defendant is designated as an
unknown owner, or the like, or whenever his whereabouts are
unknown and cannot be ascertained by diligent inquiry." Thus, it
now applies to any action, whether in personam, in rem or quasi in
rem.12
Regarding the matter of the affidavit of service, the relevant portion
of Section 19,13 Rule 14 of the Rules of Court simply speaks of the
following:
... an affidavit showing the deposit of a copy of the summons and
order for publication in the post office, postage prepaid, directed to
the defendant by registered mail to his last known address.
Service of summons by publication is proved by the affidavit of the
printer, his foreman or principal clerk, or of the editor, business or
advertising manager of the newspaper which published the
summons. The service of summons by publication is complemented
by service of summons by registered mail to the defendant's last
known address. This complementary service is evidenced by an
affidavit "showing the deposit of a copy of the summons and order
for publication in the post office, postage prepaid, directed to the
defendant by registered mail to his last known address."

The rules, however, do not require that the affidavit of

complementary service be executed by the clerk of court. While the
trial court ordinarily does the mailing of copies of its orders and
processes, the duty to make the complementary service by
registered mail is imposed on the party who resorts to service by
publication.

Moreover, even assuming that the service of summons was

defective, the trial court acquired jurisdiction over the person
of petitioner by his own voluntary appearance in the
action against him. In this connection, Section 20, Rule 14 of the
Rules of Court states:
SEC. 20. Voluntary appearance. - The defendant's voluntary
appearance in the action shall be equivalent to service of
summons. The inclusion in a motion to dismiss of other grounds
aside from lack of jurisdiction over the person of the defendant shall
not be deemed a voluntary appearance. (emphasis supplied)
Petitioner voluntarily appeared in the action when he filed the
"Omnibus Motion for Reconsideration and to Admit Attached
Answer"14 This was equivalent to service of summons and vested
the trial court with jurisdiction over the person of petitioner.
Entitlement To
Notice Of Proceedings

The trial court allowed respondent to present its evidence ex

parte on account of petitioner's failure to file his answer within the
prescribed period. Petitioner assails this action on the part of the
trial court as well as the said court's failure to furnish him with
copies of orders and processes issued in the course of the
proceedings.

The effects of a defendant's failure to file an answer within the time

allowed therefor are governed by Sections 3 and 4, Rule 9 (on
Effect of Failure to Plead) of the Rules of Court:
SEC. 3. Default; declaration of. - If the defending party fails to
answer within the time allowed therefor, the court shall,
upon motion of the claiming party with notice to the
defending party, and proof of such failure, declare the
defending party in default. Thereupon, the court shall proceed to
render judgment granting the claimant such relief as his pleading
may warrant, unless the court in its discretion requires the claimant
to submit evidence. Such reception of evidence may be delegated to
the clerk of court.

SEC. 4. Effect of order of default. - A party in default shall be

entitled to notice of subsequent proceedings but not to take
part in the trial. (emphasis supplied)
If the defendant fails to file his answer on time, he may be declared
in default upon motion of the plaintiff with notice to the said
defendant. In case he is declared in default, the court shall proceed
to render judgment granting the plaintiff such relief as his pleading
may warrant, unless the court in its discretion requires the plaintiff
to submit evidence. The defaulting defendant may not take part in
the trial but shall be entitled to notice of subsequent proceedings.

In this case, even petitioner himself does not dispute that he failed
to file his answer on time. That was in fact why he had to file an
"Omnibus Motion for Reconsideration and to Admit Attached
Answer." But respondent moved only for the ex parte presentation
of evidence, not for the declaration of petitioner in default. In its
February 6, 2004 order, the trial court stated:
The disputed Order of September 11, 2003 allowing the
presentation of evidence ex-parte precisely ordered that "despite
and notwithstanding service of summons by publication, no answer
has been filed with the Court within the required period and/or
forthcoming.["] Effectively[,] that was a finding that the
defendant [that is, herein petitioner] was in default for
failure to file an answer or any responsive pleading within
the period fixed in the publication as precisely the defendant
[could not] be found and for which reason, service of summons by
publication was ordered. It is simply illogical to notify the defendant
of the Order of September 11, 2003 simply on account of the reality
that he was no longer residing and/or found on his last known
address and his whereabouts unknown - thus the publication of the
summons. In other words, it was reasonable to expect that the
defendant will not receive any notice or order in his last known
address. Hence, [it was] impractical to send any notice or order to
him. Nonetheless, the record[s] will bear out that a copy of
the order of September 11, 2003 was mailed to the
defendant at his last known address but it was not claimed.
(emphasis supplied)
As is readily apparent, the September 11, 2003 order did not limit
itself to permitting respondent to present its evidence ex parte but
in effect issued an order of default. But the trial court could not
validly do that as an order of default can be made only upon motion
of the claiming party.15 Since no motion to declare petitioner in
default was filed, no default order should have been issued.

To pursue the matter to its logical conclusion, if a party declared in

default is entitled to notice of subsequent proceedings, all the more
should a party who has not been declared in default be entitled to
such notice. But what happens if the residence or whereabouts of
the defending party is not known or he cannot be located? In such a
case, there is obviously no way notice can be sent to him and the
notice requirement cannot apply to him. The law does not require
that the impossible be done.16 Nemo tenetur ad impossibile. The law
obliges no one to perform an impossibility.17 Laws and rules must
be interpreted in a way that they are in accordance with logic,
common sense, reason and practicality.18

Hence, even if petitioner was not validly declared in default, he

could not reasonably demand that copies of orders and processes be
furnished him. Be that as it may, a copy of the September 11, 2003
order was nonetheless still mailed to petitioner at his last known
address but it was unclaimed.

CorrectnessOf
Non-Admission Of Answer

Petitioner failed to file his answer within the required period.

Indeed, he would not have moved for the admission of his answer
had he filed it on time. Considering that the answer was belatedly
filed, the trial court did not abuse its discretion in denying its
admission.

Petitioner's plea for equity must fail in the face of the clear and
express language of the rules of procedure and of the September
11, 2003 order regarding the period for filing the answer. Equity is
available only in the absence of law, not as its replacement.19 Equity
may be applied only in the absence of rules of procedure, never in
contravention thereof.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioner.

SO ORDERED

G.R. No. L-18164 January 23, 1967

WILLIAM F. GEMPERLE, plaintiff-appellant,

vs.
HELEN SCHENKER and PAUL SCHENKER as her husband, defendants-appellees.

Gamboa & Gamboa for plaintiff-appellant.

A. R. Narvasa for defendants-appellees.

CONCEPCION, C. J.:
Appeal, taken by plaintiff, William F. Gemperle, from a decision of the Court of First Instance of Rizal
dismissing this case for lack of jurisdiction over the person of defendant Paul Schenker and for want
of cause of action against his wife and co-defendant, Helen Schenker said Paul Schenker "being in
no position to be joined with her as party defendant, because he is beyond the reach of the
magistracy of the Philippine courts."

The record shows that sometime in 1952, Paul Schenker-hereinafter referred to as Schenker —
acting through his wife and attorney-in-fact, Helen Schenker — herein-after referred to as Mrs.
Schenker — filed with the Court of First Instance of Rizal, a complaint — which was docketed as
Civil Case No. Q-2796 thereof — against herein plaintiff William F. Gemperle, for the enforcement of
Schenker's allegedly initial subscription to the shares of stock of the Philippines-Swiss Trading Co.,
Inc. and the exercise of his alleged pre-emptive rights to the then unissued original capital stock of
said corporation and the increase thereof, as well as for an accounting and damages. Alleging that,
in connection with said complaint, Mrs. Schenker had caused to be published some allegations
thereof and other matters, which were impertinent, irrelevant and immaterial to said case No. Q-
2796, aside from being false and derogatory to the reputation, good name and credit of Gemperle,
"with the only purpose of attacking" his" honesty, integrity and reputation" and of bringing him "into
public hatred, discredit, disrepute and contempt as a man and a businessman", Gemperle
commenced the present action against the Schenkers for the recovery of P300,000 as damages,
P30,000 as attorney's fees, and costs, in addition to praying for a judgment ordering Mrs. Schenker
"to retract in writing the said defamatory expressions". In due course, thereafter, the lower court,
rendered the decision above referred to. A reconsiderating thereof having been denied, Gemperle
interposed the present appeal.

The first question for determination therein is whether or not the lower court had acquired jurisdiction
over the person of Schenker. Admittedly, he, a Swiss citizen, residing in Zurich, Switzerland, has not
been actually served with summons in the Philippines, although the summons address to him and
Mrs. Schenker had been served personally upon her in the Philippines. It is urged by plaintiff that
jurisdiction over the person of Schenker has been secured through voluntary appearance on his
part, he not having made a special appearance to assail the jurisdiction over his person, and an
answer having been filed in this case, stating that "the defendants, by counsel, answering the
plaintiff's complaint, respectfully aver", which is allegedly a general appearance amounting to a
submission to the jurisdiction of the court, confirmed, according to plaintiff, by a P225,000
counterclaim for damages set up in said answer; but this counterclaim was set up by Mrs. Schenker
alone, not including her husband. Moreover, said answer contained several affirmative defenses,
one of which was lack of jurisdiction over the person of Schenker, thus negating the alleged waiver
of this defense. Nevertheless, We hold that the lower court had acquired jurisdiction over said
defendant, through service of the summons addressed to him upon Mrs. Schenker, it appearing from
said answer that she is the representative and attorney-in-fact of her husband aforementioned civil
case No. Q-2796, which apparently was filed at her behest, in her aforementioned representative
capacity. In other words, Mrs. Schenker had authority to sue, and had actually sued on behalf of her
husband, so that she was, also, empowered to represent him in suits filed against him, particularly in
a case, like the of the one at bar, which is consequence of the action brought by her on his behalf.

Inasmuch as the alleged absence of a cause of action against Mrs. Schenker is premised upon the
alleged lack of jurisdiction over the person of Schenker, which cannot be sustained, it follows that
the conclusion drawn therefore from is, likewise, untenable.

Wherefore, the decision appealed from should be, is hereby, reversed, and the case remanded to
the lower court for proceedings, with the costs of this instance defendants-appellees. It is so
ordered.
G.R. No. 73531. April 6, 1993.

DOLORES DELOS SANTOS, NICOLAS DELOS SANTOS and RICARDO DELOS SANTOS,
petitioners,
vs.
HON. JUDGE CAMILO MONTESA, JR. and JUANA DELOS SANTOS, respondents.

Jose C. Patalinjug for petitioners.

Leonardo O. Mancao for private respondent.

SYLLABUS

1. REMEDIAL LAW CIVIL PROCEDURE; SUMMONS; DEFENDANT'S VOLUNTARY

APPEARANCE IN THE ACTION EQUIVALENT TO SERVICE OF SUMMONS; CASE AT BAR. — At
first blush, it would appear that the recourse pursued by petitioners could elicit a favorable response
from us in as much as the proof of service of the summons upon petitioners does not indicate
impossibility of personal service, a condition precedent for resorting to substituted service. Even
then, and assuming in gratia argumenti that the statutory norms on service of summons have not
been strictly complied with, still, any defect in form and in the manner of effecting service thereof
were nonetheless erased when petitioners' counsel moved to re-examine the impugned decision and
posed a subsequent bid on appeal to impede immediate execution (Boticano vs. Chu. Jr., 145 SCRA
541 [1987]); 1 Regalado, Remedial Law Compendium, 1988 Fifth Rev. Ed., p. 136). Indeed, such
demeanor is tantamount to voluntary submission to the competencia of the court within the purview
of Section 23, Rule 14 of the Revised Rules of Court since any mode of appearance in court by a
defendant or his lawyer is equivalent to service of summons, absent any indication that the
appearance of counsel for petitioner was precisely to protest the jurisdiction of the court over the
person of defendant (Carballo vs. Encarnacion, 49 O.G. 1383; 1 Regalado, supra, p. 144; Flores vs.
Zurbito, 37 Phil. 746 [1918]; 1 Martin, Rules of Court in the Philippines, 1989 Rev. Ed., p. 473 Sison,
et al. vs. Gonzales, 50 O.G. 4756; 1 Moran, Comments on the Rules of Court, 1970 Ed., p. 467).
Neither can We treat the motion for reconsideration directed against the unfavorable disposition as a
special appearance founded on the sole challenge on invalid service of summons since the
application therefor raised another ground on failure to state a cause of action when conciliation
proceedings at the barangay level were allegedly bypassed, nay, disregarded (Republic vs. Ker and
Co., Ltd., 64 O.G. 3761; Regalado, supra, p. 152).

2. ID APPEAL; ONLY QUESTIONS OF LAW MAY BE RAISED IN PETITION FOR REVIEW ON

CERTIORARI UNDER RULE 45; CASE AT BAR The fact that petitioners are supposedly occupying
a parcel of land other than the realty claimed by private respondent deserves scant consideration
since a clarification on a factual query of this nature is proscribed by the second paragraph, Section
2 of Rule 45 of the Revised Rules of Court. Verily, counsel for petitioners' assertion in the notice of
appeal filed with respondent judge that the grievance to be elevated to this Court will focus "fully on
a question of law" (p. 32 Rollo) is a self-defeating posture and operates as a legal bar for us to dwell
into the truth or falsehood of such factual premise (Article 1431, New Civil Code; Section 4, Rule
129; Section 2(a), Rule 131, Revised Rules on Evidence).

3. ID; JUDGMENT; EXECUTION PENDING APPEAL; PREVAILING PARTY MOVING FOR

EXECUTION PENDING APPEAL OBLIGED TO SERVE COPY OF MOTION ON ADVERSE
PARTY'S COUNSEL. — Petitioners argue next that execution pending appeal was ordered without
any prior notice to them (p. 3, Petition; p. 7, Rollo). This notion is also devoid of substance since it
erroneously suggests that the court is duty-bound to notify petitioners of the immediate enforcement
of the appealed decision. A contrario, it is the prevailing party moving for execution pending appeal
under Section 2, Rule 39 of the Revised Rules of Court who is obliged to serve a copy of such
motion on the adverse party's counsel, which, on the face of the subject motion, was effected by
personal delivery (p. 23, Rollo; Lao vs. Mencias, 21 SCRA 1021 [1967]; 2 Martin, Rules of Court in
the Philippines, 1973 Ed., p. 288).

DECISION

MELO, J p:

In the suit for desahucio initiated below by herein private respondent against petitioners, the court of
origin ordered petitioners to vacate the lot in question to pay P5,000.00 per year as reasonable
rental from 1985 until possession is surrendered, and to pay P1,000.00 as attorney's fees and the
costs of the suit (pp. 37-38, Rollo). Upon appeal, Branch XIX of the Regional Trial Court of the Third
Judicial Region stationed in Malolos and presided over by herein respondent judge, granted private
respondents motion for execution pending appeal on account of petitioners' failure to post a
supersedeas bond (p. 21, Rollo). To set aside the proceedings below, the petition at hand was
instituted anchored on the supposition that petitioners were deprived of their day in court.

Petitioners' mental distress started when private respondent, who supposedly owns Lot 39 of the
Cadastral survey of Bustos with an area of 5,358 square meters covered by Original Certificate of
Title No. U-7924 a portion of which petitioners entered and occupied, lodged the complaint geared
towards petitioners' eviction. Summons was served through the mother of petitioners when the
process server was unable to locate Dolores, Nicolas, and Ricardo delos Santos in Talampas,
Bustos, Bulacan. For failure of petitioners to submit the corresponding answer, judgment was
rendered pursuant to the rules on summary procedure (pp. 2-3, Decision; pp. 37-38, Rollo).

Upon learning of said decision, petitioners sought to reconsider on the principal thesis that they were
never served notice of the conciliation meeting at the barangay level, as well as the summons. They
insist that private respondent was referring to a different piece of realty because petitioners actually
occupied Lot No. 3568 owned by Nicolas delos Santos under Original Certificate of Title No. F-
10418. Moreover, petitioners advanced the proposition that Dolores' husband should have been
impleaded. All of these arguments were to no avail. As indicated earlier, execution pending appeal
was ordered due to petitioners' failure to post a supersedeas bond.

To stave off the impending eviction of petitioners, this Court issued a restraining order on April 28,
1986 directed against the reviewing authority and private respondent until further orders (p. 52,
Rollo).

At first blush, it would appear that the recourse pursued by petitioners could elicit a favorable
response from us in as much as the proof of service of the summons upon petitioners does not
indicate impossibility of personal service, a condition precedent for resorting to substituted service.
Even then, and assuming in gratia argumenti that the statutory norms on service of summons have
not been strictly complied with, still, any defect in form and in the manner of effecting service thereof
were nonetheless erased when petitioners' counsel moved to re-examine the impugned decision and
posed a subsequent bid on appeal to impede immediate execution (Boticano vs. Chu. Jr., 145 SCRA
541 [1987]); 1 Regalado, Remedial Law Compendium, 1988 Fifth Rev. Ed., p. 136). Indeed, such
demeanor is tantamount to voluntary submission to the competencia of the court within the purview
of Section 23, Rule 14 of the Revised Rules of Court since any mode of appearance in court by a
defendant or his lawyer is equivalent to service of summons, absent any indication that the
appearance of counsel for petitioner was precisely to protest the jurisdiction of the court over the
person of defendant (Carballo vs. Encarnacion, 49 O.G. 1383; 1 Regalado, supra, p. 144; Flores vs.
Zurbito, 37 Phil. 746 [1918]; 1 Martin, Rules of Court in the Philippines, 1989 Rev. Ed., p. 473 Sison,
et al. vs. Gonzales, 50 O.G. 4756; 1 Moran, Comments on the Rules of Court, 1970 Ed., p. 467).

Neither can We treat the motion for reconsideration directed against the unfavorable disposition as a
special appearance founded on the sole challenge on invalid service of summons since the
application therefor raised another ground on failure to state a cause of action when conciliation
proceedings at the barangay level were allegedly bypassed, nay, disregarded (Republic vs. Ker and
Co., Ltd., 64 O.G. 3761; Regalado, supra, p. 152).

The fact that petitioners are supposedly occupying a parcel of land other than the realty claimed by
private respondent deserves scant consideration since a clarification on a factual query of this nature
is proscribed by the second paragraph, Section 2 of Rule 45 of the Revised Rules of Court. Verily,
counsel for petitioners' assertion in the notice of appeal filed with respondent judge that the
grievance to be elevated to this Court will focus "fully on a question of law" (p. 32 Rollo) is a self-
defeating posture and operates as a legal bar for us to dwell into the truth or falsehood of such
factual premise (Article 1431, New Civil Code; Section 4, Rule 129; Section 2(a), Rule 131, Revised
Rules on Evidence).

Petitioners argue next that execution pending appeal was ordered without any prior notice to them
(p. 3, Petition; p. 7, Rollo). This notion is also devoid of substance since it erroneously suggests that
the court is duty-bound to notify petitioners of the immediate enforcement of the appealed .appeal
under Section 2, Rule 39 of the Revised Rules of Court who is obliged to serve a copy of such
motion on the adverse party's counsel, which, on the face of the subject motion, was effected by
personal delivery (p. 23, Rollo; Lao vs. Mencias, 21 SCRA 1021 [1967]; 2 Martin, Rules of Court in
the Philippines, 1973 Ed., p. 288).

In fine, petitioners may not press the idea that they were deprived of their day in court amidst the
implicit forms of waiver performed by their lawyer in submitting every conceivable defense for
petitioners via the two motions for reconsideration below.

WHEREFORE, the petition is hereby DISMISSED for lack of merit and the restraining order issued
on April 28, 1986 LIFTED.

SO ORDERED.

[G.R. No. L-5675. April 27, 1953.]

ANTONIO CARBALLO, Petitioner, v. DEMETRIO B. ENCARNACION in his

capacity as Judge of First Instance of Manila and MARIANO ANG, Respondents.

J. Gonzales Orense for Petitioner.

Antonio Gonzales for Respondents.

SYLLABUS

1. PLEADING AND PRACTICE; JUSTICE OF THE PEACE COURTS, PROCEDURE IN;

DEFAULT, GROUNDS FOR. — In the justice of the peace court failure to appear, not
failure to answer, is the sole ground for default (Quisan v. Arellano, L-4461, Dec. 28,
1951.) . Where the defendant in the municipal court filed no answer to the complaint,
but made his appearance, and because of his failure and that of his counsel to appear
on the date of the trial, a hearing ex parte was held and judgment was rendered
thereafter, the judgment was not by default.

2. ID.; ID.; APPEALS; NO APPEAL FROM JUDGMENTS BY DEFAULT; RIGHT TO APPEAL

EXISTS UNLESS JUDGMENT IS BY DEFAULT. — If the judgment of the municipal court is
not by default, the defeated party has a right to appeal therefrom.

DECISION

MONTEMAYOR, J.:

In the Municipal Court of Manila, Mariano Ang filed a complaint (civil case No. 8769)
against Antonio Carballo for the collection of P1,860.84. The corresponding summons
was served upon defendant Carballo for appearance and trial on October 10, 1949. As
counsel for him Atty. J. Gonzales entered his written appearance on October 12, 1949.
On the same day said counsel filed a motion for postponement of the hearing for one
month on the ground that he was sick, attaching a medical certificate to prove his
illness. Hearing was postponed to October 14, 1949 at which time defendant asked for
another postponement on the ground that his counsel was still sick. The hearing was
again postponed to October 24, 1949. In said last two postponements of the hearing,
the municipal court warned the defendant that the hearing could not wait until his
counsel recovered from his illness, and that if said counsel could not attend the trial he
should obtain the services of another lawyer.

On the day set for hearing, namely, October 24, 1949, neither defendant nor his
counsel appeared although there was a written manifestation of defendant’s counsel
requesting further postponement because he was still sick. At the request of plaintiff’s
counsel, defendant was declared in default. The evidence for the plaintiff was received
after which judgment was rendered against the defendant ordering him to pay the sum
of P1,860.84 with legal interest. Counsel for defendant was duly notified of said
decision and he filed a motion for new trial on the ground that injustice had been done,
and that an error was committed in the decision. The motion for new trial was denied.
Through his counsel defendant perfected his appeal to the Court of First Instance of
Manila and he later filed an answer.

When the case was called for hearing on March 18, 1952, counsel for plaintiff argued
that the decision appealed from had become final and executory for the reason that
said judgment having been rendered by default, no appeal could be validly taken from
it. Despite opposition of the defendant, the Court of First Instance in an order dated
March 18, 1952, considering said decision final and unappealable because it had been
rendered by default, and held that the only jurisdiction left to it was to order the
execution of said decision, so it ordered the return of the record to the municipal court
for that purpose.
Defendant Carballo filed a motion for reconsideration of the order dismissing his appeal
which motion was denied by an order dated March 21, 1952, whereupon Carballo filed
the present petition for certiorari, injunction, prohibition and mandamus wherein he
asks that after due hearing the orders and actuations of respondent Judge Encarnacion
of the Court of First Instance of Manila be declared null and void; that he be ordered to
desist from executing said orders and that furthermore, he be commanded to proceed
with the trial of the case "de novo." cralaw virtua1aw l ib rary

We agree that a decision by default rendered by an inferior court is not appealable (Lim
Toco v. Co Fay, 1 45 Off. Gaz., No. 8, p. 3350). The question now is whether defendant
(now petitioner Carballo) defaulted in the municipal court of Manila. True, he filed no
answer, but his counsel filed a written appearance. In addition, said counsel filed a
motion or manifestation asking for postponement of the hearing on the ground that he
was ill. In the case of Flores v. Zurbito, (37 Phil., 746), this Court held that an
appearance in whatever form without expressly objecting to the jurisdiction of the court
over the person, is a submission to the jurisdiction of the court over the person. It is,
therefore, clear that petitioner Carballo made an appearance in the municipal court.
Could he then be declared in default just because he filed no answer? The answer must
be in the negative. In the case of Quizan v. Arellano, 2 G.R. No. 4461, December 28,
1951, the Supreme Court said that in the justice of the peace court failure to appear,
not failure to answer is the sole ground for default. What really happened in the
municipal court was that the defendant tho he filed no answer to the complaint,
nevertheless, he made his appearance, and in writing at that, but because of his failure
and that of his counsel to appear on the date of the trial, a hearing ex-parte was held
and judgment was rendered thereafter. The judgment, therefore, was not by default.
So, defendant Antonio Carballo had a right to appeal as in fact he appealed, and the
Court of First Instance should not have declared the decision appealed from final and
executory under the theory that it was not appealable.

The present petition is granted and the respondent judge is hereby directed to proceed
with the trial of the case. Respondent Mariano Ang will pay the costs.

G.R. No. 114776 February 2, 2000

MENANDRO B. LAUREANO, petitioner,

vs.
COURT OF APPEALS AND SINGAPORE AIRLINES LIMITED, respondents.

QUISUMBING, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to reverse the
Decision of the Court of Appeals, dated October 29, 1993, in C.A. G.R. No. CV 34476, as well as its
Resolution dated February 28, 1994, which denied the motion for reconsideration.

The facts of the case as summarized by the respondent appellate court are as follows:

Sometime in 1978, plaintiff [Menandro B. Laureano, herein petitioner], then Director of Flight
Operations and Chief Pilot of Air Manila, applied for employment with defendant company
[herein private respondent] through its Area Manager in Manila.
On September 30, 1978, after the usual personal interview, defendant wrote to plaintiff,
offering a contract of employment as an expatriate B-707 captain for an original period of two
(2) years commencing on January 21, 1978. Plaintiff accepted the offer and commenced
working on January 20, 1979. After passing the six-month probation period, plaintiffs
appointment was confirmed effective July 21, 1979. (Annex "B", p. 30, Rollo).

On July 21, 1979, defendant offered plaintiff an extension of his two-year contract to five (5)
years effective January 21, 1979 to January 20, 1984 subject to the terms and conditions set
forth in the contract of employment, which the latter accepted (Annex "C" p. 31, Rec.).

During his service as B-707 captain, plaintiff on August 24, 1980, while in command of a
flight, committed a noise violation offense at the Zurich Airport, for which plaintiff
apologized.(Exh. "3", p. 307, Rec.).

Sometime in 1980, plaintiff featured in a tail scraping incident wherein the tail of the aircraft
scraped or touched the runway during landing. He was suspended for a few days until he
was investigated by board headed by Capt. Choy. He was reprimanded.

On September 25, 1981, plaintiff was invited to take a course of A-300 conversion training at
Aeroformacion, Toulouse, France at dependant's expense. Having successfully completed
and passed the training course, plaintiff was cleared on April 7, 1981, for solo duty as captain
of the Airbus A-300 and subsequently appointed as captain of the A-300 fleet commanding
an Airbus A-300 in flights over Southeast Asia. (Annexes "D", "E" and "F", pp. 34-38, Rec.).

Sometime in 1982, defendant, hit by a recession, initiated cost-cutting measures. Seventeen

(17) expatriate captains in the Airbus fleet were found in excess of the defendant's
requirement (t.s.n., July 6, 1988. p. 11). Consequently, defendant informed its expatriate
pilots including plaintiff of the situation and advised them to take advance leaves. (Exh. "15",
p. 466, Rec.)

Realizing that the recession would not be for a short time, defendant decided to terminate its
excess personnel (t.s.n., July 6, 1988, p. 17). It did not, however, immediately terminate it's
A-300 pilots. It reviewed their qualifications for possible promotion to the B-747 fleet. Among
the 17 excess Airbus pilots reviewed, twelve were found qualified. Unfortunately, plaintiff was
not one of the twelve.

On October 5, 1982, defendant informed plaintiff of his termination effective November 1,

1982 and that he will be paid three (3) months salary in lieu of three months notice (Annex
"I", pp. 41-42, Rec.). Because he could not uproot his family on such short notice, plaintiff
requested a three-month notice to afford him time to exhaust all possible avenues for
reconsideration and retention. Defendant gave only two (2) months notice and one (1) month
salary. (t.s.n., Nov. 12, 1987. p. 25).

Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal dismissal before the Labor
Arbiter. Defendant moved to dismiss on jurisdiction grounds. Before said motion was
resolved, the complaint was withdrawn. Thereafter, plaintiff filed the instant case for
damages due to illegal termination of contract of services before the court a quo (Complaint,
pp. 1-10, Rec.).

Again, defendant on February 11, 1987 filed a motion to dismiss alleging inter alia: (1) that
the court has no jurisdiction over the subject matter of the case, and (2) that Philippine courts
have no jurisdiction over the instant case. Defendant contends that the complaint is for illegal
 dismissal together with a money claim arising out of and in the course of plaintiffs
employment "thus it is the Labor Arbiter and the NLRC who have the jurisdiction pursuant to
Article 217 of the Labor Code" and that, since plaintiff was employed in Singapore, all other
aspects of his employment contract and/or documents executed in Singapore. Thus,
defendant postulates that Singapore laws should apply and courts thereat shall have
jurisdiction. (pp. 50-69, Rec.).

In traversing defendant's arguments, plaintiff claimed that: (1) where the items demanded in
a complaint are the natural consequences flowing from a breach of an obligation and not
labor benefits, the case is intrinsically a civil dispute; (2) the case involves a question that is
beyond the field of specialization of labor arbiters; and (3) if the complaint is grounded not on
the employee's dismissal per se but on the manner of said dismissal and the consequence
thereof, the case falls under the jurisdiction of the civil courts. (pp. 70-73, Rec.)

On March 23, 1987, the court a quo denied defendant's motion to dismiss (pp. 82-84, Ibid).
The motion for reconsideration was likewise denied. (p. 95 ibid.)

On September 16, 1987, defendant filed its answer reiterating the grounds relied upon in its
motion to dismiss and further arguing that plaintiff is barred by laches, waiver, and estoppel
from instituting the complaint and that he has no cause of action . (pp. 102-115)1

On April 10, 1991, the trial court handed down its decision in favor of plaintiff. The dispositive portion
of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff Menandro Laureano and

against defendant Singapore Airlines Limited, ordering defendant to pay plaintiff the amounts
of —

SIN$396,104.00, or its equivalent in Philippine currency at the current rate of exchange at

the time of payment, as and for unearned compensation with legal interest from the filing of
the complaint until fully paid;

SIN$154,742.00, or its equivalent in Philippine currency at the current rate of exchange at

the time of payment; and the further amounts of P67,500.00 as consequential damages with
legal interest from the filing of the complaint until fully paid;

P1,000,000.00 as and for moral damages; P1,000,000.00 as and for exemplary damages;
and P100,000.00 as and for attorney's fees.

Costs against defendant.

SO ORDERED.2

Singapore Airlines timely appealed before the respondent court and raised the issues of jurisdiction,
validity of termination, estoppel, and damages.

On October 29, 1993, the appellate court set aside the decision of the trial court, thus,

. . . In the instant case, the action for damages due to illegal termination was filed by plaintiff-
appellee only on January 8, 1987 or more than four (4) years after the effectivity date of his
dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already prescribed.
 WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE. The
complaint is hereby dismissed.

SO ORDERED.3

Petitioner's and Singapore Airlines' respective motions for reconsideration were denied.

Now, before the Court, petitioner poses the following queries:

1. IS THE PRESENT ACTION ONE BASED ON CONTRACT WHICH PRESCRIBES IN TEN

YEARS UNDER ARTICLE 1144 OF THE NEW CIVIL CODE OR ONE FOR DAMAGES ARISING
FROM AN INJURY TO THE RIGHTS OF THE PLAINTIFF WHICH PRESCRIBES IN FOUR YEARS
UNDER ARTICLE 1146 OF THE NEW CIVIL CODE?

2. CAN AN EMPLOYEE WITH A FIXED PERIOD OF EMPLOYMENT BE RETRENCHED BY HIS

EMPLOYER?

3. CAN THERE BE VALID RETRENCHMENT IF AN EMPLOYER MERELY FAILS TO REALIZE

THE EXPECTED PROFITS EVEN IF IT WERE NOT, IN FACT, INCURRING LOSSES?

At the outset, we find it necessary to state our concurrence on the assumption of jurisdiction by the
Regional Trial Court of Manila, Branch 9. The trial court rightly ruled on the application of Philippine
law, thus:

Neither can the Court determine whether the termination of the plaintiff is legal under the
Singapore Laws because of the defendant's failure to show which specific laws of Singapore
Laws apply to this case. As substantially discussed in the preceding paragraphs, the
Philippine Courts do not take judicial notice of the laws of Singapore. The defendant that
claims the applicability of the Singapore Laws to this case has the burden of proof. The
defendant has failed to do so. Therefore, the Philippine law should be applied.4

Respondent Court of Appeals acquired jurisdiction when defendant filed its appeal before said
court.5 On this matter, respondent court was correct when it barred defendant-appellant below from
raising further the issue of jurisdiction.6

Petitioner now raises the issue of whether his action is one based on Article 1144 or on Article 1146
of the Civil Code. According to him, his termination of employment effective November 1, 1982, was
based on an employment contract which is under Article 1144, so his action should prescribe in 10
years as provided for in said article. Thus he claims the ruling of the appellate court based on Article
1146 where prescription is only four (4) years, is an error. The appellate court concluded that the
action for illegal dismissal originally filed before the Labor Arbiter on June 29, 1983, but which was
withdrawn, then filed again in 1987 before the Regional Trial Court, had already prescribed.

In our view, neither Article 11447 nor Article 11468 of the Civil Code is here pertinent. What is
applicable is Article 291 of the Labor Code, viz:

Art. 291. Money claims. — All money claims arising from employee-employer relations
accruing during the effectivity of this Code shall be filed within three (3) years from the time
the cause of action accrued; otherwise they shall be forever barred.

xxx xxx xxx

What rules on prescription should apply in cases like this one has long been decided by this Court.
In illegal dismissal, it is settled, that the ten-year prescriptive period fixed in Article 1144 of the Civil
Code may not be invoked by petitioners, for the Civil Code is a law of general application, while the
prescriptive period fixed in Article 292 of the Labor Code [now Article 291] is a SPECIAL LAW
applicable to claims arising from employee-employer relations.9

More recently in De Guzman vs. Court of Appeals,10 where the money claim was based on a written
contract, the Collective Bargaining Agreement, the Court held:

. . . The language of Art. 291 of the Labor Code does not limit its application only to "money
claims specifically recoverable under said Code" but covers all money claims arising from an
employee-employer relations" (Citing Cadalin v. POEA Administrator, 238 SCRA 721, 764
[1994]; and Uy v. National Labor Relations Commission, 261 SCRA 505, 515 [1996]). . . .

It should be noted further that Article 291 of the Labor Code is a special law applicable to
money claims arising from employer-employee relations; thus, it necessarily prevails over
Article 1144 of the Civil Code, a general law. Basic is the rule in statutory construction that
"where two statutes are of equal theoretical application to a particular case, the one
designed therefore should prevail." (Citing Leveriza v. Intermediate Appellate Court, 157
SCRA 282, 294.) Generalia specialibus non derogant.11

In the light of Article 291, aforecited, we agree with the appellate court's conclusion that petitioner's
action for damages due to illegal termination filed again on January 8, 1987 or more than four (4)
years after the effective date of his dismissal on November 1, 1982 has already prescribed.

In the instant case, the action for damages due to illegal termination was filed by plaintiff-
appelle only on January 8, 1987 or more than four (4) years after the effectivity date of his
dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already prescribed.

We base our conclusion not on Article 1144 of the Civil Code but on which sets the prescription
period at three (3) years and which governs under this jurisdiction.

Petitioner claims that the running of the prescriptive period was tolled when he filed his complaint for
illegal dismissal before the Labor Arbiter of the National Labor Relations Commission. However, this
claim deserves scant consideration; it has no legal leg to stand on. In Olympia International,
Inc., vs., Court of Appeals, we held that "although the commencement of a civil action stops the
running of the statute of prescription or limitations, its dismissal or voluntary abandonment by the
plaintiff leaves in exactly the same position as though no action had been commenced at all."12

Now, as to whether petitioner's separation from the company due to retrenchment was valid, the
appellate court found that the employment contract of petitioner allowed for pre-termination of
employment. We agree with the Court of Appeals when it said,

It is a settled rule that contracts have the force of law between the parties. From the moment
the same is perfected, the parties are bound not only to the fulfillment of what has been
expressly stipulated but also to all consequences which, according to their nature, may be in
keeping with good faith, usage and law. Thus, when plaintiff-appellee accepted the offer of
employment, he was bound by the terms and conditions set forth in the contract, among
others, the right of mutual termination by giving three months written notice or by payment of
three months salary. Such provision is clear and readily understandable, hence, there is no
room for interpretation.
 xxx xxx xxx

Further, plaintiff-appellee's contention that he is not bound by the provisions of the

Agreement, as he is not a signatory thereto, deserves no merit. It must be noted that when
plaintiff-appellee's employment was confirmed, he applied for membership with the
Singapore Airlines Limited (Pilots) Association, the signatory to the aforementioned
Agreement. As such, plaintiff-appellee is estopped from questioning the legality of the said
agreement or any proviso contained therein.13

Moreover, the records of the present case clearly show that respondent court's decision is amply
supported by evidence and it did not err in its findings, including the reason for the retrenchment:

When defendant-appellant was faced with the world-wide recession of the airline industry
resulting in a slow down in the company's growth particularly in the regional operation (Asian
Area) where the Airbus 300 operates. It had no choice but to adopt cost cutting measures,
such as cutting down services, number of frequencies of flights, and reduction of the number
of flying points for the A-300 fleet (t.s.n., July 6, 1988, pp. 17-18). As a result, defendant-
appellant had to lay off A-300 pilots, including plaintiff-appellee, which it found to be in
excess of what is reasonably needed.14

All these considered, we find sufficient factual and legal basis to conclude that petitioner's
termination from employment was for an authorized cause, for which he was given ample notice and
opportunity to be heard, by respondent company. No error nor grave abuse of discretion, therefore,
could be attributed to respondent appellate court.1âwphi1.nêt

ACCORDINGLY, the instant petition is DISMISSED. The decision of the Court of Appeals in C.A. CV
No. 34476 is AFFIRMED.

SO ORDERED.

G.R. No. 168747 October 19, 2007

VICTORIA REGNER, Petitioner,

vs.
CYNTHIA R. LOGARTA, TERESA R. TORMIS and CEBU COUNTRY CLUB, Inc., Respondents.

DECISION

CHICO-NAZARIO, J.:

This Petition for Review on Certiorari seeks to reverse the Decision1 dated 6 May 2005 of the Court
of Appeals in CA-G.R. CV No. 71028 entitled, "Victoria Regner v. Cynthia Logarta, 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 No. CEB
23927. The Order dated 9 November 2000 of the RTC dismissed herein petitioner‘s complaint for
declaration of nullity of a deed of donation, for failure to serve summons on Cynthia Logarta, an
indispensable party therein.

Civil Case No. CEB. 23927 arose from the following factual antecedents:
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-Borja
(Melinda).

Herein petitioner Victoria Regner (Victoria) is the second wife of Luis.

During the lifetime of Luis, he acquired several properties, among which is a share at Cebu Country
Club Inc., evidenced by Proprietary Ownership Certificate No. 0272. On 15 May 1998, Luis executed
a Deed2 of Donation in favor of respondents Cynthia and Teresa covering Proprietary Ownership
Certificate No. 0272 of the Cebu Country Club, Inc.

Luis passed away on 11 February 1999.

On 15 June 1999, Victoria filed a Complaint3 for Declaration of Nullity of the Deed of Donation with
Prayer for Issuance of a Writ of Preliminary Injunction and Temporary Restraining Order against
Cynthia and Teresa with the RTC, docketed as Civil Case No. CEB. 23927. Victoria alleged in her
complaint that: on 17 March 1997, Luis made a written declaration wherein he stated that due to his
illness and forgetfulness, he would not sign any document without the knowledge of his lawyer, Atty.
Francis Zosa; on 15 May 1998, when Luis was already very ill and no longer of sound and disposing
mind, Cynthia and Teresa , conspiring and confederating with each other, fraudulently made or
caused to be fraudulently made a Deed of Donation whereby they made it appear that Luis donated
to them Proprietary Ownership Certificate No. 0272; since Luis no longer had the ability to write or
affix his signature, Melinda, acting under the influence of her sisters, Cynthia and Teresa,
fraudulently manipulated the hand of Luis so that he could affix his thumbmark on the assailed Deed
of Donation; on 8 February 1998, or three days before the death of Luis, and when he was already in
comatose condition at the Cebu Doctors‘ Hospital, Melinda, Teresa, and Cynthia caused the
preparation of an affidavit to the effect that Luis affirmed the Deed of Donation he allegedly executed
earlier by lifting his hand to affix his thumbmark on the said affidavit.

Sheriff Melchor A. Solon served the summonses on Cynthia and Teresa at the Borja Family Clinic in
Tagbilaran City wherein Melinda worked as a doctor, but Melinda refused to receive the summonses
for her sisters and informed the sheriff that their lawyer, Atty. Francis Zosa, would be the one to
receive the same.

Upon her arrival in the Philippines, on 1 June 2000, Teresa was personally served the summons at
Room 304, Regency Crest Condominium, Banilad, Cebu City. She filed her Answer4 with
counterclaim with the RTC on 6 June 2000.

Subsequently, on 12 September 2002, Teresa filed a motion to dismiss Civil Case No. CEB 23927
because of petitioner‘s failure to prosecute her action for an unreasonable length of time.

Petitioner opposed5 the motion and filed her own motion to set the case for pre-trial, to which Teresa
filed her rejoinder on the ground that their sister, Cynthia, an indispensable party, had not yet been
served a summons. Thus, Teresa prayed for the dismissal of petitioner‘s complaint, as the case
would not proceed without Cynthia‘s presence.

On 9 November 2000, the RTC issued an Order6 granting respondent Teresa‘s motion to dismiss,
pertinent portions of which read:

Considering that the donees in the Deed of Donation are Cynthia R. Logarta and Teresa R. Tormis,
they are therefore an (sic) indispensable party (sic). In the case of Quisumbing vs. Court of Appeals,
189 SCRA 325, indispensable parties are those with such an interest in the controversy that a final
decree would necessarily affect their rights so that the court could not proceed without their
presence

Wherefore, in view of the foregoing, the instant case is hereby dismissed without prejudice.

A motion for reconsideration was filed by petitioner, but the same was denied in an Order dated 14
February 2001.

Aggrieved, petitioner appealed to the Court of Appeals. On 6 May 2005, the Court of Appeals
rendered a Decision denying the appeal and affirming in toto the order of dismissal of the complaint
by the RTC and the denial of the motion for reconsideration thereof. The Court of Appeals
ratiocinated that petitioner‘s failure to move for an extraterritorial service of summons constitutes
failure to prosecute for an unreasonable length of time, thus:

[T]he plaintiff-appellant [Victoria Regner] should have moved for the extraterritorial service of
summons for both defendants-appellees Teresa R. Tormis and Cynthia R. Logarta as they were not
residing and were not found in the Philippines when plaintiff-appellant [Victoria Regner] filed this
case below. Although defendant-appellant Teresa Tormis was personally served with summons on
June 1, 2000 when she came to the Philippines but the same was only effected after a long wait or
after the lapse of almost one year from the date the complaint was filed on June 15, 1999. To allow
this practice would be to make the continuation of like proceedings before the courts dependent on
when the defendants would be personally served with summons by the time they would come to the
Philippines, which would only unnecessarily delay the proceedings and clog the court dockets as
well. The afore-cited rule was precisely crafted to meet situations similar to the present case to avoid
unnecessary delays.

It has to be emphasized that it is incumbent upon the plaintiff [Victoria Regner] to move with leave of
court for the extraterritorial service of summons. Taking into account the considerable time that had
elapsed from the filing of the complaint on June 15, 1999 until defendant-appellee Teresa R. Tormis,
through counsel, filed a motion to dismiss on September 12, 2000, or approximately fifteen (15)
months, without any act on the part of plaintiff-appellant [Victoria Regner] to move for extraterritorial
service of summons upon the person of defendant-appellee Cynthia Logarta renders plaintiff-
appellant‘s [Victoria Regner] complaint dismissible for failure to prosecute her action for
unreasonable length of time under Section 3, Rule 17, Revised Rules of Court, x x x.7

Hence, this appeal via petition8 for review on certiorari filed by petitioner raising the following
assignment of errors:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE DELAY IN SERVING SUMMONS ON
ONE OF THE DEFENDANTS CONSTITUTES A FAILURE TO PROSECUTE NOTWITHSTANDING
THAT THE REST OF THE CO-DEFENDANTS WERE DULY SERVED WITH SUMMONSES

THE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT THE ANSWER FILED BY ONE
INDIVIDUAL DEFENDANT REDOUNDS TO THE BENEFIT OF THE OTHER DEFENDANT WHO
HAS NOT BEEN SERVED WITH SUMMONS, THE NATURE OF ACTION BEING ADMITTEDLY
COMMON AMONG ALL DEFENDANTS.9

From the foregoing, this Court identifies the issues to be resolved in this petition as: (1) Whether a
co-donee is an indispensable party in an action to declare the nullity of the deed of donation, and (2)
whether delay in the service of summons upon one of the defendants constitutes failure to prosecute
that would warrant dismissal of the complaint.
A Court must acquire jurisdiction over the persons of indispensable parties before it can validly
pronounce judgments personal to the parties. Courts acquire jurisdiction over a party plaintiff upon
the filing of the complaint. On the other hand, jurisdiction over the person of a party defendant is
assured upon the service of summons in the manner required by law or otherwise by his voluntary
appearance. As a rule, if a defendant has not been summoned, the court acquires no jurisdiction
over his person, and a personal judgment rendered against such defendant 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 contemplation of law and, hence, it can never become final and executory.11

Rule 3, Section 7 of the Rules of Court, defines indispensable parties as parties-in-interest without
whom there can be no final determination of an action. As such, they must be joined either as
plaintiffs or as defendants. The general rule with reference to the making of parties in a civil action
requires, of course, the joinder of all necessary parties where possible, and the joinder of all
indispensable parties under any and all conditions, their presence being a sine qua non for the
exercise of judicial power.12 It is precisely "when an indispensable party is not before the court [that]
the action should be dismissed."13 The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent parties but
even as to those present.14

As we ruled in Alberto v. Mananghala15 :

In an action for recovery of property against a person who purchased it from another who in turn
acquired it from others by the same means or by donation or otherwise, the predecessors of
defendants are indispensable parties if the transfers, if not voided, may bind plaintiff. (Garcia vs.
Reyes, 17 Phil. 127.) In the latter case, this Court held:

In order to bring this suit duly to a close, it is imperative to determine the only question raised in
connection with the pending appeal, to wit, whether all the persons who intervened in the matter of
the transfers and donation herein referred to, are or are not necessary parties to this suit, since it is
asked in the complaint that the said transfers and donation be declared null and void – an
indispensable declaration for the purpose, in a proper case, of concluding the plaintiff to be the sole
owner of the house in dispute.

If such a declaration of annulment can directly affect the persons who made and who were
concerned in the said transfers, nothing could be more proper and just than to hear them in the
litigation, as parties interested in maintaining the validity of those transactions, and therefore,
whatever be the nature of the judgment rendered, Francisco Reyes, Dolores Carvajal, Alfredo
Chicote, Vicente Miranda, and Rafael Sierra, besides the said minors, must be included in the case
as defendants." (Garcia vs. Reyes, 17 Phil., 130-131.)

It takes no great degree of legal sophistication to realize that Cynthia and Teresa are indispensable
parties to Civil Case No. CEB 23927. Cynthia and Teresa allegedly derived their rights to the subject
property by way of donation from their father Luis. The central thrust of the petitioner‘s complaint in
Civil Case No. CEB 23927 was that Luis could not have donated Proprietary Ownership Certificate
No. 0272 to his daughters Cynthia and Teresa, as Luis was already very ill and no longer of sound
and disposing mind at the time of donation on 15 May 1997. Accordingly, the prayer in petitioner‘s
complaint was for the trial court to declare null and void the Deed of Donation and to restrain the
Cebu Country Club, Inc. from transferring title and ownership of Proprietary Ownership Certificate
No. 0272 to Cynthia and Teresa.

Thus, based on the Deed of Donation, Teresa and Cynthia are co-owners of Proprietary
Membership Certificate No. 0272 of Cebu Country Club, Inc. The country club membership
certificate is undivided and it is impossible to pinpoint which specific portion of the property belongs
to either Teresa or Cynthia. Indeed, both Teresa and Cynthia are indispensable parties in Civil Case
No. CEB 23927.

An indispensable party has been defined as follows:

An indispensable party is a party who has such an interest in the controversy or subject matter that a
final adjudication cannot be made, in his absence, without injuring or affecting that interest, a party
who has not only an interest in the subject matter of the controversy, but also has an interest of such
nature that a final decree cannot be made without affecting his interest or leaving the controversy in
such a condition that its final determination may be wholly inconsistent with equity and good
conscience. It has also been considered that an indispensable party is a person in whose absence
there cannot be a determination between the parties already before the court which is effective,
complete, or equitable. Further, an indispensable party is one who must be included in an action
before it may properly go forward.

A person is not an indispensable party, however, if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. Also, a person is not an
indispensable 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 the subject matter of the action. It is not a
sufficient reason to declare a person to be an indispensable party that his presence will avoid
multiple litigation.16

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 therein:

An indispensable party is one whose interest will be affected by the court‘s action in the litigation,
and without whom no final determination of the case can be had. The party‘s interest in the subject
matter of the suit and in the relief sought are so inextricably intertwined with the other parties that his
legal presence as a party to the proceeding is an absolute necessity. In his absence there cannot be
a resolution of the dispute of the parties before the court which is effective, complete, or equitable.

The rationale for treating all the co-owners of a property as indispensable parties in a suit involving
the co-owned property is explained in Arcelona v. Court of Appeals18 :

As held by the Supreme Court, were the courts to permit an action in ejectment to be maintained by
a person having merely an undivided interest in any given tract of land, a judgment in favor of the
defendants would not be conclusive as against the other co-owners not parties to the suit, and thus
the defendant in possession of the property might be harassed by as many succeeding actions of
ejectment, as there might be co-owners of the title asserted against him. The purpose of this
provision was to prevent multiplicity of suits by requiring the person asserting a right against the
defendant to include with him, either as co-plaintiffs or as co-defendants, all persons standing in the
same position, so that the whole matter in dispute may be determined once and for all in one
litigation.

Applying the foregoing definitions and principles to the present case, this Court finds that any
decision in Civil Case No. CEB 23927 cannot bind Cynthia, and the Court cannot nullify the donation
of the property she now co-owns with Teresa, even if limited only to the portion belonging to Teresa,
to whom summons was properly served, since ownership of the property is still pro indiviso.
Obviously, Cynthia is an indispensable party in Civil Case No. CEB 23927 without whom the lower
court is barred from making a final adjudication as to the validity of the entire donation. Without the
presence of indispensable parties to a suit or proceeding, a judgment therein cannot attain finality.19

Being an indispensable party in Civil Case No. CEB 23927, the trial court must also acquire
jurisdiction over Cynthia‘s person through the proper service of summons.

Based on the foregoing disquisitions, the issue of whether the answer filed by Teresa should benefit
Cynthia who was not served summons need not be discussed.

As to determine whether Cynthia was properly served a summons, it will be helpful to determine first
the nature of the action filed against Cynthia and Teresa by petitioner Victoria, whether it is an action
in personam, in rem or quasi in rem. This is 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 a personal action, the plaintiff seeks the recovery of 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 the then Rules of Court, 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 mortgage on, real property. An action in personam is an action
against a person on the basis of his personal liability, while an action in rem is an action against the
thing itself, instead of against the person.21

In an action in personam, personal service of summons or, if this is not possible and he cannot be
personally served, substituted service, as provided in Section 7, Rule 14 of the Rules 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 be served a summons
because he is temporarily abroad, but is otherwise a Philippine resident, service of summons may,
by leave of court, be made by publication.24 Otherwise stated, a resident defendant in an action in
personam, who cannot be personally served a summons, may be summoned either by means of
substituted service in accordance with Section 7, Rule 14 of the Rules of Court, or by publication as
provided in Sections 15 and 16 of the same Rule.

In all of these cases, it should be noted, defendant must be a resident of the Philippines; otherwise
an action in personam cannot be brought because jurisdiction over his person is essential to make a
binding decision.

On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person of the
defendant is not essential for giving the court jurisdiction so long as the court acquires jurisdiction
over the res. If the defendant is a nonresident and he is not found in the country, summons may be
served extraterritorially in accordance with Section 15, Rule 14 of the Rules of Court, which
provides:

Section 15. Extraterritorial service. - When the defendant does not reside and is not found in the
Philippines, and the action affects the personal status of the plaintiff or 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 contingent, or in which the relief demanded consists, wholly or in part, in excluding the
defendant from any interest therein, or the property of the defendant has been attached within the
Philippines, service may, by leave of court, be effected out of the Philippines by personal service as
under Section 6; or by publication in a newspaper of general 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 be
sent by registered mail to the last known address of the defendant, or in any other manner the court
may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not
be less than sixty (60) days after notice, within which the defendant must answer.

As stated above, there are only four instances wherein a defendant who is a non-resident and is not
found in the country may be served a summons by extraterritorial service, to wit: (1) when the action
affects the personal status of the plaintiff; (2) when the action relates to, or the subject of which is
property within the Philippines, on which the defendant claims a lien or an interest, actual or
contingent; (3) when the relief demanded in such action consists, wholly or in part, in excluding the
defendant from any interest in property located in the Philippines; and (4) when the defendant non-
resident‘s property has been attached within the Philippines. In these instances, service of summons
may be effected by (a) personal service out of the country, with leave of court; (b) publication, also
with leave of court; or (c) any other manner the court may deem sufficient.25

In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is that it has
jurisdiction over the res, i.e., the personal status of the plaintiff who is domiciled in the Philippines or
the property litigated or attached. Service of 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 jurisdiction, but for complying
with the requirements of fair play or due process, so that the defendant will be informed of the
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 and he
can thereby take steps to protect his interest if he is so minded.26

In petitioner‘s Complaint in Civil Case No. CEB No. 23427, she alleged that Cynthia is residing at
462 West Vine No. 201, Glendale, California, 912041, U.S.A.; while Teresa is residing at 2408 South
Hacienda Boulevard, Hacienda Heights, California, but they usually visit here in the Philippines and
can be served summonses and other processes at the Borja Family Clinic, Bohol. Pertinent portions
of the Complaint read:

2. Defendant Cynthia R. Logarta is a Filipino, of legal age, married to Ramon Logarta,

resident (sic) 463 West Vine No.201, Glendale, California, 912041, USA. She however
usually visits in the Philippines and can be served with summons and other processes of this
Honorable Court at Borja Family Clinic, Tagbilaran, Bohol;

3. Defendant Teresa R. Tormis is likewise a Filipino, of legal age, married to Antonio Tormis,
and a resident of 2408 South Hacienda Heights, California, 19745, U.S.A. She however
usually visits in the Philippines and can be served with summons and other processes of this
Honorable Court at Borja Family Clinic, Tagbilaran, Bohol.27

Petitioner prayed for a declaration of nullity of the deed of donation, to restrain Cebu Country Club,
Inc. from transferring title and ownership of Proprietary Ownership Certificate No. 0272 to Cynthia
and Teresa, and for moral and exemplary damages. Civil Case No. CEB 23927 is evidently an
action against Cynthia and Teresa on the basis of their personal liability for the alleged fraudulent
transfer of the subject Country Club membership from Luis to their name. In this sense, petitioner
questions the participation and shares of Cynthia and Teresa in the transferred Country Club
membership. Moreover, the membership certificate from the Cebu Country Club, Inc. is a personal
property. Thus, the action instituted by petitioner before the RTC is in personam.

Being an action in personam, the general rule requires the personal service of summons on Cynthia
within the Philippines, but this is not possible in the present case because Cynthia is a non-resident
and is not found within the Philippines.
As Cynthia is a nonresident who is not found in the Philippines, service of summons on her must be
in accordance with Section 15, Rule 14 of the Rules of Court. Such service, to be effective outside
the Philippines, must be made either (1) by personal service; (2) by publication in a newspaper of
general 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 should be sent by registered mail to the last known address of
the defendant; or (3) in any other manner which the court may deem sufficient. The third mode, like
the first two, must be made outside the Philippines, such as through the Philippine Embassy in the
foreign country where Cynthia resides.

Since in the case at bar, the service of summons upon Cynthia was not done by any of the
authorized modes, the trial court was correct in dismissing petitioner‘s complaint.

Section 3, Rule 17 of the 1997 Rules of Civil Procedure, states –

SEC. 3. Dismissal due to fault of plaintiff. – If, for no justifiable cause, the plaintiff fails to appear on
the date of the presentation of his evidence in chief on the complaint, or to prosecute his action for
an unreasonable length of time, or to comply with these Rules or any order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own motion, without
prejudice to the right of the defendant to prosecute his counterclaim in the same or in a separate
action. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise
declared by the court.

As can be gleaned from the rule, there are three instances when the complaint may be dismissed
due to the plaintiff's fault: (1) if he fails to appear during a scheduled trial, especially on the date for
the presentation of his evidence in chief; (2) if he fails to prosecute his action for an unreasonable
length of time; and (3) if he fails to comply with the rules or any order of the court.28

Considering the circumstances of the case, it can be concluded that the petitioner failed to prosecute
the case for an unreasonable length of time. There is failure to prosecute when the plaintiff, being
present, is not ready or is unwilling to proceed with the scheduled trial or when postponements in the
past were due to the plaintiff's own making, intended to be dilatory or caused substantial prejudice
on the part of the defendant.29

While a court can dismiss a case on the ground of failure to prosecute, the true test for the exercise
of such power is whether, under the prevailing circumstances, the plaintiff is culpable for want of due
diligence in failing to proceed with reasonable promptitude.30 As to what constitutes an
"unreasonable length of time," within the purview of the above-quoted provision, the Court has ruled
that it "depends upon the circumstances of each particular case," and that "the sound discretion of
the court" in the determination of said question "will not be disturbed, in the absence of patent
abuse"; and that "the burden of showing abuse of judicial discretion is upon the appellant since
every presumption is in favor of the correctness of the court's action."31 Likewise, the concept of
promptness is a relative term and must not unnecessarily be an inflexible one. It connotes an action
without hesitation and loss of time. As to what constitutes the term is addressed to the consideration
of the trial court, bearing in mind that while actions must be disposed of with dispatch, the essential
ingredient is the administration of justice and not mere speed.32

It is well to quote the doctrine laid in Padua v. Ericta,33 as accentuated in the subsequent case
Marahay v. Melicor34 :

Courts should not brook undue delays in the ventilation and determination of causes. It should be
their constant effort to assure that litigations are prosecuted and resolved with dispatch.
Postponements of trials and hearings should not be allowed except on meritorious grounds; and the
grant or refusal thereof rests entirely in the sound discretion of the Judge. It goes without saying,
however, that discretion must be reasonably and wisely exercised, in the light of the attendant
circumstances. Some reasonable deferment of the proceedings may be allowed or tolerated to the
end that cases may be adjudged only after full and free presentation of evidence by all the parties,
especially where the deferment would cause no substantial prejudice to any part. The desideratum
of a speedy disposition of cases should not, if at all possible, result in the precipitate loss of a party‘s
right to present evidence and either in plaintiff's being non-suited or the defendant's being
pronounced liable under an ex parte judgment.

"[T]rial courts have x x x the duty to dispose of controversies after trial on the merits whenever
possible. It is deemed an abuse of discretion for them, on their own motion, ‗to enter a dismissal
which is not warranted by the circumstances of the case‘ (Municipality of Dingras v. Bonoan, 85 Phil.
458-59 [1950]). While it is true that the dismissal of an action on grounds specified under Section 3,
Rule 17 of the Revised Rules of Court is addressed to their discretion (Flores v. Phil. Alien Property
Administrator, 107 Phil. 778 [1960]; Montelibano v. Benares, 103 Phil. 110 [1958]; Adorable v.
Bonifacio, 105 Phil. 1269 [1959]; Inter-Island Gas Service, Inc. v. De la Gerna, L-17631, October 19,
1966, 18 SCRA 390), such discretion must be exercised soundly with a view to the circumstances
surrounding each particular case (Vernus-Sanciangco v. Sanciangco, L-12619, April 28, 1962, 4
SCRA 1209). If facts obtain that serve as mitigating circumstances for the delay, the same should be
considered and dismissal denied or set aside (Rudd v. Rogerson, 15 ALR 2d 672; Cervi v.
Greenwood, 147 Colo. 190, 362 P.2d 1050 [1961]), especially where the suit appears to be
meritorious and the plaintiff was not culpably negligent and no injury results to defendant (27 C.J.S.
235-36; 15 ALR 3rd 680)." (Abinales vs. Court of First Instance of Zamboanga City, Br. I, 70 SCRA
590, 595).

"It is true that the allowance or denial of petitions for postponement and the setting aside of orders
previously issued, rest principally upon the sound discretion of the judge to whom they are
addressed, but always predicated on the consideration that more than the mere convenience of the
courts or of the parties of the case, the ends of justice and fairness would be served thereby
(Camara Vda. de Zubiri v. Zubiri, et al., L-16745, December 17, 1966). When no substantial rights
are affected and the intention to delay is not manifest, the corresponding motion to transfer the
hearing having been filed accordingly, it is sound judicial discretion to allow them (Rexwell Corp. v.
Canlas, L-16746, December 30, 1961)." x x x.

This Court recalls that the complaint herein was filed on 15 June 1999. The summonses for Cynthia
and Teresa were served on their sister Melinda at the Borja Family Clinic in Tagbilaran City, but the
latter refused to receive the same. It was only on 1 June 2000 that summons was served on Teresa
at Room 304, Regency Crest Condominium, Banilad, Cebu City, when she was in the Philippines for
a visit. However, the summons for Cynthia was never served upon her. 1âw phi 1

Although Section 1, Rule 14 of the Rules, imposes upon the clerk of court the duty to serve
summons, this does not relieve the petitioner of her own duty as the plaintiff in a civil case to
prosecute the case diligently. If the clerk had been negligent, it was petitioner‘s duty to call the
court‘s attention to that fact. It must be noted that it was not even petitioner who called the court‘s
attention that summons had not been served on Cynthia, but Teresa. This despite the fact that
petitioner was aware, as early as 15 June 1999, when she filed her complaint, that the summonses
could not be served on Teresa and Cynthia, as she admitted therein that Teresa and Cynthia were
residing abroad. Petitioner as plaintiff should have asked that Cynthia and Teresa be summoned by
publication at the earliest possible time. She cannot idly sit by and wait till this is done. She cannot
afterwards wash her hands and say that the delay was not her fault. She cannot simply "fold [her]
hands" and say that it is the duty of the clerk of court to have the summonses served on Cynthia and
Teresa for the prompt disposition of her case. If there were no means of summoning any of the
defendants, petitioner should have so informed the court within a reasonable period of time, so that
the case could be disposed of one way or another and the administration of justice would not suffer
delay. The non-performance of that duty by petitioner as plaintiff is an express ground for dismissing
an action. For, indeed, this duty imposed upon her was precisely to spur on the slothful.

For failure to diligently pursue the complaint, petitioner trifled with the right of the respondents to
speedy trial. It also sorely tried the patience of the court and wasted its precious time and attention.
To allow petitioner to wait until such time that 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 justice which would in time erode the people‘s
confidence in the judiciary. We take a dim view of petitioner‘s complacent attitude. Ex nihilo nihil fit.35

Likewise, petitioner‘s counsel inexplicably failed to diligently pursue the service of summonses on
respondents. These were acts of negligence, laxity and truancy which the court could have very
easily avoided or timely remedied. Petitioner and her counsel could not avail themselves of this
Court‘s sympathy, considering their apparent complacency, if not delinquency, in the conduct of their
litigation.

Considering the foregoing, we sustain the dismissal by the trial court of the petitioner‘s complaint for
failure to prosecute for a period of more than one year (from the time of filing thereof on 15 June
1997 until Teresa‘s filing of a motion to dismiss).

WHEREFORE, premises considered, the instant petition is 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.

G.R. No. L-13525 November 30, 1962

FAR EAST INTERNATIONAL IMPORT and EXPORT CORPORATION, plaintiff-appellee,

vs.
NANKAI KOGYO CO. LTD., ET AL., defendants,
NANKAI KOGYO CO., LTD., defendant-appellant.

Protasio Canalita, Jesus Ocampo and Gonzalo D. David for plaintiff-appellee.

Marcial Ranola and Fernandez and Benedicto for defendant-appellant.

PAREDES, J.:

On December 26, 1956, the Far East International Import & Export Corporation, Far East for short,
organized under Philippine Laws, entered into a Contract of Sale of Steel Scrap with the Nankai
Kogyo Co., Ltd., Nankai for short, a foreign corporation organized under Japanese Laws with
address at Osaka, Japan. The buyer sign in Japan and the seller in Manila, Philippines. The
pertinent provisions of the agreement are represented below —

1. Quantity: Approximately 5,000 (five thousand) metric tons 10% more or less.

xxx xxx xxx

10. Payments: BUYER shall establish an irrevocable without recourse Letter of Credit in the
amount of U.S. $312,500.00 with China Banking Corp. in Manila, not later than 30 days upon
 receipt of SELLERS' confirmation about the availability of export permit, and shall be subject
to the following terms and conditions:

a. This Letter of Credit shall be drawable 90% of quantity been shipped

uponpresentation of:

xxx xxx xxx

b. the remaining balance of 10% of the shipment shall be adjusted between BUYER
and SELLER immediately after the discharge is completed at the port of destination,
and shall be drawable by the SELLER upon presentation of:

xxx xxx xxx

13. Force Majeure: the execution of this agrrement is subject to any and allGovernment
restrictions prohibiting or penalizing in whole or in part theexport of Iron & Steel Scrap from
the Philippines, and the Seller shall not be responsible for delay in or failure of shipment or
delivery or delays in transportation due to force majeure, strikes, dfferences with workmen,
accidents, fires, flood, mobilizations, wars, foreign wars, riots, revolutions, regulations and
restrictions or to any conditions beyond thecontrol of the SELLER whether the nature herein
stated or not.

14. Dispute: In case of disputes, Board of Arbitration may be formed in Japan. Decision by
the board of Arbitration shall be final and binding on both BUYER AND SELLER.

Upon perfection of the contract and after having been informed of the readiness to ship and that the
Export License was to expire on March 18, 1957,Nankai opened a letter for credit (No. 38/80049)
with the China BankingCorporation, issued by the Nippon Kangyo, Ltd., Tokyo, Japan, in the
amountof $312,500.00 on January 30, 1957. On March 15, 1957, only four (4) daysbefore the
expiration of the Far East licence, three (3) boats sent by Nankai arrived in the Philippines, one to
load in Manila, the other two at Poro Point, San Fernando, La Union, and Tacloban, Leyte,
respectively. On March 19, 1957, the expiration of the export license, only 1,058.6 metric tonsof
scrap steel was loaded on the SS Mina (loading in Manila). The loading wasaccordingly stopped.
The boat at Poro Point was also unloaded of the 200 metric tons, for the same reason. An
agreement was reached wherby the Far East would seek an extension of the license. However, the
untimely death of President Magsaysay and the taking over by President Garcia changed the
picture, for the latter and/or his agents refused to extend the license. The two boats sailed to Japan
without any cargo, the third (SS Mina) only 1,058.6 metric tons.

On April 27, 1957, Nankai confirmed and acknowleged delivery of the 1,058.6 metric tons of steel
scrap, but asked for damages amounting to $148,135.00 consisting of dead freight charges,
damages, bank charges, phone and cable expenses (Exh. F).

On May 4, 1957, Far East wrote the Everett Steamship Corporation, requesting the issuance of a
complete set of the Bill of Lading for the shipment, in order that payment thereof be effected against
the Letter of Credit. Under date of May 7, 1957, the Everett informed Far East that they were not in a
position to comply because the Bill of Lading was issued and signed in Tokyo by the Master of the
boat, upon request of the Charterer, defendant herein.

As repeated requests, both against the shipping agent and the buyers (Nankai), for the issuance of
the of Bill Lading were ignored, Far East filed on May 16, 1957, the present complaint for Specific
Performance, damages, a writ of preliminiry mandatory injunction directed against Nankai and the
shipping company, to issue and deliver to the plaintiff, a complete set of negotiable of Lading for the
1,058.6 metric tons of scrap and a writ of preliminary injunction against the China Banking
Corporation and the Nankai to maintain the Letter Credit. The lower court issued on May 17, 1957
an ex parte writ of preliminary injunction, after Far East had posted a bond in the amount of
P50,000.00.

By Special Apperance, defendant Nankai filed a Motion to Dismiss the complaint and dissolve the
preliminary mandatory injunction on the followinggrounds: lack of jurisdiction over the person of the
defendant and the subject matter: and failure to state a cause of action against the said defendant.
On June 8, 1957 plaintiff Far East opposed the Special Appearance and Motion to Dismiss.

Before the Special Appearance, Motions to Dismiss and Dissolve Preliminary Mandatory Injunction
could be ruled upon by the court a quo, plaintiff filed a Motion to file amended complaint, it appearing
that Nankai had already taken the Bill of Lading for the shipment from the Master of the SS Mina and
used the same to secure the delivery of the 1,058.6 metric tons of scrap. The most important
amendments introduced are the allegation that defendant is doing business in the Philippines with
office address at R-517 Luneta Hotel, Manila, represented by Mr. Issei Ishida and Mr. Tominaga,
and the additional prayer to order the defendant Nankai to pay plaintiff the price of the
scrapamounting to $68,809.00 or its equivalent in Philippine currency.

The motions to dismiss the complaint and to dissolve the Writ of Preliminary Mandatory Injunction
were denied, the Court holding that the grounds therefor "do not appear to be indubitable".

On June 26, 1957, the defendant Nankai presented an opposition to the motion to admit amended
complaint, stating that the same is belated and an unfair and unjust attempt to establish by
allegation, a semblance of jurisdiction of the Court over the person of the defendant Nankai and the
subject matter.

Under date of June 29, 1957, the motion to file an amended complaint was denied. A motion for
reconsideration of the order was presented on July 31, 1957, plaintiff alleging that the amended
complaint contained facts which are necessary and indispensable for the complete resolution of the
issues between the parties and that the amendment is a matter of right, since defendants have not
yet filed a responsive pleading (Sec. 1, Rule 17, Rules of Court). An opposition was registered by
defendant. Before resolution on the reconsideration could be issued, defendant filed its Answer to
the original complaint containing the customary admissions and denials. As Special Defenses, it
reiterated the grounds contained in the Motion to Dismiss Complaint and Dissolve the Writ of
Preliminary Mandatory Injunction and the arguments invoked in the oppositions, replies, etc. On
August 20, 1957, the Amended Complaint was ordered admitted and on September 30, 1957,
Nankai presented its Answer, which is identical to the Answer to the original complaint.

At the trial, plaintiff Far East, thru the testimony of its Secretary Pablo Ocampo, showed that the
transaction in question was intended to be the beginning of business to be undertaken by Nankai, as
in fact, the representatives of the company had made inquiries as to the operation of mines and
mining rights in this jurisdiction; (Nankai) thru its representatives, Messrs. Ishida and Tominaga,
established a temporary office at Room 517 Luneta Hotel and manifested their intention to put up
one at the Madrigal building, which did not materialize, to the belated confirmation of the head office;
that in spite of the repeated demands and actual receipt of the delivery of the 1,056.8 metric tons of
scrap steel, Nankai and the steamship company failed and consistently refused to issue the Bill of
Lading, which acts prevented plaintiff from collecting the price of the scrap from theChina Banking
Corporation against the Letter of Credit. Defendant Everett Steamship Company and the China
Banking Corporation also presented evidence, both oral and documentary.
Defendant Nankai presented Francisco Santos, accountant of the Luneta Hotel, to prove that it has
not established an office at Room 517 of said Hotel; Nabuo Yoshida, chief of the Import Section of
defendant Nankai show that it has not established a branch office in the Philippines and that the
buying of the scrap was the only transiction of the defendant had in the Philippines; Tan Tiong Tick,
the financier of the exportation in behalf of appellee, and Tan Tia Cuan, the contact man, to prove
that the real party in interest is not the plaintiff Far East but the Delta Enterprises, and that the
plaintiffwas merely the holder of the Export License but had no scrap.

The lower court rendered judgment absolving, defendants Everett Steamship Company and China
Banking Corporation from liability and denied the claim for damages, both actual and moral, of the
parties; found that the question of jurisdiction over the person of defendant and the subject matter
has become moot and

. . . hereby renders judgment in favor of the plaintiff and against defendant Nankai Kogyo
Co., Ltd., sentencing said defendant to pay plaintiff the amount of U.S. $67,710.50, or its
equivalent in pesos, with interest thereon at the legal rate from the date of filing of plaintiff's
complaint until fully paid, plus the sum of P1,000.00 as attorney's fees, and to pay the costs.

Defendant assigned six (6) errors allegedly committed by the lower court, which may be
consolidated into two propositions: to wit —

(1) Whether or not the trial court acquired jurisdiction over the subject matter and over the
person of the defendant-appellant; and

(2) the propriety of the award.

Defendant contends that Philippine Courts have no jurisdiction to take cognizance of the case
because the Nankai is not doing business in the islands; and that while it has entered into the
transaction in question, same, however, does not constitute "doing business", so as to make it
amenable to summons and subject it to the Court's jurisdiction. It bolstered this claim by a provision
in the contract which provides that "In case of disputes, Board of Arbitration may be formed in Japan.
Decision of the Board of Arbitration shall be final and binding on both BUYER and SELLER".

The rule pertinent to the questions in issue provides —

SEC. 14. Service upon private foreign corporations. — If the defendant is a foreign
corporation, or a non-resident joint stock company or association, doing business in the
Philippines, service may be made on its resident agent designated in accordance with law for
that purpose, or, if there be no such agent, on the government official designated by law to
that effect, or on any officer or agent within the Philipines. (Rule 7).

The above rule indicates three modes of effecting service of summons upon a private, foreign
corporation, viz: (1) by serving upon the agent designated in accordance with law to accept service
of summons; (2) if there is no resident agent, by service on the government cial designated by law to
that effect; and (3) by serving on any officer or agent of said corporation with Philippines. The
plaintiff complied with the third stated above, for it has been shown that Mr. Ishida, who personally
signed the contract for the purchase of the scrap in question in behalf of the Nankai Kogyo, the
Trade Manager of said Company, Mr. Tominaga the Chief of the Petroleum Section of the same
company and Mr. Yoshida was the man-in-charge of the Import Section of the company's Tokyo
Branch. All these three, including the first two who were served with Summons, were officers of the
defendant company.
It is true that the defendant entered a Special Appearance, wherein it contested the jurisdiction of the
Philippines Courts to take cognizance of the case on grounds contained in the various pleadings
presented by it. The motion to dismiss on the ground of lack of jurisdiction had been overruled
because it did not appear indubitable. Subsequently, however, the defendant filed its Answer and
invoked defenses and grounds for dismissal of complaint other than lack of jurisdiction (See pars. 12
& 13 of Answer to Amended Complaint), which circumstance vested upon the Court jurisdiction to
take cognizance of the case.

Even though the defendant objects to the jurisdiction of the court, if at thesame time he
alleges any non-jurisdictional ground for dismissing the action, the Court acquires jurisdiction
over him. Even though he does not intend to confer jurisdiction upon the court, his
appearance for some other purpose than to object to the jurisdiction subjects him to
jurisdiction of the court.Even though he does not wish to submit to the jurisdiction of the
court, he cannot ask the court to act upon any question except the question of jurisdiction,
without conferring jurisdiction upon the court.

Thus though a Special appearance to object to the jurisdiction is not a submission, if it is

followed by a motion to dismiss or to quash the motion invokes the jurisdiction of Court to
decide the issue raised by the motion; and a decision of that issue binds the defendant.
Therefore if the decision of the motion is based upon a finding of facts necessary to
jurisdiction, this finding binds the defendant and the court acquires jurisdiction to determine
the merits of the case.

. . . . Undoubtedly if after his objection to the jurisdiction is wrongly overruled, a defendant

files a cross complaint demanding affirmative relief, he cannot thereafter claim that the court
had no jurisdiction over him. (p. 352.) (I Conflict of Laws, Beale and authorities cited therein.)

Not only did appellant allege non-jurisdictional grounds in its pleadings to have the complaint
dismissed, but it also went into trial on the merits and presented evidence destined to resist
appellee's claim. Verily, there could not be a better situation of acquired jurisdiction based on
consent. Consequently, the provision of the contract wherein it was agreed that disputes should be
submitted to a Board of Arbitration which may be formed in Japan (in the supposition that it can
apply to the matter in dispute - payment of the scrap), seems to have been waived with appellant's
voluntary submission. Apart from the fact that the clause employs the word "may".

The appellant alleges that the lower court did not acquire jurisdiction, because it was not doing
business in the Philippines and the requirement of summons had not been fulfilled. It is difficult to lay
down any rule of universal application to determine when a foreign corporation is doing business.
Each case must turn upon its own peculiar facts and upon the language of the statute applicable.
But from the proven facts obtaining in this particular case, the appellant's defense of lack of
jurisdiction appears unavailing. The case of Pacific Micronesian Line, Inc. v. Baens del Rosario, et
al., G.R. No. L-7154, October 23, 1954, relied upon in the Motion to Dismiss and other pleadings
presented by defendant-appellant, stand on a different footing. Therein, We made the following
pronouncements:

. . . . And the only act it did here was to secure the services of Luceno Pelingon to act as
cook and chief steward in one of its vessels authorizing to that effect the Luzon Stevedoring
Co., Inc., a domestic corporation, and the contract of employment was entered into on July
18, 1951. It further appears that petitioner has never sent its ships to the Philippines nor has
it transported nor even solicited the transportation passengers and cargoes to and from the
Philippines. In words, petitioner engaged the services of Pelingon not as part of the operation
of its business but merely to employ him as member of the crew in one of its ships. That act
 apparently is an isolated one, incidental, or casual, and "not of a character to indicate a
purpose to engage in business" within the meaning of the rule. (Emphasis ours.)

In the instant case, the testimony of Atty. Pablo Ocampo that appellant was doing business in the
Philippines corroborated by no less than Nabuo Yoshida, one of appellant's officers, that he was
sent to the Philippines by his company to look into the operation of mines, thereby revealing the
defendant's desire to continue engaging in business here, after receiving the shipment of the iron
under consideration, making the Philippines a base thereof.

The rule stated in the preceding section that the doing of a single act doesnot constitute
business within the meaning of statutes prescribing the conditions to be complied with the
foreign corporations must be qualified to this extent, that a single act may bring the
corporation. In such a case, the single act of transaction is not merly incidental or casual, but
is of such character as distinctly to indicate a purpose on the part of the foreign corporation
to do other business in the state, and to make the state a basis of operations for the conduct
of a part of corporation's ordinary business. (17 Fletchers Cyc. of Corporations, sec. 8470,
pp. 572-573, and authorities cited therein.) (Emphasis ours.)

It is finally noted that when defendant's motion to dismiss in the Micronesian case was denied, it
immediately brought the matter to this Court on Prohibition seeking to restrain the Workmen's
Compensation mission from exercising jurisdiction over the controversy. In the present case, the
defendant, while entering a Special Appearance to contest the jurisdiction of the Court, pursued its
defense further by filing its Answer and going into trial.

There is no appeal on the lower court's findings that the failure of the appellee herein to make full
shipment of the scrap was due, not to the fault of said appellee, but to the action and intervention of
the Philippine Government, which was beyond the control of the plaintiff. This aspect of the case is
particularly covered by paragraph 13 of the contract, heretofore reproduced..

3. Jurisdiction Over the Res

a. Even if a person is not within the jurisdiction of a state, if he has property in there, the court
may exercise jurisdiction.

Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947)

Gulf Oil Corp. v. Gilbert

No. 93

Argued December 18, 19, 1946

Decided March 10, 1947

330 U.S. 501

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

1. A federal district court has power to dismiss an action at law pursuant to the doctrine
of forum non conveniens -- at least where its jurisdiction is based on diversity of
citizenship and the state courts have such power. Pp. 330 U. S. 502-509, 330 U. S. 512.

2. A resident of Virginia brought an action in a federal district court in New York City
against a Pennsylvania corporation qualified to do business in both Virginia and New
York (where it had designated agents to receive service of process) to recover damages
for destruction of plaintiff's public warehouse and its contents in Virginia by fire resulting
from defendant's negligence. The court had jurisdiction (based solely on diversity of
citizenship), and the venue was correct, but all events in litigation had taken place in
Virginia, most of the witnesses resided there, and both state and federal courts in
Virginia were available to plaintiff and were able to obtain jurisdiction of defendant.
Applying the doctrine of forum non conveniens, the court dismissed the suit.

Held: it did not abuse its discretion in doing so. Pp. 330 U. S. 509-512.

3. Important considerations in the application of the doctrine of forum non

conveniens, from the standpoint of litigants, are relative ease of access to sources of
proof, availability of compulsory process for attendance of unwilling witnesses, cost of
obtaining attendance

Page 330 U. S. 502

of willing witnesses, possibility of view of the premises if that be appropriate, and all
other practical problems that make trial of a case easy, expeditious, and inexpensive.
P. 330 U. S. 508.

4. Considerations of public interest in applying the doctrine include the undesirability of

piling up litigation in congested centers, the burden of jury duty on people of a
community having no relation to the litigation, the local interest in having localized
controversies decided at home, and the unnecessary injection of problems in conflict of
laws. Pp. 330 U. S. 508-509.

153 F.2d 883, reversed.

Applying the doctrine of forum non conveniens, a district court dismissed a tort action in
New York arising out of events occurring in Virginia. 62 F. Supp. 291. The Circuit Court
of Appeals reversed. 153 F.2d 883. This Court granted certiorari. 328 U.S.
830. Reversed, p. 330 U. S. 512.

MR. JUSTICE JACKSON delivered the opinion of the Court.

The questions are whether the United States District Court has inherent power to
dismiss a suit pursuant to the doctrine of forum non conveniens and, if so, whether that
power was abused in this case.

The respondent-plaintiff brought this action in the Southern District of New York, but
resides at Lynchburg, Virginia, where he operated a public warehouse. He alleges that
the petitioner-defendant, in violation of the ordinances of Lynchburg, so carelessly
handled a delivery of gasoline to his warehouse tanks and pumps as to cause

Page 330 U. S. 503

an explosion and fire which consumed the warehouse building to his damage of
$41,889.10, destroyed merchandise and fixtures to his damage of $3,602.40, caused
injury to his business and profits of $20,038.27, and burned the property of customers in
his custody under warehousing agreements to the extent of $300,000. He asks
judgment of $365,529.77, with costs and disbursements, and interest from the date of
fire. The action clearly is one in tort.

The petitioner-defendant is a corporation organized under the laws of Pennsylvania,

qualified to do business in both Virginia and New York, and it has designated officials of
each state as agents to receive service of process. When sued in New York, the
defendant, invoking the doctrine of forum non conveniens, claimed that the appropriate
place for trial is Virginia, where the plaintiff lives and defendant does business, where all
events in litigation took place, where most of the witnesses reside, and where both state
and federal courts are available to plaintiff, and are able to obtain jurisdiction of the
defendant.

The case, on its merits, involves no federal question, and was brought in the United
States District Court solely because of diversity in citizenship of the parties. Because of
the character of its jurisdiction and the holdings of and under Erie Railroad Co. v.
Tompkins, 304 U. S. 64, the District Court considered that the law of New York as
to forum non conveniens applied, and that it required the case to be left to Virginia
courts. [Footnote 1] It therefore dismissed.

The Circuit Court of Appeals disagreed as to the applicability of New York law, took a
restrictive view of the application of the entire doctrine in federal courts, and, one judge
dissenting, reversed. [Footnote 2] The case is here on certiorari. 328 U.S. 830.

Page 330 U. S. 504

It is conceded that the venue statutes of the United States permitted the plaintiff to
commence his action in the Southern District of New York, and empower that court to
entertain it. [Footnote 3] But that does not settle the question whether it must do so.
Indeed, the doctrine of forum non conveniens can never apply if there is absence of
jurisdiction or mistake of venue.

This Court, in one form of words or another, has repeatedly recognized the existence of
the power to decline jurisdiction in exceptional circumstances. As formulated by Mr.
Justice Brandeis, the rule is:

"Obviously, the proposition that a court having jurisdiction must exercise it is not
universally true -- else the admiralty court could never decline jurisdiction on the ground
that the litigation is between foreigners. Nor is it true of courts administering other
systems of our law. Courts of equity and of law also occasionally decline, in the interest
of justice, to exercise jurisdiction where the suit is between aliens or nonresidents, or
where, for kindred reasons, the litigation can more appropriately be conducted in a
foreign tribunal."

Canada Malting Co., Ltd. v. Paterson Steamships, Ltd., 285 U. S. 413, 285 U. S. 422-
423.

We later expressly said that a state court "may, in appropriate cases, apply the doctrine
of forum non conveniens." Broderick v. Rosner, 294 U. S. 629, 294 U. S. 643; Williams
v. North Carolina, 317 U. S. 287, 317 U. S. 294, n. 5. Even where federal rights binding
on state courts under the Constitution are sought to be adjudged, this Court has
sustained state courts in a refusal to entertain a litigation between a nonresident and a
foreign corporation or between two foreign corporations. Douglas v. New York, N.H. &
H. R. Co., 279 U. S. 377; Anglo-American Provision Co. v.

Page 330 U. S. 505

Davis Provision Co. No. 1, 191 U. S. 373. It has held the use of an inappropriate forum
in one case an unconstitutional burden on interstate commerce. Davis v. Farmers'
Cooperative Equity Co., 262 U. S. 312. On substantially forum non conveniens grounds,
we have required federal courts to relinquish decision of cases within their jurisdiction
where the court would have to participate in the administrative policy of a state. Railroad
Commission v. Rowan & Nichols Oil Co., 311 U. S. 570; Burford v. Sun Oil Co., 319 U.
S. 315; but cf. Meredith v. Winter Haven, 320 U. S. 228. And, most recently, we
decided Williams v. Green Bay & Western R. Co., 326 U. S. 549, in which the Court,
without questioning the validity of the doctrine, held it had been applied in that case
without justification. [Footnote 4]

It is true that, in cases under the Federal Employers' Liability Act, we have held that
plaintiff's choice of a forum cannot be defeated on the basis of forum non
conveniens. But this was because the special venue act under which those cases are
brought was believed to require it. Baltimore & Ohio R. Co. v. Kepner, 314 U. S.
44; Miles v. Illinois Central R. Co., 315 U. S. 698. Those decisions do not purport to
modify the doctrine as to other cases governed by the general venue statutes.
Page 330 U. S. 506

But the court below says that

"The Kepner case . . . warned against refusal of jurisdiction in a particular case

controlled by congressional act; here, the only difference is that congressional act, plus
judicial interpretation (under the Neirbo case), spells out the result."

153 F.2d at 885. The Federal Employers' Liability Act, however, which controlled
decision in the Kepner case, specifically provides where venue may be had in any suit
on a cause of action arising under that statute. What the court below refers to as
"congressional act, plus judicial interpretation" is the general statute of venue in
diversity suits, plus our decision that it gives the defendant "a personal privilege
respecting the venue, or place of suit, which he may assert, or may waive at his
election," Neirbo Co. v. Bethlehem Shipbuilding Corp., Ltd., 308 U. S. 165, 308 U. S.
168. The Federal Employers' Liability Act, as interpreted by Kepner, increases the
number of places where the defendant may be sued, and makes him accept the
plaintiff's choice. The Neirbo case is only a declaration that, if the defendant, by filing
consent to be sued, waives its privilege to be sued at its place of residence, it may be
sued in the federal courts at the place where it has consented to be sued. But the
general venue statute plus the Neirbo interpretation do not add up to a declaration that
the court must respect the choice of the plaintiff, no matter what the type of suit or
issues involved. The two, taken together, mean only that the defendant may consent to
be sued, and it is proper for the federal court to take jurisdiction, not that the plaintiff's
choice cannot be questioned. The defendant's consent to be sued extends only to give
the court jurisdiction of the person; it assumes that the court, having the parties before
it, will apply all the applicable law, including, in those cases where it is appropriate, its
discretionary judgment as to whether the suit should be entertained. In all cases in
which the doctrine of forum non conveniens comes into

Page 330 U. S. 507

play, it presupposes at least two forums in which the defendant is amenable to process;
the doctrine furnishes criteria for choice between them.

II

The principle of forum non conveniens is simply that a court may resist imposition upon
its jurisdiction even when jurisdiction is authorized by the letter of a general venue
statute. These statutes are drawn with a necessary generality, and usually give a
plaintiff a choice of courts, so that he may be quite sure of some place in which to
pursue his remedy. But the open door may admit those who seek not simply justice, but
perhaps justice blended with some harassment. A plaintiff sometimes is under
temptation to resort to a strategy of forcing the trial at a most inconvenient place for an
adversary, even at some inconvenience to himself.
Many of the states have met misuse of venue by investing courts with a discretion to
change the place of trial on various grounds, such as the convenience of witnesses and
the ends of justice. [Footnote 5] The federal law contains no such express criteria to
guide the district court in exercising its power. But the problem is a very old one
affecting the administration of the courts as well as the rights of litigants, and, both in
England and in this country, the common law worked out techniques and criteria for
dealing with it. [Footnote 6]

Page 330 U. S. 508

Wisely, it has not been attempted to catalogue the circumstances which will justify or
require either grant or denial of remedy. The doctrine leaves much to the discretion of
the court to which plaintiff resorts, and experience has not shown a judicial tendency to
renounce one's own jurisdiction so strong as to result in many abuses. [Footnote 7]

If the combination and weight of factors requisite to given results are difficult to forecast
or state, those to be considered are not difficult to name. An interest to be considered,
and the one likely to be most pressed, is the private interest of the litigant. Important
considerations are the relative ease of access to sources of proof; availability of
compulsory process for attendance of unwilling, and the cost of obtaining attendance of
willing, witnesses; possibility of view of premises, if view would be appropriate to the
action, and all other practical problems that make trial of a case easy, expeditious, and
inexpensive. There may also be questions as to the enforceability of a judgment if one
is obtained. The court will weigh relative advantages and obstacles to fair trial. It is often
said that the plaintiff may not, by choice of an inconvenient forum, "vex," "harass," or
"oppress" the defendant by inflicting upon him expense or trouble not necessary to his
own right to pursue his remedy. [Footnote 8] But, unless the balance is strongly in favor
of the defendant, the plaintiff's choice of forum should rarely be disturbed.

Factors of public interest also have place in applying the doctrine. Administrative
difficulties follow for courts when litigation is piled up in congested centers instead of
being handled at its origin. Jury duty is a burden that ought not to be imposed upon the
people of a community

Page 330 U. S. 509

which has no relation to the litigation. In cases which touch the affairs of many persons,
there is reason for holding the trial in their view and reach, rather than in remote parts of
the country where they can learn of it by report only. There is a local interest in having
localized controversies decided at home. There is an appropriateness, too, in having the
trial of a diversity case in a forum that is at home with the state law that must govern the
case, rather than having a court in some other forum untangle problems in conflict of
laws, and in law foreign to itself.

The law of New York as to the discretion of a court to apply the doctrine of forum non
conveniens, and as to the standards that guide discretion is, so far as here involved, the
same as the federal rule. Murnan v. Wabash Ry. Co., 246 N.Y. 244, 158 N.E.
508; Wedemann v. United States Trust Co.. 258 N.Y. 315, 179 N.E. 712; see Gregonis
v. Philadelphia & Reading Coal & Iron Co., 235 N.Y. 152, 139 N.E. 223. It would not be
profitable therefore to pursue inquiry as to the source from which our rule must flow.

III

Turning to the question whether this is one of those rather rare cases where the
doctrine should be applied, we look first to the interests of the litigants.

The plaintiff himself is not a resident of New York, nor did any event connected with the
case take place there, nor does any witness with the possible exception of experts live
there. No one connected with that side of the case save counsel for the plaintiff resides
there, and he has candidly told us that he was retained by insurance companies
interested presumably because of subrogation. His affidavits and argument are devoted
to controverting claims as to defendant's inconvenience, rather than to showing that the
present forum serves any convenience

Page 330 U. S. 510

of his own, with one exception. The only justification for trial in New York advanced here
is one rejected by the district court and is set forth in the brief as follows:

"This Court can readily realize that an action of this type, involving as it does a claim for
damages in an amount close to $400,000, is one which may stagger the imagination of
a local jury which is surely unaccustomed to dealing with amounts of such a nature.
Furthermore, removed from Lynchburg, the respondent will have an opportunity to try
this case free from local influences and preconceived notions which make it difficult to
procure a jury which has no previous knowledge of any of the facts herein."

This unproven premise that jurors of New York live on terms of intimacy with $400,000
transactions is not an assumption we easily make. Nor can we assume that a jury from
Lynchburg and vicinity would be "staggered" by contemplating the value of a warehouse
building that stood in their region, or of merchandise and fixtures such as were used
there, nor are they likely to be staggered by the value of chattels which the people of
that neighborhood put in storage. It is a strange argument on behalf of a Virginia plaintiff
that the community which gave him patronage to make his business valuable is not
capable of furnishing jurors who know the value of the goods they store, the building
they are stored in, or the business their patronage creates. And there is no specification
of any local influence, other than accurate knowledge of local conditions, that would
make a fair trial improbable. The net of this is that we cannot say the District Court was
bound to entertain a provincial fear of the provincialism of a Virginia jury. That leaves
the Virginia plaintiff without even a suggested reason for transporting this suit to New
York.

Page 330 U. S. 511

Defendant points out that not only the plaintiff, but every person who participated in the
acts charged to be negligent, resides in or near Lynchburg. It also claims a need to
interplead an alleged independent contractor which made the delivery of the gasoline
and which is a Virginia corporation domiciled in Lynchburg, that it cannot interplead in
New York. There also are approximately 350 persons residing in and around Lynchburg
who stored with plaintiff the goods for the damage to which he seeks to recover. The
extent to which they have left the community since the fire and the number of them who
will actually be needed is in dispute. The complaint alleges that defendant's conduct
violated Lynchburg ordinances. Conditions are said to require proof by firemen and by
many others. The learned and experienced trial judge was not unaware that litigants
generally manage to try their cases with fewer witnesses than they predict in such
motions as this. But he was justified in concluding that this trial is likely to be long, and
to involve calling many witnesses, and that Lynchburg, some 400 miles from New York,
is the source of all proofs for either side, with possible exception of experts. Certainly to
fix the place of trial at a point where litigants cannot compel personal attendance and
may be forced to try their cases on deposition is to create a condition not satisfactory to
court, jury, or most litigants. Nor is it necessarily cured by the statement of plaintiff's
counsel that he will see to getting many of the witnesses to the trial, and that some of
them "would be delighted to come to New York to testify." There may be circumstances
where such a proposal should be given weight. In others, the offer may not turn out to
be as generous as defendant or court might suppose it to be. Such matters are for the
District Court to decide in exercise of a sound discretion.

The court likewise could well have concluded that the task of the trial court would be
simplified by trial in Virginia.

Page 330 U. S. 512

If trial was in a state court, it could apply its own law to events occurring there. If in
federal court by reason of diversity of citizenship, the court would apply the law of its
own state in which it is likely to be experienced. The course of adjudication in New York
federal court might be beset with conflict of laws problems all avoided if the case is
litigated in Virginia, where it arose.

We are convinced that the District Court did not exceed its powers or the bounds of its
discretion in dismissing plaintiff's complaint and remitting him to the courts of his own
community. The Circuit Court of Appeals took too restrictive a view of the doctrine as
approved by this Court. Its judgment is

Reversed.

MR. JUSTICE REED and MR. JUSTICE BURTON dissent. They do not set out the
factual reasons for their dissent, since the Court's affirmance of Koster v. Lumbermens
Mutual casualty Co., 330 U. S. 518, would control.

U.S. Supreme Court

Travelers Health Assn. v. Virginia, 339 U.S. 643 (1950)

Travelers Health Association v. Virginia

No. 76

Argued November 15, 1949

Reargued April 17, 1950

Decided June 5, 1950

339 U.S. 643

APPEAL FROM THE SUPREME COURT OF APPEALS OF VIRGINIA

Syllabus

In a proceeding under § 6 of the Virginia "Blue Sky Law," the State Corporation
Commission ordered an Association, located in Nebraska and engaged in the mail order
health insurance business, and its treasurer (appellants here) to cease and desist from
further offerings or sales of certificates of insurance to Virginia residents until the
Association had complied with the Act by furnishing information as to its financial
condition, consenting to suit against it by service of process on the Secretary of the
Commonwealth, and obtaining a permit. Notice of the proceeding was served on
appellants by registered mail, as authorized by § 6 when other forms of service are
unavailable. They appeared specially, challenged the jurisdiction of the State, and
moved to quash the service of summons. On recommendations from Virginia members,
the Association for many years had been issuing insurance certificates to residents of
Virginia, and it had approximately 800 members there. It had caused claims for losses
to be investigated, and the Virginia courts were open to it for the enforcement of
obligations of certificate holders.

Held:

1. The State has power to issue a cease and desist order to enforce at least the
requirement that the Association consent to suit against it by service of process on the
Secretary of the Commonwealth. Pp. 339 U. S. 646-647.

2. The contacts and ties of appellants with Virginia residents, together with that State's
interest in faithful observance of the certificate obligations, justify subjecting appellants
to cease and desist proceedings under § 6. Pp. 339 U. S. 647-648.

3. Virginia's subjection of the Association to the jurisdiction of the State Commission in a

§ 6 proceeding is consistent with fair play and substantial justice, and is not offensive to
the Due Process Clause of the Fourteenth Amendment. P. 339 U. S. 649.
4. The power of the State to subject the Association to the jurisdiction of the State
Commission and to authorize a cease and

Page 339 U. S. 644

desist order under § 6 is not vitiated by the fact that business activities carried on
outside of the State are affected. P. 339 U. S. 650.

5. Service of process on appellants by registered mail did not violate the requirements
of due process. Pp. 339 U. S. 650-651.

188 Va. 877, 51 S.E.2d 263, affirmed.

An order of the Virginia Corporation Commission requiring appellants to cease and

desist from offering and issuing, without a permit, certificates of insurance to residents
of the State, was affirmed by the Supreme Court of Appeals. 188 Va. 877, 51 S.E.2d
263. On appeal to this Court, affirmed, p. 339 U. S. 651.

MR. JUSTICE BLACK delivered the opinion of the Court.

In an effort to protect its citizens from "unfairness, imposition and fraud" in sales of
certificates of insurance and other forms of securities, the Virginia "Blue Sky Law"
requires those selling or offering such securities to obtain a permit from the State
Corporation Commission. [Footnote 1] Applicants for permits must meet comprehensive
conditions: they must, for example, provide detailed information

Page 339 U. S. 645

concerning their solvency, and must agree that suits can be filed against them in
Virginia by service of process on the Secretary of the Commonwealth. [Footnote 2]

While violation of the Act is a misdemeanor punishable by criminal sanctions, § 6

provides another method for enforcement. After notice and a hearing "on the merits,"
the State Corporation Commission is authorized to issue a cease and desist order
restraining violations of the Act. The section also provides for service by registered mail
where other types of service are unavailable

"because the offering is by advertisement and/or solicitation through periodicals, mail,

telephone, telegraph, radio, or other means of communication from beyond the limits of
the State. . . ."

The highest court of Virginia rejected contentions that this section violates constitutional
requirements of due process, and the case is properly here on appeal under 28 U.S.C.
§ 1257(2).
In this case, cease and desist proceedings under § 6 were instituted by the State
Corporation Commission against Travelers Health Association and against R. E. Pratt,
as treasurer of the Association and in his personal capacity. Having received notice by
registered mail only, they appeared "specially" for

"the sole purpose of objecting to the alleged jurisdiction of the Virginia and of its State
Corporation Commission, and of moving to set aside and quash service of summons. . .
."

The agreed stipulation of facts and certain exhibits offered by the state can be
summarized as follows:

The appellant Travelers Health Association was incorporated in Nebraska as a nonprofit

membership association in 1904. Since that time, its only office has been located in
Omaha, from which it has conducted a mail order health insurance business. New
members pay an initiation fee and obligate themselves to pay periodic

Page 339 U. S. 646

assessments at the Omaha office. The funds so collected are used for operating
expenses and sick benefits to members. The Association has no paid agents; its new
members are usually obtained through the unpaid activities of those already members,
who are encouraged to recommend the Association to friends and submit their names
to the home office. The appellant Pratt in Omaha mails solicitations to these prospects.
He encloses blank applications which, if signed and returned to the home office with the
required fee, usually result in election of applicants as members. Certificates are then
mailed, subject to return within 10 days "if not satisfactory." Travelers has solicited
Virginia members in this manner since 1904, and has caused many sick benefit claims
to be investigated. When these proceedings were instituted, it had approximately 800
Virginia members.

The Commission, holding that the foregoing facts supported the state's power to act in §
6 proceedings, overruled appellants' objection to jurisdiction and their motion to quash
service. The Association and its treasurer were ordered to cease and desist from further
solicitations or sales of certificates to Virginia residents

"through medium of any advertisement from within or from without the state, and/or
through the mails or otherwise, by intra- or interstate communication, . . . unless and
until"

it obtained authority in accordance with the "Blue Sky Law." This order was affirmed by
the Virginia Court of Appeals. 188 Va. 877, 882, 51 S.E.2d 263, 271.

Appellants do not question the validity of the Virginia law

"to the extent that it provides that individual and corporate residents of other states shall
not come into the State for the purpose of doing business there without first submitting
to the regulatory authority of the State."

As to such state power see, e.g., Hall v. Geiger-Jones Co., 242 U. S. 539. Their basic
contention is that all their activities take place in Nebraska, and that consequently

Page 339 U. S. 647

Virginia has no power to reach them in cease and desist proceedings to enforce any
part of its regulatory law. We cannot agree with this general due process objection, for
we think the state has power to issue a "cease and desist order" enforcing at least that
regulatory provision requiring the Association to accept service of process by Virginia
claimants on the Secretary of the Commonwealth.

Appellants' chief reliance for the due process contention is on Minnesota Commercial
Men's Assn. v. Benn, 261 U. S. 140. There, a Minnesota association obtained members
in Montana by the same mail solicitation process used by Travelers to get Virginia
members. The certificates issued to Montana members also reserved the right to
investigate claims, although the Court pointed out that Benn's claim had not been
investigated. This Court held that, since the contracts were "executed and to be
performed" in Minnesota, the Association was not "doing business" in Montana, and
therefore could not be sued in Montana courts unless "consent" to Montana suits could
be implied. The Court found the circumstances under which the insurance transactions
took place insufficient to support such an implication.

But where business activities reach out beyond one state and create continuing
relationships and obligations with citizens of another state, courts need not resort to a
fictional "consent" in order to sustain the jurisdiction of regulatory agencies in the latter
state. And, in considering what constitutes "doing business" sufficiently to justify
regulation in the state where the effects of the "business" are felt, the narrow grounds
relied on by the Court in the Benn case cannot be deemed controlling.

In Osborn v. Ozlin, 310 U. S. 53, 310 U. S. 62, we recognized that a state has a
legitimate interest in all insurance policies protecting its residents against risks, an
interest which the state can protect even though the "state action may have
repercussions beyond state lines. . . ." And in Hoopeston

Page 339 U. S. 648

Canning Co. v. Cullen, 318 U. S. 313, 318 U. S. 316, we rejected the contention, based
on the Benn case, among others, that a state's power to regulate must be determined
by a "conceptualistic discussion of theories of the place of contracting or of
performance." Instead, we accorded "great weight" to the "consequences" of the
contractual obligations in the state where the insured resided and the "degree of
interest" that state had in seeing that those obligations were faithfully carried out. And
in International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316, this Court, after
reviewing past cases, concluded:

"due process requires only that, in order to subject a defendant to a judgment in

personam, if he be not present within the territory of the forum, he have certain
minimum contacts with it such that the maintenance of the suit does not offend
'traditional notions of fair play and substantial justice.'"

Measured by the principles of the Osborn, Hoopeston, and International Shoe cases,
the contacts and ties of appellants with Virginia residents, together with that state's
interest in faithful observance of the certificate obligations, justify subjecting appellants
to cease and desist proceedings under § 6. The Association did not engage in mere
isolated or short-lived transactions. Its insurance certificates, systematically and widely
delivered in Virginia following solicitation based on recommendations of Virginians,
create continuing obligations between the Association and each of the many certificate
holders in the state. Appellants have caused claims for losses to be investigated, and
the Virginia courts were available to them in seeking to enforce obligations created by
the group of certificates. See International Shoe Co. v. Washington, supra, at 326 U. S.
320.

Moreover, if Virginia is without power to require this Association to accept service of

process on the Secretary of the Commonwealth, the only forum for injured certificate
holders might be Nebraska. Health benefit

Page 339 U. S. 649

claims are seldom so large that Virginia policyholders could afford the expense and
trouble of a Nebraska law suit. In addition, suits on alleged losses can be more
conveniently tried in Virginia, where witnesses would most likely live and where claims
for losses would presumably be investigated. Such factors have been given great
weight in applying the doctrine of forum non conveniens. See Gulf Oil Corp. v.
Gilbert, 330 U. S. 501, 330 U. S. 508. And prior decisions of this Court have referred to
the unwisdom, unfairness, and injustice of permitting policyholders to seek redress only
in some distant state where the insurer is incorporated. [Footnote 3] The Due Process
Clause does not forbid a state to protect its citizens from such injustice.

There is, of course, one method by which claimants could recover from appellants in
Virginia courts without the aid of substituted service of process: certificate holders in
Virginia could all be garnished to the extent of their obligations to the Association. See
Huron Holding Corporation v. Lincoln Mine Operating Co., 312 U. S. 183, 312 U. S. 193.
While such an indirect procedure would undeniably be more troublesome to claimants
than the plan adopted by the state in its "Blue Sky Law," it would clearly be even more
harassing to the Association and its Virginia members. Metaphysical concepts of
"implied consent" and "presence" in a state should not be solidified into a constitutional
barrier against Virginia's simple, direct, and fair plan for service of process on the
Secretary of the Commonwealth.
We hold that Virginia's subjection of this Association to the jurisdiction of that state's
Corporation Commission in a § 6 proceeding is consistent with "fair play and substantial
justice," and is not offensive to the Due Process Clause.

Page 339 U. S. 650

Appellants also contend that § 6 as here applied violates due process because the
Commission order attempts to "destroy or impair" their right to make contracts in
Nebraska with Virginia residents. Insofar as this contention can be raised in a special
appearance merely to contest jurisdiction, it is essentially the same as the due process
issue discussed above. For reasons just given, Virginia has power to subject Travelers
to the jurisdiction of its Corporation Commission, and its cease and desist provisions
designed to accomplish this purpose "cannot be attacked merely because they affect
business activities which are carried on outside the state." Hoopeston Canning Co. v.
Cullen, supra, at 318 U. S. 320-321. See also Osborn v. Ozlin, 310 U. S. 53, 310 U. S.
62. These two opinions make clear that Allgeyer v. Louisiana, 165 U. S. 578, requires
no different result.

Appellants concede that, in the Osborn and Hoopeston cases, we sustained state laws
providing protective standards for policyholders in those states, even though
compliance with those standards by the insurance companies could have repercussions
on similar out-of-state contracts. It is argued, however, that those cases are
distinguishable because they both involved companies which were "licensed to do
business in the state of the forum and were actually doing business within the state. . . ."
But, while Hoopeston Canning Co. had done business in New York under an old law, it
brought the case here to challenge certain provisions of a new licensing law with which
it had to comply if it was to do business there in the future. Thus, it was seeking the
same kind of relief that appellants seek here, and for the same general purpose. What
we there said as to New York's power is equally applicable to Virginia's power here.

It is also suggested that service of process on appellants by registered mail does not
meet due process requirements.

Page 339 U. S. 651

What we have said answers this contention insofar as it alleges a lack of state
jurisdiction because appellants were served outside Virginia. If service by mail is
challenged as not providing adequate and reasonable notice, the contention has been
answered by International Shoe Co. v. Washington, supra, at 326 U. S. 320-321. See
also Mullane v. Central Hanover Bank, 339 U. S. 306.

The due process questions we have already discussed are the only alleged errors relied
on in appellants' brief, [Footnote 4] and appellants' special appearance only challenged
state jurisdiction and the service of process. We therefore have no occasion to discuss
the scope of the Commission's order, or the methods by which the state might attempt
to enforce it. [Footnote 5]
Affirmed.

[Footnote 1]

Acts of the General Assembly of Virginia, 1928, c. 529, p. 1373, as amended, Acts of
1932, c. 236, p. 434, Michie's 1942 Code of Virginia, § 3848(47) et seq.

[Footnote 2]

Michie § 3848(51), (55).

[Footnote 3]

Pennsylvania Lumbermen's Mutual Fire Ins. Co. v. Meyer, 197 U. S. 407, 197 U. S.
418-419; Connecticut Mutual Life Ins. Co. v. Spratley, 172 U. S. 602, 172 U. S. 619; cf.
International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 319.

[Footnote 4]

One federal question suggested in the appellants' statement of jurisdiction was that § 6,
as interpreted by the state court, infringed federal control of the mails delegated to
Congress by Art. I, § 8(7) of the United States Constitution. But appellants' brief on
submission of the case does not include this question in the "specifications of errors
relied upon," and does not even mention that constitutional clause.

[Footnote 5]

For examples of problems which might be raised by attempts to impose punishment for
violation of the order, see Strassheim v. Daily, 221 U. S. 280, 221 U. S. 284-285; cf.
Hyatt v. New York ex rel. Corkran, 188 U. S. 691, 188 U. S. 712, 188 U. S. 719. Section
6 itself provides no method for enforcement, except insofar as such stature might be
attributed to its provision for giving a cease and desist order

"publicity . . . to the public through the press or otherwise as the commission may, in its
discretion, determine to be advisable for the reasonable information and protection of
the public."

MR. JUSTICE DOUGLAS, concurring.

Since the formula adopted by the Court is adequate to dispose of this case, I have
joined in the opinion. But I feel that the type of problem presented requires a more
selective treatment. Hence, my separate opinion.

Page 339 U. S. 652

Virginia's Blue Sky Law [Footnote 2/1] is a comprehensive scheme for the protection of
the state's investors. Securities can be offered for sale in the state only after the issuer
obtains a permit. [Footnote 2/2] To get it, the applicant must supply detailed information
about its solvency, its earning record, and the nature of the securities. [Footnote 2/3]
Promoters may be required to supply a bond. [Footnote 2/4] Applicants must appoint an
agent, the Secretary of the Commonwealth, to receive service of process. [Footnote 2/5]
Only after proof of their good character and financial responsibility are security
salesmen licensed. [Footnote 2/6] After issuance, the state Corporation Commission is
authorized again to investigate the issuer with an eye to possible revocation of its
permit. [Footnote 2/7] These are the high points of the comprehensive regulation which
Virginia seeks to apply to appellants.

That the business of insurance is interstate commerce is established by United States v.

South-Eastern Underwriters Assn., 322 U. S. 533. Any doubts about the power of a
state to exclude an interstate insurance company which refuses to comply with its
regulatory laws were dispelled by the passage of the McCarran Act. 59 Stat. 33, 15
U.S.C. §§ 1011-1015. See Robertson v. California, 328 U. S. 440, 328 U. S. 461-462.

The requirements of due process do not, in my opinion, preclude the extension of

Virginia's regulatory scheme to appellant. I put to one side the case where a
policyholder seeks to sue the out of state company in Virginia.

Page 339 U. S. 653

His ability to sue is not necessarily the measure of Virginia's power to regulate, as the
Court said in Old Wayne Mut. Life Assn. v. McDonough, 204 U. S. 8, 204 U. S. 21. It is
the nature of the state's action that determines the kind or degree of activity in the state
necessary for satisfying the requirements of due process. What is necessary to sustain
a tax or to maintain a suit by a creditor, see Old Wayne Life Assn. v. McDonough,
supra; Provident Savings Life Assn. Society v. Kentucky, 239 U. S. 103, 239 U. S. 114-
116; Issacs, An Analysis of Doing Business, 25 Col.L.Rev. 1018, 1024, is not, in my
view, determinative when the state seeks to regulate solicitation within its borders.

Blue Sky Laws are a well recognized exercise of the police power of the states. See
Hall v. Geiger-Jones Co., 242 U. S. 539, 242 U. S. 552. The wiles of the salesman have
been many; the devices to avoid state regulation have been clever and calculated. One
of those who contested the constitutionality of the Michigan Blue Sky Law in Merrick v.
N.W. Halsey & Co., 242 U. S. 568, 242 U. S. 573, had no place of business in the state
and was not sending agents into it. The history of the various methods used to evade
state regulation is too recent to require extended comment. Instrumentalities of
interstate and foreign commerce were extensively employed by those beyond the reach
of a state to sell securities to its citizens. See H.R.Rep. No.85, 73d Cong., 1st Sess. 10.
The Securities Act of 1933, 48 Stat. 74, 15 U.S.C. § 77a et seq., was passed to fill the
gap. [Footnote 2/8]
A state is helpless when the out of state company operates beyond the borders,
establishes no office in the state, and has no agents, salesmen, or solicitors to obtain

Page 339 U. S. 654

business for it within the state. Then it is beyond the reach of process. In the present
case, however, that is only the formal arrangement. The actual arrangement shows a
method of soliciting business within Virginia as active, continuous, and methodical as it
would be if regular agents or solicitors were employed. Cf. Hoopeston Canning Co. v.
Cullen, 318 U. S. 313.

Practically all of appellants' business in Virginia originates with and is the result of the
activities of its Virginia members. The recommendation of a member relieves an
applicant of the duty of furnishing any reference. Though the old members are not
designated as "agents," it "clearly appears," as stated by the Supreme Court of Appeals,

"that the association relies almost exclusively on these activities of its Virginia members
to bring about an expansion of its Virginia business."

Travelers Health Assn. v. Virginia, 188 Va. 877, 887, 51 S.E.2d 263, 267. This device
for soliciting business in Virginia may be unconventional and unorthodox; but it operates
functionally precisely as though appellants had formally designated the Virginia
members as their agents. Through these people, appellants have realistically entered
the state, looking for and obtaining business. Whether such solicitation is isolated or
continuous, it is activity which Virginia can regulate. See Hooper v. California, 155 U. S.
648, 155 U. S. 658. The requirements of due process may demand more or less
[Footnote 2/9] minimal contacts than are present here, depending on what the pinch of
the decision is or what it requires of the foreign corporation. See International Shoe Co.
v. Washington, 326 U. S. 310, 326 U. S. 316-319. Where

Page 339 U. S. 655

the corporate project entails the use of one or more people in the state for the
solicitation of business, in my view, it does no violence to the traditional concept of due
process to allow the state to provide protective measures governing that solicitation.
That is all that is done here.

I cannot agree that this appeal is premature. Virginia has placed an injunction on
appellants, an injunction which may have numerous consequences, e.g., contempt
proceedings. There is an existing controversy -- real and vital to appellants.

[Footnote 2/1]

Acts of the General Assembly of Virginia, 1928, c. 529, p. 1373, as amended, Acts of
1932, c. 236, p. 434, Michie's Code of Virginia, § 3848(47) et seq.
[Footnote 2/2]

Michie § 3848(47).

[Footnote 2/3]

Michie § 3848(51).

[Footnote 2/4]

Michie § 3848(51)(r).

[Footnote 2/5]

Michie § 3848(55).

[Footnote 2/6]

Michie § 3848(50)(m).

[Footnote 2/7]

Michie § 3848(53).

[Footnote 2/8]

By § 3(a)(8), insurance policies issued by a corporation subject to the supervision of

specified state agencies are exempt from this federal regulation. Section 18 provides
that the Act does not affect the jurisdiction of any state agency over a security or a
person.

[Footnote 2/9]

As Mr. Justice Rutledge said in Frene v. Louisville Cement Co., 77 U.S.App.D.C. 129,
134 F.2d 511, 516,

". . . some casual or even single acts done within the borders of the sovereignty may
confer power to acquire jurisdiction of the person, provided there is also reasonable
provision for giving notice of the suit in accordance with minimal due process
requirements."

MR. JUSTICE MINTON, with whom MR. JUSTICE JACKSON joins, dissenting.

The State Corporation Commission of Virginia instituted the proceedings leading to the
cease and desist order entered in the instant case under § 6 of the Virginia Securities
Law. Michie's Va.Code 1942, § 3848(52). That section provides for service by
registered mail upon persons or corporations offering securities through the mails or by
other means of communication. After hearing, the Commission is authorized to issue
the order and to give it such publicity as the Commission considers desirable.

In this case, no action has been taken under § 15 of the Law, which provides that
violation of the statute is a misdemeanor and punishable by fine, or under § 17, which
provides for the imposition of a fine upon failure to comply with a lawful order of the
Commission. Michie's Va.Code, 1942, § 3848(61)(63). The Commission has in no way
attempted to enforce the order issued by the Commission against appellants. Therefore,
appellants have not been hurt, and the question of due process is not reached. In the
scheme of the statute, publicity appears to be the sole sanction of § 6. I know of no
reason why Virginia may not go through this

Page 339 U. S. 656

shadow-boxing performance in order to publicize the activities of appellants in Virginia

and notify its citizens that appellants have not qualified under the Securities Law. That is
all the Commission says that it is doing or has the power to do under § 6. The
Commission's view of the nature of this proceeding -- a view reiterated by Virginia in its
brief on the appeal to this Court -- was stated in its opinion:

"Respondents rely on the fact that their contacts with citizens of Virginia are by mail,
that they are not doing business in Virginia, and that they do not enter Virginia either
personally or by agents. In setting up this defense, they lose sight of the nature of this
action. They are not charged with doing business in Virginia, but with offering and
advertising for sale and promoting the sale of insurance contracts in Virginia by mail,
and the action is to foreclose them from these activities. Whether the action will suffice
to actually stop them is beside the point. It will suffice to put them on notice of pertinent
laws of Virginia, to give them an opportunity to be heard and the state an opportunity to
determine the facts, and, if, after hearing, a cease and desist order is issued, the
Commission will then be authorized to give such publicity to the order as it sees fit for
the 'information and protection of the public.'"

"* * * *"

"No word found in or inference derived from Section 6 aforesaid may properly, in our
judgment, be said to impose penalties upon the respondents. . . ."

"* * * *"

"There is no element of compulsion except such as may flow from a dread of the
publicity attending such an order. In such cases, the only weapon available to the
Commonwealth is to publicly advise that the

Page 339 U. S. 657

securities of the respondent do not bear the stamp of the state's approval, and are being
presented to the public without regard to the regulatory laws enacted to protect them.
Section 6, supra, imposes no penalties, exacts no direct toll from those against whom
its orders proceed. . . ."

The question of substituted service on the Secretary of the Commonwealth is not here
in any aspect. As far as appears, service in this manner is not authorized by the Virginia
statutes except where the nonresident has opened and is conducting a place of
business within the State. Michie's Va.Code, 1942, § 3848(55)a. Up to this date, Virginia
has not claimed the power to require appellants, who do business in Virginia only by
mail, to appoint the Secretary of the Commonwealth as their agent for service of
process, nor have the courts of Virginia rendered judgment in a suit where service was
made in that manner. I do not understand, therefore, what possible application the
Court's reference to substituted service on the Secretary of the Commonwealth could
have in this case. I would answer the question of due process when Virginia has
attempted to apply its process to appellants in a proceeding that has consequences of a
nature which entitle a person to the protection of the Due Process Clause. See Parker
v. Los Angeles County, 338 U. S. 327. I would therefore dismiss the appeal.

As stated, it seems to me that the majority opinion is saying that Virginia has more
power than it claims in the instant proceeding. While Virginia has not attempted to do
more than publicize the activities of appellants in the State, I read the majority opinion to
intimate that, under the service by registered letter, Virginia might go further. The cease
and desist order issued cannot validly compel appellants to designate the Secretary of
the Commonwealth as their agent for service of process any more than

Page 339 U. S. 658

it can constitutionally be considered as automatically accomplishing that result. An in

personam judgment cannot be based upon service by registered letter on a nonresident
corporation or a natural person neither of whom has ever been within the
Virginia. Pennoyer v. Neff, 95 U. S. 714; Old Wayne Mutual Life Assn. v.
McDonough, 204 U. S. 8, 204 U. S. 22-23. If that may not be done directly, it may not
be done indirectly. Certainly such service cannot be justified where its purpose is to
make substituted service legal in the future. These nonresidents cannot be brought in
through service by registered mail and compelled to designate the Secretary of the
Commonwealth as their agent for service of process so that thereafter service may be
effected upon such nonresidents by serving the Secretary. So to hold would allow the
State to pull itself up by its own bootstraps.

Service by registered mail is said by the majority to be sufficient where the corporation
has "minimum contacts" with the state of the forum. How many "contacts" a corporation
or person must have before being subjected to suit we are not informed. Here, all of
appellants' contacts with the residents of Virginia were by mail. No agent of appellant
corporation has entered the State, nor has the individual appellant. The contracts were
made wholly in Nebraska. Under these circumstances, I would hold that appellants were
never "present" in Virginia.

"For the terms 'present' or 'presence' are used merely to symbolize those activities of
the corporation's agent within the state which courts will deem to be sufficient to satisfy
the demands of due process."

International Shoe Co. v. Washington, 326 U. S. 310, 326 U. S. 316-317.

As I understand the International Shoe Co. case, the minimum contacts which a
corporation has in the State

Page 339 U. S. 659

must be "activities of the corporation's agent within the state." There were such contacts
by agents within the State in that case. Service was made, in addition to notice by
registered letter, by personal service within the State upon one of those agents. Service
on an agent within the jurisdiction would seem to me indispensable to a judgment
against a corporation. It would seem to be an a fortiori proposition that judgment could
not be obtained against a natural person who was not available for personal service.

We are not dealing here with the power of Virginia to regulate the transaction of
insurance business with its citizens, as was the case in Osborn v. Ozlin, 310 U. S. 53,
and Hoopeston Canning Co. v. Cullen, 318 U. S. 313. In the case at bar, we are
concerned only with how Virginia may enforce such power as it has. No question of the
sufficiency of service was involved in either the Osborn or the Hoopeston cases, both of
which were brought against some officer of a state. The question in those cases was
whether the State had power, and not whether, having the power, it had also acquired
jurisdiction of a defendant against whom a judgment could be rendered enforcing that
power.

I would not attempt to instruct Virginia as to how to protect its citizens from these
intruders from Nebraska. But I do not believe we should even intimate that judgments in
personam may be obtained, by the simple process of sending a registered letter,
against a corporation whose agents have never been in the forum where suit is brought,
or against a natural person who is not personally served within the State.

MR. JUSTICE REED and MR. JUSTICE FRANKFURTER, agreeing with the Court in
reaching the merits, on the merits join this dissent.

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United States Supreme Court

WORLD-WIDE VOLKSWAGEN CORP. v. WOODSON(1980)

No. 78-1078

Argued: October 3, 1979Decided: January 21, 1980

A products-liability action was instituted in an Oklahoma state court by respondents

husband and wife to recover for personal injuries sustained in Oklahoma in an accident
involving an automobile that had been purchased by them in New York while they were
New York residents and that was being driven through Oklahoma at the time of the
accident. The defendants included the automobile retailer and its wholesaler
(petitioners), New York corporations that did no business in Oklahoma. Petitioners
entered special appearances, claiming that Oklahoma's exercise of jurisdiction over
them would offend limitations on the State's jurisdiction imposed by the Due Process
Clause of the Fourteenth Amendment. The trial court rejected petitioners' claims, and
they then sought, but were denied, a writ of prohibition in the Oklahoma Supreme Court
to restrain respondent trial judge from exercising in personam jurisdiction over them.

Held:

Consistently with the Due Process Clause, the Oklahoma trial court may not exercise in
personam jurisdiction over petitioners. Pp. 291-299.

(a) A state court may exercise personal jurisdiction over a nonresident defendant only so
long as there exist "minimum contacts" between the defendant and the forum State.
International Shoe Co. v. Washington, 326 U.S. 310 . The defendant's contacts with the
forum State must be such that maintenance of the suit does not offend traditional notions
of fair play and substantial justice, id., at 316, and the relationship between the
defendant and the forum must be such that it is "reasonable . . . to require the
corporation to defend the particular suit which is brought there," id., at 317. The Due
Process Clause "does not contemplate that a state may make binding a judgment in
personam against an individual or corporate defendant with which the state has no
contacts, ties, or relations." Id., at 319. Pp. 291-294.

(b) Here, there is a total absence in the record of those affiliating circumstances that are
a necessary predicate to any exercise of state-court jurisdiction. Petitioners carry on no
activity whatsoever in Oklahoma; they close no sales and perform no services there,
 avail [444 U.S. 286, 287] themselves of none of the benefits of Oklahoma law, and solicit
no business there either through salespersons or through advertising reasonably
calculated to reach that State. Nor does the record show that they regularly sell cars to
Oklahoma residents or that they indirectly, through others, serve or seek to serve the
Oklahoma market. Although it is foreseeable that automobiles sold by petitioners would
travel to Oklahoma and that the automobile here might cause injury in Oklahoma,
"foreseeability" alone is not a sufficient benchmark for personal jurisdiction under the
Due Process Clause. The foreseeability that is critical to due process analysis is not the
mere likelihood that a product will find its way into the forum State, but rather is that the
defendant's conduct and connection with the forum are such that he should reasonably
anticipate being haled into court there. Nor can jurisdiction be supported on the theory
that petitioners earn substantial revenue from goods used in Oklahoma. Pp. 295-299.

585 P.2d 351, reversed.

WHITE, J., delivered the opinion of the Court, in which BURGER, C. J., and STEWART,
POWELL, REHNQUIST, and STEVENS, JJ., joined. BRENNAN, J., filed a dissenting
opinion, post, p. 299. MARSHALL, J., filed a dissenting opinion, in which BLACKMUN,
J., joined, post, p. 313 BLACKMUN, J., filed a dissenting opinion, post, p. 317.

Herbert Rubin argued the cause for petitioners. With him on the briefs were Dan A.
Rogers, Bernard J. Wald, and Ian Ceresney.

Jefferson G. Greer argued the cause for respondents. With him on the brief was
Charles A. Whitebook.

MR. JUSTICE WHITE delivered the opinion of the Court.

The issue before us is whether, consistently with the Due Process Clause of the
Fourteenth Amendment, an Oklahoma court may exercise in personam jurisdiction over
a nonresident automobile retailer and its wholesale distributor in a products-liability
action, when the defendants' only connection with Oklahoma is the fact that an
automobile sold in New York to New York residents became involved in an accident in
Oklahoma. [444 U.S. 286, 288]

Respondents Harry and Kay Robinson purchased a new Audi automobile from
petitioner Seaway Volkswagen, Inc. (Seaway), in Massena, N. Y., in 1976. The
following year the Robinson family, who resided in New York, left that State for a new
home in Arizona. As they passed through the State of Oklahoma, another car struck
their Audi in the rear, causing a fire which severely burned Kay Robinson and her two
children. 1

The Robinsons 2 subsequently brought a products-liability action in the District Court for
Creek County, Okla., claiming that their injuries resulted from defective design and
placement of the Audi's gas tank and fuel system. They joined as defendants the
automobile's manufacturer, Audi NSU Auto Union Aktiengesellschaft (Audi); its importer,
Volkswagen of America, Inc. (Volkswagen); its regional distributor, petitioner World-
Wide Volkswagen Corp. (World-Wide); and its retail dealer, petitioner Seaway. Seaway
and World-Wide entered special appearances, 3 claiming that Oklahoma's exercise of
jurisdiction over them would offend the limitations on the State's jurisdiction imposed by
the Due Process Clause of the Fourteenth Amendment. 4

The facts presented to the District Court showed that World-Wide is incorporated and
has its business office in New [444 U.S. 286, 289] York. It distributes vehicles, parts, and
accessories, under contract with Volkswagen, to retail dealers in New York, New
Jersey, and Connecticut. Seaway, one of these retail dealers, is incorporated and has
its place of business in New York. Insofar as the record reveals, Seaway and World-
Wide are fully independent corporations whose relations with each other and with
Volkswagen and Audi are contractual only. Respondents adduced no evidence that
either World-Wide or Seaway does any business in Oklahoma, ships or sells any
products to or in that State, has an agent to receive process there, or purchases
advertisements in any media calculated to reach Oklahoma. In fact, as respondents'
counsel conceded at oral argument, Tr. of Oral Arg. 32, there was no showing that any
automobile sold by World-Wide or Seaway has ever entered Oklahoma with the single
exception of the vehicle involved in the present case.

Despite the apparent paucity of contacts between petitioners and Oklahoma, the District
Court rejected their constitutional claim and reaffirmed that ruling in denying petitioners'
motion for reconsideration. 5 Petitioners then sought a writ of prohibition in the Supreme
Court of Oklahoma to restrain the District Judge, respondent Charles S. Woodson, from
exercising in personam jurisdiction over them. They renewed their contention that,
because they had no "minimal contacts," App. 32, with the State of Oklahoma, the
actions of the District Judge were in violation of their rights under the Due Process
Clause.

The Supreme Court of Oklahoma denied the writ, 585 P.2d 351 (1978), 6 holding that
personal jurisdiction over petitioners was authorized by Oklahoma's "long-arm"
statute, [444 U.S. 286, 290] Okla. Stat., Tit. 12, 1701.03 (a) (4) (1971). 7 Although the
court noted that the proper approach was to test jurisdiction against both statutory and
constitutional standards, its analysis did not distinguish these questions, probably
because 1701.03 (a) (4) has been interpreted as conferring jurisdiction to the limits
permitted by the United States Constitution. 8 The court's rationale was contained in the
following paragraph, 585 P.2d, at 354:

"In the case before us, the product being sold and distributed by the petitioners is by its
very design and purpose so mobile that petitioners can foresee its possible use in
Oklahoma. This is especially true of the distributor, who has the exclusive right to
distribute such automobile in New York, New Jersey and Connecticut. The evidence
presented below demonstrated that goods sold and distributed by the petitioners were
used in the State of Oklahoma, and under the facts we believe it reasonable to infer,
 given the retail value of the automobile, that the petitioners derive substantial income
from automobiles which from time to time are used in the State of Oklahoma. This being
the case, we hold that under the facts presented, the trial court was justified in
concluding [444 U.S. 286, 291] that the petitioners derive substantial revenue from goods
used or consumed in this State."

We granted certiorari, 440 U.S. 907 (1979), to consider an important constitutional question with
respect to state-court jurisdiction and to resolve a conflict between the Supreme Court of
Oklahoma and the highest courts of at least four other States. 9 We reverse.

II

The Due Process Clause of the Fourteenth Amendment limits the power of a state court
to render a valid personal judgment against a nonresident defendant. Kulko v. California
Superior Court, 436 U.S. 84, 91 (1978). A judgment rendered in violation of due process
is void in the rendering State and is not entitled to full faith and credit elsewhere.
Pennoyer v. Neff, 95 U.S. 714, 732 -733 (1878). Due process requires that the
defendant be given adequate notice of the suit, Mullane v. Central Hanover Trust Co.,
339 U.S. 306, 313 -314 (1950), and be subject to the personal jurisdiction of the court,
International Shoe Co. v. Washington, 326 U.S. 310 (1945). In the present case, it is not
contended that notice was inadequate; the only question is whether these particular
petitioners were subject to the jurisdiction of the Oklahoma courts.

As has long been settled, and as we reaffirm today, a state court may exercise personal
jurisdiction over a nonresident defendant only so long as there exist "minimum contacts"
between the defendant and the forum State. International Shoe Co. v. Washington,
supra, at 316. The concept of minimum contacts, in turn, can be seen to perform two
related, but [444 U.S. 286, 292] distinguishable, functions. It protects the defendant
against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure
that the States, through their courts, do not reach out beyond the limits imposed on
them by their status as coequal sovereigns in a federal system.

The protection against inconvenient litigation is typically described in terms of

"reasonableness" or "fairness." We have said that the defendant's contacts with the
forum State must be such that maintenance of the suit "does not offend `traditional
notions of fair play and substantial justice.'" International Shoe Co. v. Washington,
supra, at 316, quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940). The relationship
between the defendant and the forum must be such that it is "reasonable . . . to require
the corporation to defend the particular suit which is brought there." 326 U.S., at 317 .
Implicit in this emphasis on reasonableness is the understanding that the burden on the
defendant, while always a primary concern, will in an appropriate case be considered in
light of other relevant factors, including the forum State's interest in adjudicating the
dispute, see McGee v. International Life Ins. Co., 355 U.S. 220, 223 (1957); the
plaintiff's interest in obtaining convenient and effective relief, see Kulko v. California
Superior Court, supra, at 92, at least when that interest is not adequately protected by
the plaintiff's power to choose the forum, cf. Shaffer v. Heitner, 433 U.S. 186, 211 , n. 37
(1977); the interstate judicial system's interest in obtaining the most efficient resolution
of controversies; and the shared interest of the several States in furthering fundamental
substantive social policies, see Kulko v. California Superior Court, supra, at 93, 98.

The limits imposed on state jurisdiction by the Due Process Clause, in its role as a
guarantor against inconvenient litigation, have been substantially relaxed over the
years. As we noted in McGee v. International Life Ins. Co., supra, at 222-223 [444 U.S.
286, 293] this trend is largely attributable to a fundamental transformation in the
American economy:

"Today many commercial transactions touch two or more States and may involve parties
separated by the full continent. With this increasing nationalization of commerce has
come a great increase in the amount of business conducted by mail across state lines.
At the same time modern transportation and communication have made it much less
burdensome for a party sued to defend himself in a State where he engages in
economic activity."

The historical developments noted in McGee, of course, have only accelerated in the generation
since that case was decided.

Nevertheless, we have never accepted the proposition that state lines are irrelevant for
jurisdictional purposes, nor could we, and remain faithful to the principles of interstate
federalism embodied in the Constitution. The economic interdependence of the States
was foreseen and desired by the Framers. In the Commerce Clause, they provided that
the Nation was to be a common market, a "free trade unit" in which the States are
debarred from acting as separable economic entities. H. P. Hood & Sons, Inc. v. Du
Mond, 336 U.S. 525, 538 (1949). But the Framers also intended that the States retain
many essential attributes of sovereignty, including, in particular, the sovereign power to
try causes in their courts. The sovereignty of each State, in turn, implied a limitation on
the sovereignty of all of its sister States - a limitation express or implicit in both the
original scheme of the Constitution and the Fourteenth Amendment.

Hence, even while abandoning the shibboleth that "[t]he authority of every tribunal is
necessarily restricted by the territorial limits of the State in which it is established,"
Pennoyer v. Neff, supra, at 720, we emphasized that the reasonableness of asserting
jurisdiction over the defendant must be assessed "in the context of our federal system of
government," [444 U.S. 286, 294] International Shoe Co. v. Washington, 326 U.S., at 317 ,
and stressed that the Due Process Clause ensures not only fairness, but also the
"orderly administration of the laws," id., at 319. As we noted in Hanson v. Denckla, 357
U.S. 235, 250 -251 (1958):

"As technological progress has increased the flow of commerce between the States, the
need for jurisdiction over nonresidents has undergone a similar increase. At the same
time, progress in communications and transportation has made the defense of a suit in a
foreign tribunal less burdensome. In response to these changes, the requirements for
personal jurisdiction over nonresidents have evolved from the rigid rule of Pennoyer v.
 Neff, 95 U.S. 714 , to the flexible standard of International Shoe Co. v. Washington, 326
U.S. 310 . But it is a mistake to assume that this trend heralds the eventual demise of all
restrictions on the personal jurisdiction of state courts. [Citation omitted.] Those
restrictions are more than a guarantee of immunity from inconvenient or distant litigation.
They are a consequence of territorial limitations on the power of the respective States."

Thus, the Due Process Clause "does not contemplate that a state may make binding a
judgment in personam against an individual or corporate defendant with which the state has no
contacts, ties, or relations." International Shoe Co. v. Washington, supra, at 319. Even if the
defendant would suffer minimal or no inconvenience from being forced to litigate before the
tribunals of another State; even if the forum State has a strong interest in applying its law to the
controversy; even if the forum State is the most convenient location for litigation, the Due
Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest
the State of its power to render a valid judgment. Hanson v. Denckla, supra, at 251, 254. [444
U.S. 286, 295]

III

Applying these principles to the case at hand, 10 we find in the record before us a total
absence of those affiliating circumstances that are a necessary predicate to any
exercise of state-court jurisdiction. Petitioners carry on no activity whatsoever in
Oklahoma. They close no sales and perform no services there. They avail themselves
of none of the privileges and benefits of Oklahoma law. They solicit no business there
either through salespersons or through advertising reasonably calculated to reach the
State. Nor does the record show that they regularly sell cars at wholesale or retail to
Oklahoma customers or residents or that they indirectly, through others, serve or seek
to serve the Oklahoma market. In short, respondents seek to base jurisdiction on one,
isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous
circumstance that a single Audi automobile, sold in New York to New York residents,
happened to suffer an accident while passing through Oklahoma.

It is argued, however, that because an automobile is mobile by its very design and
purpose it was "foreseeable" that the Robinsons' Audi would cause injury in Oklahoma.
Yet "foreseeability" alone has never been a sufficient benchmark for personal
jurisdiction under the Due Process Clause. In Hanson v. Denckla, supra, it was no
doubt foreseeable that the settlor of a Delaware trust would subsequently move to
Florida and seek to exercise a power of appointment there; yet we held that Florida
courts could not constitutionally [444 U.S. 286, 296] exercise jurisdiction over a Delaware
trustee that had no other contacts with the forum State. In Kulko v. California Superior
Court, 436 U.S. 84 (1978), it was surely "foreseeable" that a divorced wife would move
to California from New York, the domicile of the marriage, and that a minor daughter
would live with the mother. Yet we held that California could not exercise jurisdiction in a
child-support action over the former husband who had remained in New York.

If foreseeability were the criterion, a local California tire retailer could be forced to
defend in Pennsylvania when a blowout occurs there, see Erlanger Mills, Inc. v. Cohoes
Fibre Mills, Inc., 239 F.2d 502, 507 (CA4 1956); a Wisconsin seller of a defective
automobile jack could be haled before a distant court for damage caused in New
Jersey, Reilly v. Phil Tolkan Pontiac, Inc., 372 F. Supp. 1205 (NJ 1974); or a Florida
soft-drink concessionaire could be summoned to Alaska to account for injuries
happening there, see Uppgren v. Executive Aviation Services, Inc., 304 F. Supp. 165,
170-171 (Minn. 1969). Every seller of chattels would in effect appoint the chattel his
agent for service of process. His amenability to suit would travel with the chattel. We
recently abandoned the outworn rule of Harris v. Balk, 198 U.S. 215 (1905), that the
interest of a creditor in a debt could be extinguished or otherwise affected by any State
having transitory jurisdiction over the debtor. Shaffer v. Heitner, 433 U.S. 186 (1977).
Having interred the mechanical rule that a creditor's amenability to a quasi in rem action
travels with his debtor, we are unwilling to endorse an analogous principle in the present
case. 11 [444 U.S. 286, 297]

This is not to say, of course, that foreseeability is wholly irrelevant. But the foreseeability
that is critical to due process analysis is not the mere likelihood that a product will find
its way into the forum State. Rather, it is that the defendant's conduct and connection
with the forum State are such that he should reasonably anticipate being haled into
court there. See Kulko v. California Superior Court, supra, at 97-98; Shaffer v. Heitner,
433 U.S., at 216 ; and see id., at 217-219 (STEVENS, J., concurring in judgment). The
Due Process Clause, by ensuring the "orderly administration of the laws," International
Shoe Co. v. Washington, 326 U.S., at 319 , gives a degree of predictability to the legal
system that allows potential defendants to structure their primary conduct with some
minimum assurance as to where that conduct will and will not render them liable to suit.

When a corporation "purposefully avails itself of the privilege of conducting activities

within the forum State," Hanson v. Denckla, 357 U.S., at 253 , it has clear notice that it
is subject to suit there, and can act to alleviate the risk of burdensome litigation by
procuring insurance, passing the expected costs on to customers, or, if the risks are too
great, severing its connection with the State. Hence if the sale of a product of a
manufacturer or distributor such as Audi or Volkswagen is not simply an isolated
occurrence, but arises from the efforts of the manufacturer or distributor to serve,
directly or indirectly, the market for its product in other States, it is not unreasonable to
subject it to suit in one of those States if its allegedly defective merchandise has there
been the source of injury to its owner or to others. The forum State does not [444 U.S.
286, 298] exceed its powers under the Due Process Clause if it asserts personal
jurisdiction over a corporation that delivers its products into the stream of commerce
with the expectation that they will be purchased by consumers in the forum State. Cf.
Gray v. American Radiator & Standard Sanitary Corp., 22 Ill. 2d 432, 176 N. E. 2d 761
(1961).

But there is no such or similar basis for Oklahoma jurisdiction over World-Wide or
Seaway in this case. Seaway's sales are made in Massena, N. Y. World-Wide's market,
although substantially larger, is limited to dealers in New York, New Jersey, and
Connecticut. There is no evidence of record that any automobiles distributed by World-
Wide are sold to retail customers outside this tristate area. It is foreseeable that the
purchasers of automobiles sold by World-Wide and Seaway may take them to
Oklahoma. But the mere "unilateral activity of those who claim some relationship with a
nonresident defendant cannot satisfy the requirement of contact with the forum State."
Hanson v. Denckla, supra, at 253.

In a variant on the previous argument, it is contended that jurisdiction can be supported

by the fact that petitioners earn substantial revenue from goods used in Oklahoma. The
Oklahoma Supreme Court so found, 585 P.2d, at 354-355, drawing the inference that
because one automobile sold by petitioners had been used in Oklahoma, others might
have been used there also. While this inference seems less than compelling on the
facts of the instant case, we need not question the court's factual findings in order to
reject its reasoning.

This argument seems to make the point that the purchase of automobiles in New York,
from which the petitioners earn substantial revenue, would not occur but for the fact that
the automobiles are capable of use in distant States like Oklahoma. Respondents
observe that the very purpose of an automobile is to travel, and that travel of
automobiles sold by petitioners is facilitated by an extensive chain of Volkswagen
service centers throughout the country, including some in Oklahoma. 12 [444 U.S. 286,
299] However, financial benefits accruing to the defendant from a collateral relation to
the forum State will not support jurisdiction if they do not stem from a constitutionally
cognizable contact with that State. See Kulko v. California Superior Court, 436 U.S., at
94 -95. In our view, whatever marginal revenues petitioners may receive by virtue of the
fact that their products are capable of use in Oklahoma is far too attenuated a contact to
justify that State's exercise of in personam jurisdiction over them.

Because we find that petitioners have no "contacts, ties, or relations" with the State of
Oklahoma, International Shoe Co. v. Washington, supra, at 319, the judgment of the
Supreme Court of Oklahoma is

Reversed.

Footnotes
[ Footnote 1 ] The driver of the other automobile does not figure in the present litigation.

[ Footnote 2 ] Kay Robinson sued on her own behalf. The two children sued through
Harry Robinson as their father and next friend.

[ Footnote 3 ] Volkswagen also entered a special appearance in the District Court, but
unlike World-Wide and Seaway did not seek review in the Supreme Court of Oklahoma
and is not a petitioner here. Both Volkswagen and Audi remain as defendants in the
litigation pending before the District Court in Oklahoma.

[ Footnote 4 ] The papers filed by the petitioners also claimed that the District Court
lacked "venue of the subject matter," App. 9, or "venue over the subject matter," id., at
11.
[ Footnote 5 ] The District Court's rulings are unreported, and appear at App. 13 and 20.

[ Footnote 6 ] Five judges joined in the opinion. Two concurred in the result, without
opinion, and one concurred in part and dissented in part, also without opinion.

[ Footnote 7 ] This subsection provides:

"A court may exercise personal jurisdiction over a person, who acts directly or by an
agent, as to a cause of action or claim for relief arising from the person's . . . causing
tortious injury in this state by an act or omission outside this state if he regularly does or
solicits business or engages in any other persistent course of conduct, or derives
substantial revenue from goods used or consumed or services rendered, in this state. . .
."

The State Supreme Court rejected jurisdiction based on 1701.03 (a) (3), which authorizes
jurisdiction over any person "causing tortious injury in this state by an act or omission in this
state." Something in addition to the infliction of tortious injury was required.

[ Footnote 8 ] Fields v. Volkswagen of America, Inc., 555 P.2d 48 (Okla. 1976);

Carmack v. Chemical Bank New York Trust Co., 536 P.2d 897 (Okla. 1975); Hines v.
Clendenning, 465 P.2d 460 (Okla. 1970).

[ Footnote 9 ] Cf. Tilley v. Keller Truck & Implement Corp., 200 Kan. 641, 438 P.2d 128
(1968); Granite States Volkswagen, Inc. v. District Court, 177 Colo. 42, 492 P.2d 624
(1972); Pellegrini v. Sachs & Sons, 522 P.2d 704 (Utah 1974); Oliver v. American
Motors Corp., 70 Wash. 2d 875, 425 P.2d 647 (1967).

[ Footnote 10 ] Respondents argue, as a threshold matter, that petitioners waived any

objections to personal jurisdiction by (1) joining with their special appearances a
challenge to the District Court's subject-matter jurisdiction, see n. 4, supra, and (2)
taking depositions on the merits of the case in Oklahoma. The trial court, however,
characterized the appearances as "special," and the Oklahoma Supreme Court, rather
than finding jurisdiction waived, reached and decided the statutory and constitutional
questions. Cf. Kulko v. California Superior Court, 436 U.S. 84, 91 , n. 5 (1978).

[ Footnote 11 ] Respondents' counsel, at oral argument, see Tr. of Oral Arg. 19-22, 29,
sought to limit the reach of the foreseeability standard by suggesting that there is
something unique about automobiles. It is true that automobiles are uniquely mobile,
see Tyson v. Whitaker & Son, Inc., 407 A.2d 1, 6, and n. 11 (Me. 1979) (McKusick, C.
J.), that they did play a crucial role in the expansion of personal jurisdiction through the
fiction of implied consent, e. g., Hess v. Pawloski, 274 U.S. 352 (1927), and that [444
U.S. 286, 297] some of the cases have treated the automobile as a "dangerous
instrumentality." But today, under the regime of International Shoe, we see no difference
for jurisdictional purposes between an automobile and any other chattel. The
"dangerous instrumentality" concept apparently was never used to support personal
jurisdiction; and to the extent it has relevance today it bears not on jurisdiction but on
the possible desirability of imposing substantive principles of tort law such as strict
liability.

[ Footnote 12 ] As we have noted, petitioners earn no direct revenues from these

service centers. See supra, at 289.

MR. JUSTICE BRENNAN, dissenting. *

The Court holds that the Due Process Clause of the Fourteenth Amendment bars the
States from asserting jurisdiction over the defendants in these two cases. In each case
the Court so decides because it fails to find the "minimum contacts" that have been
required since International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
Because I believe that the Court reads International Shoe and its progeny too narrowly,
and because I believe that the standards enunciated by those cases may already be
obsolete as constitutional boundaries, I dissent.

The Court's opinions focus tightly on the existence of contacts between the forum and
the defendant. In so doing, they accord too little weight to the strength of the forum
State's interest in the case and fail to explore whether there [444 U.S. 286, 300] would be
any actual inconvenience to the defendant. The essential inquiry in locating the
constitutional limits on state-court jurisdiction over absent defendants is whether the
particular exercise of jurisdiction offends "`traditional notions of fair play and substantial
justice.'" International Shoe, supra, at 316, quoting Milliken v. Meyer, 311 U.S. 457, 463
(1940). The clear focus in International Shoe was on fairness and reasonableness.
Kulko v. California Superior Court, 436 U.S. 84, 92 (1978). The Court specifically
declined to establish a mechanical test based on the quantum of contacts between a
State and the defendant:

"Whether due process is satisfied must depend rather upon the quality and nature of the
activity in relation to the fair and orderly administration of the laws which it was the
purpose of the due process clause to insure. That clause does not contemplate that a
state may make binding a judgment in personam against an individual or corporate
defendant with which the state has no contacts, ties, or relations." 326 U.S., at 319
(emphasis added).

The existence of contacts, so long as there were some, was merely one way of giving content to
the determination of fairness and reasonableness.

Surely International Shoe contemplated that the significance of the contacts necessary
to support jurisdiction would diminish if some other consideration helped establish that
jurisdiction would be fair and reasonable. The interests of the State and other parties in
proceeding with the case in a particular forum are such considerations. McGee v.
International Life Ins. Co., 355 U.S. 220, 223 (1957), for instance, accorded great
importance to a State's "manifest interest in providing effective means of redress" for its
citizens. See also Kulko v. California Superior Court, supra, at 92; Shaffer v. Heitner,
433 U.S. 186, 208 (1977); Mullane v. Central Hanover Trust Co., 339 U.S. 306, 313
(1950).

Another consideration is the actual burden a defendant [444 U.S. 286, 301] must bear in
defending the suit in the forum. McGee, supra. Because lesser burdens reduce the
unfairness to the defendant, jurisdiction may be justified despite less significant
contacts. The burden, of course, must be of constitutional dimension. Due process limits
on jurisdiction do not protect a defendant from all inconvenience of travel, McGee,
supra, at 224, and it would not be sensible to make the constitutional rule turn solely on
the number of miles the defendant must travel to the courtroom. 1 Instead, the
constitutionally significant "burden" to be analyzed relates to the mobility of the
defendant's defense. For instance, if having to travel to a foreign forum would hamper
the defense because witnesses or evidence or the defendant himself were immobile, or
if there were a disproportionately large number of witnesses or amount of evidence that
would have to be transported at the defendant's expense, or if being away from home
for the duration of the trial would work some special hardship on the defendant, then the
Constitution would require special consideration for the defendant's interests.

That considerations other than contacts between the forum and the defendant are
relevant necessarily means that the Constitution does not require that trial be held in the
State which has the "best contacts" with the defendant. See Shaffer v. Heitner, supra, at
228 (BRENNAN, J., dissenting). The defendant has no constitutional entitlement to the
best forum or, for that matter, to any particular forum. Under even the most restrictive
view of International Shoe, several States could have jurisdiction over a particular cause
of action. We need only determine whether the forum States in these cases satisfy the
constitutional minimum. 2 [444 U.S. 286, 302]

II

In each of these cases, I would find that the forum State has an interest in permitting the
litigation to go forward, the litigation is connected to the forum, the defendant is linked to
the forum, and the burden of defending is not unreasonable. Accordingly, I would hold
that it is neither unfair nor unreasonable to require these defendants to defend in the
forum State.

In No. 78-952, a number of considerations suggest that Minnesota is an interested and

convenient forum. The action was filed by a bona fide resident of the
forum. 3 Consequently, Minnesota's interests are similar to, even if lesser than, the
interests of California in McGee, supra, "in providing a forum for its residents and in
regulating the activities of insurance companies" doing business in the State. 4 Post, at
332. Moreover, Minnesota has "attempted to assert [its] particularized interest in trying
such cases in its courts by . . . enacting a special jurisdictional statute." Kulko, supra, at
98; McGee, supra, at 221, 224. As in McGee, a resident forced to travel to a distant
State to prosecute an action [444 U.S. 286, 303] against someone who has injured him
could, for lack of funds, be entirely unable to bring the cause of action. The plaintiff's
residence in the State makes the State one of a very few convenient fora for a personal
injury case (the others usually being the defendant's home State and the State where
the accident occurred). 5

In addition, the burden on the defendant is slight. As Judge Friendly has recognized,
Shaffer emphasizes the importance of identifying the real impact of the lawsuit.
O'Connor v. Lee-Hy Paving Corp., 579 F.2d 194, 200 (CA2 1978) (upholding the
constitutionality of jurisdiction in a very similar case under New York's law after Shaffer).
Here the real impact is on the defendant's insurer, which is concededly amenable to suit
in the forum State. The defendant is carefully protected from financial liability because
the action limits the prayer for damages to the insurance policy's liability limit. 6 The
insurer will handle the case for the defendant. The defendant is only a nominal party
who need be no more active in the case than the cooperation clause of his policy
requires. Because of the ease of airline transportation, he need not lose significantly
more time than if the case were at home. Consequently, if the suit went forward [444 U.S.
286, 304] in Minnesota, the defendant would bear almost no burden or expense beyond
what he would face if the suit were in his home State. The real impact on the named
defendant is the same as it is in a direct action against the insurer, which would be
constitutionally permissible. Watson v. Employers Liability Assurance Corp., 348 U.S.
66 (1954); Minichiello v. Rosenberg, 410 F.2d 106, 109-110 (CA2 1968). The only
distinction is the formal, "analytica[l] prerequisite," post, at 331, of making the insured a
named party. Surely the mere addition of appellant's name to the complaint does not
suffice to create a due process violation. 7

Finally, even were the relevant inquiry whether there are sufficient contacts between the
forum and the named defendant, I would find that such contacts exist. The insurer's
presence in Minnesota is an advantage to the defendant that may well have been a
consideration in his selecting the policy he did. An insurer with offices in many States
makes it easier for the insured to make claims or conduct other business that may
become necessary while traveling. It is simply not true that "State Farm's decision to do
business in Minnesota was completely adventitious as far as Rush was concerned."
Post, at 328-329. By buying a State Farm policy, the defendant availed himself of the
benefits he might derive from having an insurance agent in Minnesota who could,
among other things, facilitate a suit for appellant against a Minnesota resident. It seems
unreasonable to read the Constitution as permitting one to take advantage of his
nationwide insurance network but not to be burdened by it.

In sum, I would hold that appellant is not deprived of due process by being required to
submit to trial in Minnesota, first because Minnesota has a sufficient interest in and
connection [444 U.S. 286, 305] to this litigation and to the real and nominal defendants,
and second because the burden on the nominal defendant is sufficiently slight.
 B

In No. 78-1078, the interest of the forum State and its connection to the litigation is
strong. The automobile accident underlying the litigation occurred in Oklahoma. The
plaintiffs were hospitalized in Oklahoma when they brought suit. Essential witnesses
and evidence were in Oklahoma. See Shaffer v. Heitner, 433 U.S., at 208 . The State
has a legitimate interest in enforcing its laws designed to keep its highway system safe,
and the trial can proceed at least as efficiently in Oklahoma as anywhere else.

The petitioners are not unconnected with the forum. Although both sell automobiles
within limited sales territories, each sold the automobile which in fact was driven to
Oklahoma where it was involved in an accident. 8 It may be true, as the Court suggests,
that each sincerely intended to limit its commercial impact to the limited territory, and
that each intended to accept the benefits and protection of the laws only of those States
within the territory. But obviously these were unrealistic hopes that cannot be treated as
an automatic constitutional shield. 9 [444 U.S. 286, 306]

An automobile simply is not a stationary item or one designed to be used in one place.
An automobile is intended to be moved around. Someone in the business of selling
large numbers of automobiles can hardly plead ignorance of their mobility or pretend
that the automobiles stay put after they are sold. It is not merely that a dealer in
automobiles foresees that they will move. Ante, at 295. The dealer actually intends that
the purchasers will use the automobiles to travel to distant States where the dealer does
not directly "do business." The sale of an automobile does purposefully inject the
vehicle into the stream of interstate commerce so that it can travel to distant States. See
Kulko, 436 U.S., at 94 ; Hanson v. Denckla, 357 U.S. 235, 253 (1958).

This case is similar to Ohio v. Wyandotte Chemicals Corp., 401 U.S. 493 (1971). There
we indicated, in the course of denying leave to file an original-jurisdiction case, that
corporations having no direct contact with Ohio could constitutionally be brought to trial
in Ohio because they dumped pollutants into streams outside Ohio's limits which
ultimately, through the action of the water, reached Lake Erie and affected Ohio. No
corporate acts, only their consequences, occurred in Ohio. The stream of commerce is
just as natural a force as a stream of water, and it was equally predictable that the cars
petitioners released would reach distant States. 10

The Court accepts that a State may exercise jurisdiction over a distributor which
"serves" that State "indirectly" by "deliver[ing] its products into the stream of commerce
with the expectation that they will be purchased by consumers in the forum State." Ante,
at 297-298. It is difficult to see why the Constitution should distinguish between a case
involving [444 U.S. 286, 307] goods which reach a distant State through a chain of
distribution and a case involving goods which reach the same State because a
consumer, using them as the dealer knew the customer would, took them there. 11 In
each case the seller purposefully injects the goods into the stream of commerce and
those goods predictably are used in the forum State. 12
Furthermore, an automobile seller derives substantial benefits from States other than its
own. A large part of the value of automobiles is the extensive, nationwide network of
highways. Significant portions of that network have been constructed by and are
maintained by the individual States, including Oklahoma. The States, through their
highway programs, contribute in a very direct and important way to the value of
petitioners' businesses. Additionally, a network of other related dealerships with their
service departments operates throughout the country under the protection of the laws of
the various States, including Oklahoma, and enhances the value of petitioners'
businesses by facilitating their customers' traveling.

Thus, the Court errs in its conclusion, ante, at 299 (emphasis added), that "petitioners
have no `contacts, ties, or relations'" with Oklahoma. There obviously are contacts, and,
given Oklahoma's connection to the litigation, the contacts are sufficiently significant to
make it fair and reasonable for the petitioners to submit to Oklahoma's jurisdiction.

III

It may be that affirmance of the judgments in these cases would approach the outer
limits of International Shoe's jurisdictional [444 U.S. 286, 308] principle. But that principle,
with its almost exclusive focus on the rights of defendants, may be outdated. As MR.
JUSTICE MARSHALL wrote in Shaffer v. Heitner, 433 U.S., at 212 : "`[T]raditional
notions of fair play and substantial justice' can be as readily offended by the
perpetuation of ancient forms that are no longer justified as by the adoption of new
procedures. . . ."

International Shoe inherited its defendant focus from Pennoyer v. Neff, 95 U.S. 714
(1878), and represented the last major step this Court has taken in the long process of
liberalizing the doctrine of personal jurisdiction. Though its flexible approach
represented a major advance, the structure of our society has changed in many
significant ways since International Shoe was decided in 1945. Mr. Justice Black, writing
for the Court in McGee v. International Life Ins. Co., 355 U.S. 220, 222 (1957),
recognized that "a trend is clearly discernible toward expanding the permissible scope
of state jurisdiction over foreign corporations and other nonresidents." He explained the
trend as follows:

"In part this is attributable to the fundamental transformation of our national economy
over the years. Today many commercial transactions touch two or more States and may
involve parties separated by the full continent. With this increasing nationalization of
commerce has come a great increase in the amount of business conducted by mail
across state lines. At the same time modern transportation and communication have
made it much less burdensome for a party sued to defend himself in a State where he
engages in economic activity." Id., at 222-223.

As the Court acknowledges, ante, at 292-293, both the nationalization of commerce and the
ease of transportation and communication have accelerated in the generation since
1957. 13 [444 U.S. 286, 309] The model of society on which the International Shoe Court
based its opinion is no longer accurate. Business people, no matter how local their businesses,
cannot assume that goods remain in the business' locality. Customers and goods can be
anywhere else in the country usually in a matter of hours and always in a matter of a very few
days.

In answering the question whether or not it is fair and reasonable to allow a particular
forum to hold a trial binding on a particular defendant, the interests of the forum State
and other parties loom large in today's world and surely are entitled to as much weight
as are the interests of the defendant. The "orderly administration of the laws" provides a
firm basis for according some protection to the interests of plaintiffs and States as well
as of defendants. 14 Certainly, I cannot see how a defendant's right to due process is
violated if the defendant suffers no inconvenience. See ante, at 294.

The conclusion I draw is that constitutional concepts of fairness no longer require the
extreme concern for defendants that was once necessary. Rather, as I wrote in dissent
from Shaffer v. Heitner, supra, at 220 (emphasis added), minimum [444 U.S. 286,
310] contacts must exist "among the parties, the contested transaction, and the forum
State." 15 The contacts between any two of these should not be determinate. "[W]hen a
suitor seeks to lodge a suit in a State with a substantial interest in seeing its own law
applied to the transaction in question, we could wisely act to minimize conflicts,
confusion, and uncertainty by adopting a liberal view of jurisdiction, unless
considerations of fairness or efficiency strongly point in the opposite direction." 16 433
U.S., at 225 -226. Mr. Justice Black, dissenting in Hanson v. Denckla, 357 U.S., at 258 -
259, expressed similar concerns by suggesting that a State should have jurisdiction
over a case growing out of a transaction significantly related to that State "unless
litigation there would impose such a heavy and disproportionate burden on a
nonresident defendant that it would offend what this Court has referred to as `traditional
notions of fair play and substantial justice.'" 17 Assuming [444 U.S. 286, 311] that a State
gives a nonresident defendant adequate notice and opportunity to defend, I do not think
the Due Process Clause is offended merely because the defendant has to board a
plane to get to the site of the trial.

The Court's opinion in No. 78-1078 suggests that the defendant ought to be subject to a
State's jurisdiction only if he has contacts with the State "such that he should
reasonably anticipate being haled into court there." 18 Ante, at 297. There is nothing
unreasonable or unfair, however, about recognizing commercial reality. Given the
tremendous mobility of goods and people, and the inability of businessmen to control
where goods are taken by customers (or retailers), I do not think that the defendant
should be in complete control of the geographical stretch of his amenability to suit.
Jurisdiction is no longer premised on the notion that nonresident defendants have
somehow impliedly consented to suit. People should understand that they are held
responsible for the consequences of their actions and that in our society most actions
have consequences affecting many States. When an action in fact causes injury in
another State, the actor should be prepared to answer for it there unless defending in
that State would be unfair for some reason other than that a state boundary must be
crossed. 19
In effect the Court is allowing defendants to assert the sovereign [444 U.S. 286,
312] rights of their home States. The expressed fear is that otherwise all limits on
personal jurisdiction would disappear. But the argument's premise is wrong. I would not
abolish limits on jurisdiction or strip state boundaries of all significance, see Hanson,
supra, at 260 (Black, J., dissenting); I would still require the plaintiff to demonstrate
sufficient contacts among the parties, the forum, and the litigation to make the forum a
reasonable State in which to hold the trial. 20

I would also, however, strip the defendant of an unjustified veto power over certain very
appropriate fora - a power the defendant justifiably enjoyed long ago when
communication and travel over long distances were slow and unpredictable and when
notions of state sovereignty were impractical and exaggerated. But I repeat that that is
not today's world. If a plaintiff can show that his chosen forum State has a sufficient
interest in the litigation (or sufficient contacts with the defendant), then the defendant
who cannot show some real injury to a constitutionally protected interest, see O'Connor
v. Lee-Hy Paving Corp., 579 F.2d, at 201, should have no constitutional excuse not to
appear. 21

The plaintiffs in each of these cases brought suit in a forum with which they had
significant contacts and which had significant contacts with the litigation. I am not
convinced that the defendants would suffer any "heavy and disproportionate burden" in
defending the suits. Accordingly, I would hold [444 U.S. 286, 313] that the Constitution
should not shield the defendants from appearing and defending in the plaintiffs' chosen
fora.

[ Footnote * ] [This opinion applies also to No. 78-952, Rush et al. v. Savchuk, post, p.
320.]

[ Footnote 1 ] In fact, a courtroom just across the state line from a defendant may often
be far more convenient for the defendant than a courtroom in a distant corner of his own
State.

[ Footnote 2 ] The States themselves, of course, remain free to choose whether to

extend their jurisdiction to embrace all defendants over whom the Constitution would
permit exercise of jurisdiction.

[ Footnote 3 ] The plaintiff asserted jurisdiction pursuant to Minn. Stat. 571.41, subd. 2
(1978), which allows garnishment of an insurer's obligation to defend and indemnify its
insured. See post, at 322-323, n. 3, and accompanying text. The Minnesota Supreme
Court has interpreted the statute as allowing suit only to the insurance policy's liability
limit. The court has held that the statute embodies the rule of Seider v. Roth, 17 N. Y.
2d 111, 216 N. E. 2d 312 (1966).

[ Footnote 4 ] To say that these considerations are relevant is a far cry from saying that
they are "substituted for . . . contacts with the defendant and the cause of action." Post,
at 332. The forum's interest in the litigation is an independent point of inquiry even
under traditional readings of International Shoe's progeny. If there is a shift in focus, it is
not away from "the relationship among the defendant, the forum, and the litigation."
Post, at 332 (emphasis added). Instead it is a shift within the same accepted
relationship from the connections between the defendant and the forum to those
between the forum and the litigation.

[ Footnote 5 ] In every International Shoe inquiry, the defendant, necessarily, is outside

the forum State. Thus it is inevitable that either the defendant or the plaintiff will be
inconvenienced. The problem existing at the time of Pennoyer v. Neff, 95 U.S. 714
(1878), that a resident plaintiff could obtain a binding judgment against an unsuspecting,
distant defendant, has virtually disappeared in this age of instant communication and
virtually instant travel.

[ Footnote 6 ] It is true that the insurance contract is not the subject of the litigation.
Post, at 329. But one of the undisputed clauses of the insurance policy is that the
insurer will defend this action and pay any damages assessed, up to the policy limit.
The very purpose of the contract is to relieve the insured from having to defend himself,
and under the state statute there could be no suit absent the insurance contract. Thus,
in a real sense, the insurance contract is the source of the suit. See Shaffer v. Heitner,
433 U.S. 186, 207 (1977).

[ Footnote 7 ] Were the defendant a real party subject to actual liability or were there
significant noneconomic consequences such as those suggested by the Court's note
20, post, at 331, a more substantial connection with the forum State might well be
constitutionally required.

[ Footnote 8 ] On the basis of this fact the state court inferred that the petitioners derived
substantial revenue from goods used in Oklahoma. The inference is not without support.
Certainly, were use of goods accepted as a relevant contact, a plaintiff would not need
to have an exact count of the number of petitioners' cars that are used in Oklahoma.

[ Footnote 9 ] Moreover, imposing liability in this case would not so undermine certainty
as to destroy an automobile dealer's ability to do business. According jurisdiction does
not expand liability except in the marginal case where a plaintiff cannot afford to bring
an action except in the plaintiff's own State. In addition, these petitioners are
represented by insurance companies. They not only could, but did, purchase insurance
to protect them should they stand trial and lose the case. The costs of the insurance no
doubt are passed on to customers.

[ Footnote 10 ] One might argue that it was more predictable that the pollutants would
reach Ohio than that one of petitioners' cars would reach Oklahoma. The Court's
analysis, however, excludes jurisdiction in a contiguous State such as Pennsylvania as
surely as in more distant States such as Oklahoma.
[ Footnote 11 ] For example, I cannot understand the constitutional distinction between
selling an item in New Jersey and selling an item in New York expecting it to be used in
New Jersey.

[ Footnote 12 ] The manufacturer in the case cited by the Court, Gray v. American
Radiator & Standard Sanitary Corp., 22 Ill. 2d 432, 176 N. E. 2d 761 (1961), had no
more control over which States its goods would reach than did the petitioners in this
case.

[ Footnote 13 ] Statistics help illustrate the amazing expansion in mobility since

International Shoe. The number of revenue passenger-miles flown on [444 U.S. 286,
309] domestic and international flights increased by nearly three orders of magnitude
between 1945 (450 million) and 1976 (179 billion). U.S. Department of Commerce,
Historical Statistics of the United States, pt. 2, p. 770 (1975); U.S. Department of
Commerce, Statistical Abstract of the United States 670 (1978). Automobile vehicle-
miles (including passenger cars, buses, and trucks) driven in the United States
increased by a relatively modest 500% during the same period, growing from 250 billion
in 1945 to 1,409 billion in 1976. Historical Statistics, supra, at 718; Statistical Abstract,
supra, at 647.

[ Footnote 14 ] The Court has recognized that there are cases where the interests of
justice can turn the focus of the jurisdictional inquiry away from the contracts between a
defendant and the forum State. For instance, the Court indicated that the requirement of
contacts may be greatly relaxed (if indeed any personal contacts would be required)
where a plaintiff is suing a nonresident defendant to enforce a judgment procured in
another State. Shaffer v. Heitner, 433 U.S., at 210 -211, nn. 36, 37.

[ Footnote 15 ] In some cases, the inquiry will resemble the inquiry commonly
undertaken in determining which State's law to apply. That it is fair to apply a State's law
to a nonresident defendant is clearly relevant in determining whether it is fair to subject
the defendant to jurisdiction in that State. Shaffer v. Heitner, supra, at 225 (BRENNAN,
J., dissenting); Hanson v. Denckla, 357 U.S. 235, 258 (1958) (Black, J., dissenting).
See n. 19, infra.

[ Footnote 16 ] Such a standard need be no more uncertain than the Court's test "in
which few answers will be written `in black and white. The greys are dominant and even
among them the shades are innumerable.' Estin v. Estin, 334 U.S. 541, 545 (1948)."
Kulko v. California Superior Court, 436 U.S. 84, 92 (1978).

[ Footnote 17 ] This strong emphasis on the State's interest is nothing new. This Court,
permitting the forum to exercise jurisdiction over nonresident claimants to a trust largely
on the basis of the forum's interest in closing the trust, stated:

"[T]he interest of each state in providing means to close trusts that exist by the grace of
its laws and are administered under the supervision of its courts is so insistent and
rooted in custom as to establish beyond doubt the right of its courts to determine the
 interests of all claimants, resident or nonresident, provided its procedure accords full
opportunity to [444 U.S. 286, 311] appear and be heard." Mullane v. Central Hanover
Trust Co., 339 U.S. 306, 313 (1950).

[ Footnote 18 ] The Court suggests that this is the critical foreseeability rather than the
likelihood that the product will go to the forum State. But the reasoning begs the
question. A defendant cannot know if his actions will subject him to jurisdiction in
another State until we have declared what the law of jurisdiction is.

[ Footnote 19 ] One consideration that might create some unfairness would be if the
choice of forum also imposed on the defendant an unfavorable substantive law which
the defendant could justly have assumed would not apply. See n. 15, supra.

[ Footnote 20 ] For instance, in No. 78-952, if the plaintiff were not a bona fide resident
of Minnesota when the suit was filed or if the defendant were subject to financial liability,
I might well reach a different result. In No. 78-1078, I might reach a different result if the
accident had not occurred in Oklahoma.

[ Footnote 21 ] Frequently, of course, the defendant will be able to influence the choice
of forum through traditional doctrines, such as venue or forum non conveniens,
permitting the transfer of litigation. Shaffer v. Heitner, 433 U.S., at 228 , n. 8
(BRENNAN, J., dissenting).

MR. JUSTICE MARSHALL, with whom MR. JUSTICE BLACKMUN joins, dissenting.

For over 30 years the standard by which to measure the constitutionally permissible
reach of state-court jurisdiction has been well established:

"[D]ue process requires only that in order to subject a defendant to a judgment in

personam, if he be not present within the territory of the forum, he have certain minimum
contacts with it such that the maintenance of the suit does not offend `traditional notions
of fair play and substantial justice.'" International Shoe Co. v. Washington, 326 U.S. 310,
316 (1945), quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940).

The corollary, that the Due Process Clause forbids the assertion of jurisdiction over a defendant
"with which the state has no contacts, ties, or relations," 326 U.S., at 319 , is equally clear. The
concepts of fairness and substantial justice as applied to an evaluation of "the quality and
nature of the [defendant's] activity," ibid., are not readily susceptible of further definition,
however, and it is not surprising that the constitutional standard is easier to state than to apply.

This is a difficult case, and reasonable minds may differ as to whether respondents
have alleged a sufficient "relationship among the defendant[s], the forum, and the
litigation," Shaffer v. Heitner, 433 U.S. 186, 204 (1977), to satisfy the requirements of
International Shoe. I am concerned, however, that the majority has reached its result by
taking an unnecessarily narrow view of petitioners' forum-related conduct. The majority
asserts that "respondents seek to base jurisdiction on one, isolated occurrence and
whatever inferences can be drawn therefrom: the fortuitous circumstance that a single
Audi automobile, sold in New York to New York [444 U.S. 286, 314] residents, happened
to suffer an accident while passing through Oklahoma." Ante, at 295. If that were the
case, I would readily agree that the minimum contacts necessary to sustain jurisdiction
are not present. But the basis for the assertion of jurisdiction is not the happenstance
that an individual over whom petitioners had no control made a unilateral decision to
take a chattel with him to a distant State. Rather, jurisdiction is premised on the
deliberate and purposeful actions of the defendants themselves in choosing to become
part of a nationwide, indeed a global, network for marketing and servicing automobiles.

Petitioners are sellers of a product whose utility derives from its mobility. The unique
importance of the automobile in today's society, which is discussed in MR. JUSTICE
BLACKMUN'S dissenting opinion, post, at 318, needs no further elaboration. Petitioners
know that their customers buy cars not only to make short trips, but also to travel long
distances. In fact, the nationwide service network with which they are affiliated was
designed to facilitate and encourage such travel. Seaway would be unlikely to sell many
cars if authorized service were available only in Massena, N. Y. Moreover, local dealers
normally derive a substantial portion of their revenues from their service operations and
thereby obtain a further economic benefit from the opportunity to service cars which
were sold in other States. It is apparent that petitioners have not attempted to minimize
the chance that their activities will have effects in other States; on the contrary, they
have chosen to do business in a way that increases that chance, because it is to their
economic advantage to do so.

To be sure, petitioners could not know in advance that this particular automobile would
be driven to Oklahoma. They must have anticipated, however, that a substantial portion
of the cars they sold would travel out of New York. Seaway, a local dealer in the second
most populous State, and World-Wide, [444 U.S. 286, 315] one of only seven regional
Audi distributors in the entire country, see Brief for Respondents 2, would scarcely have
been surprised to learn that a car sold by them had been driven in Oklahoma on
Interstate 44, a heavily traveled transcontinental highway. In the case of the distributor,
in particular, the probability that some of the cars it sells will be driven in every one of
the contiguous States must amount to a virtual certainty. This knowledge should alert a
reasonable businessman to the likelihood that a defect in the product might manifest
itself in the forum State - not because of some unpredictable, aberrant, unilateral action
by a single buyer, but in the normal course of the operation of the vehicles for their
intended purpose.

It is misleading for the majority to characterize the argument in favor of jurisdiction as

one of "`foreseeability' alone." Ante, at 295. As economic entities petitioners reach out
from New York, knowingly causing effects in other States and receiving economic
advantage both from the ability to cause such effects themselves and from the activities
of dealers and distributors in other States. While they did not receive revenue from
making direct sales in Oklahoma, they intentionally became part of an interstate
economic network, which included dealerships in Oklahoma, for pecuniary gain. In light
of this purposeful conduct I do not believe it can be said that petitioners "had no reason
to expect to be haled before a[n Oklahoma] court." Shaffer v. Heitner, supra, at 216; see
ante, at 297, and Kulko v. California Superior Court, 436 U.S. 84, 97 -98 (1978).

The majority apparently acknowledges that if a product is purchased in the forum State
by a consumer, that State may assert jurisdiction over everyone in the chain of
distribution. See ante, at 297-298. With this I agree. But I cannot agree that jurisdiction
is necessarily lacking if the product enters the State not through the channels of
distribution but in the course of its intended use by the consumer. We have
recognized [444 U.S. 286, 316] the role played by the automobile in the expansion of our
notions of personal jurisdiction. See Shaffer v. Heitner, supra, at 204; Hess v. Pawloski,
274 U.S. 352 (1927). Unlike most other chattels, which may find their way into States far
from where they were purchased because their owner takes them there, the intended
use of the automobile is precisely as a means of traveling from one place to another. In
such a case, it is highly artificial to restrict the concept of the "stream of commerce" to
the chain of distribution from the manufacturer to the ultimate consumer.

I sympathize with the majority's concern that persons ought to be able to structure their
conduct so as not to be subject to suit in distant forums. But that may not always be
possible. Some activities by their very nature may foreclose the option of conducting
them in such a way as to avoid subjecting oneself to jurisdiction in multiple forums. This
is by no means to say that all sellers of automobiles should be subject to suit
everywhere; but a distributor of automobiles to a multistate market and a local
automobile dealer who makes himself part of a nationwide network of dealerships can
fairly expect that the cars they sell may cause injury in distant States and that they may
be called on to defend a resulting lawsuit there.

In light of the quality and nature of petitioners' activity, the majority's reliance on Kulko v.
California Superior Court, supra, is misplaced. Kulko involved the assertion of state-
court jurisdiction over a nonresident individual in connection with an action to modify his
child custody rights and support obligations. His only contact with the forum State was
that he gave his minor child permission to live there with her mother. In holding that the
exercise of jurisdiction violated the Due Process Clause, we emphasized that the cause
of action as well as the defendant's actions in relation to the forum State arose "not from
the defendant's commercial transactions in interstate commerce, but rather from his
personal, [444 U.S. 286, 317] domestic relations," 436 U.S., at 97 (emphasis supplied),
contrasting Kulko's actions with those of the insurance company in McGee v.
International Life Ins. Co., 355 U.S. 220 (1957), which were undertaken for commercial
benefit. *

Manifestly, the "quality and nature" of commercial activity is different, for purposes of
the International Shoe test, from actions from which a defendant obtains no economic
advantage. Commercial activity is more likely to cause effects in a larger sphere, and
the actor derives an economic benefit from the activity that makes it fair to require him
to answer for his conduct where its effects are felt. The profits may be used to pay the
costs of suit, and knowing that the activity is likely to have effects in other States the
defendant can readily insure against the costs of those effects, thereby sparing himself
much of the inconvenience of defending in a distant forum.

Of course, the Constitution forbids the exercise of jurisdiction if the defendant had no
judicially cognizable contacts with the forum. But as the majority acknowledges, if such
contacts are present the jurisdictional inquiry requires a balancing of various interests
and policies. See ante, at 292; Rush v. Savchuk, post, at 332. I believe such contacts
are to be found here and that, considering all of the interests and policies at stake,
requiring petitioners to defend this action in Oklahoma is not beyond the bounds of the
Constitution. Accordingly, I dissent.

[ Footnote * ] Similarly, I believe the Court in Hanson v. Denckla, 357 U.S. 235 (1958),
was influenced by the fact that trust administration has traditionally been considered a
peculiarly local activity.

MR. JUSTICE BLACKMUN, dissenting.

I confess that I am somewhat puzzled why the plaintiffs in this litigation are so insistent
that the regional distributor and the retail dealer, the petitioners here, who handled the
ill-fated Audi automobile involved in this litigation, be named defendants. It would
appear that the manufacturer and the [444 U.S. 286, 318] importer, whose subjectability to
Oklahoma jurisdiction is not challenged before this Court, ought not to be judgment-
proof. It may, of course, ultimately amount to a contest between insurance companies
that, once begun, is not easily brought to a termination. Having made this much of an
observation, I pursue it no further.

For me, a critical factor in the disposition of the litigation is the nature of the
instrumentality under consideration. It has been said that we are a nation on wheels.
What we are concerned with here is the automobile and its peripatetic character. One
need only examine our national network of interstate highways, or make an appearance
on one of them, or observe the variety of license plates present not only on those
highways but in any metropolitan area, to realize that any automobile is likely to wander
far from its place of licensure or from its place of distribution and retail sale. Miles per
gallon on the highway (as well as in the city) and mileage per thankful are familiar
allegations in manufacturers' advertisements today. To expect that any new automobile
will remain in the vicinity of its retail sale - like the 1914 electric car driven by the
proverbial "little old lady" - is to blink at reality. The automobile is intended for distance
as well as for transportation within a limited area.

It therefore seems to me not unreasonable - and certainly not unconstitutional and

beyond the reach of the principles laid down in International Shoe Co. v. Washington,
326 U.S. 310 (1945), and its progeny - to uphold Oklahoma jurisdiction over this New
York distributor and this New York dealer when the accident happened in Oklahoma. I
see nothing more unfair for them than for the manufacturer and the importer. All are in
the business of providing vehicles that spread out over the highways of our several
States. It is not too much to anticipate at the time of distribution and at the time of retail
sale that this Audi would be in Oklahoma. Moreover, in assessing "minimum contacts,"
foreseeable use in another State seems to me to be little different from foreseeable
resale [444 U.S. 286, 319] in another State. Yet the Court declares this distinction
determinate. Ante, at 297-299.

MR. JUSTICE BRENNAN points out in his dissent, ante, at 307, that an automobile
dealer derives substantial benefits from States other than its own. The same is true of
the regional distributor. Oklahoma does its best to provide safe roads. Its police
investigate accidents. It regulates driving within the State. It provides aid to the victim
and thereby, it is hoped, lessens damages. Accident reports are prepared and made
available. All this contributes to and enhances the business of those engaged
professionally in the distribution and sale of automobiles. All this also may benefit
defendants in the very lawsuits over which the State asserts jurisdiction.

My position need not now take me beyond the automobile and the professional who
does business by way of distributing and retailing automobiles. Cases concerning other
instrumentalities will be dealt with as they arise and in their own contexts.

I would affirm the judgment of the Supreme Court of Oklahoma. Because the Court
reverses that judgment, it will now be about parsing every variant in the myriad of motor
vehicle fact situations that present themselves. Some will justify jurisdiction and others
will not. All will depend on the "contact" that the Court sees fit to perceive in the
individual case.

G.R. No. L-11390 March 26, 1918

EL BANCO ESPAÑOL-FILIPINO, plaintiff-appellant,

vs.
VICENTE PALANCA, administrator of the estate of Engracio Palanca Tanquinyeng, defendant-
appellant.

Aitken and DeSelms for appellant.

Hartigan and Welch for appellee.

STREET, J.:

This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to foreclose a
mortgage upon various parcels of real property situated in the city of Manila. The mortgage in
question is dated June 16, 1906, and was executed by the original defendant herein, Engracio
Palanca Tanquinyeng y Limquingco, as security for a debt owing by him to the bank. Upon March
31, 1906, the debt amounted to P218,294.10 and was drawing interest at the rate of 8 per centum
per annum, payable at the end of each quarter. It appears that the parties to this mortgage at that
time estimated the value of the property in question at P292,558, which was about P75,000 in
excess of the indebtedness. After the execution of this instrument by the mortgagor, he returned to
China which appears to have been his native country; and he there died, upon January 29, 1810,
without again returning to the Philippine Islands.

As the defendant was a nonresident at the time of the institution of the present action, it was
necessary for the plaintiff in the foreclosure proceeding to give notice to the defendant by publication
pursuant to section 399 of the Code of Civil Procedure. An order for publication was accordingly
obtained from the court, and publication was made in due form in a newspaper of the city of Manila.
At the same time that the order of the court should deposit in the post office in a stamped envelope a
copy of the summons and complaint directed to the defendant at his last place of residence, to wit,
the city of Amoy, in the Empire of China. This order was made pursuant to the following provision
contained in section 399 of the Code of Civil Procedure:

In case of publication, where the residence of a nonresident or absent defendant is known,

the judge must direct a copy of the summons and complaint to be forthwith deposited by the
clerk in the post-office, postage prepaid, directed to the person to be served, at his place of
residence

Whether the clerk complied with this order does not affirmatively appear. There is, however, among
the papers pertaining to this case, an affidavit, dated April 4, 1908, signed by Bernardo Chan y
Garcia, an employee of the attorneys of the bank, showing that upon that date he had deposited in
the Manila post-office a registered letter, addressed to Engracio Palanca Tanquinyeng, at Manila,
containing copies of the complaint, the plaintiff's affidavit, the summons, and the order of the court
directing publication as aforesaid. It appears from the postmaster's receipt that Bernardo probably
used an envelope obtained from the clerk's office, as the receipt purports to show that the letter
emanated from the office.

The cause proceeded in usual course in the Court of First Instance; and the defendant not having
appeared, judgment was, upon July 2, 1908, taken against him by default. Upon July 3, 1908, a
decision was rendered in favor of the plaintiff. In this decision it was recited that publication had been
properly made in a periodical, but nothing was said about this notice having been given mail. The
court, upon this occasion, found that the indebtedness of the defendant amounted to P249,355. 32,
with interest from March 31, 1908. Accordingly it was ordered that the defendant should, on or
before July 6, 1908, deliver said amount to the clerk of the court to be applied to the satisfaction of
the judgment, and it was declared that in case of the failure of the defendant to satisfy the judgment
within such period, the mortgage property located in the city of Manila should be exposed to public
sale. The payment contemplated in said order was never made; and upon July 8, 1908, the court
ordered the sale of the property. The sale took place upon July 30, 1908, and the property was
bought in by the bank for the sum of P110,200. Upon August 7, 1908, this sale was confirmed by the
court.

About seven years after the confirmation of this sale, or to the precise, upon June 25, 1915, a motion
was made in this cause by Vicente Palanca, as administrator of the estate of the original defendant,
Engracio Palanca Tanquinyeng y Limquingco, wherein the applicant requested the court to set aside
the order of default of July 2, 1908, and the judgment rendered upon July 3, 1908, and to vacate all
the proceedings subsequent thereto. The basis of this application, as set forth in the motion itself,
was that the order of default and the judgment rendered thereon were void because the court had
never acquired jurisdiction over the defendant or over the subject of the action.

At the hearing in the court below the application to vacate the judgment was denied, and from this
action of the court Vicente Planca, as administrator of the estate of the original defendant, has
appealed. No other feature of the case is here under consideration than such as related to the action
of the court upon said motion.

The case presents several questions of importance, which will be discussed in what appears to be
the sequence of most convenient development. In the first part of this opinion we shall, for the
purpose of argument, assume that the clerk of the Court of First Instance did not obey the order of
the court in the matter of mailing the papers which he was directed to send to the defendant in
Amoy; and in this connection we shall consider, first, whether the court acquired the necessary
jurisdiction to enable it to proceed with the foreclosure of the mortgage and, secondly, whether those
proceedings were conducted in such manner as to constitute due process of law.

The word "jurisdiction," as applied to the faculty of exercising judicial power, is used in several
different, though related, senses since it may have reference (1) to the authority of the court to
entertain a particular kind of action or to administer a particular kind of relief, or it may refer to the
power of the court over the parties, or (2) over the property which is the subject to the litigation.

The sovereign authority which organizes a court determines the nature and extent of its powers in
general and thus fixes its competency or jurisdiction with reference to the actions which it may
entertain and the relief it may grant.

Jurisdiction over the person is acquired by the voluntary appearance of a party in court and his
submission to its authority, or it is acquired by the coercive power of legal process exerted over the
person.

Jurisdiction over the property which is the subject of the litigation may result either from a seizure of
the property under legal process, whereby it is brought into the actual custody of the law, or it may
result from the institution of legal proceedings wherein, under special provisions of law, the power of
the court over the property is recognized and made effective. In the latter case the property, though
at all times within the potential power of the court, may never be taken into actual custody at all. An
illustration of the jurisdiction acquired by actual seizure is found in attachment proceedings, where
the property is seized at the beginning of the action, or some subsequent stage of its progress, and
held to abide the final event of the litigation. An illustration of what we term potential jurisdiction over
the res, is found in the proceeding to register the title of land under our system for the registration of
land. Here the court, without taking actual physical control over the property assumes, at the
instance of some person claiming to be owner, to exercise a jurisdiction in rem over the property and
to adjudicate the title in favor of the petitioner against all the world.

In the terminology of American law the action to foreclose a mortgage is said to be a proceeding
quasi in rem, by which is expressed the idea that while it is not strictly speaking an action in rem yet
it partakes of that nature and is substantially such. The expression "action in rem" is, in its narrow
application, used only with reference to certain proceedings in courts of admiralty wherein the
property alone is treated as responsible for the claim or obligation upon which the proceedings are
based. The action quasi rem differs from the true action in rem in the circumstance that in the former
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. All proceedings having for their sole object
the sale or other disposition of the property of the defendant, whether by attachment, foreclosure, or
other form of remedy, are in a general way thus designated. The judgment entered in these
proceedings is conclusive only between the parties.

In speaking of the proceeding to foreclose a mortgage the author of a well known treaties, has said:

Though nominally against person, such suits are to vindicate liens; they proceed upon
seizure; they treat property as primarily indebted; and, with the qualification above-
mentioned, they are substantially property actions. In the civil law, they are styled
hypothecary actions, and their sole object is the enforcement of the lien against the res; in
the common law, they would be different in chancery did not treat the conditional
conveyance as a mere hypothecation, and the creditor's right ass an equitable lien; so, in
both, the suit is real action so far as it is against property, and seeks the judicial recognition
 of a property debt, and an order for the sale of the res. (Waples, Proceedings In Rem. sec.
607.)

It is true that in proceedings of this character, if the defendant for whom publication is made appears,
the action becomes as to him a personal action and is conducted as such. This, however, does not
affect the proposition that where the defendant fails to appear the action is quasi in rem; and it
should therefore be considered with reference to the principles governing actions in rem.

There is an instructive analogy between the foreclosure proceeding and an action of attachment,
concerning which the Supreme Court of the United States has used the following language:

If the defendant appears, the cause becomes mainly a suit in personam, with the added
incident, that the property attached remains liable, under the control of the court, to answer
to any demand which may be established against the defendant by the final judgment of the
court. But, if there is no appearance of the defendant, and no service of process on him, the
case becomes, in its essential nature, a proceeding in rem, the only effect of which is to
subject the property attached to the payment of the defendant which the court may find to be
due to the plaintiff. (Cooper vs. Reynolds, 10 Wall., 308.)

In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary
seizure is to, be considered necessary in order to confer jurisdiction upon the court. In this case the
lien on the property is acquired by the seizure; and the purpose of the proceedings is to subject the
property to that lien. If a lien already exists, whether created by mortgage, contract, or statute, the
preliminary seizure is not necessary; and the court proceeds to enforce such lien in the manner
provided by law precisely as though the property had been seized upon attachment. (Roller vs.
Holly, 176 U. S., 398, 405; 44 L. ed., 520.) It results that the mere circumstance that in an
attachment the property may be seized at the inception of the proceedings, while in the foreclosure
suit it is not taken into legal custody until the time comes for the sale, does not materially affect the
fundamental principle involved in both cases, which is that the court is here exercising a jurisdiction
over the property in a proceeding directed essentially in rem.

Passing now to a consideration of the jurisdiction of the Court of First Instance in a mortgage
foreclosure, it is evident that the court derives its authority to entertain the action primarily from the
statutes organizing the court. The jurisdiction of the court, in this most general sense, over the cause
of action is obvious and requires no comment. Jurisdiction over the person of the defendant, if
acquired at all in such an action, is obtained by the voluntary submission of the defendant or by the
personal service of process upon him within the territory where the process is valid. If, however, the
defendant is a nonresident and, remaining beyond the range of the personal process of the court,
refuses to come in voluntarily, the court never acquires jurisdiction over the person at all. Here the
property itself is in fact the sole thing which is impleaded and is the responsible object which is the
subject of the exercise of judicial power. It follows that the jurisdiction of the court in such case is
based exclusively on the power which, under the law, it possesses over the property; and any
discussion relative to the jurisdiction of the court over the person of the defendant is entirely apart
from the case. The jurisdiction of the court over the property, considered as the exclusive object of
such action, is evidently based upon the following conditions and considerations, namely: (1) that the
property is located within the district; (2) that the purpose of the litigation is to subject the property by
sale to an obligation fixed upon it by the mortgage; and (3) that the court at a proper stage of the
proceedings takes the property into custody, if necessary, and expose it to sale for the purpose of
satisfying the mortgage debt. An obvious corollary is that no other relief can be granted in this
proceeding than such as can be enforced against the property.
We may then, from what has been stated, formulated the following proposition relative to the
foreclosure proceeding against the property of a nonresident mortgagor who fails to come in and
submit himself personally to the jurisdiction of the court: (I) That the jurisdiction of the court is
derived from the power which it possesses over the property; (II) that jurisdiction over the person is
not acquired and is nonessential; (III) that the relief granted by the court must be limited to such as
can be enforced against the property itself.

It is important that the bearing of these propositions be clearly apprehended, for there are many
expressions in the American reports from which it might be inferred that the court acquires personal
jurisdiction over the person of the defendant by publication and notice; but such is not the case. In
truth the proposition that jurisdiction over the person of a nonresident cannot be acquired by
publication and notice was never clearly understood even in the American courts until after the
decision had been rendered by the Supreme Court of the United States in the leading case of
Pennoyer vs. Neff (95 U. S. 714; 24 L. ed., 565). In the light of that decision, and of other decisions
which have subsequently been rendered in that and other courts, the proposition that jurisdiction
over the person cannot be thus acquired by publication and notice is no longer open to question; and
it is now fully established that a personal judgment upon constructive or substituted service against a
nonresident who does not appear is wholly invalid. This doctrine applies to all kinds of constructive
or substituted process, including service by publication and personal service outside of the
jurisdiction in which the judgment is rendered; and the only exception seems to be found in the case
where the nonresident defendant has expressly or impliedly consented to the mode of service. (Note
to Raher vs. Raher, 35 L. R. A. [N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A. [N. S.], 312

The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that the process from the
tribunals of one State cannot run into other States or countries and that due process of law requires
that the defendant shall be brought under the power of the court by service of process within the
State, or by his voluntary appearance, in order to authorize the court to pass upon the question of
his personal liability. The doctrine established by the Supreme Court of the United States on this
point, being based upon the constitutional conception of due process of law, is binding upon the
courts of the Philippine Islands. Involved in this decision is the principle that in proceedings in rem or
quasi in rem against a nonresident who is not served personally within the state, and who does not
appear, the relief must be confined to the res, and the court cannot lawfully render a personal
judgment against him. (Dewey vs. Des Moines, 173 U. S., 193; 43 L. ed., 665; Heidritter vs.
Elizabeth Oil Cloth Co., 112 U. S., 294; 28 L. ed., 729.) Therefore in an action to foreclose a
mortgage against a nonresident, upon whom service has been effected exclusively by publication,
no personal judgment for the deficiency can be entered. (Latta vs. Tutton, 122 Cal., 279; Blumberg
vs. Birch, 99 Cal., 416.)

It is suggested in the brief of the appellant that the judgment entered in the court below offends
against the principle just stated and that this judgment is void because the court in fact entered a
personal judgment against the absent debtor for the full amount of the indebtedness secured by the
mortgage. We do not so interpret the judgment.

In a foreclosure proceeding against a nonresident owner it is necessary for the court, as in all cases
of foreclosure, to ascertain the amount due, as prescribed in section 256 of the Code of Civil
Procedure, and to make an order requiring the defendant to pay the money into court. This step is a
necessary precursor of the order of sale. In the present case the judgment which was entered
contains the following words:

Because it is declared that the said defendant Engracio Palanca Tanquinyeng y Limquingco,
is indebted in the amount of P249,355.32, plus the interest, to the 'Banco Espanol-Filipino' . .
. therefore said appellant is ordered to deliver the above amount etc., etc.
This is not the language of a personal judgment. Instead it is clearly intended merely as a
compliance with the requirement that the amount due shall be ascertained and that the evidence of
this it may be observed that according to the Code of Civil Procedure a personal judgment against
the debtor for the deficiency is not to be rendered until after the property has been sold and the
proceeds applied to the mortgage debt. (sec. 260).

The conclusion upon this phase of the case is that whatever may be the effect in other respects of
the failure of the clerk of the Court of First Instance to mail the proper papers to the defendant in
Amoy, China, such irregularity could in no wise impair or defeat the jurisdiction of the court, for in our
opinion that jurisdiction rest upon a basis much more secure than would be supplied by any form of
notice that could be given to a resident of a foreign country.

Before leaving this branch of the case, we wish to observe that we are fully aware that many
reported cases can be cited in which it is assumed that the question of the sufficiency of publication
or notice in a case of this kind is a question affecting the jurisdiction of the court, and the court is
sometimes said to acquire jurisdiction by virtue of the publication. This phraseology was undoubtedly
originally adopted by the court because of the analogy between service by the publication and
personal service of process upon the defendant; and, as has already been suggested, prior to the
decision of Pennoyer vs. Neff (supra) the difference between the legal effects of the two forms of
service was obscure. It is accordingly not surprising that the modes of expression which had already
been molded into legal tradition before that case was decided have been brought down to the
present day. But it is clear that the legal principle here involved is not effected by the peculiar
language in which the courts have expounded their ideas.

We now proceed to a discussion of the question whether the supposed irregularity in the
proceedings was of such gravity as to amount to a denial of that "due process of law" which was
secured by the Act of Congress in force in these Islands at the time this mortgage was foreclosed.
(Act of July 1, 1902, sec. 5.) In dealing with questions involving the application of the constitutional
provisions relating to due process of law the Supreme Court of the United States has refrained from
attempting to define with precision the meaning of that expression, the reason being that the idea
expressed therein is applicable under so many diverse conditions as to make any attempt ay precise
definition hazardous and unprofitable. As applied to a judicial proceeding, however, it may be laid
down with certainty that the requirement of due process is satisfied if the following conditions are
present, namely; (1) There must be a court or tribunal clothed with judicial power to hear and
determine the matter before it; (2) jurisdiction must be lawfully acquired over the person of the
defendant or over the property which is the subject of the proceeding; (3) the defendant must be
given an opportunity to be heard; and (4) judgment must be rendered upon lawful hearing.

Passing at once to the requisite that the defendant shall have an opportunity to be heard, we
observe that in a foreclosure case some notification of the proceedings to the nonresident owner,
prescribing the time within which appearance must be made, is everywhere recognized as essential.
To answer this necessity the statutes generally provide for publication, and usually in addition
thereto, for the mailing of notice to the defendant, if his residence is known. Though commonly
called constructive, or substituted service of process in any true sense. It is merely a means
provided by law whereby the owner may be admonished that his property is the subject of judicial
proceedings and that it is incumbent upon him to take such steps as he sees fit to protect it. In
speaking of notice of this character a distinguish master of constitutional law has used the following
language:

. . . if the owners are named in the proceedings, and personal notice is provided for, it is
rather from tenderness to their interests, and in order to make sure that the opportunity for a
 hearing shall not be lost to them, than from any necessity that the case shall assume that
form. (Cooley on Taxation [2d. ed.], 527, quoted in Leigh vs. Green, 193 U. S., 79, 80.)

It will be observed that this mode of notification does not involve any absolute assurance that the
absent owner shall thereby receive actual notice. The periodical containing the publication may
never in fact come to his hands, and the chances that he should discover the notice may often be
very slight. Even where notice is sent by mail the probability of his receiving it, though much
increased, is dependent upon the correctness of the address to which it is forwarded as well as upon
the regularity and security of the mail service. It will be noted, furthermore, that the provision of our
law relative to the mailing of notice does not absolutely require the mailing of notice unconditionally
and in every event, but only in the case where the defendant's residence is known. In the light of all
these facts, it is evident that actual notice to the defendant in cases of this kind is not, under the law,
to be considered absolutely necessary.

The idea upon which the law proceeds in recognizing the efficacy of a means of notification which
may fall short of actual notice is apparently this: Property is always assumed to be in the possession
of its owner, in person or by agent; and he may be safely held, under certain conditions, to be
affected with knowledge that proceedings have been instituted for its condemnation and sale.

It is the duty of the owner of real estate, who is a nonresident, to take measures that in some
way he shall be represented when his property is called into requisition, and if he fails to do
this, and fails to get notice by the ordinary publications which have usually been required in
such cases, it is his misfortune, and he must abide the consequences. (6 R. C. L., sec. 445
[p. 450]).

It has been well said by an American court:

If property of a nonresident cannot be reached by legal process upon the constructive notice,
then our statutes were passed in vain, and are mere empty legislative declarations, without
either force, or meaning; for if the person is not within the jurisdiction of the court, no
personal judgment can be rendered, and if the judgment cannot operate upon the property,
then no effective judgment at all can be rendered, so that the result would be that the courts
would be powerless to assist a citizen against a nonresident. Such a result would be a
deplorable one. (Quarl vs. Abbett, 102 Ind., 233; 52 Am. Rep., 662, 667.)

It is, of course universally recognized that the statutory provisions relative to publication or other
form of notice against a nonresident owner should be complied with; and in respect to the publication
of notice in the newspaper it may be stated that strict compliance with the requirements of the law
has been held to be essential. In Guaranty Trust etc. Co. vs. Green Cove etc., Railroad Co. (139 U.
S., 137, 138), it was held that where newspaper publication was made for 19 weeks, when the
statute required 20, the publication was insufficient.

With respect to the provisions of our own statute, relative to the sending of notice by mail, the
requirement is that the judge shall direct that the notice be deposited in the mail by the clerk of the
court, and it is not in terms declared that the notice must be deposited in the mail. We consider this
to be of some significance; and it seems to us that, having due regard to the principles upon which
the giving of such notice is required, the absent owner of the mortgaged property must, so far as the
due process of law is concerned, take the risk incident to the possible failure of the clerk to perform
his duty, somewhat as he takes the risk that the mail clerk or the mail carrier might possibly lose or
destroy the parcel or envelope containing the notice before it should reach its destination and be
delivered to him. This idea seems to be strengthened by the consideration that placing upon the
clerk the duty of sending notice by mail, the performance of that act is put effectually beyond the
control of the plaintiff in the litigation. At any rate it is obvious that so much of section 399 of the
Code of Civil Procedure as relates to the sending of notice by mail was complied with when the court
made the order. The question as to what may be the consequences of the failure of the record to
show the proof of compliance with that requirement will be discussed by us further on.

The observations which have just been made lead to the conclusion that the failure of the clerk to
mail the notice, if in fact he did so fail in his duty, is not such an irregularity, as amounts to a denial of
due process of law; and hence in our opinion that irregularity, if proved, would not avoid the
judgment in this case. Notice was given by publication in a newspaper and this is the only form of
notice which the law unconditionally requires. This in our opinion is all that was absolutely necessary
to sustain the proceedings.

It will be observed that in considering the effect of this irregularity, it makes a difference whether it be
viewed as a question involving jurisdiction or as a question involving due process of law. In the
matter of jurisdiction there can be no distinction between the much and the little. The court either has
jurisdiction or it has not; and if the requirement as to the mailing of notice should be considered as a
step antecedent to the acquiring of jurisdiction, there could be no escape from the conclusion that
the failure to take that step was fatal to the validity of the judgment. In the application of the idea of
due process of law, on the other hand, it is clearly unnecessary to be so rigorous. The jurisdiction
being once established, all that due process of law thereafter requires is an opportunity for the
defendant to be heard; and as publication was duly made in the newspaper, it would seem highly
unreasonable to hold that failure to mail the notice was fatal. We think that in applying the
requirement of due process of law, it is permissible to reflect upon the purposes of the provision
which is supposed to have been violated and the principle underlying the exercise of judicial power
in these proceedings. Judge in the light of these conceptions, we think that the provision of Act of
Congress declaring that no person shall be deprived of his property without due process of law has
not been infringed.

In the progress of this discussion we have stated the two conclusions; (1) that the failure of the clerk
to send the notice to the defendant by mail did not destroy the jurisdiction of the court and (2) that
such irregularity did not infringe the requirement of due process of law. As a consequence of these
conclusions the irregularity in question is in some measure shorn of its potency. It is still necessary,
however, to consider its effect considered as a simple irregularity of procedure; and it would be idle
to pretend that even in this aspect the irregularity is not grave enough. From this point of view,
however, it is obvious that any motion to vacate the judgment on the ground of the irregularity in
question must fail unless it shows that the defendant was prejudiced by that irregularity. The least,
therefore, that can be required of the proponent of such a motion is to show that he had a good
defense against the action to foreclose the mortgage. Nothing of the kind is, however, shown either
in the motion or in the affidavit which accompanies the motion.

An application to open or vacate a judgment because of an irregularity or defect in the proceedings

is usually required to be supported by an affidavit showing the grounds on which the relief is sought,
and in addition to this showing also a meritorious defense to the action. It is held that a general
statement that a party has a good defense to the action is insufficient. The necessary facts must be
averred. Of course if a judgment is void upon its face a showing of the existence of a meritorious
defense is not necessary. (10 R. C. L., 718.)

The lapse of time is also a circumstance deeply affecting this aspect of the case. In this connection
we quote the following passage from the encyclopedic treatise now in course of publication:

Where, however, the judgment is not void on its face, and may therefore be enforced if
permitted to stand on the record, courts in many instances refuse to exercise their quasi
 equitable powers to vacate a judgement after the lapse of the term ay which it was entered,
except in clear cases, to promote the ends of justice, and where it appears that the party
making the application is himself without fault and has acted in good faith and with ordinary
diligence. Laches on the part of the applicant, if unexplained, is deemed sufficient ground for
refusing the relief to which he might otherwise be entitled. Something is due to the finality of
judgments, and acquiescence or unnecessary delay is fatal to motions of this character,
since courts are always reluctant to interfere with judgments, and especially where they have
been executed or satisfied. The moving party has the burden of showing diligence, and
unless it is shown affirmatively the court will not ordinarily exercise its discretion in his favor.
(15 R. C. L., 694, 695.)

It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y Limquingco, died
January 29, 1910. The mortgage under which the property was sold was executed far back in 1906;
and the proceedings in the foreclosure were closed by the order of court confirming the sale dated
August 7, 1908. It passes the rational bounds of human credulity to suppose that a man who had
placed a mortgage upon property worth nearly P300,000 and had then gone away from the scene of
his life activities to end his days in the city of Amoy, China, should have long remained in ignorance
of the fact that the mortgage had been foreclosed and the property sold, even supposing that he had
no knowledge of those proceedings while they were being conducted. It is more in keeping with the
ordinary course of things that he should have acquired information as to what was transpiring in his
affairs at Manila; and upon the basis of this rational assumption we are authorized, in the absence of
proof to the contrary, to presume that he did have, or soon acquired, information as to the sale of his
property.

The Code of Civil Procedure, indeed, expressly declares that there is a presumption that things have
happened according to the ordinary habits of life (sec. 334 [26]); and we cannot conceive of a
situation more appropriate than this for applying the presumption thus defined by the lawgiver. In
support of this presumption, as applied to the present case, it is permissible to consider the
probability that the defendant may have received actual notice of these proceedings from the
unofficial notice addressed to him in Manila which was mailed by an employee of the bank's
attorneys. Adopting almost the exact words used by the Supreme Court of the United States in
Grannis vs. Ordeans (234 U. S., 385; 58 L. ed., 1363), we may say that in view of the well-known
skill of postal officials and employees in making proper delivery of letters defectively addressed, we
think the presumption is clear and strong that this notice reached the defendant, there being no proof
that it was ever returned by the postal officials as undelivered. And if it was delivered in Manila,
instead of being forwarded to Amoy, China, there is a probability that the recipient was a person
sufficiently interested in his affairs to send it or communicate its contents to him.

Of course if the jurisdiction of the court or the sufficiency of the process of law depended upon the
mailing of the notice by the clerk, the reflections in which we are now indulging would be idle and
frivolous; but the considerations mentioned are introduced in order to show the propriety of applying
to this situation the legal presumption to which allusion has been made. Upon that presumption,
supported by the circumstances of this case, ,we do not hesitate to found the conclusion that the
defendant voluntarily abandoned all thought of saving his property from the obligation which he had
placed upon it; that knowledge of the proceedings should be imputed to him; and that he acquiesced
in the consequences of those proceedings after they had been accomplished. Under these
circumstances it is clear that the merit of this motion is, as we have already stated, adversely
affected in a high degree by the delay in asking for relief. Nor is it an adequate reply to say that the
proponent of this motion is an administrator who only qualified a few months before this motion was
made. No disability on the part of the defendant himself existed from the time when the foreclosure
was effected until his death; and we believe that the delay in the appointment of the administrator
and institution of this action is a circumstance which is imputable to the parties in interest whoever
they may have been. Of course if the minor heirs had instituted an action in their own right to recover
the property, it would have been different.

It is, however, argued that the defendant has suffered prejudice by reason of the fact that the bank
became the purchaser of the property at the foreclosure sale for a price greatly below that which had
been agreed upon in the mortgage as the upset price of the property. In this connection, it appears
that in article nine of the mortgage which was the subject of this foreclosure, as amended by the
notarial document of July 19, 1906, the parties to this mortgage made a stipulation to the effect that
the value therein placed upon the mortgaged properties should serve as a basis of sale in case the
debt should remain unpaid and the bank should proceed to a foreclosure. The upset price stated in
that stipulation for all the parcels involved in this foreclosure was P286,000. It is said in behalf of the
appellant that when the bank bought in the property for the sum of P110,200 it violated that
stipulation.

It has been held by this court that a clause in a mortgage providing for a tipo, or upset price, does
not prevent a foreclosure, nor affect the validity of a sale made in the foreclosure proceedings.
(Yangco vs. Cruz Herrera and Wy Piaco, 11 Phil. Rep., 402; Banco-Español Filipino vs. Donaldson,
Sim and Co., 5 Phil. Rep., 418.) In both the cases here cited the property was purchased at the
foreclosure sale, not by the creditor or mortgagee, but by a third party. Whether the same rule
should be applied in a case where the mortgagee himself becomes the purchaser has apparently not
been decided by this court in any reported decision, and this question need not here be considered,
since it is evident that if any liability was incurred by the bank by purchasing for a price below that
fixed in the stipulation, its liability was a personal liability derived from the contract of mortgage; and
as we have already demonstrated such a liability could not be the subject of adjudication in an action
where the court had no jurisdiction over the person of the defendant. If the plaintiff bank became
liable to account for the difference between the upset price and the price at which in bought in the
property, that liability remains unaffected by the disposition which the court made of this case; and
the fact that the bank may have violated such an obligation can in no wise affect the validity of the
judgment entered in the Court of First Instance.

In connection with the entire failure of the motion to show either a meritorious defense to the action
or that the defendant had suffered any prejudice of which the law can take notice, we may be
permitted to add that in our opinion a motion of this kind, which proposes to unsettle judicial
proceedings long ago closed, can not be considered with favor, unless based upon grounds which
appeal to the conscience of the court. Public policy requires that judicial proceedings be upheld. The
maximum here applicable is non quieta movere. As was once said by Judge Brewer, afterwards a
member of the Supreme Court of the United States:

Public policy requires that judicial proceedings be upheld, and that titles obtained in those
proceedings be safe from the ruthless hand of collateral attack. If technical defects are
adjudged potent to destroy such titles, a judicial sale will never realize that value of the
property, for no prudent man will risk his money in bidding for and buying that title which he
has reason to fear may years thereafter be swept away through some occult and not readily
discoverable defect. (Martin vs. Pond, 30 Fed., 15.)

In the case where that language was used an attempt was made to annul certain foreclosure
proceedings on the ground that the affidavit upon which the order of publication was based
erroneously stated that the State of Kansas, when he was in fact residing in another State. It was
held that this mistake did not affect the validity of the proceedings.

In the preceding discussion we have assumed that the clerk failed to send the notice by post as
required by the order of the court. We now proceed to consider whether this is a proper assumption;
and the proposition which we propose to establish is that there is a legal presumption that the clerk
performed his duty as the ministerial officer of the court, which presumption is not overcome by any
other facts appearing in the cause.

In subsection 14 of section 334 of the Code of Civil Procedure it is declared that there is a
presumption "that official duty has been regularly performed;" and in subsection 18 it is declared that
there is a presumption "that the ordinary course of business has been followed." These
presumptions are of course in no sense novelties, as they express ideas which have always been
recognized. Omnia presumuntur rite et solemniter esse acta donec probetur in contrarium. There is
therefore clearly a legal presumption that the clerk performed his duty about mailing this notice; and
we think that strong considerations of policy require that this presumption should be allowed to
operate with full force under the circumstances of this case. A party to an action has no control over
the clerk of the court; and has no right to meddle unduly with the business of the clerk in the
performance of his duties. Having no control over this officer, the litigant must depend upon the court
to see that the duties imposed on the clerk are performed.

Other considerations no less potent contribute to strengthen the conclusion just stated. There is no
principle of law better settled than that after jurisdiction has once been required, every act of a court
of general jurisdiction shall be presumed to have been rightly done. This rule is applied to every
judgment or decree rendered in the various stages of the proceedings from their initiation to their
completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S., 449); and if the record is silent
with respect to any fact which must have been established before the court could have rightly acted,
it will be presumed that such fact was properly brought to its knowledge. (The Lessee of Grignon vs.
Astor, 2 How., 319; 11 L. ed., 283.)

In making the order of sale [of the real state of a decedent] the court are presumed to have
adjudged every question necessary to justify such order or decree, viz: The death of the
owners; that the petitioners were his administrators; that the personal estate was insufficient
to pay the debts of the deceased; that the private acts of Assembly, as to the manner of sale,
were within the constitutional power of the Legislature, and that all the provisions of the law
as to notices which are directory to the administrators have been complied with. . . . The
court is not bound to enter upon the record the evidence on which any fact was decided.
(Florentine vs. Barton, 2 Wall., 210; 17 L. ed., 785.) Especially does all this apply after long
lapse of time.

Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255) contains an instructive
discussion in a case analogous to that which is now before us. It there appeared that in order to
foreclose a mortgage in the State of Kentucky against a nonresident debtor it was necessary that
publication should be made in a newspaper for a specified period of time, also be posted at the front
door of the court house and be published on some Sunday, immediately after divine service, in such
church as the court should direct. In a certain action judgment had been entered against a
nonresident, after publication in pursuance of these provisions. Many years later the validity of the
proceedings was called in question in another action. It was proved from the files of an ancient
periodical that publication had been made in its columns as required by law; but no proof was
offered to show the publication of the order at the church, or the posting of it at the front door of the
court-house. It was insisted by one of the parties that the judgment of the court was void for lack of
jurisdiction. But the Supreme Court of the United States said:

The court which made the decree . . . was a court of general jurisdiction. Therefore every
presumption not inconsistent with the record is to be indulged in favor of its jurisdiction. . . . It
is to be presumed that the court before making its decree took care of to see that its order for
constructive service, on which its right to make the decree depended, had been obeyed.
It is true that in this case the former judgment was the subject of collateral , or indirect attack, while
in the case at bar the motion to vacate the judgment is direct proceeding for relief against it. The
same general presumption, however, is indulged in favor of the judgment of a court of general
jurisdiction, whether it is the subject of direct or indirect attack the only difference being that in case
of indirect attack the judgment is conclusively presumed to be valid unless the record affirmatively
shows it to be void, while in case of direct attack the presumption in favor of its validity may in certain
cases be overcome by proof extrinsic to the record.

The presumption that the clerk performed his duty and that the court made its decree with the
knowledge that the requirements of law had been complied with appear to be amply sufficient to
support the conclusion that the notice was sent by the clerk as required by the order. It is true that
there ought to be found among the papers on file in this cause an affidavit, as required by section
400 of the Code of Civil Procedure, showing that the order was in fact so sent by the clerk; and no
such affidavit appears. The record is therefore silent where it ought to speak. But the very purpose of
the law in recognizing these presumptions is to enable the court to sustain a prior judgment in the
face of such an omission. If we were to hold that the judgment in this case is void because the
proper affidavit is not present in the file of papers which we call the record, the result would be that in
the future every title in the Islands resting upon a judgment like that now before us would depend, for
its continued security, upon the presence of such affidavit among the papers and would be liable at
any moment to be destroyed by the disappearance of that piece of paper. We think that no court,
with a proper regard for the security of judicial proceedings and for the interests which have by law
been confided to the courts, would incline to favor such a conclusion. In our opinion the proper
course in a case of this kind is to hold that the legal presumption that the clerk performed his duty
still maintains notwithstanding the absence from the record of the proper proof of that fact.

In this connection it is important to bear in mind that under the practice prevailing in the Philippine
Islands the word "record" is used in a loose and broad sense, as indicating the collective mass of
papers which contain the history of all the successive steps taken in a case and which are finally
deposited in the archives of the clerk's office as a memorial of the litigation. It is a matter of general
information that no judgment roll, or book of final record, is commonly kept in our courts for the
purpose of recording the pleadings and principal proceedings in actions which have been
terminated; and in particular, no such record is kept in the Court of First Instance of the city of
Manila. There is, indeed, a section of the Code of Civil Procedure which directs that such a book of
final record shall be kept; but this provision has, as a matter of common knowledge, been generally
ignored. The result is that in the present case we do not have the assistance of the recitals of such a
record to enable us to pass upon the validity of this judgment and as already stated the question
must be determined by examining the papers contained in the entire file.

But it is insisted by counsel for this motion that the affidavit of Bernardo Chan y Garcia showing that
upon April 4, 1908, he sent a notification through the mail addressed to the defendant at Manila,
Philippine Islands, should be accepted as affirmative proof that the clerk of the court failed in his duty
and that, instead of himself sending the requisite notice through the mail, he relied upon Bernardo to
send it for him. We do not think that this is by any means a necessary inference. Of course if it had
affirmatively appeared that the clerk himself had attempted to comply with this order and had
directed the notification to Manila when he should have directed it to Amoy, this would be conclusive
that he had failed to comply with the exact terms of the order; but such is not this case. That the
clerk of the attorneys for the plaintiff erroneously sent a notification to the defendant at a mistaken
address affords in our opinion very slight basis for supposing that the clerk may not have sent notice
to the right address.

There is undoubtedly good authority to support the position that when the record states the evidence
or makes an averment with reference to a jurisdictional fact, it will not be presumed that there was
other or different evidence respecting the fact, or that the fact was otherwise than stated. If, to give
an illustration, it appears from the return of the officer that the summons was served at a particular
place or in a particular manner, it will not be presumed that service was also made at another place
or in a different manner; or if it appears that service was made upon a person other than the
defendant, it will not be presumed, in the silence of the record, that it was made upon the defendant
also (Galpin vs. Page, 18 Wall., 350, 366; Settlemier vs. Sullivan, 97 U. S., 444, 449). While we
believe that these propositions are entirely correct as applied to the case where the person making
the return is the officer who is by law required to make the return, we do not think that it is properly
applicable where, as in the present case, the affidavit was made by a person who, so far as the
provisions of law are concerned, was a mere intermeddler.

The last question of importance which we propose to consider is whether a motion in the cause is
admissible as a proceeding to obtain relief in such a case as this. If the motion prevails the judgment
of July 2, 1908, and all subsequent proceedings will be set aside, and the litigation will be renewed,
proceeding again from the date mentioned as if the progress of the action had not been interrupted.
The proponent of the motion does not ask the favor of being permitted to interpose a defense. His
purpose is merely to annul the effective judgment of the court, to the end that the litigation may again
resume its regular course.

There is only one section of the Code of Civil Procedure which expressly recognizes the authority of
a Court of First Instance to set aside a final judgment and permit a renewal of the litigation in the
same cause. This is as follows:

SEC. 113. Upon such terms as may be just the court may relieve a party or legal
representative from the judgment, order, or other proceeding taken against him through his
mistake, inadvertence, surprise, or excusable neglect; Provided, That application thereof be
made within a reasonable time, but in no case exceeding six months after such judgment,
order, or proceeding was taken.

An additional remedy by petition to the Supreme Court is supplied by section 513 of the same Code.
The first paragraph of this section, in so far as pertinent to this discussion, provides as follows:

When a judgment is rendered by a Court of First Instance upon default, and a party thereto is
unjustly deprived of a hearing by fraud, accident, mistake or excusable negligence, and the
Court of First Instance which rendered the judgment has finally adjourned so that no
adequate remedy exists in that court, the party so deprived of a hearing may present his
petition to the Supreme Court within sixty days after he first learns of the rendition of such
judgment, and not thereafter, setting forth the facts and praying to have judgment set aside. .
..

It is evident that the proceeding contemplated in this section is intended to supplement the remedy
provided by section 113; and we believe the conclusion irresistible that there is no other means
recognized by law whereby a defeated party can, by a proceeding in the same cause, procure a
judgment to be set aside, with a view to the renewal of the litigation.

The Code of Civil Procedure purports to be a complete system of practice in civil causes, and it
contains provisions describing with much fullness the various steps to be taken in the conduct of
such proceedings. To this end it defines with precision the method of beginning, conducting, and
concluding the civil action of whatever species; and by section 795 of the same Code it is declared
that the procedure in all civil action shall be in accordance with the provisions of this Code. We are
therefore of the opinion that the remedies prescribed in sections 113 and 513 are exclusive of all
others, so far as relates to the opening and continuation of a litigation which has been once
concluded.
The motion in the present case does not conform to the requirements of either of these provisions;
and the consequence is that in our opinion the action of the Court of First Instance in dismissing the
motion was proper.

If the question were admittedly one relating merely to an irregularity of procedure, we cannot
suppose that this proceeding would have taken the form of a motion in the cause, since it is clear
that, if based on such an error, the came to late for relief in the Court of First Instance. But as we
have already seen, the motion attacks the judgment of the court as void for want of jurisdiction over
the defendant. The idea underlying the motion therefore is that inasmuch as the judgment is a nullity
it can be attacked in any way and at any time. If the judgment were in fact void upon its face, that is,
if it were shown to be a nullity by virtue of its own recitals, there might possibly be something in this.
Where a judgment or judicial order is void in this sense it may be said to be a lawless thing, which
can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its
head.

But the judgment in question is not void in any such sense. It is entirely regular in form, and the
alleged defect is one which is not apparent upon its face. It follows that even if the judgment could
be shown to be void for want of jurisdiction, or for lack of due process of law, the party aggrieved
thereby is bound to resort to some appropriate proceeding to obtain relief. Under accepted principles
of law and practice, long recognized in American courts, a proper remedy in such case, after the
time for appeal or review has passed, is for the aggrieved party to bring an action to enjoin the
judgment, if not already carried into effect; or if the property has already been disposed of he may
institute suit to recover it. In every situation of this character an appropriate remedy is at hand; and if
property has been taken without due process, the law concedes due process to recover it. We
accordingly old that, assuming the judgment to have been void as alleged by the proponent of this
motion, the proper remedy was by an original proceeding and not by motion in the cause. As we
have already seen our Code of Civil Procedure defines the conditions under which relief against a
judgment may be productive of conclusion for this court to recognize such a proceeding as proper
under conditions different from those defined by law. Upon the point of procedure here involved, we
refer to the case of People vs. Harrison (84 Cal., 607) wherein it was held that a motion will not lie to
vacate a judgment after the lapse of the time limited by statute if the judgment is not void on its face;
and in all cases, after the lapse of the time limited by statute if the judgment is not void on its face;
and all cases, after the lapse of such time, when an attempt is made to vacate the judgment by a
proceeding in court for that purpose an action regularly brought is preferable, and should be
required. It will be noted taken verbatim from the California Code (sec. 473).

The conclusions stated in this opinion indicate that the judgment appealed from is without error, and
the same is accordingly affirmed, with costs. So ordered.

G.R. No. 46631 November 16, 1939

IDONAH SLADE PERKINS, petitioner,

vs.
ARSENIO P. DIZON, Judge of First Instance of Manila, EUGENE ARTHUR PERKINS, and
BENGUET CONSOLIDATED MINING COMPANY, respondents.

Alva J. Hill for petitioner.

Ross, Lawrence, Selph & Carrascoso for respondent Judge and Benguet Consolidated Mining
Company.
DeWitt, Perkins & Ponce Enrile for respondent Perkins.
MORAN, J.:

On July 6, 1938, respondent, Eugene Arthur Perkins, instituted an action in the Court of First
Instance of Manila against the Benguet Consolidated Mining Company for dividends amounting to
P71,379.90 on 52,874 shares of stock registered in his name, payment of which was being withheld
by the company; and, for the recognition of his right to the control and disposal of said shares, to the
exclusion of all others. To the complaint, the company filed its answer alleging, by way of defense,
that the withholding of such dividends and the non-recognition of plaintiff's right to the disposal and
control of the shares were due to certain demands made with respect to said shares by the petitioner
herein, Idonah Slade Perkins, and by one George H. Engelhard. The answer prays that the adverse
claimants be made parties to the action and served with notice thereof by publication, and that
thereafter all such parties be required to interplead and settle the rights among themselves. On
September 5, 1938, the trial court ordered respondent Eugene Arthur Perkins to include in his
complaint as parties defendant petitioner, Idonah Slade Perkins, and George H. Engelhard. The
complaint was accordingly amended and in addition to the relief prayed for in the original complaint,
respondent Perkins prayed that petitioner Idonah Slade Perkins and George Engelhard be adjudged
without interest in the shares of stock in question and excluded from any claim they assert thereon.
Thereafter, summons by publication were served upon the non-resident defendants, Idonah Slade
Perkins and George H. Engelhard, pursuant to the order of the trial court. On December 9, 1938,
Engelhard filed his answer to the amended complaint, and on December 10, 1938, petitioner Idonah
Slade Perkins, through counsel, filed her pleading entitled "objection to venue, motion to quash, and
demurrer to jurisdiction" wherein she challenged the jurisdiction of the lower court over her person.
Petitioner's objection, motion and demurrer having been overruled as well as her motion for
reconsideration of the order of denial, she now brought the present petition for certiorari, praying that
the summons by publication issued against her be declared null and void, and that, with respect to
her, respondent Judge be permanently prohibited from taking any action on the case.

The controlling issue here involved is whether or not the Court of First Instance of Manila has
acquired jurisdiction over the person of the present petitioner as a non-resident defendant, or,
notwithstanding the want of such jurisdiction, whether or not said court may validly try the case. The
parties have filed lengthy memorandums relying on numerous authorities, but the principles
governing the question are well settled in this jurisdiction.

Section 398 of our Code of Civil Procedure provides that when a non-resident defendant is sued in
the Philippine courts and it appears, by the complaint or by affidavits, that the action relates to real or
personal property within the Philippines in which said defendant has or claims a lien or interest,
actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding such
person from any interest therein, service of summons maybe made by publication.

We have fully explained the meaning of this provision in El Banco Español Filipino vs. Palanca, 37
Phil., 921, wherein we laid down the following rules:

(1) In order that the court may validly try a case, it must have jurisdiction over the subject-
matter and over the persons of the parties. Jurisdiction over the subject-matter is acquired by
concession of the sovereign authority which organizes a court and determines the nature
and extent of its powers in general and thus fixes its jurisdiction with reference to actions
which it may entertain and the relief it may grant. Jurisdiction over the persons of the parties
is acquired by their voluntary appearance in court and their submission to its authority, or by
the coercive power of legal process exerted over their persons.
 (2) When the defendant is a non-resident and refuses to appear voluntary, the court cannot
acquire jurisdiction over his person even if the summons be served by publication, for he is
beyond the reach of judicial process. No tribunal established by one State can extend its
process beyond its territory so as to subject to its decisions either persons or property
located in another State. "There are many expressions in the American reports from which it
might be inferred that the court acquires personal jurisdiction over the person of the
defendant by publication and notice; but such is not the case. In truth, the proposition that
jurisdiction over the person of a non-resident cannot be acquired by publication and notice
was never clearly understood even in the American courts until after the decision had been
rendered by the Supreme Court of the United States in the leading case of Pennoyer v.
Neff (95 U.S., 714; 24 Law. ed., 565). In the light of that decisions which have subsequently
been rendered in that and other courts, the proposition that jurisdiction over the person
cannot be thus acquired by publication and notice is no longer open to question; and it is
now fully established that a personal judgment upon constructive or substituted service
against a non-resident who does not appear is wholly invalid. This doctrine applies to all
kinds of constructive or substituted process, including service by publication and personal
service outside of the jurisdiction in which the judgment is rendered; and the only exception
seems to be found in the case where the non-resident defendant has expressly or impliedly
consented to the mode of service. (Note to Raher vs. Raher, 35 L. R. A. [N. S.], 292; see
also L.R.A. 585; 35 L.R.A. [N.S.], 312.)

(3) The general rule, therefore, is that a suit against a non-resident cannot be entertained by
a Philippine court. Where, however, the action is in rem or quasi in rem in connection with
property located in the Philippines, the court acquires jurisdiction over the res, and its
jurisdiction over the person of the non-resident is non-essential. In order that the court may
exercise power over the res, it is not necessary that the court should take actual custody of
the property, potential custody thereof being sufficient. There is potential custody when, from
the nature of the action brought, the power of the court over the property is impliedly
recognized by law. "An illustration of what we term potential jurisdiction over the res, is found
in the proceeding to register the title of land under our system for the registration of land.
Here the court, without taking actual physical control over the property , assumes, at the
instance of some person claiming to be owner, to exercise a jurisdiction in rem over the
property and to adjudicate the title in favor of the petitioner against all the world."

(4) As before stated, in an action in rem or quasi in rem against a non-resident defendant,
jurisdiction over his person is non-essential, and if the law requires in such case that the
summons upon the defendant be served by publication, it is merely to satisfy the
constitutional requirement of due process. If any be said, in this connection, that "may
reported cases can be cited in which it is assumed that the question of the sufficiency of
publication or notice in the case of this kind is a question affecting the jurisdiction of the
court, and the court is sometimes said to acquire jurisdiction by virtue of the publication. This
phraseology was undoubtedly originally adopted by the court because of the analogy
between service by publication and personal service of process upon the defendant; and, as
has already been suggested, prior to the decision of Pennoyer v. Neff (supra), the difference
between the legal effects of the two forms of service was obscure. It is accordingly not
surprising that the modes of expression which had already been moulded into legal tradition
before that case was decided have been brought down to the present day. But it is clear that
the legal principle here involved is not affected by the peculiar languages in which the courts
have expounded their ideas." lawphi1.net

The reason for the rule that Philippine courts cannot acquire jurisdiction over the person of a non-
resident, as laid down by the Supreme Court of the United States in Pennoyer v. Neff, supra, may be
found in a recognized principle of public law to the effect that "no State can exercise direct
jurisdiction and authority over persons or property without its territory. Story, Confl. L., ch. 2; Wheat,
Int. L., pt. 2, ch. 2. The several States are of equal dignity and authority, and the independence of
one implies the exclusion of power from all others. And so it is laid down by jurists, as an elementary
principle, that the laws of one State have no operation outside of its territory, except so far as is
allowed by comity; and that no tribunal established by it can extend its process beyond that territory
so as to subject either persons or property to its decisions. "Any exertion of authority of this sort
beyond this limit," says Story, "is a mere nullity, and incapable of binding such persons or property in
any other tribunals." Story, Confl. L., sec. 539." (Pennoyer v. Neff, 95 U.S., 714; 24 Law. ed., 565,
568-569.).

When, however, the action relates to property located in the Philippines, the Philippine courts may
validly try the case, upon the principle that a "State, through its tribunals, may subject property
situated within its limits owned by non-residents to the payment of the demand of its own citizens
against them; and the exercise of this jurisdiction in no respect infringes upon the sovereignty of the
State where the owners are domiciled. Every State owes protection to its citizens; and, when non-
residents deal with them, it is a legitimate and just exercise of authority to hold and appropriate any
property owned by such non-residents to satisfy the claims of its citizens. It is in virtue of the State's
jurisdiction over the property of the non-resident situated within its limits that its tribunals can inquire
into the non-resident's obligations to its own citizens, and the inquiry can then be carried only to the
extent necessary to control the disposition of the property. If the non-resident has no property in the
State, there is nothing upon which the tribunals can adjudicate." (Pennoyer v. Neff, supra.)

In the instant case, there can be no question that the action brought by Eugene Arthur Perkins in his
amended complaint against the petitioner, Idonah Slade Perkins, seeks to exclude her from any
interest in a property located in the Philippines. That property consists in certain shares of stocks of
the Benguet Consolidated Mining Company, a sociedad anonima, organized in the Philippines under
the provisions of the Spanish Code of Commerce, with its principal office in the City of Manila and
which conducts its mining activities therein. The situs of the shares is in the jurisdiction where the
corporation is created, whether the certificated evidencing the ownership of those shares are within
or without that jurisdiction. (Fletcher Cyclopedia Corporations, Permanent ed. Vol. 11, p. 95). Under
these circumstances, we hold that the action thus brought is quasi in rem, for while the judgement
that may be rendered therein is not strictly a judgment in rem, "it fixes and settles the title to the
property in controversy and to that extent partakes of the nature of the judgment in rem." (50 C.J., p
503). As held by the Supreme Court of the United States in Pennoyer v. Neff (supra);

It is true that, in a strict sense, a proceeding in rem is one taken directly against property,
and has for its object the disposition of the property, without reference to the title of individual
claimants; but , in a large and more general sense, the terms are applied to actions between
parties, where the direct object is to reach and dispose of property owned by them, or of
some interest therein.

The action being in quasi in rem, The Court of First Instance of Manila has jurisdiction over the
person of the non-resident. In order to satisfy the constitutional requirement of due process,
summons has been served upon her by publication. There is no question as to the adequacy of
publication made nor as to the mailing of the order of publication to the petitioner's last known place
of residence in the United States. But, of course, the action being quasi in rem and notice having be
made by publication, the relief that may be granted by the Philippine court must be confined to
the res, it having no jurisdiction to render a personal judgment against the non-resident. In the
amended complaint filed by Eugene Arthur Perkins, no money judgment or other relief in
personam is prayed for against the petitioner. The only relief sought therein is that she be declared
to be without any interest in the shares in controversy and that she be excluded from any claim
thereto.
Petitioner contends that the proceeding instituted against her is one of interpleading and is therefore
an action in personam. Section 120 of our Code of Civil Procedure provides that whenever
conflicting claims are or may be made upon a person for or relating to personal property, or the
performance of an obligation or any portion thereof, so that he may be made subject to several
actions by different persons, such person may bring an action against the conflicting claimants,
disclaiming personal interest in the controversy, and the court may order them to interplead with one
another and litigate their several claims among themselves, there upon proceed to determine their
several claims. Here, The Benguet Consolidated Mining Company, in its answer to the complaint
filed by Eugene Arthur Perkins, averred that in connection with the shares of stock in question,
conflicting claims were being made upon it by said plaintiff, Eugene Arthur Perkins, his wife Idonah
Slade Perkins, and one named George H. Engelhard, and prayed that these last two be made
parties to the action and served with summons by publication, so that the three claimants may
litigate their conflicting claims and settle their rights among themselves. The court has not issued an
order compelling the conflicting claimants to interplead with one another and litigate their several
claims among themselves, but instead ordered the plaintiff to amend his complaint including the
other two claimants as parties defendant. The plaintiff did so, praying that the new defendants thus
joined be excluded fro any interest in the shares in question, and it is upon this amended complaint
that the court ordered the service of the summons by publication. It is therefore, clear that the
publication of the summons was ordered not in virtue of an interpleading, but upon the filing of the
amended complaint wherein an action quasi in rem is alleged.

Had not the complaint been amended, including the herein petitioner as an additional defendant, and
had the court, upon the filing of the answer of the Benguet Consolidated Mining Company, issued an
order under section 120 of the Code of Civil Procedure, calling the conflicting claimants into court
and compelling them to interplead with one another, such order could not perhaps have validly been
served by publication or otherwise, upon the non-resident Idonah Slade Perkins, for then the
proceeding would be purely one of interpleading. Such proceeding is a personal action, for it merely
seeks to call conflicting claimants into court so that they may interplead and litigate their several
claims among themselves, and no specific relief is prayed for against them, as the interpleader have
appeared in court, one of them pleads ownership of the personal property located in the Philippines
and seeks to exclude a non-resident claimant from any interest therein, is a question which we do
not decide not. Suffice it to say that here the service of the summons by publication was ordered by
the lower court by virtue of an action quasi in rem against the non-resident defendant.

Respondents contend that, as the petitioner in the lower court has pleaded over the subject-matter,
she has submitted herself to its jurisdiction. We have noticed, however, that these pleas have been
made not as independent grounds for relief, but merely as additional arguments in support of her
contention that the lower court had no jurisdiction over the person. In other words, she claimed that
the lower court had no jurisdiction over her person not only because she is a non-resident, but also
because the court had no jurisdiction over the subject-matter of the action and that the issues therein
involved have already been decided by the New York court and are being relitigated in the California
court. Although this argument is obviously erroneous, as neither jurisdiction over the subject-matter
nor res adjudicata nor lis pendens has anything to do with the question of jurisdiction over her
person, we believe and so hold that the petitioner has not, by such erroneous argument, submitted
herself to the jurisdiction of the court. Voluntary appearance cannot be implied from either a
mistaken or superflous reasoning but from the nature of the relief prayed for.

For all the foregoing, petition is hereby denied, with costs against petitioner.

[G.R. No. L-18176. October 26, 1966.]

LAZARO B. RAYRAY, Plaintiff-Appellant, v. CHAE KYUNG LEE, Defendant-

 Appellee.

Lazaro B. Rayray for Plaintiff-Appellee.

Solicitor General, for Defendant-Appellant.

SYLLABUS

1. JURISDICTION; ANNULMENT OF MARRIAGE. — An action for annulment of marriage

is within the jurisdiction of our courts of first instance, and, in Manila, of its Court of
Juvenile and Domestic Relations. The latter court, in the case at bar, acquired
jurisdiction over plaintiff by his submission thereto in consequence of the filing of the
complaint. Defendant whose whereabouts is unknown, was placed under the jurisdiction
of said court, upon summons by publication.

2. ID.; ID.; NATURE OF ACTION; JURISDICTION, HOW ACQUIRED. — Annulment of

marriage is an action in rem, for it concerns the status of the Parties, and status affects
or binds the whole world. The res is the relation between said parties, or their marriage
tie. Jurisdiction over the same depends upon the nationality or domicile of the parties,
not the place of celebration of marriage, or the locus celebrationis.

3. ID.; ID.; ID.; WHEN COURT HAS JURISDICTION OVER THE RES. — Marriage is one
of the cases of double status, in that the status therein involves and affects two
persons. One is married, never in abstract or in a vacuum, but, always to somebody
else. Hence, a judicial decree on the marriage status of a person necessarily reflects
upon the status of another and the relation between them. The prevailing rule is,
accordingly, that a court had jurisdiction over the res, in an action for annulment of
marriage, provided, at least, one of the parties is domiciled in, or a national of, the
forum. Since plaintiff is a Filipino, domiciled in the Philippines, it follows that the lower
court had jurisdiction over the res, in addition to its jurisdiction over the subject-matter
and the parties. Hence, it could validly inquire into the legality of the marriage between
the parties.

4. FOREIGN MARRIAGES; ANNULMENT ON THE GROUND OF PREVIOUS MARRIAGE;

CASE AT BAR. — Plaintiff seeks the annulment of his marriage to defendant. He
testified that they were married in Pusan, Korea, on March 15, 1953; that before the
wedding, she obtained the "police clearance" Exhibit A, written in Korean language,
which was necessary in order that the could contract marriage; that according to the
translation into English (Exhibit B) of said Exhibit A, defendant was already married on
February 16, 1953; that when he confronted the defendant with the contents of this
document, her reply was that it is not unusual for a Korean girl to marry twice in Korea;
that when he inquired about her status on March 15, 1953, defendant confided to him
that she had lived (before) with about two (2) Americans and a Korean, adding,
however, that there was no impediment to her contracting marriage with him; and that,
later on, they were separated and her whereabouts are now unknown to him. Held
Plaintiff’s evidence is insufficient to establish that defendant war married to another
person prior to March 15, 1953. To begin with, Exhibit A is not signed. It merely
purports to bear the seal of the Chief of Pusan National Police. Secondly, the latter had
no personal knowledge of the truth of the entry therein concerning defendant’s status
on February 15, 1953. Defendant was a native not of Pusan, but of Seoul, Korea.
Hence, Exhibit A could, at best, be no more than hearsay evidence. Again, when
plaintiff allegedly confronted the defendant with the contents of Exhibit B, defendant did
not say that she had been married before. Plaintiff declared that she admitted having
previously lived with several other men, adding, however, that she had no impediment,
thus, in effect, negating the alleged previous marriage. Thirdly, Exhibit A was obtained
in order to establish defendant’s qualification to contract marriage, and yet the wedding
took place, despite the entry in said document to the effect that defendant was married
already. There is no competent evidence to the effect that Korean laws permit bigamy
or polygamy. The presumption is that the foreign law is identical to the lex fori, or, in
the case at bar, the Philippine law.

DECISION

CONCEPCION, C.J.:

Appeal from a decision of the Court of Juvenile and Domestic Relations.

Plaintiff Lazaro Rayray seeks the annulment of his marriage to defendant Chae Kyung
Lee. Inasmuch as, the latter’s whereabouts is unknown, and she was formerly a
resident of Pusan, Korea, summons was served by publication, as provided in the Rules
of Court. Thereafter, plaintiff moved that defendant be declared in default, she not
having filed an answer, and that a date be set for the reception of his evidence. Before
acting on this motion, the lower court referred the case to the City Fiscal of Manila,
pursuant to Articles 88 and 101 of the Civil Code of the Philippines, for the purpose of
determining whether or not a collusion between the parties exists. Said officer having
found no such collusion, the case was heard on the merits. In due course, thereafter,
decision was rendered dismissing plaintiff’s complaint, without costs, upon the ground:
(1) that the court could not nullify a marriage contracted abroad; and (2) that the facts
proven do not warrant the relief prayed for. A reconsideration of this decision having
been denied, plaintiff appealed to the Court of Appeals, which certified the case to the
Supreme Court, the jurisdiction of the lower court being in issue in the appeal.

In relation thereto, the court a quo found that it had no jurisdiction to pass upon the
validity of plaintiff’s marriage to the defendant, it having been solemnized in Seoul,
Korea. Said conclusion is erroneous. In order that a given case could be validly decided
by a court of justice, it must have jurisdiction over: (1) the subject matter of the
litigation; (2) the person of the parties therein; and (3) in actions in rem or quasi-in-
rem, the res. 1

The subject-matter of the present case is the annulment of plaintiff’s marriage to the
defendant, which is within the jurisdiction of our courts of first instance, 2 and, in
Manila, of its Court of Juvenile and Domestic Relations. 3

The same acquired jurisdiction over plaintiff herein by his submission thereto in
consequence of the filing of the complaint herein. 4 Defendant was placed under the
jurisdiction of said court, upon the service of summons by publication. 5

This is an action in rem, for it concerns the status of the parties herein, and status
affects or binds the whole world. The res in the present case is the relation between
said parties, or their marriage tie. 6 Jurisdiction over the same depends upon the
nationality or domicile of the parties, not the place of celebration of marriage, or the
locus celebrationis. 7 Plaintiff herein is a citizen of the Philippines, domiciled therein. His
status is, therefore, subject to our jurisdiction, on both counts. True that defendant was
and — under plaintiff’s theory — still is a non-resident alien. But, this fact does not
deprive the lower court of its jurisdiction to pass upon the validity of her marriage to
plaintiff herein.

Indeed, marriage is one of the cases of double status, in that the status therein
involves and affects two persons. One is married, never in abstract or in a vacuum, but,
always to somebody else. Hence, a judicial decree on the marriage status of a person
necessarily reflects upon the status of another and the relation between them. The
prevailing rule is, accordingly, that a court has jurisdiction over the res, in an action for
annulment of marriage, provided, at least, one of the parties is domiciled in, or a
national of, the forum. 8 Since plaintiff is a Filipino, domiciled in the Philippines, it
follows that the lower court had jurisdiction over the res, in addition to its jurisdiction
over the subject-matter and the parties. In other words, it could validly inquire into the
legality of the marriage between the parties herein.

As regards the substantial, validity of said marriage, plaintiff testified that he met the
defendant in Pusan, Korea, sometime in 1952, where she was operating a night club,
that they lived together from November 1952 to April 1955; that they were married in
Pusan, Korea, a March 15, 1953, as attested to by their marriage certificate Exhibit D;
that before the wedding she obtained the "police clearance" Exhibit A, written in Korean
language, and dated February 16, 1953, which was necessary in order that she could
contract marriage; that on June 30, 1953, he proceeded to India and left the
defendant, then in advanced stage of pregnancy, in Korea; that in October, 1953, he
joined him in India, bringing with her said Exhibit A, and its translation into English,
Exhibit B; that he then noticed that, on February 16, 1953, defendant was already
married, according to said Exhibit B; that as he confronted the defendant with the
contents of this document, her reply was that it is not unusual for a Korean girl to
marry twice in Korea; that when he inquired about her status on March 15, 1953
defendant confided to him that she had lived with about two (2) Americans and a
Korean, adding, however, that there was no impediment to her contracting marriage
with him; and that, later on, they were separated and her whereabouts are now
unknown to him.

The lower court considered plaintiff’s evidence insufficient to establish that defendant
was married to another person prior to March 15, 1953, and we agree with this
conclusion. To begin with, Exhibit A is not signed. It merely purports to bear the seal of
the Chief of Pusan National Police. Secondly, the record does not show who prepared it,
much less that he had personal knowledge of the truth of the entry therein concerning
defendant’s status on February 15, 1953. It should be noted, that defendant was a
native, not of Pusan, but of Seoul, Korea. Hence, Exhibit A could, at best, be no more
than hearsay evidence. Again, when plaintiff allegedly confronted the defendant with
the contents of Exhibit B, defendant did not say that she had been married before.
Plaintiff declared that she admitted having previously lived with several other men,
adding, however, that she had no impediment, thus, in effect, negating the alleged
previous marriage.

Thirdly, if Exhibit A was obtained on February 16, 1953, in order to establish

defendant’s qualification to contract marriage, why is it that the wedding took place,
despite the entry in said document to the effect that defendant was married already?
There is no competent evidence to the effect that Korean laws permit bigamy or
polygamy. Moreover, the presumption is that the foreign law is identical to the lex fori,
or, in the case at bar, the Philippine Law. 9 In fact, the statement, imputed by plaintiff
to the defendant, to the effect that, although she had cohabited before with other men,
there was no impediment to her marrying him, clearly suggests that a previous
marriage on her part, would have been, in her opinion, a legal obstacle to her marriage
with the plaintiff. Then too, the marriage certificate Exhibit D contains spaces for the
entry of data on whether any of the contracting parties had been previously married;
whether the prior marriage had been dissolved by a decree of divorce; and, if there had
been such decree, the date thereof. Sure}y, these data would be absolutely irrelevant if
polygamy were sanctioned in Korea. And, again, why is it that Exhibit D states that
defendant had no previous marriage?

Last, but not least, plaintiff cannot possibly secure the relief prayed for unless full faith
and credence are given to his testimony, but we cannot believe him for the records
show that he would not hesitate to lie when it suits his purpose. Thus, for instance,
when plaintiff contracted marriage with the defendant, he said that he was single,
although, he admitted, this was a lie, because, sometime in 1940, he married in
Baguio, one Adelaida Melecio or Valdez. 10 But, then he would, also, have us believe
that his marriage with the latter was illegal or fictitious, because Adelaida and he did no
more than sign, on a small window in the City Hall of Baguio, certain documents the
contents of which he did not read.

WHEREFORE, the decision appealed from should be, as it is hereby, affirmed, with the
costs of this instance against; plaintiff-appellant. It is so ordered.

4. Act of State Doctrine and Jurisdiction Over the Subject Matter

United States Court of Appeals,District of Columbia

Circuit.
Hassan EL–FADL, Appellant v. CENTRAL BANK OF JORDAN, et al.,
Appellees.

No. 94–7212.

Decided: February 06, 1996

Before:  GINSBURG, ROGERS and TATEL, Circuit Judges. Sam W. Burgan, Washington, DC,
argued the cause for appellant, with whom Frederick R. McDermott, Oxon Hill, MD, was on the
briefs. Christopher M. Curran, argued the cause for appellees Central Bank of Jordan, et al.,
with whom George L. Paul, Washington, DC, was on the brief. John R. Fornaciari, argued the
cause for appellee Petra International Banking Corporation, with whom John J. Vecchione,
Washington, DC, was on the brief.

Hassan El–Fadl filed suit in the Superior Court of the District of Columbia seeking to
recover damages against Petra International Banking Corporation (―PIBC‖) for wrongful
termination of employment as well as for various tort claims against several Jordanian
institutions and officials:  the Central Bank of Jordan, its Governor and Deputy
Governor, and Petra Bank (together, the ―Jordanian defendants‖).1 The Central Bank
of Jordan removed the case to federal district court pursuant to the Federal Sovereign
Immunities Act (―FSIA‖), 28 U.S.C. § 1441(d) (1994). Following the removal, the
Jordanian defendants filed a motion to dismiss, and PIBC also filed a motion to dismiss
and, in the alternative, for summary judgment. The district court dismissed the
complaint as to all defendants. First, the court ruled that the Central Bank, Governor
Mohammed Saeed El–Nabulsi, and Deputy Governor Michel Marto (together, the
―sovereign defendants‖) were immune from suit under the FSIA. Second, the court
granted Petra Bank's motion to dismiss for lack of personal jurisdiction under the District
of Columbia ―doing business‖ and long-arm statutes found in D.C.Code §§ 13–334, 13–
422, and 13–423. Third, the court granted PIBC's motion to dismiss on forum non
conveniens grounds, although the court had personal jurisdiction, because El–Fadl had
an available forum in the Jordanian courts. The court denied El–Fadl's motion for
reconsideration.

On appeal, El–Fadl contends principally that the district court erred in finding that he
had an adequate alternative forum available to sue PIBC in Jordan and that the court
erred in dismissing, prior to discovery, his claims against Petra Bank for lack of personal
jurisdiction in the District of Columbia. He also contends that the district court erred in
dismissing his claims against Deputy Governor Marto. Although we find no merit to
El–Fadl's claim that the court has jurisdiction over Deputy Governor Marto, we reverse
the pre-discovery dismissal as to Petra Bank for lack of personal jurisdiction and
remand to allow El–Fadl to have discovery of jurisdictional facts. We also reverse and
remand the forum non conveniens dismissal of the claims against Petra Bank and PIBC
because the defendants failed to show that El–Fadl's claims can be filed in the
Jordanian courts.

I.

El–Fadl is a Lebanese national who has lived in Jordan since 1982. In his complaint,
he alleges that he was employed by PIBC, a subsidiary in the District of Columbia of
Petra Bank, a privately owned bank in Jordan. From 1982 to 1989 he was employed
by PIBC in Jordan as manager of a regional office for Middle Eastern clients. He had
signed a contract under which he ―would be permanently employed for life as a senior
manager of Petra International Banking Corporation.‖ The defendants maintain that
El–Fadl was employed by Petra Bank (not PIBC) as a senior manager with
responsibility for currency and precious metals trading.
In August 1989, the Central Bank of Jordan announced that it had uncovered
widespread financial improprieties at Petra Bank and placed Petra Bank in receivership.
Since then, Petra Bank has been run by a Liquidation Committee appointed by the
Jordanian government. The Deputy Governor of the Central Bank, Michel Marto, was
appointed to administer the liquidation of PIBC, and Marto came to the District of
Columbia for that purpose. On September 14, 1989, Marto sent El–Fadl a letter in
which PIBC terminated El–Fadl's employment as senior manager of the PIBC office in
Amman. As part of the Jordanian authorities' investigation of the Petra Bank scandal,
El–Fadl was arrested on October 29, 1989. El–Fadl alleges that the military police
detained him for five days and tortured him, until he was released on bail. El–Fadl was
prosecuted first in the Military Courts under Martial Law and then in the State Security
Court, where he was ―declared innocent‖ on April 9, 1992, which finding was affirmed by
the Prime Minister on August 2, 1992. While the charges were pending, El–Fadl
alleges that he was forbidden to leave Jordan. On July 30, 1993, El–Fadl filed suit in
the District of Columbia.

II.

Sovereign immunity. The district court dismissed the claims against the Central Bank,
Governor Nabulsi and Deputy Governor Marto under the FSIA. The court found that
the Central Bank was a ―foreign state‖ under the FSIA, 28 U.S.C. § 1603(a), and had
not waived its sovereign immunity. The court ruled that Nabulsi and Marto were also
immune because they were being sued in their official capacities as agents of the
Central Bank. The court rejected El–Fadl's arguments that his claims fell under the
―non-commercial tort‖ exception or the ―commercial activity‖ exception to the FSIA. 28
U.S.C. §§ 1604, 1605(a)(2), (5).

On appeal, El–Fadl has abandoned his claims against the Central Bank and Nabulsi but
seeks to maintain his claims against Marto on the ground that Marto was acting not in
his official capacity but in an individual capacity as Chairman and General Manager of
PIBC. Because El–Fadl failed to present any evidence that Marto was acting outside
his official capacity, the district court found that Marto had no ―personal interests at
stake in connection with Petra [Bank] or PIBC.‖ We affirm.

An individual can qualify as an ―agency or instrumentality of a foreign state.‖ 28

U.S.C. § 1603(b) (1994); 2  see Chuidian v. Philippine Nat'l Bank, 912 F.2d 1095, 1101–
03 (9th Cir.1990). Although El–Fadl claims to be suing Marto in an individual capacity,
the only evidence in the record shows that Marto's activities in managing PIBC were
neither personal nor private, but were undertaken only on behalf of the Central Bank.
Thus, Marto's affidavit states that in connection with the liquidation of PIBC, after being
elected Chairman of PIBC and serving as its General Manager, he continued to be
employed only at the Central Bank and that his ―responsibilities with respect to PIBC
were only a very minor part of [his] responsibilities as a Deputy Governor of the Central
Bank.‖ El–Fadl points to nothing more than the fact that Marto was Chairman and
General Manager of PIBC and sent the letter of termination while he was in the District
of Columbia. We therefore affirm the dismissal of the claims against Marto on grounds
of sovereign immunity.3 El–Fadl is not entitled to discovery against Marto because, in
light of the evidence that Marto proffered to the district court and the absence of any
showing by El–Fadl that Marto was not acting in his official capacity, discovery would
― ‗frustrate the significance and benefit of entitlement to immunity from suit.‘ ‖
Foremost–McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 449 (D.C.Cir.1990)
(quoting Gould, Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 451 (6th Cir.1988)).

III.

Personal jurisdiction. The district court granted Petra Bank's motion to dismiss for lack
of personal jurisdiction under D.C.Code §§ 13–422, 13–334 or 13–423(a). First, the
district court agreed that it lacked general jurisdiction over Petra Bank under D.C.Code
§ 13–422 because Petra Bank was not a ―person domiciled in, organized under the
laws of, or maintaining his or its principal place of business in, the District of
Columbia.‖ 4 D.C.Code Ann. § 13–422 (1995). Second, the court agreed with Petra
Bank that it was not subject to general jurisdiction for ―doing business‖ in the District of
Columbia under D.C.Code § 13–334.5 Neither Petra Bank's maintenance of
correspondent banking relationships nor its ownership of more than 70% of the shares
in PIBC sufficed for ―doing business.‖ Third, the court agreed that it lacked specific
jurisdiction over Petra Bank under the District of Columbia long-arm statute because
none of El–Fadl's claims ―arose from‖ Petra Bank's alleged contacts with the District.
D.C.Code Ann. § 13–423(a) (1995). Although El–Fadl had moved to stay dismissal
for lack of personal jurisdiction until he had conducted discovery of jurisdictional facts,
the district court denied his motion as moot.

A.

Raising Issue on Appeal. In his brief on appeal, El–Fadl contends that the district
court had personal jurisdiction over Petra Bank. He alleges, citing the long-arm
statute, that various general business contacts of Petra Bank with the District of
Columbia constitute ―transacting any business in the District of Columbia.‖ D.C.Code
Ann. § 13–423(a)(1). In addition, he alleges that, by entering into collateral loan
agreements in the District, Petra Bank is ―contracting to supply services in the District of
Columbia.‖ Id. § 13–423(a)(2). El–Fadl also alleges that Petra Bank caused him
tortious injury in the District of Columbia because he was employed in the District when
Petra Bank allegedly tortiously interfered with his employment contract and defamed
him. Id. § 14–423(a)(3), (4).

El–Fadl's brief does not distinguish between ―transacting business‖ under the long-arm
statute and ―doing business‖ for purposes of general jurisdiction. See Crane v. Carr,
814 F.2d 758, 763 (D.C.Cir.1987). His reliance on the long-arm statute is misplaced
because he has failed to show any connection between the alleged jurisdictional acts
and the District of Columbia. Because El–Fadl's claims are not related to any of Petra
Bank's general business contacts with the District of Columbia, they cannot confer
specific jurisdiction under the long-arm statute. See Helicopteros Nacionales de
Colombia, S.A. v. Hall, 466 U.S. 408, 414 n. 8, 104 S.Ct. 1868, 1872 n. 8, 80 L.Ed.2d
404 (1984) (Helicol). As to El–Fadl's claims of tortious injury under subsections (a)(3)
and (4), it appears unlikely that one living and working in Jordan would be injured in the
District of Columbia merely because his employer's principal place of business was
located here. In any event, El–Fadl has made no showing that such conduct by Petra
Bank was ―purposefully directed‖ at the District of Columbia. See Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174, 2184, 85 L.Ed.2d 528 (1985). Thus,
we affirm the district court's holding that it lacked personal jurisdiction under § 13–
423(a).6

On the other hand, El–Fadl's brief repeats the language of what the courts have
construed to be the District of Columbia's general jurisdiction statute, D.C.Code § 13–
334(a), in arguing, as he did in the district court, that ―Petra Bank has been doing
business in the District of Columbia.‖ Appellant's Brief at 17–20. In support of his
contention, he recites a long list of general contacts between Petra Bank and the District
of Columbia, see infra Part III(B), and maintains that Petra Bank ―had systematically
been involved in commercial banking activities in the District of Columbia,‖ ―continuously
and systematically conducted business in the District of Columbia,‖ and had a
―continuous presence and continuing involvement in business activities in the District of
Columbia.‖ Id. at 18–20. This is the language of general jurisdiction, directly
responsive to Petra Bank's motion to dismiss for lack of jurisdiction under § 13–334.
The district court's opinion makes clear that it so understood El–Fadl's arguments,
explaining:

Doing business has been interpreted by the District of Columbia Court of Appeals as
requiring a ―continuing corporate presence‖, and conducting ―substantial business‖ in
the District. The defendants argue that [El–Fadl's] conclusory statements alleging that
the defendants are doing business in the District within the meaning of § 13–334 are
not sufficient to constitute the prima facie showing necessary to carry the burden of
establishing personal jurisdiction. The Court is inclined to agree. [El–Fadl] has failed
to present any evidence to support his position that the court could exercise jurisdiction
over the Jordanian defendant pursuant to D.C.Code § 13–334. To the contrary, the
defendants seem to establish that their presence in the District of Columbia is very
limited, and, in the case of Petra Bank, the presence of PIBC in the District is insufficient
to create personal jurisdiction over Petra Bank. (emphasis added)7

Federal Rule of Appellate Procedure 28(a)(6) requires the appellant's brief to include an
argument, which ―must contain the contentions of the appellant on the issues presented,
and the reasons therefor, with citations to the authorities, statutes, and parts of the
record relied on.‖ In explaining the application of Rule 28(a)(6), this court has stated:

The premise of our adversarial system is that appellate courts do not sit as self-directed
boards of legal inquiry and research, but essentially as arbiters of legal questions
presented and argued by the parties before them․ Failure to enforce [Rule 28(a)(6) ]
will ultimately deprive us in substantial measure of that assistance of counsel which the
system assumes—a deficiency that we can perhaps supply by other means, but not
without altering the character of our institution. Of course not all legal arguments
bearing upon the issue in question will always be identified by counsel, and we are not
precluded from supplementing the contentions of counsel through our own deliberation
and research. But where counsel has made no attempt to address the issue, we will
not remedy the defect․

Carducci v. Regan, 714 F.2d 171, 177 (D.C.Cir.1983) (Scalia, J.). Thus, when an
appellant ―contented itself with conclusory assertions,‖ the ―[a]ppellees did not address
the merits of the claim at all,‖ and ―the issue was not passed upon below,‖ this court
―normally will not address claims raised in such a cursory fashion.‖ Texas Rural Legal
Aid, Inc. v. Legal Servs. Corp., 940 F.2d 685, 697–98 (D.C.Cir.1991);  see also Rollins
Envtl. Servs. (NJ) Inc. v. EPA, 937 F.2d 649, 652 n. 2 (D.C.Cir.1991). Nor will the
court address issues that are not at all mentioned in the appellant's brief, by contrast
with ―a situation in which an appellant incorporates by reference or otherwise ‗implicitly‘
raises a generic legal claim.‖ McBride v. Merrell Dow & Pharmaceuticals, Inc., 800
F.2d 1208, 1211 (D.C.Cir.1986).

By contrast with the barren claims in Texas Rural Legal Aid, El–Fadl presented in his
brief detailed factual assertions in opposition to Petra Bank's assertions, adopted by the
district court, that it was not ―doing business‖ in the District of Columbia within the
meaning of § 13–334. The Jordanian defendants recognized that El–Fadl was again
contesting their claim of lack of jurisdiction under § 13–334 and have devoted nine
pages of the eleven page-section in their brief on personal jurisdiction to a
comprehensive analysis of § 13–334. Jordanian Appellees' Brief at 25–33. As
noted, the district court expressly ruled on the § 13–334 arguments by the parties.
Nothing in our local version of Rule 28 would require more. D.C.Cir.R. 28(a).

Consequently, neither the opposing party, the district court, nor this court has been
misled by the fact that El–Fadl did not expressly cite D.C.Code § 13–334(a) itself in his
brief. The ―doing business‖ arguments in El–Fadl's brief, in response to the district
court's agreement with Petra Bank's § 13–334(a) arguments, are presented in the
language of general jurisdiction, notwithstanding the misguided attempts by El–Fadl's
counsel to link these contacts to the long-arm statute.8 El–Fadl did not distinguish
between specific and general jurisdiction in opposing Petra Bank's motion to dismiss for
lack of personal jurisdiction in the district court, and by making the same arguments in
his brief on appeal, it is clear that he has not waived his § 13–334(a) arguments.
Moreover, his failure to cite § 13–334(a) in haec verba becomes more understandable
in light of ―the confusion that sometimes attends the analysis of personal jurisdiction
issues,‖ Crane, 814 F.2d at 763, and the misleading organization of the District of
Columbia Code. Chapter 4 of title 13 of the District of Columbia Code addresses
jurisdiction while chapter 3 of title 13 addresses service of process. Yet, as the district
court here recognized, the District of Columbia courts have construed § 13–334(a) to
be a jurisdictional statute. See supra note 7. Indeed, other district courts in this
circuit have acknowledged that § 13–334(a) on its face appears to apply only to service
of process. See Ross v. Product Dev. Corp., 736 F.Supp. 285, 289 n. 7 (D.D.C.1989);
 Bayles v. K–Mart Corp., 636 F.Supp. 852, 855 (D.D.C.1986).
The court, in any event, has unquestioned authority to reach the issue of general
jurisdiction, even if El–Fadl had waived any reliance on § 13–334(a). ―When an issue
or claim is properly before the court, the court is not limited to the particular legal
theories advanced by the parties, but rather retains the independent power to identify
and apply the proper construction of governing law.‖ Kamen v. Kemper Fin. Servs.,
Inc., 500 U.S. 90, 99, 111 S.Ct. 1711, 1718, 114 L.Ed.2d 152 (1991). The Supreme
Court has upheld a decision by this court to reach ―an issue ‗antecedent to ․ and
ultimately dispositive of‘ the dispute before it, even an issue the parties fail to identify
and brief.‖ United States Nat'l Bank v. Independent Ins. Agents, 508 U.S. 439, 447,
113 S.Ct. 2173, 2178, 124 L.Ed.2d 402 (1993) (quoting Arcadia v. Ohio Power Co., 498
U.S. 73, 77, 111 S.Ct. 415, 418, 112 L.Ed.2d 374 (1990)) (ellipsis in U.S. Nat'l Bank ).
In the instant case, resolution of the § 13–334(a) basis for personal jurisdiction is
potentially dispositive of Petra Bank's motion to dismiss for lack of personal jurisdiction.
Moreover, prudential concerns should not lead us to construe El–Fadl's brief as waiving
reliance on § 13–334(a). Recognizing that ―the hard analysis comes in determining
when an issue or claim is properly before the court,‖ Independent Ins. Agents v. Clarke,
955 F.2d 731, 742 (D.C.Cir.1992) (Silberman, J., dissenting), rev'd sub nom. United
States Nat'l Bank v. Independent Ins. Agents, 508 U.S. 439, 113 S.Ct. 2173, 124
L.Ed.2d 402 (1993), we find that El–Fadl's brief presents both possible bases, general
and specific, for personal jurisdiction over Petra Bank. Indeed, El–Fadl asserts, in his
statement of issues presented, that ―[t]he District Court erred ․ in dismissing claims
against a foreign defendant for lack of personal jurisdiction, prior to discovery or a
hearing.‖

Declining to reach the issue of general jurisdiction would not further the prudential
concerns underlying Federal Rule of Appellate Procedure 28 as articulated in Carducci
v. Regan. This court has the benefit of briefing by both parties as well as the ruling of
the district court. Cf. United States v. Dunkel, 927 F.2d 955, 956 (7th Cir.1991) (―A
skeletal ‗argument‘, really nothing more than an assertion, does not preserve a claim.‖).
The jurisdictional issue is fully presented to us, with the assistance that counsel can
provide. Efficiency in appellate adjudication is not served by letting stand a potentially
erroneous decision because counsel for the appellant has failed to cite the title and
section number of a statute that both parties address and the district court discussed in
its decision on personal jurisdiction. Cf. Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 60
n. 2 (4th Cir.1993). The lack of any prejudice to the appellee or to the institutional
structure of the court from this apparently inadvertent omission strengthens the general
proposition that the court should ―liberally construe briefs in determining issues
presented for review.‖ SEC v. Recile, 10 F.3d 1093, 1096 (5th Cir.1993) (per curiam);
 accord Federal Sav. & Loan Ins. Corp. v. Haralson, 813 F.2d 370, 373 n. 3 (11th
Cir.1987). Any other result would be unduly harsh because the issue involves
jurisdiction, thereby jeopardizing a party's right to have the merits of his claims heard
before any discovery has taken place. Cf. Sikora v. Brenner, 379 F.2d 134, 136
(D.C.Cir.1967);   Rohler v. TRW, Inc., 576 F.2d 1260, 1264 (7th Cir.1978).

B.
 Discovery of facts for general jurisdiction. As part of his contention that the district
court had general jurisdiction over Petra Bank, El–Fadl requests discovery from Petra
Bank of jurisdictional facts. In opposing the Jordanian defendants' motion to dismiss
for lack of personal jurisdiction, El–Fadl requested the district court to stay ruling on the
motion until he had conducted ―limited discovery‖ on ―[t]he extent of Petra Bank's
business activities in the District of Columbia.‖ In his brief on appeal, El–Fadl
maintains that ―[q]uestions put to Petra Bank on discovery regarding its business
activities in the District of Columbia went unanswered․ At the very least, El–Fadl is
entitled to discovery on this matter before it is decided. Crane v. Carr, 814 F.2d 758
(D.C.Cir.1987).‖

On the present record, El–Fadl has not made a prima facie case that Petra Bank was
―doing business‖ in the District of Columbia. See D.C.Code Ann. § 13–334(a);
 Edmond v. United States Postal Serv. Gen. Counsel, 949 F.2d 415, 424 (D.C.Cir.1991).
For general jurisdiction, the Due Process Clause requires that the defendant have
―continuous and systematic general business contacts‖ with the forum. Helicol, 466
U.S. at 416, 104 S.Ct. at 1873;  see also Perkins v. Benguet Consol. Mining Co., 342
U.S. 437, 438, 72 S.Ct. 413, 414, 96 L.Ed. 485 (1952). El–Fadl asserts the following
facts about Petra Bank's contacts with the District of Columbia:  (1) Petra Bank issued a
commercial loan of over $500,000 in 1989;  (2) in litigation concerning that loan in the
D.C. Superior Court, Petra Bank filed a counter-claim;  (3) Petra Bank has entered into
several ―collateral agreements covering loans in the District of Columbia,‖ using a form
contract that selects as the governing law the laws of the District of Columbia;  (4) Petra
Bank owns 70% of PIBC, its District of Columbia subsidiary, with which Petra Bank
maintains bank accounts in the District of Columbia;  (5) El–Fadl sent millions of dollars
by wire transfers through Petra Bank from PIBC offices in Jordan to PIBC's main office
in the District of Columbia;  and (6) in a deposition for another case, PIBC's general
manager, Randolph Old, stated that Petra Bank had ―joint loans‖ with PIBC and that
PIBC acted as Petra Bank's ―collection agent‖ in the District of Columbia. The
allegations concerning the loan, the consequent litigation, and the collateral agreements
are mere isolated and sporadic contacts unrelated to the claims in the instant case. By
contrast, § 13–334(a) requires a ―continuing corporate presence in the forum ․ directed
at advancing the corporation's objectives.‖ AMAF Int'l Corp., 428 A.2d at 851;  see also
Helicol, 466 U.S. at 416–17, 104 S.Ct. at 1873. El–Fadl's allegations concerning the
relationship between PIBC and Petra Bank attempt to attribute the subsidiary's contacts
with the District of Columbia to the parent corporation.9 Although a parent-subsidiary
relationship alone is insufficient, Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S.
333, 336–37, 45 S.Ct. 250, 251, 69 L.Ed. 634 (1925), if parent and subsidiary ―are not
really separate entities,‖ I.A.M. Nat'l Pension Fund v. Wakefield Indus., Inc., 699 F.2d
1254, 1259 (D.C.Cir.1983), or one acts as an agent of the other, Wells Fargo & Co. v.
Wells Fargo Express Co., 556 F.2d 406, 419 (9th Cir.1977), the local subsidiary's
contacts can be imputed to the foreign parent. Yet El–Fadl has shown only that Petra
Bank owns the majority of shares in PIBC and that the two corporations have worked
together on certain transactions. See Ramamurti v. Rolls–Royce Ltd., 454 F.Supp.
407, 413 (D.D.C.1978), aff'd mem., 612 F.2d 587 (D.C.Cir.1980).
Even though El–Fadl's present jurisdictional allegations are insufficient, he has
sufficiently demonstrated that it is possible that he could supplement them through
discovery. In Crane, 814 F.2d at 760, this court reversed when a plaintiff's case was
dismissed ―with no opportunity for discovery on the issue of jurisdiction.‖ Because no
discovery at all had been allowed, Crane differs from Naartex Consulting Corp. v. Watt,
722 F.2d 779 (D.C.Cir.1983), cert. denied, 467 U.S. 1210, 104 S.Ct. 2399, 81 L.Ed.2d
355 (1984), in which the court held that the district court did not abuse its discretion in
denying further jurisdictional discovery when the plaintiff had already had ― ‗ample
opportunity‘ to take discovery.‖ Id. at 788 (quoting Zerilli v. Smith, 656 F.2d 705, 716
(D.C.Cir.1981));  see Edmond v. United States Postal Serv. Gen. Counsel, 953 F.2d
1398, 1401 (D.C.Cir.1992) (R.B. Ginsburg, J., concurring in denial of rehearing en
banc). The Crane court held that the plaintiff was ―entitled to a fair opportunity to
inquire into [the defendant]'s affiliations with the District.‖ 814 F.2d at 764. Similarly,
in Edmond, this court held that the district court abused its discretion in denying
jurisdictional discovery when the plaintiff had alleged the existence of a conspiracy that
would allow the court to attribute the local conspirator's contacts with the District of
Columbia to the co-conspirators. 949 F.2d at 425. The Edmond court distinguished
Naartex as a case ―where the allegations of conspiracy were conclusory.‖ Id.;  see
also Wyatt v. Kaplan, 686 F.2d 276, 283–84 (5th Cir.1982).

El–Fadl's request is for initial discovery, limited to jurisdictional facts. His allegations,
although they fall short of a prima facie case that Petra Bank was ―doing business‖ in
the District of Columbia, are not ―conclusory‖ to the extent that El–Fadl has alleged
specific transactions. His theory that Petra Bank may have had further, as yet
unknown, connections to the District is not implausible. Petra Bank initially denied
having any contacts with the District of Columbia other than as a correspondent bank.
If litigation had not fortuitously ensued over Petra Bank's $500,000 commercial loan, El–
Fadl would not have been able to challenge the statements by Petra Bank's affiants that
it had not extended such loans. A plaintiff faced with a motion to dismiss for lack of
personal jurisdiction is entitled to reasonable discovery, lest the defendant defeat the
jurisdiction of a federal court by withholding information on its contacts with the forum.

Accordingly, we reverse the dismissal of El–Fadl's claims against Petra Bank for lack of
personal jurisdiction and remand those claims to the district court in order to allow El–
Fadl to conduct reasonable discovery on personal jurisdiction.

IV.

Forum non conveniens. The district court dismissed El–Fadl's claims against all
defendants on the ground of forum non conveniens. In light of the affirmance of the
dismissal of the claims against the sovereign defendants on other grounds, El–Fadl's
objections to the dismissal on forum non conveniens relate to the remaining defendants,
Petra Bank and PIBC.

In deciding a forum non conveniens motion, the district court must first establish that
there is an adequate alternative forum:
At the outset of any forum non conveniens inquiry, the court must determine whether
there exists an alternative forum. Ordinarily, this requirement will be satisfied when the
defendant is ―amenable to process‖ in the other jurisdiction. In rare circumstances,
however, where the remedy offered by the other forum is clearly unsatisfactory, the
other forum may not be an adequate alternative, and the initial requirement may not be
satisfied. Thus, for example, dismissal would not be appropriate where the alternative
forum does not permit litigation of the subject matter of the dispute.

Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254 n. 22, 102 S.Ct. 252, 265 n. 22, 70
L.Ed.2d 419 (1981) (citation omitted). Only if there is an adequate alternative forum
must the court then weigh the relative conveniences to the parties against the
presumption of the plaintiff's forum selection. Pain v. United Technologies Corp., 637
F.2d 775, 784 (D.C.Cir.1980), cert. denied, 454 U.S. 1128, 102 S.Ct. 980, 71 L.Ed.2d
116 (1981). ―Availability of adequate alternative fora is a threshold test ․ in the sense
that a forum non conveniens motion cannot be granted unless the test is fulfilled.‖
Friends for All Children, Inc. v. Lockheed Aircraft Corp., 717 F.2d 602, 607
(D.C.Cir.1983). The defendant bears the burden of proving that there is an adequate
alternative forum. See, e.g., Mercier v. Sheraton Int'l, Inc., 935 F.2d 419, 423, 425 (1st
Cir.1991);  In re Air Crash Disaster Near New Orleans, 821 F.2d 1147, 1164 (5th
Cir.1987) (en banc), vacated in part on other grounds, 490 U.S. 1032, 109 S.Ct. 1928,
104 L.Ed.2d 400 (1989);  Cheng v. Boeing Co., 708 F.2d 1406, 1411 (9th Cir.), cert.
denied, 464 U.S. 1017, 104 S.Ct. 549, 78 L.Ed.2d 723 (1983);  Schertenleib v. Traum,
589 F.2d 1156, 1160 (2d Cir.1978);  see also Watson v. Merrell Dow Pharmaceuticals,
Inc., 769 F.2d 354, 357 (6th Cir.1985).

Our review of the grant of a motion to dismiss for forum non conveniens is for abuse
of discretion. Piper Aircraft, 454 U.S. at 257, 102 S.Ct. at 266;  Pain, 637 F.2d at 781.
Although this is a deferential standard of review, the district court abuses its discretion
when it fails to consider a material factor or clearly errs in evaluating the factors before
it, Mercier, 935 F.2d at 423, or ―does not hold the defendants to their burden of
persuasion on all elements of the forum non conveniens analysis.‖ Reid–Walen v.
Hansen, 933 F.2d 1390, 1394 (8th Cir.1991);  see also Lacey v. Cessna Aircraft Co.,
862 F.2d 38, 43 (3d Cir.1988).

To show the existence of an adequate alternative forum, the defendant ―must provide
enough information to enable the District Court‖ to evaluate the alternative forum.
Piper Aircraft, 454 U.S. at 258, 102 S.Ct. at 267. Because the defendant has the
burden of establishing that an adequate alternative forum exists, this court will reverse
when ―the affidavit through which [the defendant] attempted to meet its burden contains
substantial gaps.‖ Mercier, 935 F.2d at 425. The amount of information that the
defendant must provide, in supporting affidavits or other evidence, depends on the facts
of the individual case. Lacey, 862 F.2d at 44. Accordingly, the defendant must
provide more detailed information if the plaintiff provides evidence that controverts the
defendant's evidence. See Camejo v. Ocean Drilling & Exploration, 838 F.2d 1374,
1379–80 & n. 17 (5th Cir.1988). If the record before the court is so ―fragmentary‖ that
―it is impossible to make a sound determination‖ of whether an adequate alternative
forum exists, the court will remand for further development of the facts. See C.A. La
Seguridad v. Transytur Line, 707 F.2d 1304, 1308–09 (11th Cir.1983).

PIBC and Petra Bank could not prove on the present record that Jordan was an
adequate alternative forum. PIBC submitted an affidavit from a Jordanian attorney,
Rami M. Al–Hadidi, who states that ―Jordanian courts are open to El–Fadl to adjudicate
these claims against the defendants.‖ Al–Hadidi also explains that the Jordanian Civil
Code recognizes various causes of action that El–Fadl has brought. Yet PIBC's expert
fails to address various potentially dispositive provisions of Jordanian law that El–Fadl
brought to the district court's attention. Given the gap in PIBC's expert's affidavit and
the undeveloped state of the record on this issue, the district court erred in finding that
PIBC or Petra Bank met its burden of showing that Jordan is an adequate alternative
forum. Cf. Mercier, 935 F.2d at 425;  C.A. La Seguridad, 707 F.2d at 1308.

El–Fadl maintains that the Jordanian courts lack jurisdiction over claims based on
actions taken in connection with the Petra Bank scandal—including actions on which he
bases his claims for recovery. He called the district court's attention to a Jordanian
statute, Law No. 2 for the year 1992, the Law of Lifting of Responsibility as a Result of
Cancellation of the Martial Law (issued Sep. 12, 1991) (―Law No. 2‖). As part of the
lifting of martial law, Law No. 2 referred ―[a]ll lawsuits‖ then in the military courts to the
―competent Courts,‖ except that ―[n]otwithstanding the [general] provisions ․, the
lawsuits of Petra Bank Company which are currently at the Martial Courts under
investigations or trial shall be referred to the State Security Court.‖ Law No. 2 further
declared that:

All civil and military employees as well as all the other persons who undertook the
implementation of the instructions of the Military Administration or had any relation with
the implementation thereof at any time during the time when the martial law was in
effect shall be discharged from any legal responsibility which resulted or will result from
their actions pursuant to the provisions.

In addition, El–Fadl cited two resolutions regarding Petra Bank.10 Based on the
foregoing legal authorities, El–Fadl's expert, a Jordanian attorney named Ibrahim J.
Tukan, states in his affidavit that ―[t]he above listed laws, decrees, and statutes
constitute an absolute prohibition to Mr. El–Fadl to bring his causes of action in Jordan.‖
PIBC's expert, Al–Hadidi, does not address any of these authorities in his affidavit.

Consequently, if El–Fadl's expert is correct in describing the legal situation in Jordan,

the Jordanian courts would appear to be closed to El–Fadl's claims against Petra Bank
and perhaps even to claims against PIBC. Then this court would be faced with the
―rare circumstance[ ]‖ in which ―the alternative forum does not permit litigation of the
subject matter of the dispute.‖ Piper Aircraft, 454 U.S. at 254 n. 22, 102 S.Ct. at 265 n.
22. A foreign forum is not inadequate merely because it has less favorable
substantive law, id. at 247–55, 102 S.Ct. at 261–65, because it employs different
adjudicative procedures, see, e.g., Lockman Found. v. Evangelical Alliance Mission,
930 F.2d 764, 768 (9th Cir.1991), or because of general allegations of corruption in the
judicial system. See, e.g., Blanco v. Banco Industrial de Venezuela, 997 F.2d 974,
981–82 (2d Cir.1993). El–Fadl's repeated reliance on a State Department report
expressing ―concern about the impartiality‖ of the Jordanian court system, for example,
is unavailing. But if the foreign forum would deny him access to its judicial system on
the claims in his complaint, dismissal on forum non conveniens grounds is
inappropriate. See Ceramic Corp. v. Inka Maritime Corp., 1 F.3d 947, 949 (9th
Cir.1993).

The district court concluded ―that the affidavit submitted by [El–Fadl's] Jordanian
attorney does not state unequivocally that [El–Fadl] is barred from bringing this suit in
Jordan.‖ Yet the attorney (Tukan) makes precisely that claim in his affidavit, based on
his interpretation of the Jordanian statutes. PIBC and Petra Bank failed to respond
with evidence that the Jordanian courts are available to El–Fadl. Petra Bank, which
argued only that Resolution No. 4/90 directed El–Fadl's claims to insolvency
proceedings, failed to address Law No. 2 altogether. PIBC's only evidence showing
that El–Fadl can sue PIBC in Jordan was the conclusory statement in Al–Hadidi's
affidavit that ―Jordanian courts are open to El–Fadl to adjudicate these claims against
the defendants.‖ This conclusory statement—even though not specifically contradicted
in Tukan's affidavit as it pertains to PIBC—flies in the face of evidence that El–Fadl may
not be able to sue Petra Bank, and the statement is insufficient to show that he can sue
PIBC in Jordan. This court will remand when the district court fails to consider a
material matter in dispute. See Mercier, 935 F.2d at 423. Moreover, the district court
appears to have incorrectly placed the burden of proving the inadequacy of the
Jordanian courts upon El–Fadl in stating that:  ―[A]s the plaintiff [El–Fadl] has failed to
demonstrate that this action would be barred in its entirety in Jordan, the Court
determines that an adequate alternative forum exists.‖ The district court was required
to hold PIBC and Petra Bank to their burden of persuasion on this issue. See Reid–
Walen, 933 F.2d at 1394.

For these reasons, we hold that the district court erred in dismissing El–Fadl's claims
against Petra Bank and PIBC on forum non conveniens grounds. On remand, the
district court should determine the accuracy of El–Fadl's uncontroverted
characterization of the legal effect of the decrees as they relate to claims against Petra
Bank. In determining whether the Jordanian courts provide El–Fadl with an alternative
forum, the district court should also determine whether the Jordanian decrees would bar
suit against PIBC. In addition, because El–Fadl's expert, Tukan, also concluded that
El–Fadl's intentional tort claims could not be brought in a civil lawsuit for recovery of
damages, but could only be brought in conjunction with a criminal complaint, the district
court should determine whether the Jordanian courts are inadequate for that reason.
Although this procedural difference may not render El–Fadl's remedy in Jordan
inadequate, see Lockman Found., 930 F.2d at 768–69, the district court should consider
whether the situation would be different if El–Fadl shows that filing a criminal complaint
requires the cooperation of the Jordanian authorities, who worked with the defendants
in prosecuting El–Fadl in the military courts.
If the district court on remand finds that PIBC and Petra Bank have met their burden to
show that Jordan is an adequate alternative forum, and the court again concludes that
the balance of private and public interests weighs in favor of forum non conveniens
dismissal, ―the trial judge must finally ensure that [El–Fadl] can reinstate [his] suit in the
alternative forum without undue inconvenience or prejudice.‖ Pain, 637 F.2d at 785.
If doubts about the availability of an alternative forum remain due to the difficulties in
determining Jordanian law, the district court may dismiss for forum non conveniens, but
only if conditioned on the defendants' submitting to jurisdiction in Jordan and on the
Jordanian courts' acceptance of the case. See, e.g., Blanco, 997 F.2d at 984;
 Mercier, 935 F.2d at 426;  Baris v. Sulpicio Lines, Inc., 932 F.2d 1540, 1551–52 (5th
Cir.1991). Even if the district court determines that there is an available forum, the
court may condition a dismissal on PIBC's agreement to be served in the District of
Columbia for suit in Jordan.11

Accordingly, we reverse the dismissal of the claims against Petra Bank for lack of
personal jurisdiction and remand to allow El–Fadl to conduct discovery of jurisdictional
facts;  we also reverse the dismissal of the claims against Petra Bank and PIBC on
grounds of forum non conveniens, remanding for a finding whether Petra Bank and
PIBC can show that Jordan is an adequate alternative forum;  otherwise, we affirm.

FOOTNOTES

1. The complaint sought damages from PIBC for breach of employment contract,
refusal to pay wages and negligent termination of employment contract;  from the
sovereign defendants (the Central Bank, its Governor and Deputy Governor) and PIBC
for malicious prosecution and false arrest;  from the sovereign defendants for false
imprisonment;  and from all defendants for libel and intentional infliction of emotional
and physical distress.

2. 28 U.S.C. § 1603(b) provides:An ―agency or instrumentality of a foreign state‖

means any entity—(1) which is a separate legal person, corporate or otherwise, and(2)
which is an organ of a foreign state or political subdivision thereof, or a majority of
whose shares or other ownership interest is owned by a foreign state or political
subdivision thereof, and(3) which is neither a citizen of a State of the United States as
defined in section 1332(c) and (d) of this title, nor created under the laws of any third
country.

3. In light of our disposition, we do not reach the district court's alternative holding
that it lacked personal jurisdiction over Deputy Governor Marto.

4. The district court ruled that it had personal jurisdiction over PIBC under § 13–422
of the D.C.Code.

5. D.C.Code § 13–334(a) (1995) (Service on foreign corporations) provides:In an

action against a foreign corporation doing business in the District, process may be
served on the agent of the corporation or person conducting its business, or, when he is
absent and can not be found, by leaving a copy at the principal place of business in the
District, or, where there is no such place of business, by leaving a copy at the place of
business or residence of the agent in the District, and that service is effectual to bring
the corporation before the court.

6. We also affirm the district court's holding that it lacked jurisdiction under § 13–422
because the record shows that Petra Bank is organized under the laws of Jordan and
maintains its principal place of business there.

7. The district court cited AMAF Int'l Corp. v. Ralston Purina Co., 428 A.2d 849, 851
(D.C.1981) (per curiam), and Guevara v. Reed, 598 A.2d 1157, 1159 (D.C.1991). In
those cases, the D.C. Court of Appeals rejected the argument that § 13–334(a) ―is
merely a service of process act, superseded when the long-arm statute was enacted,‖
and construed the statute to ―confer[ ] jurisdiction upon trial courts here over foreign
corporations doing substantial business in the District of Columbia, even though the
claim arose from a transaction which occurred elsewhere, and hence, outside the scope
of the long-arm statute.‖ Guevara, 598 A.2d at 1159 (citing AMAF Int'l Corp., 428 A.2d
849). AMAF relied on this court's opinion in Goldberg v. Southern Builders, Inc., 184
F.2d 345, 346–47 (D.C.Cir.1950). 428 A.2d at 850.

8. Not all the contacts recited by El–Fadl can logically be tied into his assertion of
specific jurisdiction. Although El–Fadl concludes that his claims ―arise from Petra's
role in taking over and managing PIBC,‖ he makes numerous other allegations of
continuous contacts by Petra Bank that are unrelated to its takeover of PIBC (e.g.,
―Petra Bank by its own and separate conduct made commercial loans․‖). His claims
obviously do not ―aris[e] from‖ these unrelated contacts. Thus, many of El–Fadl's
allegations would relate only to a claim for general jurisdiction under § 13–334(a).

9. In an unrelated case, the court did not reach the issue of whether PIBC was the
―alter ego‖ of Petra Bank. A.I. Trade Fin., Inc. v. Petra Int'l Banking Corp., 62 F.3d
1454, 1457 (D.C.Cir.1995).

10. Resolution No. 4/90 of the Economic Security Committee, entitled Liquidation of
Petra Bank Public Shareholding Company Ltd., issued on July 15, 1990, decrees
that:Upon the request of the liquidator, the courts and the execution departments shall
stop the proceedings in any court action or act at present undertaken by Petra Bank or
against it. As from the date of the start of the liquidation no court action or any new
judicial proceedings may be heard against Petra Bank or the liquidator.In Resolution
No. 230/90, entitled Suspension of Lawsuits and issued on September 8, 1990, the
Petra Bank Liquidation Committee announced that:[T]he Liquidation Committee has
resolved ․ [to] [r]equest the competent Courts to suspend the progress in all the lawsuits
in which the Petra Bank is a party whether as a plaintiff or defendant before the Courts
of Conciliation, First Instance and Appeal as well as the Wages Authority Court of the
Ministry of Labour and [to] commission the Director General to communicate with the
concerned authorities for the implementation of this resolution.El–Fadl has also
produced letters from Bassam Atari, the deputy chairman of the Liquidation Committee,
to the President of the Amman Court of Appeals and to the President of the Magistrate
Court of Amman, in which Atari refers to the two resolutions quoted above and requests
the judges on both those courts to implement the resolutions and ―suspend all the
lawsuits in which the Petra Bank is a party.‖

11. We do not decide PIBC's contention that El–Fadl's claims were barred by
D.C.Code § 12–301, because his causes of action accrued in September 1989 and he
did not file suit until July 1993. El–Fadl responded that the running of the statute of
limitations period was tolled by reason of imprisonment or, alternatively, duress.
D.C.Code Ann. § 12–302(a)(3). The district court did not reach the merits of El–Fadl's
arguments for tolling;  inasmuch as the merits rest on findings of fact that this court is ill
equipped to make, nor do we.

Opinion for the Court filed by Circuit Judge ROGERS.

SYLLABUS
OCTOBER TERM, 2007
REPUBLIC OF PHILIPPINES V. PIMENTEL

SUPREME COURT OF THE UNITED STATES

REPUBLIC OF PHILIPPINES et al. v. PIMENTEL, temporary administrator of ESTATE

OF PIMENTEL, DECEASED, et al.

certiorari to the united states court of appeals for the ninth circuit

No. 06–1204. Argued March 17, 2008—Decided June 12, 2008

A class action by and for human rights victims (Pimentel class) of Ferdinand Marcos,
while he was President of the Republic of the Philippines (Republic), led to a nearly $2
billion judgment in a United States District Court. The Pimentel class then sought to
attach the assets of Arelma, S. A. (Arelma), a company incorporated by Marcos, held by
a New York broker (Merrill Lynch). The Republic and a Philippine commission
(Commission) established to recover property wrongfully taken by Marcos are also
attempting to recover this and other Marcos property. The Philippine National Banc
(PNB) holds some of the disputed assets in escrow, awaiting the outcome of pending
litigation in the Sandiganbayan, a Philippine court determining whether Marcos‘ property
should be forfeited to the Republic. Facing claims from various Marcos creditors,
including the Pimentel class, Merrill Lynch filed this interpleader action under 28 U.
S. C. §1335, naming, among the defendants, the Republic, the Commission, Arelma,
PNB (all petitioners here), and the Pimentel class (respondents here). The Republic and
the Commission asserted sovereign immunity under the Foreign Sovereign Immunities
Act of 1976, and moved to dismiss pursuant to Federal Rule of Civil Procedure 19(b),
arguing that the action could not proceed without them. Arelma and PNB also sought a
Rule 19(b) dismissal. The District Court refused, but the Ninth Circuit reversed, holding
that the Republic and the Commission are entitled to sovereign immunity and are
required parties under Rule 19(a), and it entered a stay pending the Sandiganbayan
litigation‘s outcome. Finding that that litigation could not determine entitlement to
Arelma‘s assets, the District Court vacated the stay and ultimately awarded the assets
to the Pimentel class. The Ninth Circuit affirmed, holding that dismissal was not
warranted under Rule 19(b) because, though the Republic and the Commission were
required parties, their claim had so little likelihood of success on the merits that the
action could proceed without them. The court found it unnecessary to consider whether
prejudice to those entities might be lessened by a judgment or interim decree in the
interpleader action, found the entities‘ failure to obtain a judgment in the Sandiganbayan
an equitable consideration counseling against dismissing the interpleader suit, and
found that allowing the interpleader case to proceed would serve the Pimentel class‘
interests.

Held:

1. Because Arelma and PNB also seek review of the Ninth Circuit’s decision, this
Court need not rule on the question whether the Republic and the Commission, having
been dismissed from the suit, had the right to seek review of the decision that the suit
could proceed in their absence. As a general matter any party may move to dismiss an
action under Rule 19(b). Arelma and PNB have not lost standing to have the judgment
vacated in its entirety on procedural grounds simply because they did not appeal, or
petition for certiorari on, the underlying merits ruling denying them the interpleaded
assets. Pp. 7–9.

2. Rule 19 requires dismissal of the interpleader action. Pp. 9–20.

(a) Under Rule 19(a), nonjoinder even of a required person does not always result in
dismissal. When joinder is not feasible, the question whether an action should proceed
turns on nonexclusive considerations in Rule 19(b), which asks whether “in equity and
good conscience, the action should proceed among the existing parties or should be
dismissed.” The joinder issue can be complex, and the case-specific determinations
involve multiple factors, some “substantive, some procedural, some compelling by
themselves, and some subject to balancing against opposing interests,” Provident
Tradesmens Bank & Trust Co. v. Patterson, 390 U. S. 102, 119. Pp. 9–10.

(b) Here, Rule 19(a)‘s application is not contested: The Republic and the
Commission are required entities. And this Court need not decide the proper standard
of review for Rule 19(b) decisions, because the Ninth Circuit‘s errors of law require
reversal. Pp. 10–19.

(1) The first factor directs the court to consider, in determining whether the action
may proceed, the prejudice to absent entities and present parties in the event judgment
is rendered without joinder. Rule 19(b)(1). The Ninth Circuit gave insufficient weight to
the sovereign status of the Republic and the Commission in considering whether they
would be prejudiced if the case proceeded. Giving full effect to sovereign immunity
promotes the comity and dignity interests that contributed to the development of the
immunity doctrine. See, e.g., Verlinden B. V. v. Central Bank of Nigeria, 461 U. S. 480,
486. These interests are concrete here. The entities‘ claims arise from historically and
politically significant events for the Republic and its people, and the entities have a
unique interest in resolving matters related to Arelma‘s assets. A foreign state has a
comity interest in using its courts for a dispute if it has a right to do so. Its dignity is not
enhanced if other nations bypass its courts without right or good cause. A more specific
affront could result if property the Republic and the Commission claim is seized by a
foreign court decree. This Court has not considered the precise question presented, but
authorities involving the intersection of joinder and the United States‘ governmental
immunity, see, e.g., Mine Safety Appliances Co. v. Forrestal, 326 U. S. 371, 373–375,
instruct that where sovereign immunity is asserted, and the sovereign‘s claims are not
frivolous, dismissal must be ordered where there is a potential for injury to the absent
sovereign‘s interests. The claims of the Republic and the Commission were not
frivolous, and the Ninth Circuit thus erred in ruling on their merits. The privilege of
sovereign immunity from suit is much diminished if an important and consequential
ruling affecting the sovereign‘s substantial interest is determined, or at least assumed,
by a federal court in its absence and over its objection. The Pimentel class‘ interest in
recovering its damages is not discounted, but important comity concerns are implicated
by assertion of foreign sovereign immunity. The error is not that the courts below gave
too much weight to the Pimentel class‘ interests, but that they did not accord proper
weight to the compelling sovereign immunity claim. Pp. 11–16.

(2) The second factor is the extent to which any prejudice could be lessened or
avoided by relief or measures alternative to dismissal, Rule 19(b)(2), but no alternative
remedies or forms of relief have been proposed or appear to be available. As to the
third factor—whether a judgment rendered without the absent party would be adequate,
Rule 19(b)(3)—―adequacy‖ refers not to satisfaction of the Pimentel class‘ claims, but to
the ―public stake in settling disputes by wholes, whenever possible,‖ Provident
Bank, supra, at 111. Going forward with the action in the absence of the Republic and
the Commission would not further this public interest because they could not be bound
by a judgment to which they were not parties. As to the fourth factor—whether the
plaintiff would have an adequate remedy if the action were dismissed for nonjoinder,
Rule 19(b)(4)—the Ninth Circuit made much of the tort victims‘ lack of an alternative
forum. But Merrill Lynch, not the Pimentel class, is the plaintiff as the stakeholder in the
interpleader action. See 28 U. S. C. §1335(a). The Pimentel class‘ interests are not
irrelevant to Rule 19(b)‘s equitable balance, but the Rule‘s other provisions are the
relevant ones to consult. A dismissal on the ground of nonjoinder will not provide Merrill
Lynch with a judgment determining entitlement to the assets so it could be done with the
matter, but it likely would give Merrill Lynch an effective defense against piecemeal
litigation by various claimants and inconsistent, conflicting judgments. Any prejudice to
Merrill Lynch is outweighed by prejudice to the absent entities invoking sovereign
immunity. In the usual course, the Ninth Circuit‘s failure to give sufficient weight to the
likely prejudice to the Republic and the Commission would warrant reversal and remand
for further determinations, but here, that error plus this Court‘s analysis under Rule
19(b)‘s additional provisions require the action‘s dismissal. Pp. 17–20.

464 F. 3d 885, reversed and remanded.

Kennedy, J., delivered the opinion of the Court, in which Roberts, C. J., and Scalia,
Thomas, Ginsburg, Breyer, and Alito, JJ., joined, in which Souter, J., joined as to all but
Parts IV–B and V, and in which Stevens, J., joined as to Part II. Stevens, J., and Souter,
J., filed opinions concurring in part and dissenting in part.

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Islamic Republic of Iran v. Pahlavi, 62 NY 2d. 474, 5 July 1984; (IN PDF)

642 F. Supp. 297 (1986)

Helen LIU, in her individual capacity, as heir and special administrator of the estate of
Henry Liu, and as guardian ad litem for George Liu, Plaintiff,
v.
The REPUBLIC OF CHINA, Wong HsiLing, Hu Yi-Min, Chen Hu-Men, Chen Chi-Li, Wu Tun
and Tung Kuei-Sen, Defendants.

No. C-85-7461 EFL.

United States District Court, N.D. California.

August 11, 1986.

*298 John S. Martel, Farella, Braun & Martel, San Francisco, Cal. for defendant-
Republic of China.

*299 Jerome M. Garchik, San Francisco, Cal. for plaintiff.

Arthur L. Liman, Paul, Weiss, Rifkind, et al., New York City, for plaintiff-co-council.
Thomas G. Corcoran, Jr., Corcoran, Youngman & Rowe, Lloyd N. Cutler, Wilmer, Cutler
& Pickering, Washington, D.C. for defendants-co-council.

ORDER DENYING MOTION TO DISMISS ON ACT OF STATE GROUNDS

LYNCH, District Judge.

Introduction

On October 15, 1984, Henry Liu was shot to death at his home in Daly City, California.
Plaintiff, Helen Liu, suing in her individual capacity, as heir and special administrator of
the estate of Henry Liu, and as guardian ad litem for George Liu, has filed this lawsuit
alleging that the Republic of China ("ROC") and the named defendants are responsible
for the death of her husband.

The complaint pleads six claims. Four claims seek recovery under various legal theories
for the wrongful death of Henry Liu. A fifth claim seeks recovery for injury to Helen Liu,
who was at home when the killing occurred. The final claim seeks recovery for the injury
to Henry Liu for the initial assault on him by his killers.

The individual defendants named in the complaint have been tried and convicted by
tribunals in the ROC of criminal conduct relating to the killing of Henry Liu.[1] The
individual defendants include Vice Admiral Wong Hsi-ling, former director of the ROC's
Defense Intelligence Bureau, as well as Major General Hu Yi-min and Colonel Chen Hu-
men, also former officials of the Defense Intelligence Bureau. The remaining three
defendants, Chen Chi-li, Wu Tun and Tung Kuei-sen, are ROC citizens who were
allegedly recruited to assist in the killing of Henry Liu.

Currently before the Court is the ROC's motion to dismiss the claims against it on act of
state grounds. The ROC does not argue that the actual killing of Henry Liu is an act of
state which this Court may not review.[2] Rather, the ROC asserts the following:

The Republic of China does not dispute that Henry Liu's death was caused by the private
individuals named in the Complaint. Indeed, the civilian and military courts of the ROC, in the
course of convicting these individuals, have made formal findings to that effect. The present
Complaint, however, does not rest on the facts and the published findings of the ROC courts.
Instead, it alleges that the murder of Henry Liu was a deliberate official act of the ROC, that
these individuals acted in concert with other unnamed ROC officials who approved
and *300 authorized their actions, and that the criminal proceedings before the ROC tribunals
were part of a conspiracy to cover up these official acts.
The ROC has at all times repudiated the acts of the individual defendants. It vigorously denies
that the Government had knowledge of, participated in, or condoned their conspiracy. This
position has been fully sustained by exhaustive military and civilian trials and appeals following
thorough investigation of the facts.

Nevertheless, the Complaint would have this Court go behind the findings and judgments of the
ROC courts to investigate de novo the alleged events in the ROC in the hope that this Court
may disagree with what the ROC's courts have duly found. This would require the Court to
inquire into, and sit in judgment upon, the most sensitive areas of the ROC's governmental
affairs, proceedings and motivation. The ROC is confident that if this Court performed such a
function it would reach the same conclusion as did the ROC courts. But as the United States
would undoubtedly assert if the circumstances were reversed, the ROC submits that the Act of
State doctrine bars the very inquiry itself, regardless of its outcome.

ROC's Points and Authorities, at 1-2 (emphasis omitted).

In resolving this motion, the Court requested the parties to brief two additional issues
that it felt may have a bearing on how the Court would rule. These issues are (1)
whether this suit is barred, as to the ROC, by the Foreign Sovereign Immunities Act, 28
U.S.C. §§ 1602-11, and (2) whether the ROC may possibly be liable under respondeat
superior for the activities of the individual defendants named in the complaint.

Having received the requested supplemental briefing and held oral argument on the
matter, the Court denies ROC's motion to dismiss the complaint. For the reasons
discussed below, the Court has concluded that it would be premature to dismiss
plaintiff's complaint at this time. However, the Court notes that dismissal on act of state
grounds may become necessary as the litigation of this matter progresses.

I. ACT OF STATE DOCTRINE

"The act of state doctrine declares that a United States court will not adjudicate a
politically sensitive dispute which would require the court to judge the legality of the
sovereign act of a foreign state." International Ass'n of Machinists v. OPEC, 649 F.2d
1354, 1358 (9th Cir. 1981), cert. denied, 454 U.S. 1163, 102 S. Ct. 1036, 71 L. Ed. 2d
319 (1982). The traditional formulation of the doctrine is as follows:

Every sovereign State is bound to respect the independence of every other sovereign State,
and the courts of one country will not sit in judgment on the acts of the government of another
done within its own territory. Redress of grievances by reason of such acts must be obtained
through means open to be availed of by sovereign powers as between themselves.
Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 691 n. 7, 96 S. Ct.
1854, 1859 n. 7, 48 L. Ed. 2d 301 (1976) (quoting Underhill v. Hernandez, 168 U.S.
250, 252, 18 S. Ct. 83, 84, 42 L. Ed. 456 (1897)).

The act of state doctrine is not jurisdictional, as are questions of sovereign immunity,
nor is its observance mandated by the Constitution. DeRoburt v. Gannett Co., Inc., 733
F.2d 701, 702-03 (1984), cert. denied, 469 U.S. 1159, 105 S. Ct. 909, 83 L. Ed. 2d 923
(1985). Rather, the doctrine stems from a recognition by the "Judicial Branch that its
engagement in the task of passing on the validity of the foreign acts of state may hinder
rather than further this country's pursuit of goals both for itself and for the community of
nations as a whole in the international sphere." Timberlane Lumber Co. v. Bank of
America, 549 F.2d 597, 605 (9th Cir.1976), aff'd, 749 F.2d 1378 (9th Cir.1984), cert.
denied, ___ U.S. ___, 105 S. Ct. 3514, 87 L. Ed. 2d 643 (1985) (quoting Banco
Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 84 S.Ct. *301 923, 937, 11 L. Ed.
2d 804 (1964)). In essence, it is a judicial doctrine of self restraint based on an
acknowledgment that certain disputes involving foreign affairs should be be left for
resolution by one of the other two branches of government. See International Ass'n of
Machinists, 649 F.2d at 1358-59.

The very nature of the act of state doctrine makes it difficult to define. The Ninth Circuit
has stated that the "doctrine does not suggest a rigid rule of application.... `[S]ome
aspects of international law touch more sharply on national nerves than do others; the
less important the implications of an issue are for our foreign relations, the weaker the
justification for exclusivity in the political branches.' The decision to deny access to
judicial relief is not one we make lightly.... The `touchstone' or `crucial element' is the
potential for interference with our foreign relations." Id. at 1360 (quoting in
part Sabbatino, 376 U.S. at 428, 84 S.Ct. at 940) (citations omitted); see
also DeRoburt, 733 F.2d at 704.

Obviously, a "successful act of state defense must rest on a factual showing that an act
of state occurred...." Ramirez v. Weinberger, 745 F.2d 1500, 1534 (D.C.Cir.
1984), vacated on other grounds, ___ U.S. ___, 105 S. Ct. 2325, 86 L. Ed. 2d 255
(1985). The ROC concedes, as it must, that the killing of an American citizen in the
United States is not the type of activity to which the act of state doctrine has generally
applied.[3]Cf. Letelier v. Republic of Chile, 488 F. Supp. 665, 674 (D.D.C.1980) (suit
against the Republic of Chile regarding assassination of Chilean dissident leader in
United States not subject to act of state doctrine). The ROC argues that the act of state
doctrine is nevertheless applicable because the plaintiff in this case "asks this Court to
determine that those investigations, prosecutions, and court adjudications [of the
individual defendants] not only were erroneous, but were so lacking in integrity as to
constitute mere shams." ROC's Points and Authorities, at 9. This charge arises from the
fact that contrary to the findings in the criminal prosecutions of the individual
defendants, the plaintiff alleges that other members of the ROC government played a
role in the killing of Henry Liu and that their role has been covered up by the ROC. The
ROC also argues that the case must be dismissed on act of state grounds because
litigation of the case would involve searching inquiries into the internal decisionmaking
of the ROC and into ROC national security and intelligence matters. ROC's Points and
Authorities, at 4.

Even assuming that the ROC's description of the ramifications of allowing this case to
proceed is accurate, the applicability of the act of state doctrine is, for a number of
reasons, not clear-cut.

First, it is not clear that the ROC has shown the existence of an act of state. Not all
activities of a foreign sovereign state are acts of state for purposes of the
doctrine. Timberlane, 549 F.2d at 606. Typically, "acts of state" involve acts by which a
foreign state "has exercised its jurisdiction to give effect to its public interests." Id. at 607
(9th Cir.1976) (quoting The Restatement (Second) of Foreign Relations Law of the
United States § 41 (1965)). The ROC concedes that the actual killing of Henry Liu in this
Country is not an act that is subject to the doctrine. ROC's Reply Brief, at 1. And courts
have generally not considered the resolution of a controversy in a foreign tribunal as an
act of state. Quoting the Restatement (Second) of Foreign Relations Law of the United
States, the Ninth Circuit has observed as follows:

An `act of state' as the term is used in this Title involves the public interest of a state as a state,
as distinct from its interest in providing the means of adjudicating disputes or claims that arise
within its territory.... A judgment of a court may be an act of state. Usually it is not, because it
involves the interests of private litigants or because court adjudication is not the usual way in
which the *302 state exercises its jurisdiction to give effect to public interests.

Id. at 608 (quoting the Restatement at comment "d," page 127).

Second, the fact that the litigation of this case may involve embarrassing or intrusive
discovery does not necessarily implicate the act of state doctrine. As described above,
the traditional purpose of the doctrine has been to avoid judicial review of acts of foreign
states, not to dismiss cases otherwise properly before the court on the basis that the
required discovery may intrude on the interests of or embarrass a foreign state. But
cf. Clayco Petroleum Corp. v. Occidental Corp., 712 F.2d 404, 407 (9th Cir.1983), cert.
denied, 464 U.S. 1040, 104 S. Ct. 703, 79 L. Ed. 2d 168 (1984) (suggesting a
willingness to limit judicial inquiries solely on the basis that they would "impugn or
question the nobility of a foreign nation's motivation").

Finally, unlike most cases dismissed on act of state grounds, resolution of this case
would not necessarily require the Court to directly pass judgment on the legitimacy of an
act of state. See generally Northrop Corp. v. McDonnell Douglas Corp., 705 F.2d 1030,
1048 (9th Cir.1983), cert. denied, 464 U.S. 849, 104 S. Ct. 156, 78 L. Ed. 2d 144 (1983)
("issue ... is whether resolution of Northrop's claims would necessitate direct judicial
inquiry into" foreign military procurement decisions). The Court would not directly
challenge the findings of the ROC courts, although its findings could conceivably be
inconsistent with those of the ROC courts. Instead, the Court's task would be limited to
determining whether the ROC is responsible for the killing of Henry Liu. The ROC
wholeheartedly agrees that the killing of Henry Liu was an illegal act. Consequently, the
fact that this Court would be required to find that the killing of Henry Liu was "wrongful"
certainly does not require application of the act of state doctrine. Cf. Letelier v. Republic
of Chile, 488 F. Supp. 665 (D.D.C.1980) (alleged assassination by agents of Chilean
government of a dissident in the United States not an act of state).

Notwithstanding the Court's expressed concerns regarding the applicability of the act of
state doctrine, if the Court could conclude at this stage in the litigation that a finding of
liability on the part of the ROC would necessarily involve findings inconsistent with those
made by the courts of the ROC or involve a probing inquiry into ROC national security
and intelligence affairs, the Court may be inclined to dismiss the case.

Even though this case may not be easily "pigeon holed" as one involving the act of state
doctrine, this Court does not believe that the doctrine is therefore clearly inapplicable.
The doctrine is one of discretion and must be applied in light of the circumstances of
each case. As mentioned earlier, the Ninth Circuit and the Supreme Court have
recognized that the act of state doctrine is not an "inflexible and all encompassing
rule." DeRoburt, 733 F.2d at 703. "The teaching of the courts which have considered
application of the act of state doctrine is that the doctrine is to be applied pragmatically
and flexibly, with reference to its underlying considerations." Tchacosh Co., LTD v.
Rockwell Intern. Corp., 766 F.2d 1333, 1337 (9th Cir.1985). The touchstone for
determining the doctrines applicability is the potential for interference with our foreign
relations. Timberlane, 549 F.2d at 607. "Whether forbearance by an American court in a
given situation is advisable or appropriate depends upon the balance of relevant
considerations." Id. at 606.

The concerns identified by the ROC are certainly of the same nature as the concerns
which have led courts to apply the act of state doctrine. Clearly, a lawsuit that calls into
question the propriety and thoroughness with which another country has investigated
and prosecuted wrongdoing by high level intelligence officials involving such a serious
offense as premeditated murder touches "sharply on national nerves." Sabbatino, 376
U.S. at 428, 84 S. Ct. at 940. Similarly, few inquiries allowed by an United States court
could be more intrusive than one directed at the *303 highest levels of a foreign
country's intelligence bureau. The Ninth Circuit has previously recognized that even
when an act of state is not directly implicated a "case may get so deeply involved in
affairs of state" that the trial judge may on his own motion have to terminate the
litigation. DeRoburt, 733 F.2d at 704.

Despite the concerns expressed above, the Court does not believe that the case should
be dismissed at this stage of the litigation. The act of state doctrine provides a basis for
dismissal only if the case cannot be resolved without passing on the validity of the
relevant act of state.[4]See Northrop, 705 F.2d at 1048; Ramirez v. Weinberger, 745 F.2d
1500, 1533-37 (D.C.Cir.1984) (en banc), vacated on other grounds, ___ U.S. ___, 105
S. Ct. 2325, 86 L. Ed. 2d 255 (1985); Sharon v. Time, Inc., 599 F. Supp. 538, 546
(S.D.N.Y.1984). In this case, the Court believes that the plaintiff may be able to
establish liability on the part of the ROC without calling into question any of the factual
findings of the ROC tribunals or conducting intrusive inquiries into the workings of the
ROC's Defense Intelligence Bureau.

As described earlier, the ROC has admitted the involvement of a number of its officials
in the killing of Henry Liu. Moreover, the ROC has accepted as true the factual findings
in that regard made by its own tribunals. Based on the briefing provided by the parties,
the Court has concluded that the plaintiff may be able to impute the admittedly improper
acts of the named defendants to the ROC by use of the doctrine of respondeat
superior. Thus, before this Court considers dismissing this case on act of state grounds,
the plaintiff should be given an opportunity by way of a summary judgment motion to
argue the liability of ROC based on the factual findings of the ROC's tribunals.

This Court's determination to allow a summary judgment motion on the respondeat

superior liability of the ROC should not suggest that the Court has concluded that such
liability exists. The Court has simply determined that, given the ROC's admissions
regarding the actions of the named defendants, the plaintiff should be given an
opportunity to brief and argue the issue of respondeat superior before this Court
considers dismissing the plaintiff's claims against the ROC on act of state grounds.

The Court is aware that in their previous filings and upon the request of this Court both
sides addressed the issue of respondeat superior liability. Nevertheless, the Court does
not believe that it would be appropriate for it to decide the issue on the basis of the
papers previously provided it. The Court wishes to give both sides a full opportunity to
argue the respondeat superior issue in light of this Order.[5] Thus, the plaintiff is ordered
to file a summary judgment motion on whether, accepting the factual findings of the
ROC tribunals as admissions by the ROC, the ROC is liable under principles
of respondeat superior for any of the claims asserted against it. The motion should be
briefed and scheduled in accordance with the local rules and the rules of this Court
generally applicable to such motions.

II. SOVEREIGN IMMUNITY

In its original motion to dismiss, the ROC did not raise the issue of whether dismissal
was required under the Foreign Sovereign *304 Immunities Act ("FSIA"), 28 U.S.C. §
1605(a). In requesting briefing on the availability of respondeat superior liability, the
Court also asked the parties to address the sovereign immunity issue because of its
jurisdictional nature. Having reviewed the parties' briefs, the Court has concluded that at
this stage in the litigation the Court cannot dismiss the claims against the ROC on
grounds of sovereign immunity.

Section 1605(a) of the FSIA provides that a "foreign state shall not be immune from the
jurisdiction of courts of the United States or of the States in any case
(5) ... in which money damages are sought against a foreign state for personal injury or death,
or damage to or loss of property, occurring in the United States and caused by the tortious act
or omission of that foreign state or of any official or employee of that foreign state while acting
within the scope of his office or employment; except this paragraph [5] shall not apply to ... (A)
any claim based upon the exercise or performance or the failure to exercise or perform a
discretionary function regardless of whether the discretion be abused...."

28 U.S.C. § 1605(a).

Section 1605(a) removes immunity for torts committed either by the foreign state or by
its agents acting within the scope of their employment. In this case, the plaintiff alleges
both grounds: (1) that the ROC actually authorized the murder of Henry Liu and (2) that
Henry Liu's killers were agents of the ROC acting with the scope of their employment.
These allegation are sufficient to avoid dismissal of this action at this point in the
litigation.

The ROC argues that even if the Court finds that plaintiff has sufficiently alleged that the
killing of Henry Liu was authorized by the ROC or was performed by an agent of the
ROC acting within the scope of his authority, the complaint should still be dismissed on
grounds of sovereign immunity. Section 1605(a) (5) (A) provides that suits otherwise
allowed under section 1605(a) (5) will not be allowed if based on the exercise or
performance of a discretionary function. Id. The ROC asserts that if the Court accepts
plaintiff's allegation that the killing of Henry Liu was either authorized by the ROC or
within the scope of the employment of those individuals who actually were involved, the
Court must conclude that the decision to kill Henry Liu and the carrying out of that
decision involved a "discretionary function." The Court rejects this argument.

The discretionary function exemption contained in section 1605(a) (5) (A) of the FSIA
corresponds with a similar exemption found in the Federal Tort Claims Act
("FTCA"). Compare 28 U.S.C. § 1605(a) (5) (A) with id. § 2680(a). The Ninth Circuit has
recognized that Congress intended that courts rely on judicial interpretations of the
FTCA's similar provision when interpreting section 1605(a) (5) (A) of the FSIA. [6]Olsen
by Sheldon v. Government of Mexico, 729 F.2d 641, 646-47 (9th Cir.), cert denied sub
nom., 469 U.S. 917, 105 S. Ct. 295, 83 L. Ed. 2d 230 (1984).

In interpreting the FTCA, the Supreme Court has stated that an act is discretionary in
nature when "there is room for policy judgment and decision...." Dalehite v. United
States, 346 U.S. 15, 35-36, 73 S. Ct. 956, 968, 97 L. Ed. 1427 (1953). Other cases
have held that the discretionary function exception does not provide immunity for acts
"clearly outside the authority delegated...." Birnbaum v. United States, 588 F.2d 319,
329 (2d Cir. 1978); see also Hatahley v. United States, 351 U.S. 173, 181, 76 S. Ct.
745, 751, 100 L. Ed. 1065 (1956); Medley v. United States, 543 F. Supp. 1211, 1219
(N.D.Cal. 1982).

*305 This Court holds that planning and conducting the murder of Henry Liu could not
have been a discretionary function as defined by the FSIA. Such an act is not one
where "there is room for policy judgment and decision." The killing of Americans
residing in the United States is not a policy option available to foreign countries.
Moreover, the ROC appears to admit that the killing of Henry Liu could not, under ROC
law, have been legally authorized by anyone in that government. The ROC and its
agents simply did not have the discretion to commit the acts alleged. [7] Judge Green
aptly expressed this view in a similar case:

Whatever policy options may exist for a foreign country, it has no "discretion" to perpetrate
conduct designed to result in the assassination of an individual or individuals, action that is
clearly contrary to the precepts of humanity as recognized in both national and international law.

Letelier v. Republic of Chile, 488 F. Supp. 665, 673 (D.D.C.1980); see also Estate of
Silme Domingo v. Republic of the Philippines, No. C 82-1055-V (W.D.Wash. July 17,
1984) [Available on WESTLAW, DCTU database] (adopting Judge Green's reasoning in
a similar case).

Because plaintiff has alleged sufficient facts to fall within the exception to sovereign
immunity contained in section 1605(a) (5) of the FSIA and because the discretionary
function exemption is inapplicable, the Court cannot dismiss this case on sovereign
immunity grounds at this stage in the litigation.

Conclusion

The Court denies without prejudice the ROC's motion to dismiss on act of state
grounds. The Court has concluded that the claims against the ROC should not be
dismissed at least until the plaintiff has had the opportunity to argue respondeat
superior liability based on the admissions of the ROC. The Court has also concluded
that, at this point in the litigation, the claims against the ROC are not barred by
sovereign immunity. Plaintiff's allegations fall within the FSIA's immunity exception and
do not relate to the exercise or performance of a discretionary function. The Court
orders the plaintiff to file a summary judgment motion consistent with the directives of
this Order. After that motion is decided, the Court will once again consider whether this
case should be dismissed on act of state grounds.

IT IS SO ORDERED.

NOTES

[1] Defendant Tung Kuei-sen, a fugitive, was convicted inabsentia.

[2] "The ROC does not assert that the Act of State doctrine applies to murders or other
actions by a foreign state or its agents that take place in the United States." ROC's
Reply Brief, at 1 (emphasis in original).
In a letter sent after the hearing on this matter, the ROC cites a number of opinions
decided on July 18, 1986 by the Honorable Harold M. Fong. See Sison v. Marcos, No.
86-0225; Trajano v. Marcos, No. 66-0207; Hilao v. Marcos, No. 86-390; Republic of the
Philippines v. Marcos, Nos. 86-0155 and 86-0213. In a number of those opinions, Judge
Fong dismissed on act of state grounds allegations of kidnapping, torture and murder.
All of these allegations appear to have involved conduct occurring in the Philippines, not
the United States. Consequently, they provide no support for the argument that the
killing of an American in the United States by agents of a foreign government should be
considered an act of state for purposes of the doctrine. If the ROC is now making such
an argument, the Court rejects it. See Letelier v. Republic of Chile, 488 F. Supp.
665, 674 (D.D.C.1980) (suit against the Republic of Chile regarding assassination of
Chilean dissident leader in United States not subject to act of state doctrine); Alfred
Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 691 n. 7, 96 S. Ct. 1854,
1859 n. 7, 48 L. Ed. 2d 301 (1976) ("Every sovereign State is bound to respect the
independence of every other sovereign State, and the courts of one country will not sit
in judgment on the acts of the government of another done within its own territory.")
(emphasis added; quoting Underhill v. Hernandez, 168 U.S. 250, 252, 18 S. Ct. 83, 84,
42 L. Ed. 456 (1897).

[3] See supra note 2.

[4] "Our opening brief made clear that we do not assert that the Act of State doctrine
would apply to a complaint that accepted the facts as found by the ROC courts." ROC's
Reply Brief, at 2.

[5] Both parties filed excellent briefs on the issue of respondeat superior liability, and the
Court does not anticipate that the parties' summary judgment briefs will vary
considerably from those previously submitted. However, because the plaintiff's previous
argument was not based on the premise that the facts of the case are as admitted by
the ROC ("It is the complaint, not defendant's `findings', which must be accepted as true
here." Plaintiff's Supp. Opposition, at 2; "We thus approach this Court's inquiries
unburdened by the assumption defendant indulges that the Taiwan proceedings control
this Court's decision on sovereign immunity and respondeat superior." Id. at 7.), the
Court has concluded that fairness dictates that the respondeat superior issue be
formally briefed as a motion for summary judgment.

[6] "The FSIA provides considerable guidance as to which acts or decisions constitute
discretionary functions. Not only does the language of the FSIA discretionary function
exception replicate that of the Federal Tort Claims Act (FTCA), 28 U.S.C. § 2680(a), but
the legislative history of the FSIA, in explaining section 1605(a) (5) (A), directs us to the
FTCA.... To determine the scope of the discretionary function exception of the FSIA, we
therefore turn to the interpretation given the similar FTCA provision." Olsen by Sheldon
v. Government of Mexico, 729 F.2d 641, 646-47 (9th Cir.), cert. denied sub nom., 469
U.S. 917, 105 S. Ct. 295, 83 L. Ed. 2d 230 (1984).
[7] In United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig
Airlines), 467 U.S. 797, 104 S. Ct. 2755, 2765, 81 L. Ed. 2d 660 (1984), the Supreme
Court stated that, "[i]t is the nature of the conduct, rather than the status of the actor,
that governs whether the discretionary function exception applies in a given
case." Id. The rationale underlying the discretionary function exception is a desire "to
prevent judicial `second-guessing' of legislative and administrative decisions grounded
in social, economic, and political policy through the medium of an action in tort." Id. "[I]f
judicial review would encroach upon this type of balancing done by an agency, then the
exception would apply." Chamberlin v. Isen, 779 F.2d 522, 523 (9th Cir. 1985)
(quoting Begay v. United States, 768 F.2d 1059, 1064 (9th Cir.1985)).

The alleged conduct involved here is the intentional killing of Henry Liu. A determination
that such conduct is wrong certainly does not involve the type of judicial second-
guessing that is likely to encroach on the ability of foreign countries to make policy
decisions entitled to any respect at all in the international community.
In re PHILIPPINE NATIONAL BANK,
Philippine National Bank, Petitioner,
v.
United States District Court for the District of Hawaii,
Respondent,
Maximo Hilao; Estate of Ferdinand Marcos; Imelda R.
Marcos; Ferdinand R. Marcos, Jr., Real Parties in Interest.
No. 04-71843.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted June 16, 2004.
Filed February 4, 2005.
Jay R. Ziegler, Buchalter, Nemer, Fields & Younger, Los Angeles, CA, for the
petitioner.
Robert A. Swift, Kohn, Swift & Graf, PC, Philadelphia, PA; John J. Bartko,
William I. Edlund, Bartko, Zankel, Tarrant & Miller, San Francisco, CA; for real
parties in interest.
Petition for Writ of Mandamus to the United States District Court for the
District of Hawaii. D.C. No. MDL-00840-MLR.
Before: GOODWIN, CANBY, and TALLMAN, Circuit Judges.
CANBY, Circuit Judge:
1

The Philippine National Bank petitions this court for a writ of mandamus to prevent
the district court from pursuing contempt and discovery proceedings against the
Bank because of the Bank's transfer of funds to the Republic of the Philippines
pursuant to a judgment of the Philippine Supreme Court. 1 We conclude that the
 district court's orders violated the act of state doctrine, and we accordingly issue the
writ.
BACKGROUND
2

This mandamus petition represents one more chapter in a long-running dispute over
the right to the assets of the estate of former Philippine President Ferdinand E.
Marcos. On one side is a class of plaintiffs who obtained a large judgment in the
federal district court in Hawaii against the Marcos estate for human rights violations
by the Marcos regime. The judgment included an injunction restraining the estate
and its agents or aiders and abettors from transferring any of the estate's assets. 2 On
the other side is the Republic of the Philippines, which independently has sought
forfeiture of the Marcos estate's assets on the ground that they were stolen by
Marcos from the Philippine government and its people.
3

In an earlier case, we dealt with the attempt of class plaintiffs to reach assets of the
Marcos estate located in Swiss banks. Credit Suisse v. U.S. Dist. Ct. for the Cent.
Dist. of Cal., 130 F.3d 1342, 1347-48 (9th Cir.1997). The Swiss assets had been frozen
by the Swiss government at the request of the Republic, which was seeking to recover
them. The class plaintiffs obtained an injunction from the district court requiring the
Swiss banks to hold the assets for the benefit of the class plaintiffs. We held that the
injunction violated the act of state doctrine, which precludes our courts from
declaring "invalid" a foreign sovereign's official act — in this case the freeze order of
the Swiss government. Id. We accordingly granted a writ of mandamus directing
dismissal of the district court's order, and ordering the district court:
4

to refrain from taking any further action in [this] action or any other case involving
any or all of the [class plaintiffs] and any assets of the Estate of Ferdinand E. Marcos
held or claimed to be held by the Banks.

Id. at 1348.3
5

Thereafter, the Swiss government released the funds frozen in Switzerland for
transfer to the Philippine National Bank in escrow pending a determination of
proper disposal by a competent court in the Philippines. The Philippine National
Bank deposited the funds in Singapore. The Philippine Supreme Court subsequently
held that the assets were forfeited to the Republic of the Philippines.
6
 The district court then issued the orders that precipitated the present petition for
mandamus. The district court ruled that the Philippine Supreme Court had viol ated
"due process by any standard" and that its judgment was entitled to no deference. It
ordered reinstatement of an earlier settlement agreement in the district court
litigation that had been rejected when the Philippine courts refused to approve it and
the Republic failed to give its consent to the agreement. 4 The district court further
stated in an Order Directing Compliance:
7

The Court's Special Master has brought to the Court's attention that there is an
imminent threat that the monies transferred from Swiss banks to Singapore,
pursuant to a "certain escrow agreement[,"] may be released by the banking official s
pursuant to claims filed by the Philippine Commission on Good Government.
8

***
9

IT IS HEREBY ORDERED that any such transfer, without first appearing and
showing cause in this court as to how such transfer might occur without violating the
Court's injunction shall be considered contempt of the Court's earlier order. Any and
all persons and banking institutions participating in such transfers ... are hereby
notified that such transfer would be considered in contempt of this Court's
injunction[.]
10

The district court then issued an Order to Show Cause against the Philippine Bank,
which was not a party to the litigation in the district court, requiring the Bank to
show why it should not be held in contempt for violating the court's injunction
against transfer of assets by the estate. A hearing on the Order to Show Cause was
held, but not concluded because the district court ruled that a Bank officer's
declaration could not be considered unless the officer was deposed. The district court
set a time and place for the deposition.
11

The Bank then filed the present petition for mandamus in this court, seeking to
restrain the district court from enforcing its Order to Show Cause and from pursuing
discovery against the Bank officer. The Bank asserts that it has transferred nearly all
of the funds in issue to the Republic pursuant to the judgment of the Philippine
courts.5 The Bank contends that the officer's deposition would violate Philippine
bank secrecy laws. More important, the Bank contends that the entire proceeding
against the Bank for its transfer of funds violated the act of state doctrine. We stayed
the proceedings in district court pending our ruling on the mandamus petition.
DISCUSSION
 1. The act of state doctrine.
12

[1] Every sovereign state is bound to respect the independence of every other
sovereign state, and the courts of one country will not sit in judgment on the acts of
the government of another, done within its own territory. Redress of grievances by
reason of such acts must be obtained through the means open to be availed of by
sovereign powers as between themselves.
13

Underhill v. Hernandez, 168 U.S. 250, 252, 18 S. Ct. 83, 42 L. Ed. 456 (1897). The
act of state doctrine originally was deemed to arise from international law, but more
recently has been viewed as a function of our constitutional separation of
powers. W.S. Kirkpatrick & Co. v. Envtl. Tectonics Corp., Int'l, 493 U.S. 400,
404, 110 S. Ct. 701, 107 L. Ed. 2d 816 (1990). So viewed, the doctrine reflects "`the
strong sense of the Judicial Branch that its engagement in the task of passing on the
validity of foreign acts of state may hinder' the conduct of foreign
affairs." Id. (quoting Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 423, 84 S.
Ct. 923, 11 L. Ed. 2d 804 (1964)).
14

The district court's orders in issue violated this principle. In order to obtain assets
from the Philippine Bank, or to hold the Bank in contempt for the transfer of those
assets to the Republic, the district court necessarily (and expressly) held invalid the
forfeiture judgment of the Philippine Supreme Court. We conclude that this action of
the district court violated the act of state doctrine.
15

The class plaintiffs in the district court argue that the act of state doctrine is directed
at the executive and legislative branches of foreign governments, and does not apply
to judicial decisions. Although the act of state doctrine is normally inapplicable to
court judgments arising from private litigation, there is no inflexible rule preventing
a judgment sought by a foreign government from qualifying as an act of state. See
Liu v. Republic of China, 892 F.2d 1419, 1433-34 & n. 2 (9th Cir.1989) (citing
RESTATEMENT (SECOND) OF FOREIGN RELATIONS OF THE UNITED STATES §
41 cmt. d (1965)) ("A judgment of a court may be an act of state."). There is no
question that the judgment of the Philippine Supreme Court gave effect to the public
interest of the Philippine government. The forfeiture action was not a mere dispute
between private parties; it was an action initiated by the Philippine government
pursuant to its "statutory mandate to recover property allegedly stolen from the
treasury."6 In re Estate of Ferdinand Marcos Human Rights Litig., 94 F.3d at 546.
We have earlier characterized the collection efforts of the Republic to be
governmental. Id. The subject matter of the forfeiture action thus qualifies for
treatment as an act of state.
16
 The class plaintiffs next argue that the act of state doctrine is inapplicable because
the judgment of the Philippine Supreme Court did not concern matters within its
own territory. Generally, the act of state doctrine applies to official acts of foreign
sovereigns "performed within [their] own territory." Credit Suisse, 130 F.3d at 1346
(internal quotations omitted). The act of the Philippine Supreme Court was not
wholly external, however. Its judgment, which the district court declared invalid, was
issued in the Philippines and much of its force upon the Philippine Bank arose from
the fact that the Bank is a Philippine corporation. It is also arguable whether the
bank accounts have a specific locus in Singapore, although they apparently were
carried on the books of bank branches there. 7 See Callejo v. Bancomer,
S.A, 764 F.2d 1101, 1121-25 (5th Cir.1985) (discussing differing theories of situs of
intangibles). Even if we assume for purposes of decision that the assets were located
in Singapore, we conclude that this fact does not preclude treatment of the
Philippine judgment as an act of state in the extraordinary circumstances of this
case. "[T]he [act of state] doctrine is to be applied pragmatically and flexibly, with
reference to its underlying considerations." Tchacosh Co. v. Rockwell Int'l
Corp., 766 F.2d 1333, 1337 (9th Cir.1985). Thus, even when an act of a foreign state
affects property outside of its territory, "the considerations underlying the act of
state doctrine may still be present." Callejo, 764 F.2d at 1121 n. 29. Because the
Republic's "interest in the [enforcement of its laws does not] end at its
borders," id., the fact that the escrow funds were deposited in Singapore does not
preclude the application of the act of state doctrine. The underlying governmental
interest of the Republic supports treatment of the judgment as an act of state.
17

It is most important to keep in mind that the Republic did not simply intrude into
Singapore in exercising its forfeiture jurisdiction. The presence of the assets in
Singapore was a direct result of events that were the subject of our decision in Credit
Suisse. There we upheld as an act of state a freeze order by the Swiss government,
enacted in anticipation of the request of the Philippine government, to preserve the
Philippine government's claims against the very assets in issue today. Credit
Suisse, 130 F.3d at 1346-47. Indeed, the Philippine National Bank argues that the
district court's orders violated our mandate in Credit Suisse "directing the district
court to refrain from taking any further action" with regard to assets of the Marcos
estate "held or claimed to be held by the [Swiss] Banks." Id. at 1348. The district
court held that our mandate did not apply to the assets once they left the hands of
the Swiss banks. We need not decide the correctness of that ruling because we
conclude that, in these circumstances, the Philippine forfeiture judgment is an act of
state. The Swiss government did not repudiate its freeze order, and the Swiss banks
did not transfer the funds in the ordinary course of business. They delivered the
funds into escrow with the approval of the Swiss courts in order to permit the very
adjudication of the Philippine courts that the district court considered invalid. To
permit the district court to frustrate the procedure chosen by the Swiss and
Philippine governments to adjudicate the entitlement of the Republic to these assets
would largely nullify the effect of our decision in Credit Suisse. In these unusual
circumstances, we do not view the choice of a Singapore locus for the escrow of funds
to be fatal to the treatment of the Philippine Supreme Court's judgment as an act of
state.
 2. The mandamus remedy.
18

We also conclude that the district court's error qualifies for correction by a writ of
mandamus. In so ruling, we consider the factors set forth in Bauman v. U.S. Dist.
Ct., 557 F.2d 650 (9th Cir.1977):
19

(1) The party seeking the writ has no other adequate means, such as a direct appeal,
to attain the relief he or she desires. (2) The petitioner will be damaged or prejudiced
in a way not correctable on appeal. (This guideline is closely related to the first.) (3)
The district court's order is clearly erroneous as a matter of law. (4) The district
court's order is an oft-repeated error, or manifests a persistent disregard of the
federal rules. (5) The district court's order raises new and important problems, or
issues of law of first impression.
20

Id. at 654-55. "None of these guidelines is determinative and all five guidelines need
not be satisfied at once for a writ to issue." Credit Suisse, 130 F.3d at 1345. Rarely
will all five "guidelines point in the same direction" or even be relevant to the
particular inquiry. See id.
21

With regard to the first two factors, we conclude that the district court's error is not
sufficiently correctable on appeal. No appeal will lie unless a contempt order is
issued and sanctions have been imposed. See Estate of Domingo v. Republic of the
Philippines, 808 F.2d 1349, 1350(9th Cir.1987). The Bank has made a sufficient
showing that subjecting its officer to cross-examination will place the officer and the
Bank in danger of violating Philippine bank secrecy laws. Requiring the Bank "to
choose between being in contempt of court and violating [Philippine] law clearly
constitutes severe prejudice that could not be remedied on direct appeal." Credit
Suisse, 130 F.3d at 1346.
22

As for the third Bauman factor, our discussion of the act of state doctrine makes
clear that the district court's orders are erroneous as a matter of law. In addition, the
district court is attempting to apply its injunction against transfer of assets to the
Philippine National Bank as an aider and abettor or agent of the estate of Marcos.
But the Bank can hardly have been acting as an aider and abettor or agent of the
estate when it transferred assets to the Republic pursuant to the forfeiture judgment
of the Philippine Supreme Court, entered over the opposition of the Marcos estate.
The error in the district court's orders is apparent.
23
 With regard to the fourth Bauman factor, we cannot say that the district court's error
is "oft-repeated." The fifth factor, however, favors mandamus because the district
court's ruling raises new and important problems regarding the act of state doctrine.
24

Four of the five Bauman factors thus favor issuance of the writ. We therefore grant
the Bank's petition. The district court's order, dated February 25, 2004, to the
Philippine National Bank to show cause, and its order, dated April 8, 2004, to the
Bank to produce its employee, Rogel L. Zenarosa, for a deposition are vacated. The
district court is directed to refrain from any further action against the Philippine
National Bank in this action or any other action involving any of the funds that were
the subject of the decision of the Philippine Supreme Court dated July 15, 2003. This
court retains jurisdiction over the district court litigation, MDL No. 840, to the
extent that it involves any action against the Philippine National Bank.
25

WRIT OF MANDAMUS ISSUED.

Notes:
1

We have jurisdiction pursuant to 28 U.S.C. § 1651(a)

2

The district court's injunction included a finding of fact that the Republic of the
Philippines, which was not a party to the litigation, was an agent or aider and abettor
of the Estate. On appeal by the Republic, we vacated the injunction to the extent that
it purported to restrain the Republic, because sovereign immunity precluded district
court jurisdiction over the RepublicIn re Estate of Ferdinand Marcos Human Rights
Litig., 94 F.3d 539, 548 (9th Cir.1996).
3

We subsequently clarified that the mandate did not preclude the district court from
participating in settlement discussions or otherwise performing its duties under
Fed.R.Civ.P. 23, "so long as such duties do not involve an attempt to reach Marcos
assets held or claimed to be held by the [Swiss] banks...." Unpub. Order, No. 97-
70193 (9th Cir. Dec. 23, 1997)
4

The Republic of the Philippines appealed the order reinstating the settlement and
the Order Directing Compliance, but we dismissed the appeal on the ground that the
Republic lacked standing because it was neither a party to the litigation nor a person
or banking institution bound by the Order Directing ComplianceHilao v. Estate of
Marcos, 393 F.3d 987, 2004 WL 2985245 (9th Cir. Dec.28, 2004).
5
 Certain of the funds held in another bank in Singapore were not transferred because
the bank refused to release the funds and instead filed an interpleader action in
Singapore
6

The Philippine judgment is therefore distinguishable from the foreign judgment

inTimberlane Lumber Co. v. Bank of America, 549 F.2d 597 (9th Cir.1976), relied on
by the class plaintiffs here. Timberlane refused to consider the foreign judgment an
act of state in part because the "judicial proceedings [] were initiated by Caminals, a
private party and one of the alleged co-conspirators, not by the Honduran
government itself." Id. at 608.
7

The class plaintiffs citeHilao v. Estate of Marcos, 95 F.3d 848, 851 (9th Cir.1996),
for the proposition that the locus of a bank deposit is the branch where the deposit is
made. Hilao, however, was applying a California statute that specified the place and
manner of levying execution; it did not purport to state a general rule for
determining the locus of bank accounts.
The REPUBLIC OF THE PHILIPPINES, Plaintiff-Appellee,
v.
Ferdinand E. MARCOS, et al., Defendants-Appellants.
No. 86-6091.
United States Court of Appeals,
Ninth Circuit.
Argued and Submitted Feb. 10, 1988.
Decided Dec. 1, 1988.
Special Concurrence, Dec. 2, 1988.
Richard A. Hibey, Anderson, Hibey, Nauheim & Blair, Washington, D.C., John
J. Bartko, Bartko, Welsch, Tarrant & Miller, and Stephen Horn, Schmeltzer,
Aptaker & Sheppard, P.C., Washington, D.C., for defendants-appellants
Ferdinand E. Marcos, Imelda R. Marcos and Ramon Azurin.
John J. Stumreiter, Rosenfeld, Meyer & Susman, Beverly Hills, Cal. and Gerald
Walpin, Rosenman, Colin, Freund, Lewis & Cohen, New York City, for
defendants-appellants Diosdado C. Ordonez and Ancor Holdings, N.V.
Ronald L. Olson, Bradley S. Phillips, Richard B. Kendall, Munger, Tolles &
Olson, Los Angeles, Cal., for plaintiff-appellee Republic of the Philippines.
Richard K. Willard, Asst. Atty. Gen., James M. Spears, Deputy Asst. Atty. Gen.,
Robert C. Bonner, U.S. Atty., Robert E. Kopp, John F. Cordes, and John P.
Schnitker, Asst. U.S. Attys., Washington, D.C., for the amicus curiae U.S.
Appeal from the United States District Court for the Central District of
California.
 Before BROWNING, Chief Judge, ANDERSON, * SCHROEDER, FLETCHER,
PREGERSON, ALARCON, CANBY, NORRIS, BEEZER BRUNETTI, and
NOONAN, Circuit Judges.
NOONAN, Circuit Judge:
1

The Republic of the Philippines (the Republic) brought a civil suit against its former
president, Ferdinand Marcos, and his wife Imelda (the Marcoses), asserting claims
under the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
Secs. 1961 et seq., and other applicable law. The district court on June 25, 1986
entered a preliminary injunction enjoining the Marcoses from disposing of any of
their assets save for the payment of attorney fees and normal living expenses. The
Marcoses appealed. A panel of this court reversed, 2-1. 818 F.2d 1473 (9th Cir.1987).
We took the case en banc and now affirm the district court.
Federal Jurisdiction
2

The Republic alleges that the Marcoses engaged in mail fraud, wire fraud, and the
transportation of stolen property in the foreign or interstate commerce of the United
States. The acts alleged are crimes under 18 U.S.C. Secs. 1341, 1343, and 2315. The
Republic alleges that the acts were repeated, forming a pattern of predicate acts
under RICO, 18 U.S.C. Sec. 1961, and thereby giving rise to civil liability under RICO,
18 U.S.C. Sec. 1964.
3

Contrary to the contention of the Marcoses, the Republic as a governmental body is a

person within the meaning of 18 U.S.C. Sec. 1961(3). Illinois Department of Revenue
v. Phillips, 771 F.2d 312 (7th Cir.1985). The foreign nature of the Republic does not
deprive it of statutory personhood. Cf. Pfizer, Inc. v. Government of
India, 434 U.S. 308, 98 S. Ct. 584, 54 L. Ed. 2d 563 (1978). Accordingly the Republic
has standing to assert the RICO claims.
4

Contrary to the contention of the Marcoses, the complaint, as interpreted by the

district court, sufficiently alleges a RICO offense. The Republic alleges that the
Marcoses and the other defendants arranged for the investment in real estate in
Beverly Hills, California of $4 million fraudulently obtained by the Marcoses; that
the Marcoses arranged for the creation of two bank accounts in the name of Imelda
Marcos at Lloyds Bank of California totaling over $800,000 also fraudulently
obtained by the Marcoses; and that the Marcoses transported into Hawaii money,
jewels, and other property worth over $7 million also fraudulently obtained by them.
Criminal conduct under RICO "forms a pattern if it embraces criminal acts that have
the same or similar purposes, results, participants, victims, or methods of
commission, or otherwise are interrelated by distinguishing characteristics and are
 not isolated events." Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 n.
14, 105 S. Ct. 3275, 3285, n. 14, 87 L. Ed. 2d 346 (quoting 18 U.S.C. Sec. 3575(e)).
The purposes of the acts here alleged are the same--to invest and to conceal
fraudulently-obtained booty. The results are the same--the investment of the booty.
The principals are the same--the Marcoses. The victim is the same--the Republic.
The episodes are not isolated events. They represent a plan and a practice of getting
the fruits of fraud out of the Philippines and into the assumed safety of the United
States. If proved, the allegations show acts that form a pattern.
5

Contrary to the contention of the Marcoses, the complaint as read by the district
court also alleges a RICO enterprise. A RICO enterprise has been found to consist of
"a group of individuals associated in fact for the purpose of illegally trafficking in
narcotics ..., utilizing the United States mail to defraud ..., and corruptly influencing
... the outcome of state court proceedings." United States v. Turkette, 452 U.S. 576,
579, 101 S. Ct. 2524, 2526, 69 L. Ed. 2d 246 (1981). Here there is alleged to be a
group of individuals associated in fact for the purpose of illegally investing the fruits
of fraud and illegally using the mails and wire and illegally transporting in interstate
commerce the fruits of the fraud.
6

The effect on the commerce of the United States of engaging in mail or wire fraud or
bringing stolen property into the country is palpable. The Marcoses are mistaken in
arguing that such criminal acts have no consequences for commerce to or in this
country. The criminal enterprise which they are charged with conducting consisted
in operations taking place within the United States. These operations had multiple
effects on the domestic and foreign commerce of this country. If the operations were
criminal, the operators incurred criminal liability under our law. United States v.
Stratton, 649 F.2d 1066, 1075 (5th Cir.1981) (appearance of out-of-state litigants
before court that was a criminal RICO enterprise); United States v.
Altomare, 625 F.2d 5 (4th Cir.1980) (interstate telephone calls perpetuating RICO
enterprise affected interstate commerce). The Republic's allegations are sufficient to
establish federal jurisdiction. 18 U.S.C. Sec. 1964.
Pendent Jurisdiction
7

The gravamen of the Republic's entire case is the allegation that the Marcoses stole
public money:
8

During his twenty years as President of the Philippines, Mr. Marcos used his po sition
of power and authority to convert and cause to be converted, to his use and that of
his friends, family, and associates, money, funds, and property belonging to the
Philippines and its people. Complaint, p 12 (emphasis added).
9

This common allegation supports not only plaintiff's RICO claims but also the eight
claims for conversion, fraud and deceit, constructive fraud, constructive trust, breach
of implied contract, quiet title, accounting, and subrogation. The claims for a
constructive trust, to quiet title, an accounting, and subrogation merely set forth
different forms of relief for the same underlying wrongs.
10

The Republic's strategy of bringing suit in a number of other jurisdictions is not

decisive of the question whether the claims are such that they would ordinarily be
tried in one judicial proceeding. The present location of the sought-for funds in
banks in various countries is not determinative as to the underlying wrongs alleged
in the complaint. The claims brought in this suit would ordinarily be tried in a single
case. In both the RICO and non-RICO claims, the Republic alleges that the Marcoses
converted public funds while in office. The district court concluded:
11

This Court has pendent jurisdiction over plaintiff's other claims under state and
foreign law in that such claims arise from a common nucleus of operative fact and
are so intertwined with other matters pending before the court as to make the
exercise of such jurisdiction over these claims appropriate.
12

The district court was correct in asserting pendent jurisdiction over these claims.
They derive from "a common nucleus of operative fact" and are such that a plaintiff
"would ordinarily be expected to try them all in one judicial proceeding." United
Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 1138, 16 L. Ed.
2d 218 (1966). The power of a federal court to decide pendent claims is "wide-
ranging." See Carnegie-Mellon Univ. v. Cohill, --- U.S. ----, 108 S. Ct. 614, 618, 98 L.
Ed. 2d 720 (1988). The exercise of the power is discretionary but ordinarily the
power if it exists is exercised; only exceptionally is the power not employed. See C.
Wright, A. Miller & E. Cooper 13B Federal Practice and Procedure Sec. 3567.1 (1984
and 1988 Supp.).
13

The common nucleus of operative facts that binds the RICO and non-RICO claims
together is pleaded in paragraph 12, which is incorporated by reference into each
claim for relief. To prove the predicates for RICO that allegedly occurred in this
country, the Republic will have to prove theft, the acceptance of bribes, extortion,
conspiracy, and similar acts in the Marcoses' conduct of the government in the
Philippines. For example, to prove that stolen money was unlawfully transported in
the United States, the Republic will have to prove theft in the Philippines. The
operative facts necessary as part of the proof of the RICO claim are also the facts
 necessary to prove the theft. The RICO claims cannot be proved without getting
deeply into the pendent claims and proving some or all of them. Because the acts
charged, if proved, support both the RICO and the non-RICO claims, the district
court has subject matter jurisdiction over all claims in the Republic's complaint.
14

True, the pendent claims may involve more property than that which entered into or
affected the foreign or domestic commerce of the United States. The dissent appears
to assume that jurisdiction over the pendent claims cannot extend beyond this
property. But that is not the law. Properly pendent claims need not be for the
identical property involved in the federal cause of action. The pendent claims remain
within the court's jurisdiction if the vital facts that must be proved as predicates of
the RICO claims are the same as those that must be proved to establish the extortion,
bribery, theft, fraud, and conversions alleged by the pendent claims.
15

At "every stage of the proceeding" the district court must exercise discretion as to the
pendent claims. See Carnegie-Mellon Univ. v. Cohill, 108 S. Ct. at 618. In light of a
more fully developed record than that now before this court, the district judge may
conclude that some or all of the pendent claims should be dismissed notwithstanding
our holding that the district court has the power to assert jurisdiction over those
claims. Gibbs, 383 U.S. at 727, 86 S.Ct. at 1139. See also 3A J. Moore, W. Taggert & J.
Wicker, Moore's Federal Practice p 18.07[1.-3] at 18-36-37 (2d ed. 1987). As of the
record now before us, pendent jurisdiction exists and supports an injunction based
on the pendent claims.
Act of State and Political Question
16

Before determining whether issuance of an injunction was appropriate we consider

two defenses which, if accepted, would block trial of the case: the Marcoses maintain,
first, that their acts are insulated because they were acts of state not reviewable by
our courts; and second, that any adjudication of these acts would involve the
investigation of political questions beyond our courts' competence.
17

Acts of State. The classification of certain acts as "acts of state" with the consequence
that their validity will be treated as beyond judicial review is a pragmatic device, not
required by the nature of sovereign authority and inconsistently applied in
international law. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 421-22, 84 S.
Ct. 923, 936-37, 11 L. Ed. 2d 804 (1964). The purpose of the device is to keep the
judiciary from embroiling the courts and the country in the affairs of the foreign
nation whose acts are challenged. Minimally viewed, the classification keeps a court
from making pronouncements on matters over which it has no power; maximally
interpreted, the classification prevents the embarrassment of a court offending a
foreign government that is "extant at the time of suit." Id. at 428, 84 S.Ct. at 940.
18

The "continuing vitality" of the doctrine depends on "its capacity to reflect the proper
distribution of functions between the judicial and political branches of the
Government on matters bearing upon foreign relations." Id. at 427-28, 84 S.Ct. at
939-40. Consequently, there are "constitutional underpinnings" to the
classification. Id. at 423, 84 S.Ct. at 938. A court that passes on the validity of an "act
of state" intrudes into the domain of the political branches. The proper application of
the doctrine is illustrated by Occidental Petroleum Corp. v. Buttes Gas & Oil
Co., 331 F. Supp. 92 (C.D.Cal.1971), aff'd per curiam, 461 F.2d 1261 (9th Cir.), cert.
denied, 409 U.S. 950, 93 S. Ct. 272, 34 L. Ed. 2d 221 (1972).
19

As a practical tool for keeping the judicial branch out of the conduct of foreign
affairs, the classification of "act of state" is not a promise to the ruler of any foreign
country that his conduct, if challenged by his own country after his fall, may not
become the subject of scrutiny in our courts. No estoppel exists insulating a depo sed
dictator from accounting. No guarantee has been granted that immunity may be
acquired by an ex-chief magistrate invoking the magic words "act of state" to cover
his or her past performance.
20

The classification might, it may be supposed, be used to prevent judicial challenge in

our courts to many deeds of a dictator in power, at least when it is apparent that
sustaining such challenge would bring our country into a hostile confrontation with
the dictator. Once deposed, the dictator will find it difficult to deploy the defense
successfully. The "balance of considerations" is shifted. Sabbatino, 376 U.S.
at 428, 84 S. Ct. at 940. A fortiori, when a ruler's former domain has turned against
him and seeks the recovery of what it claims he has stolen, the classification has little
or no applicability. The act of state doctrine is supple, flexible, ad hoc. The doctrine
is meant to facilitate the foreign relations of the United States, not to furnish the
equivalent of sovereign immunity to a deposed leader.
21

In the instant case the Marcoses offered no evidence whatsoever to support the
classification of their acts as acts of state. The burden of proving acts of s tate rested
upon them. Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682,
695, 96 S. Ct. 1854, 1861, 48 L. Ed. 2d 301 (1976). They did not even undertake the
proof. The United States, invited by the court to address this matter as an amicus,
assures us that the Executive does not at present see the applicability of this defense.
Brief of the United States of America as Amicus Curiae, p. 11. The act of state
doctrine, the Executive declares, has "no bearing" on this case as it stands. As the
doctrine is a pragmatic one, we cannot exclude the possibility that, at some later
point in the development of this litigation, the Marcoses might produce evidence that
would warrant its application. On the present record, the defense does not apply.
22

Political Questions. Bribetaking, theft, embezzlement, extortion, fraud, and

conspiracy to do these things are all acts susceptible of concrete proofs that need not
involve political questions. The court, it is true, may have to determine questions of
Philippine law in determining whether a given act was legal or illegal. But questions
of foreign law are not beyond the capacity of our courts. See Zschernig v.
Miller, 389 U.S. 429, 461, 88 S. Ct. 664, 681, 19 L. Ed. 2d 683 (1968) (Harlan, J.
concurring); Fed.R.Civ.P. 44.1 (allowing consideration of foreign law materials). The
court will be examining the acts of the president of a country whose immediate
political heritage is from our own. Although sometimes criticized as a ruler and at
times invested with extraordinary powers, Ferdinand Marcos does not appear to
have had the authority of an absolute autocrat. He was not the state, but the head of
the state, bound by the laws that applied to him. Our courts have had no difficulty in
distinguishing the legal acts of a deposed ruler from his acts for personal profit that
lack a basis in law. As in the case of the deposed Venezuelan ruler, Marcos Perez
Jimenez, the latter acts are as adjudicable and redressable as would be a dictator's
act of rape. Jimenez v. Aristeguieta, 311 F.2d 547 (5th Cir.1962).
The Convenience of the Forum
23

The Marcoses maintain that the Republic's action should have been dismissed, even
if the district court had jurisdiction, on the ground of forum non conveniens. They
point to the foreign character of the plaintiff, the nature of the Republic's claims
about the Marcoses' conduct in office, and the fact that the court will be called upon
to decide questions of Philippine law. The inconvenience of the forum was argued by
the Marcoses to the district court. But the court did not address the argument. On
the present record the district court did not abuse its discretion in refusing to
dismiss the Republic's action on forum non conveniens grounds before issuing the
preliminary injunction.
Injunction Rather Than Attachment
24

Fed.R.Civ.P. 64 makes available all remedies for the seizure of property "in the
manner provided by the law of the state in which the district court is held." The
Marcoses argue that the freeze of their assets is an attachment and that California
law permits attachment only in connection with a claim based upon a contract.
Cal.Civ.Proc.Code Sec. 483.010(c). The Marcoses are mistaken. While a freeze of
assets has the effect of an attachment, it is not an attachment. F.T.C. v. H.N. Singer,
Inc., 668 F.2d 1107, 1112 (9th Cir.1982). The court has power to preserve the status
quo by equitable means. A preliminary injunction is such a
means. F.T.C., 668 F.2d at 1112.
25

The Standard for Issuance of the Injunction

26

The issuance of the preliminary injunction was not an abuse of discretion by the
district court if that court properly concluded that the Republic had shown the
probability of success on the merits of its pendent claims and the possibility of
irreparable injury, or that the pendent claims raised serious questions and the
balance of hardships tipped sharply in favor of the Republic. Hoopa Valley Tribe v.
Christie, 812 F.2d 1097, 1102 (9th Cir.1987). "These are not two distinct tests, but
rather the opposite ends of a single 'continuum in which the required showing of
harm varies inversely with the required showing of meritoriousness.' " Rodeo
Collection, Ltd. v. West Seventh, 812 F.2d 1215, 1217 (9th Cir.1987) (quoting San
Diego Committee Against Registration and the Draft v. Governing Board of the
Grossmont Union High School Dist., 790 F.2d 1471, 1473 n. 3 (9th Cir.1986)). "The
critical element in determining the test to be applied is the relative hardsh ip to the
parties. If the balance of harm tips decidedly toward the plaintiff, then the plaintiff
need not show as robust a likelihood of success on the merits as when the balance
tips less decidedly." Benda v. Grand Lodge of Int'l Assoc. of Machinists & Aerospace
Workers, 584 F.2d 308, 315 (9th Cir.1978), cert. dismissed, 441 U.S. 937, 99 S.
Ct. 2065, 60 L. Ed. 2d 667 (1979) (citation omitted).
27

For the purposes of injunctive relief, "serious questions" refers to questions which
cannot be resolved one way or the other at the hearing on the injunction and as to
which the court perceives a need to preserve the status quo lest one side prevent
resolution of the questions or execution of any judgment by altering the status quo.
Serious questions are "substantial, difficult and doubtful, as to make them a fair
ground for litigation and thus for more deliberative investigation." Hamilton Watch
Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir.1952) (Frank, J.). Serious
questions need not promise a certainty of success, nor even present a probability of
success, but must involve a "fair chance of success on the merits." National Wildlife
Fed'n v. Coston, 773 F.2d 1513, 1517 (9th Cir.1985) (Duniway, J.). Applying these
principles and definitions to this case, we conclude that the district court did not
abuse its discretion in granting the preliminary injunction.
28

The district court stated orally that "the hardship is clearly on the side of the
plaintiff." The district court also made the written finding that there was more than a
mere possibility of irreparable harm; in fact, it concluded that the Republic "would
be irreparably injured if [the injunction] were not issued." (emphasis added). The
Marcoses have offered no evidence of any hardship they would suffer if the
injunction were issued. Indeed, the district court stipulated in the injunction that the
Marcoses may use their assets to cover normal living expenses and legal fees.
Irreparable injury was weighed against zero evidence of hardship. On this record, the
balance of hardships tipped decidedly in the Republic's favor.
29
 The district court also concluded that the Republic had a "substantial likelihoo d" of
prevailing on the merits. Although we do not read this as a finding of probability of
success, we do believe that it represents a finding that the Republic has at least a fair
chance of success, which is all that is required. See Benda, 584 F.2d at 315. We agree
with the district court that the Republic has at least a fair chance of prevailing on the
merits, including on the merits of its constructive trust claim.
30

The Republic presented evidence that in February 1986 the Marcoses had
transported from the Philippines to Hawaii $8.2 million worth of cash, negotiable
instruments, jewelry, and other property, allegedly derived from the Marcoses'
wrongdoing in the Philippines. Ferdinand Marcos swore by affidavit that it had not
been his intention to go to Hawaii and that he had been taken there involuntarily by
the government of the United States. But as he sought to recover from United States
Customs all of these items he clearly intended to introduce them into the United
States. He used the United States mail and telephone services for this purpose.
31

The Republic also presented evidence that since at least 1968 the Marcoses had a
checking account at a bank in Beverly Hills, California and that this account was
used to make payments of $200,000 to "William Saunders" and $100,000 to "Jane
Ryan." The Republic introduced evidence that these names were aliases under which
Ferdinand Marcos and Imelda Marcos acted. The Republic presented evidence of the
creation by the Marcoses in 1970 of a Lichtenstein entity entitled the "Sandy
Foundation," which in effect was a trust to make investments for the benefit of the
Marcoses and their children, Imelda, Ferdinand, and Irene, and which was funded by
the Marcoses with an initial capital of 100,000 Swiss francs. The Republic presented
evidence that "Jane Ryan" and "William Saunders" transferred their accounts to this
trust and that Credit Suisse, a Zurich bank, was "the administering bank" of the
trust. The Republic presented evidence of correspondence by the Marcoses as
customers of that bank and the use by Imelda Marcos of the alias of Jane Ryan in
dealing with that bank.
32

According to the Republic's evidence, a code was worked out for contacts between
the Marcoses and the trust. According to a copy of a memorandum signed by
Ferdinand Marcos, if he cabled "Happy Birthday" to the bank, its Hong Kong
representative, Ralph Klein, would proceed to Manila and "contact him through Col.
Fabian C. Ver." (Colonel Ver is now General Ver, associated with the Marcoses in
power and in their flight from the Philippines.)
33

In addition to this evidence of secretive dealings in substantial sums of money in the

course of which the Marcoses used a bank in California, the Republic submitted a
statement by the Minister of the Budget of the Philippines as to the total salaries
 authorized to be paid Ferdinand Marcos as president from 1966 to 1985 and Imelda
Marcos as a minister of government from 1976 to 1985. The total authorized amount
is P 2,288,750, in dollars less than $800,000. The Republic submitted what purports
to be a balance sheet signed by Ferdinand Marcos as part of a tax return stating his
assets as of December 31, 1966 as P 150,000, in dollars less than $60,000. The
Republic submitted the sworn deposition, executed June 16, 1986, of Rafael
Fernando, Representative and Coordinator on the West Coast of the United States of
the Presidential Commission on Good Government of the Republic of the
Philippines. Fernando declares that Swiss bank authorities have documented to the
government of the Republic the existence of bank accounts owned by Ferdinand
Marcos in the amount of $200 million and have reported to the Republic the
existence of other accounts held for or on behalf of him in the amount of
approximately $1.3 billion.
34

The Marcoses' clandestine dealings with Credit Suisse and the Lichtenstein trust and
the discrepancy between the purported balance sheet of 1966 and the reported assets
of 1986, coupled with the reported authorized salaries of the Marcoses as members
of the government of the Republic, give rise to the inference that very large sums of
money were amassed by the Marcoses by the unlawful means alleged by the
Republic. The inference depends in part on the hearsay statements of Fernando. It
was within the discretion of the district court to accept this hearsay for purposes of
deciding whether to issue the preliminary injunction. Flynt Distrib. Co., Inc. v.
Harvey, 734 F.2d 1389, 1394 (9th Cir.1984) ("The urgency of obtaining a preliminary
injunction necessitates a prompt determination and makes it difficult to obtain
affidavits from persons who would be competent to testify at trial. The trial court
may give even inadmissible evidence some weight, when to do so serves the purpose
of preventing irreparable harm before trial."); see also K-2 Ski Co. v. Head Ski
Co., 467 F.2d 1087, 1088 (9th Cir.1972) (trial court may consider allegations in
verified complaint in issuing preliminary injunction). No affidavits countering the
inference were presented by the Marcoses. See K-2 Ski Co., 467 F.2d at 1089. The
Republic's case remains to be proved. The Republic has put forward enough to show
a fair chance of succeeding with its proof.
The Scope of the Injunction
35

The injunction is directed against individuals, not against property; it enjoins the
Marcoses and their associates from transferring certain assets wherever they are
located. Because the injunction operates in personam, not in rem, there is no reason
to be concerned about its territorial reach. See, e.g., Steele v. Bulova Watch
Co., 344 U.S. 280, 289, 73 S. Ct. 252, 257, 97 L. Ed. 319 (1952) (district court "in
exercising its equity powers may command persons properly before it to cease to
perform acts outside its territorial jurisdiction") (citations omitted).
36
 A court has the power to issue a preliminary injunction to prevent a defendant from
dissipating assets in order to preserve the possibility of equitable remedies. See, e.g.,
F.T.C. v. H.N. Singer, Inc., 668 F.2d 1107, 1112 (9th Cir.1982) (preliminary
injunction appropriate to preserve the possibility of equitable remedies). The
injunction here enjoins the defendants from secreting those assets necessary to
preserve the possibility of equitable relief.
37

Although the gravamen of the complaint is that the Marcoses converted public
property to their own use, the seventh claim for relief, which alleges a constructive
trust, states an equitable cause of action and seeks equitable relief: "[The Marcoses],
by virtue of their position as President of the Philippines and Governor of Manila,
respectively, occupied positions of trust as to the Philippines and its people. [The
Marcoses] violated said trust by their numerous acts of conversion, fraud, deceit,
constructive fraud, civil conspiracy, acts of racketeering, and other unlawful acts." As
the result of these asserted violations of trust, the Marcoses acquired specific funds
and real property, including the accounts with Lloyds Bank, the real property in
Beverly Hills, the deposits with the Swiss banks and the property brought into
Hawaii. Complaint, paragraphs 62-67. In granting the preliminary injunction, the
district court specifically found "that the Philippines will be entitled to an accounting
for, and to impose a constructive trust upon, the property subject to this Order." The
district court found the preliminary injunction necessary to preserve the possibility
of equitable relief. On this record, the district court did not abuse its discretion in
entering an injunction of this scope.
38

The district court remains free to modify or dissolve the preliminary injunction if
warranted by developments in this case subsequent to the noticing of this appeal.
Lyng v. Northwest Indian Cemetery Protective Assoc., --- U.S. ----, 108 S. Ct. 1319,
1330, 99 L. Ed. 2d 534 (1988). See also 7 J. Moore, W. Taggert & J. Wicker, Moore's
Federal Practice p 65.07 at 65-114 (2d ed. 1987).
39

In Summation. Jurisdiction to hear the Republic's claims and to enter the

preliminary injunction exists. A serious question of liability has been presented and
the Republic has a fair chance of success on the merits of its case. The Marcoses have
not presented any preclusive defense. The scope of the injunction is justified. It was
imperative for the district court to preserve the status quo lest the defendants
prevent resolution of the case by putting their property beyond the reach of the
court. Hardship to the Republic would have been great and irreparable if the district
court had not taken its prudent, amply justified action to keep the Marcoses' assets
from disappearing.
40

AFFIRMED.
41

SCHROEDER, Circuit Judge, with whom CANBY, Circuit Judge, joins concurring in
part and dissenting in part.
42

I join in the majority's conclusion that there is a well-pleaded RICO claim providing
federal subject matter jurisdiction. I agree further that the act of state doctrine is not
a threshold bar to considering the activities of the defendants during the time that
Mr. Marcos was the Philippine head of state. Those were the principal issues that a
majority of the three-judge panel considered and that we undertook to decide in this
en banc proceeding.
43

The injunction we review, however, was entered only a week after this suit was filed,
and the record before us is minimal. It does not provide support for the majority's
resolution of the further issues it must reach, without reasoned analysis, in order to
uphold this injunction. I therefore dissent from the affirmance.
44

The injunction is based upon the district court's exercise of pendent jurisdiction, not
federal question jurisdiction. It is based on a complaint alleging, in the most
sweeping of generalities, pendent claims of fraud and conversion by the Marcoses
over the course of twenty years. The pendent claims are alleged to be violations of as
yet unspecified laws of as yet unspecified states and countries. The district court's
injunction purports to reach over a billion dollars worth of assets, the bulk of which
are located in Switzerland. See Republic of the Philippines v. Marcos, 818 F.2d 1473,
1476 (9th Cir.1987).
45

To affirm this injunction, the majority must hold that the district court properly
exercised pendent jurisdictional authority to reach all of the Marcoses' property,
wherever located. I cannot agree. The basis for federal jurisdiction is contained in
RICO allegations of illegal activities concerning assets now located in the United
States. There has been no showing that these claims arise in any way from the same
allegedly wrongful transactions through which the Marcoses acquired other property
located elsewhere. Nor does the record disclose any reason why a court in California,
as opposed to courts in the Philippines or Switzerland, should decide claims to
property stolen from the Philippines and transported to Switzerland. I therefore part
company with the majority when it affirms on this record the district court's issuance
of a preliminary injunction preventing the Marcoses from disposing of any assets
anywhere in the world.
46
 In my view the existence of pendent jurisdiction over claims reaching all the
Marcoses' assets has not yet been established. As explained more fully below this
injunction should be vacated and the matter remanded to the district court for
consideration of pendent jurisdiction and other issues on the basis of a fuller record.
BACKGROUND
47

The plaintiff sought an injunction to be entered solely in the exercise of pendent

jurisdiction because RICO does not authorize injunctive relief. See Religious
Technology Center v. Wollersheim, 796 F.2d 1076, 1088-89 (9th Cir.1986), cert.
denied, 479 U.S. 1103, 107 S. Ct. 1336, 94 L. Ed. 2d 187 (1987). RICO, however, does
provide the requisite federal question jurisdiction.
48

For the RICO predicate acts in violation of the laws of the United States, the
complaint alleged violations of 18 U.S.C. Secs. 1341, 1343, 2314, and 2315. The
alleged racketeering activities essentially involve mail and wire fraud and the
importation of stolen goods into the United States. The showing before the district
court of the Marcoses' actual holdings in the United States included the Marcoses'
interests in California real estate, the existence of a bank account with a California
bank, and the transporting to Hawaii of $8.2 million in funds and property.
49

The district court granted the injunction in conclusory fashion, finding:

50

(1) That there is a substantial danger that, if this Order were not issued, the parties
against whom this Order is directed would transfer or conceal funds, property, books and
records, placing said items beyond the Court's process and recovery by the Philippines in
this action.
51

(2) That the Philippines therefore would be irreparably injured if this Order were not
issued.
52

(3) That there is a substantial likelihood that the Philippines will prevail in thi s action,
and that the Philippines will be entitled to an accounting for, and to impose a
constructive trust upon, the property subject to this Order.
53

When this court first considered this appeal, a fractured three-judge panel held that
the complaint should have been dismissed in its entirety. A majority of the panel
 held that the act of state doctrine prevented the court from inquiring into the
Marcoses' activities during the period in question. Marcos, 818 F.2d at 1489-90.
Because a majority of the panel concluded that the act of state doctrine prevented the
court from adjudicating any of the claims, the majority did not need to consider, and
did not address, the issues of pendent jurisdiction.
54

Judge Hall, in a separate concurring opinion, concluded that there was additionally a
lack of subject matter jurisdiction because no RICO claim had been well
pleaded. Id. at 1490-91.
55

Judge Nelson dissented, disagreeing with the other judges as to the applicability of
the act of state doctrine. The dissent argued persuasively that the majority's holding
with respect to the act of state doctrine was inconsistent with existing Supreme Court
and Ninth Circuit authority. Id. at 1492-95. We granted en banc review because of
that inconsistency, which was the principal focus of the petition for rehearing and
rehearing en banc filed by the Government of the Philippines.
RICO CLAIMS AND FEDERAL QUESTION JURISDICTION
56

In defense of the panel's decision that the complaint be dismissed in its entirety, the
Marcoses have focused upon Judge Hall's separate opinion that there was no well -
pleaded RICO claim and hence no federal jurisdiction. See id. at 1490-91. The
Marcoses have urged that in order to make out a claim under RICO, the complaint
would have to allege that there was an adverse economic impact upon the United
States by virtue of the defendants' conduct.
57

RICO, however, was aimed at the destructive effect of organized criminal activity on
our society. Its provisions do not focus on any adverse effect of specific activity on
the nation's GNP. Its history emphasizes the adverse consequences of organized
crime on our democratic processes, our domestic security and our general welfare,
including but not limited to the economic system. See RICO Statement of Findings
and Purpose, Pub.L. No. 91-452, 84 Stat. 922 (1970), 91st Cong., 2d Sess., reprinted
in 1970 U.S.Code Cong. & Admin.News 1073. The Supreme Court has stated:
58

RICO is to be read broadly. This is the lesson not only of Congress' self-consciously
expansive language and overall approach, ... but also of its express admonition that RICO
is to "be liberally construed to effectuate its remedial purposes." ... RICO was an
aggressive initiative to supplement old remedies and develop new methods for fig hting
crime.
59
 Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 497-98, 105 S. Ct. 3275,
3286, 87 L. Ed. 2d 346 (1985); see also Russello v. United States, 464 U.S. 16,
26, 104 S. Ct. 296, 302, 78 L. Ed. 2d 17 (1983) ("[t]he legislative history clearly
demonstrates that the RICO statute was intended to provide new weapons of
unprecedented scope for an assault upon organized crime and its economic roots").
60

What RICO does require is "a pattern of racketeering activity." 18 U.S.C. Sec. 1962.
By definition, "racketeering activity" necessitates a violation of one of our state or
federal laws. 18 U.S.C. Sec. 1961. Federal RICO jurisdiction thus attaches only to
those activities that allegedly violate our domestic laws.
61

In this case, in Count One of the Complaint, the plaintiff alleges that the Marcoses
engaged in mail and wire fraud, and importation of stolen property into the United
States in violation of 18 U.S.C. Secs. 1341, 1343, 2314, 2315. In engaging in these
activities, the plaintiff alleges that the Marcoses were conducting a RICO enterprise
as part of an association in fact with the other defendants. These allegations, on their
face at least, would survive a motion to dismiss for lack of subject matter
jurisdiction. I therefore agree that there is a RICO basis for federal subject matter
jurisdiction.
62

Finding a basis for federal question jurisdiction is but a first step, however, in
reviewing the propriety of this injunction. The claims on which this injunction rests
are pleaded as claims pendent to the RICO claims. The next step is thus to consider
whether the relationship between the pendent claims and the federal claims are
sufficiently close to permit the district court to assume jurisdiction over pendent
claims reaching the Marcoses' worldwide holdings. See United Mine Workers v.
Gibbs, 383 U.S. 715, 725, 86 S. Ct. 1130, 1138, 16 L. Ed. 2d 218 (1966).THE
INJUNCTION AND PENDENT JURISDICTION
63

In holding that the district court had pendent jurisdiction over claims to the
Marcoses' assets wherever located in the world, the majority fails to appreciate that
pendent jurisdiction can derive only when there is a sufficient factual connection
between the activities giving rise to the pendent claims and the activities giving rise
to the federal claims. In this case, such pendent jurisdiction should properly derive
only from activities directly related to the alleged RICO violations of United States
law. These comprise the alleged fraudulent dealings in this country and illegal
importation of assets into the United States. It is not enough for the majority to
characterize all the claims as involving criminal misconduct. See majority op. at
1359-1360.
64
 Plaintiff claims the assets now in the United States are traceable to thefts of assets
rightfully belonging to the people of the Philippines. There may well be a sufficient
factual nexus to sustain pendent jurisdiction for claims arising from the original
wrongful appropriations of the property now found in this country. This is because
the property is the same. No such factual link as yet exists for the pendent claims to
property transferred from the Philippines to other countries.
65

It is an elementary legal principle that federal courts are courts of limited

jurisdiction. There are constitutional restraints on their exercise of jurisdiction. The
Constitution restricts federal courts' jurisdiction to claims "arising under [the]
Constitution, the Laws of the United States, and Treaties made, or which shall be
made, under their Authority." U.S. Const., art. III, Sec. 2. When a plaintiff pleads a
federal claim within a district court's federal subject matter jurisdiction, a plaintiff
may not automatically bring any other claim against the same defendant. Subject
matter jurisdiction of non-federal claims, under the judicially-created doctrine of
pendent jurisdiction, depends upon the relationship between those claims and the
federal claims.
66

The Supreme Court initially set out the concept underlying pendent jurisdiction in
1824 in Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 6 L.
Ed. 204 (1824). There, the Court stated that
67

when a question to which the judicial power of the Union is extended by the constitution,
forms an ingredient of the original cause, it is in the power of congress to give the Circuit
Courts jurisdiction of that cause, although other questions of fact or of law may be
involved in it.
68

Id. at 823. The Court subsequently expanded the Osborn doctrine in Siler v.
Louisville & Nashville R.R. Co., 213 U.S. 175, 29 S. Ct. 451, 53 L. Ed. 753 (1909), then
narrowed pendent jurisdiction's scope in Hurn v. Oursler, 289 U.S. 238, 53 S.
Ct. 586, 77 L. Ed. 1148 (1933). Finally, more than two decades ago, the Court
clarified the scope of pendent jurisdiction in United Mine Workers v.
Gibbs, 383 U.S. 715, 86 S. Ct. 1130, 16 L. Ed. 2d 218 (1966).
69

In Gibbs, a unanimous Court rejected Hurn as "unnecessarily grudging," id. at

725, 86 S.Ct. at 1138, and adopted a two-part test resting on considerations of power
and discretion. In evaluating a federal court's power to hear a pendent claim, the
Court stated that:
70
[p]endent jurisdiction, in the sense of judicial power, exists whenever there is a claim
"arising under [the] Constitution, the Laws of the United States, and Treaties made, or
which shall be made, under their Authority ...," U.S. Const., Art. III, Sec. 2, and the
relationship between that claim and the state claim permits the conclusion that the entire
action before the court comprises but one constitutional "case." The federal claim must
have substance sufficient to confer subject matter jurisdiction on the court.... The state
and federal claims must derive from a common nucleus of operative fact. But if,
considered without regard to their federal or state character, a plaintiff's claims are such
that he would ordinarily be expected to try them all in one judicial proceeding, then,
assuming substantiality of the federal issues, there is power in federal courts to hear the
whole.
71

Id.
72

Thus, federal claims and pendent claims must all derive from a "common nucleus of
operative fact." They must also be the sort that would ordinarily be tried in "one
judicial proceeding." Id. The majority opinion does not analyze the pendent claims.
Instead, it merely announces that the pendent claims arose from a nucleus of
operative fact common to the RICO claims. Majority op. at 1359.
73

In reviewing the entry of the preliminary injunction, we should consider the nature
of the asserted pendent jurisdiction and address the two jurisdictional issues that
Gibbs requires courts to address when dealing with pendent claims.
74

The first question, therefore, is whether the RICO claims and all of the pendent
claims arise from a "common nucleus of operative fact." They do not. The RICO
claims of necessity have to do with the defendants' activities that violated the
criminal laws of the United States. The pendent claims are not limited to those
activities and reach property that has not been shown to have any connection with
the United States itself or violations of our law.
75

Upholding pendent jurisdiction in such circumstances is thus contrary to the

teaching of decisions following Gibbs that have focused on the nexus between events
underlying the federal cause of action and those underlying pendent state causes of
action. See, e.g., Finn v. Gunter, 722 F.2d 711, 713 (11th Cir.1984) (finding pendent
jurisdiction); PAAC v. Rizzo, 502 F.2d 306, 312-13 (3d Cir.1974), cert.
denied, 419 U.S. 1108, 95 S. Ct. 780, 42 L. Ed. 2d 804 (1975) (no pendent
jurisdiction); see also C. Wright, A. Miller & E. Cooper, 13B Federal Practice and
Procedure Sec. 3567.1 (1984). Our circuit also evaluates pendent claims under the
 nexus test. See, e.g., Klaus v. Hi-Shear Corp., 528 F.2d 225, 231 (9th Cir.1975). The
plaintiffs have provided us with no explanation of how the pendent claims are
related to the RICO claims. The only factual connection between all the claims of
wrongdoing in this case appears to be a common plaintiff and common defendants.
Under Gibbs and the constitutional restraints on the exercise of power by the federal
judiciary in Article III, that is not sufficient.
76

Moreover, even assuming there is a common nexus of fact reaching all the Marcoses'
assets, pendent jurisdiction would exist only as to the claims that would ordinarily b e
tried in one judicial proceeding. Gibbs, 383 U.S. at 725, 86 S. Ct. at 1138. These are
not such claims. The RICO claims allege violations of the United States' criminal
laws through activities in this country. The pendent claims, on the other hand,
encompass allegations of fraud and conversion stemming from the Marcoses' actions
in the Philippines spanning a twenty-year period. Further, the bulk of the property
claimed, according to the complaint, is located in Switzerland. The claims against the
Marcoses are in fact already the subject of multiple judicial proceedings. See, e.g.,
Republic of the Philippines v. Marcos, litigation in the Southern District of New
York, 86 Civ. 2294 (PNL), and Republic of the Philippines v. Marcos, litigation in the
District of Hawaii, No. CV-86-0155 HMF. The plaintiff cites no case remotely similar
in scope to this case. The claims here are not those ordinarily tried in one judicial
proceeding.
ACT OF STATE DOCTRINE
77

The majority of our three-judge panel concluded that the act of state doctrine bars
consideration of the plaintiffs' claims. I agree with the majority of this en banc court
that such a holding is not appropriate on this record. I do not agree with the
majority, however, that this injunction can be affirmed without any regard to the act
of state doctrine.
78

The panel majority's use of the act of state doctrine as a threshold bar in the
circumstances of this case is not consistent with the development of that doctrine
under Supreme Court authority. See, e.g., Alfred Dunhill of London, Inc. v.
Cuba, 425 U.S. 682, 96 S. Ct. 1854, 48 L. Ed. 2d 301 (1976); Banco Nacional de Cuba
v. Sabbatino, 376 U.S. 398, 84 S. Ct. 923, 11 L. Ed. 2d 804 (1964). We have expressly
stated that the act of state doctrine is not jurisdictional. See International
Association of Machinists and Aerospace Workers v. OPEC, 649 F.2d 1354, 1359 (9th
Cir.1981), cert. denied, 454 U.S. 1163, 102 S. Ct. 1036, 71 L. Ed. 2d 319 (1982);
Timberlane Lumber Co. v. Bank of America, 549 F.2d 597, 602 (9th Cir.1976), cert.
denied, 472 U.S. 1032, 105 S. Ct. 3514, 87 L. Ed. 2d 643 (1985). Rather, the doctrine
involves the judiciary's prudential decision to refrain from adjudicating the legality
of a foreign sovereign's public acts that were committed within its own territory.
See OPEC, 649 F.2d at 1359; see also Sabbatino, 376 U.S. at 401, 84 S.Ct. at 926. The
Supreme Court, in addressing the act of state doctrine, has stated:
79

Every sovereign state is bound to respect the independence of every other sovereign state,
and the courts of one country will not sit in judgment on the acts of the government of
another, done within its own territory. Redress of grievances by reason of such acts must
be obtained through the means open to be availed of by sovereign powers as between
themselves.
80

Sabbatino, 376 U.S. at 416, 84 S.Ct. at 934 (quoting Underhill v.

Hernandez, 168 U.S. 250, 252, 18 S. Ct. 83, 84, 42 L. Ed. 456 (1897)).
81

The act of state doctrine "expresses the strong sense of the Judicial Branch that its
engagement in the task of passing on the validity of foreign acts of state may hinder
rather than further this country's pursuit of goals both for itself and for the
community of nations as a whole in the international sphere." Sabbatino, 376 U.S.
at 423, 84 S. Ct. at 938. The Court further elaborated that the doctrine involves
separation of powers:
82

[The doctrine's] continuing vitality depends on its capacity to reflect the proper
distribution of functions between the judicial and political branches of the Government
on matters bearing upon foreign affairs.... [S]ome aspects of international law touch
much more sharply on national nerves than do others; the less important the
implications of an issue are for our foreign relations, the weaker the justification for
exclusivity in the political branches.... [W]e decide only that the Judicial Branch will not
examine the validity of a taking of property within its own territory by a foreign sovereign
government, extant and recognized by this country at the time of suit.
83

Id. at 427-28, 84 S.Ct. at 940.

84

However, these considerations are less compelling in the situation before us, where
the foreign government has itself invoked our jurisdiction, and the challenged
actions involve a government no longer in power. In Sabbatino, the Supreme Court
observed that, "[t]he balance of relevant considerations may also be shifted if the
government which perpetrated the challenged act of state is no longer in existence ...
for the political interest of this country may, as a result, be measurably altered." 376
U.S. at 428, 84 S. Ct. at 940. "Moreover, the act of state doctrine reflects respect for
foreign states, so that when a state comes into our courts and asks that our courts
scrutinize its actions, the justification for application of the doctrine may well be
significantly weaker." Republic of the Philippines v. Marcos, 806 F.2d 344, 359 (2d
Cir.1986).
85

Further, the Supreme Court has noted that for doctrine to apply the acts in question
must have involved public acts of the sovereign. The Court stated that in each of its
act of state decisions, the facts were sufficient to demonstrate that
86

the conduct in question was the public act of those with authority to exercise sovereign
powers and was entitled to respect in our courts. [H]ere, no statute, decree, order, or
resolution of the Cuban Government itself was offered in evidence indicating that Cuba
had repudiated its obligations in general or any class thereof or that it had as a sovereign
matter determined to confiscate the amounts due three foreign importers.
87

Alfred Dunhill, 425 U.S. at 694-95, 96 S.Ct. at 1861.

88

Accordingly, the courts have insisted that the act of state doctrine precludes review
of public acts of the sovereign. See, e.g., Marcos, 806 F.2d at 358 ("[t]hat the acts
must be public acts of the sovereign as been repeatedly affirmed") (emphasis in
original); Filartiga v. Pena-Irala, 630 F.2d 876, 889 (2d Cir.1980) ("we doubt
whether action by a state official in violation of the Constitution and laws of the
Republic of Paraguay, and wholly unratified by that nation's government, could
properly be characterized as an act of state"); Arango v. Guzman Travel Advisors
Corp., 621 F.2d 1371, 1380 (5th Cir.1980) ("[t]he act of state doctrine only precludes
judicial inquiry into the legality, validity, and propriety of the acts and motivations of
foreign sovereigns acting in their governmental roles within their own boundaries");
Jimenez v. Aristeguieta, 311 F.2d 547, 557 (5th Cir.1962) ("judicial authorities cannot
review the acts done by a sovereign in his own territory to determine illegality");
Sharon v. Time, Inc., 599 F. Supp. 538, 544 (S.D.N.Y.1984) ("[t]he doctrine is limited
to laws, decrees, decisions, seizures, and other officially authorized 'public acts' ");
see also Restatement (Second) of Foreign Relations Law Sec. 41 (1965) (doctrine
involves refraining "from examining the validity of an act of a foreign state by which
that state has exercised its jurisdiction to give effect to its public interest").
89

As the dissenting opinion of Judge Nelson quite rightly pointed out, the act of state
doctrine cannot bar the plaintiffs' action at this stage in the proceedings due to the
distinction between the official acts and the private conduct of a former head of
state. As Judge Nelson stated:
90

Marcos and his agents no doubt exercised broad power, especially after the imposition of
martial law in 1972. But the appropriate inquiry is not to invoke the talismanic label
"dictator." The district court should determine which of the challenged acts were official
and which were not. Only by doing so can the court determine the extent to which the act
of state doctrine may apply.
91

818 F.2d at 1494-95.

92

At this point, no determinations have been made regarding the capacity in which the
Marcoses were acting when the alleged unlawful conduct occurred. Accordingly, the
original panel majority erred in finding that, at this stage of the litigation, the act of
state doctrine bars adjudication of the bulk of the Philippine government's pendent
claims.
93

The majority decision here, however, goes much further. It declares that the
injunction can be affirmed without regard to the act of state doctrine. In my view, we
should instead instruct the district court to consider to what extent, if any, the
doctrine applies in the circumstances of this case, and on the basis of the record
which has developed more fully during the pendency of this interlocutory appeal.
Until such consideration can be given, an injunction of this breadth is not
appropriate.
94

This en banc court requested the amicus views of the Department of State on the act
of state issues. Its brief concludes that the application of the act of state doctrine at
this stage is speculative and the injunction premature. The majority's reliance upon
the position of the United States as support for its holding is wholly misplaced. The
government urges that an injunction should not have been entered on the basis of
this record. The government amicus curiae brief states in appropriate context as
follows:
95

[T]he record before the district court, which did not include any detailed specification of
the factual basis for the bulk of the nonfederal claims, did not make it possible even to
analyze the extent to which those claims are properly before the court....
96

Even assuming jurisdiction, it is not clear at this stage that the district court should, as a
prudential matter, undertake to adjudicate the bulk of the nonfederal claims. The court's
capacity to do so fairly and expeditiously and without offending the sensibility of other
nations cannot be resolved on this record. Adjudication in this district court may turn out
to be barred by considerations of international comity and forum non conveniens.
97
The act of state doctrine seems to us to have little or no bearing on this case at this stage
of its development. The doctrine provides, in general, that the validity of specific acts of a
foreign sovereign is not subject to challenge in our courts; the circumstances of a
particular case may, however, make that general principle inapplicable. On the present
record, it is not clear that any act of state--an act of a sovereign within its territorial
jurisdiction on matters pertaining to its governmental sovereignty--is involved in this
case. Nor is it clear that the case would require an adjudication of the validity of such an
act, without which the case could not fairly proceed. Under these circumstances, the
bearing, if any, of the act of state doctrine on this case should be determined only after
further development of the case on the merits.
98

Amicus brief at 11-12.

99

The United States' views are wholly in accord with those expressed in this dissent
and are in conflict with the majority.
CONCLUSION
100

This injunction is unprecedented in its breadth. To decide the merits of the pendent
claims, the district court would have to unravel all of the Marcoses' financial
transactions over a long period of time and over much of the globe. It would take a
corps of historians years to accomplish the task. We are not yet told why a single
district judge in California should undertake it.
101

I would vacate the injunction and remand the matter to the district court for further
consideration of the appropriate scope of a preliminary injunction.
102

FLETCHER, Circuit Judge, concurring specially in Judge SCHROEDER's concurring

and dissenting opinion:
103

I concur fully in the following portions of Judge Schroeder's opinion: its discussion
of the basis for finding jurisdiction based on a well-pleaded RICO claim; its
discussion of the basis for concluding that the act of state doctrine is not a prudential
bar at this stage of the proceedings in this case.
104
 I concur only in its conclusion that the injunction should be vacated and remanded
for further consideration in that I do not agree with its restrictive view of pendent
jurisdiction (by the same token, I cannot agree with the majority's expansive
approach). Also, I would stay the vacation of the injunction for a reasonable period
of time to allow the district court to reconsider the injunction and its scope in light of
the current state of the record.
*

Judge Anderson heard argument and participated in the discussion of this case, but
died before the opinion was finally agreed upon
[G.R. No. 47517. June 27, 1941.]

IDONAH SLADE PERKINS, Petitioner, v. MAMERTO ROXAS, ET AL., Respondents.

Alva J. Hill for Petitioner.

DeWitt, Perkins & Ponce Enrile for respondent Judge and respondent Perkins.

Ross, Lawrence, Selph & Carrascoso, Jr., for respondent Benguet Consolidated Mining Co.

SYLLABUS

1. COURTS; MEANING OF JURISDICTION OVER SUBJECT MATTER; ADJUDICATION

OF TITLE TO CERTAIN SHARES OF STOCK. — By jurisdiction over the the subject matter
is meant the nature of the cause of action and of the relief sought, and this is conferred by the
sovereign authority which organizes the court, and is to be sought for in the general nature of its
power, or in authority specially conferred. The respondent’s action calls for the adjudication of
title to certain shares of stock of the Benguet Consolidated Mining Company, and the granting of
affirmative reliefs, which fall within the general jurisdiction of the Court of First Instance of
Manila. (Vide sec. 146, et seq., Adm. Code, as amended by Comm. Act No. 145; sec 56, Act No.
136, as amended by Act No. 400.)

2. ID.; ID.; CROSS-COMPLAINT. — I. S. P. in her cross-complaint brought suit against E. A.

P. and the Benguet Consolidated Mining Company upon the alleged judgment of the Supreme
Court of the State of New York and asked the court below to render judgment enforcing that
New York judgment, and to issue execution thereon. This is a form of action recognized by
section 309 of the Code of Civil Procedure (now section 47, Rule 39, Rules of Court) and which
falls within the general jurisdiction of the Court of First Instance of Manila, to adjudicate, settle
and determine.

3. ID.; ID.; ID.; — Whether or not the respondent judge in the course of the proceedings will
give validity and efficacy to the New York judgment set up by the petitioner in her cross-
complaint is a question that goes to the merits of the controversy and relates to the rights of the
parties as between each other, and not to the jurisdiction or power of the court. The test of
jurisdiction is whether or not the tribunal has power to enter upon the inquiry, no whether its
conclusion in the course of it is right or wrong. If its decision is erroneous, its judgment can be
 reversed on appeal; but its determination of the question, which the petitioner here anticipates
and seeks to prevent, is the exercise by the court — and the rightful exercise — of its
jurisdiction.

DECISION

LAUREL, J.:

On July 5, 1938, the respondent, Eugene Arthur Perkins, filed a complaint in the Court
of First Instance of Manila against the Benguet Consolidated Mining Company for the
recovery of the sum of P71,379.90, consisting of dividends which have been declared
and made payable on 52,874 shares of stock registered in his name, payment of which
was being withheld by the company, and for the recognition of his right to the control
and disposal of said shares, to the exclusion of all others. To the complaint, the
company filed its answer, alleging, by way of defense, that the withholding of plaintiff’s
right to the disposal and control of the shares was due to certain demands made with
respect to said shares by the petitioner herein, Idonah Slade Perkins, and by one
George H. Engelhard. The answer prays that the adverse claimants be made parties to
the action and served with notice thereof by publication, and that thereafter all such
parties be required to interplead and settle the rights among themselves.

On September 5, 1938, the trial court ordered the respondent, Eugene Arthur Perkins,
to include in his complaint as parties defendants petitioner, Idonah Slade Perkins, and
George H. Engelhard. The complaint was accordingly amended and in addition to the
relief prayed for in the original complaint, respondent Perkins prayed that petitioner
Idonah Slade Perkins and George H. Engelhard be adjudged without interest in the
shares of stock in question and excluded from any claim they assert thereon.
Thereafter, summons by publication were served upon the non-resident defendants,
Idonah Slade Perkins and George H. Engelhard, pursuant to the order of the trial court.
On December 9, 1938, Engelhard filed his answer to the amended complaint, and on
January 8, 1940, petitioner’s objection to the court’s jurisdiction over her person having
been overruled by the trial court and by this court in G. R. No. 46831, petitioner filed
her answer with a cross-complaint in which she sets up a judgment allegedly obtained
by her against respondent, Eugene Arthur Perkins, from the Supreme Court of the State
of the New York, wherein it is declared that she is the sole legal owner and entitled to
the possession and control of the shares of stock in question together with all the cash
dividends declared thereon by the Benguet Consolidated Mining Company, and prays
for various affirmative reliefs against the Respondent. To the answer and cross-
complaint thus filed, the respondent, Eugene Arthur Perkins, filed a reply and an
answer in which he sets up several defenses to the enforcement in this jurisdiction of
the judgment of the Supreme Court of the State of New York above alluded to. Instead
of demurring to the reply on either of the two grounds specified in section 100 of the
Code of Civil Procedure, Petitioner, Idonah Slade Perkins, on June 5, 1940, filed a
demurrer thereto on the ground that "the court has no jurisdiction of the subject of the
action," because the alleged judgment of the Supreme Court of the State of New York is
res judicata.
Petitioner’s demurrer having been overruled, she now filed in this court a petition
entitled" Certiorari, Prohibition and Mandamus," alleging that "the respondent judge is
about to and will render judgment in the above-mentioned case disregarding the
constitutional rights of this petitioner; contrary to and annulling the final, subsisting,
valid judgment rendered and entered in this petitioner’s favor by the courts of the State
of New York, . . . which decision is res judicata on all the questions constituting the
subject matter of civil case No. 53317, of the Court of First Instance of Manila; and
which New York judgment the Court of First Instance of Manila is without jurisdiction of
annul, amend, reverse, or modify in any respect whatsoever" ; and praying that the
order of the respondent judge overruling the demurrer be annulled, and that he and his
successors be permanently prohibited from taking any action on the case, except to
dismiss the same.

The only question here to be determined, therefore, is whether or not, in view of the
alleged judgment entered in favor of the petitioner by the Supreme Court of New York,
and which is claimed by her to be res judicata on all questions raised by the
respondent, Eugene Arthur Perkins, in civil case No. 53317 of the Court of First
Instance of Manila, the local court has jurisdiction over the subject matter of the action
in the said case. By jurisdiction over the subject matter is meant the nature of the
cause of action and of the relief sought, and this is conferred by the sovereign authority
which organizes the court, and is to be sought for in general nature of its powers, or in
authority specially conferred. In the present case, the amended complaint filed by the
respondent, Eugene Arthur Perkins, in the court below alleged the ownership in himself
of the shares of stock involved in this action as manager of the conjugal partnership
between him and his wife, Idonah Slade Perkins; that the petitioner, Idonah Slade
Perkins; that such claims are invalid, unfounded, and made only for the purpose of
vexing, hindering and delaying Eugene Arthur Perkins in the exercise of the lawful
control over and use of said amended complaint prays, inter alia, "that defendant
Benguet Consolidated Mining Company be required and ordered to recognize the right
of the plaintiff to the control and disposal of said shares so standing in his name to the
exclusion of all others; that the additional defendants, Idonah Slade Perkins and George
H. Engelhard, be each held to have no interest or claim in the subject matter of the
controversy between plaintiff and defendant Benguet Consolidated Mining Company, or
in or under the judgment to be rendered herein and that by the said judgment they,
and each of them be excluded therefrom; and that the plaintiff be awarded the costs of
this suit and general relief." The respondent’s action, therefore, calls for the
adjudication of title to certain shares of stock of the Benguet Consolidated Mining
Company, and the granting of affirmative reliefs, which fall within the general
jurisdiction of the Court of First Instance of Manila. (Vide: sec. 146, et seq., Adm. Code,
as amended by Commonwealth Act No. 145; sec. 56, Act No. 136, as amended by Act
No. 400.)

Similarly, the Court of First Instance of Manila is empowered to adjudicate the several
demands contained in petitioner’s cross- complaint. The cross-complaint sets up a
judgment allegedly recovered by Idonah Slade Perkins against Eugene Arthur Perkins in
the Supreme Court of New York and by way of relief prays: jgc:chanrob les.com. ph

"(1) Judgment against the plaintiff Eugene Arthur Perkins in the sum of one hundred
eighty-five thousand and four hundred dollars ($185,400), representing cash dividend
of March 30, 1937.
"(2) That plaintiff Eugene Arthur Perkins be required to deliver to this defendant the
certificates representing the 48,000 shares of capital stock of Benguet Consolidated
Mining Co. issued as a stock dividend on the 24,000 shares owned by this defendant as
described in the judgment Exhibit 1-A.

"(3) That this defendant recover under that judgment Exhibit 1-A interest upon the
amount of each cash dividend referred to in that judgment received by plaintiff Eugene
Arthur Perkins from February, 1930, to and including the dividend of March 30, 1937,
from the date of payment of each of such dividends at the rate of 7 per cent per annum
until paid.

"(4) That this defendant recover of plaintiff her costs and disbursements in that New
York action amounting to the sum of one thousand five hundred eighty-four and 20/000
dollars ($1,584.00), and the further sum of two thousand dollars ($2,000) granted her
in that judgment Exhibit 1-A as an extra allowance, together with interest.

"(5) For an order directing an execution to be issued in favor of this defendant and
against the plaintiff for amounts sufficient to satisfy the New York judgment Exhibit 1-A
in its entirety, and against the plaintiff and the defendant Benguet Consolidated Mining
Co. for such other amounts prayed for herein as this court may find to be due and
payable by each of them; and ordering them to comply with all other orders which this
court may issue in favor of the defendant in this case.

"(6) For the costs of this action, and

"(7) For such other relief as may be appropriate and proper in the premises." cralaw virtua1aw li bra ry

In other words, Idonah Slade Perkins in her cross-complaint brought suit against
Eugene Arthur perkins and the Benguet Consolidated Mining Company upon the alleged
judgment of the Supreme Court of the State of New York and asked the court below to
render judgment enforcing that New York judgment, and to issue execution thereon.
This is a form of action recognized by section 309 of the Code of Civil Procedure (now
section 47, Rule 39, Rules of Court) and which falls within the general jurisdiction of the
Court of First Instance of Manila, to adjudicate, settle and determine.

The petitioner expresses the fear that the respondent judge may render judgment
"annulling the final, subsisting, valid judgment rendered and entered in this petitioner’s
favor by the courts of the State of New York, . . . which decision is res judicata on all
the questions constituting the subject matter of civil case No. 53317," and argues on
the assumption that the respondent judge is without jurisdiction to take cognizance of
the cause. Whether or not the respondent judge in the course of the proceedings will
give validity and efficacy to the New York judgment set up by the petitioner in her
cross-complaint is a question that goes to the merits of the controversy and relates to
the rights of the parties as between each other, and not to the jurisdiction or power of
the court. The test of jurisdiction is whether or not the tribunal has power to enter upon
the inquiry, not whether its conclusion in the course of it is right or wrong. If its
decision is erroneous, its judgment can be reversed on appeal; but its determination of
the question, which the petitioner here anticipates and seeks to prevent, is the exercise
by that court — and the rightful exercise — of its jurisdiction.
The petition is, therefore, hereby denied, with costs against the petitioner. So ordered.

Avanceña, C.J., Diaz, Moran and Horrilleno, JJ., concur.

[G.R. No. L-1403. October 29, 1948.]

VICENTE CALUAG and JULIANA GARCIA, Petitioners, v. POTENCIANO PECSON

and ANGEL H. MOJICA, Judges of the Court of First Instance of Bulacan, and
LEON ALEJO, Respondents.

Marcial G. Mendiola, for Petitioners.

Antonio Gonzalez for respondent L. Alejo.

The respondent Judge Pecson in his own behalf.

SYLLABUS

1. CONTEMPT; WHEN CONTEMPT IS DIRECT OR INDIRECT. — The contempt supposed

to have been committed by the petitioners is not a direct contempt under section 1,
Rule 64, for it is not a misbehavior in the presence of or so near a court or judge as to
interrupt the administration of justice. It is an indirect contempt or disobedience of a
lawful order of the court, under section 3, Rule 64, of the Rules of Court.

2. ID.; INDIRECT CONTEMPT; PLEADING AND PRACTICE. — Where a contempt under

section 3 has been committed against a superior court or judge the charge may be filed
with such superior court, and the accused put under custody; but if the hearing is
ordered to be had forthwith, the accused may be released from custody upon filing a
bond in an amount to be fixed by the court for his appearance to answer the charge.

3. COURTS; JURISDICTION OVER THE SUBJECT MATTER. — Jurisdiction of the subject

matter of a particular case is something more than the general power conferred by law
upon a court to take cognizance of cases of the general class to which the particular
case belongs. It is not enough that a court has power in abstract to try and decide the
class of litigations to which a case belongs; it is necessary that said power be properly
invoked, or called into activity, by the filing of a petition, complaint or other appropriate
pleading.

4. CONTEMPT; STATUTES; SECTION 9, RULE 39 IN CONNECTION WITH SECTION 7 OF

RULE 64 APPLIED AND CONSTRUED. — The provision of section 9, Rule 39, is applicable
only to specific acts other than those provided for or covered by section 10 of the same
Rule, that is, it refers to a specific act which the party or person must personally do,
because his personal qualification and circumstances have been taken into
consideration in accordance with the provision of article 1161 of the Civil Code. But if a
judgment directs a party to execute a conveyance of land or to deliver deeds or other
documents or to perform any specific act which may be performed by some other
person, or in some other way provided by law with the same effect, as in the present
 case, section 10 and not said section 9 of Rule 39 applies; and under the provision of
said section 10, the court may direct the act to be done, at the cost of the disobedient
party, by some other person appointed or designated by the court, and the act when so
done shall have like effect as if done by the party himself.

5. JUDGMENTS; WANT OF POWER TO RENDER THE PARTICULAR JUDGMENT, EFFECT

OF. — A judgment may be void for want of power to render the particular judgment,
though the court may have had jurisdiction over the subject matter and the parties. A
wrong decision made within the limits of the court’s authority is erroneous and may be
corrected on appeal or other direct review, but a wrong, or for that matter a correct,
decision is void, and may be set aside either directly or collaterally, where the court
exceeds its jurisdiction and power in rendering it. Hence though the court has acquired
jurisdiction over the subject matter and the particular case has been submitted properly
to it for hearing and decision, it will overstep its jurisdiction if it renders a judgment
which it has no power under the law to render.

6. CERTIORARI; JUDGMENT OF IMPRISONMENT IMPOSED BY COURT WITHOUT

STATUTORY POWER; COLLATERAL ATTACK. — A sentence which imposes upon the
defendant in a criminal prosecution a penalty different from or in excess of the
maximum which the Court is authorized by law to impose for the offense of which the
defendant was convicted, is void for want or excess of jurisdiction as to the excess in
the latter case. And a judgment of imprisonment which the court has no constitutional
or statutory power to impose, as in the present case, may also be collaterally attacked
for want or rather in excess of jurisdiction.

DECISION

FERIA, J.:

This is a petition for certiorari and prohibition filed by the petitioners on the ground that
the respondent judge acted without or in excess of the jurisdiction of the court in
rendering the resolution dated April 1, 1947, which declares the petitioners guilty of
contempt of court for not complying or performing the order of the court of January 7,
1947, in the case No. 5486 of the Court of First Instance of Bulacan, requiring the
petitioners to execute a deed of sale in favor of plaintiff over one-half of the land pro
indiviso in question, within ten days from the receipt of copy of said resolution, and
which orders that the petitioners be imprisoned until they perform the said act.

The first ground on which the petition is based is that the judgment of the court which
the petitioners are ordered to perform has not yet become final. This ground is
unfounded. From the pleadings and annexes it appears that the judgment of the lower
court against the petitioners was appealed to the Court of Appeals and was affirmed by
the latter in its decision promulgated on May 30, 1944; that the petition to appeal to
the Supreme Court by certiorari filed by the petitioners was denied on July 24, 1944;
that a motion for reconsideration filed by the petitioners was also denied on August 21,
1944; that the record of the case, having been destroyed during the liberation, was
reconstituted; that on September 24, 1945, the Deputy Clerk of this Court wrote a
letter to and notified the petitioners of the resolution of the Court declaring said record
reconstituted, together with the copies of the decision of the Court of Appeals and
resolutions of the Supreme Court during Japanese occupation of June 24 and August
21, 1944; and that on October 23, 1946, the clerk of Court of First Instance of Bulacan
notified the attorneys for both parties of the said decision of the Court of Appeals and
resolutions of the Supreme Court. There can be no question, therefore, that the
judgment of the Court of First Instance above mentioned, as affirmed by the Court of
Appeals, has become final and executory.

The other two grounds alleged by the petitioners in support of the present petition
for certiorari are: that plaintiff’s action abated or was extinguished upon the death of
the plaintiff Fortunato Alejo, because his right of legal redemption was a personal one,
and therefore not transferable to his successors in interest; and that, even assuming
that it is not a personal one and therefore transferable, his successors in interest have
failed to secure the substitution of said deceased by his legal representative under
section 17, Rule 3. These reasons or grounds do not deserve any serious consideration,
not only because they are without merits, but because the Court of First Instance of
Bulacan, having jurisdiction to render that judgment, the latter cannot be disobeyed
however erroneous it may be (Compañia General de Tabacos v. Alhambra Cigar &
Cigarette Mfg. Co., 33 Phil., 503; Golding v. Balatbat, 36 Phil., 941). And this Court can
not in this proceeding correct any error which may have been committed by the lower
court.

However, although not alleged, we may properly take judicial notice of the fact that the
respondent Judges have acted without jurisdiction in proceeding against and declaring
the petitioners guilty of contempt of court.

The contempt supposed to have been committed by the petitioners is not a direct
contempt under section 1, Rule 64, for it is not a misbehavior in the presence of or so
near a court or judge as to interrupt the administration of justice. It is an indirect
contempt or disobedience of a lawful order of the court, under section 3, Rule 64, of the
Rules of Court. According to sections 4 and 5 of said rule, where a contempt under
section 3 has been committed against a superior court or judge the charge may be filed
with such superior court, and the accused put under custody; but if the hearing is
ordered to be had forthwith, the accused may be released from custody upon filing a
bond in an amount to be fixed by the court for his appearance to answer the charge.
From the record it appears that no charge for contempt was filed against the petitioners
nor was a trial held. The only proceeding had in this case which led to the conviction of
the defendants are: the order of January 7, 1947, issued by the lower court requiring
the defendants to execute the deed of conveyance as directed in the judgment within
ten days from the receipt of the copy of said order, with the admonition that upon
failure to do so said petitioners will be dealt with for contempt of court; the motion of
March 21, 1947, filed by the attorney for the respondent Leon Alejo, administrator of
the estate of Fortunato Alejo, that the petitioners be punished for contempt; and the
resolution of the court of April 1, 1947, denying the second motion for reconsideration
of March 17, 1947, of the order of January 7, 1947, filed by the petitioners, and
ordering the petitioners to be imprisoned in the provincial jail until they have complied
with the order of the court above mentioned.

It is well settled that jurisdiction of the subject matter of a particular case is something
more than the general power conferred by law upon a court to take cognizance of cases
of the general class to which the particular case belongs. It is not enough that a court
has power in abstract to try and decide the class of litigations to which a case belongs;
it is necessary that said power be properly invoked, or called into activity, by the filing
of a petition, complaint or other appropriate pleading. A Court of First Instance has an
abstract jurisdiction or power to try and decide criminal cases for homicide committed
within its territorial jurisdiction; but it has no power to try and decide a criminal case
against a person for homicide committed within its territory, unless a complaint or
information against him be filed with the said court. And it has also power to try civil
cases involving title to real estate situated within its district; but it has no jurisdiction to
take cognizance of a dispute or controversy between two persons over title of real
property located in his province, unless a proper complaint be filed with its court. So,
although the Court of First Instance of Bulacan has power conferred by law to punish as
guilty of indirect contempt a party who disobeys its order or judgment, it did not have
or acquire jurisdiction of the particular case under consideration to declare the
petitioners guilty of indirect contempt, and order their confinement until they have
executed the deed of conveyance in question, because neither a charge has been filed
against them nor a hearing thereof held as required by law.

The respondent Judge Angel Mojica acted not only without jurisdiction in proceeding
against and declaring the petitioners guilty of contempt, but also in excess of
jurisdiction in ordering the confinement of the petitioners, because it had no power to
impose such punishment upon the latter.

The respondent judge has no power under the law to order the confinement of the
petitioners until they have complied with the order of the court. Section 9, Rule 39, in
connection with section 7 of Rule 64, provides that if a person is required by a
judgment or order of the court to perform any other act than the payment of money or
sale or delivery of real or personal property, and said person disobeys such judgment or
order while it is yet in his power to perform it, he may be punished for contempt and
imprisoned until he performs said order. This provision is applicable only to specific acts
other than those provided for or covered by section 10 of the same Rule, that is, it
refers to a specific act which the party or person must personally do, because his
personal qualification and circumstances have been taken into consideration in
accordance with the provision of article 1161 of the Civil Code. But if a judgment directs
a party to execute a conveyance of land or to deliver deeds or other documents or to
perform any specific act which may be performed by some other person, or in some
other way provided by law with the same effect, as in the present case, section 10, and
not said section 9 of Rule 39 applies; and under the provision of said section 10, the
court may direct the act to be done at the cost of the disobedient party, by some other
person appointed or designated by the court, and the act when so done shall have like
effect as if done by the party himself.

It is also well settled by the authorities that a judgment may be void for want of power
to render the particular judgment, though the court may have had jurisdiction over the
subject matter and the parties. A wrong decision made within the limits of the court’s
authority is erroneous and may be corrected on appeal or other direct review, but a
wrong, or for that matter a correct, decision is void, and may be set aside either
directly or collaterally, where the court exceeds its jurisdiction and power in rendering
it. Hence though the court has acquired jurisdiction over the subject matter and the
particular case has been submitted properly to it for hearing and decision, it will
overstep its jurisdiction if it renders a judgment which it has no power under the law to
render. A sentence which imposes upon the defendant in a criminal prosecution a
penalty different from or in excess of the maximum which the court is authorized by
law to impose for the offense of which the defendant was convicted, is void for want or
excess of jurisdiction, as to the excess in the latter case. And a judgment of
imprisonment which the court has no constitutional or statutory power to impose, as in
the present case, may also be collaterally attacked for want or rather in excess of
jurisdiction.

In Cruz v. Director of Prisons (17 Phil., 269, 272, 273), this Court said the following
applicable to punishment imposed for contempt of court: jgc:chanroble s.com.p h

". . . The courts uniformly hold that where a sentence imposes a punishment in excess
of the power of the court to impose, such sentence is void as to the excess, and some
of the courts hold that the sentence is void in toto; but the weight of authority sustains
the proposition that such a sentence is void only as to the excess imposed in case the
parts are separable, the rule being that the petitioner is not entitled to his discharge on
a writ of habeas corpus unless he has served out so much of the sentence as was valid.
(Ex parte Erdmann, 88 Cal., 579; Lowrey v. Hogue, 85 Cal., 600; Armstrong v. People,
37 Ill., 459; State v. Brannon, 34 La Ann., 942; People v. Liscomb, 19 Am. Rep., 211;
In re Taylor, 7 S. D., 382, 45 L. R. A., 136; Ex parte Mooney, 26 W. Va., 36, 53 Am.
Rep., 59; U. S. v. Pridgeon, 153 U. S., 48; In re Graham, 133 U. S., 461.)."

In the present case, in view of the failure of the petitioners to execute the deed of
conveyance directed in the judgment of the court, the respondent may, under section
10, Rule 39, either order its execution by some other person appointed or designated
by the court at the expense of the petitioners, or enter a judgment divesting the title of
the petitioner over the property in question and vesting it in Leon Alejo, administrator
of estate of the deceased Fortunato Alejo, and such judgment has the force and effect
of a conveyance executed in due form of law.

In view of the foregoing, the order of the court of April 7, 1947, ordering the
confinement of the petitioners in the provincial jail until they have complied with the
order of the court, is set aside without costs. So ordered.

Moran, C.J., Pablo, Bengzon, Briones and Tuason, JJ., concur.

Paras, J., concurs in the result.

Separate Opinions

PERFECTO, J., concurring and dissenting: chanrob1e s virtual 1aw l ibra ry

On August 10, 1937, Fortunato Alejo filed a complaint against the spouses Vicente
Caluag and Juliana Garcia, herein petitioners, for the redemption of one-half pro
indiviso of a parcel of land in Guiguinto, Bulacan, covered by transfer certificate No.
19178. After trial, the Court of First Instance of Bulacan rendered judgment on June 23,
1941, ordering petitioners to execute a deed of sale in favor of Fortunato Alejo, upon
payment by plaintiff, as purchase price, of the amount of P2,551. The judgment was
affirmed by the Court of Appeals of Central Luzon on May 30, 1944. A petition for
review on certiorari was denied by the Supreme Court of the so-called Republic of the
Philippines on July 28, 1944. Petitioners’ counsel alleges, under oath, that he was not
notified of said denial. The record of the case was lost or burned during the liberation of
Manila. Fortunato Alejo died on December 10, 1944, petitioners made aware of the fact
only on December 1, 1946. The record, upon petition, was duly reconstituted on August
30, 1946, a resolution to said effect having been issued by this Court.

On October 21, 1946, respondent Leon Alejo, judicial administrator of the estate of
Fortunato Alejo, filed a motion with the Court of First Instance of Bulacan for the
execution of the judgment. On October 28, the motion was indefinitely postponed. On
November 21, Leon Alejo filed another motion for the execution of the judgment, which
was granted on January 7, 1947, Judge Potenciano Pecson ordering defendants "to
execute the deed of sale in favor of the plaintiff for the sum of P2,551 over one-half of
the land pro indiviso described in transfer certificate of title No. 19178 within ten days
from the receipt of a copy of this order; upon failure to do so the said defendants will
be dealt with for contempt of court:"

On February 3, 1947, Leon Alejo filed a petition praying that defendants be punished
for contempt for having failed to comply with the order of January 7. On February 19,
defendants filed a petition seeking reconsideration of the order of January 7, and
dismissal of the complaint for contempt, upon three grounds: (a) That the judgment of
the Court of Appeals of Central Luzon, has not become final and executory; (b) That the
plaintiff’s action was abated or extinguished upon Fortunato Alejo’s death, his right to
legal redemption being personal; and (c) That his successors cannot ask for the
execution of the judgment because they failed to secure the reglementary substitution
of parties and amendment of the judgment.

On March 3, Judge Pecson denied defendants’ petition and granted them five days
within which to comply with the order of January 7, otherwise they would be held in
contempt of court. On March 17, defendants filed another petition for reconsideration.
On March 21, Leon Alejo moved again that defendants be punished for contempt. On
April 1, Judge Angel H. Mojica issued a resolution denying the second petition for
reconsideration, finding defendants guilty of contempt of court and ordering their
confinement in the provincial jail of Bulacan until they have complied with the order of
January 7, directing further that warrant of arrest be issued to said effect. On April 1,
1947, Leon Alejo deposited with the court of first instance the amount of P2,261.63,
evidenced by provincial receipt No. 211013.

Upon the above facts, petitioners raise before us several questions.

(a) LACK OF NOTIFICATION

Petitioners maintain that the decision of the Court of Appeals of Central Luzon,
promulgated on May 30, 1944, and the resolution of the Supreme Court of the so-called
Republic of the Philippines, issued on July 24, 1944, denying their petition for review
on certiorari, had not yet become final, because their counsel has not yet received a
copy of the resolution of denial dated July 24, 1944.
Although the allegation of non-receipt of notice is made under oath and the opposing
party does not specifically contradict the allegation, in respondent Leon Alejo’s answer
it is stated that petitioners filed a motion for reconsideration of the resolution of denial
of July 24, 1944, and the motion was denied on August 21, 1944.

A perusal of the record as declared reconstituted by this Court demonstrates that on

August 11, 1944, the Supreme Court of the so- called Republic of the Philippines
adopted a resolution granting petitioners an extension of five days only of the
reglementary period within which to file a motion for reconsideration of the resolution of
denial of July 24, 1944, the extension granted being in response to petitioners’ prayer
for an extension of ten days, and that on August 21, 1944, said Supreme Court issued
a resolution denying the motion for reconsideration, with Mr. Justice Ozaeta dissenting.

The authenticity of the copies of papers forming part of the reconstituted record has not
been disputed by petitioners. We may, therefore, assume that said record represents
the proceedings which have taken place. Upon this premise, we are constrained to
dismiss petitioners’ allegation that they were not notified of the resolution of denial of
July 24, 1944, as, otherwise, they could not have filed a petition for extension of ten
days and, after being given an extension of only five days, a motion for reconsideration,
the filing of which was necessarily based on petitioners’ knowledge of the resolution of
denial of July 24, 1944, a knowledge that they should have obtained, in the ordinary
course of judicial proceedings, from official notification.

Petitioners’ contention, being based on a fact that is unacceptable, has no leg to stand
on.

(b) EFFECT OF FORTUNATO ALEJO’S DEATH

The next question raised by petitioners is that upon Fortunato Alejo’s death on
December 10, 1944, the complaint "was abated or extinguished," his "act of legal
redemption being personal and not real," and his heirs "could not have acquired that
right" (of legal redemption).

Petitioners appear to labor under the confusion of mistaken concepts. They assume that
the right of legal redemption of Fortunato Alejo is of such personal nature that it could
not be transmitted to his heirs. The proposition has no basis in law. There is absolutely
no reason why his heirs could not inherit said right of legal redemption. Petitioners then
jump to the proposition that Fortunato Alejo’s death "abated or extinguished" his
complaint, premised on the wrong idea that the right of legal redemption is not
transmissible by inheritance. The reasoning is the result of a confusion of petitioners’
wrong concept on substantive law with a mistaken idea of adjective law.

Petitioners’ contention has no merit.

(c) NINE-DAY PERIOD

Petitioners contend that, granting arguendo that the judgment has become final and
executory and that Fortunato Alejo’s heirs stepped into his shoes after his death and
could have exercised his right of legal redemption, "they should have done or exercised
it within nine days from his death or knowledge thereof.."
Petitioners chose not to adduce any reason in support of the theory which has
absolutely no basis in law.

(d) PROCEDURAL OMISSIONS

Petitioners allege that Fortunato Alejo’s heirs, or the administrator or executor of his
estate, are not entitled to the execution of the judgment due to three procedural
omissions, i. e. : (a) No petition for substitution has been filed with the Court of
Appeals of Central Luzon; (b) No petition to secure amendment of the judgment so as
to make effective the substitution; and (c) No petition to remand the record to the
Court of First Instance of Bulacan.

The grounds alleged are exclusively technical in nature and of scant importance. After
the judgment became final and executory, it is late to raise the question of substitution.
In the present case, it appears that Leon Alejo is appearing as the judicial administrator
of the deceased Fortunato Alejo. Such a representative capacity, undoubtedly given to
him by proper judicial appointment, satisfies fully the legal purposes of substitution.
The remanding of the record to the Court of First Instance of Bulacan is a matter of
official duty, compliance of which does not require any initiative from any party.

(e) CONTEMPT OF COURT

Petitioners allege that they could not properly and legally be declared in contempt of
court because: (a) The judgment sought to be executed ordered them to execute the
corresponding deed of sale upon payment by plaintiff of the sum of P2,551, and only
the sum of P2,261.63 has so far been paid or consigned, thus leaving a balance of
P289.37, and (b). The judgment provides that the sale be executed "in favor of
Fortunato Alejo, who is now dead." cralaw virt ua1aw lib ra ry

Respondent Leon Alejo answered that the amount deposited with the Court of First
Instance of Bulacan is P2,551. At the hearing, his attorney explained that two deposits
were made, one in the sum of P2,261.63 and the other in the amount of P289.37, due
to a misunderstanding of the clerk of the lower court of said Respondent. But the fact
that the deposit was made only on April 1, 1947, as alleged under oath by petitioners,
is not denied by Respondent. April 1, 1947, is the date of the resolution issued by
Judge Mojica, ordering confinement of petitioners in the provincial jail of Bulacan until
they comply with the order of January 7, 1947.

Upon the technicality of substitution, petitioners’ contention is without merit.

We are of opinion that the resolution holding petitioners guilty of contempt and ordering
their confinement in the provincial jail of Bulacan should be denied force and effect
upon weightier grounds than the ones alleged by petitioners.

The applicable provision of law in this case is section 10 of Rule 39 which provides: jgc:chanrob les.co m.ph

"Judgment for specific acts; vesting title. — If a judgment directs a party to execute a
conveyance of land, or to deliver deeds or other documents, or to perform any other
specific act, and the party fails to comply within the time specified, the court may direct
the act to be done at the cost of the disobedient party by some other person appointed
by the court and the act when so done shall have like effect as if done by the party. If
real or personal property is within the Philippines, the court in lieu of directing a
conveyance thereof may enter a judgment divesting the title of any party and vesting it
in others and such judgment shall have the force and effect of a conveyance executed
in due form of law." cralaw virtua1aw l ib rary

Accordingly, instead of intimidating petitioners to be dealt with for contempt of court,

as provided in the last part of its order of January 7, 1947, and insisting in its order of
March 3, 1947, that petitioners should comply with said order of January 7, reiterating
that, otherwise, "the court will be constrained to hold said defendants in contempt of
court" and, lastly, in issuing the resolution of April 1, 1947, finding petitioners guilty of
contempt, ordering their confinement in the provincial jail of Bulacan, until they have
complied with the order of January 7, and, to said effect, ordering their arrest, the
lower court should have directed that the deed of sale provided in the judgment and in
the order of January 7, to be executed by petitioners, be done by some other person
"appointed by the court" and "at the cost of the disobedient party." The lower court’s
orders intimidating petitioners with punishment for contempt, and ordering their arrest
and confinement in the provincial jail of Bulacan for an indeterminate period, until they
have complied with the order of January 7, a course of action that petitioners may not
follow until their respective deaths, must be declared null and void.

There are members of this Court which hold the position that the lower court could
have legally followed two alternatives, either by applying the above-quoted section 10
of Rule 39 or by punishing petitioners for contempt, by applying section 9 of the same
Rule 39, but they are of opinion that the lower court acted with grave abuse of
discretion by resorting to the drastic measure of contempt proceedings, when the
proceeding outlined by section 10 of Rule 39 could be availed of easily and without
causing unnecessary suffering to any party. The rule is that when two or more means
are available to attain a legal end, harsher ones should only be adopted as a last resort.

There are other members of this Court, among them the writer of this opinion, that are
convinced that in the case at bar section 9 of Rule 39 is not applicable and the lower
court could not have followed other proceeding than the one outlined by section 10 of
Rule 39. Furthermore, those of us who maintain such position, are of opinion that, even
in the hypothesis that the lower court could have followed the contempt proceedings
outlined by section 9 of Rule 39, the lower court could only punish petitioners with fine
or fixed term of imprisonment, or both, as provided by section 6 of Rule 64, but never
to hold them in confinement, as provided in the resolution of April 1, 1947, for an
indefinite period, until petitioners should choose to execute the deed of sale in question.
Although that authority is granted in section 7 of Rule 64, we hold that said section
cannot be given force nor effect, because it is null and void as violative of the following
constitutional mandate: "Excessive fines shall not be imposed, nor cruel and unusual
punishment inflicted." (Section 1 [19], Article III of the Constitution.)

While petitioners could have avoided altogether any imprisonment or they could reduce
its term to any period of time they may choose, there is nothing to preclude them from
undergoing forty or more years imprisonment, if they decide to continue refusing that
long, while the life imprisonment provided by the Revised Penal Code for the most
heinous crimes, murder, parricide, treason, and others, is limited to a maximum of
thirty years. Is it not shocking that a longer term should be imposed for a simple
refusal to sign a deed of sale, for which refusal the disobedient party may have strong
reasons, because he may deem it humiliating, than for the most hateful crimes known
under our laws? By the way, is it not absurd for the lower court to wait for petitioners
to execute the deed of sale until they choose to perform the action required of them,
which may take years, instead of appointing a third person to perform the act according
to section 10 of Rule 39, which will take just a small fraction of a day?

For all the foregoing, the orders of the lower court of January 7, March 3, and April 1,
1947, are set aside. To make effective the execution of the deed of sale as provided in
the judgment in question, upon the validity of which the members of this Court follow
the same alignment as that in the case of Co Kim Cham v. Valdez, L-5, 1 the lower
court is ordered to follow the procedure outlined by section 10 of Rule 39. The petition
is denied in all other respects. Certain orders subject of petition are set aside.

C. CHOICE OF FORUM AND FORUM NON CONVENIENS

G.R. No. 115849 January 24, 1996

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and
MERCURIO RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO DEMETRIA, and
JOSE JANOLO, respondents.

DECISION

PANGANIBAN, J.:

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

Simply stated, these are the major questions brought before this Court in the instant Petition for
review on certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated
January 14, 1994 of the respondent Court of Appeals1 in CA-G.R CV No. 35756 and the Resolution
promulgated June 14, 1994 denying the motion for reconsideration. The dispositive portion of the
said Decision reads:

WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the
damages awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of
the award in paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In
all other aspects, said decision is hereby AFFIRMED.

All references to the original plaintiffs in the decision and its dispositive portion are deemed,
herein and hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito.
 Costs against appellant bank.

The dispositive portion of the trial court's2 decision dated July 10, 1991, on the other hand, is as
follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs

and against the defendants as follows:

1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of
land situated at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less,
covered by and embraced in Transfer Certificates of Title Nos. T-106932 to T-106937,
inclusive, of the Land Records of Laguna, between the plaintiffs as buyers and the defendant
Producers Bank for an agreed price of Five and One Half Million (P5,500,000.00) Pesos;

2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and
receipt from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a
deed of absolute sale over the aforementioned six (6) parcels of land, and to immediately
deliver to the plaintiffs the owner's copies of T.C.T. Nos. T-106932 to T- 106937, inclusive,
for purposes of registration of the same deed and transfer of the six (6) titles in the names of
the plaintiffs;

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

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

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

6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate
damages in the amount of P20,000.00;

With costs against the defendants.

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

The Parties

Petitioner First Philippine International Bank (formerly Producers Bank of the Philippines; petitioner
Bank, for brevity) is a banking institution organized and existing under the laws of the Republic of the
Philippines. Petitioner Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all
times material to this case, Head-Manager of the Property Management Department of the petitioner
Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of
original plaintiffs-appellees Demetrio Demetria and Jose Janolo.

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

The Facts

The facts of this case are summarized in the respondent Court's Decision3 as follows:

(1) In the course of its banking operations, the defendant Producer Bank of the Philippines
acquired six parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rose,
Laguna, and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. The
property used to be owned by BYME Investment and Development Corporation which had
them mortgaged with the bank as collateral for a loan. The original plaintiffs, Demetrio
Demetria and Jose O. Janolo, wanted to purchase the property and thus initiated
negotiations for that purpose.

(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME investment's
legal counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property
Management Department of the defendant bank. The meeting was held pursuant to plaintiffs'
plan to buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo,
following the advice of defendant Rivera, made a formal purchase offer to the bank through a
letter dated August 30, 1987 (Exh. "B"), as follows:

August 30, 1987

The Producers Bank of the Philippines

Makati, Metro Manila

Attn. Mr. Mercurio Q. Rivera

Manager, Property Management Dept.

Gentleman:

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

TCT NO. AREA

T-106932 113,580 sq. m.
T-106933 70,899 sq. m.
T-106934 52,246 sq. m.
T-106935 96,768 sq. m.
T-106936 187,114 sq. m.
T-106937 481,481 sq. m.

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

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

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

September 1, 1987

JP M-P GUTIERREZ ENTERPRISES

142 Charisma St., Doña Andres II
Rosario, Pasig, Metro Manila

Attention: JOSE O. JANOLO

Dear Sir:

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

We shall be very glad to hear your position on the on the matter.

Best regards.

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

September 17, 1987

Producers Bank
Paseo de Roxas
Makati, Metro Manila

Attention: Mr. Mercurio Rivera

Gentlemen:

In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta.
Rosa, Laguna, I would like to amend my previous offer and I now propose to buy the said lot
at P4.250 million in CASH..

Hoping that this proposal meets your satisfaction.

(5) There was no reply to Janolo's foregoing letter of September 17, 1987. What took place
was a meeting on September 28, 1987 between the plaintiffs and Luis Co, the Senior Vice-
President of defendant bank. Rivera as well as Fajardo, the BYME lawyer, attended the
meeting. Two days later, or on September 30, 1987, plaintiff Janolo sent to the bank, through
Rivera, the following letter (Exh. "E"):
The Producers Bank of the Philippines
Paseo de Roxas, Makati
Metro Manila

Attention: Mr. Mercurio Rivera

Re: 101 Hectares of Land

in Sta. Rosa, Laguna

Gentlemen:

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

Thank you.

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

Attention: Atty. Demetrio Demetria

Dear Sir:

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

For your information.

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

Mr. Mercurio Rivera

Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila

Dear Mr. Rivera:

This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-
hectare lot located in Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to
106937.

From the documents at hand, it appears that your counter-offer dated September 1, 1987 of
this same lot in the amount of P5.5 million was accepted by our client thru a letter dated
September 30, 1987 and was received by you on October 5, 1987.

In view of the above circumstances, we believe that an agreement has been perfected. We
were also informed that despite repeated follow-up to consummate the purchase, you now
refuse to honor your commitment. Instead, you have advertised for sale the same lot to
others.

In behalf of our client, therefore, we are making this formal demand upon you to
consummate and execute the necessary actions/documentation within three (3) days from
your receipt hereof. We are ready to remit the agreed amount of P5.5 million at your advice.
Otherwise, we shall be constrained to file the necessary court action to protect the interest of
our client.

We trust that you will be guided accordingly.

(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter
and stated, in its communication of December 2, 1987 (Exh. "I"), that said letter has been
"referred . . . to the office of our Conservator for proper disposition" However, no response
came from the Acting Conservator. On December 14, 1987, the plaintiffs made a second
tender of payment (Exh. "L" and "L-1"), this time through the Acting Conservator, defendant
Encarnacion. Plaintiffs' letter reads:

PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila

Attn.: Atty. NIDA ENCARNACION

Central Bank Conservator

We are sending you herewith, in - behalf of our client, Mr. JOSE O. JANOLO, MBTC Check
No. 258387 in the amount of P5.5 million as our agreed purchase price of the 101-hectare lot
covered by TCT Nos. 106932, 106933, 106934, 106935, 106936 and 106937 and registered
under Producers Bank.

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

Kindly acknowledge receipt of our payment.

(9) The foregoing letter drew no response for more than four months. Then, on May 3, 1988,
plaintiff, through counsel, made a final demand for compliance by the bank with its
obligations under the considered perfected contract of sale (Exhibit "N"). As recounted by the
trial court (Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex "4" of
 defendant's answer to amended complaint), the defendants through Acting Conservator
Encarnacion repudiated the authority of defendant Rivera and claimed that his dealings with
the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal. On that
basis, the defendants justified the refusal of the tenders of payment and the non-compliance
with the obligations under what the plaintiffs considered to be a perfected contract of sale.

(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages against
the bank, its Manager Rivers and Acting Conservator Encarnacion. The basis of the suit was
that the transaction had with the bank resulted in a perfected contract of sale, The
defendants took the position that there was no such perfected sale because the defendant
Rivera is not authorized to sell the property, and that there was no meeting of the minds as
to the price.

On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar
Hernandez and Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner
of 80% of the Bank's outstanding shares of stock, he had a substantial interest in resisting
the complaint. On July 8, 1991, the trial court issued an order denying the motion to
intervene on the ground that it was filed after trial had already been concluded. It also denied
a motion for reconsideration filed thereafter. From the trial court's decision, the Bank,
petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals which
subsequently affirmed with modification the said judgment. Henry Co did not appeal the
denial of his motion for intervention.

In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of
Demetria and Janolo, in view of the assignment of the latters' rights in the matter in litigation to said
private respondent.

On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and
several other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and
Cruz, filed an action (hereafter, the "Second Case") — purportedly a "derivative suit" — with the
Regional Trial Court of Makati, Branch 134, docketed as Civil Case No. 92-1606, against
Encarnacion, Demetria and Janolo "to declare any perfected sale of the property as unenforceable
and to stop Ejercito from enforcing or implementing the sale"4 In his answer, Janolo argued that the
Second Case was barred by litis pendentia by virtue of the case then pending in the Court of
Appeals. During the pre-trial conference in the Second Case, plaintiffs filed a Motion for Leave of
Court to Dismiss the Case Without Prejudice. "Private respondent opposed this motion on the
ground, among others, that plaintiff's act of forum shopping justifies the dismissal of both cases, with
prejudice."5 Private respondent, in his memorandum, averred that this motion is still pending in the
Makati RTC.

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

I.

The Court of Appeals erred in declaring that a contract of sale was perfected between
Ejercito (in substitution of Demetria and Janolo) and the bank.

II.

The Court of Appeals erred in declaring the existence of an enforceable contract of sale
between the parties.
 III.

The Court of Appeals erred in declaring that the conservator does not have the power to
overrule or revoke acts of previous management.

IV.

The findings and conclusions of the Court of Appeals do not conform to the evidence on
record.

On the other hand, petitioners prayed for dismissal of the instant suit on the ground8 that:

I.

Petitioners have engaged in forum shopping.

II.

The factual findings and conclusions of the Court of Appeals are supported by the evidence
on record and may no longer be questioned in this case.

III.

The Court of Appeals correctly held that there was a perfected contract between Demetria
and Janolo (substituted by; respondent Ejercito) and the bank.

IV.

The Court of Appeals has correctly held that the conservator, apart from being estopped
from repudiating the agency and the contract, has no authority to revoke the contract of sale.

The Issues

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

1) Was there forum-shopping on the part of petitioner Bank?

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

3) Assuming there was, was the said contract enforceable under the statute of frauds?

4) Did the bank conservator have the unilateral power to repudiate the authority of the bank
officers and/or to revoke the said contract?

5) Did the respondent Court commit any reversible error in its findings of facts?

The First Issue: Was There Forum-Shopping?

In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated
Revised Circular No. 28-91 requiring that a party "must certify under oath . . . [that] (a) he has not
(t)heretofore commenced any other action or proceeding involving the same issues in the Supreme
Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no
such action or proceeding is pending" in said courts or agencies. A violation of the said circular
entails sanctions that include the summary dismissal of the multiple petitions or complaints. To be
sure, petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating "for the
record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch
134, involving a derivative suit filed by stockholders of petitioner Bank against the conservator and
other defendants but which is the subject of a pending Motion to Dismiss Without Prejudice.9

Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of
actual forum shopping because the instant petition pending before this Court involves "identical
parties or interests represented, rights asserted and reliefs sought (as that) currently pending before
the Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues in the two cases
are so interwined that a judgement or resolution in either case will constitute res judicata in the
other." 10

On the other hand, petitioners explain 11 that there is no forum-shopping because:

1) In the earlier or "First Case" from which this proceeding arose, the Bank was impleaded
as a defendant, whereas in the "Second Case" (assuming the Bank is the real party in
interest in a derivative suit), it was plaintiff;

2) "The derivative suit is not properly a suit for and in behalf of the corporation under the
circumstances";

3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and

attached to the Petition identifies the action as a "derivative suit," it "does not mean that it is
one" and "(t)hat is a legal question for the courts to decide";

4) Petitioners did not hide the Second Case at they mentioned it in the said
VERIFICATION/CERTIFICATION.

We rule for private respondent.

To begin with, forum-shopping originated as a concept in private international law.12 , where non-
resident litigants are given the option to choose the forum or place wherein to bring their suit for
various reasons or excuses, including to secure procedural advantages, to annoy and harass the
defendant, to avoid overcrowded dockets, or to select a more friendly venue. To combat these less
than honorable excuses, the principle of forum non conveniens was developed whereby a court, in
conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most "convenient"
or available forum and the parties are not precluded from seeking remedies elsewhere.

In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a party attempts to
have his action tried in a particular court or jurisdiction where he feels he will receive the most
favorable judgment or verdict." Hence, according to Words and Phrases14 , "a litigant is open to the
charge of "forum shopping" whenever he chooses a forum with slight connection to factual
circumstances surrounding his suit, and litigants should be encouraged to attempt to settle their
differences without imposing undue expenses and vexatious situations on the courts".

In the Philippines, forum shopping has acquired a connotation encompassing not only a choice of
venues, as it was originally understood in conflicts of laws, but also to a choice of remedies. As to
the first (choice of venues), the Rules of Court, for example, allow a plaintiff to commence personal
actions "where the defendant or any of the defendants resides or may be found, or where the plaintiff
or any of the plaintiffs resides, at the election of the plaintiff" (Rule 4, Sec, 2 [b]). As to remedies,
aggrieved parties, for example, are given a choice of pursuing civil liabilities independently of the
criminal, arising from the same set of facts. A passenger of a public utility vehicle involved in a
vehicular accident may sue on culpa contractual, culpa aquiliana or culpa criminal — each remedy
being available independently of the others — although he cannot recover more than once.

In either of these situations (choice of venue or choice of remedy), the litigant actually shops
for a forum of his action, This was the original concept of the term forum shopping.

Eventually, however, instead of actually making a choice of the forum of their actions,
litigants, through the encouragement of their lawyers, file their actions in all available courts,
or invoke all relevant remedies simultaneously. This practice had not only resulted to (sic)
conflicting adjudications among different courts and consequent confusion enimical (sic) to
an orderly administration of justice. It had created extreme inconvenience to some of the
parties to the action.

Thus, "forum shopping" had acquired a different concept — which is unethical professional
legal practice. And this necessitated or had given rise to the formulation of rules and canons
discouraging or altogether prohibiting the practice. 15

What therefore originally started both in conflicts of laws and in our domestic law as a legitimate
device for solving problems has been abused and mis-used to assure scheming litigants of dubious
reliefs.

To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already
mentioned, promulgated Circular 28-91. And even before that, the Court had prescribed it in the
Interim Rules and Guidelines issued on January 11, 1983 and had struck down in several
cases 16 the inveterate use of this insidious malpractice. Forum shopping as "the filing of repetitious
suits in different courts" has been condemned by Justice Andres R. Narvasa (now Chief Justice)
in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes, et al., "as a reprehensible
manipulation of court processes and proceedings . . ." 17 when does forum shopping take place?

There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party

seeks a favorable opinion (other than by appeal or certiorari) in another. The principle
applies not only with respect to suits filed in the courts but also in connection with litigations
commenced in the courts while an administrative proceeding is pending, as in this case, in
order to defeat administrative processes and in anticipation of an unfavorable administrative
ruling and a favorable court ruling. This is specially so, as in this case, where the court in
which the second suit was brought, has no jurisdiction.18

The test for determining whether a party violated the rule against forum shopping has been laid
dawn in the 1986 case of Buan vs. Lopez 19 , also by Chief Justice Narvasa, and that is, forum
shopping exists where the elements of litis pendentia are present or where a final judgment in one
case will amount to res judicata in the other, as follows:

There thus exists between the action before this Court and RTC Case No. 86-36563 identity
of parties, or at least such parties as represent the same interests in both actions, as well as
identity of rights asserted and relief prayed for, the relief being founded on the same facts,
and the identity on the two preceding particulars is such that any judgment rendered in the
other action, will, regardless of which party is successful, amount to res adjudicata in the
action under consideration: all the requisites, in fine, of auter action pendant.
 xxx xxx xxx

As already observed, there is between the action at bar and RTC Case No. 86-36563, an
identity as regards parties, or interests represented, rights asserted and relief sought, as well
as basis thereof, to a degree sufficient to give rise to the ground for dismissal known as auter
action pendant or lis pendens. That same identity puts into operation the sanction of twin
dismissals just mentioned. The application of this sanction will prevent any further delay in
the settlement of the controversy which might ensue from attempts to seek reconsideration
of or to appeal from the Order of the Regional Trial Court in Civil Case No. 86-36563
promulgated on July 15, 1986, which dismissed the petition upon grounds which appear
persuasive.

Consequently, where a litigant (or one representing the same interest or person) sues the same
party against whom another action or actions for the alleged violation of the same right and the
enforcement of the same relief is/are still pending, the defense of litis pendencia in one case is bar to
the others; and, a final judgment in one would constitute res judicata and thus would cause the
dismissal of the rest. In either case, forum shopping could be cited by the other party as a ground to
ask for summary dismissal of the two 20 (or more) complaints or petitions, and for imposition of the
other sanctions, which are direct contempt of court, criminal prosecution, and disciplinary action
against the erring lawyer.

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

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

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

In an earlier case 23 but with the same logic and vigor, we held:
 In other words, the filing by the petitioners of the instant special civil action for certiorari and
prohibition in this Court despite the pendency of their action in the Makati Regional Trial
Court, is a species of forum-shopping. Both actions unquestionably involve the same
transactions, the same essential facts and circumstances. The petitioners' claim of absence
of identity simply because the PCGG had not been impleaded in the RTC suit, and the suit
did not involve certain acts which transpired after its commencement, is specious. In the
RTC action, as in the action before this Court, the validity of the contract to purchase and sell
of September 1, 1986, i.e., whether or not it had been efficaciously rescinded, and the
propriety of implementing the same (by paying the pledgee banks the amount of their loans,
obtaining the release of the pledged shares, etc.) were the basic issues. So, too, the relief
was the same: the prevention of such implementation and/or the restoration of the status quo
ante. When the acts sought to be restrained took place anyway despite the issuance by the
Trial Court of a temporary restraining order, the RTC suit did not become functus oficio. It
remained an effective vehicle for obtention of relief; and petitioners' remedy in the premises
was plain and patent: the filing of an amended and supplemental pleading in the RTC suit, so
as to include the PCGG as defendant and seek nullification of the acts sought to be enjoined
but nonetheless done. The remedy was certainly not the institution of another action in
another forum based on essentially the same facts, The adoption of this latter recourse
renders the petitioners amenable to disciplinary action and both their actions, in this Court as
well as in the Court a quo, dismissible.

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

Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the
matter in controversy. They are not principally or even subsidiarily liable; much less are they direct
parties in the assailed contract of sale; and

Secondly, the allegations of the complaint in the Second Case show that the stockholders are
bringing a "derivative suit". In the caption itself, petitioners claim to have brought suit "for and in
behalf of the Producers Bank of the Philippines" 24 . Indeed, this is the very essence of a derivative
suit:

An individual stockholder is permitted to institute a derivative suit on behalf of the corporation

wherein he holdsstock in order to protect or vindicate corporate rights, whenever the officials
of the corporation refuse to sue, or are the ones to be sued or hold the control of the
corporation. In such actions, the suing stockholder is regarded as a nominal party, with the
corporation as the real party in interest. (Gamboa v. Victoriano, 90 SCRA 40, 47 [1979];
emphasis supplied).

In the face of the damaging admissions taken from the complaint in the Second Case, petitioners,
quite strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was
brought, not by the minority shareholders, but by Henry Co et al., who not only own, hold or control
over 80% of the outstanding capital stock, but also constitute the majority in the Board of Directors of
petitioner Bank. That being so, then they really represent the Bank. So, whether they sued
"derivatively" or directly, there is undeniably an identity of interests/entity represented.

Petitioner also tried to seek refuge in the corporate fiction that the personality Of the Bank is
separate and distinct from its shareholders. But the rulings of this Court are consistent: "When the
fiction is urged as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of
an existing obligation, the circumvention of statutes, the achievement or perfection of a monopoly or
generally the perpetration of knavery or crime, the veil with which the law covers and isolates the
corporation from the members or stockholders who compose it will be lifted to allow for its
consideration merely as an aggregation of individuals." 25

In addition to the many cases 26 where the corporate fiction has been disregarded, we now add the
instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise
blatant violation of the prohibition against forum-shopping. Shareholders, whether suing as the
majority in direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court
processes, particularly where, as in this case, the corporation itself has not been remiss in vigorously
prosecuting or defending corporate causes and in using and applying remedies available to it. To
rule otherwise would be to encourage corporate litigants to use their shareholders as fronts to
circumvent the stringent rules against forum shopping.

Finally, petitioner Bank argued that there cannot be any forum shopping, even
assuming arguendo that there is identity of parties, causes of action and reliefs sought, "because it
(the Bank) was the defendant in the (first) case while it was the plaintiff in the other (Second
Case)",citing as authority Victronics Computers, Inc., vs. Regional Trial Court, Branch 63, Makati,
etc. et al., 27 where Court held:

The rule has not been extended to a defendant who, for reasons known only to him,
commences a new action against the plaintiff — instead of filing a responsive pleading in the
other case — setting forth therein, as causes of action, specific denials, special and
affirmative defenses or even counterclaims, Thus, Velhagen's and King's motion to dismiss
Civil Case No. 91-2069 by no means negates the charge of forum-shopping as such did not
exist in the first place. (emphasis supplied)

Petitioner pointed out that since it was merely the defendant in the original case, it could not have
chosen the forum in said case.

Respondent, on the other hand, replied that there is a difference in factual setting
between Victronics and the present suit. In the former, as underscored in the above-quoted Court
ruling, the defendants did not file any responsive pleading in the first case. In other words, they did
not make any denial or raise any defense or counter-claim therein In the case before us however,
petitioners filed a responsive pleading to the complaint — as a result of which, the issues were
joined.

Indeed, by praying for affirmative reliefs and interposing counter–claims in their responsive
pleadings, the petitioners became plaintiffs themselves in the original case, giving unto themselves
the very remedies they repeated in the Second Case.

Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is
the vexation caused the courts and parties-litigant by a party who asks different courts and/or
administrative agencies to rule on the same or related causes and/or to grant the same or
substantially the same reliefs, in the process creating the possibility of conflicting decisions being
rendered by the different fora upon the same issue. In this case, this is exactly the problem: a
decision recognizing the perfection and directing the enforcement of the contract of sale will directly
conflict with a possible decision in the Second Case barring the parties front enforcing or
implementing the said sale. Indeed, a final decision in one would constitute res judicata in the
other 28 .

The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction
possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed
because petitioners' present counsel entered their appearance only during the proceedings in this
Court, and the Petition's VERIFICATION/CERTIFICATION contained sufficient allegations as to the
pendency of the Second Case to show good faith in observing Circular 28-91. The Lawyers who filed
the Second Case are not before us; thus the rudiments of due process prevent us from motu
propio imposing disciplinary measures against them in this Decision. However, petitioners
themselves (and particularly Henry Co, et al.) as litigants are admonished to strictly follow the rules
against forum-shopping and not to trifle with court proceedings and processes They are warned that
a repetition of the same will be dealt with more severely.

Having said that, let it be emphasized that this petition should be dismissed not merely because of
forum-shopping but also because of the substantive issues raised, as will be discussed shortly.

The Second Issue: Was The Contract Perfected?

The respondent Court correctly treated the question of whether or not there was, on the basis of the
facts established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has
been established, respondent Court stated:

There is no dispute that the object of the transaction is that property owned by the defendant
bank as acquired assets consisting of six (6) parcels of land specifically identified under
Transfer Certificates of Title Nos. T-106932 to T-106937. It is likewise beyond cavil that the
bank intended to sell the property. As testified to by the Bank's Deputy Conservator, Jose
Entereso, the bank was looking for buyers of the property. It is definite that the plaintiffs
wanted to purchase the property and it was precisely for this purpose that they met with
defendant Rivera, Manager of the Property Management Department of the defendant bank,
in early August 1987. The procedure in the sale of acquired assets as well as the nature and
scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera
himself, which testimony was relied upon by both the bank and by Rivera in their appeal
briefs. Thus (TSN of July 30, 1990. pp. 19-20):

A: The procedure runs this way: Acquired assets was turned over to me and then I
published it in the form of an inter-office memorandum distributed to all branches that
these are acquired assets for sale. I was instructed to advertise acquired assets for
sale so on that basis, I have to entertain offer; to accept offer, formal offer and upon
having been offered, I present it to the Committee. I provide the Committee with
necessary information about the property such as original loan of the borrower, bid
price during the foreclosure, total claim of the bank, the appraised value at the time
the property is being offered for sale and then the information which are relative to
the evaluation of the bank to buy which the Committee considers and it is the
Committee that evaluate as against the exposure of the bank and it is also the
Committee that submit to the Conservator for final approval and once approved, we
have to execute the deed of sale and it is the Conservator that sign the deed of sale,
sir.

The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the
property, dealt with and talked to the right person. Necessarily, the agenda was the price of
the property, and plaintiffs were dealing with the bank official authorized to entertain offers, to
accept offers and to present the offer to the Committee before which the said official is
authorized to discuss information relative to price determination. Necessarily, too, it being
inherent in his authority, Rivera is the officer from whom official information regarding the
price, as determined by the Committee and approved by the Conservator, can be had. And
Rivera confirmed his authority when he talked with the plaintiff in August 1987. The
testimony of plaintiff Demetria is clear on this point (TSN of May 31,1990, pp. 27-28):

Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did
you ask him point-blank his authority to sell any property?

A: No, sir. Not point blank although it came from him, (W)hen I asked him how long it
would take because he was saying that the matter of pricing will be passed upon by
the committee. And when I asked him how long it will take for the committee to
decide and he said the committee meets every week. If I am not mistaken
Wednesday and in about two week's (sic) time, in effect what he was saying he was
not the one who was to decide. But he would refer it to the committee and he would
relay the decision of the committee to me.

Q — Please answer the question.

A — He did not say that he had the authority (.) But he said he would refer the matter
to the committee and he would relay the decision to me and he did just like that.

"Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co
was the Head, with Jose Entereso as one of the members.

What transpired after the meeting of early August 1987 are consistent with the authority and
the duties of Rivera and the bank's internal procedure in the matter of the sale of bank's
assets. As advised by Rivera, the plaintiffs made a formal offer by a letter dated August 20,
1987 stating that they would buy at the price of P3.5 Million in cash. The letter was for the
attention of Mercurio Rivera who was tasked to convey and accept such offers. Considering
an aspect of the official duty of Rivera as some sort of intermediary between the plaintiffs-
buyers with their proposed buying price on one hand, and the bank Committee, the
Conservator and ultimately the bank itself with the set price on the other, and considering
further the discussion of price at the meeting of August resulting in a formal offer of P3.5
Million in cash, there can be no other logical conclusion than that when, on September 1,
1987, Rivera informed plaintiffs by letter that "the bank's counter-offer is at P5.5 Million for
more than 101 hectares on lot basis," such counter-offer price had been determined by the
Past Due Committee and approved by the Conservator after Rivera had duly presented
plaintiffs' offer for discussion by the Committee of such matters as original loan of borrower,
bid price during foreclosure, total claim of the bank, and market value. Tersely put, under the
established facts, the price of P5.5 Million was, as clearly worded in Rivera's letter (Exh. "E"),
the official and definitive price at which the bank was selling the property.

There were averments by defendants below, as well as before this Court, that the P5.5
Million price was not discussed by the Committee and that price. As correctly characterized
by the trial court, this is not credible. The testimonies of Luis Co and Jose Entereso on this
point are at best equivocal and considering the gratuitous and self-serving character of these
declarations, the bank's submission on this point does not inspire belief. Both Co ad
Entereso, as members of the Past Due Committee of the bank, claim that the offer of the
plaintiff was never discussed by the Committee. In the same vein, both Co and Entereso
openly admit that they seldom attend the meetings of the Committee. It is important to note
that negotiations on the price had started in early August and the plaintiffs had already
offered an amount as purchase price, having been made to understand by Rivera, the official
in charge of the negotiation, that the price will be submitted for approval by the bank and that
the bank's decision will be relayed to plaintiffs. From the facts, the official bank price. At any
 rate, the bank placed its official, Rivera, in a position of authority to accept offers to buy and
negotiate the sale by having the offer officially acted upon by the bank. The bank cannot turn
around and later say, as it now does, that what Rivera states as the bank's action on the
matter is not in fact so. It is a familiar doctrine, the doctrine of ostensible authority, that if a
corporation knowingly permits one of its officers, or any other agent, to do acts within the
scope of an apparent authority, and thus holds him out to the public as possessing power to
do those acts, the corporation will, as against any one who has in good faith dealt with the
corporation through such agent, he estopped from denying his authority (Francisco v. GSIS,
7 SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v.
Court of Appeals, G.R. No. 103957, June 14, 1993). 29

Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows:
"(1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established."

There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6)
parcels of land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less,
and covered by Transfer Certificates of Title Nos. T-106932 to T-106937. There is, however, a
dispute on the first and third requisites.

Petitioners allege that "there is no counter-offer made by the Bank, and any supposed counter-offer
which Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank,
there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept." 30 They disputed the
factual basis of the respondent Court's findings that there was an offer made by Janolo for P3.5
million, to which the Bank counter-offered P5.5 million. We have perused the evidence but cannot
find fault with the said Court's findings of fact. Verily, in a petition under Rule 45 such as this, errors
of fact — if there be any - are, as a rule, not reviewable. The mere fact that respondent Court (and
the trial court as well) chose to believe the evidence presented by respondent more than that
presented by petitioners is not by itself a reversible error. In fact, such findings merit serious
consideration by this Court, particularly where, as in this case, said courts carefully and meticulously
discussed their findings. This is basic.

Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review
the question of Rivera's authority to act and petitioner's allegations that the P5.5 million counter-offer
was extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which
could be drawn from the factual findings of the respondent Court. They also delve into the
contractual elements of consent and cause.

The authority of a corporate officer in dealing with third persons may be actual or apparent. The
doctrine of "apparent authority", with special reference to banks, was laid out in Prudential Bank vs.
Court of Appeals31 , where it was held that:

Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent's apparent representation yields to the
principal's true representation and the contract is considered as entered into between the
principal and the third person (citing National Food Authority vs. Intermediate Appellate
Court, 184 SCRA 166).

A bank is liable for wrongful acts of its officers done in the interests of the bank or in
the course of dealings of the officers in their representative capacity but not for acts
outside the scape of their authority (9 C.J.S., p. 417). A bank holding out its officers
and agents as worthy of confidence will not be permitted to profit by the frauds they
 may thus be enabled to perpetrate in the apparent scope of their employment; nor
will it be permitted to shirk its responsibility for such frauds even though no benefit
may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking
corporation is liable to innocent third persons where the representation is made in the
course of its business by an agent acting within the general scope of his authority
even though, in the particular case, the agent is secretly abusing his authority and
attempting to perpetrate a fraud upon his principal or some other person, for his own
ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR
1021).

Application of these principles is especially necessary because banks have a fiduciary

relationship with the public and their stability depends on the confidence of the people in their
honesty and efficiency. Such faith will be eroded where banks do not exercise strict care in
the selection and supervision of its employees, resulting in prejudice to their depositors.

From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or
implied authority to act for the Bank in the matter of selling its acquired assets. This evidence
includes the following:

(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times material to this case,
Manager of the Property Management Department of the Bank". By his own admission,
Rivera was already the person in charge of the Bank's acquired assets (TSN, August 6,
1990, pp. 8-9);

(b) As observed by respondent Court, the land was definitely being sold by the Bank. And
during the initial meeting between the buyers and Rivera, the latter suggested that the
buyers' offer should be no less than P3.3 million (TSN, April 26, 1990, pp. 16-17);

(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5 million (TSN, 30
July 1990, p.11);

(d) Rivera signed the letter dated September 1, 1987 offering to sell the property for P5.5
million (TSN, July 30, p. 11);

(e) Rivera received the letter dated September 17, 1987 containing the buyers' proposal to
buy the property for P4.25 million (TSN, July 30, 1990, p. 12);

(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of
the Bank (TSN, January 16, 1990, p. 18);

(g) Rivera arranged the meeting between the buyers and Luis Co on September 28, 1994,
during which the Bank's offer of P5.5 million was confirmed by Rivera (TSN, April 26, 1990,
pp. 34-35). At said meeting, Co, a major shareholder and officer of the Bank, confirmed
Rivera's statement as to the finality of the Bank's counter-offer of P5.5 million (TSN, January
16, 1990, p. 21; TSN, April 26, 1990, p. 35);

(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the
officer acting for the Bank in relation to parties interested in buying assets owned/acquired by
the Bank. In fact, Rivera was the officer mentioned in the Bank's advertisements offering for
sale the property in question (cf. Exhs. "S" and "S-1").
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et. al.32 , the Court,
through Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the
apparent authority of the officer of the Bank of P.I. in charge of acquired assets is borne out by
similar circumstances surrounding his dealings with buyers.

To be sure, petitioners attempted to repudiate Rivera's apparent authority through documents and
testimony which seek to establish Rivera's actual authority. These pieces of evidence, however, are
inherently weak as they consist of Rivera's self-serving testimony and various inter-office
memoranda that purport to show his limited actual authority, of which private respondent cannot be
charged with knowledge. In any event, since the issue is apparent authority, the existence of which
is borne out by the respondent Court's findings, the evidence of actual authority is immaterial insofar
as the liability of a corporation is concerned 33 .

Petitioners also argued that since Demetria and Janolo were experienced lawyers and their "law
firm" had once acted for the Bank in three criminal cases, they should be charged with actual
knowledge of Rivera's limited authority. But the Court of Appeals in its Decision (p. 12) had already
made a factual finding that the buyers had no notice of Rivera's actual authority prior to the sale. In
fact, the Bank has not shown that they acted as its counsel in respect to any acquired assets; on the
other hand, respondent has proven that Demetria and Janolo merely associated with a loose
aggrupation of lawyers (not a professional partnership), one of whose members (Atty. Susana
Parker) acted in said criminal cases.

Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer in the letter dated
September 17, 1987 extinguished the Bank's offer of P5.5 million 34 .They disputed the respondent
Court's finding that "there was a meeting of minds when on 30 September 1987 Demetria and
Janolo through Annex "L" (letter dated September 30, 1987) "accepted" Rivera's counter offer of
P5.5 million under Annex "J" (letter dated September 17, 1987)", citing the late Justice Paras35 , Art.
1319 of the Civil Code 36 and related Supreme Court rulings starting with Beaumont vs. Prieto 37 .

However, the above-cited authorities and precedents cannot apply in the instant case because, as
found by the respondent Court which reviewed the testimonies on this point, what was "accepted" by
Janolo in his letter dated September 30, 1987 was the Bank's offer of P5.5 million as confirmed and
reiterated to Demetria and Atty. Jose Fajardo by Rivera and Co during their meeting on September
28, 1987. Note that the said letter of September 30, 1987 begins with"(p)ursuant to our discussion
last 28 September 1987 . . .

Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co
that the September 28, 1987 meeting "was meant to have the offerors improve on their position of
P5.5. million."38 However, both the trial court and the Court of Appeals found petitioners' testimonial
evidence "not credible", and we find no basis for changing this finding of fact.

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

We note that the Bank's repudiation, through Conservator Encarnacion, of Rivera's authority and
action, particularly the latter's counter-offer of P5.5 million, as being "unauthorized and illegal" came
only on May 12, 1988 or more than seven (7) months after Janolo' acceptance. Such delay, and the
absence of any circumstance which might have justifiably prevented the Bank from acting earlier,
clearly characterizes the repudiation as nothing more than a last-minute attempt on the Bank's part
to get out of a binding contractual obligation.

Taken together, the factual findings of the respondent Court point to an implied admission on the
part of the petitioners that the written offer made on September 1, 1987 was carried through during
the meeting of September 28, 1987. This is the conclusion consistent with human experience, truth
and good faith.

It also bears noting that this issue of extinguishment of the Bank's offer of P5.5 million was raised for
the first time on appeal and should thus be disregarded.

This Court in several decisions has repeatedly adhered to the principle that points of law,
theories, issues of fact and arguments not adequately brought to the attention of the trial
court need not be, and ordinarily will not be, considered by a reviewing court, as they cannot
be raised for the first time on appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145
SCRA 592).40

. . . It is settled jurisprudence that an issue which was neither averred in the complaint nor
raised during the trial in the court below cannot be raised for the first time on appeal as it
would be offensive to the basic rules of fair play, justice and due process (Dihiansan vs. CA,
153 SCRA 713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty &
Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175 SCRA 70 [1989];
Gevero vs. IAC, G.R. 77029, August 30, 1990).41

Since the issue was not raised in the pleadings as an affirmative defense, private respondent was
not given an opportunity in the trial court to controvert the same through opposing evidence. Indeed,
this is a matter of due process. But we passed upon the issue anyway, if only to avoid deciding the
case on purely procedural grounds, and we repeat that, on the basis of the evidence already in the
record and as appreciated by the lower courts, the inevitable conclusion is simply that there was a
perfected contract of sale.

The Third Issue: Is the Contract Enforceable?

The petition alleged42 :

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the
meeting of 28 September 1987, and it was this verbal offer that Demetria and Janolo
accepted with their letter of 30 September 1987, the contract produced thereby would be
unenforceable by action — there being no note, memorandum or writing subscribed by the
Bank to evidence such contract. (Please see article 1403[2], Civil Code.)

Upon the other hand, the respondent Court in its Decision (p, 14) stated:

. . . Of course, the bank's letter of September 1, 1987 on the official price and the plaintiffs'
acceptance of the price on September 30, 1987, are not, in themselves, formal contracts of
sale. They are however clear embodiments of the fact that a contract of sale was perfected
between the parties, such contract being binding in whatever form it may have been entered
into (case citations omitted). Stated simply, the banks' letter of September 1, 1987, taken
together with plaintiffs' letter dated September 30, 1987, constitute in law a sufficient
memorandum of a perfected contract of sale.
The respondent Court could have added that the written communications commenced not only from
September 1, 1987 but from Janolo's August 20, 1987 letter. We agree that, taken together, these
letters constitute sufficient memoranda — since they include the names of the parties, the terms and
conditions of the contract, the price and a description of the property as the object of the contract.

But let it be assumed arguendo that the counter-offer during the meeting on September 28, 1987 did
constitute a "new" offer which was accepted by Janolo on September 30, 1987. Still, the statute of
frauds will not apply by reason of the failure of petitioners to object to oral testimony proving
petitioner Bank's counter-offer of P5.5 million. Hence, petitioners — by such utter failure to object —
are deemed to have waived any defects of the contract under the statute of frauds, pursuant to
Article 1405 of the Civil Code:

Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of article 1403, are
ratified by the failure to object to the presentation of oral evidence to prove the same, or by
the acceptance of benefits under them.

As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the
counter-offer of P5.5 million is a plenty — and the silence of petitioners all throughout the
presentation makes the evidence binding on them thus;

A Yes, sir, I think it was September 28, 1987 and I was again present because Atty.
Demetria told me to accompany him we were able to meet Luis Co at the Bank.

xxx xxx xxx

Q Now, what transpired during this meeting with Luis Co of the Producers Bank?

A Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.

Q What price?

A The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is
the final price and that is the price they intends (sic) to have, sir.

Q What do you mean?.

A That is the amount they want, sir.

Q What is the reaction of the plaintiff Demetria to Luis Co's statement (sic) that the defendant
Rivera's counter-offer of 5.5 million was the defendant's bank (sic) final offer?

A He said in a day or two, he will make final acceptance, sir.

Q What is the response of Mr. Luis Co?.

A He said he will wait for the position of Atty. Demetria, sir.

[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]

Q What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
 A We went straight to the point because he being a busy person, I told him if the amount of
P5.5 million could still be reduced and he said that was already passed upon by the
committee. What the bank expects which was contrary to what Mr. Rivera stated. And he told
me that is the final offer of the bank P5.5 million and we should indicate our position as soon
as possible.

Q What was your response to the answer of Mr. Luis Co?

A I said that we are going to give him our answer in a few days and he said that was it. Atty.
Fajardo and I and Mr. Mercurio [Rivera] was with us at the time at his office.

Q For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office
in Producers Bank Building during this meeting?

A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.

Q By Mr. Co you are referring to?

A Mr. Luis Co.

Q After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter
offer by the bank?

A Yes, sir, we did.? Two days thereafter we sent our acceptance to the bank which offer we
accepted, the offer of the bank which is P5.5 million.

[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]

Q According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the
Committee and it is not within his power to reduce this amount. What can you say to that
statement that the amount of P5.5 million was reached by the Committee?

A It was not discussed by the Committee but it was discussed initially by Luis Co and the
group of Atty. Demetrio Demetria and Atty. Pajardo (sic) in that September 28, 1987
meeting, sir.

[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]

The Fourth Issue: May the Conservator Revoke

the Perfected and Enforceable Contract.

It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the
Philippines during the time that the negotiation and perfection of the contract of sale took place.
Petitioners energetically contended that the conservator has the power to revoke or overrule actions
of the management or the board of directors of a bank, under Section 28-A of Republic Act No. 265
(otherwise known as the Central Bank Act) as follows:

Whenever, on the basis of a report submitted by the appropriate supervising or examining

department, the Monetary Board finds that a bank or a non-bank financial intermediary
performing quasi-banking functions is in a state of continuing inability or unwillingness to
maintain a state of liquidity deemed adequate to protect the interest of depositors and
 creditors, the Monetary Board may appoint a conservator to take charge of the assets,
liabilities, and the management of that institution, collect all monies and debts due said
institution and exercise all powers necessary to preserve the assets of the institution,
reorganize the management thereof, and restore its viability. He shall have the power to
overrule or revoke the actions of the previous management and board of directors of the
bank or non-bank financial intermediary performing quasi-banking functions, any provision of
law to the contrary notwithstanding, and such other powers as the Monetary Board shall
deem necessary.

In the first place, this issue of the Conservator's alleged authority to revoke or repudiate the
perfected contract of sale was raised for the first time in this Petition — as this was not litigated in
the trial court or Court of Appeals. As already stated earlier, issues not raised and/or ventilated in the
trial court, let alone in the Court of Appeals, "cannot be raised for the first time on appeal as it would
be offensive to the basic rules of fair play, justice and due process."43

In the second place, there is absolutely no evidence that the Conservator, at the time the contract
was perfected, actually repudiated or overruled said contract of sale. The Bank's acting conservator
at the time, Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What
petitioners are really referring to is the letter of Conservator Encarnacion, who took over from Romey
after the sale was perfected on September 30, 1987 (Annex V, petition) which unilaterally repudiated
— not the contract — but the authority of Rivera to make a binding offer — and which unarguably
came months after the perfection of the contract. Said letter dated May 12, 1988 is reproduced
hereunder:

May 12, 1988

Atty. Noe C. Zarate

Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila

Dear Atty. Zarate:

This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria
regarding the six (6) parcels of land located at Sta. Rosa, Laguna.

We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor
perfected a "contract to sell and buy" with any of them for the following reasons.

In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and approved by former
Acting Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M.
Pascua detailed the functions of Property Management Department (PMD) staff and officers
(Annex A.), you will immediately read that Manager Mr. Mercurio Rivera or any of his
subordinates has no authority, power or right to make any alleged counter-offer. In short,
your lawyer-clients did not deal with the authorized officers of the bank.

Moreover, under Sec. 23 and 36 of the Corporation Code of the Philippines (Bates
Pambansa Blg. 68.) and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended),
only the Board of Directors/Conservator may authorize the sale of any property of the
corportion/bank..
 Our records do not show that Mr. Rivera was authorized by the old board or by any of the
bank conservators (starting January, 1984) to sell the aforesaid property to any of your
clients. Apparently, what took place were just preliminary discussions/consultations between
him and your clients, which everyone knows cannot bind the Bank's Board or Conservator.

We are, therefore, constrained to refuse any tender of payment by your clients, as the same
is patently violative of corporate and banking laws. We believe that this is more than
sufficient legal justification for refusing said alleged tender.

Rest assured that we have nothing personal against your clients. All our acts are official,
legal and in accordance with law. We also have no personal interest in any of the properties
of the Bank.

Please be advised accordingly.

Very truly yours,

(Sgd.) Leonida T. Encarnacion

LEONIDA T. EDCARNACION
Acting Conservator

In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the
conservator of a bank, it must be pointed out that such powers must be related to the "(preservation
of) the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its
viability." Such powers, enormous and extensive as they are, cannot extend to the post-
facto repudiation of perfected transactions, otherwise they would infringe against the non-impairment
clause of the Constitution 44 . If the legislature itself cannot revoke an existing valid contract, how can
it delegate such non-existent powers to the conservator under Section 28-A of said law?

Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are,
under existing law, deemed to be defective — i.e., void, voidable, unenforceable or rescissible.
Hence, the conservator merely takes the place of a bank's board of directors. What the said board
cannot do — such as repudiating a contract validly entered into under the doctrine of implied
authority — the conservator cannot do either. Ineluctably, his power is not unilateral and he cannot
simply repudiate valid obligations of the Bank. His authority would be only to bring court actions to
assail such contracts — as he has already done so in the instant case. A contrary understanding of
the law would simply not be permitted by the Constitution. Neither by common sense. To rule
otherwise would be to enable a failing bank to become solvent, at the expense of third parties, by
simply getting the conservator to unilaterally revoke all previous dealings which had one way or
another or come to be considered unfavorable to the Bank, yielding nothing to perfected contractual
rights nor vested interests of the third parties who had dealt with the Bank.

The Fifth Issue: Were There Reversible Errors of Facts?

Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact
by the Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers
Hanover & Trust Corporation, 45 , we held:

. . . The rule regarding questions of fact being raised with this Court in a petition
for certiorari under Rule 45 of the Revised Rules of Court has been stated in Remalante vs.
Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138, thus:
 The rule in this jurisdiction is that only questions of law may be raised in a petition
for certiorari under Rule 45 of the Revised Rules of Court. "The jurisdiction of the Supreme
Court in cases brought to it from the Court of Appeals is limited to reviewing and revising the
errors of law imputed to it, its findings of the fact being conclusive " [Chan vs. Court of
Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of
decisions]. This Court has emphatically declared that "it is not the function of the Supreme
Court to analyze or weigh such evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been committed by the lower court" (Tiongco v. De la
Merced, G. R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R.
No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G. R. No. L-
47531, February 20, 1984, 127 SCRA 596). "Barring, therefore, a showing that the findings
complained of are totally devoid of support in the record, or that they are so glaringly
erroneous as to constitute serious abuse of discretion, such findings must stand, for this
Court is not expected or required to examine or contrast the oral and documentary evidence
submitted by the parties" [Santa Ana, Jr. vs. Hernandez, G. R. No. L-16394, December 17,
1966, 18 SCRA 973] [at pp. 144-145.]

Likewise, in Bernardo vs. Court of Appeals 46 , we held:

The resolution of this petition invites us to closely scrutinize the facts of the case, relating to
the sufficiency of evidence and the credibility of witnesses presented. This Court so held that
it is not the function of the Supreme Court to analyze or weigh such evidence all over again.
The Supreme Court's jurisdiction is limited to reviewing errors of law that may have been
committed by the lower court. The Supreme Court is not a trier of facts. . . .

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and
Development Corp. 47 :

The Court has consistently held that the factual findings of the trial court, as well as the Court
of Appeals, are final and conclusive and may not be reviewed on appeal. Among the
exceptional circumstances where a reassessment of facts found by the lower courts is
allowed are when the conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or impossible; when
there is grave abuse of discretion in the appreciation of facts; when the judgment is premised
on a misapprehension of facts; when the findings went beyond the issues of the case and
the same are contrary to the admissions of both appellant and appellee. After a careful study
of the case at bench, we find none of the above grounds present to justify the re-evaluation
of the findings of fact made by the courts below.

In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance
Company Inc. vs. Hon. Court of Appeals, et al. 48 is equally applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate court, . . . (I)t is
not the function of this Court to assess and evaluate all over again the evidence, testimonial
and documentary, adduced by the parties, particularly where, such as here, the findings of
both the trial court and the appellate court on the matter coincide. (emphasis supplied)

Petitioners, however, assailed the respondent Court's Decision as "fraught with findings and
conclusions which were not only contrary to the evidence on record but have no bases at all,"
specifically the findings that (1) the "Bank's counter-offer price of P5.5 million had been determined
by the past due committee and approved by conservator Romey, after Rivera presented the same
for discussion" and (2) "the meeting with Co was not to scale down the price and start negotiations
anew, but a meeting on the already determined price of P5.5 million" Hence, citing Philippine
National Bank vs. Court of Appeals 49 , petitioners are asking us to review and reverse such factual
findings.

The first point was clearly passed upon by the Court of Appeals 50 , thus:

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

xxx xxx xxx

. . . The argument deserves scant consideration. As pointed out by plaintiff, during the
meeting of September 28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-
president of the bank, where the topic was the possible lowering of the price, the bank official
refused it and confirmed that the P5.5 Million price had been passed upon by the Committee
and could no longer be lowered (TSN of April 27, 1990, pp. 34-35) (p. 15, CA Decision).

The respondent Court did not believe the evidence of the petitioners on this point, characterizing it
as "not credible" and "at best equivocal and considering the gratuitous and self-serving character of
these declarations, the bank's submissions on this point do not inspire belief."

To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo
Romey to testify on their behalf, as he would have been in the best position to establish their thesis.
Under the rules on evidence 51 , such suppression gives rise to the presumption that his testimony
would have been adverse, if produced.

The second point was squarely raised in the Court of Appeals, but petitioners' evidence was deemed
insufficient by both the trial court and the respondent Court, and instead, it was respondent's
submissions that were believed and became bases of the conclusions arrived at.

In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower
courts are valid and correct. But the petitioners are now asking this Court to disturb these findings to
fit the conclusion they are espousing, This we cannot do.

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

Epilogue.

In summary, there are two procedural issues involved forum-shopping and the raising of issues for
the first time on appeal [viz., the extinguishment of the Bank's offer of P5.5 million and the
conservator's powers to repudiate contracts entered into by the Bank's officers] — which per
se could justify the dismissal of the present case. We did not limit ourselves thereto, but delved as
well into the substantive issues — the perfection of the contract of sale and its enforceability, which
required the determination of questions of fact. While the Supreme Court is not a trier of facts and as
a rule we are not required to look into the factual bases of respondent Court's decisions and
resolutions, we did so just the same, if only to find out whether there is reason to disturb any of its
factual findings, for we are only too aware of the depth, magnitude and vigor by which the parties
through their respective eloquent counsel, argued their positions before this Court.

We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a
government-appointed conservator and "there is need to rehabilitate the Bank in order to get it back
on its feet . . . as many people depend on (it) for investments, deposits and well as employment. As
of June 1987, the Bank's overdraft with the Central Bank had already reached P1.023 billion . . . and
there were (other) offers to buy the subject properties for a substantial amount of money." 53

While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot
emotionally close its eyes to overriding considerations of substantive and procedural law, like
respect for perfected contracts, non-impairment of obligations and sanctions against forum-
shopping, which must be upheld under the rule of law and blind justice.

This Court cannot just gloss over private respondent's submission that, while the subject properties
may currently command a much higher price, it is equally true that at the time of the transaction in
1987, the price agreed upon of P5.5 million was reasonable, considering that the Bank acquired
these properties at a foreclosure sale for no more than P3.5 million 54 . That the Bank procrastinated
and refused to honor its commitment to sell cannot now be used by it to promote its own advantage,
to enable it to escape its binding obligation and to reap the benefits of the increase in land values.
To rule in favor of the Bank simply because the property in question has algebraically accelerated in
price during the long period of litigation is to reward lawlessness and delays in the fulfillment of
binding contracts. Certainly, the Court cannot stamp its imprimatur on such outrageous proposition.

WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court
hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is
REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or
similar acts will be dealt with more severely. Costs against petitioners.

SO ORDERED.

G.R. No. 162894 February 26, 2008

RAYTHEON INTERNATIONAL, INC., petitioner,

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

DECISION
TINGA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure which seeks the reversal of the Decision1 and Resolution2 of the Court of Appeals in CA-
G.R. SP No. 67001 and the dismissal of the civil case filed by respondent against petitioner with the
trial court.

As culled from the records of the case, the following antecedents appear:

Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing
under the laws of the State of Connecticut, United States of America, and respondent Stockton W.
Rouzie, Jr., an American citizen, entered into a contract whereby BMSI hired respondent as its
representative to negotiate the sale of services in several government projects in the Philippines for
an agreed remuneration of 10% of the gross receipts. On 11 March 1992, respondent secured a
service contract with the Republic of the Philippines on behalf of BMSI for the dredging of rivers
affected by the Mt. Pinatubo eruption and mudflows.3

On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations
Commission (NLRC) a suit against BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert and
Walter G. Browning for alleged nonpayment of commissions, illegal termination and breach of
employment contract.4 On 28 September 1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered
judgment ordering BMSI and RUST to pay respondent‘s money claims.5 Upon appeal by BMSI, the
NLRC reversed the decision of the Labor Arbiter and dismissed respondent‘s complaint on the
ground of lack of jurisdiction.6 Respondent elevated the case to this Court but was dismissed in a
Resolution dated 26 November 1997. The Resolution became final and executory on 09 November
1998.

On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before
the Regional Trial Court (RTC) of Bauang, La Union. The Complaint,7 docketed as Civil Case No.
1192-BG, named as defendants herein petitioner Raytheon International, Inc. as well as BMSI and
RUST, the two corporations impleaded in the earlier labor case. The complaint essentially reiterated
the allegations in the labor case that BMSI verbally employed respondent to negotiate the sale of
services in government projects and that respondent was not paid the commissions due him from
the Pinatubo dredging project which he secured on behalf of BMSI. The complaint also averred that
BMSI and RUST as well as petitioner itself had combined and functioned as one company.

In its Answer,8 petitioner alleged that contrary to respondent‘s claim, it was a foreign corporation duly
licensed to do business in the Philippines and denied entering into any arrangement with respondent
or paying the latter any sum of money. Petitioner also denied combining with BMSI and RUST for
the purpose of assuming the alleged obligation of the said companies.9 Petitioner also referred to the
NLRC decision which disclosed that per the written agreement between respondent and BMSI and
RUST, denominated as "Special Sales Representative Agreement," the rights and obligations of the
parties shall be governed by the laws of the State of Connecticut.10 Petitioner sought the dismissal of
the complaint on grounds of failure to state a cause of action and forum non conveniens and prayed
for damages by way of compulsory counterclaim.11

On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on Affirmative
Defenses and for Summary Judgment12 seeking the dismissal of the complaint on grounds of forum
non conveniens and failure to state a cause of action. Respondent opposed the same. Pending the
resolution of the omnibus motion, the deposition of Walter Browning was taken before the Philippine
Consulate General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied petitioner‘s omnibus motion. The trial court
held that the factual allegations in the complaint, assuming the same to be admitted, were sufficient
for the trial court to render a valid judgment thereon. It also ruled that the principle of forum non
conveniens was inapplicable because the trial court could enforce judgment on petitioner, it being a
foreign corporation licensed to do business in the Philippines.15

Petitioner filed a Motion for Reconsideration16 of the order, which motion was opposed by
respondent.17 In an Order dated 31 July 2001,18 the trial court denied petitioner‘s motion. Thus, it
filed a Rule 65 Petition19 with the Court of Appeals praying for the issuance of a writ of certiorari and
a writ of injunction to set aside the twin orders of the trial court dated 13 September 2000 and 31
July 2001 and to enjoin the trial court from conducting further proceedings.20

On 28 August 2003, the Court of Appeals rendered the assailed Decision21 denying the petition for
certiorari for lack of merit. It also denied petitioner‘s motion for reconsideration in the assailed
Resolution issued on 10 March 2004.22

The appellate court held that although the trial court should not have confined itself to the allegations
in the complaint and should have also considered evidence aliunde in resolving petitioner‘s omnibus
motion, it found the evidence presented by petitioner, that is, the deposition of Walter Browning,
insufficient for purposes of determining whether the complaint failed to state a cause of action. The
appellate court also stated that it could not rule one way or the other on the issue of whether the
corporations, including petitioner, named as defendants in the case had indeed merged together
based solely on the evidence presented by respondent. Thus, it held that the issue should be
threshed out during trial.23 Moreover, the appellate court deferred to the discretion of the trial court
when the latter decided not to desist from assuming jurisdiction on the ground of the inapplicability of
the principle of forum non conveniens.

Hence, this petition raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE

COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE

COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24

Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua Law
Office, counsel on record for respondent, manifested that the lawyer handling the case, Atty. Rogelio
Karagdag, had severed relations with the law firm even before the filing of the instant petition and
that it could no longer find the whereabouts of Atty. Karagdag or of respondent despite diligent
efforts. In a Resolution25 dated 20 November 2006, the Court resolved to dispense with the filing of a
comment.

The instant petition lacks merit.

Petitioner mainly asserts that the written contract between respondent and BMSI included a valid
choice of law clause, that is, that the contract shall be governed by the laws of the State of
Connecticut. It also mentions the presence of foreign elements in the dispute – namely, the parties
and witnesses involved are American corporations and citizens and the evidence to be presented is
located outside the Philippines – that renders our local courts inconvenient forums. Petitioner
theorizes that the foreign elements of the dispute necessitate the immediate application of the
doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in judicial
resolution of conflicts-of-laws problems, namely: jurisdiction, choice of law, and recognition and
enforcement of judgments. Thus, in the instances27 where the Court held that the local judicial
machinery was adequate to resolve controversies with a foreign element, the following requisites
had to be proved: (1) that the Philippine Court is one to which the parties may conveniently resort;
(2) that the Philippine Court is in a position to make an intelligent decision as to the law and the
facts; and (3) that the Philippine Court has or is likely to have the power to enforce its decision.28

On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine
court and where the court has jurisdiction over the subject matter, the parties and the res, it may or
can proceed to try the case even if the rules of conflict-of-laws or the convenience of the parties
point to a foreign forum. This is an exercise of sovereign prerogative of the country where the case is
filed.29

Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the
law30 and by the material allegations in the complaint, irrespective of whether or not the plaintiff is
entitled to recover all or some of the claims or reliefs sought therein.31 Civil Case No. 1192-BG is an
action for damages arising from an alleged breach of contract. Undoubtedly, the nature of the action
and the amount of damages prayed are within the jurisdiction of the RTC.

As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent
(as party plaintiff) upon the filing of the complaint. On the other hand, jurisdiction over the person of
petitioner (as party defendant) was acquired by its voluntary appearance in court.32

That the subject contract included a stipulation that the same shall be governed by the laws of the
State of Connecticut does not suggest that the Philippine courts, or any other foreign tribunal for that
matter, are precluded from hearing the civil action. Jurisdiction and choice of law are two distinct
concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice
of law asks the further question whether the application of a substantive law which will determine the
merits of the case is fair to both parties.33 The choice of law stipulation will become relevant only
when the substantive issues of the instant case develop, that is, after hearing on the merits proceeds
before the trial court.

Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse
impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties
are not precluded from seeking remedies elsewhere.34 Petitioner‘s 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 court‘s desistance.35

Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its conclusion
that it can assume jurisdiction over the dispute notwithstanding its foreign elements. In the same
manner, the Court defers to the sound discretion of the lower courts because their findings are
binding on this Court.

Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause of
action against petitioner. Failure to state a cause of action refers to the insufficiency of allegation in
the pleading.36 As a general rule, the elementary test for failure to state a cause of action is whether
the complaint alleges facts which if true would justify the relief demanded.37

The complaint alleged that petitioner had combined with BMSI and RUST to function as one
company. Petitioner contends that the deposition of Walter Browning rebutted this allegation. On this
score, the resolution of the Court of Appeals is instructive, thus:

x x x Our examination of the deposition of Mr. Walter Browning as well as other documents
produced in the hearing shows that these evidence aliunde are not quite sufficient for us to
mete a ruling that the complaint fails to state a cause of action.

Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs that
Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty obligations of
defendant Rust International in the Makar Port Project in General Santos City, after Rust
International ceased to exist after being absorbed by REC. Other documents already
submitted in evidence are likewise meager to preponderantly conclude that Raytheon
International, Inc., Rust International[,] Inc. and Brand Marine Service, Inc. have combined
into one company, so much so that Raytheon International, Inc., the surviving company (if at
all) may be held liable for the obligation of BMSI to respondent Rouzie for unpaid
commissions. Neither these documents clearly speak otherwise.38

As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and RUST
merged together requires the presentation of further evidence, which only a full-blown trial on the
merits can afford.

WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution
of the Court of Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 120077 October 13, 2000

THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND
MARCELO G. SANTOS, respondents.

PARDO, J.:

The case before the Court is a petition for certiorari1 to annul the following orders of the National
Labor Relations Commission (hereinafter referred to as "NLRC") for having been issued without or
with excess jurisdiction and with grave abuse of discretion:2

(1) Order of May 31, 1993.3 Reversing and setting aside its earlier resolution of August 28,
1992.4 The questioned order declared that the NLRC, not the Philippine Overseas
Employment Administration (hereinafter referred to as "POEA"), had jurisdiction over private
respondent's complaint;

(2) Decision of December 15, 1994.5 Directing petitioners to jointly and severally pay private
respondent twelve thousand and six hundred dollars (US$ 12,600.00) representing salaries
for the unexpired portion of his contract; three thousand six hundred dollars (US$3,600.00)
 as extra four months salary for the two (2) year period of his contract, three thousand six
hundred dollars (US$3,600.00) as "14th month pay" or a total of nineteen thousand and eight
hundred dollars (US$19,800.00) or its peso equivalent and attorney's fees amounting to ten
percent (10%) of the total award; and

(3) Order of March 30, 1995.6 Denying the motion for reconsideration of the petitioners.

In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an
overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of Oman.
Subsequently, in June 1988, he was directly hired by the Palace Hotel, Beijing, People's Republic of
China and later terminated due to retrenchment.

Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the Manila Hotel
International Company, Limited (hereinafter referred to as "MHICL").

When the case was filed in 1990, MHC was still a government-owned and controlled corporation
duly organized and existing under the laws of the Philippines.

MHICL is a corporation duly organized and existing under the laws of Hong Kong.7 MHC is an
"incorporator" of MHICL, owning 50% of its capital stock.8

By virtue of a "management agreement"9 with the Palace Hotel (Wang Fu Company Limited),
MHICL10 trained the personnel and staff of the Palace Hotel at Beijing, China.

Now the facts.

During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent
Santos received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager, Palace
Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that he was recommended by one
Nestor Buenio, a friend of his.

Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary
and increased benefits. The position was slated to open on October 1, 1988.11

On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.

On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign employment
contract to respondent Santos. Mr. Henk advised respondent Santos that if the contract was
acceptable, to return the same to Mr. Henk in Manila, together with his passport and two additional
pictures for his visa to China.

On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective June 30,
1988, under the pretext that he was needed at home to help with the family's piggery and poultry
business.

On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's letter.
Respondent Santos enclosed four (4) signed copies of the employment contract (dated June 4,
1988) and notified them that he was going to arrive in Manila during the first week of July 1988.
The employment contract of June 4, 1988 stated that his employment would commence September
1, 1988 for a period of two years.12 It provided for a monthly salary of nine hundred dollars
(US$900.00) net of taxes, payable fourteen (14) times a year.13

On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing Press.

On July 1, 1988, respondent Santos arrived in Manila.

On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the Palace
Hotel.14

Subsequently, respondent Santos signed an amended "employment agreement" with the Palace
Hotel, effective November 5, 1988. In the contract, Mr. Shmidt represented the Palace Hotel. The
Vice President (Operations and Development) of petitioner MHICL Miguel D. Cergueda signed the
employment agreement under the word "noted".

From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He returned
to China and reassumed his post on July 17, 1989.

On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a handwritten
note that respondent Santos be given one (1) month notice of his release from employment.

On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt
that his employment at the Palace Hotel print shop would be terminated due to business reverses
brought about by the political upheaval in China.15 We quote the letter:16

"After the unfortunate happenings in China and especially Beijing (referring to Tiannamen
Square incidents), our business has been severely affected. To reduce expenses, we will not
open/operate printshop for the time being.

"We sincerely regret that a decision like this has to be made, but rest assured this does in no
way reflect your past performance which we found up to our expectations."

"Should a turnaround in the business happen, we will contact you directly and give you
priority on future assignment."

On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos and paid
all benefits due him, including his plane fare back to the Philippines.

On October 3, 1989, respondent Santos was repatriated to the Philippines.

On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt,
demanding full compensation pursuant to the employment agreement.

On November 11, 1989, Mr. Shmidt replied, to wit:17

His service with the Palace Hotel, Beijing was not abruptly terminated but we followed the
one-month notice clause and Mr. Santos received all benefits due him.
 "For your information the Print Shop at the Palace Hotel is still not operational and with a low
business outlook, retrenchment in various departments of the hotel is going on which is a
normal management practice to control costs.

"When going through the latest performance ratings, please also be advised that his
performance was below average and a Chinese National who is doing his job now shows a
better approach.

"In closing, when Mr. Santos received the letter of notice, he hardly showed up for work but
still enjoyed free accommodation/laundry/meals up to the day of his departure."

On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the Arbitration
Branch, National Capital Region, National Labor Relations Commission (NLRC). He prayed for an
award of nineteen thousand nine hundred and twenty three dollars (US$19,923.00) as actual
damages, forty thousand pesos (P40,000.00) as exemplary damages and attorney's fees equivalent
to 20% of the damages prayed for. The complaint named MHC, MHICL, the Palace Hotel and Mr.
Shmidt as respondents.

The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the
proceedings before the Labor Arbiter.18

On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners, thus:19

"WHEREFORE, judgment is hereby rendered:

"1. directing all the respondents to pay complainant jointly and severally;

"a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;

"b) P50,000.00 as moral damages;

"c) P40,000.00 as exemplary damages; and

"d) Ten (10) percent of the total award as attorney's fees.

"SO ORDERED."

On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had
jurisdiction over the case.

On August 28, 1992, the NLRC promulgated a resolution, stating:20

"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void for want
of jurisdiction. Complainant is hereby enjoined to file his complaint with the POEA.

"SO ORDERED."

On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted
resolution. He argued that the case was not cognizable by the POEA as he was not an "overseas
contract worker."21
On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed Labor
Arbiter Emerson Tumanon to hear the case on the question of whether private respondent was
retrenched or dismissed.22

On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the testimonial
and documentary evidence presented to and heard by him.23

Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital
Region, Arbitration Branch, and the case was transferred to Labor Arbiter Jose G. de Vera.24

On November 25, 1994, Labor Arbiter de Vera submitted his report.25 He found that respondent
Santos was illegally dismissed from employment and recommended that he be paid actual damages
equivalent to his salaries for the unexpired portion of his contract.26

On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:27

"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are
supported by substantial evidence, judgment is hereby rendered, directing the respondents
to jointly and severally pay complainant the following computed contractual benefits: (1)
US$12,600.00 as salaries for the unexpired portion of the parties' contract; (2) US$3,600.00
as extra four (4) months salary for the two (2) years period (sic) of the parties' contract; (3)
US$3,600.00 as "14th month pay" for the aforesaid two (2) years contract stipulated by the
parties or a total of US$19,800.00 or its peso equivalent, plus (4) attorney's fees of 10% of
complainant's total award.

"SO ORDERED."

On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter de
Vera's recommendation had no basis in law and in fact.28

On March 30, 1995, the NLRC denied the motion for reconsideration.29

Hence, this petition.30

On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a temporary
restraining order and/or writ of preliminary injunction and a motion for the annulment of the entry of
judgment of the NLRC dated July 31, 1995.31

On November 20, 1995, the Court denied petitioner's urgent motion. The Court required respondents
to file their respective comments, without giving due course to the petition.32

On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the petition
and its annexes, they can not defend and sustain the position taken by the NLRC in its assailed
decision and orders. The Solicitor General prayed that he be excused from filing a comment on
behalf of the NLRC33

On April 30,1996, private respondent Santos filed his comment.34

On June 26, 1996, the Court granted the manifestation of the Solicitor General and required the
NLRC to file its own comment to the petition.35
On January 7, 1997, the NLRC filed its comment.

The petition is meritorious.

I. Forum Non-Conveniens

The NLRC was a seriously inconvenient forum.

We note that the main aspects of the case transpired in two foreign jurisdictions and the case
involves purely foreign elements. The only link that the Philippines has with the case is that
respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations. Not
all cases involving our citizens can be tried here.

The employment contract. — Respondent Santos was hired directly by the Palace Hotel, a foreign
employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was
then employed. He was hired without the intervention of the POEA or any authorized recruitment
agency of the government.36

Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over
the case if it chooses to do so provided: (1) that the Philippine court is one to which the parties may
conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as
to the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its
decision.37 The conditions are unavailing in the case at bar.

Not Convenient. — We fail to see how the NLRC is a convenient forum given that all the incidents of
the case — from the time of recruitment, to employment to dismissal occurred outside the
Philippines. The inconvenience is compounded by the fact that the proper defendants, the Palace
Hotel and MHICL are not nationals of the Philippines. Neither .are they "doing business in the
Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the
Philippines.

No power to determine applicable law. — Neither can an intelligent decision be made as to the law
governing the employment contract as such was perfected in foreign soil. This calls to fore the
application of the principle of lex loci contractus (the law of the place where the contract was made).38

The employment contract was not perfected in the Philippines. Respondent Santos signified his
acceptance by writing a letter while he was in the Republic of Oman. This letter was sent to the
Palace Hotel in the People's Republic of China.

No power to determine the facts. — Neither can the NLRC determine the facts surrounding the
alleged illegal dismissal as all acts complained of took place in Beijing, People's Republic of China.
The NLRC was not in a position to determine whether the Tiannamen Square incident truly
adversely affected operations of the Palace Hotel as to justify respondent Santos' retrenchment.

Principle of effectiveness, no power to execute decision. — Even assuming that a proper decision
could be reached by the NLRC, such would not have any binding effect against the employer, the
Palace Hotel. The Palace Hotel is a corporation incorporated under the laws of China and was not
even served with summons. Jurisdiction over its person was not acquired.

This is not to say that Philippine courts and agencies have no power to solve controversies involving
foreign employers. Neither are we saying that we do not have power over an employment contract
executed in a foreign country. If Santos were an "overseas contract worker", a Philippine forum,
specifically the POEA, not the NLRC, would protect him.39 He is not an "overseas contract worker" a
fact which he admits with conviction.40

Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's decision
cannot be sustained.

II. MHC Not Liable

Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL
was liable for Santos' retrenchment, still MHC, as a separate and distinct juridical entity cannot be
held liable.

True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock. However,
this is not enough to pierce the veil of corporate fiction between MHICL and MHC.

Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the corporate
fiction is used to defeat public convenience, justify wrong, protect fraud or defend a crime. 41 It is
done only when a corporation is a mere alter ego or business conduit of a person or another
corporation.

In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of
itself a sufficient reason for disregarding the fiction of separate corporate personalities."

The tests in determining whether the corporate veil may be pierced are: First, the defendant must
have control or complete domination of the other corporation's finances, policy and business
practices with regard to the transaction attacked. There must be proof that the other corporation had
no separate mind, will or existence with respect the act complained of. Second, control must be used
by the defendant to commit fraud or wrong. Third, the aforesaid control or breach of duty must be the
proximate cause of the injury or loss complained of. The absence of any of the elements prevents
the piercing of the corporate veil.43

It is basic that a corporation has a personality separate and distinct from those composing it as well
as from that of any other legal entity to which it may be related.44 Clear and convincing evidence is
needed to pierce the veil of corporate fiction.45 In this case, we find no evidence to show that MHICL
and MHC are one and the same entity.

III. MHICL not Liable

Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his employment
contract with the Palace Hotel. This fact fails to persuade us.

First, we note that the Vice President (Operations and Development) of MHICL, Miguel D. Cergueda
signed the employment contract as a mere witness. He merely signed under the word "noted".

When one "notes" a contract, one is not expressing his agreement or approval, as a party
would.46 In Sichangco v. Board of Commissioners of Immigration,47 the Court recognized that the term
"noted" means that the person so noting has merely taken cognizance of the existence of an act or
declaration, without exercising a judicious deliberation or rendering a decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of the
document is that which, "in a deed or other formal instrument is that part which comes after the
recitals, or where there are no recitals, after the parties (emphasis ours)."48 As opposed to a party to
a contract, a witness is simply one who, "being present, personally sees or perceives a thing; a
beholder, a spectator, or eyewitness."49 One who "notes" something just makes a "brief written
statement"50 a memorandum or observation.

Second, and more importantly, there was no existing employer-employee relationship between
Santos and MHICL. In determining the existence of an employer-employee relationship, the
following elements are considered:51

"(1) the selection and engagement of the employee;

"(2) the payment of wages;

"(3) the power to dismiss; and

"(4) the power to control employee's conduct."

MHICL did not have and did not exercise any of the aforementioned powers. It did not select
respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his
friend, Nestor Buenio. MHICL did not engage respondent Santos to work. The terms of employment
were negotiated and finalized through correspondence between respondent Santos, Mr. Schmidt
and Mr. Henk, who were officers and representatives of the Palace Hotel and not MHICL. Neither did
respondent Santos adduce any proof that MHICL had the power to control his conduct. Finally, it
was the Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent Santos'
services.

Neither is there evidence to suggest that MHICL was a "labor-only contractor."52 There is no proof
that MHICL "supplied" respondent Santos or even referred him for employment to the Palace Hotel.

Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same
entity. The fact that the Palace Hotel is a member of the "Manila Hotel Group" is not enough to
pierce the corporate veil between MHICL and the Palace Hotel.

IV. Grave Abuse of Discretion

Considering that the NLRC was forum non-conveniens and considering further that no employer-
employee relationship existed between MHICL, MHC and respondent Santos, Labor Arbiter Ceferina
J. Diosana clearly had no jurisdiction over respondent's claim in NLRC NCR Case No. 00-02-01058-
90.

Labor Arbiters have exclusive and original jurisdiction only over the following:53

"1. Unfair labor practice cases;

"2. Termination disputes;

"3. If accompanied with a claim for reinstatement, those cases that workers may file involving
wages, rates of pay, hours of work and other terms and conditions of employment;
 "4. Claims for actual, moral, exemplary and other forms of damages arising from employer-
employee relations;

"5. Cases arising from any violation of Article 264 of this Code, including questions involving
legality of strikes and lockouts; and

"6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement."

In all these cases, an employer-employee relationship is an indispensable jurisdictional requirement.

The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited to
disputes arising from an employer-employee relationship which can be resolved by reference to the
Labor Code, or other labor statutes, or their collective bargaining agreements.54

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

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

V. The Fallo

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

No costs.

SO ORDERED.

G.R. No. 102223 August 22, 1996

COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-TRADE, INC., (formerly

ASPAC-ITEC PHILIPPINES, INC.) and FRANCISCO S. AGUIRRE, petitioners,
vs.
THE COURT OF APPEALS, ITEC INTERNATIONAL, INC., and ITEC, INC., respondents.

TORRES, JR., J.:p

Business Corporations, according to Lord Coke, "have no souls." They do business peddling goods, wares or even services
across national boundaries in "souless forms" in quest for profits albeit at times, unwelcomed in these strange lands venturing into
uncertain markets and, the risk of dealing with wily competitors.

This is one of the issues in the case at bar.

Contested in this petition for review on Certiorari is the Decision of the Court of Appeals on
June 7, 1991, sustaining the RTC Order dated February 22, 1991, denying the petitioners'
Motion to Dismiss, and directing the issuance of a writ of preliminary injunction, and its
companion Resolution of October 9, 1991, denying the petitioners' Motion for
Reconsideration.

Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for brevity) and
ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both domestic corporations, while
petitioner Francisco S. Aguirre is their President and majority stockholder. Private
Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for brevity) are
corporations duly organized and existing under the laws of the State of Alabama, United
States of America. There is no dispute that ITEC is a foreign corporation not licensed to do
business in the Philippines.

On August 14, 1987, ITEC entered into a contract with petitioner ASPAC referred to as
"Representative Agreement".1 Pursuant to the contract, ITEC engaged ASPAC as its
"exclusive representative" in the Philippines for the sale of ITEC's products, in consideration
of which, ASPAC was paid a stipulated commission. The agreement was signed by G.A.
Clark and Francisco S. Aguirre, presidents of ITEC and ASPAC respectively, for and in
behalf of their companies.2 The said agreement was initially for a term of twenty-four months.
After the lapse of the agreed period, the agreement was renewed for another twenty-four
months.

Through a "License Agreement"3 entered into by the same parties on November 10, 1988,
ASPAC was able to incorporate and use the name "ITEC" in its own name. Thus , ASPAC
Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC (Philippines).

By virtue of said contracts, ASPAC sold electronic products, exported by ITEC, to their sole
customer, the Philippine Long Distance Telephone Company, (PLDT, for brevity).

To facilitate their transactions, ASPAC, dealing under its new appellation, and PLDT
executed a document entitled "PLDT-ASPAC/ITEC PROTOCOL"4 which defined the project
details for the supply of ITEC's Interface Equipment in connection with the Fifth Expansion
Program of PLDT.

One year into the second term of the parties' Representative Agreement, ITEC decided to
terminate the same, because petitioner ASPAC allegedly violated its contractual commitment
as stipulated in their agreements.5

ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE
COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of which is likewise
petitioner Aguirre, of using knowledge and information of ITEC's products specifications to
develop their own line of equipment and product support, which are similar, if not identical to
ITEC's own, and offering them to ITEC's former customer.

On January 31, 1991, the complaint6 in Civil Case No. 91-294, was filed with the Regional
Trial Court of Makati, Branch 134 by ITEC, INC. Plaintiff sought to enjoin, first, preliminarily
and then, after trial, permanently; (1) defendants DIGITAL, CMDI, and Francisco Aguirre and
their agents and business associates, to cease and desist from selling or attempting to sell to
PLDT and to any other party, products which have been copied or manufactured "in like
manner, similar or identical to the products, wares and equipment of plaintiff," and (2)
defendant ASPAC, to cease and desist from using in its corporate name, letter heads,
envelopes, sign boards and business dealings, plaintiff's trademark, internationally known as
ITEC; and the recovery from defendants in solidum, damages of at least P500,000.00,
attorney's fees and litigation expenses.

In due time, defendants filed a motion to dismiss7 the complaint on the following grounds:

(1) That plaintiff has no legal capacity to sue as it is a foreign corporation doing business in
the Philippines without the required BOI authority and SEC license, and (2) that plaintiff is
simply engaged in forum shopping which justifies the application against it of the principle of
"forum non conveniens".

On February 8, 1991, the complaint was amended by virtue of which ITEC

INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC.8

In their Supplemental Motion to Dismiss,9 defendants took note of the amendment of the
complaint and asked the court to consider in toto their motion to dismiss and their
supplemental motion as their answer to the amended complaint.

After conducting hearings on the prayer for preliminary injunction, the court a quo on
February 22, 1991, issued its Order: 10 (1) denying the motion to dismiss for being devoid of
legal merit with a rejection of both grounds relied upon by the defendants in their motion to
dismiss, and (2) directing the issuance of a writ of preliminary injunction on the same day.

From the foregoing order, petitioners elevated the case to the respondent Court of Appeals
on a Petition for Certiorari and Prohibition11 under Rule 65 of the Revised Rules of Court,
assailing and seeking the nullification and the setting aside of the Order and the Writ of
Preliminary Injunction issued by the Regional Trial Court.

The respondent appellate court stated, thus:

We find no reason whether in law or from the facts of record, to disagree with the
(lower court's) ruling. We therefore are unable to find in respondent Judge's issuance
of said writ the grave abuse of discretion ascribed thereto by the petitioners.

In fine, We find that the petition prima facie does not show that Certiorari lies in the
present case and therefore, the petition does not deserve to be given due course.

WHEREFORE, the present petition should be, as it is hereby, denied due course and
accordingly, is hereby dismissed. Costs against the petitioners.

SO ORDERED.12

Petitioners filed a motion for reconsideration13 on June 7, 1991, which was likewise denied by
the respondent court.

WHEREFORE, the present motion for reconsideration should be, as it is hereby,

denied for lack of merit. For the same reason, the motion to have the motion for
reconsideration set for oral argument likewise should be and is hereby denied.

SO ORDERED.14
Petitioners are now before us via Petition for Review on Certiorari15 under Rule 45 of the
Revised Rules of Court.

It is the petitioners' submission that private respondents are foreign corporations actually
doing business in the Philippines without the requisite authority and license from the Board of
Investments and the Securities and Exchange Commission, and thus, disqualified from
instituting the present action in our courts. It is their contention that the provisions of the
Representative Agreement, petitioner ASPAC executed with private respondent ITEC, are
similarly "highly restrictive" in nature as those found in the agreements which confronted the
Court in the case of Top-Weld Manufacturing, Inc. vs. ECED S.A. et al.,16 as to reduce
petitioner ASPAC to a mere conduit or extension of private respondents in the Philippines.

In that case, we ruled that respondent foreign corporations are doing business in the
Philippines because when the respondents entered into the disputed contracts with the
petitioner, they were carrying out the purposes for which they were created, i.e., to
manufacture and market welding products and equipment. The terms and conditions of the
contracts as well as the respondents' conduct indicate that they established within our
country a continuous business, and not merely one of a temporary character. The
respondents could be exempted from the requirements of Republic Act 5455 if the petitioner
is an independent entity which buys and distributes products not only of the petitioner, but
also of other manufacturers or transacts business in its name and for its account and not in
the name or for the account of the foreign principal. A reading of the agreements between
the petitioner and the respondents shows that they are highly restrictive in nature, thus
making the petitioner a mere conduit or extension of the respondents.

It is alleged that certain provisions of the "Representative Agreement" executed by the

parties are similar to those found in the License Agreement of the parties in the Top-Weld
case which were considered as "highly restrictive" by this Court. The provisions in point are:

2.0 Terms and Conditions of Sales.

2.1 Sale of ITEC products shall be at the purchase price set by ITEC from time to
time. Unless otherwise expressly agreed to in writing by ITEC the purchase price is
net to ITEC and does not include any transportation charges, import charges or taxes
into or within the Territory. All orders from customers are subject to formal
acceptance by ITEC at its Huntsville, Alabama U.S.A. facility.

xxx xxx xxx

3.0 Duties of Representative

3.1. REPRESENTATIVE SHALL:

3.1.1. Not represent or offer for sale within the Territory any product which competes
with an existing ITEC product or any product which ITEC has under active
development.

3.1.2. Actively solicit all potential customers within the Territory in a systematic and
business like manner.
 3.1.3. Inform ITEC of all request for proposals, requests for bids, invitations to bid
and the like within the Territory.

3.1.4. Attain the Annual Sales Goal for the Territory established by ITEC. The Sales
Goals for the first 24 months is set forth on Attachment two (2) hereto. The Sales
Goal for additional twelve month periods, if any, shall be sent to the Sales Agent by
ITEC at the beginning of each period. These Sales Goals shall be incorporated into
this Agreement and made a part hereof.

xxx xxx xxx

6.0. Representative as Independent Contractor

xxx xxx xxx

6.2. When acting under this Agreement REPRESENTATIVE is authorized to solicit

sales within the Territory on ITEC's behalf but is authorized to bind ITEC only in its
capacity as Representative and no other, and then only to specific customers and on
terms and conditions expressly authorized by ITEC in writing.17

Aside from the abovestated provisions, petitioners point out the following matters of record,
which allegedly bear witness to the respondents' activities within the Philippines in pursuit of
their business dealings:

a. While petitioner ASPAC was the authorized exclusive representative for three (3)
years, it solicited from and closed several sales for and on behalf of private
respondents as to their products only and no other, to PLDT, worth no less than US $
15 Million (p. 20, tsn, Feb. 18, 1991);

b. Contract No. 1 (Exhibit for Petitioners) which covered these sales and identified by
private respondents' sole witness, Mr. Clarence Long, is not in the name of petitioner
ASPAC as such representative, but in the name of private respondent ITEC, INC. (p.
20, tsn, Feb. 18, 1991);

c. The document denominated as "PLDT-ASPAC/ITEC PROTOCOL (Annex C of the

original and amended complaints) which defined the responsibilities of the parties
thereto as to the supply, installation and maintenance of the ITEC equipment sold
under said Contract No. 1 is, as its very title indicates, in the names jointly of the
petitioner ASPAC and private respondents;

d. To evidence receipt of the purchase price of US $ 15 Million, private respondent

ITEC, Inc. issued in its letter head, a Confirmation of payment dated November 13,
1989 and its Invoice dated November 22, 1989 (Annexes 1 and 2 of the Motion to
Dismiss and marked as Exhibits 2 and 3 for the petitioners), both of which were
identified by private respondent's sole witness, Mr. Clarence Long (pp. 25-27, tsn,
Feb. 18, 1991).18

Petitioners contend that the above acts or activities belie the supposed independence of
petitioner ASPAC from private respondents. "The unrebutted evidence on record below for
the petitioners likewise reveal the continuous character of doing business in the Philippines
by private respondents based on the standards laid down by this Court in Wang
 Laboratories, Inc. vs. Hon. Rafael T . Mendoza, et al.19 and again in TOP-WELD. (supra)" It
thus appears that as the respondent Court of Appeals and the trial court's failure to give
credence on the grounds relied upon in support of their Motion to Dismiss that petitioners
ascribe grave abuse of discretion amounting to an excess of jurisdiction of said courts.

Petitioners likewise argue that since private respondents have no capacity to bring suit here,
the Philippines is not the "most convenient forum" because the trial court is devoid of any
power to enforce its orders issued or decisions rendered in a case that could not have been
commenced to begin with, such that in insisting to assume and exercise jurisdiction over the
case below, the trial court had gravely abused its discretion and even actually exceeded its
jurisdiction.

As against petitioner's insistence that private respondent is "doing business" in the Philippines, the
latter maintains that it is not.

We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules and Regulations
Implementing the Omnibus Investments Code of 1987, the following:

(1) A foreign firm is deemed not engaged in business in the Philippines if it transacts
business through middlemen, acting in their own names, such as indebtors,
commercial bookers commercial merchants.

(2) A foreign corporation is deemed not "doing business" if its representative

domiciled in the Philippines has an independent status in that it transacts business in
its name and for its account. 20

Private respondent argues that a scrutiny of its Representative Agreement with the
Petitioners will show that although ASPAC was named as representative of ITEC., ASPAC
actually acted in its own name and for its own account. The following provisions are
particularly mentioned:

3.1.7.1. In the event that REPRESENTATIVE imports directly from ITEC,

REPRESENTATIVE will pay for its own account; all customs duties and import fees
imposed on any ITEC products; all import expediting or handling charges and
expenses imposed on ITEC products; and any stamp tax fees imposed on ITEC.

xxx xxx xxx

4.1. As complete consideration and payment for acting as representative under this
Agreement, REPRESENTATIVE shall receive a sales commission equivalent to
a per centum of the FOB value of all ITEC equipment sold to customers within the
territory as a direct result of REPRESENTATIVE's sales efforts.21

More importantly, private respondent charges ASPAC of admitting its independence from
ITEC by entering and ascribing to provision No. 6 of the Representative Agreement.

6.0 Representative as Independent Contractor

6.1. When performing any of its duties under this Agreement, REPRESENTATIVE
shall act as an independent contractor and not as an employee, worker, laborer,
partner, joint venturer of ITEC as these terms are defined by the laws, regulations,
 decrees or the like of any jurisdiction, including the jurisdiction of the United States,
the state of Alabama and the Territory.22

Although it admits that the Representative Agreement contains provisions which both
support and belie the independence of ASPAC, private respondent echoes the respondent
court's finding that the lower court did not commit grave abuse of discretion nor acted in
excess of jurisdiction when it found that the ground relied upon by the petitioners in their
motion to dismiss does not appear to be indubitable.23

The issues before us now are whether or not private respondent ITEC is an unlicensed
corporation doing business in the Philippines, and if it is, whether or not this fact bars it from
invoking the injunctive authority of our courts.

Considering the above, it is necessary to state what is meant by "doing business" in the
Philippines. Section 133 of the Corporation Code, provides that "No foreign corporation,
transacting business in the Philippines without a license, or its successors or assigns, shall
be permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine Courts or administrative tribunals on any valid cause of action
recognized under Philippine laws."24

Generally, a "foreign corporation" has no legal existence within the state in which it is foreign.
This proceeds from the principle that juridical existence of a corporation is confined within the
territory of the state under whose laws it was incorporated and organized, and it has no legal
status beyond such territory. Such foreign corporation may be excluded by any other state
from doing business within its limits, or conditions may be imposed on the exercise of such
privileges.25 Before a foreign corporation can transact business in this country, it must first
obtain a license to transact business in the Philippines, and a certificate from the appropriate
government agency. If it transacts business in the Philippines without such a license, it shall
not be permitted to maintain or intervene in any action, suit, or proceeding in any court or
administrative agency of the Philippines, but it may be sued on any valid cause of action
recognized under Philippine laws.26

In a long line of decisions, this Court has not altogether prohibited foreign corporation not
licensed to do business in the Philippines from suing or maintaining an action in Philippine
Courts. What it seeks to prevent is a foreign corporation doing business in the Philippines
without a licensed from gaining access to Philippine Courts.27

The purpose of the law in requiring that foreign corporations doing business in the
Philippines be licensed to do so and that they appoint an agent for service of process is to
subject the foreign corporation doing business in the Philippines to the jurisdiction of its
courts. The object is not to prevent the foreign corporation from performing single acts, but to
prevent it from acquiring a domicile for the purpose of business without taking steps
necessary to render it amenable to suit in the local courts.28 The implication of the law is that
it was never the purpose of the legislature to exclude a foreign corporation which happens to
obtain an isolated order for business from the Philippines, and thus, in effect, to permit
persons to avoid their contracts made with such foreign corporations.29

There is no exact rule or governing principle as to what constitutes "doing" or "engaging" or

"transacting" business. Indeed, such case must be judged in the light of its peculiar
circumstances, upon its peculiar facts and upon the language of the statute applicable. The
true test, however, seems to be whether the foreign corporation is continuing the body or
substance of the business or enterprise for which it was organized.30

Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include:

soliciting orders, purchases, service contracts, opening offices, whether called

"liaison" offices or branches; appointing representatives or distributors who are
domiciled in the Philippines or who in any calendar year stay in the Philippines for a
period or periods totalling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that imply a continuity or
commercial dealings or arrangements and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization.

Thus, a foreign corporation with a settling agent in the Philippines which issued twelve
marine policies covering different shipments to the Philippines31 and a foreign corporation
which had been collecting premiums on outstanding policies 32 were regarded as doing
business here.

The same rule was observed relating to a foreign corporation with an "exclusive distributing
agent" in the Philippines, and which has been selling its products here since 1929,33 and a
foreign corporation engaged in the business of manufacturing and selling computers
worldwide, and had installed at least 26 different products in several corporations in the
Philippines, and allowed its registered logo and trademark to be used and made it known
that there exists a designated distributor in the Philippines.34

In Georg Grotjahn GMBH and Co. vs. Isnani,35 it was held that the uninterrupted performance
by a foreign corporation of acts pursuant to its primary purposes and functions as a regional
area headquarters for its home office, qualifies such corporation as one doing business in
the country.

These foregoing instances should be distinguished from a single or isolated transaction or

occasional, incidental, or casual transactions, which do not come within the meaning of the
law,36 for in such case, the foreign corporation is deemed not engaged in business in the
Philippines.

Where a single act or transaction, however, is not merely incidental or casual but indicates
the foreign corporation's intention to do other business in the Philippines, said single act or
transaction constitutes "doing" or "engaging in" or "transacting" business in the
Philippines.3 7

In determining whether a corporation does business in the Philippines or not, aside from their
activities within the forum, reference may be made to the contractual agreements entered
into by it with other entities in the country. Thus, in the Top-Weld case (supra), the foreign
corporation's LICENSE AND TECHNICAL AGREEMENT and DISTRIBUTOR AGREEMENT
with their local contacts were made the basis of their being regarded by this Tribunal as
corporations doing business in the country. Likewise, in Merill Lynch Futures, Inc. vs. Court
of Appeals, etc. 38 the FUTURES CONTRACT entered into by the petitioner foreign
corporation weighed heavily in the court's ruling.
With the abovestated precedents in mind, we are persuaded to conclude that private
respondent had been "engaged in" or "doing business" in the Philippines for some time now.
This is the inevitable result after a scrutiny of the different contracts and agreements entered
into by ITEC with its various business contacts in the country, particularly ASPAC and
Telephone Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a local
electronics firm engaged by ITEC to be its local technical representative, and to create a
service center for ITEC products sold locally. Its arrangements, with these entities indicate
convincingly ITEC's purpose to bring about the situation among its customers and the
general public that they are dealing directly with ITEC, and that ITEC is actively engaging in
business in the country.

In its Master Service Agreement39 with TESSI, private respondent required its local technical
representative to provide the employees of the technical and service center with ITEC
identification cards and business cards, and to correspond only on ITEC, Inc., letterhead.
TESSI personnel are instructed to answer the telephone with "ITEC Technical Assistance
Center.", such telephone being listed in the telephone book under the heading of ITEC
Technical Assistance Center, and all calls being recorded and forwarded to ITEC on a
weekly basis.

What is more, TESSI was obliged to provide ITEC with a monthly report detailing the failure
and repair of ITEC products, and to requisition monthly the materials and components
needed to replace stock consumed in the warranty repairs of the prior month.

A perusal of the agreements between petitioner ASPAC and the respondents shows that
there are provisions which are highly restrictive in nature, such as to reduce petitioner
ASPAC to a mere extension or instrument of the private respondent.

The "No Competing Product" provision of the Representative Agreement between ITEC and
ASPAC provides: "The Representative shall not represent or offer for sale within the Territory
any product which competes with an existing ITEC product or any product which ITEC has
under active development." Likewise pertinent is the following provision: "When acting under
this Agreement, REPRESENTATIVE is authorized to solicit sales within the Territory on
ITEC's behalf but is authorized to bind ITEC only in its capacity as Representative and no
other, and then only to specific customers and on terms and conditions expressly authorized
by ITEC in writing."

When ITEC entered into the disputed contracts with ASPAC and TESSI, they were carrying
out the purposes for which it was created, i.e., to market electronics and communications
products. The terms and conditions of the contracts as well as ITEC's conduct indicate that
they established within our country a continuous business, and not merely one of a
temporary character.40

Notwithstanding such finding that ITEC is doing business in the country, petitioner is
nonetheless estopped from raising this fact to bar ITEC from instituting this injunction case
against it.

A foreign corporation doing business in the Philippines may sue in Philippine Courts although
not authorized to do business here against a Philippine citizen or entity who had contracted
with and benefited by said corporation.41 To put it in another way, a party is estopped to
challenge the personality of a corporation after having acknowledged the same by entering
into a contract with it. And the doctrine of estoppel to deny corporate existence applies to a
foreign as well as to domestic corporations.42 One who has dealt with a corporation of foreign
origin as a corporate entity is estopped to deny its corporate existence and capacity: The
principle will be applied to prevent a person contracting with a foreign corporation from later
taking advantage of its noncompliance with the statutes chiefly in cases where such person
has received the benefits of the contract.43

The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua non
habere debet — no person ought to derive any advantage of his own wrong. This is as it
should be for as mandated by law, "every person must in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe honesty and
good faith."44

Concededly, corporations act through agents, like directors and officers. Corporate dealings
must be characterized by utmost good faith and fairness. Corporations cannot just feign
ignorance of the legal rules as in most cases, they are manned by sophisticated officers with
tried management skills and legal experts with practiced eye on legal problems. Each party
to a corporate transaction is expected to act with utmost candor and fairness and, thereby
allow a reasonable proportion between benefits and expected burdens. This is a norm which
should be observed where one or the other is a foreign entity venturing in a global market.

As observed by this Court in TOP-WELD (supra), viz:

The parties are charged with knowledge of the existing law at the time they enter into a
contract and at the time it is to become operative. (Twiehaus v. Rosner, 245 SW 2d 107; Hall
v. Bucher, 227 SW 2d 98). Moreover, a person is presumed to be more knowledgeable
about his own state law than his alien or foreign contemporary. In this case, the record
shows that, at least, petitioner had actual knowledge of the applicability of R.A. No. 5455 at
the time the contract was executed and at all times thereafter. This conclusion is compelled
by the fact that the same statute is now being propounded by the petitioner to bolster its
claim. We, therefore sustain the appellate court's view that "it was incumbent upon TOP-
WELD to know whether or not IRTI and ECED were properly authorized to engage in
business in the Philippines when they entered into the licensing and distributorship
agreements." The very purpose of the law was circumvented and evaded when the petitioner
entered into said agreements despite the prohibition of R.A. No. 5455. The parties in this
case being equally guilty of violating R.A. No. 5455, they are in pari delicto, in which case it
follows as a consequence that petitioner is not entitled to the relief prayed for in this case.

The doctrine of lack of capacity to sue based on the failure to acquire a local license is based
on considerations of sound public policy. The license requirement was imposed to subject
the foreign corporation doing business in the Philippines to the jurisdiction of its courts. It was
never intended to favor domestic corporations who enter into solitary transactions with
unwary foreign firms and then repudiate their obligations simply because the latter are not
licensed to do business in this country.45

In Antam Consolidated Inc. vs. Court of Appeals, et al.46 we expressed our chagrin over this
commonly used scheme of defaulting local companies which are being sued by unlicensed
foreign companies not engaged in business in the Philippines to invoke the lack of capacity
to sue of such foreign companies. Obviously, the same ploy is resorted to by ASPAC to
prevent the injunctive action filed by ITEC to enjoin petitioner from using knowledge possibly
acquired in violation of fiduciary arrangements between the parties.

By entering into the "Representative Agreement" with ITEC, Petitioner is charged with
knowledge that ITEC was not licensed to engage in business activities in the country, and is
thus estopped from raising in defense such incapacity of ITEC, having chosen to ignore or
even presumptively take advantage of the same.

In Top-Weld, we ruled that a foreign corporation may be exempted from the license
requirement in order to institute an action in our courts if its representative in the country
maintained an independent status during the existence of the disputed contract. Petitioner is
deemed to have acceded to such independent character when it entered into the
Representative Agreement with ITEC, particularly, provision 6.2 (supra).

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

Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts of the
case, whether to give due course to the suit or dismiss it, on the principle of forum non
convenience.4 7 Hence, the Philippine Court may refuse to assume jurisdiction in spite of its
having acquired jurisdiction. Conversely, the court may assume jurisdiction over the case if it
chooses to do so; provided, that the following requisites are met: 1) That the Philippine Court
is one to which the parties may conveniently resort to; 2) That the Philippine Court is in a
position to make an intelligent decision as to the law and the facts; and, 3) That the
Philippine Court has or is likely to have power to enforce its decision.48

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

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

SO ORDERED.

[G.R. NO. 149177 : November 23, 2007]

KAZUHIRO HASEGAWA and NIPPON ENGINEERING

CONSULTANTS CO., LTD., Petitioners, v. MINORU
KITAMURA, Respondent.

DECISION

NACHURA, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45
of the Rules of Court assailing the April 18, 2001 Decision1 of the
Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25,
2001 Resolution2 denying the motion for reconsideration thereof.

On March 30, 1999, petitioner Nippon Engineering Consultants Co.,

Ltd. (Nippon), a Japanese consultancy firm providing technical and
management support in the infrastructure projects of foreign
governments,3 entered into an Independent Contractor Agreement
(ICA) with respondent Minoru Kitamura, a Japanese national
permanently residing in the Philippines.4 The agreement provides
that respondent was to extend professional services to Nippon for a
year starting on April 1, 1999.5 Nippon then assigned respondent to
work as the project manager of the Southern Tagalog Access Road
(STAR) Project in the Philippines, following the company's
consultancy contract with the Philippine Government.6

When the STAR Project was near completion, the Department of

Public Works and Highways (DPWH) engaged the consultancy
services of Nippon, on January 28, 2000, this time for the detailed
engineering and construction supervision of the Bongabon-Baler
Road Improvement (BBRI) Project.7 Respondent was named as the
project manager in the contract's Appendix 3.1.8

On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's

general manager for its International Division, informed respondent
that the company had no more intention of automatically renewing
his ICA. His services would be engaged by the company only up to
the substantial completion of the STAR Project on March 31, 2000,
just in time for the ICA's expiry.9

Threatened with impending unemployment, respondent, through his

lawyer, requested a negotiation conference and demanded that he
be assigned to the BBRI project. Nippon insisted that respondent's
contract was for a fixed term that had already expired, and refused
to negotiate for the renewal of the ICA.10

As he was not able to generate a positive response from the

petitioners, respondent consequently initiated on June 1, 2000 Civil
Case No. 00-0264 for specific performance and damages with the
Regional Trial Court of Lipa City.11

For their part, petitioners, contending that the ICA had been
perfected in Japan and executed by and between Japanese
nationals, moved to dismiss the complaint for lack of jurisdiction.
They asserted that the claim for improper pre-termination of
respondent's ICA could only be heard and ventilated in the proper
courts of Japan following the principles of lex loci celebrationis and
lex contractus.12

In the meantime, on June 20, 2000, the DPWH approved Nippon's

request for the replacement of Kitamura by a certain Y. Kotake as
project manager of the BBRI Project.13

On June 29, 2000, the RTC, invoking our ruling in Insular

Government v. Frank14 that matters connected with the
performance of contracts are regulated by the law prevailing at the
place of performance,15 denied the motion to dismiss.16 The trial
court subsequently denied petitioners' motion for
reconsideration,17 prompting them to file with the appellate court,
on August 14, 2000, their first Petition for Certiorari under Rule 65
[docketed as CA-G.R. SP No. 60205].18 On August 23, 2000, the CA
resolved to dismiss the petition on procedural grounds'for lack of
statement of material dates and for insufficient verification and
certification against forum shopping.19 An Entry of Judgment was
later issued by the appellate court on September 20, 2000.20

Aggrieved by this development, petitioners filed with the CA, on

September 19, 2000, still within the reglementary period,
a second Petition for Certiorari under Rule 65 already stating
therein the material dates and attaching thereto the proper
verification and certification. This second petition, which
substantially raised the same issues as those in the first, was
docketed as CA-G.R. SP No. 60827.21

Ruling on the merits of the second petition, the appellate court

rendered the assailed April 18, 2001 Decision22 finding no grave
abuse of discretion in the trial court's denial of the motion to
dismiss. The CA ruled, among others, that the principle of lex loci
celebrationis was not applicable to the case, because nowhere in the
pleadings was the validity of the written agreement put in issue.
The CA thus declared that the trial court was correct in applying
instead the principle of lex loci solutionis.23

Petitioners' motion for reconsideration was subsequently denied by

the CA in the assailed July 25, 2001 Resolution.24

Remaining steadfast in their stance despite the series of denials,

petitioners instituted the instant Petition for Review
on Certiorari25 imputing the following errors to the appellate court:

A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN

FINDING THAT THE TRIAL COURT VALIDLY EXERCISED
JURISDICTION OVER THE INSTANT CONTROVERSY, DESPITE THE
FACT THAT THE CONTRACT SUBJECT MATTER OF THE
PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO
JAPANESE NATIONALS, WRITTEN WHOLLY IN THE JAPANESE
LANGUAGE AND EXECUTED IN TOKYO, JAPAN.

B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN

OVERLOOKING THE NEED TO REVIEW OUR ADHERENCE TO THE
PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF RECENT
DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.26

The pivotal question that this Court is called upon to resolve is

whether the subject matter jurisdiction of Philippine courts in civil
cases for specific performance and damages involving contracts
executed outside the country by foreign nationals may be assailed
on the principles of lex loci celebrationis, lex contractus, the "state
of the most significant relationship rule," or forum non conveniens.

However, before ruling on this issue, we must first dispose of the

procedural matters raised by the respondent.

Kitamura contends that the finality of the appellate court's decision

in CA-G.R. SP No. 60205 has already barred the filing of the second
petition docketed as CA-G.R. SP No. 60827 (fundamentally raising
the same issues as those in the first one) and the instant Petition
for Review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on
account of the petition's defective certification of non-forum
shopping, it was a dismissal without prejudice.27 The same holds
true in the CA's dismissal of the said case due to defects in the
formal requirement of verification28 and in the other requirement in
Rule 46 of the Rules of Court on the statement of the material
dates.29 The dismissal being without prejudice, petitioners can re-
file the petition, or file a second petition attaching thereto the
appropriate verification and certification as they, in fact did and
stating therein the material dates, within the prescribed period30 in
Section 4, Rule 65 of the said Rules.31

The dismissal of a case without prejudice signifies the absence of a

decision on the merits and leaves the parties free to litigate the
matter in a subsequent action as though the dismissed action had
not been commenced. In other words, the termination of a case not
on the merits does not bar another action involving the same
parties, on the same subject matter and theory.32

Necessarily, because the said dismissal is without prejudice and has

no res judicataeffect, and even if petitioners still indicated in the
verification and certification of the second certiorari petition that the
first had already been dismissed on procedural
grounds,33 petitioners are no longer required by the Rules to
indicate in their certification of non-forum shopping in the instant
Petition for Review of the second certiorari petition, the status of the
aforesaid first petition before the CA. In any case, an omission in
the certificate of non-forum shopping about any event that will not
constitute res judicata and litis pendentia, as in the present case, is
not a fatal defect. It will not warrant the dismissal and nullification
of the entire proceedings, considering that the evils sought to be
prevented by the said certificate are no longer present.34

The Court also finds no merit in respondent's contention that

petitioner Hasegawa is only authorized to verify and certify, on
behalf of Nippon, the certiorari petition filed with the CA and not the
instant petition. True, the Authorization35 dated September 4, 2000,
which is attached to the second certiorari petition and which is also
attached to the instant Petition for Review, is limited in scope its
wordings indicate that Hasegawa is given the authority to sign for
and act on behalf of the company only in the petition filed with the
appellate court, and that authority cannot extend to the instant
Petition for Review .36 In a plethora of cases, however, this Court
has liberally applied the Rules or even suspended its application
whenever a satisfactory explanation and a subsequent fulfillment of
the requirements have been made.37 Given that petitioners herein
sufficiently explained their misgivings on this point and appended to
their Reply38 an updated Authorization39 for Hasegawa to act on
behalf of the company in the instant petition, the Court finds the
same as sufficient compliance with the Rules.

However, the Court cannot extend the same liberal treatment to the
defect in the verification and certification. As respondent pointed
out, and to which we agree, Hasegawa is truly not authorized to act
on behalf of Nippon in this case. The aforesaid September 4, 2000
Authorization and even the subsequent August 17, 2001
Authorization were issued only by Nippon's president and chief
executive officer, not by the company's board of directors. In not a
few cases, we have ruled that corporate powers are exercised by
the board of directors; thus, no person, not even its officers, can
bind the corporation, in the absence of authority from the
board.40 Considering that Hasegawa verified and certified the
petition only on his behalf and not on behalf of the other petitioner,
the petition has to be denied pursuant to Loquias v. Office of the
Ombudsman.41 Substantial compliance will not suffice in a matter
that demands strict observance of the Rules.42 While technical rules
of procedure are designed not to frustrate the ends of justice,
nonetheless, they are intended to effect the proper and orderly
disposition of cases and effectively prevent the clogging of court
dockets.43

Further, the Court has observed that petitioners incorrectly filed a

Rule 65 petition to question the trial court's denial of their motion to
dismiss. It is a well-established rule that an order denying a motion
to dismiss is interlocutory, and cannot be the subject of the
extraordinary Petition for Certiorari or mandamus. The appropriate
recourse is to file an answer and to interpose as defenses the
objections raised in the motion, to proceed to trial, and, in case of
an adverse decision, to elevate the entire case by appeal in due
course.44 While there are recognized exceptions to this
rule,45 petitioners' case does not fall among them.

This brings us to the discussion of the substantive issue of the case.

Asserting that the RTC of Lipa City is an inconvenient forum,

petitioners question its jurisdiction to hear and resolve the civil case
for specific performance and damages filed by the respondent. The
ICA subject of the litigation was entered into and perfected in
Tokyo, Japan, by Japanese nationals, and written wholly in the
Japanese language. Thus, petitioners posit that local courts have no
substantial relationship to the parties46 following the [state of the]
most significant relationship rule in Private International Law.47

The Court notes that petitioners adopted an additional but different

theory when they elevated the case to the appellate court. In the
Motion to Dismiss48 filed with the trial court, petitioners never
contended that the RTC is an inconvenient forum. They merely
argued that the applicable law which will determine the validity or
invalidity of respondent's claim is that of Japan, following the
principles of lex loci celebrationis and lex contractus.49 While not
abandoning this stance in their petition before the appellate court,
petitioners on certiorari significantly invoked the defense of forum
non conveniens.50 On Petition for Review before this Court,
petitioners dropped their other arguments, maintained the forum
non conveniens defense, and introduced their new argument that
the applicable principle is the [state of the] most significant
relationship rule.51

Be that as it may, this Court is not inclined to deny this petition

merely on the basis of the change in theory, as explained
in Philippine Ports Authority v. City of Iloilo.52 We only pointed out
petitioners' inconstancy in their arguments to emphasize their
incorrect assertion of conflict of laws principles.

To elucidate, in the judicial resolution of conflicts problems, three

consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should
litigation be initiated? (2) Which law will the court apply? and (3)
Where can the resulting judgment be enforced?53

Analytically, jurisdiction and choice of law are two distinct

concepts.54 Jurisdiction considers whether it is fair to cause a
defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The power
to exercise jurisdiction does not automatically give a state
constitutional authority to apply forum law. While jurisdiction and
the choice of the lex fori will often coincide, the "minimum contacts"
for one do not always provide the necessary "significant contacts"
for the other.55 The question of whether the law of a state can be
applied to a transaction is different from the question of whether
the courts of that state have jurisdiction to enter a judgment.56

In this case, only the first phase is at issue jurisdiction. ςηαñrοbl εš νι r†υ αl lαω l ιbrα rÿ

Jurisdiction, however, has various aspects. For a court to validly

exercise its power to adjudicate a controversy, it must have
jurisdiction over the plaintiff or the petitioner, over the defendant or
the respondent, over the subject matter, over the issues of the case
and, in cases involving property, over the res or the thing which is
the subject of the litigation.57 In assailing the trial court's
jurisdiction herein, petitioners are actually referring to subject
matter jurisdiction.

Jurisdiction over the subject matter in a judicial proceeding is

conferred by the sovereign authority which establishes and
organizes the court. It is given only by law and in the manner
prescribed by law.58 It is further determined by the allegations of
the complaint irrespective of whether the plaintiff is entitled to all or
some of the claims asserted therein.59 To succeed in its motion for
the dismissal of an action for lack of jurisdiction over the subject
matter of the claim,60 the movant must show that the court or
tribunal cannot act on the matter submitted to it because no law
grants it the power to adjudicate the claims.61

In the instant case, petitioners, in their motion to dismiss, do not

claim that the trial court is not properly vested by law with
jurisdiction to hear the subject controversy for, indeed, Civil Case
No. 00-0264 for specific performance and damages is one not
capable of pecuniary estimation and is properly cognizable by the
RTC of Lipa City.62 What they rather raise as grounds to question
subject matter jurisdiction are the principles of lex loci
celebrationis and lex contractus, and the "state of the most
significant relationship rule."

The Court finds the invocation of these grounds unsound.

Lex loci celebrationis relates to the "law of the place of the

ceremony"63 or the law of the place where a contract is made.64 The
doctrine of lex contractus or lex loci contractus means the "law of
the place where a contract is executed or to be performed."65 It
controls the nature, construction, and validity of the contract66 and
it may pertain to the law voluntarily agreed upon by the parties or
the law intended by them either expressly or implicitly.67 Under the
"state of the most significant relationship rule," to ascertain what
state law to apply to a dispute, the court should determine which
state has the most substantial connection to the occurrence and the
parties. In a case involving a contract, the court should consider
where the contract was made, was negotiated, was to be
performed, and the domicile, place of business, or place of
incorporation of the parties.68 This rule takes into account several
contacts and evaluates them according to their relative importance
with respect to the particular issue to be resolved.69

Since these three principles in conflict of laws make reference to the

law applicable to a dispute, they are rules proper for the second
phase, the choice of law.70 They determine which state's law is to be
applied in resolving the substantive issues of a conflicts
problem.71 Necessarily, as the only issue in this case is that of
jurisdiction, choice-of-law rules are not only inapplicable but also
not yet called for.

Further, petitioners' premature invocation of choice-of-law rules is

exposed by the fact that they have not yet pointed out any conflict
between the laws of Japan and ours. Before determining which law
should apply, first there should exist a conflict of laws situation
requiring the application of the conflict of laws rules.72 Also, when
the law of a foreign country is invoked to provide the proper rules
for the solution of a case, the existence of such law must be pleaded
and proved.73

It should be noted that when a conflicts case, one involving a

foreign element, is brought before a court or administrative agency,
there are three alternatives open to the latter in disposing of it: (1)
dismiss the case, either because of lack of jurisdiction or refusal to
assume jurisdiction over the case; (2) assume jurisdiction over the
case and apply the internal law of the forum; or (3) assume
jurisdiction over the case and take into account or apply the law of
some other State or States.74 The court's power to hear cases and
controversies is derived from the Constitution and the laws. While it
may choose to recognize laws of foreign nations, the court is not
limited by foreign sovereign law short of treaties or other formal
agreements, even in matters regarding rights provided by foreign
sovereigns.75

Neither can the other ground raised, forum non conveniens,76 be

used to deprive the trial court of its jurisdiction herein. First, it is
not a proper basis for a motion to dismiss because Section 1, Rule
16 of the Rules of Court does not include it as a ground.77 Second,
whether a suit should be entertained or dismissed on the basis of
the said doctrine depends largely upon the facts of the particular
case and is addressed to the sound discretion of the trial court.78 In
this case, the RTC decided to assume jurisdiction. Third, the
propriety of dismissing a case based on this principle requires a
factual determination; hence, this conflicts principle is more
properly considered a matter of defense.79

Accordingly, since the RTC is vested by law with the power to

entertain and hear the civil case filed by respondent and the
grounds raised by petitioners to assail that jurisdiction are
inappropriate, the trial and appellate courts correctly denied the
petitioners' motion to dismiss.

WHEREFORE, premises considered, the Petition for Review

on Certiorari is DENIED.

SO ORDERED.
G.R. No. 120135 March 31, 2003

BANK OF AMERICA NT & SA, BANK OF AMERICA INTERNATIONAL, LTD., petitioners,

vs.
COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO LITONJUA, SR., and AURELIO
K. LITONJUA, JR., respondents.

AUSTRIA-MARTINEZ, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the November
29, 1994 decision of the Court of Appeals1 and the April 28, 1995 resolution denying petitioners'
motion for reconsideration.

The factual background of the case is as follows:

On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas, for brevity) filed a
Complaint2 before the Regional Trial Court of Pasig against the Bank of America NT&SA and Bank
of America International, Ltd. (defendant banks for brevity) alleging that: they were engaged in the
shipping business; they owned two vessels: Don Aurelio and El Champion, through their wholly-
owned corporations; they deposited their revenues from said business together with other funds with
the branches of said banks in the United Kingdom and Hongkong up to 1979; with their business
doing well, the defendant banks induced them to increase the number of their ships in operation,
offering them easy loans to acquire said vessels;3 thereafter, the defendant banks acquired, through
their (Litonjuas') corporations as the borrowers: (a) El Carrier4; (b) El General5; (c) El Challenger6;
and (d) El Conqueror7; the vessels were registered in the names of their corporations; the operation
and the funds derived therefrom were placed under the complete and exclusive control and
disposition of the petitioners;8 and the possession the vessels was also placed by defendant banks
in the hands of persons selected and designated by them (defendant banks).9

The Litonjuas claimed that defendant banks as trustees did not fully render an account of all the
income derived from the operation of the vessels as well as of the proceeds of the subsequent
foreclosure sale;10 because of the breach of their fiduciary duties and/or negligence of the petitioners
and/or the persons designated by them in the operation of private respondents' six vessels, the
revenues derived from the operation of all the vessels declined drastically; the loans acquired for the
purchase of the four additional vessels then matured and remained unpaid, prompting defendant
banks to have all the six vessels, including the two vessels originally owned by the private
respondents, foreclosed and sold at public auction to answer for the obligations incurred for and in
behalf of the operation of the vessels; they (Litonjuas) lost sizeable amounts of their own personal
funds equivalent to ten percent (10%) of the acquisition cost of the four vessels and were left with
the unpaid balance of their loans with defendant banks.11 The Litonjuas prayed for the accounting of
the revenues derived in the operation of the six vessels and of the proceeds of the sale thereof at
the foreclosure proceedings instituted by petitioners; damages for breach of trust; exemplary
damages and attorney's fees.12

Defendant banks filed a Motion to Dismiss on grounds of forum non conveniens and lack of cause of
action against them.13

On December 3, 1993, the trial court issued an Order denying the Motion to Dismiss, thus:

"WHEREFORE, and in view of the foregoing consideration, the Motion to Dismiss is hereby
DENIED. The defendant is therefore, given a period of ten (10) days to file its Answer to the
complaint.
 "SO ORDERED."14

Instead of filing an answer the defendant banks went to the Court of Appeals on a "Petition for
Review on Certiorari"15 which was aptly treated by the appellate court as a petition for certiorari.
They assailed the above-quoted order as well as the subsequent denial of their Motion for
Reconsideration.16 The appellate court dismissed the petition and denied petitioners' Motion for
Reconsideration.17

Hence, herein petition anchored on the following grounds:

"1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT THE
SEPARATE PERSONALITIES OF THE PRIVATE RESPONDENTS (MERE
STOCKHOLDERS) AND THE FOREIGN CORPORATIONS (THE REAL BORROWERS)
CLEARLY SUPPORT, BEYOND ANY DOUBT, THE PROPOSITION THAT THE PRIVATE
RESPONDENTS HAVE NO PERSONALITIES TO SUE.

"2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT WHILE THE
PRINCIPLE OF FORUM NON CONVENIENS IS NOT MANDATORY, THERE ARE,
HOWEVER, SOME GUIDELINES TO FOLLOW IN DETERMINING WHETHER THE
CHOICE OF FORUM SHOULD BE DISTURBED. UNDER THE CIRCUMSTANCES
SURROUNDING THE INSTANT CASE, DISMISSAL OF THE COMPLAINT ON THE
GROUND OF FORUM NON-CONVENIENS IS MORE APPROPRIATE AND PROPER.

"3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL JUDGMENT IN THE
PHILIPPINES. IN FACT, THE PENDENCY OF FOREIGN ACTION MAY BE THE LEGAL
BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY THE PRIVATE
RESPONDENT. COROLLARY TO THIS, THE RESPONDENT COURT OF APPEALS
FAILED TO CONSIDER THE FACT THAT PRIVATE RESPONDENTS ARE GUILTY OF
FORUM SHOPPING." 18

As to the first assigned error: Petitioners argue that the borrowers and the registered owners of the
vessels are the foreign corporations and not private respondents Litonjuas who are mere
stockholders; and that the revenues derived from the operations of all the vessels are deposited in
the accounts of the corporations. Hence, petitioners maintain that these foreign corporations are the
legal entities that have the personalities to sue and not herein private respondents; that private
respondents, being mere shareholders, have no claim on the vessels as owners since they merely
have an inchoate right to whatever may remain upon the dissolution of the said foreign corporations
and after all creditors have been fully paid and satisfied;19 and that while private respondents may
have allegedly spent amounts equal to 10% of the acquisition costs of the vessels in question, their
10% however represents their investments as stockholders in the foreign corporations.20

Anent the second assigned error, petitioners posit that while the application of the principle of forum
non conveniens is discretionary on the part of the Court, said discretion is limited by the guidelines
pertaining to the private as well as public interest factors in determining whether plaintiffs' choice of
forum should be disturbed, as elucidated in Gulf Oil Corp. vs. Gilbert21 and Piper Aircraft Co. vs.
Reyno,22 to wit:

"Private interest factors include: (a) the relative ease of access to sources of proof; (b) the
availability of compulsory process for the attendance of unwilling witnesses; (c) the cost of
obtaining attendance of willing witnesses; or (d) all other practical problems that make trial of
a case easy, expeditious and inexpensive. Public interest factors include: (a) the
administrative difficulties flowing from court congestion; (b) the local interest in having
 localized controversies decided at home; (c) the avoidance of unnecessary problems in
conflict of laws or in the application of foreign law; or (d) the unfairness of burdening citizens
in an unrelated forum with jury duty."23

In support of their claim that the local court is not the proper forum, petitioners allege the following:

"i) The Bank of America Branches involved, as clearly mentioned in the Complaint, are
based in Hongkong and England. As such, the evidence and the witnesses are not readily
available in the Philippines;

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

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

"iv) All the loans involved were granted to the Private Respondents'
foreign CORPORATIONS;

"v) The Restructuring Agreements were ALL governed by the laws of England;

"vi) The subsequent sales of the mortgaged vessels and the application of the sales
proceeds occurred and transpired outside the Philippines, and the deliveries of the sold
mortgaged vessels were likewise made outside the Philippines;

"vii) The revenues of the vessels and the proceeds of the sales of these vessels
were ALL deposited to the Accounts of the foreign CORPORATIONS abroad; and

"viii) Bank of America International Ltd. is not licensed nor engaged in trade or business in
the Philippines."24

Petitioners argue further that the loan agreements, security documentation and all subsequent
restructuring agreements uniformly, unconditionally and expressly provided that they will be
governed by the laws of England;25 that Philippine Courts would then have to apply English law in
resolving whatever issues may be presented to it in the event it recognizes and accepts herein case;
that it would then be imposing a significant and unnecessary expense and burden not only upon the
parties to the transaction but also to the local court. Petitioners insist that the inconvenience and
difficulty of applying English law with respect to a wholly foreign transaction in a case pending in the
Philippines may be avoided by its dismissal on the ground of forum non conveniens. 26

Finally, petitioners claim that private respondents have already waived their alleged causes of action
in the case at bar for their refusal to contest the foreign civil cases earlier filed by the petitioners
against them in Hongkong and England, to wit:

"1.) Civil action in England in its High Court of Justice, Queen's Bench Division Commercial
Court (1992-Folio No. 2098) against (a) LIBERIAN TRANSPORT NAVIGATION. SA.; (b)
ESHLEY COMPANIA NAVIERA SA., (c) EL CHALLENGER SA; (d) ESPRIONA SHIPPING
CO. SA; (e) PACIFIC NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g)
EDUARDO K. LITONJUA & (h) AURELIO K. LITONJUA.
 "2.) Civil action in England in its High Court of Justice, Queen's Bench Division, Commercial
Court (1992-Folio No. 2245) against (a) EL CHALLENGER S.A., (b) ESPRIONA SHIPPING
COMPANY S.A., (c) EDUARDO KATIPUNAN LITONJUA and (d) AURELIO KATIPUNAN
LITONJUA.

"3.) Civil action in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992),
against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA
SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE
NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC.,
(g) AURELIO KATIPUNAN LITONJUA, JR., and (h) EDUARDO KATIPUNAN LITONJUA.

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

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

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

We deny the petition for lack of merit.

It is a well-settled rule that the order denying the motion to dismiss cannot be the subject of petition
for certiorari. Petitioners should have filed an answer to the complaint, proceed to trial and await
judgment before making an appeal. As repeatedly held by this Court:

"An order denying a motion to dismiss is interlocutory and cannot be the subject of the
extraordinary petition for certiorari or mandamus. The remedy of the aggrieved party is to file
an answer and to interpose as defenses the objections raised in his motion to dismiss,
proceed to trial, and in case of an adverse decision, to elevate the entire case by appeal in
due course. xxx Under certain situations, recourse to certiorari or mandamus is considered
appropriate, i.e., (a) when the trial court issued the order without or in excess of jurisdiction;
(b) where there is patent grave abuse of discretion by the trial court; or (c) appeal would not
prove to be a speedy and adequate remedy as when an appeal would not promptly relieve a
 defendant from the injurious effects of the patently mistaken order maintaining the plaintiff's
baseless action and compelling the defendant needlessly to go through a protracted trial and
clogging the court dockets by another futile case."34

Records show that the trial court acted within its jurisdiction when it issued the assailed Order
denying petitioners' motion to dismiss. Does the denial of the motion to dismiss constitute a patent
grave abuse of discretion? Would appeal, under the circumstances, not prove to be a speedy and
adequate remedy? We will resolve said questions in conjunction with the issues raised by the
parties.

First issue. Did the trial court commit grave abuse of discretion in refusing to dismiss the complaint
on the ground that plaintiffs have no cause of action against defendants since plaintiffs are merely
stockholders of the corporations which are the registered owners of the vessels and the borrowers of
petitioners?

No. Petitioners' argument that private respondents, being mere stockholders of the foreign
corporations, have no personalities to sue, and therefore, the complaint should be dismissed, is
untenable. A case is dismissible for lack of personality to sue upon proof that the plaintiff is not the
real party-in-interest. Lack of personality to sue can be used as a ground for a Motion to Dismiss
based on the fact that the complaint, on the face thereof, evidently states no cause of
action.35 In San Lorenzo Village Association, Inc. vs. Court of Appeals,36 this Court clarified that a
complaint states a cause of action where it contains three essential elements of a cause of action,
namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the
act or omission of the defendant in violation of said legal right. If these elements are absent, the
complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of
action.37 To emphasize, it is not the lack or absence of cause of action that is a ground for dismissal
of the complaint but rather the fact that the complaint states no cause of action.38 "Failure to state a
cause of action" refers to the insufficiency of allegation in the pleading, unlike "lack of cause of
action" which refers to the insufficiency of factual basis for the action. "Failure to state a cause of
action" may be raised at the earliest stages of an action through a motion to dismiss the complaint,
while "lack of cause of action" may be raised any time after the questions of fact have been resolved
on the basis of stipulations, admissions or evidence presented.39

In the case at bar, the complaint contains the three elements of a cause of action. It alleges that: (1)
plaintiffs, herein private respondents, have the right to demand for an accounting from defendants
(herein petitioners), as trustees by reason of the fiduciary relationship that was created between the
parties involving the vessels in question; (2) petitioners have the obligation, as trustees, to render
such an accounting; and (3) petitioners failed to do the same.

Petitioners insist that they do not have any obligation to the private respondents as they are mere
stockholders of the corporation; that the corporate entities have juridical personalities separate and
distinct from those of the private respondents. Private respondents maintain that the corporations
are wholly owned by them and prior to the incorporation of such entities, they were clients of
petitioners which induced them to acquire loans from said petitioners to invest on the additional
ships.

We agree with private respondents. As held in the San Lorenzo case,40

"xxx assuming that the allegation of facts constituting plaintiffs' cause of action is not as clear
and categorical as would otherwise be desired, any uncertainty thereby arising should be so
resolved as to enable a full inquiry into the merits of the action."
As this Court has explained in the San Lorenzo case, such a course, would preclude multiplicity of
suits which the law abhors, and conduce to the definitive determination and termination of the
dispute. To do otherwise, that is, to abort the action on account of the alleged fatal flaws of the
complaint would obviously be indecisive and would not end the controversy, since the institution of
another action upon a revised complaint would not be foreclosed.41

Second Issue. Should the complaint be dismissed on the ground of forum non-conveniens?

No. The doctrine of forum non-conveniens, literally meaning 'the forum is inconvenient', emerged in
private international law to deter the practice of global forum shopping,42 that is to prevent non-
resident litigants from choosing the forum or place wherein to bring their suit for malicious reasons,
such as to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded
dockets, or to select a more friendly venue. Under this doctrine, a court, in conflicts of law cases,
may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and
the parties are not precluded from seeking remedies elsewhere.43

Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely
upon the facts of the particular case and is addressed to the sound discretion of the trial court.44 In
the case of Communication Materials and Design, Inc. vs. Court of Appeals,45 this Court held that
"xxx [a Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that
the following requisites are met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as
to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its
decision."46 Evidently, all these requisites are present in the instant case.

Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals,47 that the
doctrine of forum non conveniens should not be used as a ground for a motion to dismiss because
Sec. 1, Rule 16 of the Rules of Court does not include said doctrine as a ground. This Court further
ruled that while it is within the discretion of the trial court to abstain from assuming jurisdiction on this
ground, it should do so only after vital facts are established, to determine whether special
circumstances require the court's desistance; and that the propriety of dismissing a case based on
this principle of forum non conveniens requires a factual determination, hence it is more properly
considered a matter of defense.48

Third issue. Are private respondents guilty of forum shopping because of the pendency of foreign
action?

No. Forum shopping exists where the elements of litis pendentia are present and where a final
judgment in one case will amount to res judicata in the other.49 Parenthetically, for litis pendentia to
be a ground for the dismissal of an action there must be: (a) identity of the parties or at least such as
to represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same acts; and (c) the identity in the two cases should be such that the
judgment which may be rendered in one would, regardless of which party is successful, amount
to res judicata in the other.50

In case at bar, not all the requirements for litis pendentia are present. While there may be identity of
parties, notwithstanding the presence of other respondents,51 as well as the reversal in positions of
plaintiffs and defendants52, still the other requirements necessary for litis pendentia were not shown
by petitioner. It merely mentioned that civil cases were filed in Hongkong and England without
however showing the identity of rights asserted and the reliefs sought for as well as the presence of
the elements of res judicata should one of the cases be adjudged.
As the Court of Appeals aptly observed:

"xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad involving the
parties herein xxx, failed to provide this Court with relevant and clear specifications that
would show the presence of the above-quoted elements or requisites for res judicata. While
it is true that the petitioners in their motion for reconsideration (CA Rollo, p. 72), after
enumerating the various civil actions instituted abroad, did aver that "Copies of the foreign
judgments are hereto attached and made integral parts hereof as Annexes 'B', 'C', 'D' and
'E'", they failed, wittingly or inadvertently, to include a single foreign judgment in their
pleadings submitted to this Court as annexes to their petition. How then could We have been
expected to rule on this issue even if We were to hold that foreign judgments could be the
basis for the application of the aforementioned principle of res judicata?"53

Consequently, both courts correctly denied the dismissal of herein subject complaint.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioners.

SO ORDERED.

G.R. No. 103493 June 19, 1997

PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and

ATHONA HOLDINGS, N.V., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT,
PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents.

MENDOZA, J.:

This case presents for determination the conclusiveness of a foreign judgment upon the rights of the
parties under the same cause of action asserted in a case in our local court. Petitioners brought this
case in the Regional Trial Court of Makati, Branch 56, which, in view of the pendency at the time of
the foreign action, dismissed Civil Case No. 16563 on the ground of litis pendentia, in addition
to forum non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for review
on certiorari.

The facts are as follows:

On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners
Ayala International Finance Limited (hereafter called AYALA) 1 and Philsec Investment Corporation
(hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock owned by
Ducat with a market value of P14,088,995.00. In order to facilitate the payment of the loans, private
respondent 1488, Inc., through its president, private respondent Drago Daic, assumed Ducat's
obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a Warranty
Deed with Vendor's Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter called
ATHONA) a parcel of land in Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC
and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the
purchase price. The balance of US$307,209.02 was to be paid by means of a promissory note
executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the
US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and
delivered to 1488, Inc. all the shares of stock in their possession belonging to Ducat.

As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered
by the note became due and demandable. Accordingly, on October 17, 1985, private respondent
1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of the
balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly
perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to
1488, Inc. under the Agreement. Originally instituted in the United States District Court of Texas,
165th Judicial District, where it was docketed as Case No. 85-57746, the venue of the action was
later transferred to the United States District Court for the Southern District of Texas, where 1488,
Inc. filed an amended complaint, reiterating its allegations in the original complaint. ATHONA filed an
answer with counterclaim, impleading private respondents herein as counterdefendants, for
allegedly conspiring in selling the property at a price over its market value. Private respondent
Perlas, who had allegedly appraised the property, was later dropped as counterdefendant. ATHONA
sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the
alternative, the rescission of sale of the property. For their part, PHILSEC and AYALA filed a motion
to dismiss on the ground of lack of jurisdiction over their person, but, as their motion was denied,
they later filed a joint answer with counterclaim against private respondents and Edgardo V.
Guevarra, PHILSEC's own former president, for the rescission of the sale on the ground that the
property had been overvalued. On March 13, 1990, the United States District Court for the Southern
District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was
"frivolous and [was] brought against him simply to humiliate and embarrass him." For this reason, the
U.S. court imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay
damages to Guevarra.

On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners filed
a complaint "For Sum of Money with Damages and Writ of Preliminary Attachment" against private
respondents in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 16563.
The complaint reiterated the allegation of petitioners in their respective counterclaims in Civil Action
No. H-86-440 of the United States District Court of Southern Texas that private respondents
committed fraud by selling the property at a price 400 percent more than its true value of
US$800,000.00. Petitioners claimed that, as a result of private respondents' fraudulent
misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement and
to purchase the Houston property. Petitioners prayed that private respondents be ordered to return
to ATHONA the excess payment of US$1,700,000.00 and to pay damages. On April 20, 1987, the
trial court issued a writ of preliminary attachment against the real and personal properties of private
respondents. 2

Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis
pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non
conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat
contended that the alleged overpricing of the property prejudiced only petitioner ATHONA, as buyer,
but not PHILSEC and BPI-IFL which were not parties to the sale and whose only participation was to
extend financial accommodation to ATHONA under a separate loan agreement. On the other hand,
private respondents 1488, Inc. and its president Daic filed a joint "Special Appearance and Qualified
Motion to Dismiss," contending that the action being in personam, extraterritorial service of
summons by publication was ineffectual and did not vest the court with jurisdiction over 1488, Inc.,
which is a non-resident foreign corporation, and Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducat's motion to dismiss, stating that "the evidentiary
requirements of the controversy may be more suitably tried before the forum of the litis pendentia in
the U.S., under the principle in private international law of forum non conveniens," even as it noted
that Ducat was not a party in the U.S. case.

A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. On March 9,
1988, the trial court 3 granted the motion to dismiss filed by 1488, Inc. and Daic on the ground of litis
pendentia considering that

the "main factual element" of the cause of action in this case which is the validity of
the sale of real property in the United States between defendant 1488 and plaintiff
ATHONA is the subject matter of the pending case in the United States District Court
which, under the doctrine of forum non conveniens, is the better (if not exclusive)
forum to litigate matters needed to determine the assessment and/or fluctuations of
the fair market value of real estate situated in Houston, Texas, U.S.A. from the date
of the transaction in 1983 up to the present and verily, . . . (emphasis by trial court)

The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were
non-residents and the action was not an action in rem or quasi in rem, so that extraterritorial
service of summons was ineffective. The trial court subsequently lifted the writ of attachment
it had earlier issued against the shares of stocks of 1488, Inc. and Daic.

Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the
principle of litis pendentia and forum non conveniens and in ruling that it had no jurisdiction over the
defendants, despite the previous attachment of shares of stocks belonging to 1488, Inc. and Daic.

On January 6, 1992, the Court of Appeals 4 affirmed the dismissal of Civil Case No. 16563 against
Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus:

The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants
are Philsec, the Ayala International Finance Ltd. (BPI-IFL's former name) and the
Athona Holdings, NV. The case at bar involves the same parties. The transaction
sued upon by the parties, in both cases is the Warranty Deed executed by and
between Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the
promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed
by herein appellants, on the marketability of Ducat's securities given in exchange for
the Texas property. The recovery of a sum of money and damages, for fraud
purportedly committed by appellees, in overpricing the Texas land, constitute the
action before the Philippine court, which likewise stems from the same Warranty
Deed.

The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the
recovery of a sum of money for alleged tortious acts, so that service of summons by
publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic. The
dismissal of Civil Case No. 16563 on the ground of forum non conveniens was likewise
affirmed by the Court of Appeals on the ground that the case can be better tried and decided
by the U.S. court:

The U.S. case and the case at bar arose from only one main transaction, and involve
foreign elements, to wit: 1) the property subject matter of the sale is situated in
Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3)
although the buyer, Athona Holdings, a foreign corporation which does not claim to
 be doing business in the Philippines, is wholly owned by Philsec, a domestic
corporation, Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4)
the Warranty Deed was executed in Texas, U.S.A.

In their present appeal, petitioners contend that:

1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME

PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE
COURT OF APPEALS IN AFFIRMING THE TRIAL COURT'S DISMISSAL OF THE
CIVIL ACTION IS NOT APPLICABLE.

2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE

COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF
THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.

3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF

APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY
REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL
COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS
EVERY REASON TO PROTECT AND VINDICATE PETITIONERS' RIGHTS FOR
TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE RESPONDENTS
(WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE IN
THE PHILIPPINES.

We will deal with these contentions in the order in which they are made.

First. It is important to note in connection with the first point that while the present case was pending
in the Court of Appeals, the United States District Court for the Southern District of Texas rendered
judgment 5 in the case before it. The judgment, which was in favor of private respondents, was
affirmed on appeal by the Circuit Court of Appeals. 6 Thus, the principal issue to be resolved in this
case is whether Civil Case No. 16536 is barred by the judgment of the U.S. court.

Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment
admitting the foreign decision is not necessary. On the other hand, petitioners argue that the foreign
judgment cannot be given the effect of res judicata without giving them an opportunity to impeach it
on grounds stated in Rule 39, §50 of the Rules of Court, to wit: "want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact."

Petitioners' contention is meritorious. While this Court has given the effect of res judicata to foreign
judgments in several cases, 7 it was after the parties opposed to the judgment had been given ample
opportunity to repel them on grounds allowed under the law. 8 It is not necessary for this purpose to
initiate a separate action or proceeding for enforcement of the foreign judgment. What is essential is
that there is opportunity to challenge the foreign judgment, in order for the court to properly
determine its efficacy. This is because in this jurisdiction, with respect to actions in personam, as
distinguished from actions in rem, a foreign judgment merely constitutes prima facie evidence of
the justness of the claim of a party and, as such, is subject to proof to the contrary. 9 Rule 39, §50
provides:

Sec. 50. Effect of foreign judgments. — The effect of a judgment of a tribunal of a

foreign country, having jurisdiction to pronounce the judgment is as follows:
 (a) In case of a judgment upon a specific thing, the judgment is conclusive upon the
title to the thing;

(b) In case of a judgment against a person, the judgment is presumptive evidence of

a right as between the parties and their successors in interest by a subsequent title;
but the judgment may be repelled by evidence of a want of jurisdiction, want of notice
to the party, collusion, fraud, or clear mistake of law or fact.

Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton,
Ltd., 10 which private respondents invoke for claiming conclusive effect for the foreign judgment in
their favor, the foreign judgment was considered res judicata because this Court found "from the
evidence as well as from appellant's own pleadings" 11 that the foreign court did not make a "clear
mistake of law or fact" or that its judgment was void for want of jurisdiction or because of fraud or
collusion by the defendants. Trial had been previously held in the lower court and only afterward was
a decision rendered, declaring the judgment of the Supreme Court of the State of Washington to
have the effect of res judicata in the case before the lower court. In the same vein, in Philippines
International Shipping Corp. v. Court of Appeals, 12 this Court held that the foreign judgment was
valid and enforceable in the Philippines there being no showing that it was vitiated by want of notice
to the party, collusion, fraud or clear mistake of law or fact. The prima facie presumption under the
Rule had not been rebutted.

In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the
judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of private
respondents. The proceedings in the trial court were summary. Neither the trial court nor the
appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the
evidence presented thereat, to assure a proper determination of whether the issues then being
litigated in the U.S. court were exactly the issues raised in this case such that the judgment that
might be rendered would constitute res judicata. As the trial court stated in its disputed order dated
March 9, 1988.

On the plaintiff's claim in its Opposition that the causes of action of this case and the
pending case in the United States are not identical, precisely the Order of January
26, 1988 never found that the causes of action of this case and the case pending
before the USA Court, were identical. (emphasis added)

It was error therefore for the Court of Appeals to summarily rule that petitioners' action is
barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction of the
U.S. court over their persons, but their claim was brushed aside by both the trial court and
the Court of Appeals. 13

Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the
enforcement of judgment in the Regional Trial Court of Makati, where it was docketed as Civil Case
No. 92-1070 and assigned to Branch 134, although the proceedings were suspended because of the
pendency of this case. To sustain the appellate court's ruling that the foreign judgment constitutes
res judicata and is a bar to the claim of petitioners would effectively preclude petitioners from
repelling the judgment in the case for enforcement. An absurdity could then arise: a foreign judgment
is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to resist a claim
as in this case, but it may be opposed by the defendant if the foreign judgment is sought to be
enforced against him in a separate proceeding. This is plainly untenable. It has been held therefore
that:
 [A] foreign judgment may not be enforced if it is not recognized in the jurisdiction
where affirmative relief is being sought. Hence, in the interest of justice, the
complaint should be considered as a petition for the recognition of the Hongkong
judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the
defendant, private respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if applicable. 14

Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070
should be consolidated. 15 After all, the two have been filed in the Regional Trial Court of Makati,
albeit in different salas, this case being assigned to Branch 56 (Judge Fernando V. Gorospe), while
Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such proceedings,
petitioners should have the burden of impeaching the foreign judgment and only in the event they
succeed in doing so may they proceed with their action against private respondents.

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

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

Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over
1488, Inc. and Daic could not be obtained because this is an action in personam and summons were
served by extraterritorial service. Rule 14, §17 on extraterritorial service provides that service of
summons on a non-resident defendant may be effected out of the Philippines by leave of Court
where, among others, "the property of the defendant has been attached within the Philippines." 18 It is
not disputed that the properties, real and personal, of the private respondents had been attached
prior to service of summons under the Order of the trial court dated April 20, 1987. 19

Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the
proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11
sanctions imposed on the petitioners by the U.S. court, the Court finds that the judgment sought to
be enforced is severable from the main judgment under consideration in Civil Case No. 16563. The
separability of Guevara's claim is not only admitted by petitioners, 20 it appears from the pleadings
that petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563. 21 Hence,
the TRO should be lifted and Civil Case No. 92-1445 allowed to proceed.

WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is
REMANDED to the Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070 and
for further proceedings in accordance with this decision. The temporary restraining order issued on
June 29, 1994 is hereby LIFTED.

SO ORDERED.
 [G.R. No. 141536. February 26, 2001.]

GIL MIGUEL T. PUYAT, Petitioner, v. RON ZABARTE, Respondent.

DECISION

PANGANIBAN, J.:

Summary judgment in a litigation is resorted to if there is no genuine issue as to any

material fact, other than the amount of damages. If this verity is evident from the
pleadings and the supporting affidavits, depositions and admissions on file with the
court, the moving party is entitled to such remedy as a matter of course. chanrob1e s virtua1 law lib rary

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
challenging the August 31, 1999 Decision 1 of the Court of Appeals (CA), which
affirmed the Regional Trial Court (RTC) of Pasig City, Branch 67 in Civil Case No.
64107; and the January 20, 2000 CA Resolution 2 which denied reconsideration.

The assailed CA Decision disposed as follows: jgc:chanro bles. com.ph

"WHEREFORE, finding no error in the judgment appealed from, the same is AFFIRMED."
3

The Facts

The facts of this case, as narrated by the Court of Appeals, are as follows: 4

"It appears that on 24 January 1994, [Respondent] Ron Zabarte commenced [an
action] to enforce the money judgment rendered by the Superior Court for the State of
California, County of Contra Costa, U.S.A. On 18 March 1994, [petitioner] filed his
Answer with the following special and affirmative defenses: chanrob1es vi rtua l 1aw lib rary

x x x

‘8) The Superior Court for the State of California, County of Contra Costa[,] did not
properly acquire jurisdiction over the subject matter of and over the persons involved in
[C]ase #C21-00265.

‘9) The Judgment on Stipulations for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 was obtained without the assistance of counsel for [petitioner] and
without sufficient notice to him and therefore, was rendered in clear violation of
[petitioner’s] constitutional rights to substantial and procedural due process.
‘10) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 was procured by means of fraud or collusion or undue influence
and/or based on a clear mistake of fact and law.

‘11) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 is contrary to the laws, public policy and canons of morality
obtaining in the Philippines and the enforcement of such judgment in the Philippines
would result in the unjust enrichment of [respondent at the expense of [petitioner] in
this case.

‘12) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 is null and void and unenforceable in the Philippines.

‘13) In the transaction, which is the subject matter in Case #C21-00265, [petitioner] is
not in any way liable, in fact and in law, to [respondent] in this case, as contained in
[petitioner’s] ‘Answer to Complaint’ in Case #C21-00265 dated April 1, 1991, Annex ‘B’
of [respondent’s] ‘Complaint’ dated December 6, 1993.

‘14) [Respondent] is guilty of misrepresentation or falsification in the filing of his

‘Complaint’ in this case dated December 6, 1993. Worse, [respondent] has no capacity
to sue in the Philippines.

‘15) Venue has been improperly laid in this case.’

(Record, pp. 42-44)

"On 1 August 1994, [respondent] filed a [M]otion for [S]ummary [J]udgment under
Rule 34 of the Rules of Court alleging that the [A]nswer filed by [petitioner] failed to
tender any genuine issue as to the material facts. In his [O]pposition to [respondent’s]
motion, [petitioner] demurred as follows: chanrob1e s virtual 1aw lib rary

‘2) [Petitioner] begs to disagree[;];in support hereof, [he] wishes to mention that in his
‘Answer with Special and Affirmative Defenses’ dated March 16, 1994 [petitioner] has
interposed that the ‘Judgment on Stipulations for Entry in Judgment’ is null and void,
fraudulent, illegal and unenforceable, the same having been obtained by means of
fraud, collusion, undue influence and/or clear mistake of fact and law. In addition, [he]
has maintained that said ‘Judgment on Stipulations for Entry in Judgment’ was obtained
without the assistance of counsel for [petitioner] and without sufficient notice to him
and therefore, was rendered in violation of his constitutional rights to substantial and
procedural due process.’

"The [M]otion for [S]ummary [J]udgment was set for hearing on 12 August 1994 during
which [respondent] marked and submitted in evidence the following: chanrob 1es vi rtua l 1aw lib rary

Exhibit ‘A’ — . . . Judgment on Stipulation For Entry In Judgment of the Supreme Court
of the State of California[,] County of Contra Costa[,] signed by Hon. Ellen James,
Judge of the Superior Court.

Exhibit ‘B’ — . . . Certificate of Authentication of the [O]rder signed by the Hon. Ellen
James, issued by the Consulate General of the Republic of the Philippines.
Exhibit ‘C’ — [R]eturn of the [W]rit of [E]xecution (writ unsatisfied) issued by the
sheriff/marshall, County of Santa Clara, State of California.

Exhibit ‘D’ — [W]rit of [E]xecution

Exhibit ‘E’ — [P]roof of [S]ervice of copies of [W]rit of [E]xecution, [N]otice of [L]evy,

[M]emorandum of [G]arnishee, [E]xemptions from [E]nforcement of [J]udgment.

Exhibit ‘F’ — Certification issued by the Secretary of State, State of California that
Stephen Weir is the duly elected, qualified and acting [c]ounty [c]lerk of the County of
Contra Costa of the State of California.

Exhibit ‘G’ — Certificate of [A]uthentication of the [W]rit of [E]xecution.

"On 6 April 1995, the court a quo issued an [O]rder granting [respondent’s] [M]otion
for [S]ummary [J]udgment [and] likewise granting [petitioner] ten (10) days to submit
opposing affidavits, after which the case would be deemed submitted for resolution
(Record, pp. 152-153). [Petitioner] filed a [M]otion for [R]econsideration of the
aforesaid [O]rder and [respondent] filed [C]omment. On 30 June 1995, [petitioner]
filed a [M]otion to [D]ismiss on the ground of lack of jurisdiction over the subject
matter of the case and forum-non-conveniens (Record, pp. 166-170). In his
[O]pposition to the [M]otion (Record, pp. 181-182) [respondent] contended that
[petitioner could] no longer question the jurisdiction of the lower court on the ground
that [the latter’s] Answer had failed to raise the issue of jurisdiction. [Petitioner]
countered by asserting in his Reply that jurisdiction [could] not be fixed by agreement
of the parties. The lower court dismissed [his] [M]otion for [R]econsideration and
[M]otion [to] [D]ismiss (Record, pp. 196-198), . . .." cralaw virtua1aw l ibra ry

The RTC 5 eventually rendered its February 21, 1997 Decision, 6 which disposed as
follows:jgc:chanrobles. com.ph

"WHEREFORE, judgment is hereby rendered, ordering [petitioner] to pay [respondent]

the following amounts: jgc:chan robles. com.ph

"1. The amount of U.S. dollars $241,991.33, with the interest of legal rate from October
18, 1991, or its peso equivalent, pursuant to the [J]udgment of [S]tipulation for [E]ntry
in [J]udgment dated December 19, 1991; chanrob1es vi rtua 1 1aw 1ib ra ry

"2. The amount of P30,000.00 as attorney’s fees;

"3. To pay the costs of suit.

"The claim for moral damages, not having been substantiated, it is hereby denied." 7

Ruling of the Court of Appeals

Affirming the trial court, the Court of Appeals held that petitioner was estopped from
assailing the judgment that had become final and had, in fact, been partially executed.
The CA also ruled that summary judgment was proper, because petitioner had failed to
tender any genuine issue of fact and was merely maneuvering to delay the full effects
of the judgment.

Citing Ingenohl v. Olsen, 8 the CA also rejected petitioner’s argument that the RTC
should have dismissed the action for the enforcement of a foreign judgment, on the
ground of forum non conveniens. It reasoned out that the recognition of the foreign
judgment was based on comity, reciprocity and res judicata.

Hence, this Petition. 9

Issue

In his Memorandum, petitioner submits this lone but all-embracing issue: jgc:chanrob les.com. ph

"Whether or not the Court of Appeals acted in a manner . . . contrary to law when it
affirmed the Order of the trial court granting respondent’s Motion for Summary
Judgment and rendering judgment against the petitioner." 10

In his discussion, petitioner contends that the CA erred in ruling in this wise: chanrob1es vi rtua l 1aw lib ra ry

1. That his Answer failed to tender a genuine issue of fact regarding the following: chanrob1es vi rtua l 1aw lib ra ry

(a) the jurisdiction of a foreign court over the subject matter

(b) the validity of the foreign judgment

(c) the judgment’s conformity to Philippine laws, public policy, canons of morality, and
norms against unjust enrichment

2. That the principle of forum non conveniens was inapplicable to the instant case.

This Court’s Ruling

The Petition has no merit.

First Question: chanrob1es v irt ual 1aw l ibra ry

Summary Judgment

Petitioner vehemently insists that summary judgment is inappropriate to resolve the

case at bar, arguing that his Answer allegedly raised genuine and material factual
matters which he should have been allowed to prove during trial.

On the other hand, respondent argues that the alleged "genuine issues of fact" raised
by petitioner are mere conclusions of law or "propositions arrived at not by any process
of natural reasoning from a fact or a combination of facts stated but by the application
of the artificial rules of law to the facts pleaded." 11
The RTC granted respondent’s Motion for Summary Judgment because petitioner, in his
Answer, admitted the existence of the Judgment on Stipulation for Entry in Judgment.
Besides, he had already paid $5,000 to respondent, as provided in the foreign
judgment sought to be enforced. 12 Hence, the trial court ruled that, there being no
genuine issue as to any material fact, the case should properly be resolved through
summary judgment. The CA affirmed this ruling.

We concur with the lower courts. Summary judgment is a procedural device for the
prompt disposition of actions in which the pleadings raise only a legal issue, and not a
genuine issue as to any material fact. By genuine issue is meant a question of fact that
calls for the presentation of evidence. It should be distinguished from an issue that is
sham, contrived, set in bad faith and patently unsubstantial. 13

Summary judgment is resorted to in order to avoid long drawn out litigations and
useless delays. When affidavits, depositions and admissions on file show that there are
no genuine issues of fact to be tried, the Rules allow a party to pierce the allegations in
the pleadings and to obtain immediate relief by way of summary judgment. In short,
since the facts are not in dispute, the court is allowed to decide the case summarily by
applying the law to the material facts.

Petitioner contends that by allowing summary judgment, the two courts a quo
prevented him from presenting evidence to substantiate his claims. We do not agree.
Summary judgment is based on facts directly proven by affidavits, depositions or
admissions. 14 In this case, the CA and the RTC both merely ruled that trial was not
necessary to resolve the case. Additionally and correctly, the RTC specifically ordered
petitioner to submit opposing affidavits to support his contentions that (1) the
Judgment on Stipulation for Entry in Judgment was procured on the basis of fraud,
collusion, undue influence, or a clear mistake of law or fact; and (2) that it was contrary
to public policy or the canons of morality. 15

Again, in its Order 16 dated November 29, 1995, the trial court clarified that the
opposing affidavits were "for [petitioner] to spell out the facts or circumstances [that]
would constitute lack of jurisdiction over the subject matter of and over the persons
involved in Case No. C21-00265," and that would render the judgment therein null and
void. In this light, petitioner’s contention that he was not allowed to present evidence to
substantiate his claims is clearly untenable.

For summary judgment to be valid, Rule 34, Section 3 of the Rules of Court, requires
(a) that there must be no genuine issue as to any material fact, except for the amount
of damages; and (b) that the party presenting the motion for summary judgment must
be entitled to a judgment as a matter of law. 17 As mentioned earlier, petitioner
admitted that a foreign judgment had been rendered against him and in favor of
respondent, and that he had paid $5,000 to the latter in partial compliance therewith.
Hence, respondent, as the party presenting the Motion for Summary Judgment, was
shown to be entitled to the judgment.

The CA made short shrift of the first requirement. To show that petitioner had raised no
genuine issue, it relied instead on the finality of the foreign judgment which was, in
fact, partially executed. Hence, we shall show in the following discussion how the
defenses presented by petitioner failed to tender any genuine issue of fact, and why a
full-blown trial was not necessary for the resolution of the issues.

Jurisdiction

Petitioner alleges that jurisdiction over Case No. C21-00265, which involved partnership
interest, was vested in the Securities and Exchange Commission, not in the Superior
Court of California, County of Contra Costa.

We disagree. In the absence of proof of California law on the jurisdiction of courts, we

presume that such law, if any, is similar to Philippine law. We base this conclusion on
the presumption of identity or similarity, also known as processual presumption. 18 The
Complaint, 19 which respondent filed with the trial court, was for the enforcement of a
foreign judgment. He alleged therein that the action of the foreign court was for the
collection of a sum of money, breach of promissory notes, and damages. 20

In our jurisdiction, such a case falls under the jurisdiction of civil courts, not of the
Securities and Exchange Commission (SEC). The jurisdiction of the latter is exclusively
over matters enumerated in Section 5, PD 902-A, 21 prior to its latest amendment. If
the foreign court did not really have jurisdiction over the case, as petitioner claims, it
would have been very easy for him to show this. Since jurisdiction is determined by the
allegations in a complaint, he only had to submit a copy of the complaint filed with the
foreign court. Clearly, this issue did not warrant trial.
chanrob1e s virtua1 1aw 1ib rary

Rights to Counsel and to Due Process

Petitioner contends that the foreign judgment, which was in the form of a Compromise
Agreement, cannot be executed without the parties being assisted by their chosen
lawyers. The reason for this, he points out, is to eliminate collusion, undue influence
and/or improper exertion of ascendancy by one party over the other. He alleges that he
discharged his counsel during the proceedings, because he felt that the latter was not
properly attending to the case. The judge, however, did not allow him to secure the
services of another counsel. Insisting that petitioner settle the case with respondent,
the judge practically imposed the settlement agreement on him. In his Opposing
Affidavit, petitioner states:
jgc:chanrobles. com.ph

"It is true that I was initially represented by a counsel in the proceedings in #C21-
00625. I discharged him because I then felt that he was not properly attending to my
case or was not competent enough to represent my interest. I asked the Judge for time
to secure another counsel but I was practically discouraged from engaging one as the
Judge was insistent that I settle the case at once with the [respondent]. Being a
foreigner and not a lawyer at that I did not know what to do. I felt helpless and the
Judge and [respondent’s] lawyer were the ones telling me what to do. Under ordinary
circumstances, their directives should have been taken with a grain of salt especially so
[since respondent’s] counsel, who was telling me what to do, had an interest adverse to
mine. But [because] time constraints and undue influence exerted by the Judge and
[respondent’s] counsel on me disturbed and seriously affected my freedom to act
according to my best judgment and belief. In point of fact, the terms of the settlement
were practically imposed on me by the Judge seconded all the time by [respondent’s]
counsel. I was then helpless as I had no counsel to assist me and the collusion between
the Judge and [respondent’s] counsel was becoming more evident by the way I was
treated in the Superior Court of [t]he State of California. I signed the ‘Judgment on
Stipulation for Entry in Judgment’ without any lawyer assisting me at the time and
without being fully aware of its terms and stipulations." 22

The manifestation of petitioner that the judge and the counsel for the opposing party
had pressured him would gain credibility only if he had not been given sufficient time to
engage the services of a new lawyer. Respondent’s Affidavit 23 dated May 23, 1994,
clarified, however, that petitioner had sufficient time, but he failed to retain a counsel.
Having dismissed his lawyer as early as June 19, 1991, petitioner directly handled his
own defense and negotiated a settlement with respondent and his counsel in December
1991. Respondent also stated that petitioner, ignoring the judge’s reminder of the
importance of having a lawyer, argued that "he would be the one to settle the case and
pay" anyway. Eventually, the Compromise Agreement was presented in court and
signed before Judge Ellen James on January 3, 1992. Hence, petitioner’s rights to
counsel and to due process were not violated.

Unjust Enrichment

Petitioner avers that the Compromise Agreement violated the norm against unjust
enrichment because the judge made him shoulder all the liabilities in the case, even if
there were two other defendants, G.S.P & Sons, Inc. and the Genesis Group.

We cannot exonerate petitioner from his obligation under the foreign judgment, even if
there are other defendants who are not being held liable together with him. First, the
foreign judgment itself does not mention these other defendants, their participation or
their liability to Respondent. Second, petitioner’s undated Opposing Affidavit states:"
[A]lthough myself and these entities were initially represented by Atty. Lawrence L.
Severson of the Law Firm Kouns, Quinlivan & Severson, . . . I discharged . . . said
lawyer. Subsequently, I assumed the representation for myself and these firms and this
was allowed by the Superior Court of the State of California without any authorization
from G.G.P. & Sons, Inc. and the Genesis Group." 24 Clearly, it was petitioner who
chose to represent the other defendants; hence, he cannot now be allowed to impugn a
decision based on this ground.

In any event, contrary to petitioner’s contention, unjust enrichment or solutio indebiti

does not apply to this case. This doctrine contemplates payment when there is no duty
to pay, and the person who receives the payment has no right to receive it. 25 In this
case, petitioner merely argues that the other two defendants whom he represented
were liable together with him. This is not a case of unjust enrichment.

We do not see, either, how the foreign judgment could be contrary to law, morals,
public policy or the canons of morality obtaining in the country. Petitioner owed money,
and the judgment required him to pay it. That is the long and the short of this case.

In addition, the maneuvering of petitioner before the trial court reinforce our belief that
his claims are unfounded. Instead of filing opposing affidavits to support his affirmative
defenses, he filed a Motion for Reconsideration of the Order allowing summary
judgment, as well as a Motion to Dismiss the action on the ground of forum non
conveniens. His opposing affidavits were filed only after the Order of November 29,
1995 had denied both Motions. 26 Such actuation was considered by the trial court as a
dilatory ploy which justified the resolution of the action by summary judgment.
According to the CA, petitioner’s allegations sought to delay the full effects of the
judgment; hence, summary judgment was proper. On this point, we concur with both
courts.

Second Question: chanrob1es vi rt ual 1aw li bra ry

Forum Non Conveniens

Petitioner argues that the RTC should have refused to entertain the Complaint for
enforcement of the foreign judgment on the principle of forum non conveniens. He
claims that the trial court had no jurisdiction, because the case involved partnership
interest, and there was difficulty in ascertaining the applicable law in California. All the
aspects of the transaction took place in a foreign country, and respondent is not even
Filipino.

We disagree. Under the principle of forum non conveniens, even if the exercise of
jurisdiction is authorized by law, courts may nonetheless refuse to entertain a case for
any of the following practical reasons: jgc:chanrobles .com.p h

"1) The belief that the matter can be better tried and decided elsewhere, either because
the main aspects of the case transpired in a foreign jurisdiction or the material
witnesses have their residence there;

2) The belief that the non-resident plaintiff sought the forum[,] a practice known as
forum shopping[,] merely to secure procedural advantages or to convey or harass the
defendant;

3) The unwillingness to extend local judicial facilities to non-residents or aliens when

the docket may already be overcrowded;

4) The inadequacy of the local judicial machinery for effectuating the right sought to be
maintained; and

5) The difficulty of ascertaining foreign law." 27

None of the aforementioned reasons barred the RTC from exercising its jurisdiction. In
the present action, there was no more need for material witnesses, no forum shopping
or harassment of petitioner, no inadequacy in the local machinery to enforce the foreign
judgment, and no question raised as to the application of any foreign law.

Authorities agree that the issue of whether a suit should be entertained or dismissed on
the basis of the above-mentioned principle depends largely upon the facts of each case
and on the sound discretion of the trial court. 28 Since the present action lodged in the
RTC was for the enforcement of a foreign judgment, there was no need to ascertain the
rights and the obligations of the parties based on foreign laws or contracts. The parties
needed only to perform their obligations under the Compromise Agreement they had
entered into.

Under Section 48, Rule 39 of the 1997 Rules of Civil Procedure, a judgment in an action
in personam rendered by a foreign tribunal clothed with jurisdiction is presumptive
evidence of a right as between the parties and their successors-in-interest by a
subsequent title. 29

Also, under Section 5(n) of Rule 131, a court — whether in the Philippines or elsewhere
— enjoys the presumption that it is acting in the lawful exercise of its jurisdiction, and
that it is regularly performing its official duty. 30 Its judgment may, however, be
assailed if there is evidence of want of jurisdiction, want of notice to the party,
collusion, fraud or clear mistake of law or fact. But precisely, this possibility signals the
need for a local trial court to exercise jurisdiction. Clearly, the application of forum non
conveniens is not called for. chanrob1e s virtua1 1aw 1 ib rary

The grounds relied upon by petitioner are contradictory. On the one hand, he insists
that the RTC take jurisdiction over the enforcement case in order to invalidate the
foreign judgment; yet, he avers that the trial court should not exercise jurisdiction over
the same case on the basis of forum non coveniens. Not only do these defenses weaken
each other, but they bolster the finding of the lower courts that he was merely
maneuvering to avoid or delay payment of his obligation.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision and Resolution
AFFIRMED. Double costs against petitioner.

G.R. No. 154830 June 8, 2007

PIONEER CONCRETE PHILIPPINES, INC., PIONEER PHILIPPINES HOLDINGS, and PHILIP J.

KLEPZIG, petitioners,
vs.
ANTONIO D. TODARO, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before the Court is a Petition for Review on Certiorari seeking to annul and set aside the Decision1 of
the Court of Appeals (CA) dated October 31, 2000 in CA-G.R. SP No. 54155 and its Resolution2 of
August 21, 2002 denying petitioners‘ Motion for Reconsideration.

The factual and procedural antecedents of the case are as follows:

On January 16, 1998, herein respondent Antonio D. Todaro (Todaro) filed with the Regional Trial
Court (RTC) of Makati City, a complaint for Sum of Money and Damages with Preliminary
Attachment against Pioneer International Limited (PIL), Pioneer Concrete Philippines, Inc. (PCPI),
Pioneer Philippines Holdings, Inc. (PPHI), John G. McDonald (McDonald) and Philip J. Klepzig
(Klepzig).3

In his complaint, Todaro alleged that PIL is a corporation duly organized and existing under the laws
of Australia and is principally engaged in the ready-mix concrete and concrete aggregates business;
PPHI is the company established by PIL to own and hold the stocks of its operating company in the
Philippines; PCPI is the company established by PIL to undertake its business of ready-mix
concrete, concrete aggregates and quarrying operations in the Philippines; McDonald is the Chief
Executive of the Hongkong office of PIL; and, Klepzig is the President and Managing Director of
PPHI and PCPI; Todaro has been the managing director of Betonval Readyconcrete, Inc. (Betonval),
a company engaged in pre-mixed concrete and concrete aggregate production; he resigned from
Betonval in February 1996; in May 1996, PIL contacted Todaro and asked him if he was available to
join them in connection with their intention to establish a ready-mix concrete plant and other related
operations in the Philippines; Todaro informed PIL of his availability and interest to join them;
subsequently, PIL and Todaro came to an agreement wherein the former consented to engage the
services of the latter as a consultant for two to three months, after which, he would be employed as
the manager of PIL's ready-mix concrete operations should the company decide to invest in the
Philippines; subsequently, PIL started its operations in the Philippines; however, it refused to comply
with its undertaking to employ Todaro on a permanent basis.4

Instead of filing an Answer, PPHI, PCPI and Klepzig separately moved to dismiss the complaint on
the grounds that the complaint states no cause of action, that the RTC has no jurisdiction over the
subject matter of the complaint, as the same is within the jurisdiction of the NLRC, and that the
complaint should be dismissed on the basis of the doctrine of forum non conveniens.5

In its Order dated January 4, 1999, the RTC of Makati, Branch 147, denied herein petitioners'
respective motions to dismiss.6 Herein petitioners, as defendants, filed an Urgent Omnibus
Motion7 for the reconsideration of the trial court's Order of January 4, 1999 but the trial court denied
it via its Order8 dated June 3, 1999.

On August 3, 1999, herein petitioners filed a Petition for Certiorari with the CA.9 On October 31,
2000, the CA rendered its presently assailed Decision denying herein petitioners' Petition
for Certiorari. Petitioners filed a Motion for Reconsideration but the CA denied it in its Resolution
dated August 21, 2002.

Hence, herein Petition for Review on Certiorari based on the following assignment of errors:

A.

THE COURT OF APPEALS' CONCLUSION THAT THE COMPLAINT STATES A CAUSE

OF ACTION AGAINST PETITIONERS IS WITHOUT ANY LEGAL BASIS. THE ANNEXES
TO THE COMPLAINT CLEARLY BELIE THE ALLEGATION OF EXISTENCE OF AN
EMPLOYMENT CONTRACT BETWEEN PRIVATE RESPONDENT AND PETITIONERS.

B.

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN

ACCORD WITH LAW AND WITH APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT UPHELD THE JURISDICTION OF THE TRIAL COURT DESPITE THE FACT
THAT THE COMPLAINT INDUBITABLY SHOWS THAT IT IS AN ACTION FOR AN
ALLEGED BREACH OF EMPLOYMENT CONTRACT, AND HENCE, FALLS WITHIN THE
EXLCUSIVE JURISDICTION OF THE NATIONAL LABOR RELATIONS COMMISSION.

THE COURT OF APPEALS DISREGARDED AND FAILED TO CONSIDER THE

PRINCIPLE OF "FORUM NON CONVENIENS" AS A VALID GROUND FOR DISMISSING A
COMPLAINT.10
In their first assigned error, petitioners contend that there was no perfected employment contract
between PIL and herein respondent. Petitioners assert that the annexes to respondent's complaint
show that PIL's offer was for respondent to be employed as the manager only of its pre-mixed
concrete operations and not as the company's managing director or CEO. Petitioners argue that
when respondent reiterated his intention to become the manager of PIL's overall business venture in
the Philippines, he, in effect did not accept PIL's offer of employment and instead made a counter-
offer, which, however, was not accepted by PIL. Petitioners also contend that under Article 1318 of
the Civil Code, one of the requisites for a contract to be perfected is the consent of the contracting
parties; that under Article 1319 of the same Code, consent is manifested by the meeting of the offer
and the acceptance upon the thing and the cause which are to constitute the contract; that the offer
must be certain and the acceptance absolute; that a qualified acceptance constitutes a counter-offer.
Petitioners assert that since PIL did not accept respondent's counter-offer, there never was any
employment contract that was perfected between them.

Petitioners further argue that respondent's claim for damages based on the provisions of Articles 19
and 21 of the Civil Code is baseless because it was shown that there was no perfected employment
contract.

Assuming, for the sake of argument, that PIL may be held liable for breach of employment contract,
petitioners contend that PCPI and PPHI, may not also be held liable because they are juridical
entities with personalities which are separate and distinct from PIL, even if they are subsidiary
corporations of the latter. Petitioners also aver that the annexes to respondent's complaint show that
the negotiations on the alleged employment contract took place between respondent and PIL
through its office in Hongkong. In other words, PCPI and PPHI were not privy to the negotiations
between PIL and respondent for the possible employment of the latter; and under Article 1311 of the
Civil Code, a contract is not binding upon and cannot be enforced against one who was not a party
to it even if he be aware of such contract and has acted with knowledge thereof.

Petitioners further assert that petitioner Klepzig may not be held liable because he is simply acting in
his capacity as president of PCPI and PPHI and settled is the rule that an officer of a corporation is
not personally liable for acts done in the performance of his duties and within the bounds of the
authority conferred on him. Furthermore, petitioners argue that even if PCPI and PPHI are held
liable, respondent still has no cause of action against Klepzig because PCPI and PPHI have
personalities which are separate and distinct from those acting in their behalf, such as Klepzig.

As to their second assigned error, petitioners contend that since herein respondent's claims for
actual, moral and exemplary damages are solely premised on the alleged breach of employment
contract, the present case should be considered as falling within the exclusive jurisdiction of the
NLRC.

With respect to the third assigned error, petitioners assert that the principle of forum non
conveniens dictates that even where exercise of jurisidiction is authorized by law, courts may refuse
to entertain a case involving a foreign element where the matter can be better tried and decided
elsewhere, either because the main aspects of the case transpired in a foreign jurisdiction or the
material witnesses have their residence there and the plaintiff sought the forum merely to secure
procedural advantage or to annoy or harass the defendant. Petitioners also argue that one of the
factors in determining the most convenient forum for conflicts problem is the power of the court to
enforce its decision. Petitioners contend that since the majority of the defendants in the present case
are not residents of the Philippines, they are not subject to compulsory processes of the Philippine
court handling the case for purposes of requiring their attendance during trial. Even assuming that
they can be summoned, their appearance would entail excessive costs. Petitioners further assert
that there is no allegation in the complaint from which one can conclude that the evidence to be
presented during the trial can be better obtained in the Philippines. Moreover, the events which led
to the present controversy occurred outside the Philippines. Petitioners conclude that based on the
foregoing factual circumstances, the case should be dismissed under the principle of forum non
conveniens.

In his Comment, respondent extensively quoted the assailed CA Decision maintaining that the
factual allegations in the complaint determine whether or not the complaint states a cause of action.

As to the question of jurisdiction, respondent contends that the complaint he filed was not based on
a contract of employment. Rather, it was based on petitioners' unwarranted breach of their
contractual obligation to employ respondent. This breach, respondent argues, gave rise to an action
for damages which is cognizable by the regular courts.

Even assuming that there was an employment contract, respondent asserts that for the NLRC to
acquire jurisdiction, the claim for damages must have a reasonable causal connection with the
employer-employee relationship of petitioners and respondent.

Respondent further argues that there is a perfected contract between him and petitioners as they
both agreed that the latter shall employ him to manage and operate their ready-mix concrete
operations in the Philippines. Even assuming that there was no perfected contract, respondent
contends that his complaint alleges an alternative cause of action which is based on the provisions
of Articles 19 and 21 of the Civil Code.

As to the applicability of the doctrine of forum non conveniens, respondent avers that the question of
whether a suit should be entertained or dismissed on the basis of the principle of forum non
conveniens depends largely upon the facts of the particular case and is addressed to the sound
discretion of the trial judge, who is in the best position to determine whether special circumstances
require that the court desist from assuming jurisdiction over the suit.

The petition lacks merit.

Section 2, Rule 2 of the Rules of Court, as amended, defines a cause of action as the act or
omission by which a party violates a right of another. A cause of action exists if the following
elements are present: (1) a right in favor of the plaintiff by whatever means and under whatever law
it arises or is created; (2) an obligation on the part of the named defendant to respect or not to
violate such right; and, (3) an act or omission on the part of such defendant violative of the right of
the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for which the
latter may maintain an action for recovery of damages.11

In Hongkong and Shanghai Banking Corporation Limited v. Catalan,12 this Court held:

The elementary test for failure to state a cause of action is whether the complaint alleges
facts which if true would justify the relief demanded. Stated otherwise, may the court render
a valid judgment upon the facts alleged therein? The inquiry is into the sufficiency, not the
veracity of the material allegations. If the allegations in the complaint furnish sufficient basis
on which it can be maintained, it should not be dismissed regardless of the defense that may
be presented by the defendants.13

Moreover, the complaint does not have to establish or allege facts proving the existence of a cause
of action at the outset; this will have to be done at the trial on the merits of the case.14 To sustain a
motion to dismiss for lack of cause of action, the complaint must show that the claim for relief does
not exist, rather than that a claim has been defectively stated, or is ambiguous, indefinite or
uncertain.15

Hence, in resolving whether or not the Complaint in the present case states a cause of action, the
trial court correctly limited itself to examining the sufficiency of the allegations in the Complaint as
well as the annexes thereto. It is proscribed from inquiring into the truth of the allegations in the
Complaint or the authenticity of any of the documents referred or attached to the Complaint, since
these are deemed hypothetically admitted by the respondent.

This Court has reviewed respondent‘s allegations in its Complaint. In a nutshell, respondent alleged
that herein petitioners reneged on their contractual obligation to employ him on a permanent basis.
This allegation is sufficient to constitute a cause of action for damages.

The issue as to whether or not there was a perfected contract between petitioners and respondent is
a matter which is not ripe for determination in the present case; rather, this issue must be taken up
during trial, considering that its resolution would necessarily entail an examination of the veracity of
the allegations not only of herein respondent as plaintiff but also of petitioners as defendants.

The Court does not agree with petitioners' contention that they were not privy to the negotiations for
respondent's possible employment. It is evident from paragraphs 24 to 28 of the Complaint16 that, on
various occasions, Klepzig conducted negotiations with respondent regarding the latter's possible
employment. In fact, Annex "H"17 of the complaint shows that it was Klepzig who informed
respondent that his company was no longer interested in employing respondent. Hence, based on
the allegations in the Complaint and the annexes attached thereto, respondent has a cause of action
against herein petitioners.

As to the question of jurisdiction, this Court has consistently held that where no employer-employee
relationship exists between the parties and no issue is involved which may be resolved by reference
to the Labor Code, other labor statutes or any collective bargaining agreement, it is the Regional
Trial Court that has jurisdiction.18 In the present case, no employer-employee relationship exists
between petitioners and respondent. In fact, in his complaint, private respondent is not seeking any
relief under the Labor Code, but seeks payment of damages on account of petitioners' alleged
breach of their obligation under their agreement to employ him. It is settled that an action for breach
of contractual obligation is intrinsically a civil dispute.19 In the alternative, respondent seeks redress
on the basis of the provisions of Articles 19 and 21 of the Civil Code. Hence, it is clear that the
present action is within the realm of civil law, and jurisdiction over it belongs to the regular courts.20

With respect to the applicability of the principle of forum non conveniens in the present case, this
Court's ruling in Bank of America NT & SA v. Court of Appeals21 is instructive, to wit:

The doctrine of forum non conveniens, literally meaning ‗the forum is inconvenient‘, emerged
in private international law to deter the practice of global forum shopping, that is to prevent
non-resident litigants from choosing the forum or place wherein to bring their suit for
malicious reasons, such as to secure procedural advantages, to annoy and harass the
defendant, to avoid overcrowded dockets, or to select a more friendly venue. Under this
doctrine, a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it
is not the most "convenient" or available forum and the parties are not precluded from
seeking remedies elsewhere.

Whether a suit should be entertained or dismissed on the basis of said doctrine depends
largely upon the facts of the particular case and is addressed to the sound discretion of the
trial court. In the case of Communication Materials and Design, Inc. vs. Court of Appeals, this
 Court held that "xxx [a] Philippine Court may assume jurisdiction over the case if it chooses
to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to
which the parties may conveniently resort to; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has
or is likely to have power to enforce its decision."

Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of Appeals,
that the doctrine of forum non conveniens should not be used as a ground for a
motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include said
doctrine as a ground. This Court further ruled that while it is within the discretion of
the trial court to abstain from assuming jurisdiction on this ground, it should do so
only after vital facts are established, to determine whether special circumstances
require the court’s desistance; and that the propriety of dismissing a case based on
this principle of forum non conveniens requires a factual determination, hence it is
more properly considered a matter of defense.22 (emphasis supplied)

In the present case, the factual circumstances cited by petitioners which would allegedly justify the
application of the doctrine of forum non conveniens are matters of defense, the merits of which
should properly be threshed out during trial.

WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court
of Appeals are AFFIRMED.

Costs against petitioners.

SO ORDERED.

Wing On Co. v. Syyap, 64 O.G. 8311 (1964); (in pdf)

634 F. Supp. 842 (1986)

In re UNION CARBIDE CORPORATION GAS PLANT DISASTER AT BHOPAL, INDIA IN

DECEMBER, 1984.

Misc. No. 21-38 (JFK).

United States District Court, S.D. New York.

May 12, 1986.

As Amended June 10, 1986.

*843 Robins, Zelle, Larson & Kaplan, Minneapolis, Michael V. Ciresi, Bruce A. Finzen,
Roberta B. Walburn, D.S. Sastri of counsel. Barrett, Smith, Schapiro, Simon &
Armstrong, New York City, Gerald A. Novack, of counsel, for the Union of India.

Waite, Schneider, Bayless & Chesley Co., L.P.A., Cincinnati, Ohio, Stanley M. Chesley,
Phillip B. Allen, Jan Levien, of counsel, Bailey & Broder, New York City, F. Lee Bailey,
Michael C. Zwal, of counsel, for individual plaintiffs.
Hoffinger, Friedland, Dobrish, Bernfeld & Hasen, New York City, Jack S. Hoffinger, of
counsel, Liaison Counsel.

Kelley Drye & Warren, New York City, Bud G. Holman, William A. Krohley, Lisa E.
Cleary, of counsel, for defendant.

Christic Institute, Washington, D.C., Rob Hager, Shelley D. Hayes, of counsel, for
Amicus Curiae.

*844 OPINION and ORDER

KEENAN, District Judge:

FACTUAL BACKGROUND

On the night of December 2-3, 1984 the most tragic industrial disaster in history
occurred in the city of Bhopal, state of Madhya Pradesh, Union of India. Located there
was a chemical plant owned and operated by Union Carbide India Limited ("UCIL"). The
plant, situated in the northern sector of the city, had numerous hutments adjacent to it
on its southern side which were occupied by impoverished squatters. UCIL
manufactured the pesticides Sevin and Temik at the Bhopal plant at the request of, and
with the approval of, the Government of India. (Affidavit of John MacDonald
("MacDonald Aff.") at 2). UCIL was incorporated under Indian law in 1934. 50.9% of its
stock is owned by the defendant, Union Carbide Corporation, a New York corporation.
(MacDonald Aff. at 1). Methyl isocyanate (MIC), a highly toxic gas, is an ingredient in
the production of both Sevin and Temik. On the night of the tragedy MIC leaked from
the plant in substantial quantities for reasons not yet determined.

The prevailing winds on the early morning of December 3, 1984 were from Northwest to
Southeast. They blew the deadly gas into the overpopulated hutments adjacent to the
plant and into the most densely occupied parts of the city. The results were horrendous.
Estimates of deaths directly attributable to the leak range as high as 2,100. No one is
sure exactly how many perished. Over 200,000 people suffered injuriessome serious
and permanent some mild and temporary. Livestock were killed and crops damaged.
Businesses were interrupted.

On December 7, 1984 the first lawsuit was filed by American lawyers in the United
States on behalf of thousands of Indians. Dawani et al. v. Union Carbide
Corp., S.D.W.Va. (84-2479). Since then 144 additional actions have been commenced
in federal courts in the United States. The actions have all been joined and assigned by
the Judicial Panel on Multidistrict Litigation to the Southern District of New York by order
of February 6, 1985, 601 F. Supp. 1035.
The individual federal court complaints have been superseded by a consolidated
complaint filed on June 28, 1985.

The Indian Government on March 29, 1985 enacted legislation, the Bhopal Gas Leak
Disaster (Processing of Claims) Act (21 of 1985) ("Bhopal Act"), providing that the
Government of India has the exclusive right to represent Indian plaintiffs in India and
elsewhere in connection with the tragedy. Pursuant to the Bhopal Act, the Union of
India, on April 8, 1985, filed a complaint with this Court setting forth claims for relief
similar to those in the consolidated complaint of June 28, 1985.

By order of April 25, 1985 this Court established a Plaintiffs' Executive Committee,
comprised of F. Lee Bailey and Stanley M. Chesley, Esqs., who represented individual
plaintiffs and Michael V. Ciresi, Esq., whose firm represents the Union of India. Jack S.
Hoffinger, Esq., who represents individual plaintiffs, was appointed liaison counsel for
the Plaintiffs' Executive Committee.[1]

On September 24, 1985, pursuant to the Bhopal Act, the Central Government of India
framed a "scheme" for the Registration and Processing of Claims arising out of the
disaster. According to the Union of India's *845 counsel, over 487,000 claims have been
filed in India pursuant to the "scheme."

There presently are 145 actions filed in the United States District Court for the Southern
District of New York under the Judicial Panel for Multidistrict Litigation's order of
February 6, 1985, involving approximately 200,000 plaintiffs.

Before this Court is a motion by the defendant Union Carbide Corporation ("Union
Carbide") to dismiss the consolidated action on the grounds of forum non conveniens.

DISCUSSION

The doctrine of forum non conveniens allows a court to decline jurisdiction, even when
jurisdiction is authorized by a general venue statute. In support of its position that the
consolidated action before the Court should be transferred to a more convenient forum
within the Union of India pursuant to this doctrine, Union Carbide relies on the United
States Supreme Court's decisions in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S. Ct.
839, 91 L. Ed. 1055 (1947) and Piper Aircraft Co. v. Reyno, 454 U.S. 235, 102 S. Ct.
252, 70 L. Ed. 2d 419 (1981). The plaintiffs cite numerous other lower United States
federal court cases in their briefs and seek to distinguish the Supreme Court's decisions
from this case. Of course, Gilbert and Piper are the touchstones in sorting out and
examining the contentions of both sides to this motion on the various factors bearing on
convenience.

Piper teaches a straightforward formulation of the doctrine of forum non conveniens. A

district court is advised to determine first whether the proposed alternative forum is
"adequate." This inquiry should proceed in the order followed below. Then, as a matter
within its "sound discretion," Piper at 257, 102 S. Ct. at 266, the district court should
consider relevant public and private interest factors, and reasonably balance those
factors, in order to determine whether dismissal is favored. This Court will approach the
various concerns in the same direct manner in which Piper and Gilbert set them out.

At this juncture, it would be appropriate to discuss the presumptions on a forum non

conveniens motion. In Piper, the Court discussed its earlier finding in Koster v.
Lumbermens Mutual Casualty Co., 330 U.S. 518, 67 S. Ct. 828, 91 L. Ed. 1067 (1947),
which suggested that a plaintiff's choice of forum was entitled to great deference when
the forum chosen was the home of the plaintiff. This presumption was based on the fact
that the choice of the home forum indicated a reasonable assumption that the choice
was convenient. Koster at 524, 67 S. Ct. at 831. Conversely, the Piper Court found:

When the plaintiff is foreign, however, this assumption is much less reasonable. Because the
central purpose of any forum non conveniens inquiry is to ensure that the trial is convenient, a
foreign plaintiff's choice deserves less deference.

Piper 454 U.S. at 256, 102 S. Ct. at 266 (footnote omitted).

In the case now before the Court, in which the plaintiffs, including the Union of India, are
foreign, and share a home forum which is not the instant forum, the assumption that this
forum is convenient is not completely reasonable. The foreign plaintiffs' choice of the
United States forum "deserves less deference" than would be accorded a United States
citizen's choice. This Court will apply the presumption in favor of plaintiffs' choice of
forum with "less than maximum force." Piper at 261, 102 S. Ct. at 268. See note 23 at
864, infra.

1. Preliminary Considerations.

"At the outset of any forum non conveniens inquiry, the court must determine whether
there exists an alternative forum." Piper at 254, n. 22, 102 S. Ct. at 265, n. 22. The
elements of that inquiry are set forth in Piper. First, the Court said, "[o]rdinarily, this
requirement will be satisfied when the defendant is `amenable to process' in the other
jurisdiction." Piper at 254, n. 22, *846 102 S. Ct. at 265, n. 22, quoting Gilbert 330 U.S.
at 506-507, 67 S. Ct. at 842. Gilbert states that the doctrine of forum non
conveniens "presupposes at least two forums in which the defendant is amenable to
process."

Extending the limited inquiry of Gilbert, the Piper Court delved into the relevance of the
substantive and procedural differences in law which would be applied in the event a
case was transferred on the grounds of forum non conveniens. The Piper Court
determined that it was theoretically inconsistent with the underlying doctrine of forum
non conveniens, as well as grossly impractical, to consider the impact of the putative
transferee forum's law on the plaintiff in its decision on a forum non conveniens motion:
"[I]f conclusive or substantial weight were given to the possibility of a change in law,
the forum non conveniens doctrine would become virtually useless." Piper 454 U.S. at
250, 102 S. Ct. at 263.[2]

The Court listed numerous practical considerations which led to its conclusion that an
unfavorable change in law for plaintiff was not a relevant factor in the forum analysis.
First, the Court observed that if the chance of a change in law were given substantial
weight, choice of law questions would "become extremely important." Piper at 251, 102
S. Ct. at 263. U.S. courts would "have to compare the rights, remedies, and procedures
available" within the two proposed alternative forums, to determine whether a
disadvantageous change in law would occur upon transfer. Id. Since "[t]he doctrine
of forum non conveniens, however, is designed in part to help courts avoid conducting
complex exercises in comparative law," the change in law analysis would subvert the
doctrine itself. Id. Thus, a court engaged in the inquiry regarding the existence and
adequacy of an alternative forum should not hinge its decision on an unfavorable
change in law.[3]

Another practical concern relating to the "change in law" inquiry was discussed by
the Piper court. Based on the liberality of United States federal law as compared to
much foreign law with respect to availability of strict liability for tort, malleable and
diverse choice of law rules among the 50 states, availability of jury trials, contingent fee
arrangements and extensive discovery provisions, the Court observed that a change of
forum might frequently involve an unfavorable change of law for foreign plaintiffs suing
American defendants. Piper at 252, n. 18, 102 S. Ct. at 264, n. 18. Consequently, if the
unfavorable change in law were a major factor in the analysis:

[T]he American courts, which are already extremely attractive to foreign plaintiffs, would become
even more attractive. The flow of litigation into the United States would increase and further
congest already crowded courts.

Piper at 252, 102 S. Ct. at 264 (footnotes omitted).

At the point, however, where the possible change in law would provide "no remedy at
all" to plaintiff, a court may conclude that no adequate alternative exists. As
the Piper Court observed, it did not hold that:

[T]he possibility of an unfavorable change in law should never be a relevant consideration in

a forum non conveniens inquiry. Of course, if the remedy provided by the alternative forum is so
clearly inadequate or unsatisfactory that it is no remedy at all, the unfavorable change in law
may be given substantial weight; the district court may conclude that dismissal would not be in
the interests of justice.
Piper at 254, 102 S. Ct. at 265 (emphasis in original) (footnote omitted). Thus, while
it *847 is not a "major factor" in the analysis, a court must at least consider the effect on
plaintiffs of a change in law upon transfer.

To a great extent, the plaintiffs in this case argue that Indian courts do not offer an
adequate forum for this litigation by virtue of the relative "procedural and discovery
deficiencies [which] would thwart the victims' quest for" justice. (Memorandum in
Opposition by Plaintiffs' Executive Committee ("Memo in Opp.") at 2). The defendant
disputes this contention.

Plaintiffs' preliminary concern, regarding defendant's amenability to process in the

alternative forum, is more than sufficiently met in the instant case. Union Carbide has
unequivocally acknowledged that it is subject to the jurisdiction of the courts of India
(Defendant's Memorandum in Reply filed December 20, 1985 ("Reply Memo") at 8);
(oral argument January 3, 1986, transcript at 29, comment of Bud Holman, counsel for
Union Carbide). Union Carbide is definitely amenable to process in India.

Beyond this initial test, plaintiffs and amicus curiae[4] argue that the Indian legal system
is inadequate to handle the Bhopal litigation. In support of this position, plaintiffs have
submitted the affidavit of Professor Marc S. Galanter of the University of Wisconsin Law
School. Professor Galanter's credentials are impressive; he was a Fulbright Scholar at
the Faculty of Law of Delhi University and specializes in South Asian Studies at the
University of Wisconsin Law School. He is not, however, admitted to practice in India
and the Court views his opinions concerning the Indian legal system, its judiciary and
bar as far less persuasive than those of N.A. Palkhivala and J.B. Dadachanji, each of
whom has been admitted to practice in India for over 40 years. Both are Senior
Advocates before the Supreme Court of India. Mr. Palkhivala served as Indian
Ambassador to the United States from 1977 to 1979, and has represented the Indian
government on three occasions before international tribunals.

Although the outcome of this analysis, given the rule of Piper regarding change in law,
seems self-evident, the Court will review plaintiffs' argument on the inadequacy of the
Indian forum out of deference to the plaintiffs.

A. Innovation in the Indian Judicial System.

Professor Galanter describes the Indian common law legal system, inherited from the
British, in terms of its similarity to that of other common law systems. He compares the
system favorably to that of the United States or Great Britain in terms of the appellate
structure, the rule of stare decisis, the role of the judiciary as "guardian of [India's]
democratic structure and protector of citizens' rights." (Galanter Aff., at 6-12) before
pointing to its ostensible deficiencies. According to Professor Galanter, India's legal
system "was imposed on it" during the period of colonial rule. (Galanter Aff. at 11).
Galanter argues that "Indian legal institutions still reflect their colonial origins," (Galanter
Aff. at 12), in terms of the lack of broadbased legislative activity, inaccessibility of legal
information and legal services, burdensome court filing fees and limited innovativeness
with reference to legal practice and education. (Galanter Aff. at 12).

On the question of innovativeness, Mr. Palkhivala responds with numerous examples of

novel treatment of complex legal issues by the Indian Judiciary.[5] In the words of the
former ambassador of India to the United States, "a legal system is not *848 a structure
of fossils but is a living organism which grows through the judicial process and statutory
enactments." (Palkhavala Aff. at 3). The examples cited by defendant's experts suggest
a developed and independent judiciary. Plaintiffs present no evidence to bolster their
contention that the Indian legal system has not sufficiently emerged from its colonial
heritage to display the innovativeness which the Bhopal litigation would demand. Their
claim in this regard is not compelling.

B. Endemic Delays in the Indian Legal System.

Galanter discusses the problems of delay and backlog in Indian courts. Indeed, it
appears that India has approximately one-tenth the number of judges, per citizen, as the
United States,[6] and that postponements and high caseloads are widespread. Galanter
urges that the backlog is a result of Indian procedural law, which allows for
adjournments in mid-hearing, and for multiple interlocutory and final appeals. Numerous
appeals and "[c]onsiderable delay [are] caused by the tendency of courts to avoid the
decision of all the matters in issue in a suit, on the ground that the suit could be
disposed of on a preliminary point." (Galanter Aff. at 17; 18-20, 21, quoting Indian Law
Commission, 54th Report (1973) pp. 12-13).

This Court acknowledges that delays and backlog exist in Indian courts, but United
States courts are subject to delays and backlog, too. See Remarks of Honorable
Warren E. Burger, Chief Justice, Supreme Court of the United States, 100 F.R.D. 499,
534 (1983).

However, as Mr. Palkhivala states, while delays in the Indian legal system are a fact of
judicial life in the proposed alternative forum, there is no reason to assume that the
Bhopal litigation will be treated in ordinary fashion.

The Bhopal tragedy has already been approached with imagination in India.
Demonstrating the creativity and flexibility of the Indian system, the Parliament of India
has passed the Bhopal Act in order to deal with the cases arising from the sad events of
December 3, 1984. The Bhopal Act permits the cases to be treated "speedily,
effectively, equitably and to the best advantage of the claimants." (Palkhivala Aff. at 11).

Mr. Dadachanji refers to another Indian case which arose from a gas leak in New Delhi.
The Chief Justice and another Justice of the Supreme Court of India ordered the
presiding court to expedite adjudication of claims. MC Mehta v. Union of
India. (Dadachanji Aff. at 11 and Annexure A thereto). In another instance, the Indian
Supreme Court directed the High Court to hear a given matter on a daily basis, and set
a deadline for delivering judgment (Dadachanji Aff. at 11 and Annexure B thereto).
Other means of coping with delay are appointment of special tribunals by the
Government of India (Dadachanji Aff. at 12 and Annexure C thereto), and assignment of
daily hearing duties to a single special judge, otherwise unburdened, to hear a special
matter. (Dadachanji Aff. at 11). This Court is persuaded, by the example of the Bhopal
Act itself and other cases where special measures to expedite were taken by the Indian
judiciary, that the most significant, urgent and extensive litigation ever to arise from a
single event could be handled through special judicial accommodation in India, if
required.

C. Procedural and Practical Capacity of Indian Courts.

Plaintiffs contend that the Indian legal system lacks the wherewithal to allow it "to deal
effectively and expeditiously" with the issues raised in this lawsuit. (Memo in Opp. p.
53).

Plaintiffs urge that Indian practitioners emphasize oral skills rather than written briefs.
They allegedly lack specialization, practical investigative techniques and coordination
into partnerships. These factors, *849 it is argued, limit the Indian bar's ability to handle
the Bhopal litigation. As Mr. Dadachanji indicates, Indian lawyers have competently
dealt with complex technology transfers, suggesting capability within the technological
and scientific areas of legal practice, if not "specialization." (Dadachanji Aff. at 8).
Moreover, Indian attorneys use experts, when necessary. As to investigative ability, Mr.
Dadachanji persuasively points out that the Central Bureau of Investigation ("CBI") of
the Union of India is well equipped to handle factual inquiry, as is the Commission of
Enquiry constituted by the state of Madhya Pradesh. (Dadachanji Aff. at 8). While Indian
attorneys may not customarily join into large law firms, and as Mr. Palkhivala states, are
limited by present Indian law to partnerships of no more than twenty, this alone or even
in concert with other factors does not establish the inadequacy of the Indian legal
system. (Palkhivala Aff. at 8). There is no reason the Indian legislature could not provide
for the expansion of lawfirms, if such a choice is required. In any event, this Court is not
convinced that the size of a law firm has that much to do with the quality of legal service
provided. Many small firms in this country perform work at least on a par with the largest
firms. Bigger is not necessarily better.

Moreover, since the Union of India purports to represent all the claimants, it is likely that
if the case were transferred to India, the Attorney General or Solicitor General of India
and the Advocate General of Madhya Pradesh, with attendant staffs, would represent
the claimants. The Indian bar appears more than capable of shouldering the litigation if
it should be transferred to India. (Palkhivala Aff. at 9).

Next, plaintiffs and Professor Galanter argue that the substantive tort law of India is not
sufficiently developed to accommodate the Bhopal claims. Plaintiffs trace the lack of
sophistication in Indian tort law to the presence of court fees for litigants as inhibiting the
filing of civil suits. Though the filing fees may have had historical significance, they are
irrelevant here. Professor Galanter acknowledges that court fees may be waived for
"poor parties or for specific classes of litigants." (Galanter Aff. at 28). In fact, filing fees
have been waived for claimants in India in the Bhopal litigation already begun there.

Professor Galanter asserts that India lacks codified tort law, has little reported case law
in the tort field to serve as precedent, and has no tort law relating to disputes arising out
of complex product or design liability. (Galanter Aff. at 30-36). As an illustration of the
paucity of Indian tort law, Professor Galanter states that a search through the All-India
Reports for the span from 1914 to 1965 revealed only 613 tort cases reported. (Galanter
Aff. at 32). Mr. Dadachanji responds that tort law is sparsely reported in India due to
frequent settlement of such cases, lack of appeal to higher courts, and the publication of
tort cases in specialized journals other than the All-India Reports. (Dadachanji Aff. at
16-17; Palkhivala Aff. at 10). In addition, tort law has been codified in numerous Indian
statutes. (Dadachanji Aff. at 16-17).

As Professor Galanter himself states, "the major categories of tort, their elements, the
[theories] of liability, defenses, respondeat superior, the theories of damagesare all
familiar." (Galanter Aff. at 37). What is different, Galanter asserts, is the complete
absence of tort law relating to high technology or complex manufacturing processes.
This is of no moment with respect to the adequacy of the Indian courts. With the
groundwork of tort doctrine adopted from the common law and the precedential weight
awarded British cases, as well as Indian ones, it is obvious that a well-developed base
of tort doctrine exists to provide a guide to Indian courts presiding over the Bhopal
litigation. In any event, much tort law applied in American cases involving complex
technology has its source in legal principles first enunciated in Victorian England. See,
e.g., Rylands v. Fletcher, 1868, L.R. 3 H.L. 330. As Mr. Palkhivala stated in his affidavit:

*850 The plant itself was the product of highly complex technology, but complexity of the
technology cannot be equated with complexity of legal issues. The principles of liability and
damages involved in the Bhopal cases are all well established in India. The complexity is not in
the nature or determination of legal issues but in the application of the law to the events which
took place in Bhopal. Well settled law is to be applied to an unusual occurrence.

(Palkhivala Aff. at 7).

Plaintiffs next assert that India lacks certain procedural devices which are essential to
the adjudication of complex cases, the absence of which prevent India from providing
an adequate alternative forum. They urge that Indian pre-trial discovery is inadequate
and that therefore India is an inadequate alternative forum. Professor Galanter states
that the only forms of discovery available in India are written interrogatories, inspection
of documents, and requests for admissions. Parties alone are subject to discovery.
Third-party witnesses need not submit to discovery. Discovery may be directed to
admissible evidence only, not material likely to lead to relevant or admissible material,
as in the courts of the United States. Parties are not compelled to provide what will be
actual proof at trial as part of discovery.

These limits on discovery are adopted from the British system. Similar discovery tools
are used in Great Britain today. This Court finds that their application would perhaps,
however, limit the victims' access to sources of proof. Therefore, pursuant to its
equitable powers, the Court directs that the defendant consent to submit to the broad
discovery afforded by the United States Federal Rules of Civil Procedure if or when an
Indian court sits in judgment or presides over pretrial proceedings in the Bhopal
litigation.[7] Any dismissal of the action now before this Court is thus conditioned on
defendant's consent to submit to discovery on the American model, even after transfer
to another jurisdiction.

The ostensible lack of devices for third-party impleader or for organizing complex cases
under the law of the state of Madhya Pradesh are two other procedural deficiencies
which plaintiffs assert preclude a finding that India offers an adequate alternative forum.
Assuming for the moment that, upon appropriate transfer, the Bhopal litigation would be
adjudicated by the local district court in Bhopal, and that the law of Madhya Pradesh
would be applied, this Court is still not moved by plaintiffs' argument regarding
impleader or complex litigation.

Although no specific provision in the Indian Code of Civil Procedure permits the
impleading of third-parties from whom contribution is sought, other provisions in the
Code do provide for impleader. As both parties to this motion state, Order 1, Rule 10(2)
of the Indian Code of Civil Procedure "allows the court to add additional parties if the
presence of those parties is `necessary in order to enable the Court effectively and
completely to adjudicate upon and settle all questions involved in the suit.'" (Galanter
Aff. at 60; Dadachanji Aff. at 18). Professor Galanter posits that a joint tortfeasor would
not be considered a necessary party, and would not be joined. Defendant's expert,
conversely, asserts that a party can be added to prevent multiplicity of suits and
conflicts of decisions. Thus, Mr. Dadachanji argues, defendants would be able to seek
contribution from third-parties if joinder would prevent repetitive litigation or
inconsistency. Moreover, the broad provision of inherent powers to aid the ends of
justice, as codified at Section 151 of the Indian Code of Civil Procedure would prevent
an ultimate miscarriage of *851 justice in the area of impleader. (Dadachanji Aff. at
19).[8]

The absence of procedures or mechanisms within the Indian judiciary to handle

complex litigation is presented as support for plaintiffs' position regarding the non-
existence of an adequate alternative forum. Professor Galanter asserts, for example,
that Indian judges do not promote settlements. The point is wholly irrelevant to the
question of whether an adequate alternative forum exists. In any event, this Court has
labored hard and long to promote settlement between the parties for over a year, to no
avail. It would appear that settlement, although desirable for many reasons, including
conservation of attorneys' fees and costs of litigation, preservation of judicial resources,
and speed of resolution, is unlikely regardless of the level of activism of the presiding
judge.

Plaintiffs' next contention is that since no class action procedure exists in India
expeditious litigation of the Bhopal suits would be impossible. As with all of plaintiffs'
other arguments, this purported deficiency does not constitute "no remedy" at all.
Professor Galanter himself acknowledges that Order 1, Rule 8 of the Indian Code of
Civil Procedure provides a mechanism for "representative" suits, "where there are
numerous persons having the same interest in one suit." (Galanter Aff. at 54). Even if
the current state of Indian law regarding "representative" suits involves application of
the mechanism to pre-existing groups such as religious sects or associations, there is
no reason to conclude that the Indian legislature, capable of enacting the Bhopal Act,
would not see its way to enacting a specific law for class actions. In addition, it does not
appear on the face of Order 1, Rule 8 that the "representative" suit is expressly limited
to preexisting groups. The Indian district court could adopt the rule for use in a newly
created class of injured, whose members all have "the same interest" in establishing the
liability of the defendant. An Indian court has law available to create a representative
class, or perhaps a few different representative classes. The "scheme" for registration
and processing of claims, see supra, at 4, could perform the task of evaluating the
specific amounts of claims. Moreover, Mr. Dadachanji gives at least three examples
where Indian courts have consolidated suits pursuant to their inherent power under
Section 151 of the Indian Code of Civil Procedure. In at least one case, such
consolidation allegedly occurred without consent of the parties. (Dadachanji Aff. at 9).
The absence of a rule for class actions which is identical to the American rule does not
lead to the conclusion that India is not an adequate alternative forum.

Final points regarding the asserted inadequacies of Indian procedure involve

unavailability of juries or contingent fee arrangements in India. Plaintiffs do not press
these arguments, but Mr. Palkhivala touches upon them. They are easily disposed of.
The absence of juries in civil cases is a feature of many civil law jurisdictions, and of the
United Kingdom. Piper at 252, n. 18, 102 S. Ct. at 264, n. 18 and citations therein.
Furthermore, contingency fees are not found in most foreign jurisdictions. Piper at 252,
n. 18, 102 S. Ct. at 264, n. 18. In any event, the lack of contingency fees is not an
insurmountable barrier to filing claims in India, as demonstrated by the fact that more
than 4,000 suits have been filed by victims of the Bhopal gas leak in India, already.
According to Mr. Palkhivala, moreover, well-known lawyers have been known to serve
clients without charging any fees. (Palkhivala Aff. at 8).

Plaintiffs' final contention as to the inadequacy of the Indian forum is that a judgment
rendered by an Indian court cannot be enforced in the United States without *852 resort
to further extensive litigation. Conversely, plaintiffs assert, Indian law provides res
judicata effect to foreign judgments, and precludes plaintiffs from bringing a suit on the
same cause of action in India. (Galanter Aff. at 63-65). Mr. Dadachanji disputes this
description of the Indian law of res judicata. He asserts that the pendency, or even final
disposition, of an action in a foreign court does not prevent plaintiffs from suing in India
upon the original cause of action. Plaintiffs would not be limited, Mr. Dadachanji argues,
to an Indian action to enforce the foreign judgment. (Dadachanji Aff. at 19-20). In
addition, he states that an Indian court, before ordering that a foreign judgment be given
effect, would seek to establish whether the foreign court had failed to apply Indian law,
or misapplied Indian law. (Dadachanji Aff. at 20).

The possibility of non-enforcement of a foreign judgment by courts of either country

leads this Court to conclude that the issue must be addressed at this time. Since it is
defendant Union Carbide which, perhaps ironically, argues for the sophistication of the
Indian legal system in seeking a dismissal on grounds of forum non conveniens, and
plaintiffs, including the Indian Government, which state a strong preference for the
American legal system, it would appear that both parties have indicated a willingness to
abide by a judgment of the foreign nation whose forum each seeks to visit. Thus, this
Court conditions the grant of a dismissal on forum non conveniens grounds on Union
Carbide's agreement to be bound by the judgment of its preferred tribunal, located in
India, and to satisfy any judgment rendered by the Indian court, and affirmed on appeal
in India. Absent such consent to abide by and to "make good" on a foreign judgment,
without challenge except for concerns relating to minimal due process, the motion to
dismiss now under consideration will not be granted. The preference of both parties to
play ball on a distant field will be taken to its limit, with each party being ordered to be
bound by the decision of the respective foreign referees.

To sum up the discussion to this point, the Court determines that the Indian legal
system provides an adequate alternative forum for the Bhopal litigation. Far from
exhibiting a tendency to be so "inadequate or unsatisfactory" as to provide "no remedy
at all," the courts of India appear to be well up to the task of handling this case. Any
unfavorable change in law for plaintiffs which might be suffered upon transfer to the
Indian courts, will, by the rule of Piper, not be given "substantial weight." Differences
between the two legal systems, even if they inure to plaintiffs' detriment, do not suggest
that India is not an adequate alternative forum. As Mr. Palkhivala asserts with some
dignity, "[w]hile it is true to say that the Indian system today is different in some respects
from the American system, it is wholly untrue to say that it is deficient or inadequate.
Difference is not to be equated with deficiency." (Palkhivala Aff. at 4). Piper at 254, 102
S. Ct. at 265. The inquiry now turns to a weighing of the public and private interest
factors.

2. Private Interest Concerns.

The Gilbert Court set forth a list of considerations which affect the interests of the
specific litigants to an action, and which should be weighed in making a forum non
conveniens determination. The so-called private interest factors, along with public
interest factors discussed below, were not intended to be rigidly applied. As the Court
stated in Piper,
"[E]ach case turns on its facts." If central emphasis were placed on any one factor, the forum
non conveniens doctrine would lose much of the flexibility that makes it so valuable.

Piper at 249-50, 102 S. Ct. at 263. Recognizing that "[p]articularly with respect to the
question of relative ease of access to sources of proof," "the private interests point in
both directions," the Supreme Court nevertheless upheld a district court's decision to
dismiss a case in favor of the relative convenience of a forum in Scotland. Piper at 257,
102 S. Ct. at 267. By contrast, this Court finds that the private interests *853 point
strongly one way. As in Piper, it appears that the burdensome effect of a trial in this
forum supports a finding that the private interest factors in this case weigh strongly in
favor of dismissal.

A. Sources of Proof.

The first example of a private interest consideration discussed in Gilbert is "relative ease
of access to sources of proof." As stated, the analysis of this issue must hinge on the
facts. Limited discovery on the issue of forum non conveniens has taken place,
pursuant to the Court's order of August 14, 1985.[9] The Court can therefore proceed to
discuss this question.

Union Carbide argues that virtually all of the evidence which will be relevant at a trial in
this case is located in India. Union Carbide's position is that almost all records relating
to liability, and without exception, all records relevant to damages, are to be found in
and around Bhopal. On the liability question Union Carbide asserts that the Bhopal plant
was managed and operated entirely by Indian nationals, who were employed by UCIL.
(Affidavit of Warren J. Woomer, formerly Works Manager of the Bhopal plant ("Woomer
Aff.") at 2). Defendant asserts that the Bhopal plant is part of UCIL's Agricultural
Products Division, which has been a separate division of UCIL for at least 15 years, and
that the plant had "limited contact" with UCIL's Bombay headquarters, and almost no
contact with the United States. (Woomer Aff. at 4, 32). Woomer claims to have been the
last American employed by UCIL. He departed from Bhopal in 1982. (Woomer Aff. at 2).

Woomer describes the structure and organization of the Bhopal facility at the time of the
accident. The plant had seven operating units, each headed by a manager or
department head, each an Indian national.[10] The managers or department heads each
reported either directly to the plant's General Works Manager, or to one of three
Assistant Works Managers. (Woomer Aff. at 6). Each of these is also an Indian national.
Three of the operating units which at this very early stage of inquiry into liability appear
to have been potentially involved in the MIC leak are the Carbon Monoxide,
MIC/Phosgene and Carbamoylation units. (Woomer Aff. at 7-10). The Carbon Monoxide
and MIC/Phosgene units together employed 63 employees, all Indian nationals.
(Woomer Aff. at 9). The Carbamoylation unit employed 99 Indian nationals. (Woomer
Aff. at 10). Mr. Woomer states that an inquiry into the cause of the accident would
require interviews with at least those employees who were on duty at the Bhopal facility
"immediately prior or after the accident;" Mr. Woomer asserts that there are 193
employees, all Indians, who must be interviewed. (Woomer Aff. at 58). [11]

In addition to the seven operating units, the Bhopal plant contained seven functional
departments which serviced operations.[12] The seven heads of the units reported within
the plant much as the department heads did.

The maintenance unit was apparently subdivided into departments including

Instrumentation, Mechanical Maintenance, both part of the Agricultural Chemical
Maintenance unit, which employed 171 people in total, and Plant Engineering and
Formulation Maintenance, which employed 46 people. (Woomer Aff. at 11-12).
In *854 addition, the Utilities and Electrical department employed 195 people. (Woomer
Aff. at 13). According to Mr. Woomer, the various maintenance organizations performed
repairs on equipment, provided engineering support, fabricated certain equipment,
salvaged other portions, and controlled utilities, temperatures and pressures throughout
the plant. (Woomer Aff. at 11-14).

Moreover, according to Mr. Woomer, these UCIL departments also kept daily, weekly
and monthly records of plant operations, many of which were purportedly seized by the
CBI and selected for copying by CBI immediately after the accident.[13] The records and
reports of the various maintenance units would likely be relevant to the question of
liability at trial.

Of the additional functional units, it is possible that Quality Control, with 54 employees,
Purchasing, with 53, or Stores may have been directly involved in the disaster by virtue
of their participation in analyzing plant output, procuring raw materials for the chemical
processes of the plant, and maintaining spare parts and certain chemicals. (Woomer
Aff. at 14-19). Thus, the records and reports of these three departments may be
necessary to an investigation of liability. While examination of members of the Works
Office department and Industrial Relations department would likely be less directly
useful, information regarding plant budgets and employee histories might be of
relevance. Of great importance are the records and reports of the Safety/Medical
department, which was responsible for daily auditing of safety performance in all
departments, training and testing on safety rules, maintaining safety statistics and
planning and implementing safety drills. (Woomer Aff. at 22-23). The 31 Indian
employees of this department worked with the Central Safety Committee of the plant,
whose members were drawn from plant management, and the Departmental Safety
Committees. Operating units were required to monitor plant safety mechanisms weekly,
and to keep monthly checklists. (Holman Aff. # 2 at 9). The Central Safety Committee
met monthly, as did the Departmental Safety Committees. (Woomer Aff. at 39). The
MIC Unit held monthly safety committee meetings, for example, and issued monthly
reports. (Woomer Aff. at 41). Quarterly "Measures of Performance" reviews also
covered safety issues, and were required of each operating unit. (Woomer Aff. at 40).
Certainly, interviews of the plant personnel involved in safety reports and audits would
be particularly relevant to the investigation of the disaster.
Plaintiffs refer to three occasions upon which Union Carbide, not UCIL, employees
conducted safety audits at the Bhopal plant. As defendant correctly argues, these three
events constitute a very small fraction of the thousands of safety audits conducted at
the Bhopal facility. The three audits, moreover, were conducted in 1979, the fall of 1980
and in May of 1982, many years prior to the accident which is the subject of this lawsuit.
(Plaintiffs' Memo in Opp. at 25).[14]

Two accidents which occurred previously at the Bhopal plant might also be of relevance
to the liability inquiry in this litigation. On December 24, 1981, a phosgene gas leak
killed a UCIL maintenance worker. *855 Reports of the fatality were sent to Union
Carbide management in the United States. (Woomer Deposition, Exs. 30 and 31).
Plaintiffs assert that the accident report called for increased training in Bhopal by United
States employees of Union Carbide's Institute, West Virginia, plant. Defendant states
that the responsibility for remedying problems in the Bhopal plant rested with the plant
itself, and that Union Carbide did not make any recommendations, and was involved
only to the extent of receiving a copy of the report which called for its involvement in
further training. (Woomer Aff. at 41).

The second accident at Bhopal prior to the disaster of December, 1984 took place on
February 9, 1982, when a pump seal, perhaps improperly used, failed. (Memo in Opp.
at 24; Woomer Aff. at 41). Many employees were injured, and at least 25 were
hospitalized. Plaintiffs discuss the fact that Robert Oldford, president of Union Carbide
Agricultural Products Company ("UCAPC") a wholly-owned subsidiary of Union Carbide
headquartered in the United States, was in Bhopal at the time of the February 1982
leak. (Memo in Opp. at 24). Union Carbide asserts that Mr. Oldford was visiting UCIL's
Research and Development Centre, located several miles from the Bhopal plant for an
unrelated purpose, and was only coincidentally in Bhopal when the leak occurred. To
the extent that this presence in India in 1982 has any significance, Mr. Oldford, and any
other United States employees of Union Carbide who conducted safety audits in Bhopal
or were present when accidents occurred there, may be flown to Bhopal for testimony or
discovery.

In addition to safety data, two other types of proof may be relevant to a trial of this case
on the merits. Information regarding plant design, commissioning and start-up may bear
upon the liability question. Information pertinent to employee training should also have
significance.

Leaving aside the question of whether the Government of India or UCIL chose the site
and product of the Bhopal plant, the Court will evaluate the facts which bear on the
issue of relevant records. The findings below concern the location of proof only, and
bear solely upon the forum non conveniens motion. The Court expressly declines to
make findings as to actual liability at this stage of the litigation.

Plaintiffs and defendant agree that in 1973 Union Carbide entered into two agreements
with UCIL which were entitled "Design Transfer Agreement" and "Technical Service
Agreement." According to plaintiffs, Union Carbide, pursuant to the Design Transfer
Agreement, provided a process design to UCIL, the "detailing [of which] was undertaken
in India." (Memo in Opp. at 17). The process design package consisted of the basic plan
of the factory, which was to be fleshed out in the detailing phase. Plaintiffs state that at
least nine Union Carbide technicians travelled to India to monitor the progress of the
project. Union Carbide also allegedly assigned a "key engineer," John Couvaras, to
serve as UCIL Bhopal project manager. Mr. Couvaras allegedly "assumed responsibility
for virtually every aspect of the detailing of the process design," and approved detail
reports of "not only UCIL but also independent contractors, including Humphreys &
Glasgow Consultants Private Ltd. and Power Gas Limited" of Bombay, India. (Memo in
Opp. at 17-20).[15]

Plaintiffs also claim that "[n]o change of any substance was made from Union Carbide's
design during the detailing phase." Plaintiffs note that only "one portion" of the process
design work provided to UCIL by Union Carbide was not used. (Memo in Opp. at 20). In
effect, plaintiffs seek to establish that Union Carbide was the creator of the design used
in the Bhopal plant, and directed UCIL's relatively minor detailing program. They urge
that for the most *856 part relevant proof on this point is located in the United States.

Defendant seeks to refute this contention, with notable success. Turning first to the
affidavit of Robert C. Brown, who describes himself as "chief negotiator for Union
Carbide Corporation in connection with the two agreements it entered into with ... UCIL
in November, 1973," the Court is struck by the assertion that the two agreements were
negotiated at "arms-length" pursuant to Union Carbide corporate policy, and that the
Union of India mandated that the Government retain "specific control over the terms of
any agreements UCIL made with foreign companies such as Union Carbide
Corporation." (Brown Aff. at 3-4).[16]

Mr. Brown alleges that the Letter of Intent issued by the Union of India in March 1972,
pursuant to which construction and design of the plant were allowed to ensue
provided, inter alia, that:

(2) [F]oreign collaboration and import of equipment be settled to the satisfaction of the
Government.

Mr. Brown claims, on personal information, that UCIL told him that Union Carbide would
not be allowed to be involved in the Bhopal project beyond the provision of process
design packages. (Brown Aff. at 5). The Design Transfer Agreement indicates that
Union Carbide's duty under the Agreement was to provide process design packages,
and that UCIL, not Union Carbide, would be responsible to "detail design, erect and
commission the plant." (Defendant's Ex. 4, § 4.1). Union Carbide, accordingly, issued
limiting warranties with respect to the design packages, detailing of which it would not
be involved with. (Brown Aff. at 7, Ex. 4, §§ 4.1, 12.3).
The nature of UCIL's detail design work is discussed in the affidavit of Ranjit K. Dutta,
who has held various positions at UCIL and UCAPC. From 1973 through 1976, Mr.
Dutta was employed as General Manager of the Agricultural Products Division of UCIL.
(Dutta Aff. at 2).

Mr. Dutta asserts that the Bhopal facility was built by UCIL over the eight years from
1972 to 1980. (Dutta Aff. at 8). He asserts that Union Carbide's role in the project was
"narrow", and limited to providing "certain process design packages for certain parts of
the plant." (Dutta Aff. at 9). He continues, stating:

Once it did that, it had no further design or engineering role,

and that:

[T]he process design packages which Union Carbide Corporation provided are nothing more
than summary design starting points.... They set forth only the general parameters.... A plant
cannot be constructed from a process design package. The detail design comprises
approximately 80 percent of the sum of the man hours involved in the design of any project and
transposes the general process design parameters into an actual design which can be used for
purchasing equipment and actual construction.

(Dutta Aff. at 9-12). (emphasis omitted).

According to Mr. Dutta, during the five years between the date upon which Union
Carbide submitted process designs, and the date upon which the plant started-up, there
were only four visits to Bhopal by Union Carbide process design engineers. (Dutta Aff.
at 14). In contrast, he asserts that ten to fifteen UCIL engineers, working primarily out of
Bombay, were involved in design detailing. (Dutta Aff. at 16). These UCIL engineers
oversaw the 55 to 60 Indian engineers *857 employed by the Bombay engineering firm
which performed the detail design work. This firm, Humphreys and Glasgow, submitted
designs and drawings to the UCIL engineers for approval. Corrected drawings were
returned by UCIL to Humphreys and Glasgow for changes, and sent back to UCIL for
final approval. (Dutta Aff. at 19-24).[17] Mr. Dutta alleges that "at no time were Union
Carbide Corporation engineering personnel from the United States involved in
approving the detail design or drawings prepared upon which construction was based.
Nor did they receive notices of changes made." (Dutta Aff. at 24).

Mr. Dutta expressly states that the MIC storage tank and monitoring instrumentation
were fabricated or supplied by two named Indian sub-contractors. The vent gas
scrubber is alleged to have been fabricated in the Bhopal plant shop. (Dutta Aff. at 25).
Of the 12,000 pages of documents purportedly seized by the CBI regarding design and
construction of the Bhopal plant, an asserted 2,000 are design reports of Humphreys
and Glasgow, UCIL or other contractors. Defendant claims that blueprints and
calculations comprise another 1,700 pages of documents held by the CBI. Five
thousand pages of contractors' files, including specifications and contracts are asserted
to be in India. In addition, Union Carbide claims that blueprints and diagrams may not
reflect final design changes as incorporated into the actual plant, and that the detail
design engineers' testimony will be needed to determine the configuration of the actual
plant.[18] (Holman Aff. # 2 at 15-16).

One final point bearing on the information regarding liability is contained in the affidavit
of Edward Munoz, at a relevant time the General Manager of UCIL's Agricultural
Products Division. He later acted as Managing Director of UCIL. Mr. Munoz has
submitted an affidavit in which he states that Union Carbide decided to store MIC in
large quantities at the Bhopal plant, despite Mr. Munoz' warnings that MIC should be
stored only in small amounts because of safety. (Memo in Opp. at 15-16; Munoz Aff.).
Mr. Dutta, for defendant, asserts that there was never any issue of token storage of MIC
at Bhopal, as Mr. Munoz states, and that there is no truth to Mr. Munoz' assertion that
he was involved in the storage issue. (Dutta Aff. at 30).[19]*858 The Court cannot make
any determination as to the conflicting affidavits before it. This question, which involves
credibility concerns, is left for later in the litigation. To the extent that this particular
matter bears upon the relative ease of access to sources of proof, Mr. Munoz and Mr.
Dutta both may be called to testify at trial or discovery. Mr. Dutta's home is in Bhopal.
(Dutta Aff. at 1). The Court is not aware of the whereabouts of Mr. Munoz at this time.
Either of the two could travel to either alternative forum.

In addition to design and safety records, material regarding training of Bhopal personnel
is likely to be relevant to the question of liability. Plaintiffs state that Warren Woomer
supervised the training of UCIL personnel at Union Carbide's Institute, West Virginia
plant. According to plaintiffs, 40 UCIL employees were transported to Institute's MIC
facility for lengthy training. (Memo in Opp. at 22). Mr. Woomer states in reply that the 40
employees thus trained represented a fraction of the over 1,000 employees who were
trained exclusively in Bhopal. (Woomer Aff. at 43). In addition, Mr. Woomer asserts that
the training at Institute was pursuant to an arms-length agreement, that UCIL selected
the parties to be trained, and that UCIL paid Union Carbide for the training. (Woomer
Aff. at 43). Moreover, Mr. Woomer's description of the training provided at Bhopal
suggests that each of the plant's employees had lengthy cumulative training, of which
the Institute training was but a very small portion. (Woomer Aff. at 46). Personnel
records, in any event, are located in Bhopal. (Holman Aff. # 2 at 4).

The briefs and affidavits contain considerable discussion on the matter of

commissioning and start-up of the Bhopal plant. The Court need not resolve the
question of who was responsible for these aspects of plant operation. However, the
Court determines that the manual regarding start-up was prepared by Indian nationals
employed by UCIL. (Woomer Aff. at 48).
In the aggregate, it appears to the Court that most of the documentary evidence
concerning design, training, safety and start-up, in other words, matters bearing on
liability, is to be found in India. Much of the material may be held by the Indian CBI.
Material located in this country, such as process design packages and training records
of the 40 UCIL employees trained at Institute, constitutes a smaller portion of the bulk of
the pertinent data than that found in India. Moreover, while records in this country are in
English, a language understood in the courts of India, certain of the records in India are
in Hindi or other Indian languages, as well as in English. (Holman Aff. # 2 at 12). The
Indian language documents would have to be translated to be of use in the United
States. The reverse is not true. It is evident to the Court that records concerning the
design, manufacture and operation of the Bhopal plant are relatively more accessible in
India than in the United States, and that fewer translation problems would face an
Indian court than an American court. Since Union Carbide has been directed to submit
to discovery in India pursuant to the liberal grant of the American Federal Rules of Civil
Procedure, and this opinion is conditioned upon such submission, any records sought
by plaintiffs must be made available to them in India. The private interest factor of
relative ease of access to sources of proof bearing on liability favors dismissal of the
consolidated case.[20] The Indian *859 Government is asserted to have been involved in
safety, licensing and other matters relating to liability. Records relating thereto are
located in India, as are the records seized by the CBI. Although plaintiffs state that all
such records could and would be made available to this Court, it would be easier to
review them in India. Transmittal and translation problems would thereby be avoided.

B. Access to Witnesses.

Gilbert teaches a second important consideration under the heading of private interests,
the "availability of compulsory process for attendance of willing, and the cost of
obtaining attendance of unwilling, witnesses." Gilbert, 330 U.S. at 508, 67 S. Ct. at 843.
As discussed in detail above, most witnesses whose testimony would relate to
questions of causation and liability are in India. Engineers from UCIL and Humphreys
and Glasgow and other subcontractors, of whom there are hundreds, are located in
India. Shift employees from the possibly malfunctioning units, safety monitoring
personnel, those responsible for training, safety auditing, procurement, compliance with
regulations and other operations might be required to testify. More than likely, many of
these potential witnesses do not speak English, and would require translators. Many of
the witnesses are not parties to this litigation. Therefore, as the Court of Appeals for the
Second Circuit has stated in the context of a forum non conveniens motion:

In fact, the plaintiffs' cases on liability will depend in large measure upon the knowledge and
activities of such witnesses as the employees of [companies] who are not parties to this
litigation, but who directly participated in the events which gave rise to it. The United States
District Court in New York, however, has no power to subpoena any of these witnesses. It is
unlikely that many would be willing to travel to New York to testify; and the cost, in any event,
would be prohibitively great.

Fitzgerald v. Texaco, 521 F.2d 448, 451-52 (2d Cir. 1975), cert. denied, 423 U.S. 1052,
96 S. Ct. 781, 46 L. Ed. 2d 641 (1976) (footnote omitted). In contrast, the relatively few
witnesses who reside in the United States are primarily employed by Union Carbide. As
employees of a party they would probably be subject to the subpoena power of Indian
courts. Transportation costs would also be lower, since fewer people would have to
make the journey to testify.

The presence of the Indian Government in this action is also of critical importance on
this motion. Plaintiffs assert that "all necessary officials and employees of the Central
Government will voluntarily comply with requests to attend trial." (Memo in Opp. at 70;
Answer to No. 124 of Defendant's First Requests for Admission, Exhibit 55). This
statement does not provide for attendance by officials of Madhya Pradesh or the Bhopal
municipality, whom Union Carbide indicates might be impleaded as third-party
defendants. As witnesses only, these officials would not be subject to this Court's
subpoena power. As third-party defendants, they might be immune from suit in the
United States by the terms of the Foreign Sovereign Immunities Act, 28 U.S.C. §
1602 et seq. State and city officials might also lack sufficient contacts with this district to
allow this Court to exercise personal jurisdiction over them.

While Union Carbide might be deprived of testimony of witnesses or even potential

third-parties if this action were to proceed in this forum, no such problem would exist if
litigation went forward in India.

The unavailability of compulsory process for Indian non-party witnesses, of

whom *860 there are many, such as would ensure their presence at a trial in this
country, the high cost of transporting the large number of Indian nationals to the United
States, as well as the need to translate their testimony should they appear, all support
the argument favoring dismissal of this action on forum non conveniens grounds. The
private interest concerns regarding witnesses emphasize the logic of defendant's
position. Relatively fewer witnesses reside in the United States than in India. Almost all
of the witnesses located in this country are employees of defendant, and would be
subject to compulsory process in India as a result. Transportation costs for the relative
few would not compare to the alternate costs of transporting hundreds of Indian
witnesses. Since English is widely spoken in India, less translation would be required for
foreign witnesses in India than in the converse situation. Should this case be tried in
India, fewer obstacles to calling state and local officials as witnesses or parties would
face the defendant. The Court determines that this private interest factor weighs in favor
of dismissal.

C. Possibility of View.
The third private interest factor articulated in Gilbert is the ease of arranging for a view
of the premises around which the litigation centers. Plaintiffs assert that the notion that a
jury view of the plant and environs is necessary is "simply preposterous." (Memo in
Opp. at 71). Plaintiffs note that a viewing of the premises is rarely conducted in products
liability cases, since videotapes, pictures, diagrams, schematics and models are more
instructive than an actual view. (Memo in Opp. at 71). A viewing of the plant and
hutments would probably not be of utmost importance in determining liability, and this
consideration is not afforded great weight on this motion.

However, the instant case is not identical to the product design defect case cited by
plaintiffs, in which a district court judge determined that "the present appearance of the
defendants' facilities may or may not be relevant to production which occurred" in the
period in which the allegedly violative manufacture occurred. Hodson v. A.H. Robins
Co., Inc., 528 F. Supp. 809, 822 (E.D.Va.1981), aff'd, 715 F.2d 142 (4th Cir. 1983). In
the instant case, the site of the accident was sealed after the leak, and the present
condition of the plant might be relevant to a finding of liability. A viewing may not be
necessary, but conceivably could be called for later in the litigation. An Indian court is in
a far better position than this Court to direct and supervise such a viewing should one
ever be required. This consideration, though minor, also weighs in favor of dismissal.

In summary, then, the private interest factors weigh greatly in favor of dismissal on
grounds of forum non conveniens. Since the "balance is strongly in favor of the
defendant" and foreign plaintiffs' choice of a foreign forum is given less than maximum
deference, the Court determines that dismissal is favored at this point in the
inquiry. Gilbert 330 U.S. at 508, 67 S. Ct. at 843.

3. Public Interest Concerns.

The Gilbert Court articulated certain factors which affected the interests of non-parties
to a litigation to be considered in the context of the doctrine of forum non
conveniens. These public interest concerns were held to be relevant to a court's
determination of whether to dismiss on these grounds. The Supreme Court expressly
identified a few factors:

Administrative difficulties follow for courts when litigation is piled up in congested centers
instead of being handled at its origin. Jury duty is a burden that ought not to be imposed upon
the people of a community which has no relation to the litigation. In cases which touch the
affairs of many persons, there is reason for holding the trial in their view and reach rather than in
remote parts of the country where they can learn of it by report only. There is a local interest in
having localized controversies decided at home. There is an appropriateness, too, in having the
trial of a diversity case in a forum that is at home with the state law that must govern the case,
rather than *861 having a court in some other forum untangle problems in conflict of laws, and in
law foreign to itself.
Gilbert at 508-09, 67 S. Ct. at 843. The Court will consider these various factors in turn,
as well as others discussed by the parties and amicus curiae.

A. Administrative Difficulties.

As is evident from the discussion thus far, the mere size of the Bhopal case, with its
multitude of witnesses and documents to be transported and translated, obviously
creates administrative problems.

There can be no doubt that the Bhopal litigation will take its toll on any court which sits
in judgment on it. This Court sits in one of the busiest districts in the country, and finds,
as a matter within its experience, that this is a "congested center" of litigation as
described in Gilbert at 508. The burden which would be imposed should litigation
continue here was aptly described by the Court of Appeals for the Second Circuit
in Schertenlieb v. Traum, 589 F.2d 1156 (2d Cir.1978). Reviewing a district judge's
ruling for dismissal on the grounds of forum non conveniens, the Second Circuit
observed that "were it not for the somewhat unusual fact that it is the forum resident
who seeks dismissal, we would have to say very little regarding the exercise of Judge
Metzner's discretion in dismissing this case." Schertenlieb at 1164. In affirming the
ruling for dismissal, the Court of Appeals asked the rhetorical question:

If litigation is in a clearly inconvenient forum, why should defendant and the court be burdened
with its continuing there, if an alternative forum now exists so that plaintiff will not be without a
remedy?

Schertenlieb at 1163.

This Court has already determined that because of the location of the preponderance of
the evidence in India, and the difficulty of transporting documents and witnesses to this
forum, this district is clearly an inconvenient forum for the litigation. An alternative forum
is seen to exist in India. This Court feels that the answer to the Schertenlieb question is
clear.

A district judge in this district, in Domingo v. States Marine Lines, 340 F. Supp.
811 (S.D.N.Y.1972) evaluated the administrative concerns of the Southern District of
New York, relevant to this Court today, a full fourteen years later. The Domingo court
stated:

It is scarcely necessary to dwell on the fact that this Court is the most heavily burdened Federal
District Court in the country. The Civil Calendar grows more congested all the time. The priority
now properly given to the disposition of criminal cases tends to increase this congestion.
******

I see no reason why this Court, with its heavy burdens and responsibilities, should be burdened
with cases like these which, from every point of view, should be tried in the courts of the nation
where all the relevant events occurred and whose citizens are primarily involved. Certainly, this
district and the Metropolitan area in which it is situated have no conceivable relation to this
litigation except for the fact that the defendant happens to be doing business here.

Domingo at 816.

The defendant in this case, involved as it appears to have been in the process design
phase of the plant's construction, may have a slightly less tenuous connection to this
forum than a corporation which is merely doing business here. Certain business
conducted in New York, or in corporate headquarters in Danbury, Connecticut, may
have been directly related to development or operation of the UCIL facility in Bhopal.
However, almost "all the relevant events" leading to and following from the accident
occurred in India. Indian citizens are primarily involved in the case, both as witnesses
and claimants. The substantial administrative weight of this case should be centered on
a court with the most significant contacts with the event. Thus, a court in Bhopal, rather
than New York, should bear the load.

*862 In addition to the burden on the court system, continuation of this litigation in this
forum would tax the time and resources of citizens directly. Trial in this case will no
doubt be lengthy. An assigned jury would be compelled to sit for many months of proof.
Because of the large number of Indian language-speaking witnesses, the jurors would
be required to endure continual translations which would double the length of trial. The
burden on the jurors themselves, and on their families, employers and communities
would be considerable. The need for translation would be avoided if trial were to be held
in Bhopal.

Clearly, the administrative costs of this litigation are astounding and significant. Despite
its deep concern for the victims of the tragedy, this Court is persuaded by a recent
relevant decision of the New York State Court of Appeals. In the opinion in Islamic
Republic of Iran v. Pahlavi, 62 N.Y.2d 474, 478 N.Y.S.2d 597, 467 N.E.2d 245
(1984), cert. denied, ___ U.S. ___, 105 S. Ct. 783, 83 L. Ed. 2d 778 (1985), with
reference to a decision discussing actions brought in New York by the Iranian
Government against the Shah and his wife, the Court of Appeals stated that:

[T]he taxpayers of this State should not be compelled to assume the heavy financial burden
attributable to the cost of administering the litigation contemplated when their interest in the suit
and the connection of its subject matter ... is so ephemeral.
Islamic Republic at 483, 478 N.Y.S.2d 597, 467 N.E.2d 245 (citations omitted).
Administrative concerns weigh against retention of this case.

B. The Interests of India and the United States.

Plaintiffs, and especially amicus curiae emphasize this point of argument in opposition
to the motion to dismiss. Concerned with the asserted possibility of developing a
"double-standard" of liability for multinational corporations, plaintiffs urge that American
courts should administer justice to the victims of the Bhopal disaster as they would to
potential American victims of industrial accidents. The public interest is served, plaintiffs
and amicus argue, when United States corporations assume responsibility for accidents
occurring on foreign soil. "To abandon that responsibility," amicus asserts, "would both
injure our standing in the world community and betray the spirit of fairness inherent in
the American character." (Amicus Brief at 4). The specific American interests allegedly
to be served by this Court's retention of the case include the opportunity of creating
precedent which will "bind all American multinationals henceforward," (Amicus Brief at
20); promotion of "international cooperation," (Amicus Brief at 22-23); avoidance of an
asserted "double standard" of liability, and the prevention of "economic blackmail of
hazardous industries which would extract concessions on health and environmental
standards as the price of continuing operations in the United States." (Amicus Brief at
20). An additional American public interest ostensibly to be served by retention of the
litigation in this forum is advanced by plaintiffs themselves. They assert that the
deterrent effect of this case can be distinguished from the situation in Piper, where the
Court rejected the argument that "American citizens have an interest in ensuring that
American manufacturers are deterred from producing defective products, and that
additional deterrence might be obtained if Piper and [its co-defendant] were tried in the
United States, where they could be sued on the basis of both negligence and strict
liability." Piper 454 U.S. at 260, 102 S. Ct. at 268. The Court stated that:

[T]he incremental deterrence that would be gained if this trial were held in an American court is
likely to be insignificant. The American interest in this accident is simply not sufficient to justify
the enormous commitment of judicial time and resources that would inevitably be required if the
case were to be tried here.

Piper at 260-61, 102 S. Ct. at 268. According to plaintiffs, the potential for greater
deterrence in this case is "self-evident."

*863 The opposing interest of India is argued to be ill-served by sending this litigation to
India. Pointing to the fact that the Union of India chose this forum, plaintiffs state that
there can be "no question as to the public interest of India." (Memo in Opp. at 91).
Union Carbide's statements regarding the interests of India in this litigation are
summarily dismissed by the plaintiffs, who state that "Union Carbide, whose actions
caused the suffering of an entire city, has no standing to assert this belated concern for
the welfare of the Indian populace." (Memo in Opp. at 91).

Union Carbide, not surprisingly, argues that the public interest of the United States in
this litigation is very slight, and that India's interest is great. In the main, the Court
agrees with the defendant.

As noted, Robert C. Brown states in his affidavit on behalf of Union Carbide that the
Indian Government preserved the right to approve foreign collaboration and import of
equipment to be used in connection with the plant. See supra at 856. In addition, Mr.
Brown quoted excerpts from the 1972 Letter of Intent entered into by the Union of India
and UCIL, one term of which required that "the purchase of only such design and
consultancy services from abroad as are not available within the country" would be
allowed. (Brown Aff. at 6). Ranjit K. Dutta states that the Indian Government, in a
process of "Indianization," restricted the amount of foreign materials and foreign
consultants' time which could be contributed to the project, and mandated the use of
Indian materials and experts whenever possible. (Dutta Aff. at 35). In an alleged
ongoing attempt to minimize foreign exchange losses through imports, the Union of
India insisted on approving equipment to be purchased abroad, through the mechanism
of a "capital goods license." (Dutta Aff. at 48-50).

The Indian Government, through its Ministry of Petroleum and Chemicals, allegedly
required information from UCIL regarding all aspects of the Bhopal facility during
construction in 1972 and 1973, including "information on toxicity" of chemicals. (Dutta
Aff. at 44). The Ministry required progress reports throughout the course of the
construction project. These reports were required by the Secretariat for Industrial
Approvals, the Director General of Technical Development and the Director of Industries
of Madhya Pradesh. (Dutta Aff. at 45). Moreover, UCIL was ultimately required to obtain
numerous licenses during development, construction and operation of the facility. (Dutta
Aff. at 46). The list of licenses obtained fills five pages.[21]

The Indian Government regulated the Bhopal plant indirectly under a series of
environmental laws, enforced by numerous agencies, much as the Occupational Safety
and Health Administration, the Environmental Protection Agency and state and local
agencies regulate the chemical industry in the United States. (Dutta Aff. at 53-56).
Emissions from the facility were monitored by a state water pollution board, for example.
(Dutta Aff. at 64). In addition, state officials periodically inspected the fully-constructed
plant.[22] (Dutta Aff. at 56). A detailed inquiry into the plant's operations was conducted
by the Indian Government in the aftermath of the December, 1981 fatality at the MIC
unit and the February, 1982 incident involving a pump seal. (Dutta Aff. at 58-62).
Numerous federal, state and local commissions, obviously, investigated the most tragic
incident of all, the MIC leak of December, 1984.

The recital above demonstrates the immense interest of various Indian governmental
agencies in the creation, operation, *864 licensing and regulation, and investigation of
the plant. Thus, regardless of the extent of Union Carbide's own involvement in the
UCIL plant in Bhopal, or even of its asserted "control" over the plant, the facility was
within the sphere of regulation of Indian laws and agencies, at all levels. The comments
of the Court of Appeals for the Sixth Circuit with respect to its decision to dismiss a
products liability action on forum non conveniens grounds seem particularly apposite.
In In re Richardson-Merrell, Inc., 545 F. Supp. 1130 (S.D.Ohio 1982), modified sub.
nom. Dowling v. Richardson-Merrell Inc., 727 F.2d 608 (6th Cir.1984), the court
reviewed a dismissal involving an action brought by a number of plaintiffs, all of whom
were citizens of Great Britain.[23] Defendant in the action was a drug company which had
developed and tested a drug in the United States which was manufactured and
marketed in England. The suit was brought against the American parent, not the British
subsidiary, for injuries allegedly resulting from ingestion of the offending drug in England
and Scotland. The district court, in dismissing the case, stated that:

This action involves the safety of drugs manufactured in the United Kingdom and sold to its
citizens pursuant to licenses issued by that government. The interest of the United Kingdom is
overwhelmingly apparent. New York, and Ohio [the United States forums] for that matter, have a
minimal interest in the safety of products which are manufactured, regulated and sold abroad by
foreign entities, even though development or testing occurred in this country.

In re Richardson-Merrell, Inc., 545 F. Supp. at 1135 (footnote omitted). The Sixth Circuit
confirmed this view of the public interests, stating:

The interest of the United Kingdom in this litigation is great. The drug was manufactured under a
British license by British companies and was marketed and prescribed in the United Kingdom.
The alleged injuries took place in England and Scotland and the plaintiffs are citizens and
residents of those countries. When a regulated industry, such as pharmaceuticals in this case
and passenger aircraft operations in Piper Aircraft, is involved, the country where the injury
occurs has a particularly strong interest in product liability litigation.... Though no single factor
should be determinative in ruling on a forum non conveniens motion, the nature of the product
and its status as regulated or not must be considered.

Dowling, 727 F.2d at 616.

The Indian government, which regulated the Bhopal facility, has an extensive and deep
interest in ensuring that its standards for safety are complied with. As regulators, the
Indian government and individual citizens even have an interest in knowing whether
extant regulations are adequate. This Court, sitting in a foreign country, has considered
the extent of regulation by Indian agencies of the Bhopal plant. It finds that this is not
the appropriate tribunal to determine whether the Indian regulations were breached, or
whether the laws themselves were sufficient to protect Indian citizens from harm. It
would be sadly paternalistic, if not misguided, of this Court to attempt to evaluate the
regulations and standards imposed in a foreign country. As another district court stated
in the context of a drug product liability action brought by foreign plaintiffs in this
country,

*865 Each government must weigh the merits of permitting the drug's use.... Each makes its
own determination as to the standards of degree of safety and duty of care.... This balancing of
the overall benefits to be derived from a product's use with the risk of harm associated with that
use is peculiarly suited to a forum of the country in which the product is to be used.... The
United States should not impose its own view of the safety, warning, and duty of care required
of drugs sold in the United States upon a foreign country when those same drugs are sold in
that country.

Harrison v. Wyeth Laboratories, 510 F. Supp. 1, 4 (E.D.Pa.1980), aff'd mem., 676 F.2d
685 (3d Cir.1982). India no doubt evaluated its need for a pesticide plant against the
risks inherent in such development. Its conclusions regarding "[q]uestions as to the
safety of [products] marketed" or manufactured in India were "properly the concern of
that country." Harrison at 4 (emphasis omitted). This is particularly true where, as here,
the interests of the regulators were possibly drastically different from concerns of
American regulators. The Court is well aware of the moral danger of creating the
"double-standard" feared by plaintiffs and amicus curiae. However, when an industry is
as regulated as the chemical industry is in India, the failure to acknowledge inherent
differences in the aims and concerns of Indian, as compared to American citizens would
be naive, and unfair to defendant. The district court in Harrison considered the
hypothetical instance in which a products liability action arising out of an Indian accident
would be brought in the United States. The court speculated as follows:

The impropriety of [applying American standards of product safety and care] would be even
more clearly seen if the foreign country involved was, for example, India, a country with a vastly
different standard of living, wealth, resources, level of health care and services, values, morals
and beliefs than our own. Most significantly, our two societies must deal with entirely different
and highly complex problems of population growth and control. Faced with different needs,
problems and resources in our example India may, in balancing the pros and cons ... give
different weight to various factors than would our society.... Should we impose our standards
upon them in spite of such differences? We think not.

Harrison at 4-5. This Court, too, thinks that it should avoid imposing characteristically
American values on Indian concerns.

The Indian interest in creating standards of care, enforcing them or even extending
them, and of protecting its citizens from ill-use is significantly stronger than the local
interest in deterring multinationals from exporting allegedly dangerous technology. The
supposed "blackmail" effect of dismissal by which plaintiffs are troubled is not a
significant interest of the American population, either. Surely, there will be no relaxing of
regulatory standards by the responsible legislators of the United States as a response
to lower standards abroad.[24] Other concerns than bald fear of potential liability, such as
convenience or tax benefits, bear on decisions regarding where to locate a plant.
Moreover, the purported public interest of seizing this chance to create new law is no
real interest at all. This Court would exceed its authority were it to rule otherwise when
restraint was in order.

The Court concludes that the public interest of India in this litigation far outweighs the
public interest of the United States. This litigation offers a developing nation the
opportunity to vindicate the suffering of its own people within the framework of *866 a
legitimate legal system. This interest is of paramount importance.[25]

C. The Applicable Law.

Gilbert and Piper explicitly acknowledge that the need of an American court to apply
foreign law is an appropriate concern on a forum non conveniens motion, and can in
fact point toward dismissal. Gilbert, 330 U.S. at 509, 67 S. Ct. at 843; Piper, 454 U.S. at
260, 102 S. Ct. at 268. Especially when, as here, all other factors favor dismissal, the
need to apply foreign law is a significant consideration on this type of motion. Piper at
260, n. 29, 102 S. Ct. at 268, n. 29. A federal court is bound to apply the choice of law
rules of the state in which an action was originally brought; even upon transfer to a
different district, "the transferee district court must be obligated to apply the state law
that would have been applied if there had been no change of venue." Van Dusen v.
Barrack, 376 U.S. 612, 639, 84 S. Ct. 805, 821, 11 L. Ed. 2d 945 (1964). Thus, this
Court, sitting over a multidistrict litigation, must apply the various choice of law rules of
the states in which the actions now consolidated before it were brought.[26] Rather than
undertake the task of evaluating the choice of law rules of each state separately, the
Court will treat the choice of law doctrine in toto. The "governmental interest" analysis,
employed by many jurisdictions, requires a court to look to the question of which state
has the most compelling interest in the outcome of the case. India's interest in the
outcome of the litigation exceeds America's, see supra at 44-58. The lex loci
delicti analysis used in other jurisdictions indicates that the law of the state where the
tort occurred should be applied. The place in which the tort occurred was, to a very
great extent, India. Other states apply the "most significant relationship" test, or "weight
of contacts" test, which evaluate in which state most of the events constituting the tort
occurred. The contacts with India with respect to all phases of plant construction,
operation, malfunction and subsequent injuries are greater in number than those with
the United States. Thus, under any one of these three doctrines, it is likely that Indian
law will emerge as the operative law. An Indian court, therefore, would be better able to
apply the controlling law than would this United States Court, or a jury working with it.
This public interest factor also weighs in favor of dismissal on the grounds of forum non
conveniens.

CONCLUSION
It is difficult to imagine how a greater tragedy could occur to a peacetime population
than the deadly gas leak in Bhopal on the night of December 2-3, 1984. The survivors of
the dead victims, the injured and others who suffered, or may in the future suffer due to
the disaster, are entitled to compensation. This Court is firmly convinced that the Indian
legal system is in a far better position than the American courts to determine the cause
of the tragic event and thereby fix liability. Further, the Indian courts have greater
access to all the information needed to arrive at the amount of the compensation to be
awarded the victims.

The presence in India of the overwhelming majority of the witnesses and evidence, both
documentary and real, would by itself suggest that India is the most convenient forum
for this consolidated case. The additional presence in India of all but the less than
handful of claimants underscores the convenience of holding trial in India. All of the
private interest factors described in Piper and Gilbert weigh heavily
toward *867 dismissal of this case on the grounds of forum non conveniens.

The public interest factors set forth in Piper and Gilbert also favor dismissal. The
administrative burden of this immense litigation would unfairly tax this or any American
tribunal. The cost to American taxpayers of supporting the litigation in the United States
would be excessive. When another, adequate and more convenient forum so clearly
exists, there is no reason to press the United States judiciary to the limits of its capacity.
No American interest in the outcome of this litigation outweighs the interest of India in
applying Indian law and Indian values to the task of resolving this case.

The Bhopal plant was regulated by Indian agencies. The Union of India has a very
strong interest in the aftermath of the accident which affected its citizens on its own soil.
Perhaps Indian regulations were ignored or contravened. India may wish to determine
whether the regulations imposed on the chemical industry within its boundaries were
sufficiently stringent. The Indian interests far outweigh the interests of citizens of the
United States in the litigation.

Plaintiffs, including the Union of India, have argued that the courts of India are not up to
the task of conducting the Bhopal litigation. They assert that the Indian judiciary has yet
to reach full maturity due to the restraints placed upon it by British colonial rulers who
shaped the Indian legal system to meet their own ends. Plaintiffs allege that the Indian
justice system has not yet cast off the burden of colonialism to meet the emerging
needs of a democratic people.

The Court thus finds itself faced with a paradox. In the Court's view, to retain the
litigation in this forum, as plaintiffs request, would be yet another example of
imperialism, another situation in which an established sovereign inflicted its rules, its
standards and values on a developing nation. This Court declines to play such a role.
The Union of India is a world power in 1986, and its courts have the proven capacity to
mete out fair and equal justice. To deprive the Indian judiciary of this opportunity to
stand tall before the world and to pass judgment on behalf of its own people would be to
revive a history of subservience and subjugation from which India has emerged. India
and its people can and must vindicate their claims before the independent and
legitimate judiciary created there since the Independence of 1947.

This Court defers to the adequacy and ability of the courts of India. Their interest in the
sad events of December 2-3, 1984 at the UCIL plant in the City of Bhopal, State of
Madhya Pradesh, Union of India, is not subject to question or challenge. The availability
of the probative, relevant, material and necessary evidence to Indian courts is obvious
and has been demonstrated in this opinion.

Therefore, the consolidated case is dismissed on the grounds of forum non

conveniens under the following conditions:

1. Union Carbide shall consent to submit to the jurisdiction of the courts of India, and shall
continue to waive defenses based upon the statute of limitations;

2. Union Carbide shall agree to satisfy any judgment rendered against it by an Indian court, and
if applicable, upheld by an appellate court in that country, where such judgment and affirmance
comport with the minimal requirements of due process;

3. Union Carbide shall be subject to discovery under the model of the United States Federal
Rules of Civil Procedure after appropriate demand by plaintiffs.

SO ORDERED.

NOTES

[1] All counsel on the Plaintiffs' Executive Committee were most professional and helpful
to the Court in this case. Mr. Hoffinger agreed to proceed pro bono in this case, and
waived any possible fee. The Court has been informed that neither Mr. Hoffinger, nor
anyone else on the Plaintiffs' Executive Committee, nor anyone in their law firms went to
India on the days immediately following the tragedy to "sign up" Indian plaintiffs. The
behavior of many American lawyers who went to Bhopal, India during December 1984
and January 1985 is not before this Court on this motion. Suffice it to say that those
members of the American bar who travelled the 8,200 miles to Bhopal in those months
did little to better the American image in the Third Worldor anywhere else. None of them
were on the Plaintiffs' Executive Committee.

[2] The Court found a theoretical flaw in the opposite rule, as set forth by the Third
Circuit. Noting that a plaintiff would choose the forum with the most favorable choice of
law rules in the first instance, "if the possibility of an unfavorable change in substantive
law is given weight in the forum non conveniens inquiry, dismissal would rarely be
proper." Piper at 250, 102 S. Ct. at 263.

[3] Similarly, the Court determined that "the possibility of a change in law favorable to
defendant should not be considered." Piper at 252, n. 19, 102 S. Ct. at 264, n. 19.

[4] Rob Hager, Esq. for Citizens Commission on Bhopal, National Council of Churches,
United Church of Christ Commission for Racial Justice, et al.

[5] For example, Mr. Palkhivala describes four cases in which the Indian Supreme Court
crafted new and "courageous" remedies in situations relating to abridgements of
fundamental rights. (Palkhivala Aff. at 6-7). Mr. Dadachanji describes similar decisions
in which he participated as an advocate, in his affidavit. (Dadachanji Aff. at 2-3). The
Court recognizes the innovativeness of the Indian Courts, while refraining from an
exhaustive survey of Indian case law.

[6] India allegedly has 10.5 judges per million population, as compared to 107 judges
per million in the United States (Galanter Aff. at 15).

[7] A federal court has the power to condition transfer under the doctrine of forum non
conveniens upon "the condition that defendant corporations agree to provide the
records relevant to the plaintiff's claims." Piper at 257, n. 25, 102 S. Ct. 267, n. 25.
While the Court feels that it would be fair to bind the plaintiffs to American discovery
rules, too, it has no authority to do so.

[8] The Court observes that the alleged problem would appear to act to the detriment of
defendant, not plaintiffs. It is Union Carbide which urges that third-party defendants are
necessary. (Memo in Support at 27-28). Defendant discounts the supposed
unavailability of third-party impleader, while the plaintiffs find its lack objectionable.
These postures lead the Court to the conclusion that this argument is not compelling in
either direction. The lack of specific third-party practice will not concern the Court if it
does not concern Union Carbide.

[9] Discovery was ably managed by Magistrate Michael H. Dolinger, of the Southern
District of New York.

[10] The seven operating units included Carbon Monoxide, MIC/Phosgene,

Carbamoylation, Alpha Naphthol, Aldicarb, Utilities and Formulations.

[11] Mr. Woomer states that a post-accident technical team sought to interview these
193 employees. According to Mr. Woomer, the Indian CBI, which had stepped into the
plant following the tragedy, advised the technical team that interviews could be
conducted only of the General Works Manager and MIC Production Manager, neither of
whom was present at the time of the leak. (Woomer Aff. at 57-58).
[12] The seven functional units were Maintenance, Quality Control, Stores, Purchasing,
Safety/Medical, Industrial Relations and Works Office. (Woomer Aff. at 6).

[13] Mr. Bud Holman, counsel for Union Carbide, states in his second affidavit that over
36,000 of the 78,000 pages of documents seized by the CBI represent plant operation
records. (Holman Aff. # 2 at 5). He asserts that 1,700 pages deal with maintenance
work performed in 1983 and 1984. (Holman Aff. # 2 at 8).

[14] The 1982 "Operational Safety Survey" was apparently fairly extensive. It was
conducted by three United States employees of Union Carbide, and led to a report
which discussed "major" concerns and possibility of "serious personnel exposure."
(Memo in Opp. at 25). Mr. Woomer asserts, and plaintiffs do not refute, that this Survey
was not intended to "serve a policing function," but was performed at the specific
request of UCIL. In addition, follow-up responsibility "rested exclusively with UCIL plant
management." (Woomer Aff. at 37-38).

Moreover, Union Carbide states that the Union of India, itself, conducted similar safety
audits and made recommendations. (Affidavit of Ranjit K. Dutta, Business Manager of
Union Carbide Agricultural Products Company ("Dutta Aff.") at 58-64).

[15] Plaintiffs assert that Mr. Couvaras exemplifies Union Carbide's "international
employee" whose mobility throughout the Union Carbide affiliates causes "[a]ny notion
of discrete corporate identities [to] blur[]." (Memo in Opp. at 18-19).

[16] As support, Mr. Brown points to the Union Carbide Corporate Policy Manual,
Section 1.10 which states:

The "arms-length principle" is a central consideration in transfer and pricing of all

technology transactions with affiliates.

"Arms length" is defined as:

The principle whereby inter-company transactions between Union Carbide and its
affiliates, or between affiliates, will reflect the cost to unrelated parties of the same or
similar technology under similar circumstances.

(Plaintiffs' Exhibit 3). Thus, Mr. Brown argues that Union Carbide related with UCIL
much as it would have with an unaffiliated, or even competing company.

[17] Humphreys and Glasgow was allegedly responsible for the following:

Among other things, developing final equipment and unit layouts and plot plans,
including equipment layout drawings, detailed piping arrangement drawings, layout of
electrical equipment; the steel structure, including detail design and working drawings
for the buildings and foundation; mechanical equipment design including specification of
all proprietary and fabricated equipment; review and certification of vendor's drawings
and documents, preparation of orthographic piping drawings for all portions of the plant,
preparation of isometric piping drawings, preparation of preliminary and final bills of
materials for pipes, valves, gaskets, instrument associated hardware, electrical conduit;
electrical engineering work, instrument engineering, including drawings on instrument
hook ups, lists of instruments, review of instrument specification and data sheets;
definition of material and make calculation to size insulation, preparation of insulation
lists, preparation of material take off and inquiry specification packages, procurement
assistance including assisting in evaluation of bids and selection of vendors, inspection
of certain equipment and materials to ensure proper workmanship and compliance with
specifications and codes, and coordinating where Indian law required inspection or
certification by governmental inspections; preparation of a project schedule, project
reports and costs control reports at least once per month, construction supervision
including supervision of mechanical testing of installed equipment, assistance in
commissioning.

(Dutta Aff. at 19-20).

[18] Mr. Couvaras, whom plaintiffs assert was a "key engineer" for the project, and
enjoyed mobility between Union Carbide and UCIL, is described by Mr. Dutta as
primarily a UCIL employee. The "international employee" status he carried is explained
as a pension accounting mechanism. (Dutta Aff. at 27).

[19] Mr. Dutta asserts that Mr. Munoz was a paid consultant to a member of Plaintiffs'
Executive Committee at the time the affidavit was made. No documentary proof of this
assertion has been submitted. (Dutta Aff. at 31; Holman Aff. # 2 at 18). Moreover, two
affidavits submitted on behalf of defendant state that Mr. Munoz was removed from his
position as Union Carbide Corporation Division President in 1978, and is "extremely
bitter as a result of the removal." (Dutta Aff. at 31; Holman Aff. # 2 at 18).

[20] Union Carbide asserts throughout its briefs and affidavits that evidence relevant to
the question of damages is located in India, as well. Certainly the victims themselves,
and, for the most part, their medical records, are found in or near Bhopal. However, as
plaintiffs argue, a "head count" of witnesses is not dispositive of a forum non
conveniens motion. (Memo in Opp. at 74-79). Not all of the victims would need to be
transported to the United States to describe their injuries. The Bhopal "scheme"
provides a mechanism for evaluating each individual's claim. Only representative
plaintiffs need testify as to damages. This Court would not countenance the impractical
and time-consuming process of calling each of the approximately 200,000 victims at a
trial in this country. Evidence on damages, as well as liability, is found in India, but not
to the overwhelming extent contended by defendant. Moreover, the Court is concerned
with the policy effect of allowing the number of foreign victims to affect directly the forum
non conveniens determination. If carried to the extreme, this "head count" doctrine
would mean that the more people hurt, the less likely a suit in this country would be.

[21] Indian federal and municipal officials also allegedly conducted on-site inspections
resulting in approvals for portions of the construction, including approvals for the flare
tower, MIC layout and storage, unit refrigeration and MIC/Phosgene structure. (Dutta
Aff. at 46-47; Exs. 102-104).

[22] One such regular inspection appears to have taken place approximately two weeks
before the MIC disaster. (Dutta Aff. at 56; Ex. 116).

[23] Only a small number of plaintiffs in the Bhopal litigation are United States citizens.
Of the 200,000 plaintiffs, approximately nine are American. They have filed the
complaints numbered 85 Civ. 0447, 85 Civ. 1096 and 85 Civ. 2098. This is of relative
insignificance on this motion to dismiss. "The federal courts have not felt constrained to
retain jurisdiction over predominantly foreign cases involving American plaintiffs where
an examination of the Gilbert factors demonstrated that the action is more appropriately
brought in a foreign forum.... [T]he presence of a handful of American plaintiffs does not
preclude such dismissal." Nai-Chao v. Boeing Co., 555 F. Supp. 9, 21 (N.D.Cal.
1982), aff'd sub. nom., Cheng v. Boeing Co., 708 F.2d 1406 (9th Cir.1983).

[24] In any event, plaintiffs' "deterrence" and "blackmail" arguments presuppose that
Union Carbide would be held more accountable by an American than by an Indian
tribunal. Certainly, there is a real possibility of a substantial Indian judgment against
defendant, which would serve an identical deterrent function, and prevent a rush of
multinationals to foreign locations.

[25] While the accident is more than a "local controversy," given the interests of the
Indian populace, it is certainly a national controversy which should be "decided at
home." Gilbert at 508-09. No doubt Indian citizens, many of whom barely are
acquainted with their American lawyers, will find the case more accessible if it is tried "in
their view" in India.

[26] Upon a cursory review of the individual complaints comprising this action, the Court
notes that suits were brought in California, Connecticut, the District of Columbia,
Florida, Illinois, Louisiana, Maryland, New Jersey, New York, Pennsylvania, Tennessee,
Texas and West Virginia, at a minimum.

G.R. No. 166920 February 19, 2007

PACIFIC CONSULTANTS INTERNATIONAL ASIA, INC. and JENS PETER

HENRICHSEN, Petitioners,
vs.
KLAUS K. SCHONFELD, Respondent.

DECISION

CALLEJO, SR., J.:

Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the
Resolution of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 029319-01,
which, in turn, affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-04787-00
dismissing the complaint of respondent Klaus K. Schonfeld.

The antecedent facts are as follows:

Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia,
Canada. He had been a consultant in the field of environmental engineering and water supply and
sanitation. Pacicon Philippines, Inc. (PPI) is a corporation duly established and incorporated in
accordance with the laws of the Philippines. The primary purpose of PPI was to engage in the
business of providing specialty and technical services both in and out of the Philippines.2 It is a
subsidiary of Pacific Consultants International of Japan (PCIJ). The president of PPI, Jens Peter
Henrichsen, who was also the director of PCIJ, was based in Tokyo, Japan. Henrichsen commuted
from Japan to Manila and vice versa, as well as in other countries where PCIJ had business.

In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines.
In October 1997, respondent was employed by PCIJ, through Henrichsen, as Sector Manager of PPI
in its Water and Sanitation Department. However, PCIJ assigned him as PPI sector manager in the
Philippines. His salary was to be paid partly by PPI and PCIJ.

On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada,

requesting him to accept the same and affix his conformity thereto. Respondent made some
revisions in the letter of employment and signed the contract.3 He then sent a copy to Henrichsen.
The letter of employment reads:

Mr. Klaus K. Schonfeld

II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7

January 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement under which you will be engaged by our Company on the terms and conditions defined
hereunder. In case of any discrepancies or contradictions between this Letter of Employment and
the General Conditions of Employment, this Letter of Employment will prevail.

You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon Philippines,
Inc. in Manila, hereinafter referred as Pacicon. Pacicon will provide you with a separate contract,
which will define that part of the present terms and conditions for which Pacicon is responsible. In
case of any discrepancies or contradictions between the present Letter of Employment and the
contract with Pacicon Philippines, Inc. or in the case that Pacicon should not live up to its
obligations, this Letter of Employment will prevail.

1. Project Country: The Philippines with possible short-term assignments in other countries.

2. Duty Station: Manila, the Philippines.

 3. Family Status: Married.

4. Position: Sector Manager, Water and Sanitation.

5. Commencement: 1st October 1997.

6. Remuneration: US$7,000.00 per month. The amount will be paid partly as a local salary
(US$2,100.00 per month) by Pacicon and partly as an offshore salary (US$4,900.00) by PCI
to bank accounts to be nominated by you.

A performance related component corresponding to 17.6% of the total annual remuneration,

subject to satisfactory performance against agreed tasks and targets, paid offshore.

7. Accommodation: The company will provide partly furnished accommodation to a rent

including association fees, taxes and VAT not exceeding the Pesos equivalent of
US$2,900.00 per month.

8. Transportation: Included for in the remuneration.

9. Leave Travels: You are entitled to two leave travels per year.

10. Shipment of Personal

Effects: The maximum allowance is US$4,000.00.

11. Mobilization

Travel: Mobilization travel will be from New Westminster, B.C., Canada.

This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.

Yours sincerely,

Pacific Consultants International

Jens Peter Henrichsen

Above terms and conditions accepted

Date: 2 March 1998

(Sgd.)
Klaus Schonfeld

as annotated and initialed4

Section 21 of the General Conditions of Employment appended to the letter of employment reads:

21 Arbitration
Any question of interpretation, understanding or fulfillment of the conditions of employment, as well
as any question arising between the Employee and the Company which is in consequence of or
connected with his employment with the Company and which can not be settled amicably, is to be
finally settled, binding to both parties through written submissions, by the Court of Arbitration in
London.5

Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was
accorded the status of a resident alien.

As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor
Code, PPI applied for an Alien Employment Permit (Permit) for respondent before the Department of
Labor and Employment (DOLE). It appended respondent‘s contract of employment to the
application.
1aw phi 1.net

On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It
reads:

Republic of the Philippines

Department of Labor & Employment
National Capital Region

ALIEN EMPLOYMENT PERMIT

ISSUED TO: SCHONFELD, KLAUS KURT

DATE OF BIRTH: January 11, 1942 NATIONALITY: Canadian

POSITION: VP – WATER & SANITATION

EMPLOYER: PACICON PHILIPPINES, INC.

ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City

PERMIT

ISSUED ON: February 26, 1999 SIGNATURE OF BEARER:

VALID UNTIL: January 7, 2000 (Sgd.)

APPROVED: BIENVENIDO S. LAGUESMA

By: MAXIMO B. ANITO

REGIONAL DIRECTOR

(Emphasis supplied)6

Respondent received his compensation from PPI for the following periods: February to June 1998,
November to December 1998, and January to August 1999. He was also reimbursed by PPI for the
expenses he incurred in connection with his work as sector manager. He reported for work in Manila
except for occasional assignments abroad, and received instructions from Henrichsen.7
On May 5, 1999, respondent received a letter from Henrichsen informing him that his employment
had been terminated effective August 4, 1999 for the reason that PCIJ and PPI had not been
successful in the water and sanitation sector in the Philippines.8 However, on July 24, 1999,
Henrichsen, by electronic mail,9 requested respondent to stay put in his job after August 5, 1999,
until such time that he would be able to report on certain projects and discuss all the opportunities he
had developed.10 Respondent continued his work with PPI until the end of business hours on
October 1, 1999.

Respondent filed with PPI several money claims, including unpaid salary, leave pay, air fare from
Manila to Canada, and cost of shipment of goods to Canada. PPI partially settled some of his claims
(US$5,635.99), but refused to pay the rest.

On December 5, 2000, respondent filed a Complaint11 for Illegal Dismissal against petitioners PPI
and Henrichsen with the Labor Arbiter. It was docketed as NLRC-NCR Case No. 30-12-04787-00.

In his Complaint, respondent alleged that he was illegally dismissed; PPI had not notified the DOLE
of its decision to close one of its departments, which resulted in his dismissal; and they failed to
notify him that his employment was terminated after August 4, 1999. Respondent also claimed for
separation pay and other unpaid benefits. He alleged that the company acted in bad faith and
disregarded his rights. He prayed for the following reliefs:

1. Judgment be rendered in his favor ordering the respondents to reinstate complainant to

his former position without loss of seniority and other privileges and benefits, and to pay his
full backwages from the time compensation was with held (sic) from him up to the time of his
actual reinstatement. In the alternative, if reinstatement is no longer feasible, respondents
must pay the complainant full backwages, and separation pay equivalent to one month pay
for every year of service, or in the amount of US$16,400.00 as separation pay;

2. Judgment be rendered ordering the respondents to pay the outstanding monetary

obligation to complainant in the amount of US$10,131.76 representing the balance of unpaid
salaries, leave pay, cost of his air travel and shipment of goods from Manila to Canada; and

3. Judgment be rendered ordering the respondent company to pay the complainant damages
in the amount of no less than US $10,000.00 and to pay 10% of the total monetary award as
attorney‘s fees, and costs.

Other reliefs just and equitable under the premises are, likewise, prayed for.12 1aw phi 1.net

Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter
had no jurisdiction over the subject matter; and (2) venue was improperly laid. It averred that
respondent was a Canadian citizen, a transient expatriate who had left the Philippines. He was
employed and dismissed by PCIJ, a foreign corporation with principal office in Tokyo, Japan. Since
respondent‘s cause of action was based on his letter of employment executed in Tokyo, Japan dated
January 7, 1998, under the principle of lex loci contractus, the complaint should have been filed in
Tokyo, Japan. Petitioners claimed that respondent did not offer any justification for filing his
complaint against PPI before the NLRC in the Philippines. Moreover, under Section 12 of the
General Conditions of Employment appended to the letter of employment dated January 7, 1998,
complainant and PCIJ had agreed that any employment-related dispute should be brought before
the London Court of Arbitration. Since even the Supreme Court had already ruled that such an
agreement on venue is valid, Philippine courts have no jurisdiction.13
Respondent opposed the Motion, contending that he was employed by PPI to work in the Philippines
under contract separate from his January 7, 1998 contract of employment with PCIJ. He insisted that
his employer was PPI, a Philippine-registered corporation; it is inconsequential that PPI is a wholly-
owned subsidiary of PCIJ because the two corporations have separate and distinct personalities;
and he received orders and instructions from Henrichsen who was the president of PPI. He further
insisted that the principles of forum non conveniens and lex loci contractus do not apply, and that
although he is a Canadian citizen, Philippine Labor Laws apply in this case.

Respondent adduced in evidence the following contract of employment dated January 9, 1998 which
he had entered into with Henrichsen:

Mr. Klaus K. Schonfeld

II-365 Ginger Drive

New Westminster, B.C.
Canada V3L 5L5

Manila 9 January, 1998

Dear Mr. Schonfeld,

Letter of Employment

This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement, under which you will be engaged by Pacicon Philippines, Inc. on the terms and
conditions defined hereunder.

1. Project Country: The Philippines with possible assignments in other countries.

2. Duty Station: Manila, the Philippines.

3. Family Status: Married.

4. Position: Sector Manager – Water and Sanitation Sector.

5. Commencement: 1 January, 1998.

6. Remuneration: US$3,100.00 per month payable to a bank account to be nominated by

you.

7. Accommodation: The company will provide partly furnished accommodation to a rent

including association fees, taxes and VAT not exceeding the Pesos equivalent of
US$2300.00 per month.

8. Transportation: Included for in the remuneration.

9. Shipment of Personal The maximum allowance is US$2500.00 in Effects: connection with

initial shipment of personal effects from Canada.

10. Mobilization Travel: Mobilization travel will be from New Westminster, B.C., Canada.
This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.

Yours sincerely,

Pacicon Philippines, Inc.

Jens Peter Henrichsen
President14

According to respondent, the material allegations of the complaint, not petitioners‘ defenses,
determine which quasi-judicial body has jurisdiction. Section 21 of the Arbitration Clause in the
General Conditions of Employment does not provide for an exclusive venue where the complaint
against PPI for violation of the Philippine Labor Laws may be filed. Respondent pointed out that PPI
had adopted two inconsistent positions: it was first alleged that he should have filed his complaint in
Tokyo, Japan; and it later insisted that the complaint should have been filed in the London Court of
Arbitration.15

In their reply, petitioners claimed that respondent‘s employer was PCIJ, which had exercised
supervision and control over him, and not PPI. Respondent was dismissed by PPI via a letter of
Henrichsen under the letterhead of PCIJ in Japan.16 The letter of employment dated January 9, 1998
which respondent relies upon did not bear his (respondent‘s) signature nor that of Henrichsen.

On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners‘ Motion to Dismiss.
The dispositive portion reads:

WHEREFORE, finding merit in respondents‘ Motion to Dismiss, the same is hereby granted. The
instant complaint filed by the complainant is dismissed for lack of merit.

SO ORDERED.17

The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between
respondent and PCIJ was controlling; the Philippines was only the "duty station" where Schonfeld
was required to work under the General Conditions of Employment. PCIJ remained respondent‘s
employer despite his having been sent to the Philippines. Since the parties had agreed that any
differences regarding employer-employee relationship should be submitted to the jurisdiction of the
court of arbitration in London, this agreement is controlling.

On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latter‘s
decision in toto.18

Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the
following arguments:

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT AFFIRMED THE LABOR ARBITER‘S DECISION CONSIDERING THAT:

A. PETITIONER‘S TRUE EMPLOYER IS NOT PACIFIC CONSULTANTS INTERNATIONAL OF

JAPAN BUT RESPONDENT COMPANY, AND THEREFORE, THE LABOR ARBITER HAS
JURISDICTION OVER THE INSTANT CASE; AND
B. THE PROPER VENUE FOR THE PRESENT COMPLAINT IS THE ARBITRATION BRANCH OF
THE NLRC AND NOT THE COURT OF ARBITRATION IN LONDON.

II

WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION
WHEN IT AFFIRMED THE DISMISSAL OF THE COMPLAINT CONSIDERING THAT
PETITIONER‘S TERMINATION FROM EMPLOYMENT IS ILLEGAL:

A. THE CLOSURE OF RESPONDENT COMPANY‘S WATER AND SANITATION SECTOR

WAS NOT BONA FIDE.

B. ASSUMING ARGUENDO THAT THE CLOSURE OF RESPONDENT COMPANY‘S

WATER AND SANITATION SECTOR WAS JUSTIFIABLE, PETITIONER‘S DISMISSAL
WAS INEFFECTUAL AS THE DEPARTMENT OF LABOR AND EMPLOYMENT (DOLE)
AND PETITIONER WAS NOT NOTIFIED THIRTY (30) DAYS BEFORE THE ALLEGED
CLOSURE.19

Respondent averred that the absence or existence of a written contract of employment is not
decisive of whether he is an employee of PPI. He maintained that PPI, through its president
Henrichsen, directed his work/duties as Sector Manager of PPI; proof of this was his letter-proposal
to the Development Bank of the Philippines for PPI to provide consultancy services for the
Construction Supervision of the Water Supply and Sanitation component of the World Bank-Assisted
LGU Urban Water and Sanitation Project.20 He emphasized that as gleaned from Alien Employment
Permit (AEP) No. M-029908-5017 issued to him by DOLE on February 26, 1999, he is an employee
of PPI. It was PPI president Henrichsen who terminated his employment; PPI also paid his salary
and reimbursed his expenses related to transactions abroad. That PPI is a wholly-owned subsidiary
of PCIJ is of no moment because the two corporations have separate and distinct personalities.

The CA found the petition meritorious. Applying the four-fold test21 of determining an employer-
employee relationship, the CA declared that respondent was an employee of PPI. On the issue of
venue, the appellate court declared that, even under the January 7, 1998 contract of employment,
the parties were not precluded from bringing a case related thereto in other venues. While there
was, indeed, an agreement that issues between the parties were to be resolved in the London Court
of Arbitration, the venue is not exclusive, since there is no stipulation that the complaint cannot be
filed in any other forum other than in the Philippines.

On November 25, 2004, the CA rendered its decision granting the petition, the decretal portion of
which reads:

WHEREFORE, the petition is GRANTED in that the assailed Resolutions of the NLRC are hereby
REVERSED and SET ASIDE. Let this case be REMANDED to the Labor Arbiter a quo for
disposition of the case on the merits.

SO ORDERED.22

A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the
appellate court denied for lack of merit.23

In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues:
 I

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT

RELATIONSHIP EXISTED BETWEEN PETITIONERS AND RESPONDENT DESPITE THE
UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A
FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND WAS
MERELY "SECONDED" TO PETITIONERS SINCE HIS WORK ASSIGNMENT WAS IN MANILA.

II

THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER A QUO
HAS JURISDICTION OVER RESPONDENT‘S CLAIM DESPITE THE UNDISPUTED FACT THAT
RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN CORPORATION,
EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND HAD AGREED THAT ANY DISPUTE
BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE COURT OF ARBITRATION IN
LONDON."24

Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners aver
that the findings of the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA. They
maintain that it is not within the province of the appellate court in a petition for certiorari to review the
facts and evidence on record since there was no conflict in the factual findings and conclusions of
the lower tribunals. Petitioners assert that such findings and conclusions, having been made by
agencies with expertise on the subject matter, should be deemed binding and conclusive. They
contend that it was the PCIJ which employed respondent as an employee; it merely seconded him to
petitioner PPI in the Philippines, and assigned him to work in Manila as Sector Manager. Petitioner
PPI, being a wholly-owned subsidiary of PCIJ, was never the employer of respondent.

Petitioners assert that the January 9, 1998 letter of employment which respondent presented to
prove his employment with petitioner PPI is of doubtful authenticity since it was unsigned by the
purported parties. They insist that PCIJ paid respondent‘s salaries and only coursed the same
through petitioner PPI. PPI, being its subsidiary, had supervision and control over respondent‘s
work, and had the responsibilities of monitoring the "daily administration" of respondent. Respondent
cannot rely on the pay slips, expenses claim forms, and reimbursement memoranda to prove that he
was an employee of petitioner PPI because these documents are of doubtful authenticity.

Petitioners further contend that, although Henrichsen was both a director of PCIJ and president of
PPI, it was he who signed the termination letter of respondent upon instructions of PCIJ. This is
buttressed by the fact that PCIJ‘s letterhead was used to inform him that his employment was
terminated. Petitioners further assert that all work instructions came from PCIJ and that petitioner
PPI only served as a "conduit." Respondent‘s Alien Employment Permit stating that petitioner PPI
was his employer is but a necessary consequence of his being "seconded" thereto. It is not sufficient
proof that petitioner PPI is respondent‘s employer. The entry was only made to comply with the
DOLE requirements.

There being no evidence that petitioner PPI is the employer of respondent, the Labor Arbiter has no
jurisdiction over respondent‘s complaint.

Petitioners aver that since respondent is a Canadian citizen, the CA erred in ignoring their claim that
the principlesof forum non conveniens and lex loci contractus are applicable. They also point out that
the principal office, officers and staff of PCIJ are stationed in Tokyo, Japan; and the contract of
employment of respondent was executed in Tokyo, Japan.
Moreover, under Section 21 of the General Conditions for Employment incorporated in respondent‘s
January 7, 1998 letter of employment, the dispute between respondent and PCIJ should be settled
by the court of arbitration of London. Petitioners claim that the words used therein are sufficient to
show the exclusive and restrictive nature of the stipulation on venue.

Petitioners insist that the U.S. Labor-Management Act applies only to U.S. workers and employers,
while the Labor Code of the Philippines applies only to Filipino employers and Philippine-based
employers and their employees, not to PCIJ. In fine, the jurisdictions of the NLRC and Labor Arbiter
do not extend to foreign workers who executed employment agreements with foreign employers
abroad, although "seconded" to the Philippines.25

In his Comment,26 respondent maintains that petitioners raised factual issues in their petition which
are proscribed under Section 1, Rule 45 of the Rules of Court. The finding of the CA that he had
been an employee of petitioner PPI and not of PCIJ is buttressed by his documentary evidence
which both the Labor Arbiter and the NLRC ignored; they erroneously opted to dismiss his complaint
on the basis of the letter of employment and Section 21 of the General Conditions of Employment. In
contrast, the CA took into account the evidence on record and applied case law correctly.

The petition is denied for lack of merit.

It must be stressed that in resolving a petition for certiorari, the CA is not proscribed from reviewing
the evidence on record. Under Section 9 of Batas Pambansa Blg. 129, as amended by R.A. No.
7902, the CA is empowered to pass upon the evidence, if and when necessary, to resolve factual
issues.27 If it appears that the Labor Arbiter and the NLRC misappreciated the evidence to such an
extent as to compel a contrary conclusion if such evidence had been properly appreciated, the
factual findings of such tribunals cannot be given great respect and finality.28

Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which respondent
appended to his pleadings showing that he was an employee of petitioner PPI; they merely focused
on the January 7, 1998 letter of employment and Section 21 of the General Conditions of
Employment.

Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said
application, PPI averred that respondent is its employee. To show that this was the case, PPI
appended a copy of respondent‘s employment contract. The DOLE then granted the application of
PPI and issued the permit.

It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the
requirements for the issuance of an employment permit is the employment contract. Section 5, Rule
XIV (Employment of Aliens) of the Omnibus Rules provides:

SECTION 1. Coverage. – This rule shall apply to all aliens employed or seeking employment in the
Philippines and the present or prospective employers.

SECTION 2. Submission of list. – All employers employing foreign nationals, whether resident or
non-resident, shall submit a list of nationals to the Bureau indicating their names, citizenship, foreign
and local address, nature of employment and status of stay in the Philippines.

SECTION 3. Registration of resident aliens. – All employed resident aliens shall register with the
Bureau under such guidelines as may be issued by it.
SECTION 4. Employment permit required for entry. – No alien seeking employment, whether as a
resident or non-resident, may enter the Philippines without first securing an employment permit from
the Ministry. If an alien enters the country under a non-working visa and wishes to be employed
thereafter, he may only be allowed to be employed upon presentation of a duly approved
employment permit.

SECTION 5. Requirements for employment permit applicants. – The application for an employment
permit shall be accompanied by the following:

(a) Curriculum vitae duly signed by the applicant indicating his educational background, his
work experience and other data showing that he possesses technical skills in his trade or
profession.

(b) Contract of employment between the employer and the principal which shall embody the
following, among others:

1. That the non-resident alien worker shall comply with all applicable laws and rules
and regulations of the Philippines;

2. That the non-resident alien worker and the employer shall bind themselves to train
at least two (2) Filipino understudies for a period to be determined by the Minister;
and

3. That he shall not engage in any gainful employment other than that for which he
was issued a permit.

(c) A designation by the employer of at least two (2) understudies for every alien worker.
Such understudies must be the most ranking regular employees in the section or department
for which the expatriates are being hired to insure the actual transfer of technology.

Under Section 6 of the Rule, the DOLE may issue an alien employment permit based only on the
following:

(a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;

(b) Report of the Bureau Director as to the availability or non-availability of any person in the
Philippines who is competent and willing to do the job for which the services of the applicant
are desired;

(c) His assessment as to whether or not the employment of the applicant will redound to the
national interest;

(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation;

(e) The recommendation of the Board of Investments or other appropriate government

agencies if the applicant will be employed in preferred areas of investments or in accordance
with the imperative of economic development.

Thus, as claimed by respondent, he had an employment contract with petitioner PPI; otherwise,
petitioner PPI would not have filed an application for a Permit with the DOLE. Petitioners are thus
estopped from alleging that the PCIJ, not petitioner PPI, had been the employer of respondent all
along.

We agree with the conclusion of the CA that there was an employer-employee relationship between
petitioner PPI and respondent using the four-fold test. Jurisprudence is firmly settled that whenever
the existence of an employment relationship is in dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the
power of dismissal; and (d) the employer‘s power to control the employee‘s conduct. It is the so-
called "control test" which constitutes the most important index of the existence of the employer-
employee relationship–that is, whether the employer controls or has reserved the right to control the
employee not only as to the result of the work to be done but also as to the means and methods by
which the same is to be accomplished. Stated otherwise, an employer-employee relationship exists
where the person for whom the services are performed reserves the right to control not only the end
to be achieved but also the means to be used in reaching such end.29 We quote with approval the
following ruling of the CA:

[T]here is, indeed, substantial evidence on record which would erase any doubt that the respondent
company is the true employer of petitioner. In the case at bar, the power to control and supervise
petitioner‘s work performance devolved upon the respondent company. Likewise, the power to
terminate the employment relationship was exercised by the President of the respondent company.
It is not the letterhead used by the company in the termination letter which controls, but the person
who exercised the power to terminate the employee. It is also inconsequential if the second letter of
employment executed in the Philippines was not signed by the petitioner. An employer-employee
relationship may indeed exist even in the absence of a written contract, so long as the four elements
mentioned in the Mafinco case are all present.30

The settled rule on stipulations regarding venue, as held by this Court in the vintage case of
Philippine Banking Corporation v. Tensuan,31 is that while they are considered valid and enforceable,
venue stipulations in a contract do not, as a rule, supersede the general rule set forth in Rule 4 of the
Revised Rules of Court in the absence of qualifying or restrictive words. They should be considered
merely as an agreement or additional forum, not as limiting venue to the specified place. They are
not exclusive but, rather permissive. If the intention of the parties were to restrict venue, there must
be accompanying language clearly and categorically expressing their purpose and design that
actions between them be litigated only at the place named by them.32

In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other
court save —," "particularly," "nowhere else but/except —," or words of equal import were stated in
the contract.33 It cannot be said that the court of arbitration in London is an exclusive venue to bring
forth any complaint arising out of the employment contract.

Petitioners contend that respondent should have filed his Complaint in his place of permanent
residence, or where the PCIJ holds its principal office, at the place where the contract of
employment was signed, in London as stated in their contract. By enumerating possible venues
where respondent could have filed his complaint, however, petitioners themselves admitted that the
provision on venue in the employment contract is indeed merely permissive.

Petitioners‘ insistence on the application of the principle of forum non conveniens must be rejected.
The bare fact that respondent is a Canadian citizen and was a repatriate does not warrant the
application of the principle for the following reasons:

First. The Labor Code of the Philippines does not include forum non conveniens as a ground
for the dismissal of the complaint.34
 Second. The propriety of dismissing a case based on this principle requires a factual
determination; hence, it is properly considered as defense.35

Third. In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of

Appeals,36 this Court held that:

x x x [a] Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that
the following requisites are met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as
to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its
decision. x x x

Admittedly, all the foregoing requisites are present in this case.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No.
76563 is AFFIRMED. This case is REMANDED to the Labor Arbiter for disposition of the case on the
merits. Cost against petitioners.

SO ORDERED.

HEINE
v.
NEW YORK LIFE INS. CO.

No. 10465.

District Court, D. Oregon.

December 1, 1930.

C. T. Haas and E. B. Seabrook, both of Portland, Or., for plaintiff.

Huntington, Wilson & Huntington and Clark & Clark, all of Portland, Or., for defendant.

BEAN, District Judge.

This is one of a series of cases pending in this court against the New York Life
Insurance Company and the Guardian Insurance Company, each of which is a New
York corporation, to recover on some two hundred and forty life insurance policies made
and issued by the defendants in Germany, in favor of German citizens and subjects,
and payable in German marks. The policies of the New York Life Insurance Company
were issued prior to August 1, 1914, and those of the Guardian prior to May 1, 1918. As
a condition to their right to do business in Germany, the insurance companies were
required to and did submit to the supervision and control of the German insurance
officials, to invest the reserves arising from German policies in German securities, and
to establish, and they do now maintain, an office in that country with a resident
representative or agent upon whom service of process can be made.
The actions now pending are brought and prosecuted in the name of, or as assignee of
the insured by, certain parties in the United States and Germany, under an irrevocable
power of attorney, by which they are authorized and empowered to sue for, collect,
receive, and receipt for all sums due or owing under the policies, or compromise the
same in consideration of an assignment and transfer to them of the undivided 25 per
cent. interest in the policies and all rights accruing thereunder.

None of the parties to the litigation are residents or inhabitants of this district. The
plaintiffs reside in, and are citizens of, the republic of Germany. The defendants are
corporations organized and existing under the laws of New York, with their principal
offices in that state, with statutory agents in Oregon, upon whom service can be made.
None of the causes of action arose here, nor do any of the material witnesses reside in
the district, nor are any of the records of the defendant companies pertaining to the
policies in suit in the district, but such records are either at the home office in New York
or at their offices in Germany. The courts of Germany and New York are open and
functioning and competent to take jurisdiction of the controversies, and service can be
made upon the defendants in either of such jurisdictions. To require the defendants to
defend the actions in this district would impose upon them great and unnecessary
inconvenience and expense, and probably compel them to produce here (three
thousand miles from their home office) numerous records, books, and papers, all of
which are in daily use by it in taking care of current business.

In addition, it would no doubt consume months of the time of this court to try and
dispose of these cases, thus necessarily disarranging the calendar, resulting in delay,
inconvenience, and expense to other litigants who are entitled to invoke its jurisdiction.

Under these circumstances, the defendants, while conceding that the court has
jurisdiction of the person and subject-matter, urges that it should refuse, in its discretion,
to exercise such jurisdiction.

I unhesitatingly concur in this view, for, as said by Mr. Justice Holmes in Cuba Railroad
Co. v. Crosby, 222 U.S. 473, 32 S. Ct. 132, 133, 56 L. Ed. 274, 38 L. R. A. (N. S.) 40: "It
should be remembered that parties do not enter into civil relations in foreign jurisdictions
in reliance upon our courts. They could not complain if our courts refused to meddle
with their affairs, and remitted them to the place that established and would enforce
their rights. * * * The only just ground for complaint would be if their rights and liabilities,
when enforced by our courts, should be measured by a different rule from that under
which the parties dealt."

*427 It is apparent that the plaintiffs are seeking by these actions to impose on the
defendants a liability under a different rule than "that under which the parties dealt."

The courts of Germany have ruled that any person seeking to recover on a civil contract
made in Germany prior to August, 1924, and payable in marks, can only recover on the
basis provided in the monetary law of 1924. Manifestly the plaintiffs are not proceeding
on any such theory.
It is argued by the plaintiffs that, because the court has jurisdiction of the subject-matter
and the parties, it has no discretion, but should proceed with the case, regardless of
where the cause of action arose, or the law by which it is controlled, or the residence or
convenience of the parties and witnesses, or the difficulty the court would encounter in
attempting to interpret and enforce a foreign contract, or the interference with the other
business of the court. But that is a matter resting in its discretion. It may retain
jurisdiction, or it may, in the exercise of a sound discretion, decline to do so, as the
circumstances suggest. The courts have repeatedly refused, in their discretion, to
entertain jurisdiction of causes of action arising in a foreign jurisdiction, where both
parties are nonresidents of the forum. Gregonis v. Philadelphia & R. Coal & Iron Co.,
235 N.Y. 152, 139 N.E. 223, 32 A. L. R. 1, and note; Pietraroia v. New Jersey & Hudson
River Ry. & Ferry Co., 197 N.Y. 434, 91 N.E. 120; Gregonis v. P. & R. Coal & Iron Co.,
235 N.Y. 152, 139 N.E. 223, 32 A. L. R. 1; Stewart v. Litchenberg, 148 La. 195, 86 So.
734; Smith v. Mutual Life Insurance Co., 14 Allen (96 Mass.) 336-343; National
Telephone Mfg. Co. v. Du Bois, 165 Mass. 117, 42 N.E. 510, 30 L. R. A. 628, 52 Am.
St. Rep. 503; Collard v. Beach, 81 App. Div. 582, 81 N.Y.S. 619; Great Western
Railway Co. v. Miller, 19 Mich. 305; Disconto Gesellschat v. Umbreit, 127 Wis. 651, 106
N.W. 821, 15 L. R. A. (N. S.) 1045, 115 Am. St. Rep. 1063.

As said by Mr. Justice Bradley in The Belgenland, 114 U.S. 355, 5 S. Ct. 860, 864, 29 L.
Ed. 152: "Circumstances often exist which render it inexpedient for the court to take
jurisdiction of controversies between foreigners in cases not arising in the country of the
forum; as, where they are governed by the laws of the country to which the parties
belong, and there is no difficulty in a resort to its courts; or where they have agreed to
resort to no other tribunals * * * not on the ground that it has not jurisdiction, but that,
from motives of convenience, or international comity, it will use its discretion whether to
exercise jurisdiction or not."

See, also, Charter Shipping Co. v. Bowring, 281 U.S. 515, 50 S. Ct. 400, 74 L. Ed.
1008.

These, in my judgment, are cases of that kind. They are actions brought on causes of
action arising in Germany. The contract of insurance was made and to be paid there
and in German currency. It is to be construed and given effect according to the laws of
the place where it was made. 22 Am. & Eng. Ency. of Law (2d Ed.) 1350. The courts of
this country are established and maintained primarily to determine controversies
between its own citizens and those having business there, and manifestly the court may
protect itself against a flood of litigation over contracts made and to be performed in a
foreign country, where the parties and witnesses are nonresidents of the forum, and no
reason exists why the liability, if any, cannot be enforced in the courts of the country
where the cause of action arose, or in the state where the defendant was organized and
has its principal offices. True, the courts of New York have declined to exercise
jurisdiction over actions brought on insurance policies similar to those in suit. Higgins v.
N. Y. Ins. Co., 220 App. Div. 760, 222 N.Y.S. 819, and Von Nessen-Stone v. N. Y. Life
Ins. Co.[1] But that affords no reason why this court should do so. It is to me unthinkable
that residents and citizens of Germany may import bodily into this court numerous
actions against a nonresident defendant, on contracts made and payable in Germany,
and insist as a matter of right that, because it has obtained jurisdiction of the defendant
by service of its statutory agent, the taxpayers, citizens, and residents of the district
having business in the court should stand aside and wait the conclusion of the case,
where, as here, the courts of Germany and of the home state of the defendant are open
and functioning.

Judge Tucker, in the state court of Multnomah county, in an able and well-considered
opinion in a case brought on one of the German policies (Kahn v. New York), reached
the same conclusion.

Motion allowed.

III. CHOICE OF LAW AND CHARACTERIZATION

A. CONSENT BY FORUM

1. Express Consent
2. Implied Consent

B. POINTS OF CONTACT

C.

1. Nationality; domicile; residence; place of sojourn

2. Place of establishment/ incorporation of juridical person; flag of a ship
3. Situs of a thing
4. Place where act was done
5. Place where act is intended to take effect
6. Intention of contracting parties
7. Place where proceedings are instituted

[G.R. No. L-5731. June 22, 1954.]

HERBERT BROWNELL, JR., as Attorney General of the United States, Petitioner-

Appellee, v. SUN LIFE ASSURANCE COMPANY OF CANADA, Respondent-
Appellant.

Rowland F. Kirks, Stanley Gilbert, Juan T. Santos and Lino M. Patajo

for Appellee.

Perkins, Ponce Enrile & Contreras for Appellant.

SYLLABUS
1. INTERNATIONAL LAW EXTRATERRITORIAL EFFECT OF FOREIGN LA; NECESSITY OF
CONSENT OF COUNTRY IN WHICH IT IS SOUGHT TO BE ENFORCED. — A foreign law
may have extraterritorial effect in a country other than the country of origin, provided
the former, in which it is sought to be made operative, gives its consent thereto.

2. ID.; ID.; ID.; CONSENT NEED NOT BE EXPRESS. — The consent of a State to the
operation of a foreign law within its territory does not need to be express; it is enough
that said consent be implied from its conduct or from that of its authorized officers.

3. ID.; ID.; ID.; ID.; PHILIPPINE PROPERTY ACT OF 1946; BASIS OF ITS APPLICATION
IN THE PHILIPPINES. — The operation of the Philippine Property Act of 1946 in the
Philippines is not derived from the unilateral act of the United States Congress, which
made it expressly applicable, or from the saving provision contained in the proclamation
of independence. It is territorial effect. The application of said law in the Philippines is
based concurrently on said act (Philippine Property Act of 1946) and on the tacit
consent thereto and the conduct of the Philippine Government itself in receiving the
benefits of its provisions.

DECISION

LABRADOR, J.:

This is a petition instituted in the Court of First Instance of Manila under the provisions
of the Philippine Property Act of the United States against the Sun Life Assurance
Company of Canada, to compel the latter to comply with the demand of the former to
pay him the sum of P310.10, which represents one-half of the proceeds of an
endowment policy (No. 757199) which matured on August 20, 1946, and which is
payable to one Naogiro Aihara, a Japanese national. Under the policy Aihara and his
wife, Filomena Gayapan, were insured jointly for the sum of P1,000, and upon its
maturity the proceeds thereof were payable to said insured, share and share alike, or
P310.10 each. The defenses set up in the court of origin are: (1) that the immunities
provided in section 5(b) (2) of the Trading With the Enemy Act of the United States are
of doubtful application in the Philippines, and have never been adopted by any law of
the Philippines as applicable here or obligatory on the local courts; (2) that the
defendant is a trustee of the fund and is under a legal obligation to see to it that it is
paid to the person or persons entitled thereto, and unless the petitioner executes a
suitable discharge and an adequate guaranty to indemnify and keep it free and
harmless from any further liability under the policy, it may not be compelled to make
the payment demanded. The Court of First Instance of Manila having approved and
granted the petition, the respondent has appealed to this Court, contending that the
Court of origin erred in holding that the Trading With the Enemy Act of the United
States is binding upon the inhabitants of this country, notwithstanding the attainment
of complete independence on July 4, 1946, and in ordering the payment prayed for.

On July 3, 1946, the Congress of the United States passed Public Law 485-79th
Congress, known as the Philippine Property Act of 1946. Section 3 thereof provides that
"The Trading with the Enemy Act of October 6, 1917 (40 Stat. 411), as amended, shall
continue in force in the Philippines after July 4, 1946, . . ." To implement the provisions
of the act, the President of the United States on July 3, 1946, promulgated Executive
Order No. 9747, "continuing the functions of the Alien Property Custodian and the
Department of the Treasury in the Philippines." Prior to and preparatory to the approval
of said Philippine Property Act of 1946, an agreement was entered into between
President Manuel Roxas of the Commonwealth and U. S. Commissioner Paul V. McNutt
whereby title to enemy agricultural lands and other properties was to be conveyed by
the United States to the Philippines in order to help the rehabilitation of the latter, but
that in order to avoid complex legal problems in relation to said enemy properties, the
Alien Property Custodian of the United States was to continue operations in the
Philippines even after the latter’s independence, that he may settle all claims that may
exist or arise against the above-mentioned enemy properties, in accordance with the
Trading With the Enemy Act of the United States. (Report of the Committee on Insular
Affairs No. 2296 and Senate Report No. 1578 from the Committee on Territories and
Insular Affairs, to accompany S. 2345, accompanying H. R. 6801, 79th Congress, 2nd
Session.) This purpose of conveying enemy properties to the Philippines after all claims
against them shall have been settled is expressly embodied in the Philippine Property
Act of 1946.

SEC. 3. The Trading With the Enemy Act of October 6, 1917 (40 Stat. 411), as
amended, shall continue in force in the Philippines after July 4, 1946, and all powers
and authority conferred upon the President of the United States or the Alien Property
Custodian by the terms of the said Trading With the Enemy Act, as amended, with
respect to the Philippines, shall continue thereafter to be exercised by the President of
the United States, or such officer or agency as he may designate: Provided, That all
property vested in or transferred to the President of the United States, the Alien
Property Custodian, or any each officer or agency as the President of the United States
may designate under the Trading With the Enemy Act, as amended, which was located
in the Philippine at the time of each vesting, or the proceeds thereof, and which shall
remain after the satisfaction of any claim payable under the Trading With the Enemy
Act, as amended, and after the payment of such costs and expenses of administration
as may by law be charged against such property or proceeds, shall be transferred by
the President of the United States to the Republic of the Philippines: Provided further,
That such property, or proceeds thereof, may be transferred by the President of the
United States to the Republic of the Philippines upon indemnification acceptable to the
President of the United States by the Republic of the Philippines for such claims, costs,
and expenses of administration as may by law be charged against such property or
proceeds thereof before final adjudication of such claims, costs and expenses of
administration. Provided further, That the courts of first instance of the Republic of the
Philippines are hereby given jurisdiction to make and enter all such rules as to notice or
otherwise, and all such orders and decrees and to issue such process as may be
necessary and proper in the premises to enforce any orders, rules, and regulations
issued by the President of the United States, the Alien Property Custodian, or such
officer or agency designated by the President of the United States pursuant to the
Trading With the Enemy Act, as amended, with such right of appeal therefrom as may
be provided by law: And provided further, That any suit authorized under the Trading
With the Enemy Act, as amended, with respect to property vested in or transferred to
the President of the United States, the Alien Property Custodian, or any officer or
agency designated by the President of the United States hereunder, which at the time
of such vesting or transfer was located with the Philippines, shall after July 4, 1946, be
brought, in the appropriate court of first instance of the Republic of the Philippines,
against the officer or agency hereunder designated by the President of the United
States with right of appeal therefrom as may be provided by law. In any litigation
authorized under this section, the officer or administrative head of the agency
designated hereunder may appear personally, or through attorneys appointed by him,
without regard to the requirements of law other than this section.

And when the proclamation of the independence of the Philippines by President Truman
was made, said independence was granted "in accordance with and subject to the
reservations provided in the applicable statutes of the United States." The enforcement
of the Trading With the Enemy Act of the United States was contemplated to be made
applicable after independence, within the meaning of the reservations.

On the part of the Philippines, conformity to the enactment of the Philippine Property
Act of 1946 of the United States was announced by President Manuel Roxas in a joint
statement signed by him and by Commissioner McNutt. Ambassador Romulo also
formally expressed the conformity of the Philippine Government to the approval of said
act to the American Senate prior to its approval. And after the grant of independence,
the Congress of the Philippines approved Republic Act No. 8, entitled.

AN ACT TO AUTHORIZE THE PRESIDENT OF THE PHILIPPINES TO ENTER INTO SUCH

CONTRACT OR UNDERTAKINGS AS MAY BE NECESSARY TO EFFECTUATE THE
TRANSFER TO THE REPUBLIC OF THE PHILIPPINES UNDER THE PHILIPPINE PROPERTY
ACT OF NINETEEN HUNDRED AND FORTY-SIX OF ANY PROPERTY OR PROPERTY RIGHTS
OR THE PROCEEDS THEREOF AUTHORIZED TO BE TRANSFERRED UNDER SAID ACT;
PROVIDING FOR THE ADMINISTRATION AND DISPOSITION OF SUCH PROPERTIES
ONCE RECEIVED; AND APPROPRIATING THE NECESSARY FUND THEREFOR.

The Congress of the Philippines also approved Republic Act No. 7, which established a
Foreign Funds Control Office. After the approval of the Philippine Property Act of 1946
of the United States, the Philippine Government also formally expressed, through the
Secretary of Foreign Affairs, conformity thereto. (See letters of Secretary dated August
22, 1946, and June 3, 1947.) The Congress of the Philippines has also approved
Republic Act No. 477, which provides for the administration and disposition of
properties which have been or may hereafter be transferred to the Republic of the
Philippines in accordance with the Philippine Property Act of 1946 of the United States.

It is evident, therefore, that the consent of the Philippine Government to the application
of the Philippine Property Act of 1946 to the Philippines after independence was given,
not only by the Executive Department of the Philippine Government, but also by the
Congress, which enacted the laws that would implement or carry out the benefits
accruing from the operation of the United States law. The respondent-appellant,
however, contends that the operation of the law after independence could not have
actually taken, or may not take place, because both Republic Act No. 8 and Republic Act
No. 477 do not contain any specific provision whereby the Philippine Property Act of
1946 or its provisions is made applicable to the Philippines. It is also contended that in
the absence of such express provision in any of the laws passed by the Philippine
Congress, said Philippine Property Act of 1946 does not form part of our laws and is not
binding upon the courts and inhabitants of the country.
There is no question that a foreign law may have extraterritorial effect in a country
other than the country of origin, provided the latter, in which it is sought to be made
operative, gives its consent thereto. This principle is supported by unquestioned
authority.

The jurisdiction of the nation within its territory is necessarily exclusive and absolute. It
is susceptible of no limitation not imposed by itself. Any restriction upon it, deriving
validity from an external source, would imply a diminution of its sovereignty to the
extent of the restriction, and an investment of that sovereignty to the same extent in
that power which would impose such restriction. All exceptions, therefore, to the full
and complete power of a nation within its own territories, must be traced up to the
consent of the nation itself. They can flow from no other legitimate source. This consent
may be either express or implied. (Philippine Political Law by Sinco, pp. 27-28, citing
Chief Justice Marshall’s statement in the Exchange, 7 Cranch 116)

In the course of his dissenting opinion in the case of S. S. Lotus, decided by the
Permanent Court of International Justice, John Bassett Moore said: chanrob1e s virtual 1aw li bra ry

1. It is an admitted principle of International Law that a nation possesses and exercises

within its own territory an absolute and exclusive jurisdiction, and that any exception to
this right must be traced to the consent of the nation, either express or implied
(Schooner Exchange v. McFadden [1812], 7 Cranch 116, 136). The benefit of this
principle equally enures to all independent and sovereign States, and is attended with a
corresponding responsibility for what takes place within the national territory. (Digest of
International Law, by Backworth, Vol. II, pp. 1-2)

The above principle is not denied by respondent-appellant. But its argument on this
appeal is that while the acts enacted by the Philippine Congress impliedly accept the
benefits of the operation of the United States law (Philippine Property Act of 1946), no
provision in the said acts of the Philippine Congress makes said United States law
expressly applicable. In answer to this contention, it must be stated that the consent of
a State to the operation of a foreign law within its territory does not need to be
express; it is enough that said consent be implied from its conduct or from that of its
authorized officers.

515. No rule of International Law exists which prescribe a necessary form of ratification.
— Ratification can, therefore, be given tacitly as well as expressly. Tacit ratification
takes place when a State begins the execution of a treaty without expressly ratifying it.
It is usual for ratification to take the form of a document duly signed by the Heads of
the States concerned and their Secretaries for Foreign Affairs. It is usual to draft as
many documents as there are parties to the Convention, and to exchange these
documents between the parties. Occasionally the whole of the treaty is recited verbatim
in the ratifying documents, but sometimes only the title, preamble, and date of the
treaty, and the names of the signatory representatives are cited. As ratification is only
the confirmation of an already existing treaty, the essential requirements in a ratifying
document is merely that it should refer clearly and unmistakably to the treaty to be
ratified. The citation of title, preamble, date, and names of the representatives is,
therefore quite sufficient to satisfy that requirement. (Oppenheim, pp. 818-
819; Emphasis ours.)
International Law does not require that agreements between nations must be concluded
in any particular form or style. The law of nations is much more interested in the
faithful performance of international obligations than in prescribing procedural
requirements. (Treaties and Executive Agreements, by Myres S. McDougal and Asher
Lands, Yale Law Journal, Vol. 54, pp. 318-319)

In the case at bar, our ratification of or concurrence to the agreement for the extension
of the Philippine Property Act of 1946 is clearly implied from the acts of the President of
the Philippines and of the Secretary of Foreign Affairs, as well as by the enactment of
Republic Acts Nos. 7, 8, and 477.

We must emphasize the fact that the operation of the Philippine Property Act of 1946 in
the Philippines is not derived from the unilateral act of the United States Congress,
which made it expressly applicable, or from the saving provision contained in the
proclamation of independence. It is well-settled in the United States that its laws have
no extraterritorial effect. The application of said law in the Philippines is based
concurrently on said act (Philippine Property Act of 1946) and on the tacit consent
thereto and the conduct of the Philippine Government itself in receiving the benefits of
its provisions.

It is also claimed by the respondent-appellant that the trial court erred in ordering it to
pay the petitioner the amount demanded, without the execution by the petitioner of a
deed of discharge and indemnity for its protection. The Trading With the Enemy Act of
the United States, the application of which was extended to the Philippines by mutual
agreement of the two Governments, contains an express provision to the effect that
delivery of property or interest therein made to or for the account of the United States
in pursuance of the provision of the law, shall be considered as a full acquittance and
discharge for purposes of the obligation of the person making the delivery or payment.
(Section 5(b) (2), Trading With the Enemy Act.) This express provision of the United
States law saves the respondent- appellant from any further liability for the amount
ordered to be paid to the petitioner, and fully protects it from any further claim with
respect thereto. The request of the respondent - appellant that a security be granted it
for the payment to be made under the law is, therefore, unnecessary, because the
judgment rendered in this case is sufficient to prove such acquittance and discharge.

The decision appealed from should be as it is hereby affirmed, with costs against
the Respondent-Appellant.

G.R. No. L-104776 December 5, 1994

BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest of

1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in-fact, Atty. GERARDO A. DEL
MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR, NATIONAL
LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA
INTERNATIONAL BUILDERS CORPORATION, respondents.

G.R. Nos. 104911-14 December 5, 1994

BIENVENIDO M. CADALIN, ET AL., petitioners,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL, INC.
and/or ASIA INTERNATIONAL BUILDERS CORPORATION, respondents.

G.R. Nos. 105029-32 December 5, 1994

ASIA INTERNATIONAL BUILDER CORPORATION and BROWN & ROOT INTERNATIONAL,

INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M. CADALIN, ROLANDO M.
AMUL, DONATO B. EVANGELISTA, ROMEO PATAG, RIZALINO REYES, IGNACIO DE VERA,
SOLOMON B. REYES, JOSE M. ABAN, EMIGDIO N. ABARQUEZ, ANTONIO ACUPAN, ROMEO
ACUPAN, BENJAMIN ALEJANDRE, WILFREDO D. ALIGADO, MARTIN AMISTAD, JR.,
ROLANDO B. AMUL, AMORSOLO ANADING, ANTONIO T. ANGLO, VICENTE ARLITA,
HERBERT AYO, SILVERIO BALATAZO, ALFREDO BALOBO, FALCONERO BANAAG, RAMON
BARBOSA, FELIX BARCENA, FERNANDO BAS, MARIO BATACLAN, ROBERTO S. BATICA,
ENRICO BELEN, ARISTEO BICOL, LARRY C. BICOL, PETRONILLO BISCOCHO, FELIX M.
BOBIER, DIONISIO BOBONGO, BAYANI S. BRACAMANTE, PABLITO BUSTILLO, GUILLERMO
CABEZAS, BIENVENIDO CADALIN, RODOLFO CAGATAN, AMANTE CAILAO, IRENEO
CANDOR, JOSE CASTILLO, MANUEL CASTILLO, REMAR CASTROJERES, REYNALDO
CAYAS, ROMEO CECILIO, TEODULO CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO
T. DELA CRUZ, FRANCISCO DE GUZMAN, ONOFRE DE RAMA, IGNACIO DE VERA,
MODESTO DIZON, REYNALDO DIZON, ANTONIO S. DOMINGUEZ, GILBERT EBRADA,
RICARDO EBRADA, ANTONIO EJERCITO, JR., EDUARTE ERIDAO, ELADIO ESCOTOTO,
JOHN ESGUERRA, EDUARDO ESPIRITU, ERNESTO ESPIRITU, RODOLFO ESPIRITU,
NESTOR M. ESTEVA, BENJAMIN ESTRADA, VALERIO EVANGELISTA, OLIGARIO
FRANCISCO, JESUS GABAWAN, ROLANDO GARCIA, ANGEL GUDA, PACITO HERNANDEZ,
ANTONIO HILARIO, HENRY L. JACOB, HONESTO JARDINIANO, ANTONIO JOCSON,
GERARDO LACSAMANA, EFREN U. LIRIO LORETO LONTOC, ISRAEL LORENZO,
ALEJANDRO LORINO, JOSE MABALAY, HERMIE MARANAN, LEOVIGILDO MARCIAL, NOEL
MARTINEZ, DANTE MATREO, LUCIANO MELENDEZ, RENATO MELO, FRANCIS MEDIODIA,
JOSE C. MILANES, RAYMUNDO C. MILAY, CRESENCIANO MIRANDA, ILDEFONSO C.
MOLINA, ARMANDO B. MONDEJAR RESURRECCION D. NAZARENO, JUAN OLINDO,
FRANCISCO R. OLIVARES, PEDRO ORBISTA, JR., RICARDO ORDONEZ, ERNIE PANCHO,
JOSE PANCHO, GORGONIO P. PARALA, MODESTO PINPIN, JUANITO PAREA, ROMEO I.
PATAG, FRANCISCO PINPIN, LEONARDO POBLETE, JAIME POLLOS, DOMINGO PONDALIS,
EUGENIO RAMIREZ, LUCIEN M. RESPALL, GAUDENCIO RETANAN, JR., TOMAS B.
RETENER, ALVIN C. REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO G. RICAZA,
RODELIO RIETA, JR., BENITO RIVERA, JR., BERNARDO J. ROBILLOS, PABLO A. ROBLES,
JOSE ROBLEZA, QUIRINO RONQUILLO, AVELINO M. ROQUE, MENANDRO L. SABINO,
PEDRO SALGATAR, EDGARDO SALONGA, NUMERIANO SAN MATEO, FELIZARDO DE LOS
SANTOS, JR., GABRIEL SANTOS, JUANITO SANTOS, PAQUITO SOLANTE, CONRADO A.
SOLIS, JR., RODOLFO SULTAN, ISAIAS TALACTAC, WILLIAM TARUC, MENANDRO
TEMPROSA, BIENVENIDO S. TOLENTINO, BENEDICTO TORRES, MAXIMIANO TORRES,
FRANCISCO G. TRIAS, SERGIO A. URSOLINO, ROGELIO VALDEZ, LEGORIO E. VERGARA,
DELFIN VICTORIA, GILBERT VICTORIA, HERNANE VICTORIANO, FRANCISCO
VILLAFLORES, DOMINGO VILLAHERMOSA, ROLANDO VILLALOBOS, ANTONIO VILLAUZ,
DANILO VILLANUEVA, ROGELIO VILLANUEVA, ANGEL VILLARBA, JUANITO VILLARINO,
FRANCISCO ZARA, ROGELIO AALAGOS, NICANOR B. ABAD, ANDRES ABANES, REYNALDO
ABANES, EDUARDO ABANTE, JOSE ABARRO, JOSEFINO ABARRO, CELSO S. ABELANIO,
HERMINIO ABELLA, MIGUEL ABESTANO, RODRIGO G. ABUBO, JOSE B. ABUSTAN, DANTE
ACERES, REYNALDO S. ACOJIDO, LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO
ACUPAN, REYNALDO ACUPAN, SOLANO ACUPAN, MANUEL P. ADANA, FLORENTINO R.
AGNE, QUITERIO R. AGUDO, MANUEL P. AGUINALDO, DANTE AGUIRRE, HERMINIO
AGUIRRE, GONZALO ALBERTO, JR., CONRADO ALCANTARA, LAMBERTO Q. ALCANTARA,
MARIANITO J. ALCANTARA, BENCIO ALDOVER, EULALIO V. ALEJANDRO, BENJAMIN
ALEJANDRO, EDUARDO L. ALEJANDRO, MAXIMINO ALEJANDRO, ALBERTO ALMENAR,
ARNALDO ALONZO, AMADO ALORIA, CAMILO ALVAREZ, MANUEL C. ALVAREZ, BENJAMIN
R. AMBROCIO, CARLOS AMORES, BERNARD P. ANCHETA, TIMOTEO O. ANCHETA,
JEOFREY ANI, ELINO P. ANTILLON, ARMANDRO B. ANTIPONO, LARRY T. ANTONIO,
ANTONIO APILADO, ARTURO P. APILADO, FRANCISCO APOLINARIO, BARTOLOME M.
AQUINO, ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M. AQUINO, ROBERTO
ARANGORIN, BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIO ARAULLO,
ALEXANDER ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO, JUANTO AREVALO,
RAMON AREVALO, RODOLFO AREVALO, EULALIO ARGUELLES, WILFREDO P. ARICA,
JOSE M. ADESILLO, ANTONIO ASUNCION, ARTEMIO M. ASUNCION, EDGARDO ASUNCION,
REXY M. ASUNCION, VICENTE AURELIO, ANGEL AUSTRIA, RICARDO P. AVERILLA, JR.,
VIRGILIO AVILA, BARTOLOME AXALAN, ALFREDO BABILONIA, FELIMON BACAL, JOSE L.
BACANI, ROMULO R. BALBIERAN, VICENTE BALBIERAN, RODOLFO BALITBIT, TEODORO
Y. BALOBO, DANILO O. BARBA, BERNARDO BARRO, JUAN A. BASILAN, CEFERINO
BATITIS, VIVENCIO C. BAUAN, GAUDENCIO S. BAUTISTA, LEONARDO BAUTISTA, JOSE D.
BAUTISTA, ROSTICO BAUTISTA, RUPERTO B. BAUTISTA, TEODORO S. BAUTISTA,
VIRGILIO BAUTISTA, JESUS R. BAYA, WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G.
BELIR, ERIC B. BELTRAN, EMELIANO BENALES, JR., RAUL BENITEZ, PERFECTO BENSAN,
IRENEO BERGONIO, ISABELO BERMUDEZ, ROLANDO I. BERMUDEZ, DANILO BERON,
BENJAMIN BERSAMIN, ANGELITO BICOL, ANSELMO BICOL, CELESTINO BICOL, JR.,
FRANCISCO BICOL, ROGELIO BICOL, ROMULO L. BICOL, ROGELIO BILLIONES, TEOFILO N.
BITO, FERNANDO BLANCO, AUGUSTO BONDOC, DOMINGO BONDOC, PEPE S. BOOC,
JAMES R. BORJA, WILFREDO BRACEROS, ANGELES C. BRECINO, EURECLYDON G.
BRIONES, AMADO BRUGE, PABLITO BUDILLO, ARCHIMEDES BUENAVENTURA, BASILIO
BUENAVENTURA, GUILLERMO BUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO
BUTIONG, JR., HONESTO P. CABALLA, DELFIN CABALLERO, BENEDICTO CABANIGAN,
MOISES CABATAY, HERMANELI CABRERA, PEDRO CAGATAN, JOVEN C. CAGAYAT,
ROGELIO L. CALAGOS, REYNALDO V. CALDEJON, OSCAR C. CALDERON, NESTOR D.
CALLEJA, RENATO R. CALMA, NELSON T. CAMACHO, SANTOS T. CAMACHO, ROBERTO
CAMANA, FLORANTE C. CAMANAG EDGARDO M. CANDA, SEVERINO CANTOS, EPIFANIO
A. CAPONPON, ELIAS D. CARILLO, JR., ARMANDO CARREON, MENANDRO M. CASTAÑEDA,
BENIGNO A. CASTILLO, CORNELIO L. CASTILLO, JOSEPH B. CASTILLO, ANSELMO
CASTILLO, JOAQUIN CASTILLO, PABLO L. CASTILLO, ROMEO P. CASTILLO, SESINANDO
CATIBOG, DANILO CASTRO, PRUDENCIO A. CASTRO, RAMO CASTRO, JR., ROMEO A. DE
CASTRO, JAIME B. CATLI, DURANA D. CEFERINO, RODOLFO B. CELIS, HERMINIGILDO
CEREZO, VICTORIANO CELESTINO, BENJAMIN CHAN, ANTONIO C. CHUA, VIVENCIO B.
CIABAL, RODRIGO CLARETE, AUGUSTO COLOMA, TURIANO CONCEPCION, TERESITO
CONSTANTINO, ARMANDO CORALES, RENATO C. CORCUERA, APOLINAR CORONADO,
ABELARDO CORONEL, FELIX CORONEL, JR., LEONARDO CORPUZ, JESUS M. CORRALES,
CESAR CORTEMPRATO, FRANCISCO O. CORVERA, FRANCISCO COSTALES, SR.,
CELEDONIO CREDITO, ALBERTO A. CREUS, ANACLETO V. CRUZ, DOMINGO DELA CRUZ,
AMELIANO DELA CRUZ, JR., PANCHITO CRUZ, REYNALDO B. DELA CRUZ, ROBERTO P.
CRUZ, TEODORO S. CRUZ, ZOSIMO DELA CRUZ, DIONISIO A. CUARESMA, FELIMON
CUIZON, FERMIN DAGONDON, RICHARD DAGUINSIN, CRISANTO A. DATAY, NICASIO
DANTINGUINOO, JOSE DATOON, EDUARDO DAVID, ENRICO T. DAVID, FAVIO DAVID,
VICTORIANO S. DAVID, EDGARDO N. DAYACAP, JOSELITO T. DELOSO, CELERINO DE
GUZMAN, ROMULO DE GUZMAN, LIBERATO DE GUZMAN, JOSE DE LEON, JOSELITO L. DE
LUMBAN, NAPOLEON S. DE LUNA, RICARDO DE RAMA, GENEROSO DEL ROSARIO,
ALBERTO DELA CRUZ, JOSE DELA CRUZ, LEONARDO DELOS REYES, ERNESTO F. DIATA,
EDUARDO A. DIAZ, FELIX DIAZ, MELCHOR DIAZ, NICANOR S. DIAZ, GERARDO C. DIGA,
CLEMENTE DIMATULAC, ROLANDO DIONISIO, PHILIPP G. DISMAYA, BENJAMIN
DOCTOLERO, ALBERTO STO. DOMINGO, BENJAMIN E. DOZA, BENJAMIN DUPA, DANILO C.
DURAN, GREGORIO D. DURAN, RENATO A. EDUARTE, GODOFREDO E. EISMA, ARDON B.
ELLO, UBED B. ELLO, JOSEFINO ENANO, REYNALDO ENCARNACION, EDGARDO
ENGUANCIO, ELIAS EQUIPANO, FELIZARDO ESCARMOSA, MIGUEL ESCARMOSA,
ARMANDO ESCOBAR, ROMEO T. ESCUYOS, ANGELITO ESPIRITU, EDUARDO S. ESPIRITU,
REYNALDO ESPIRITU, ROLANDO ESPIRITU, JULIAN ESPREGANTE, IGMIDIO ESTANISLAO,
ERNESTO M. ESTEBAN, MELANIO R. ESTRO, ERNESTO M. ESTEVA, CONRADO ESTUAR,
CLYDE ESTUYE, ELISEO FAJARDO, PORFIRIO FALQUEZA, WILFREDO P. FAUSTINO,
EMILIO E. FERNANDEZ, ARTEMIO FERRER, MISAEL M. FIGURACION, ARMANDO F. FLORES,
BENJAMIN FLORES, EDGARDO C. FLORES, BUENAVENTURA FRANCISCO, MANUEL S.
FRANCISCO, ROLANDO FRANCISCO, VALERIANO FRANCISCO, RODOLFO GABAWAN,
ESMERALDO GAHUTAN, CESAR C. GALANG, SANTIAGO N. GALOSO, GABRIEL GAMBOA,
BERNARDO GANDAMON, JUAN GANZON, ANDRES GARCIA, JR., ARMANDO M. GARCIA,
EUGENIO GARCIA, MARCELO L. GARCIA, PATRICIO L. GARCIA, JR., PONCIANO G. GARCIA,
PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA, ROBERTO S. GARCIA, OSIAS G. GAROFIL,
RAYMUNDO C. GARON, ROLANDO G. GATELA, AVELINO GAYETA, RAYMUNDO GERON,
PLACIDO GONZALES, RUPERTO H. GONZALES, ROGELIO D. GUANIO, MARTIN V.
GUERRERO, JR., ALEXIS GUNO, RICARDO L. GUNO, FRANCISCO GUPIT, DENNIS J.
GUTIERREZ, IGNACIO B. GUTIERREZ, ANGELITO DE GUZMAN, JR., CESAR H. HABANA,
RAUL G. HERNANDEZ, REYNALDO HERNANDEZ, JOVENIANO D. HILADO, JUSTO HILAPO,
ROSTITO HINAHON, FELICISIMO HINGADA, EDUARDO HIPOLITO, RAUL L. IGNACIO,
MANUEL L. ILAGAN, RENATO L. ILAGAN, CONRADO A. INSIONG, GRACIANO G. ISLA,
ARNEL L. JACOB, OSCAR J. JAPITENGA, CIRILO HICBAN, MAXIMIANO HONRADES,
GENEROSO IGNACIO, FELIPE ILAGAN, EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO
JAVIER, ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE JESUS, CARLOS A.
JIMENEZ, DANILO E. JIMENEZ, PEDRO C. JOAQUIN, FELIPE W. JOCSON, FELINO M.
JOCSON, PEDRO N. JOCSON, VALENTINO S. JOCSON, PEDRO B. JOLOYA, ESTEBAN P.
JOSE, JR., RAUL JOSE, RICARDO SAN JOSE, GERTRUDO KABIGTING, EDUARDO S.
KOLIMLIM, SR., LAURO J. LABAY, EMMANUEL C. LABELLA, EDGARDO B. LACERONA,
JOSE B. LACSON, MARIO J. LADINES, RUFINO LAGAC, RODRIGO LAGANAPAN, EFREN M.
LAMADRID, GUADENCIO LATANAN, VIRGILIO LATAYAN, EMILIANO LATOJA, WENCESLAO
LAUREL, ALFREDO LAXAMANA, DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S.
LEGASPI, BENITO DE LEMOS, JR., PEDRO G. DE LEON, MANOLITO C. LILOC, GERARDO
LIMUACO, ERNESTO S. LISING, RENATO LISING, WILFREDO S. LISING, CRISPULO LONTOC,
PEDRO M. LOPERA, ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY LOPEZ, GARLITO
LOPEZ, GEORGE F. LOPEZ, VIRGILIO M. LOPEZ, BERNARDITO G. LOREJA, DOMINGO B.
LORICO, DOMINGO LOYOLA, DANTE LUAGE, ANTONIO M. LUALHATI, EMMANUEL
LUALHATI, JR., LEONIDEZ C. LUALHATI, SEBASTIAN LUALHATI, FRANCISCO LUBAT,
ARMANDO LUCERO, JOSELITO L. DE LUMBAN, THOMAS VICENTE O. LUNA, NOLI
MACALADLAD, ALFREDO MACALINO, RICARDO MACALINO, ARTURO V. MACARAIG,
ERNESTO V. MACARAIG, RODOLFO V. MACARAIG, BENJAMIN MACATANGAY,
HERMOGENES MACATANGAY, RODEL MACATANGAY, ROMULO MACATANGAY, OSIAS Q.
MADLANGBAYAN, NICOLAS P. MADRID, EDELBERTO G. MAGAT, EFREN C. MAGBANUA,
BENJAMIN MAGBUHAT, ALFREDO C. MAGCALENG, ANTONIO MAGNAYE, ALFONSO
MAGPANTAY, RICARDO C. MAGPANTAY, SIMEON M. MAGPANTAY, ARMANDO M.
MAGSINO, MACARIO S. MAGSINO, ANTONIO MAGTIBAY, VICTOR V. MAGTIBAY, GERONIMO
MAHILUM, MANUEL MALONZO, RICARDO MAMADIS, RODOLFO MANA, BERNARDO A.
MANALILI, MANUEL MANALILI, ANGELO MANALO, AGUILES L. MANALO, LEOPOLDO
MANGAHAS, BAYANI MANIGBAS, ROLANDO C. MANIMTIM, DANIEL MANONSON, ERNESTO
F. MANUEL, EDUARDO MANZANO, RICARDO N. MAPA, RAMON MAPILE, ROBERTO C.
MARANA, NEMESIO MARASIGAN, WENCESLAO MARASIGAN, LEONARDO MARCELO,
HENRY F. MARIANO, JOEL MARIDABLE, SANTOS E. MARINO, NARCISO A. MARQUEZ,
RICARDO MARTINEZ, DIEGO MASICAMPO, AURELIO MATABERDE, RENATO MATILLA,
VICTORIANO MATILLA, VIRGILIO MEDEL, LOLITO M. MELECIO, BENIGNO MELENDEZ,
RENER J. MEMIJE, REYNALDO F. MEMIJE, RODEL MEMIJE, AVELINO MENDOZA, JR.,
CLARO MENDOZA, TIMOTEO MENDOZA, GREGORIO MERCADO, ERNANI DELA MERCED,
RICARDO MERCENA, NEMESIO METRELLO, RODEL MEMIJE, GASPAR MINIMO, BENJAMIN
MIRANDA, FELIXBERTO D. MISA, CLAUDIO A. MODESTO, JR., OSCAR MONDEDO,
GENEROSO MONTON, RENATO MORADA, RICARDO MORADA, RODOLFO MORADA,
ROLANDO M. MORALES, FEDERICO M. MORENO, VICTORINO A. MORTEL, JR., ESPIRITU A.
MUNOZ, IGNACIO MUNOZ, ILDEFONSO MUNOZ, ROGELIO MUNOZ, ERNESTO NAPALAN,
MARCELO A. NARCIZO, REYNALDO NATALIA, FERNANDO C. NAVARETTE, PACIFICO D.
NAVARRO, FLORANTE NAZARENO, RIZAL B. NAZARIO, JOSUE NEGRITE, ALFREDO
NEPUMUCENO, HERBERT G. NG, FLORENCIO NICOLAS, ERNESTO C. NINON, AVELINO
NUQUI, NEMESIO D. OBA, DANILO OCAMPO, EDGARDO OCAMPO, RODRIGO E. OCAMPO,
ANTONIO B. OCCIANO, REYNALDO P. OCSON, BENJAMIN ODESA, ANGEL OLASO,
FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN V. ORALLO, ROMEO S. ORIGINES,
DANILO R. ORTANEZ, WILFREDO OSIAS, VIRGILIO PA-A, DAVID PAALAN, JESUS N.
PACHECO, ALFONSO L. PADILLA, DANILO PAGSANJAN, NUMERIANO PAGSISIHAN,
RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDRO PALABRICA, QUINCIANO PALO, JOSE
PAMATIAN, GONZALO PAN, PORFIRIO PAN, BIENVENIDO PANGAN, ERNESTO PANGAN,
FRANCISCO V. PASIA, EDILBERTO PASIMIO, JR., JOSE V. PASION, ANGELITO M. PENA,
DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDO M. PERALTA, ANTONIO PEREZ,
ANTOLIANO E. PEREZ, JUAN PEREZ, LEON PEREZ, ROMEO E. PEREZ, ROMULO PEREZ,
WILLIAM PEREZ, FERNANDO G. PERINO, FLORENTINO DEL PILAR, DELMAR F. PINEDA,
SALVADOR PINEDA, ELIZALDE PINPIN, WILFREDO PINPIN, ARTURO POBLETE,
DOMINADOR R. PRIELA, BUENAVENTURA PRUDENTE, CARMELITO PRUDENTE, DANTE
PUEYO, REYNALDO Q. PUEYO, RODOLFO O. PULIDO, ALEJANDRO PUNIO, FEDERICO
QUIMAN, ALFREDO L. QUINTO, ROMEO QUINTOS, EDUARDO W. RACABO, RICARDO C. DE
RAMA, RICARDO L. DE RAMA, ROLANDO DE RAMA, FERNANDO A. RAMIREZ, LITO S.
RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V. RAMIREZ, ALBERTO RAMOS, ANSELMO C.
RAMOS, TOBIAS RAMOS, WILLARFREDO RAYMUNDO, REYNALDO RAQUEDAN, MANUEL F.
RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E. RECOLASO, ALBERTO REDAZA,
ARTHUR REJUSO, TORIBIO M. RELLAMA, JAIME RELLOSA, EUGENIO A. REMOQUILLO,
GERARDO RENTOZA, REDENTOR C. REY, ALFREDO S. REYES, AMABLE S. REYES,
BENEDICTO R. REYES, GREGORIO B. REYES, JOSE A. REYES, JOSE C. REYES, ROMULO M.
REYES, SERGIO REYES, ERNESTO F. RICO, FERNANDO M. RICO, EMMANUEL RIETA,
RICARDO RIETA, LEO B. ROBLES, RUBEN ROBLES, RODOLFO ROBLEZA, RODRIGO
ROBLEZA, EDUARDO ROCABO, ANTONIO R. RODRIGUEZ, BERNARDO RODRIGUEZ, ELIGIO
RODRIGUEZ, ALMONTE ROMEO, ELIAS RONQUILLO, ELISE RONQUILLO, LUIS VAL B.
RONQUILLO, REYNOSO P. RONQUILLO, RODOLFO RONQUILLO, ANGEL ROSALES, RAMON
ROSALES, ALBERTO DEL ROSARIO, GENEROSO DEL ROSARIO, TEODORICO DEL
ROSARIO, VIRGILIO L. ROSARIO, CARLITO SALVADOR, JOSE SAMPARADA, ERNESTO SAN
PEDRO, ADRIANO V. SANCHA, GERONIMO M. SANCHA, ARTEMIO B. SANCHEZ, NICASIO
SANCHEZ, APOLONIO P. SANTIAGO, JOSELITO S. SANTIAGO, SERGIO SANTIAGO,
EDILBERTO C. SANTOS, EFREN S. SANTOS, RENATO D. SANTOS, MIGUEL SAPUYOT, ALEX
S. SERQUINA, DOMINADOR P. SERRA, ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D.
SILANG, RODOLFO B. DE SILOS, ANICETO G. SILVA, EDGARDO M. SILVA, ROLANDO C.
SILVERTO, ARTHUR B. SIMBAHON, DOMINGO SOLANO, JOSELITO C. SOLANTE, CARLITO
SOLIS, CONRADO SOLIS, III, EDGARDO SOLIS, ERNESTO SOLIS, ISAGANI M. SOLIS,
EDUARDO L. SOTTO, ERNESTO G. STA. MARIA, VICENTE G. STELLA, FELIMON SUPANG,
PETER TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P. TALUSIK, FERMIN TARUC, JR.,
LEVY S. TEMPLO, RODOLFO S. TIAMSON, LEONILO TIPOSO, ARNEL TOLENTINO, MARIO M.
TOLENTINO, FELIPE TORRALBA, JOVITO V. TORRES, LEONARDO DE TORRES, GAVINO U.
TUAZON, AUGUSTO B. TUNGUIA, FRANCISCO UMALI, SIMPLICIO UNIDA, WILFREDO V.
UNTALAN, ANTONIO VALDERAMA, RAMON VALDERAMA, NILO VALENCIANO, EDGARDO C.
VASQUEZ, ELPIDIO VELASQUEZ, NESTOR DE VERA, WILFREDO D. VERA, BIENVENIDO
VERGARA, ALFREDO VERGARA, RAMON R. VERZOSA, FELICITO P. VICMUNDO, ALFREDO
VICTORIANO, TEOFILO P. VIDALLO, SABINO N. VIERNEZ, JESUS J. VILLA, JOVEN
VILLABLANCO, EDGARDO G. VILLAFLORES, CEFERINO VILLAGERA, ALEX
VILLAHERMOZA, DANILO A. VILLANUEVA, ELITO VILLANUEVA, LEONARDO M.
VILLANUEVA, MANUEL R. VILLANUEVA, NEPTHALI VILLAR, JOSE V. VILLAREAL,
FELICISIMO VILLARINO, RAFAEL VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO,
ROBERTO YABUT, VICENTE YNGENTE, AND ORO C. ZUNIGA, respondents.

Gerardo A. Del Mundo and Associates for petitioners.

Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for BRII/AIBC.

Florante M. De Castro for private respondents in 105029-32.

QUIASON, J.:

The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine Overseas
Employment Administration's Administrator, et. al.," was filed under Rule 65 of the Revised Rules of
Court:

(1) to modify the Resolution dated September 2, 1991 of the National Labor
Relations Commission (NLRC) in POEA Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to render a new
decision: (i) declaring private respondents as in default; (ii) declaring the said labor
cases as a class suit; (iii) ordering Asia International Builders Corporation (AIBC) and
Brown and Root International Inc. (BRII) to pay the claims of the 1,767 claimants in
said labor cases; (iv) declaring Atty. Florante M. de Castro guilty of forum-shopping;
and (v) dismissing POEA Case No. L-86-05-460; and

(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for
reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-288).

The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon. National Labor
Relations Commission, et. al.," was filed under Rule 65 of the Revised Rules of Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases
Nos. L-84-06-555, L-85-10-777, L-85-10-799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive period under the
Labor Code of the Philippines instead of the ten-year prescriptive period under the
Civil Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the computation of petitioners' overtime pay;
and

(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for
reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation, et. al., v.
National Labor Relations Commission, et. al." was filed under Rule 65 of the Revised Rules of Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases
Nos. L-84-06-555, L-85-10-777, L-85-10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants; and

(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied the
motions for reconsideration of AIBC and BRII (Rollo, pp. 2-59; 61-230).

The Resolution dated September 2, 1991 of NLRC, which modified the decision of POEA in four
labor cases: (1) awarded monetary benefits only to 149 claimants and (2) directed Labor Arbiter
Fatima J. Franco to conduct hearings and to receive evidence on the claims dismissed by the POEA
for lack of substantial evidence or proof of employment.

Consolidation of Cases

G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R. Nos.
104911-14 were raffled to the Second Division. In the Resolution dated July 26, 1993, the Second
Division referred G.R. Nos. 104911-14 to the Third Division (G.R. Nos. 104911-14, Rollo, p. 895).

In the Resolution dated September 29, 1993, the Third Division granted the motion filed in G.R. Nos.
104911-14 for the consolidation of said cases with G.R. Nos. 104776 and 105029-32, which were
assigned to the First Division (G.R. Nos. 104911-14, Rollo, pp. 986-1,107; G.R. Nos. 105029-
30, Rollo, pp. 369-377, 426-432). In the Resolution dated October 27, 1993, the First Division
granted the motion to consolidate G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos. 104911-
14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p. 1562).

On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B. Evangelista, in their own
behalf and on behalf of 728 other overseas contract workers (OCWs) instituted a class suit by filing
an "Amended Complaint" with the Philippine Overseas Employment Administration (POEA) for
money claims arising from their recruitment by AIBC and employment by BRII (POEA Case No. L-
84-06-555). The claimants were represented by Atty. Gerardo del Mundo.

BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in construction;
while AIBC is a domestic corporation licensed as a service contractor to recruit, mobilize and deploy
Filipino workers for overseas employment on behalf of its foreign principals.

The amended complaint principally sought the payment of the unexpired portion of the employment
contracts, which was terminated prematurely, and secondarily, the payment of the interest of the
earnings of the Travel and Reserved Fund, interest on all the unpaid benefits; area wage and salary
differential pay; fringe benefits; refund of SSS and premium not remitted to the SSS; refund of
withholding tax not remitted to the BIR; penalties for committing prohibited practices; as well as the
suspension of the license of AIBC and the accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14).

At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was given,
together with BRII, up to July 5, 1984 to file its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants to file a
bill of particulars within ten days from receipt of the order and the movants to file their answers within
ten days from receipt of the bill of particulars. The POEA Administrator also scheduled a pre-trial
conference on July 25, 1984.

On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23, 1984,
AIBC filed a "Motion to Strike Out of the Records", the "Complaint" and the "Compliance and
Manifestation." On July 25, 1984, the claimants filed their "Rejoinder and Comments," averring,
among other matters, the failure of AIBC and BRII to file their answers and to attend the pre-trial
conference on July 25, 1984. The claimants alleged that AIBC and BRII had waived their right to
present evidence and had defaulted by failing to file their answers and to attend the pre-trial
conference.

On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the Records" filed
by AIBC but required the claimants to correct the deficiencies in the complaint pointed out in the
order.

On October 10, 1984, claimants asked for time within which to comply with the Order of October 2,
1984 and filed an "Urgent Manifestation," praying that the POEA Administrator direct the parties to
submit simultaneously their position papers, after which the case should be deemed submitted for
decision. On the same day, Atty. Florante de Castro filed another complaint for the same money
claims and benefits in behalf of several claimants, some of whom were also claimants in POEA
Case No. L-84-06-555 (POEA Case No. 85-10-779).

On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2, 1984 and
an "Urgent Manifestation," praying that the POEA direct the parties to submit simultaneously their
position papers after which the case would be deemed submitted for decision. On the same day,
AIBC asked for time to file its comment on the "Compliance" and "Urgent Manifestation" of
claimants. On November 6, 1984, it filed a second motion for extension of time to file the comment.

On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension of time
was granted.

On November 14, 1984, claimants filed an opposition to the motions for extension of time and asked
that AIBC and BRII be declared in default for failure to file their answers.

On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, that
claimants should be ordered to amend their complaint.

On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file their
answers within ten days from receipt of the order.

On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said order of
the POEA Administrator. Claimants opposed the appeal, claiming that it was dilatory and praying
that AIBC and BRII be declared in default.

On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper" dated
March 24, 1985, adding new demands: namely, the payment of overtime pay, extra night work pay,
annual leave differential pay, leave indemnity pay, retirement and savings benefits and their share of
forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15, 1985, the POEA Administrator directed
AIBC to file its answer to the amended complaint (G.R. No. 104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the same day, the
POEA issued an order directing AIBC and BRII to file their answers to the "Amended Complaint,"
otherwise, they would be deemed to have waived their right to present evidence and the case would
be resolved on the basis of complainant's evidence.

On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and Motion for
Bill of Particulars Re: Amended Complaint dated March 24, 1985." Claimants opposed the motions.

On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to file their
answers in POEA Case No. L-84-06-555.

On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition for the
issuance of a writ of injunction. On September 19, 1985, NLRC enjoined the POEA Administrator
from hearing the labor cases and suspended the period for the filing of the answers of AIBC and
BRII.

On September 19, 1985, claimants asked the POEA Administrator to include additional claimants in
the case and to investigate alleged wrongdoings of BRII, AIBC and their respective lawyers.

On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case No. L-85-
10-777) against AIBC and BRII with the POEA, demanding monetary claims similar to those subject
of POEA Case No. L-84-06-555. In the same month, Solomon Reyes also filed his own complaint
(POEA Case No. L-85-10-779) against AIBC and BRII.

On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the substitution
of the original counsel of record and the cancellation of the special powers of attorney given the
original counsel.

On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce attorney's
lien.

On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No. 86-05-460) in
behalf of 11 claimants including Bienvenido Cadalin, a claimant in POEA Case No. 84-06-555.

On December 12, 1986, the NLRC dismissed the two appeals filed on February 27, 1985 and
September 18, 1985 by AIBC and BRII.

In narrating the proceedings of the labor cases before the POEA Administrator, it is not amiss to
mention that two cases were filed in the Supreme Court by the claimants, namely — G.R. No. 72132
on September 26, 1985 and Administrative Case No. 2858 on March 18, 1986. On May 13, 1987,
the Supreme Court issued a resolution in Administrative Case No. 2858 directing the POEA
Administrator to resolve the issues raised in the motions and oppositions filed in POEA Cases Nos.
L-84-06-555 and L-86-05-460 and to decide the labor cases with deliberate dispatch.

AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order dated
September 4, 1985 of the POEA Administrator. Said order required BRII and AIBC to answer the
amended complaint in POEA Case No. L-84-06-555. In a resolution dated November 9, 1987, we
dismissed the petition by informing AIBC that all its technical objections may properly be resolved in
the hearings before the POEA.
Complaints were also filed before the Ombudsman. The first was filed on September 22, 1988 by
claimant Hermie Arguelles and 18 co-claimants against the POEA Administrator and several NLRC
Commissioners. The Ombudsman merely referred the complaint to the Secretary of Labor and
Employment with a request for the early disposition of POEA Case No. L-84-06-555. The second
was filed on April 28, 1989 by claimants Emigdio P. Bautista and Rolando R. Lobeta charging AIBC
and BRII for violation of labor and social legislations. The third was filed by Jose R. Santos,
Maximino N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of violations of labor laws.

On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated
December 12, 1986.

On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for suspension of
the period for filing an answer or motion for extension of time to file the same until the resolution of
its motion for reconsideration of the order of the NLRC dismissing the two appeals. On April 28,
1987, NLRC en banc denied the motion for reconsideration.

At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the same hearing,
the parties were given a period of 15 days from said date within which to submit their respective
position papers. On June 24, 1987 claimants filed their "Urgent Motion to Strike Out Answer,"
alleging that the answer was filed out of time. On June 29, 1987, claimants filed their "Supplement to
Urgent Manifestational Motion" to comply with the POEA Order of June 19, 1987. On February 24,
1988, AIBC and BRII submitted their position paper. On March 4, 1988, claimants filed their "Ex-
Parte Motion to Expunge from the Records" the position paper of AIBC and BRII, claiming that it was
filed out of time.

On September 1, 1988, the claimants represented by Atty. De Castro filed their memorandum in
POEA Case No. L-86-05-460. On September 6, 1988, AIBC and BRII submitted their Supplemental
Memorandum. On September 12, 1988, BRII filed its "Reply to Complainant's Memorandum." On
October 26, 1988, claimants submitted their "Ex-Parte Manifestational Motion and Counter-
Supplemental Motion," together with 446 individual contracts of employments and service records.
On October 27, 1988, AIBC and BRII filed a "Consolidated Reply."

On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No. L-84-06-
555 and the other consolidated cases, which awarded the amount of $824,652.44 in favor of only
324 complainants.

On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial Appeal" from the
decision of the POEA. On the same day, AIBC also filed its motion for reconsideration and/or appeal
in addition to the "Notice of Appeal" filed earlier on February 6, 1989 by another counsel for AIBC.

On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of the
appeal of AIBC and BRII.

On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal Memorandum,"
together with their "newly discovered evidence" consisting of payroll records.

On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among other
matters that there were only 728 named claimants. On April 20, 1989, the claimants filed their
"Counter-Manifestation," alleging that there were 1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision dated January
30, 1989 on the grounds that BRII had failed to appeal on time and AIBC had not posted the
supersedeas bond in the amount of $824,652.44.

On December 23, 1989, claimants filed another motion to resolve the labor cases.

On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767
claimants be awarded their monetary claims for failure of private respondents to file their answers
within the reglamentary period required by law.

On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:

WHEREFORE, premises considered, the Decision of the POEA in these

consolidated cases is modified to the extent and in accordance with the following
dispositions:

1. The claims of the 94 complainants identified and listed in Annex

"A" hereof are dismissed for having prescribed;

2. Respondents AIBC and Brown & Root are hereby ordered, jointly
and severally, to pay the 149 complainants, identified and listed in
Annex "B" hereof, the peso equivalent, at the time of payment, of the
total amount in US dollars indicated opposite their respective names;

3. The awards given by the POEA to the 19 complainants classified

and listed in Annex "C" hereof, who appear to have worked
elsewhere than in Bahrain are hereby set aside.

4. All claims other than those indicated in Annex "B", including those
for overtime work and favorably granted by the POEA, are hereby
dismissed for lack of substantial evidence in support thereof or are
beyond the competence of this Commission to pass upon.

In addition, this Commission, in the exercise of its powers and authority under Article
218(c) of the Labor Code, as amended by R.A. 6715, hereby directs Labor Arbiter
Fatima J. Franco of this Commission to summon parties, conduct hearings and
receive evidence, as expeditiously as possible, and thereafter submit a written report
to this Commission (First Division) of the proceedings taken, regarding the claims of
the following:

(a) complainants identified and listed in Annex "D" attached and

made an integral part of this Resolution, whose claims were
dismissed by the POEA for lack of proof of employment in Bahrain
(these complainants numbering 683, are listed in pages 13 to 23 of
the decision of POEA, subject of the appeals) and,

(b) complainants identified and listed in Annex "E" attached and

made an integral part of this Resolution, whose awards decreed by
the POEA, to Our mind, are not supported by substantial evidence"
(G.R. No. 104776; Rollo, pp. 113-115; G.R. Nos. 104911-14, pp. 85-
87; G.R. Nos. 105029-31, pp. 120-122).
On November 27, 1991, claimant Amado S. Tolentino and 12
co-claimants, who were former clients of Atty. Del Mundo, filed a petition for certiorari with the
Supreme Court (G.R. Nos. 120741-44). The petition was dismissed in a resolution dated January 27,
1992.

Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC were filed. The
first, by the claimants represented by Atty. Del Mundo; the second, by the claimants represented by
Atty. De Castro; and the third, by AIBC and BRII.

In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration.

Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No. 104776), the
claimants represented by Atty. De Castro (G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos.
105029-32).

II

Compromise Agreements

Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII have submitted,
from time to time, compromise agreements for our approval and jointly moved for the dismissal of
their respective petitions insofar as the claimants-parties to the compromise agreements were
concerned (See Annex A for list of claimants who signed quitclaims).

Thus the following manifestations that the parties had arrived at a compromise agreement and the
corresponding motions for the approval of the agreements were filed by the parties and approved by
the Court:

1) Joint Manifestation and Motion involving claimant Emigdio Abarquez and 47 co-
claimants dated September 2, 1992 (G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R.
Nos. 105029-32, Rollo, pp.
470-615);

2) Joint Manifestation and Motion involving petitioner Bienvenido Cadalin and 82 co-
petitioners dated September 3, 1992 (G.R. No. 104776, Rollo, pp. 364-507);

3) Joint Manifestation and Motion involving claimant Jose

M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos. 105029-
32, Rollo, pp. 613-722; G.R. No. 104776, Rollo, pp. 518-626; G.R. Nos. 104911-
14, Rollo, pp. 407-516);

4) Joint Manifestation and Motion involving claimant Antonio T. Anglo and 17 co-
claimants dated October 14, 1992 (G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713; G.R. Nos.
104911-14, Rollo, pp. 530-590);

5) Joint Manifestation and Motion involving claimant Dionisio Bobongo and 6 co-
claimants dated January 15, 1993 (G.R. No. 104776, Rollo, pp. 813-836; G.R. Nos.
104911-14, Rollo, pp. 629-652);
 6) Joint Manifestation and Motion involving claimant Valerio A. Evangelista and 4 co-
claimants dated March 10, 1993 (G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No.
104776, Rollo, pp. 1815-1829);

7) Joint Manifestation and Motion involving claimants Palconeri Banaag and 5 co-
claimants dated March 17, 1993 (G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos.
104911-14, Rollo, pp. 655-675);

8) Joint Manifestation and Motion involving claimant Benjamin Ambrosio and 15

other co-claimants dated May 4, 1993 (G.R. Nos. 105029-32, Rollo, pp. 906-956;
G.R. Nos. 104911-14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-1814);

9) Joint Manifestation and Motion involving Valerio Evangelista and 3 co-claimants

dated May 10, 1993 (G.R. No. 104776, Rollo, pp. 1815-1829);

10) Joint Manifestation and Motion involving petitioner Quiterio R. Agudo and 36 co-
claimants dated June 14, 1993 (G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R.
Nos. 104911-14, Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp. 1066-1183);

11) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19 co-
claimants dated July 22, 1993 (G.R. No. 104776, Rollo, pp. 1173-1235; G.R. Nos.
105029-32, Rollo, pp. 1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959);

12) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 co-
claimants dated September 7, 1993 (G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254; G.R. Nos.
104911-14, Rollo, pp. 972-984);

13) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37 co-
claimants dated September 8, 1993 (G.R. No. 104776, Rollo, pp. 1257-1375; G.R.
Nos. 104911-14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397);

14) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-claimants
dated January 10, 1994 (G.R. Nos. 105029-32, Rollo, Vol. II);

15) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimants
dated August 25, 1994 (G.R. Nos. 105029-32; G.R. No. 104776; G.R. Nos. 104911-
14).

III

The facts as found by the NLRC are as follows:

We have taken painstaking efforts to sift over the more than fifty volumes now
comprising the records of these cases. From the records, it appears that the
complainants-appellants allege that they were recruited by respondent-appellant
AIBC for its accredited foreign principal, Brown & Root, on various dates from 1975
to 1983. They were all deployed at various projects undertaken by Brown & Root in
several countries in the Middle East, such as Saudi Arabia, Libya, United Arab
Emirates and Bahrain, as well as in Southeast Asia, in Indonesia and Malaysia.
Having been officially processed as overseas contract workers by the Philippine
Government, all the individual complainants signed standard overseas employment
contracts (Records, Vols. 25-32. Hereafter, reference to the records would be
sparingly made, considering their chaotic arrangement) with AIBC before their
departure from the Philippines. These overseas employment contracts invariably
contained the following relevant terms and conditions.

PART B —

(1) Employment Position Classification :—————————

(Code) :—————————

(2) Company Employment Status :—————————

(3) Date of Employment to Commence on :—————————
(4) Basic Working Hours Per Week :—————————
(5) Basic Working Hours Per Month :—————————
(6) Basic Hourly Rate :—————————
(7) Overtime Rate Per Hour :—————————
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :—————————
Months and/or
Job Completion

xxx xxx xxx

3. HOURS OF WORK AND COMPENSATION

a) The Employee is employed at the hourly rate and overtime rate as set out in Part
B of this Document.

b) The hours of work shall be those set forth by the Employer, and Employer may, at
his sole option, change or adjust such hours as maybe deemed necessary from time
to time.

4. TERMINATION

a) Notwithstanding any other terms and conditions of this agreement, the Employer
may, at his sole discretion, terminate employee's service with cause, under this
agreement at any time. If the Employer terminates the services of the Employee
under this Agreement because of the completion or termination, or suspension of the
work on which the Employee's services were being utilized, or because of a
reduction in force due to a decrease in scope of such work, or by change in the type
of construction of such work. The Employer will be responsible for his return
transportation to his country of origin. Normally on the most expeditious air route,
economy class accommodation.

xxx xxx xxx

10. VACATION/SICK LEAVE BENEFITS

a) After one (1) year of continuous service and/or satisfactory completion of contract,
employee shall be entitled to 12-days vacation leave with pay. This shall be
computed at the basic wage rate. Fractions of a year's service will be computed on
a pro-rata basis.

b) Sick leave of 15-days shall be granted to the employee for every year of service
for non-work connected injuries or illness. If the employee failed to avail of such
leave benefits, the same shall be forfeited at the end of the year in which said sick
leave is granted.

11. BONUS

A bonus of 20% (for offshore work) of gross income will be accrued and payable only
upon satisfactory completion of this contract.

12. OFFDAY PAY

The seventh day of the week shall be observed as a day of rest with 8 hours regular
pay. If work is performed on this day, all hours work shall be paid at the premium
rate. However, this offday pay provision is applicable only when the laws of the Host
Country require payments for rest day.

In the State of Bahrain, where some of the individual complainants were deployed,
His Majesty Isa Bin Salman Al Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23
on June 16, 1976, otherwise known as the Labour Law for the Private Sector
(Records, Vol. 18). This decree took effect on August 16, 1976. Some of the
provisions of Amiri Decree No. 23 that are relevant to the claims of the complainants-
appellants are as follows (italics supplied only for emphasis):

Art. 79: . . . A worker shall receive payment for each extra hour
equivalent to his wage entitlement increased by a minimum of twenty-
five per centum thereof for hours worked during the day; and by a
minimum of fifty per centum thereof for hours worked during the
night which shall be deemed to being from seven o'clock in the
evening until seven o'clock in the morning. . . .

Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.

. . . an employer may require a worker, with his consent, to work on

his weekly day of rest if circumstances so require and in respect of
which an additional sum equivalent to 150% of his normal wage shall
be paid to him. . . .

Art. 81: . . . When conditions of work require the worker to work on

any official holiday, he shall be paid an additional sum equivalent to
150% of his normal wage.

Art. 84: Every worker who has completed one year's continuous
service with his employer shall be entitled to leave on full pay for a
period of not less than 21 days for each year increased to a period
not less than 28 days after five continuous years of service.
 A worker shall be entitled to such leave upon a quantum meruit in
respect of the proportion of his service in that year.

Art. 107: A contract of employment made for a period of indefinite

duration may be terminated by either party thereto after giving the
other party thirty days' prior notice before such termination, in writing,
in respect of monthly paid workers and fifteen days' notice in respect
of other workers. The party terminating a contract without giving the
required notice shall pay to the other party compensation equivalent
to the amount of wages payable to the worker for the period of such
notice or the unexpired portion thereof.

Art. 111: . . . the employer concerned shall pay to such worker, upon
termination of employment, a leaving indemnity for the period of his
employment calculated on the basis of fifteen days' wages for each
year of the first three years of service and of one month's wages for
each year of service thereafter. Such worker shall be entitled to
payment of leaving indemnity upon a quantum meruit in proportion to
the period of his service completed within a year.

All the individual complainants-appellants have already been

repatriated to the Philippines at the time of the filing of these cases
(R.R. No. 104776, Rollo, pp. 59-65).

IV

The issues raised before and resolved by the NLRC were:

First: — Whether or not complainants are entitled to the benefits provided by Amiri
Decree No. 23 of Bahrain;

(a) Whether or not the complainants who have worked in Bahrain are
entitled to the above-mentioned benefits.

(b) Whether or not Art. 44 of the same Decree (allegedly prescribing

a more favorable treatment of alien employees) bars complainants
from enjoying its benefits.

Second: — Assuming that Amiri Decree No. 23 of Bahrain is applicable in these

cases, whether or not complainants' claim for the benefits provided therein have
prescribed.

Third: — Whether or not the instant cases qualify as a class suit.

Fourth: — Whether or not the proceedings conducted by the POEA, as well as the
decision that is the subject of these appeals, conformed with the requirements of due
process;

(a) Whether or not the respondent-appellant was denied its right to

due process;
 (b) Whether or not the admission of evidence by the POEA after
these cases were submitted for decision was valid;

(c) Whether or not the POEA acquired jurisdiction over Brown & Root
International, Inc.;

(d) Whether or not the judgment awards are supported by substantial

evidence;

(e) Whether or not the awards based on the averages and formula
presented by the complainants-appellants are supported by
substantial evidence;

(f) Whether or not the POEA awarded sums beyond what the
complainants-appellants prayed for; and, if so, whether or not these
awards are valid.

Fifth: — Whether or not the POEA erred in holding respondents AIBC and Brown &
Root jointly are severally liable for the judgment awards despite the alleged finding
that the former was the employer of the complainants;

(a) Whether or not the POEA has acquired jurisdiction over Brown &
Root;

(b) Whether or not the undisputed fact that AIBC was a licensed
construction contractor precludes a finding that Brown & Root is liable
for complainants claims.

Sixth: — Whether or not the POEA Administrator's failure to hold respondents in

default constitutes a reversible error.

Seventh: — Whether or not the POEA Administrator erred in dismissing the following
claims:

a. Unexpired portion of contract;

b. Interest earnings of Travel and Reserve Fund;

c. Retirement and Savings Plan benefits;

d. War Zone bonus or premium pay of at least 100% of basic pay;

e. Area Differential Pay;

f. Accrued interests on all the unpaid benefits;

g. Salary differential pay;

h. Wage differential pay;

 i. Refund of SSS premiums not remitted to SSS;

j. Refund of withholding tax not remitted to BIR;

k. Fringe benefits under B & R's "A Summary of Employee Benefits"

(Annex "Q" of Amended Complaint);

l. Moral and exemplary damages;

m. Attorney's fees of at least ten percent of the judgment award;

n. Other reliefs, like suspending and/or cancelling the license to

recruit of AIBC and the accreditation of B & R issued by POEA;

o. Penalty for violations of Article 34 (prohibited practices), not

excluding reportorial requirements thereof.

Eighth: — Whether or not the POEA Administrator erred in not dismissing POEA
Case No. (L) 86-65-460 on the ground of multiplicity of suits (G.R. Nos. 104911-
14, Rollo, pp. 25-29, 51-55).

Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence
governing the pleading and proof of a foreign law and admitted in evidence a simple copy of the
Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector). NLRC invoked Article
221 of the Labor Code of the Philippines, vesting on the Commission ample discretion to use every
and all reasonable means to ascertain the facts in each case without regard to the technicalities of
law or procedure. NLRC agreed with the POEA Administrator that the Amiri Decree No. 23, being
more favorable and beneficial to the workers, should form part of the overseas employment contract
of the complainants.

NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked in
Bahrain, and set aside awards of the POEA Administrator in favor of the claimants, who worked
elsewhere.

On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of the
complainants was three years, as provided in Article 291 of the Labor Code of the Philippines, and
not ten years as provided in Article 1144 of the Civil Code of the Philippines nor one year as
provided in the Amiri Decree No. 23 of 1976.

On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot be treated
as a class suit for the simple reason that not all the complainants worked in Bahrain and therefore,
the subject matter of the action, the claims arising from the Bahrain law, is not of common or general
interest to all the complainants.

On the fourth issue, NLRC found at least three infractions of the cardinal rules of administrative due
process: namely, (1) the failure of the POEA Administrator to consider the evidence presented by
AIBC and BRII; (2) some findings of fact were not supported by substantial evidence; and (3) some
of the evidence upon which the decision was based were not disclosed to AIBC and BRII during the
hearing.
On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC are
solidarily liable for the claims of the complainants and held that BRII was the actual employer of the
complainants, or at the very least, the indirect employer, with AIBC as the labor contractor.

NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through the
summons served on AIBC, its local agent.

On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motion to
Declare AIBC in default.

On the seventh issue, which involved other money claims not based on the Amiri Decree No. 23,
NLRC ruled:

(1) that the POEA Administrator has no jurisdiction over the claims for refund of the
SSS premiums and refund of withholding taxes and the claimants should file their
claims for said refund with the appropriate government agencies;

(2) the claimants failed to establish that they are entitled to the claims which are not
based on the overseas employment contracts nor the Amiri Decree No. 23 of 1976;

(3) that the POEA Administrator has no jurisdiction over claims for moral and
exemplary damages and nonetheless, the basis for granting said damages was not
established;

(4) that the claims for salaries corresponding to the unexpired portion of their contract
may be allowed if filed within the three-year prescriptive period;

(5) that the allegation that complainants were prematurely repatriated prior to the
expiration of their overseas contract was not established; and

(6) that the POEA Administrator has no jurisdiction over the complaint for the
suspension or cancellation of the AIBC's recruitment license and the cancellation of
the accreditation of BRII.

NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 should have
been dismissed on the ground that the claimants in said case were also claimants in POEA Case
No. (L) 84-06-555. Instead of dismissing POEA Case No. (L) 86-65-460, the POEA just resolved the
corresponding claims in POEA Case No. (L) 84-06-555. In other words, the POEA did not pass upon
the same claims twice.

G.R. No. 104776

Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds:

(1) that they were deprived by NLRC and the POEA of their right to a speedy
disposition of their cases as guaranteed by Section 16, Article III of the 1987
Constitution. The POEA Administrator allowed private respondents to file their
answers in two years (on June 19, 1987) after the filing of the original complaint (on
 April 2, 1985) and NLRC, in total disregard of its own rules, affirmed the action of the
POEA Administrator;

(2) that NLRC and the POEA Administrator should have declared AIBC and BRII in
default and should have rendered summary judgment on the basis of the pleadings
and evidence submitted by claimants;

(3) the NLRC and POEA Administrator erred in not holding that the labor cases filed
by AIBC and BRII cannot be considered a class suit;

(4) that the prescriptive period for the filing of the claims is ten years; and

(5) that NLRC and the POEA Administrator should have dismissed POEA Case No.
L-86-05-460, the case filed by Atty. Florante de Castro (Rollo, pp. 31-40).

AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:

(1) that they were not responsible for the delay in the disposition of the labor cases,
considering the great difficulty of getting all the records of the more than 1,500
claimants, the piece-meal filing of the complaints and the addition of hundreds of new
claimants by petitioners;

(2) that considering the number of complaints and claimants, it was impossible to
prepare the answers within the ten-day period provided in the NLRC Rules, that
when the motion to declare AIBC in default was filed on July 19, 1987, said party had
already filed its answer, and that considering the staggering amount of the claims
(more than US$50,000,000.00) and the complicated issues raised by the parties, the
ten-day rule to answer was not fair and reasonable;

(3) that the claimants failed to refute NLRC's finding that

there was no common or general interest in the subject matter of the controversy —
which was the applicability of the Amiri Decree No. 23. Likewise, the nature of the
claims varied, some being based on salaries pertaining to the unexpired portion of
the contracts while others being for pure money claims. Each claimant demanded
separate claims peculiar only to himself and depending upon the particular
circumstances obtaining in his case;

(4) that the prescriptive period for filing the claims is that prescribed by Article 291 of
the Labor Code of the Philippines (three years) and not the one prescribed by Article
1144 of the Civil Code of the Philippines (ten years); and

(5) that they are not concerned with the issue of whether POEA Case No. L-86-05-
460 should be dismissed, this being a private quarrel between the two labor lawyers
(Rollo, pp. 292-305).

Attorney's Lien

On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint manifestations and
motions of AIBC and BRII dated September 2 and 11, 1992, claiming that all the claimants who
entered into the compromise agreements subject of said manifestations and motions were his clients
and that Atty. Florante M. de Castro had no right to represent them in said agreements. He also
claimed that the claimants were paid less than the award given them by NLRC; that Atty. De Castro
collected additional attorney's fees on top of the 25% which he was entitled to receive; and that the
consent of the claimants to the compromise agreements and quitclaims were procured by fraud
(G.R. No. 104776, Rollo, pp. 838-810). In the Resolution dated November 23, 1992, the Court
denied the motion to strike out the Joint Manifestations and Motions dated September 2 and 11,
1992 (G.R. Nos. 104911-14, Rollo, pp. 608-609).

On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's Lien,"
alleging that the claimants who entered into compromise agreements with AIBC and BRII with the
assistance of Atty. De Castro, had all signed a retainer agreement with his law firm (G.R. No.
104776, Rollo, pp. 623-624; 838-1535).

Contempt of Court

On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castro and
Atty. Katz Tierra for contempt of court and for violation of Canons 1, 15 and 16 of the Code of
Professional Responsibility. The said lawyers allegedly misled this Court, by making it appear that
the claimants who entered into the compromise agreements were represented by Atty. De Castro,
when in fact they were represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 1560-1614).

On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro for unethical
practices and moved for the voiding of the quitclaims submitted by some of the claimants.

G.R. Nos. 104911-14

The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that NLRC
gravely abused its discretion when it: (1) applied the three-year prescriptive period under the Labor
Code of the Philippines; and (2) it denied the claimant's formula based on an average overtime pay
of three hours a day (Rollo, pp. 18-22).

The claimants argue that said method was proposed by BRII itself during the negotiation for an
amicable settlement of their money claims in Bahrain as shown in the Memorandum dated April 16,
1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22).

BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the prescriptive
period in the Labor Code of the Philippines, a special law, prevails over that provided in the Civil
Code of the Philippines, a general law.

As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the overtime
pay, BRII and AIBC claimed that they were not bound by what appeared therein, because such
memorandum was proposed by a subordinate Bahrain official and there was no showing that it was
approved by the Bahrain Minister of Labor. Likewise, they claimed that the averaging method was
discussed in the course of the negotiation for the amicable settlement of the dispute and any offer
made by a party therein could not be used as an admission by him (Rollo, pp. 228-236).

G.R. Nos. 105029-32

In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it: (1)
enforced the provisions of the Amiri Decree No. 23 of 1976 and not the terms of the employment
contracts; (2) granted claims for holiday, overtime and leave indemnity pay and other benefits, on
evidence admitted in contravention of petitioner's constitutional right to due process; and (3) ordered
the POEA Administrator to hold new hearings for the 683 claimants whose claims had been
dismissed for lack of proof by the POEA Administrator or NLRC itself. Lastly, they allege that
assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRC erred when it did not apply
the one-year prescription provided in said law (Rollo, pp. 29-30).

VI

G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32

All the petitions raise the common issue of prescription although they disagreed as to the time that
should be embraced within the prescriptive period.

To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of the Civil
Code of the Philippines. NLRC believed otherwise, fixing the prescriptive period at three years as
provided in Article 291 of the Labor Code of the Philippines.

The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds, insisted
that NLRC erred in ruling that the prescriptive period applicable to the claims was three years,
instead of ten years, as found by the POEA Administrator.

The Solicitor General expressed his personal view that the prescriptive period was one year as
prescribed by the Amiri Decree No. 23 of 1976 but he deferred to the ruling of NLRC that Article 291
of the Labor Code of the Philippines was the operative law.

The POEA Administrator held the view that:

These money claims (under Article 291 of the Labor Code) refer to those arising from
the employer's violation of the employee's right as provided by the Labor Code.

In the instant case, what the respondents violated are not the rights of the workers as
provided by the Labor Code, but the provisions of the Amiri Decree No. 23 issued in
Bahrain, which ipso facto amended the worker's contracts of employment.
Respondents consciously failed to conform to these provisions which specifically
provide for the increase of the worker's rate. It was only after June 30, 1983, four
months after the brown builders brought a suit against B & R in Bahrain for this same
claim, when respondent AIBC's contracts have undergone amendments in Bahrain
for the new hires/renewals (Respondent's Exhibit 7).

Hence, premises considered, the applicable law of prescription to this instant case is
Article 1144 of the Civil Code of the Philippines, which provides:

Art. 1144. The following actions may be brought within ten years from
the time the cause of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

Thus, herein money claims of the complainants against the respondents shall
prescribe in ten years from August 16, 1976. Inasmuch as all claims were filed within
 the ten-year prescriptive period, no claim suffered the infirmity of being prescribed
(G.R. No. 104776, Rollo, 89-90).

In overruling the POEA Administrator, and holding that the prescriptive period is three years as
provided in Article 291 of the Labor Code of the Philippines, the NLRC argued as follows:

The Labor Code provides that "all money claims arising from employer-employee
relations . . . shall be filed within three years from the time the cause of action
accrued; otherwise they shall be forever barred" (Art. 291, Labor Code, as
amended). This three-year prescriptive period shall be the one applied here and
which should be reckoned from the date of repatriation of each individual
complainant, considering the fact that the case is having (sic) filed in this country. We
do not agree with the POEA Administrator that this three-year prescriptive period
applies only to money claims specifically recoverable under the Philippine Labor
Code. Article 291 gives no such indication. Likewise, We can not consider
complainants' cause/s of action to have accrued from a violation of their employment
contracts. There was no violation; the claims arise from the benefits of the law of the
country where they worked. (G.R. No. 104776, Rollo, pp.
90-91).

Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree No. 23 of
1976, NLRC opined that the applicability of said law was one of characterization, i.e., whether to
characterize the foreign law on prescription or statute of limitation as "substantive" or "procedural."
NLRC cited the decision in Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955],
where the issue was the applicability of the Panama Labor Code in a case filed in the State of New
York for claims arising from said Code. In said case, the claims would have prescribed under the
Panamanian Law but not under the Statute of Limitations of New York. The U.S. Circuit Court of
Appeals held that the Panamanian Law was procedural as it was not "specifically intended to be
substantive," hence, the prescriptive period provided in the law of the forum should apply. The Court
observed:

. . . And where, as here, we are dealing with a statute of limitations of a foreign

country, and it is not clear on the face of the statute that its purpose was to limit the
enforceability, outside as well as within the foreign country concerned, of the
substantive rights to which the statute pertains, we think that as a yardstick for
determining whether that was the purpose this test is the most satisfactory one. It
does not lead American courts into the necessity of examining into the unfamiliar
peculiarities and refinements of different foreign legal systems. . .

The court further noted:

xxx xxx xxx

Applying that test here it appears to us that the libelant is entitled to succeed, for the
respondents have failed to satisfy us that the Panamanian period of limitation in
question was specifically aimed against the particular rights which the libelant seeks
to enforce. The Panama Labor Code is a statute having broad objectives, viz: "The
present Code regulates the relations between capital and labor, placing them on a
basis of social justice, so that, without injuring any of the parties, there may be
guaranteed for labor the necessary conditions for a normal life and to capital an
equitable return to its investment." In pursuance of these objectives the Code gives
laborers various rights against their employers. Article 623 establishes the period of
 limitation for all such rights, except certain ones which are enumerated in Article 621.
And there is nothing in the record to indicate that the Panamanian legislature gave
special consideration to the impact of Article 623 upon the particular rights sought to
be enforced here, as distinguished from the other rights to which that Article is also
applicable. Were we confronted with the question of whether the limitation period of
Article 621 (which carves out particular rights to be governed by a shorter limitation
period) is to be regarded as "substantive" or "procedural" under the rule of "specifity"
we might have a different case; but here on the surface of things we appear to be
dealing with a "broad," and not a "specific," statute of limitations (G.R. No.
104776, Rollo, pp.
92-94).

Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of the
Philippines, which was applied by NLRC, refers only to claims "arising from the employer's violation
of the employee's right as provided by the Labor Code." They assert that their claims are based on
the violation of their employment contracts, as amended by the Amiri Decree No. 23 of 1976 and
therefore the claims may be brought within ten years as provided by Article 1144 of the Civil Code of
the Philippines (Rollo, G.R. Nos. 104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA 244 (1976).

AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri Decree No.
23 of 1976, argue that there is in force in the Philippines a "borrowing law," which is Section 48 of
the Code of Civil Procedure and that where such kind of law exists, it takes precedence over the
common-law conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).

First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri
Decree No. 23 of 1976 or a Philippine law on prescription that shall be the governing law.

Article 156 of the Amiri Decree No. 23 of 1976 provides:

A claim arising out of a contract of employment shall not be actionable after the lapse
of one year from the date of the expiry of the contract. (G.R. Nos. 105029-31, Rollo,
p. 226).

As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such
as service of process, joinder of actions, period and requisites for appeal, and so forth, are governed
by the laws of the forum. This is true even if the action is based upon a foreign substantive law
(Restatement of the Conflict of Laws, Sec. 685; Salonga, Private International Law, 131 [1979]).

A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed
either as procedural or substantive, depending on the characterization given such a law.

Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statute of
limitations of New York, instead of the Panamanian law, after finding that there was no showing that
the Panamanian law on prescription was intended to be substantive. Being considered merely a
procedural law even in Panama, it has to give way to the law of the forum on prescription of actions.

However, the characterization of a statute into a procedural or substantive law becomes irrelevant
when the country of the forum has a "borrowing statute." Said statute has the practical effect of
treating the foreign statute of limitation as one of substance (Goodrich, Conflict of Laws 152-153
[1938]). A "borrowing statute" directs the state of the forum to apply the foreign statute of limitations
to the pending claims based on a foreign law (Siegel, Conflicts, 183 [1975]). While there are several
kinds of "borrowing statutes," one form provides that an action barred by the laws of the place where
it accrued, will not be enforced in the forum even though the local statute has not run against it
(Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure
is of this kind. Said Section provides:

If by the laws of the state or country where the cause of action arose, the action is
barred, it is also barred in the Philippines Islands.

Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of
said Code repealed only those provisions of the Code of Civil Procedures as to which were
inconsistent with it. There is no provision in the Civil Code of the Philippines, which is inconsistent
with or contradictory to Section 48 of the Code of Civil Procedure (Paras, Philippine Conflict of Laws
104 [7th ed.]).

In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio
vigore insofar as it ordains the application in this jurisdiction of Section 156 of the Amiri Decree No.
23 of 1976.

The courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy
(Canadian Northern Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To
enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in
question would contravene the public policy on the protection to labor.

In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:

The state shall promote social justice in all phases of national development. (Sec.
10).

The state affirms labor as a primary social economic force. It shall protect the rights
of workers and promote their welfare (Sec. 18).

In article XIII on Social Justice and Human Rights, the 1987 Constitution provides:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized
and unorganized, and promote full employment and equality of employment
opportunities for all.

Having determined that the applicable law on prescription is the Philippine law, the next question is
whether the prescriptive period governing the filing of the claims is three years, as provided by the
Labor Code or ten years, as provided by the Civil Code of the Philippines.

The claimants are of the view that the applicable provision is Article 1144 of the Civil Code of the
Philippines, which provides:

The following actions must be brought within ten years from the time the right of
action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

 (3) Upon a judgment.

NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Code of
the Philippines, which in pertinent part provides:

Money claims-all money claims arising from employer-employee relations accruing

during the effectivity of this Code shall be filed within three (3) years from the time
the cause of action accrued, otherwise they shall be forever barred.

xxx xxx xxx

The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70 SCRA 244
(1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable to the cases at bench (Rollo,
p. 21). The said case involved the correct computation of overtime pay as provided in the collective
bargaining agreements and not the Eight-Hour Labor Law.

As noted by the Court: "That is precisely why petitioners did not make any reference as to the
computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and
instead insisted that work computation provided in the collective bargaining agreements between the
parties be observed. Since the claim for pay differentials is primarily anchored on the written
contracts between the litigants, the ten-year prescriptive period provided by Art. 1144(1) of the New
Civil Code should govern."

Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933) provides:

Any action to enforce any cause of action under this Act shall be commenced within
three years after the cause of action accrued otherwise such action shall be forever
barred, . . . .

The court further explained:

The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as
amended) will apply, if the claim for differentials for overtime work is solely based on
said law, and not on a collective bargaining agreement or any other contract. In the
instant case, the claim for overtime compensation is not so much because of
Commonwealth Act No. 444, as amended but because the claim is demandable right
of the employees, by reason of the above-mentioned collective bargaining
agreement.

Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to enforce
any cause of action under said law." On the other hand, Article 291 of the Labor Code of the
Philippines provides the prescriptive period for filing "money claims arising from employer-employee
relations." The claims in the cases at bench all arose from the employer-employee relations, which is
broader in scope than claims arising from a specific law or from the collective bargaining agreement.

The contention of the POEA Administrator, that the three-year prescriptive period under Article 291
of the Labor Code of the Philippines applies only to money claims specifically recoverable under said
Code, does not find support in the plain language of the provision. Neither is the contention of the
claimants in G.R. Nos. 104911-14 that said Article refers only to claims "arising from the employer's
violation of the employee's right," as provided by the Labor Code supported by the facial reading of
the provision.
 VII

G.R. No. 104776

A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) that while their
complaints were filed on June 6, 1984 with POEA, the case was decided only on January 30, 1989,
a clear denial of their right to a speedy disposition of the case; and (2) that NLRC and the POEA
Administrator should have declared AIBC and BRII in default (Rollo, pp.
31-35).

Claimants invoke a new provision incorporated in the 1987 Constitution, which provides:

Sec. 16. All persons shall have the right to a speedy disposition of their cases before
all judicial, quasi-judicial, or administrative bodies.

It is true that the constitutional right to "a speedy disposition of cases" is not limited to the accused in
criminal proceedings but extends to all parties in all cases, including civil and administrative cases,
and in all proceedings, including judicial and quasi-judicial hearings. Hence, under the Constitution,
any party to a case may demand expeditious action on all officials who are tasked with the
administration of justice.

However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition of cases" is
a relative term. Just like the constitutional guarantee of "speedy trial" accorded to the accused in all
criminal proceedings, "speedy disposition of cases" is a flexible concept. It is consistent with delays
and depends upon the circumstances of each case. What the Constitution prohibits are
unreasonable, arbitrary and oppressive delays which render rights nugatory.

Caballero laid down the factors that may be taken into consideration in determining whether or not
the right to a "speedy disposition of cases" has been violated, thus:

In the determination of whether or not the right to a "speedy trial" has been violated,
certain factors may be considered and balanced against each other. These are
length of delay, reason for the delay, assertion of the right or failure to assert it, and
prejudice caused by the delay. The same factors may also be considered in
answering judicial inquiry whether or not a person officially charged with the
administration of justice has violated the speedy disposition of cases.

Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:

It must be here emphasized that the right to a speedy disposition of a case, like the
right to speedy trial, is deemed violated only when the proceeding is attended by
vexatious, capricious, and oppressive delays; or when unjustified postponements of
the trial are asked for and secured, or when without cause or justified motive a long
period of time is allowed to elapse without the party having his case tried.

Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the amended
complaint, claimants had been asking that AIBC and BRII be declared in default for failure to file
their answers within the ten-day period provided in Section 1, Rule III of Book VI of the Rules and
Regulations of the POEA. At that time, there was a pending motion of AIBC and BRII to strike out of
the records the amended complaint and the "Compliance" of claimants to the order of the POEA,
requiring them to submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that their final disposition in the
administrative level after seven years from their inception, cannot be said to be attended by
unreasonable, arbitrary and oppressive delays as to violate the constitutional rights to a speedy
disposition of the cases of complainants.

The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said complaint
had undergone several amendments, the first being on April 3, 1985.

The claimants were hired on various dates from 1975 to 1983. They were deployed in different
areas, one group in and the other groups outside of, Bahrain. The monetary claims totalling more
than US$65 million according to Atty. Del Mundo, included:

1. Unexpired portion of contract;

2. Interest earnings of Travel and Fund;

3. Retirement and Savings Plan benefit;

4. War Zone bonus or premium pay of at least 100% of basic pay;

5. Area Differential pay;

6. Accrued Interest of all the unpaid benefits;

7. Salary differential pay;

8. Wage Differential pay;

9. Refund of SSS premiums not remitted to Social Security System;

10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue (B.I.R.);

11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits
consisting of 43 pages (Annex "Q" of Amended Complaint);

12. Moral and Exemplary Damages;

13. Attorney's fees of at least ten percent of amounts;

14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and
issued by the POEA; and

15. Penalty for violation of Article 34 (Prohibited practices) not excluding reportorial
requirements thereof (NLRC Resolution, September 2, 1991, pp. 18-19; G.R. No.
104776, Rollo, pp. 73-74).

Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some facts, the
claimants were ordered to comply with the motion of AIBC for a bill of particulars. When claimants
filed their "Compliance and Manifestation," AIBC moved to strike out the complaint from the records
for failure of claimants to submit a proper bill of particulars. While the POEA Administrator denied the
motion to strike out the complaint, he ordered the claimants "to correct the deficiencies" pointed out
by AIBC.

Before an intelligent answer could be filed in response to the complaint, the records of employment
of the more than 1,700 claimants had to be retrieved from various countries in the Middle East.
Some of the records dated as far back as 1975.

The hearings on the merits of the claims before the POEA Administrator were interrupted several
times by the various appeals, first to NLRC and then to the Supreme Court.

Aside from the inclusion of additional claimants, two new cases were filed against AIBC and BRII on
October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA Case No. L-86-
05-460). NLRC, in exasperation, noted that the exact number of claimants had never been
completely established (Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p. 57). All the three new
cases were consolidated with POEA Case No. L-84-06-555.

NLRC blamed the parties and their lawyers for the delay in terminating the proceedings, thus:

These cases could have been spared the long and arduous route towards resolution
had the parties and their counsel been more interested in pursuing the truth and the
merits of the claims rather than exhibiting a fanatical reliance on technicalities.
Parties and counsel have made these cases a litigation of emotion. The
intransigence of parties and counsel is remarkable. As late as last month, this
Commission made a last and final attempt to bring the counsel of all the parties (this
Commission issued a special order directing respondent Brown & Root's resident
agent/s to appear) to come to a more conciliatory stance. Even this failed (Rollo,
p. 58).

The squabble between the lawyers of claimants added to the delay in the disposition of the cases, to
the lament of NLRC, which complained:

It is very evident from the records that the protagonists in these consolidated cases
appear to be not only the individual complainants, on the one hand, and AIBC and
Brown & Root, on the other hand. The two lawyers for the complainants, Atty.
Gerardo Del Mundo and Atty. Florante De Castro, have yet to settle the right of
representation, each one persistently claiming to appear in behalf of most of the
complainants. As a result, there are two appeals by the complainants. Attempts by
this Commission to resolve counsels' conflicting claims of their respective authority to
represent the complainants prove futile. The bickerings by these two counsels are
reflected in their pleadings. In the charges and countercharges of falsification of
documents and signatures, and in the disbarment proceedings by one against the
other. All these have, to a large extent, abetted in confounding the issues raised in
these cases, jumble the presentation of evidence, and even derailed the prospects of
an amicable settlement. It would not be far-fetched to imagine that both counsel,
unwittingly, perhaps, painted a rainbow for the complainants, with the proverbial pot
of gold at its end containing more than US$100 million, the aggregate of the claims in
these cases. It is, likewise, not improbable that their misplaced zeal and exuberance
caused them to throw all caution to the wind in the matter of elementary rules of
procedure and evidence (Rollo, pp. 58-59).
Adding to the confusion in the proceedings before NLRC, is the listing of some of the complainants
in both petitions filed by the two lawyers. As noted by NLRC, "the problem created by this situation is
that if one of the two petitions is dismissed, then the parties and the public respondents would not
know which claim of which petitioner was dismissed and which was not."

B. Claimants insist that all their claims could properly be consolidated in a "class suit" because "all
the named complainants have similar money claims and similar rights sought irrespective of whether
they worked in Bahrain, United Arab Emirates or in Abu Dhabi, Libya or in any part of the Middle
East" (Rollo, pp. 35-38).

A class suit is proper where the subject matter of the controversy is one of common or general
interest to many and the parties are so numerous that it is impracticable to bring them all before the
court (Revised Rules of Court, Rule 3, Sec. 12).

While all the claims are for benefits granted under the Bahrain Law, many of the claimants worked
outside Bahrain. Some of the claimants were deployed in Indonesia and Malaysia under different
terms and conditions of employment.

NLRC and the POEA Administrator are correct in their stance that inasmuch as the first requirement
of a class suit is not present (common or general interest based on the Amiri Decree of the State of
Bahrain), it is only logical that only those who worked in Bahrain shall be entitled to file their claims in
a class suit.

While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for
employee's benefits), there is no common question of law or fact. While some claims are based on
the Amiri Law of Bahrain, many of the claimants never worked in that country, but were deployed
elsewhere. Thus, each claimant is interested only in his own demand and not in the claims of the
other employees of defendants. The named claimants have a special or particular interest in specific
benefits completely different from the benefits in which the other named claimants and those
included as members of a "class" are claiming (Berses v. Villanueva, 25 Phil. 473 [1913]). It appears
that each claimant is only interested in collecting his own claims. A claimants has no concern in
protecting the interests of the other claimants as shown by the fact, that hundreds of them have
abandoned their co-claimants and have entered into separate compromise settlements of their
respective claims. A principle basic to the concept of "class suit" is that plaintiffs brought on the
record must fairly represent and protect the interests of the others (Dimayuga v. Court of Industrial
Relations, 101 Phil. 590 [1957]). For this matter, the claimants who worked in Bahrain can not be
allowed to sue in a class suit in a judicial proceeding. The most that can be accorded to them under
the Rules of Court is to be allowed to join as plaintiffs in one complaint (Revised Rules of Court, Rule
3, Sec. 6).

The Court is extra-cautious in allowing class suits because they are the exceptions to the
condition sine qua non, requiring the joinder of all indispensable parties.

In an improperly instituted class suit, there would be no problem if the decision secured is favorable
to the plaintiffs. The problem arises when the decision is adverse to them, in which case the others
who were impleaded by their self-appointed representatives, would surely claim denial of due
process.

C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC should
have declared Atty. Florante De Castro guilty of "forum shopping, ambulance chasing activities,
falsification, duplicity and other unprofessional activities" and his appearances as counsel for some
of the claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop to the practice
of some parties of filing multiple petitions and complaints involving the same issues, with the result
that the courts or agencies have to resolve the same issues. Said Rule, however, applies only to
petitions filed with the Supreme Court and the Court of Appeals. It is entitled "Additional
Requirements For Petitions Filed with the Supreme Court and the Court of Appeals To Prevent
Forum Shopping or Multiple Filing of Petitioners and Complainants." The first sentence of the circular
expressly states that said circular applies to an governs the filing of petitions in the Supreme Court
and the Court of Appeals.

While Administrative Circular No. 04-94 extended the application of the anti-forum shopping rule to
the lower courts and administrative agencies, said circular took effect only on April 1, 1994.

POEA and NLRC could not have entertained the complaint for unethical conduct against Atty. De
Castro because NLRC and POEA have no jurisdiction to investigate charges of unethical conduct of
lawyers.

Attorney's Lien

The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by Atty.
Gerardo A. Del Mundo to protect his claim for attorney's fees for legal services rendered in favor of
the claimants (G.R. No. 104776, Rollo, pp. 841-844).

A statement of a claim for a charging lien shall be filed with the court or administrative agency which
renders and executes the money judgment secured by the lawyer for his clients. The lawyer shall
cause written notice thereof to be delivered to his clients and to the adverse party (Revised Rules of
Court, Rule 138, Sec. 37). The statement of the claim for the charging lien of Atty. Del Mundo should
have been filed with the administrative agency that rendered and executed the judgment.

Contempt of Court

The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. Katz Tierra
for violation of the Code of Professional Responsibility should be filed in a separate and appropriate
proceeding.

G.R. No. 104911-14

Claimants charge NLRC with grave abuse of discretion in not accepting their formula of "Three
Hours Average Daily Overtime" in computing the overtime payments. They claim that it was BRII
itself which proposed the formula during the negotiations for the settlement of their claims in Bahrain
and therefore it is in estoppel to disclaim said offer (Rollo, pp. 21-22).

Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16, 1983, which
in pertinent part states:

After the perusal of the memorandum of the Vice President and the Area Manager,
Middle East, of Brown & Root Co. and the Summary of the compensation offered by
the Company to the employees in respect of the difference of pay of the wages of the
overtime and the difference of vacation leave and the perusal of the documents
attached thereto i.e., minutes of the meetings between the Representative of the
employees and the management of the Company, the complaint filed by the
employees on 14/2/83 where they have claimed as hereinabove stated, sample of
 the Service Contract executed between one of the employees and the company
through its agent in (sic) Philippines, Asia International Builders Corporation where it
has been provided for 48 hours of work per week and an annual leave of 12 days
and an overtime wage of 1 & 1/4 of the normal hourly wage.

xxx xxx xxx

The Company in its computation reached the following averages:

A. 1. The average duration of the actual service of the employee is 35 months for the
Philippino (sic) employees . . . .

2. The average wage per hour for the Philippino (sic) employee is US$2.69 . . . .

3. The average hours for the overtime is 3 hours plus in all public holidays and
weekends.

4. Payment of US$8.72 per months (sic) of service as compensation for the

difference of the wages of the overtime done for each Philippino (sic) employee . . .
(Rollo, p.22).

BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by a subordinate
official in the Bahrain Department of Labor; (2) that there was no showing that the Bahrain Minister
of Labor had approved said memorandum; and (3) that the offer was made in the course of the
negotiation for an amicable settlement of the claims and therefore it was not admissible in evidence
to prove that anything is due to the claimants.

While said document was presented to the POEA without observing the rule on presenting official
documents of a foreign government as provided in Section 24, Rule 132 of the 1989 Revised Rules
on Evidence, it can be admitted in evidence in proceedings before an administrative body. The
opposing parties have a copy of the said memorandum, and they could easily verify its authenticity
and accuracy.

The admissibility of the offer of compromise made by BRII as contained in the memorandum is
another matter. Under Section 27, Rule 130 of the 1989 Revised Rules on Evidence, an offer to
settle a claim is not an admission that anything is due.

Said Rule provides:

Offer of compromise not admissible. — In civil cases, an offer of compromise is not

an admission of any liability, and is not admissible in evidence against the offeror.

This Rule is not only a rule of procedure to avoid the cluttering of the record with unwanted evidence
but a statement of public policy. There is great public interest in having the protagonists settle their
differences amicable before these ripen into litigation. Every effort must be taken to encourage them
to arrive at a settlement. The submission of offers and counter-offers in the negotiation table is a
step in the right direction. But to bind a party to his offers, as what claimants would make this Court
do, would defeat the salutary purpose of the Rule.

G.R. Nos. 105029-32

A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits than those
stipulated in the overseas-employment contracts of the claimants. It was of the belief that "where the
laws of the host country are more favorable and beneficial to the workers, then the laws of the host
country shall form part of the overseas employment contract." It quoted with approval the
observation of the POEA Administrator that ". . . in labor proceedings, all doubts in the
implementation of the provisions of the Labor Code and its implementing regulations shall be
resolved in favor of labor" (Rollo, pp. 90-94).

AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to enforce the
overseas-employment contracts, which became the law of the parties. They contend that the
principle that a law is deemed to be a part of a contract applies only to provisions of Philippine law in
relation to contracts executed in the Philippines.

The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided
that the laws of the host country became applicable to said contracts if they offer terms and
conditions more favorable that those stipulated therein. It was stipulated in said contracts that:

The Employee agrees that while in the employ of the Employer, he will not engage in
any other business or occupation, nor seek employment with anyone other than the
Employer; that he shall devote his entire time and attention and his best energies,
and abilities to the performance of such duties as may be assigned to him by the
Employer; that he shall at all times be subject to the direction and control of the
Employer; and that the benefits provided to Employee hereunder are substituted for
and in lieu of all other benefits provided by any applicable law, provided of course,
that total remuneration and benefits do not fall below that of the host country
regulation or custom, it being understood that should applicable laws establish that
fringe benefits, or other such benefits additional to the compensation herein agreed
cannot be waived, Employee agrees that such compensation will be adjusted
downward so that the total compensation hereunder, plus the non-waivable benefits
shall be equivalent to the compensation herein agreed (Rollo, pp. 352-353).

The overseas-employment contracts could have been drafted more felicitously. While a part thereof
provides that the compensation to the employee may be "adjusted downward so that the total
computation (thereunder) plus the non-waivable benefits shall be equivalent to the compensation"
therein agreed, another part of the same provision categorically states "that total remuneration and
benefits do not fall below that of the host country regulation and custom."

Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII,
the parties that drafted it (Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257
[1979]).

Article 1377 of the Civil Code of the Philippines provides:

The interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity.

Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared
form containing the stipulations of the employment contract and the employees merely "take it or
leave it." The presumption is that there was an imposition by one party against the other and that the
employees signed the contracts out of necessity that reduced their bargaining power (Fieldmen's
Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the overseas-employment contracts in question as
adopting the provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof.

The parties to a contract may select the law by which it is to be governed (Cheshire, Private
International Law, 187 [7th ed.]). In such a case, the foreign law is adopted as a "system" to regulate
the relations of the parties, including questions of their capacity to enter into the contract, the
formalities to be observed by them, matters of performance, and so forth (16 Am Jur 2d,
150-161).

Instead of adopting the entire mass of the foreign law, the parties may just agree that specific
provisions of a foreign statute shall be deemed incorporated into their contract "as a set of terms." By
such reference to the provisions of the foreign law, the contract does not become a foreign contract
to be governed by the foreign law. The said law does not operate as a statute but as a set of
contractual terms deemed written in the contract (Anton, Private International Law, 197 [1967]; Dicey
and Morris, The Conflict of Laws, 702-703, [8th ed.]).

A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law in Torts
and Contracts, 16 Columbia Journal of Transnational Law 1, 21 [1977]). Such party expectation is
protected by giving effect to the parties' own choice of the applicable law (Fricke v. Isbrandtsen Co.,
Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must, however, bear some relationship to the
parties or their transaction (Scoles and Hayes, Conflict of Law 644-647 [1982]). There is no question
that the contracts sought to be enforced by claimants have a direct connection with the Bahrain law
because the services were rendered in that country.

In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the
"Employment Agreement," between Norse Management Co. and the late husband of the private
respondent, expressly provided that in the event of illness or injury to the employee arising out of
and in the course of his employment and not due to his own misconduct, "compensation shall be
paid to employee in accordance with and subject to the limitation of the Workmen's Compensation
Act of the Republic of the Philippines or the Worker's Insurance Act of registry of the vessel,
whichever is greater." Since the laws of Singapore, the place of registry of the vessel in which the
late husband of private respondent served at the time of his death, granted a better compensation
package, we applied said foreign law in preference to the terms of the contract.

The case of Bagong Filipinas Overseas Corporation v. National Labor Relations Commission, 135
SCRA 278 (1985), relied upon by AIBC and BRII is inapposite to the facts of the cases at bench.
The issue in that case was whether the amount of the death compensation of a Filipino seaman
should be determined under the shipboard employment contract executed in the Philippines or the
Hongkong law. Holding that the shipboard employment contract was controlling, the court
differentiated said case from Norse Management Co. in that in the latter case there was an express
stipulation in the employment contract that the foreign law would be applicable if it afforded greater
compensation.

B. AIBC and BRII claim that they were denied by NLRC of their right to due process when said
administrative agency granted Friday-pay differential, holiday-pay differential, annual-leave
differential and leave indemnity pay to the claimants listed in Annex B of the Resolution. At first,
NLRC reversed the resolution of the POEA Administrator granting these benefits on a finding that
the POEA Administrator failed to consider the evidence presented by AIBC and BRII, that some
findings of fact of the POEA Administrator were not supported by the evidence, and that some of the
evidence were not disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead of remanding
the case to the POEA Administrator for a new hearing, which means further delay in the termination
of the case, NLRC decided to pass upon the validity of the claims itself. It is this procedure that AIBC
and BRII complain of as being irregular and a "reversible error."

They pointed out that NLRC took into consideration evidence submitted on appeal, the same
evidence which NLRC found to have been "unilaterally submitted by the claimants and not disclosed
to the adverse parties" (Rollo, pp. 37-39).

NLRC noted that so many pieces of evidentiary matters were submitted to the POEA administrator
by the claimants after the cases were deemed submitted for resolution and which were taken
cognizance of by the POEA Administrator in resolving the cases. While AIBC and BRII had no
opportunity to refute said evidence of the claimants before the POEA Administrator, they had all the
opportunity to rebut said evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were able to present
before NLRC additional evidence which they failed to present before the POEA Administrator.

Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process."

In deciding to resolve the validity of certain claims on the basis of the evidence of both parties
submitted before the POEA Administrator and NLRC, the latter considered that it was not expedient
to remand the cases to the POEA Administrator for that would only prolong the already protracted
legal controversies.

Even the Supreme Court has decided appealed cases on the merits instead of remanding them to
the trial court for the reception of evidence, where the same can be readily determined from the
uncontroverted facts on record (Development Bank of the Philippines v. Intermediate Appellate
Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor Relations Commission, 127 SCRA 463
[1984]).

C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the POEA
Administrator to hold new hearings for 683 claimants listed in Annex D of the Resolution dated
September 2, 1991 whose claims had been denied by the POEA Administrator "for lack of proof" and
for 69 claimants listed in Annex E of the same Resolution, whose claims had been found by NLRC
itself as not "supported by evidence" (Rollo, pp. 41-45).

NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which empowers it "[to]
conduct investigation for the determination of a question, matter or controversy, within its jurisdiction,
. . . ."

It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to remand a case
involving claims which had already been dismissed because such provision contemplates only
situations where there is still a question or controversy to be resolved (Rollo, pp. 41-42).

A principle well embedded in Administrative Law is that the technical rules of procedure and
evidence do not apply to the proceedings conducted by administrative agencies (First Asian
Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld Publishing House, Inc.
v. Ople, 152 SCRA 219 [1987]). This principle is enshrined in Article 221 of the Labor Code of the
Philippines and is now the bedrock of proceedings before NLRC.

Notwithstanding the non-applicability of technical rules of procedure and evidence in administrative

proceedings, there are cardinal rules which must be observed by the hearing officers in order to
comply with the due process requirements of the Constitution. These cardinal rules are collated
in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).

VIII

The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds that
NLRC had committed grave abuse of discretion amounting to lack of jurisdiction in issuing the
questioned orders. We find no such abuse of discretion.

WHEREFORE, all the three petitions are DISMISSED.

[G.R. No. 133876. December 29, 1999.]

BANK OF AMERICA, NT and SA, Petitioner, v. AMERICAN REALTY

CORPORATION and COURT OF APPEALS, Respondents.

DECISION

BUENA, J.:

Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage
constituted over a third party mortgagor’s property situated in the Philippines by filing
an action for the collection of the principal loan before foreign courts? chanrob les vi rtua l lawlib ra ry

Sought to be reversed in the instant petition for review on certiorari under Rule 45 of
the Rules of Court are the decision 1 of public respondent Court of Appeals in CA G. R.
CV No. 51094, promulgated on 30 September 1997 and its resolution, 2 dated 22 May
1998, denying petitioner’s motion for reconsideration.

Petitioner Bank of America NT & SA (BANTSA) is an international banking and financing

institution duly licensed to do business in the Philippines, organized and existing under
and by virtue of the laws of the State of California, United States of America while
private respondent American Realty Corporation (ARC) is a domestic corporation.

Bank of America International Limited (BAIL), on the other hand, is a limited liability
company organized and existing under the laws of England.

As borne by the records, BANTSA and BAIL on several occasions granted three major
multi-million United States (US) Dollar loans to the following corporate borrowers: (1)
Liberian Transport Navigation, S.A.; (2) El Challenger S.A. and (3) Eshley Compania
Naviera S.A. (hereinafter collectively referred to as "borrowers"), all of which are
existing under and by virtue of the laws of the Republic of Panama and are foreign
affiliates of private Respondent. 3

Due to the default in the payment of the loan amortizations, BANTSA and the corporate
borrowers signed and entered into restructuring agreements. As additional security for
the restructured loans, private respondent ARC as third party mortgagor executed two
real estate mortgages, 4 dated 17 February 1983 and 20 July 1984, over its parcels of
land including improvements thereon, located at Barrio Sto. Cristo, San Jose Del Monte,
Bulacan, and which are covered by Transfer Certificate of Title Nos. T-78759, T-78760,
T-78761, T-78762 and T-78763. chanroble s virtual law lib rary

Eventually, the corporate borrowers defaulted in the payment of the restructured loans
prompting petitioner BANTSA to file civil actions 5 before foreign courts for the
collection of the principal loan, to wit: jgc:chanrobles. com.ph

"a) In England, in its High Court of Justice, Queen’s Bench Division, Commercial Court
(1992-Folio No. 2098) against Liberian Transport Navigation S.A, Eshley Compania
Naviera S.A., El Challenger S.A., Espriona Shipping Company S.A., Eddie Navigation
Corp., S.A., Eduardo Katipunan Litonjua and Aurelio Katipunan Litonjua on June 17,
1992.

b) In England, in its High Court of Justice, Queen’s Bench Division, Commercial Court
(1992-Folio No. 2245) against El Challenger S.A., Espriona Shipping Company S.A.,
Eduardo Katipunan Litonjua & Aurelio Katipunan Litonjua on July 2, 1992; chanrobles vi rt ual lawli bra ry

c) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4039 of
1992) against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping
Company S.A. Pacific Navigators Corporation, Eddie Navigation Corporation S.A.,
Litonjua Chartering (Edyship) Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo
Katipunan Litonjua on November 19, 1992; and

d) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4040 of
1992) against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping
Company, S.A., Pacific Navigators Corporation, Eddie Navigation Corporation S.A.,
Litonjua Chartering (Edyship) Co., Jr. and Eduardo Katipunan Litonjua on November 21,
1992." cralaw virtua1aw li bra ry

In the civil suits instituted before the foreign courts, private respondent ARC, being a
third party mortgagor, was not impleaded as party-defendant.

On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial
Sheriff of Bulacan, Philippines, an application for extrajudicial foreclosure 6 of real
estate mortgage. chanroblesvi rtua llawli bra ry

On 22 January 1993, after due publication and notice, the mortgaged real properties
were sold at public auction in an extrajudicial foreclosure sale, with Integrated Credit
and Corporation Services Co. (ICCS) as the highest bidder for the sum of Twenty Four
Million Pesos (P24,000,000.00). 7

On 12 February 1993, private respondent filed before the Pasig Regional Trial Court,
Branch 159, an action for damages 8 against the petitioner, for the latter’s act of
foreclosing extrajudicially the real estate mortgages despite the pendency of civil suits
before foreign courts for the collection of the principal loan.

In its answer 9 petitioner alleged that the rule prohibiting the mortgagee from
foreclosing the mortgage after an ordinary suit for collection has been filed, is not
applicable in the present case, claiming that: jgc:chanroble s.com.p h
"a) The plaintiff, being a mere third party mortgagor and not a party to the principal
restructuring agreements, was never made a party defendant in the civil cases filed in
Hongkong and England;

"b) There is actually no civil suit for sum of money filed in the Philippines since the civil
actions were filed in Hongkong and England. As such, any decisions (sic) which may be
rendered in the abovementioned courts are not (sic) enforceable in the Philippines
unless a separate action to enforce the foreign judgments is first filed in the Philippines,
pursuant to Rule 39, Section 50 of the Revised Rules of Court. chanrobles. com.ph : vi rtual law lib rary

"c) Under English Law, which is the governing law under the principal agreements, the
mortgagee does not lose its security interest by filing civil actions for sums of money."
libra ry
cralaw virtua1aw

On 14 December 1993, private respondent filed a motion for suspension 10 of the

redemption period on the ground that "it cannot exercise said right of redemption
without at the same time waiving or contradicting its contentions in the case that the
foreclosure of the mortgage on its properties is legally improper and therefore invalid."
virtua 1aw lib rary
cralaw

In an order 11 dated 28 January 1994, the trial court granted the private respondent’s
motion for suspension after which a copy of said order was duly received by the
Register of Deeds of Meycauayan, Bulacan.

On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the

foreclosure sale, consolidated its ownership over the real properties, resulting to the
issuance of Transfer Certificate of Title Nos. T-18627, T-186272, T-186273, T-16471
and T-16472 in its name.

On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real
properties to Stateland Investment Corporation for the amount of Thirty Nine Million
Pesos (P39,000,000.00). 12 Accordingly, Transfer Certificate of Title Nos. T-187781(m),
T-187782(m), T-187783(m), T-16653P(m) and T-16652P(m) were issued in the latter’s
name. chanrobles. com.ph : vi rtua l law lib rary

After trial, the lower court rendered a decision 13 in favor of private respondent ARC
dated 12 May 1993, the decretal portion of which reads: jgc:chanrobles .com.p h

"WHEREFORE, judgment is hereby rendered declaring that the filing in foreign courts by
the defendant of collection suits against the principal debtors operated as a waiver of
the security of the mortgages. Consequently, the plaintiff’s rights as owner and
possessor of the properties then covered by Transfer Certificates of Title Nos. T-78759,
T-78762, T-78763, T-78760 and T-78761, all of the Register of Deeds of Meycauayan,
Bulacan, Philippines, were violated when the defendant caused the extrajudicial
foreclosure of the mortgages constituted thereon.

"Accordingly, the defendant is hereby ordered to pay the plaintiff the following sums, all
with legal interest thereon from the date of the filing of the complaint up to the date of
actual payment: jgc:chanroble s.com.p h

"1) Actual or compensatory damages in the amount of Ninety Nine Million Pesos
(P99,000,000.00); chanroblesvi rtua l|awlib rary

"2) Exemplary damages in the amount of Five Million Pesos (P5,000,000.00); and

"3) Costs of suit.

"SO ORDERED." cralaw virtua1aw l ibra ry

On appeal, the Court of Appeals affirmed the assailed decision of the lower court
prompting petitioner to file a motion for reconsideration which the appellate court
denied.

Hence, the instant petition for review 14 on certiorari where herein petitioner BANTSA
ascribes to the Court of Appeals the following assignment of errors: chanrob1 es virt ual 1aw li bra ry

1. The Honorable Court of Appeals disregarded the doctrines laid down by this Hon.
Supreme Court in the cases of Caltex Philippines, Inc. v. Intermediate Appellate Court
docketed as G.R. No. 74730 promulgated on August 25, 1989 and Philippine
Commercial International Bank v. IAC, 196 SCRA 29 (1991 case), although said cases
were duly cited, extensively discussed and specifically mentioned, as one of the issues
in the assignment of errors found on page 5 of the decision dated September 30,
1997. chanroble s virtual law lib rary

2. The Hon. Court of Appeals acted with grave abuse of discretion when it awarded the
private respondent actual and exemplary damages totalling P171,600,000.00, as of July
12, 1998 although such huge amount was not asked nor prayed for in private
respondent’s complaint, is contrary to law and is totally unsupported by evidence (sic).

In fine, this Court is called upon to resolve two main issues: chanrob1es vi rtua l 1aw lib rary

1. Whether or not the petitioner’s act of filing a collection suit against the principal
debtors for the recovery of the loan before foreign courts constituted a waiver of the
remedy of foreclosure.

2. Whether or not the award by the lower court of actual and exemplary damages in
favor of private respondent ARC, as third-party mortgagor, is proper.

The petition is bereft of merit.

First, as to the issue of availability of remedies, petitioner submits that a waiver of the
remedy of foreclosure requires the concurrence of two requisites: an ordinary civil
action for collection should be filed and subsequently a final judgment be
correspondingly rendered therein. chanrobles v irt ual lawl ibra ry

According to petitioner, the mere filing of a personal action to collect the principal loan
does not suffice; a final judgment must be secured and obtained in the personal action
so that waiver of the remedy of foreclosure may be appreciated. To put it differently,
absent any of the two requisites, the mortgagee-creditor is deemed not to have waived
the remedy of foreclosure.
We do not agree.

Certainly, this Court finds petitioner’s arguments untenable and upholds the
jurisprudence laid down in Bachrach 15 and similar cases adjudicated thereafter,
thus:jgc:chanrob les.co m.ph

"In the absence of express statutory provisions, a mortgage creditor may institute
against the mortgage debtor either a personal action for debt or a real action to
foreclose the mortgage. In other words, he may pursue either of the two remedies, but
not both. By such election, his cause of action can by no means be impaired, for each of
the two remedies is complete in itself. Thus, an election to bring a personal action will
leave open to him all the properties of the debtor for attachment and execution, even
including the mortgaged property itself. And, if he waives such personal action and
pursues his remedy against the mortgaged property, an unsatisfied judgment thereon
would still give him the right to sue for a deficiency judgment, in which case, all the
properties of the defendant, other than the mortgaged property, are again open to him
for the satisfaction of the deficiency. In either case, his remedy is complete, his cause
of action undiminished, and any advantages attendant to the pursuit of one or the other
remedy are purely accidental and are all under his right of election. On the other hand,
a rule that would authorize the plaintiff to bring a personal action against the debtor
and simultaneously or successively another action against the mortgaged property,
would result not only in multiplicity of suits so offensive to justice (Soriano v. Enriques,
24 Phil. 584) and obnoxious to law and equity (Osorio v. San Agustin, 25 Phil., 404),
but also in subjecting the defendant to the vexation of being sued in the place of his
residence or of the residence of the plaintiff, and then again in the place where the
property lies." cralawnad

In Danao v. Court of Appeals, 16 this Court, reiterating jurisprudence enunciated in

Manila Trading and Supply Co. v. Co Kim 17 and Movido v. RFC, 18 invariably held: jgc:chanroble s.com. ph

". . . The rule is now settled that a mortgage creditor may elect to waive his security
and bring, instead, an ordinary action to recover the indebtedness with the right to
execute a judgment thereon on all the properties of the debtor, including the subject
matter of the mortgage . . ., subject to the qualification that if he fails in the remedy by
him elected, he cannot pursue further the remedy he has waived. (Emphasis ours)

Anent real properties in particular, the Court has laid down the rule that a mortgage
creditor may institute against the mortgage debtor either a personal action for debt or a
real action to foreclose the mortgage. 19

In our jurisdiction, the remedies available to the mortgage creditor are deemed
alternative and not cumulative. Notably, an election of one remedy operates as a
waiver of the other. For this purpose, a remedy is deemed chosen upon the filing of the
suit for collection or upon the filing of the complaint in an action for foreclosure of
mortgage, pursuant to the provision of Rule 68 of the 1997 Rules of Civil Procedure. As
to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor
upon filing of the petition not with any court of justice but with the Office of the Sheriff
of the province where the sale is to be made, in accordance with the provisions of Act
No. 3135, as amended by Act No. 4118. chanrobles vi rt ual lawli bra ry
In the case at bench, private respondent ARC constituted real estate mortgages over its
properties as security for the debt of the principal debtors. By doing so, private
respondent subjected itself to the liabilities of a third party mortgagor. Under the law,
third persons who are not parties to a loan may secure the latter by pledging or
mortgaging their own property. 20

Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which

makes a third person who secures the fulfillment of another’s obligation by mortgaging
his own property, to be solidarily bound with the principal obligor. The signatory to the
principal contract — loan — remains to be primarily bound. It is only upon default of the
latter that the creditor may have recourse on the mortgagors by foreclosing the
mortgaged properties in lieu of an action for the recovery of the amount of the loan. 21

In the instant case, petitioner’s contention that the requisites of filing the action for
collection and rendition of final judgment therein should concur, is untenable. chanroblesvi rtua llawli bra ry:red

Thus, in Cerna v. Court of Appeals, 22 we agreed with the petitioner in said case, that
the filing of a collection suit barred the foreclosure of the mortgage: jgc:chanro bles. com.ph

"A mortgagee who files a suit for collection abandons the remedy of foreclosure of the
chattel mortgage constituted over the personal property as security for the debt or
value of the promissory note when he seeks to recover in the said collection suit." cralaw virtua 1aw lib rary

". . . When the mortgagee elects to file a suit for collection, not foreclosure, thereby
abandoning the chattel mortgage as basis for relief, he clearly manifests his lack of
desire and interest to go after the mortgaged property as security for the promissory
note . . . ."
cralaw virtua1aw l ibra ry

Contrary to petitioner’s arguments, we therefore reiterate the rule, for clarity and
emphasis, that the mere act of filing of an ordinary action for collection operates as a
waiver of the mortgage-creditor’s remedy to foreclose the mortgage. By the mere filing
of the ordinary action for collection against the principal debtors, the petitioner in the
present case is deemed to have elected a remedy, as a result of which a waiver of the
other necessarily must arise. Corollarily, no final judgment in the collection suit is
required for the rule on waiver to apply. chanroblesvi rt ualawlib ra ry

Hence, in Caltex Philippines, Inc. v. Intermediate Appellate Court, 23 a case relied upon
by petitioner, supposedly to buttress its contention, this Court had occasion to rule that
the mere act of filing a collection suit for the recovery of a debt secured by a mortgage
constitutes waiver of the other remedy of foreclosure.

In the case at bar, petitioner BANTSA only has one cause of action which is non-
payment of the debt. Nevertheless, alternative remedies are available for its enjoyment
and exercise. Petitioner then may opt to exercise only one of two remedies so as not to
violate the rule against splitting a cause of action.

As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. v.
Icarangal. 24

"For non-payment of a note secured by mortgage, the creditor has a single cause of
action against the debtor. This single cause of action consists in the recovery of the
credit with execution of the security. In other words, the creditor in his action may
make two demands, the payment of the debt and the foreclosure of his mortgage. But
both demands arise from the same cause, the non-payment of the debt, and for that
reason, they constitute a single cause of action. Though the debt and the mortgage
constitute separate agreements, the latter is subsidiary to the former, and both refer to
one and the same obligation. Consequently, there exists only one cause of action for a
single breach of that obligation. Plaintiff, then, by applying the rules above stated,
cannot split up his single cause of action by filing a complaint for payment of the debt,
and thereafter another complaint for foreclosure of the mortgage. If he does so, the
filing of the first complaint will bar the subsequent complaint. By allowing the creditor
to file two separate complaints simultaneously or successively, one to recover his credit
and another to foreclose his mortgage, we will, in effect, be authorizing him plural
redress for a single breach of contract at so much cost to the courts and with so much
vexation and oppression to the debtor." chanrobles. com : virtual law l ib rary

Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine
enunciated in Caltex, wherein this High Court relaxed the application of the general
rules to wit:
jgc:chanrob les.com. ph

"In the present case, however, we shall not follow this rule to the letter but declare that
it is the collection suit which was waived and/or abandoned. This ruling is more in
harmony with the principles underlying our judicial system. It is of no moment that the
collection suit was filed ahead, what is determinative is the fact that the foreclosure
proceedings ended even before the decision in the collection suit was rendered. . . ." cralaw virtua1aw l ibra ry

Notably, though, petitioner took the Caltex ruling out of context. We must stress that
the Caltex case was never intended to overrule the well-entrenched doctrine enunciated
in Bachrach, which to our mind still finds applicability in cases of this sort. To reiterate,
Bachrach is still good law.

We then quote the decision 25 of the trial court, in the present case, thus: jgc:chanrob les.com. ph

"The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the
peculiar circumstances obtaining therein. In the said case, the Supreme Court chastised
Caltex for making." . . a mockery of our judicial system when it initially filed a collection
suit then, during the pendency thereof, foreclosed extrajudicially the mortgaged
property which secured the indebtedness, and still pursued the collection suit to the
end." Thus, to prevent a mockery of our judicial system", the collection suit had to be
nullified because the foreclosure proceedings have already been pursued to their end
and can no longer be undone.

x x x

"In the case at bar, it has not been shown whether the defendant pursued to the end or
are still pursuing the collection suits filed in foreign courts. There is no occasion,
therefore, for this court to apply the exception laid down by the Supreme Court in
Caltex, by nullifying the collection suits. Quite obviously, too, the aforesaid collection
suits are beyond the reach of this Court. Thus the only way the court may prevent the
spector of a creditor having "plural redress for a single breach of contract" is by
holding, as the Court hereby holds, that the defendant has waived the right to foreclose
the mortgages constituted by the plaintiff on its properties originally covered by
Transfer Certificates of Title Nos. T-78759, T-78762, T-78760 and T-78761." (RTC
Decision pp., 10-11)

In this light, the actuations of Caltex are deserving of severe criticism, to say the least.
26

Moreover, petitioner attempts to mislead this Court by citing the case of PCIB v. IAC.
27 Again, petitioner tried to fit a square peg in a round hole. It must be stressed that
far from overturning the doctrine laid down in Bachrach, this Court in PCIB buttressed
its firm stand on this issue by declaring: jgc:chanrobles. com.ph

"While the law allows a mortgage creditor to either institute a personal action for the
debt or a real action to foreclosure the mortgage, he cannot pursue both remedies
simultaneously or successively as was done by PCIB in this case." chanrobles. com:c ralaw:red

x x x

"Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million
promissory note secured by real estate mortgages and subsequently filed a petition for
extrajudicial foreclosure, it violates the rule against splitting a cause of action." cralaw virtua1aw li bra ry

Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of
filing four civil suits before foreign courts, necessarily abandoned the remedy to
foreclose the real estate mortgages constituted over the properties of third-party
mortgagor and herein private respondent ARC. Moreover, by filing the four civil actions
and by eventually foreclosing extrajudicially the mortgages, petitioner in effect
transgressed the rules against splitting a cause of action well-enshrined in
jurisprudence and our statute books. chanrobles.c om:cra law:red

In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after
the collection suit was filed, considering that the creditor should not be afforded "plural
redress for a single breach of contract." For cause of action should not be confused with
the remedy created for its enforcement. 28

Notably, it is not the nature of the redress which is crucial but the efficacy of the
remedy chosen in addressing the creditor’s cause. Hence, a suit brought before a
foreign court having competence and jurisdiction to entertain the action is deemed, for
this purpose, to be within the contemplation of the remedy available to the mortgagee-
creditor. This pronouncement would best serve the interest of justice and fair play and
further discourage the noxious practice of splitting up a lone cause of action.

Incidentally, BANTSA alleges that under English Law, which according to petitioner is
the governing law with regard to the principal agreements, the mortgagee does not lose
its security interest by simply filing civil actions for sums of money. 29

We rule in the negative. chanro bles law lib rary

This argument shows desperation on the part of petitioner to rivet its crumbling cause.
In the case at bench, Philippine law shall apply notwithstanding the evidence presented
by petitioner to prove the English law on the matter.

In a long line of decisions, this Court adopted the well-imbedded principle in our
jurisdiction that there is no judicial notice of any foreign law. A foreign law must be
properly pleaded and proved as a fact. 30 Thus, if the foreign law involved is not
properly pleaded and proved, our courts will presume that the foreign law is the same
as our local or domestic or internal law. 31 This is what we refer to as the doctrine of
processual presumption.

In the instant case, assuming arguendo that the English Law on the matter were
properly pleaded and proved in accordance with Section 24, Rule 132 of the Rules of
Court and the jurisprudence laid down in Yao Kee, Et. Al. v. Sy-Gonzales, 32 said
foreign law would still not find applicability.

Thus, when the foreign law, judgment or contract is contrary to a sound and
established public policy of the forum, the said foreign law, judgment or order shall not
be applied. 33

Additionally, prohibitive laws concerning persons, their acts or property, and those
which have for their object public order, public policy and good customs shall not be
rendered ineffective by laws or judgments promulgated, or by determinations or
conventions agreed upon in a foreign country. 34

The public policy sought to be protected in the instant case is the principle imbedded in
our jurisdiction proscribing the splitting up of a single cause of action. chanroble s.com:c ralaw:red

Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent —

"If two or more suits are instituted on the basis of the same cause of action, the filing
of one or a judgment upon the merits in any one is available as a ground for the
dismissal of the others."cralaw vi rtua 1aw lib rary

Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is obviously unjust negates
the fundamental principles of Conflict of Laws. 35

Clearly then, English Law is not applicable. chanroble s virtual lawl ib rary

As to the second pivotal issue, we hold that the private respondent is entitled to the
award of actual or compensatory damages inasmuch as the act of petitioner BANTSA in
extrajudicially foreclosing the real estate mortgages constituted a clear violation of the
rights of herein private respondent ARC, as third-party mortgagor.

Actual or compensatory damages are those recoverable because of pecuniary loss in

business, trade, property, profession, job or occupation and the same must be proved,
otherwise if the proof is flimsy and non-substantial, no damages will be given. 36
Indeed, the question of the value of property is always a difficult one to settle as
valuation of real property is an imprecise process since real estate has no inherent
value readily ascertainable by an appraiser or by the court. 37 The opinions of men
vary so much concerning the real value of property that the best the courts can do is
hear all of the witnesses which the respective parties desire to present, and then, by
carefully weighing that testimony, arrive at a conclusion which is just and equitable. 38

In the instant case, petitioner assails the Court of Appeals for relying heavily on the
valuation made by Philippine Appraisal Company. In effect, BANTSA questions the act
of the appellate court in giving due weight to the appraisal report composed of twenty
three pages, signed by Mr. Lauro Marquez and submitted as evidence by
private Respondent. The appraisal report, as the records would readily show, was
corroborated by the testimony of Mr. Reynaldo Flores, witness for Private Respondent.

On this matter, the trial court observed: jgc:chanrobles. com.ph

"The record herein reveals that plaintiff-appellee formally offered as evidence the
appraisal report dated March 29, 1993 (Exhibit J, Records, p. 409), consisting of twenty
three (23) pages which set out in detail the valuation of the property to determine its
fair market value (TSN, April 22, 1994, p. 4), in the amount of P99,986,592.00 (TSN,
ibid., p. 5), together with the corroborative testimony of one Mr. Reynaldo F. Flores, an
appraiser and director of Philippine Appraisal Company, Inc. (TSN, ibid., p. 3). The
latter’s testimony was subjected to extensive cross-examination by counsel for
defendant-appellant (TSN, April 22, 1994, pp. 6-22)." 39

In the matter of credibility of witnesses, the Court reiterates the familiar and well-
entrenched rule that the factual findings of the trial court should be respected. 40 The
time-tested jurisprudence is that the findings and conclusions of the trial court on the
credibility of witnesses enjoy a badge of respect for the reason that trial courts have
the advantage of observing the demeanor of witnesses as they testify. 41

This Court will not alter the findings of the trial court on the credibility of witnesses,
principally because they are in a better position to assess the same than the appellate
court. 42 Besides, trial courts are in a better position to examine real evidence as well
as observe the demeanor of witnesses. 43

Similarly, the appreciation of evidence and the assessment of the credibility of

witnesses rest primarily with the trial court. 44 In the case at bar, we see no reason
that would justify this Court to disturb the factual findings of the trial court, as affirmed
by the Court of Appeals, with regard to the award of actual damages.

In arriving at the amount of actual damages, the trial courts justified the award by
presenting the following ratiocination in its assailed decision 45 , to wit: jgc:chanrobles. com.ph

"Indeed, the Court has its own mind in the matter of valuation. The size of the subject
real properties are (sic) set forth in their individual titles, and the Court itself has seen
the character and nature of said properties during the ocular inspection it conducted.
Based principally on the foregoing, the Court makes the following observations: jgc:chanrobles. com.ph

"1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del Monte,
Bulacan, which is (sic) not distant from Metro Manila — the biggest urban center in the
Philippines — and are easily accessible through well-paved roads;

"2. The properties are suitable for development into a subdivision for low cost housing,
as admitted by defendant’s own appraiser (TSN, May 30, 1994, p. 31);

"3. The pigpens which used to exist in the property have already been demolished.
Houses of strong materials are found in the vicinity of the property (Exhs. 2, 2-1 to 2-
7), and the vicinity is a growing community. It has even been shown that the house of
the Barangay Chairman is located adjacent to the property in question (Exh. 27), and
the only remaining piggery (named Cherry Farm) in the vicinity is about 2 kilometers
away from the western boundary of the property in question (TSN, November 19, p.
3);chanrobles. com : virtual law l ib rary

"4. It will not be hard to find interested buyers of the property, as indubitably shown by
the fact that on March 18, 1994, ICCS (the buyer during the foreclosure sale) sold the
consolidated real estate properties to Stateland Investment Corporation, in whose favor
new titles were issued, i.e., TCT Nos. T-187781(m); T-187782(m), T-187783(m); T-
16653P(m) and T-166521(m) by the Register of Deeds of Meycauayan (sic), Bulacan;

"5. The fact that ICCS was able to sell the subject properties to Stateland Investment
Corporation for Thirty Nine Million (P39,000,000.00) Pesos, which is more than triple
defendant’s appraisal (Exh. 2) clearly shows that the Court cannot rely on defendant’s
aforesaid estimate (Decision, Records, p. 603)." cralaw virtua1aw l ibra ry

It is a fundamental legal aphorism that the conclusions of the trial judge on the
credibility of witnesses command great respect and consideration especially when the
conclusions are supported by the evidence on record. 46 Applying the foregoing
principle, we therefore hold that the trial court committed no palpable error in giving
credence to the testimony of Reynaldo Flores, who according to the records, is a
licensed real estate broker, appraiser and director of Philippine Appraisal Company, Inc.
since 1990. 47 As the records show, Flores had been with the company for 26 years at
the time of his testimony. chanrobles. com : virtual law l ibra ry

Of equal importance is the fact that the trial court did not confine itself to the appraisal
report dated 29 March 1993, and the testimony given by Mr. Reynaldo Flores, in
determining the fair market value of the real property. Above all these, the record
would likewise show that the trial judge in order to appraise himself of the
characteristics and condition of the property, conducted an ocular inspection where the
opposing parties appeared and were duly represented.

Based on these considerations and the evidence submitted, we affirm the ruling of the
trial court as regards the valuation of the property —

". . . a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare
properties (sic) translates to just about Two Hundred Fifty Four Pesos (P254.00) per
square meter. This appears to be, as the court so holds, a better approximation of the
fair market value of the subject properties. This is the amount which should be
restituted by the defendant to the plaintiff by way of actual or compensatory damages .
. ." 48
Further, petitioner ascribes error to the lower court for awarding an amount allegedly
not asked nor prayed for in private respondent’s complaint.

Notwithstanding the fact that the award of actual and compensatory damages by the
lower court exceeded that prayed for in the complaint, the same is nonetheless valid,
subject to certain qualifications.
chanroble svirtual lawlib rary: red

On this issue, Rule 10, Section 5 of the Rules of Court is pertinent: jgc:chanrob les. com.ph

"SECTION 5. Amendment to conform to or authorize presentation of evidence. — When

issues not raised by the pleadings are tried with the express or implied consent of the
parties, they shall be treated in all respects as if they had been raised in the pleadings.
Such amendment of the pleadings as may be necessary to cause them to conform to
the evidence and to raise these issues may be made upon motion of any party at any
time, even after judgment; but failure to amend does not affect the result of the trial of
these issues. If evidence is objected to at the trial on the ground that it is not within the
issues made by the pleadings, the court may allow the pleadings to be amended and
shall do so with liberality if the presentation of the merits of the action and the ends of
substantial justice will be subserved thereby. The court may grant a continuance to
enable the amendment to be made." cralaw virtua1aw l ib rary

The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. v. Asociacion de

Agricultures de Talisay-Silay, Inc. 49 citing Northern Cement Corporation v.
Intermediate Appellate Court 50 is enlightening: jgc:chanrobles.c om.ph

"There have been instances where the Court has held that even without the necessary
amendment, the amount proved at the trial may be validly awarded, as in Tuazon v.
Bolanos (95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief
other than that asked for, no amendment to the complaint was necessary, especially
where defendant had himself raised the point on which recovery was based. The
appellate court could treat the pleading as amended to conform to the evidence
although the pleadings were actually not amended. Amendment is also unnecessary
when only clerical error or non substantial matters are involved, as we held in Bank of
the Philippine Islands v. Laguna (48 Phil. 5). In Co Tiamco v. Diaz (75 Phil. 672), we
stressed that the rule on amendment need not be applied rigidly, particularly where no
surprise or prejudice is caused the objecting party. And in the recent case of National
Power Corporation v. Court of Appeals (113 SCRA 556), we held that where there is a
variance in the defendant’s pleadings and the evidence adduced by it at the trial, the
Court may treat the pleading as amended to conform with the evidence. chanrobles. com.ph : vi rtua l law lib rary

"It is the view of the Court that pursuant to the above-mentioned rule and in light of
the decisions cited, the trial court should not be precluded from awarding an amount
higher than that claimed in the pleading notwithstanding the absence of the required
amendment. But it is upon the condition that the evidence of such higher amount has
been presented properly, with full opportunity on the part of the opposing parties to
support their respective contentions and to refute each other’s evidence.

"The failure of a party to amend a pleading to conform to the evidence adduced during
trial does not preclude an adjudication by the court on the basis of such evidence which
may embody new issues not raised in the pleadings, or serve as a basis for a higher
award of damages. Although the pleading may not have been amended to conform to
the evidence submitted during trial, judgment may nonetheless be rendered, not simply
on the basis of the issues alleged but also on the basis of issues discussed and the
assertions of fact proved in the course of trial. The court may treat the pleading as if it
had been amended to conform to the evidence, although it had not been actually so
amended. Former Chief Justice Moran put the matter in this way: chanrob1es vi rtua l 1aw lib rary

‘When evidence is presented by one party, with the expressed or implied consent of the
adverse party, as to issues not alleged in the pleadings, judgment may be rendered
validly as regards those issues, which shall be considered as if they have been raised in
the pleadings. There is implied consent to the evidence thus presented when the
adverse party fails to object thereto.’

"Clearly, a court may rule and render judgment on the basis of the evidence before it
even though the relevant pleading had not been previously amended, so long as no
surprise or prejudice is thereby caused to the adverse party. Put a little differently, so
long as the basic requirements of fair play had been met, as where litigants were given
full opportunity to support their respective contentions and to object to or refute each
other’s evidence, the court may validly treat the pleadings as if they had been amended
to conform to the evidence and proceed to adjudicate on the basis of all the evidence
before it."
cralaw virt ua1aw lib rary

In the instant case, in as much as the petitioner was afforded the opportunity to refute
and object to the evidence, both documentary and testimonial, formally offered by
private respondent, the rudiments of fair play are deemed satisfied. In fact, the
testimony of Reynaldo Flores was put under scrutiny during the course of the cross-
examination. Under these circumstances, the court acted within the bounds of its
jurisdiction and committed no reversible error in awarding actual damages the amount
of which is higher than that prayed for. Verily, the lower court’s actuations are
sanctioned by the Rules and supported by jurisprudence. chanroble s.com : vi rtua l law lib rary

Similarly, we affirm the grant of exemplary damages although the amount of Five
Million Pesos (P5,000,000.00) awarded, being excessive, is subject to reduction.
Exemplary or corrective damages are imposed, by way of example or correction for the
public good, in addition to the moral, temperate, liquidated or compensatory damages.
51 Considering its purpose, it must be fair and reasonable in every case and should not
be awarded to unjustly enrich a prevailing party. 52 In our view, an award of
P50,000.00 as exemplary damages in the present case qualifies the test of
reasonableness.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The
decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION of the
amount awarded as exemplary damages. Accordingly, petitioner is hereby ordered to
pay private respondent the sum of P99,000,000.00 as actual or compensatory
damages; P50,000.00 as exemplary damage and the costs of suit. cralawnad

SO ORDERED.
 [G.R. No. L-2529. December 31, 1949.]

J. A. SISON, Petitioner, v. THE BOARD OF ACCOUNTANCY and ROBERT ORR

FERGUZON, Respondents.

Quijano, Rosete & Tizon for Petitioner.

Perkins, Ponce Enrile, Contreras & Gomez for Respondent.

Claro M. Recto as amicus curiæ.

SYLLABUS

1. STATUTORY CONSTRUCTION; ACCOUNTANCY LAW; REGISTRATION OF FOREIGNERS

AS CERTIFIED PUBLIC ACCOUNTANT; SECTION 12 OF ACT No. 31085 AS AMENDED
INTERPRETED. — From the text of section 12 of Act No. 3105 as amended, it is inferred
that the registration as certified public accountant and the issuance of the
corresponding certificate as such certified public accountant, to a person who for five
years has been engaged in professional accountancy work in the Philippines and is a
holder of a certificate as certified public accountant, or as a chartered accountant, or
other similar degrees in the country of his origin, is predicated on the fact that the
country of origin of such foreign applicant (a) "does not restrict the right of Filipino
certified public accountants to practice therein." (b) "grants reciprocal rights to
Filipinos," and (c) the application for registration "be filed with the Board not later than
December 31, 1938." cralaw virtua1aw l ibra ry

2. INTERNATIONAL LAW; COMITY OF NATIONS; CERTIFIED PUBLIC ACCOUNT OF

GREAT BRITAIN; ALLOWED TO PRACTICE IN THE PHILIPPINES. — While the profession
of certified public accountant is not controlled or regulated by the Government of Great
Britain, the country of origin of respondent had been admitted in this country to the
practice of his profession of his profession as certified public accountant on the strength
of his membership of the Institute of Accountants and Actuaries in Glasgow (England),
The question of his entitlement to admission to the practice of his profession in this
jurisdiction does not, therefore, come under reciprocity, as this principle is known in
International Law, but is included in the meaning of comity, as expressed in the
alternative condition of the proviso of section 12 of Act No. 3105 which says: such
country or state does not restrict the right of Filipino certified public accountants to
practice therein.

3. ID.; COMITY AND RECIPROCITY DEFINED AND DISTINGUISHED. — International

Law is founded largely upon mutuality, reciprocity and the principle of comity of
nations. Comity, in this connection, is neither a matter of absolute obligation on the one
hand, nor of mere courtesy and good will on the other; it is the recognition which one
nation allows within its territory to the acts of foreign governments and their tribunals,
having due regard both to international duty and convenience and to the rights of its
own citizens or of other persons who are under the protection of its laws. The fact of
reciprocity does not necessarily influence the application of the doctrine of comity,
although it may do so and has been given consideration in some instances.

4. ID.; FILIPINO CERTIFIED ACCOUNTANT ALLOWED TO PRACTICE IN UNITED

KINGDOM. — The Philippines and the United Kingdom are bound by friendship and each
nation is represented in the other by the corresponding diplomatic envoy. There is no
question whatsoever to doubt the statement and assurance made by the diplomatic
representative of the British Government in the Philippines, regarding the practice of
the accountancy profession in the United Kingdom and the fact that Filipino certified
public accountants will be admitted to practice their profession in the United Kingdom
should they choose to do so.

DECISION

TORRES, J.:

In his petition for certiorari against the Board of Accountancy and Robert Orr Ferguson,
J. A. Sison prays that this Court render judgment "ordering the respondent Board of
Accountancy to revoke the certificate issued to Robert Orr Ferguson, a British subject
admitted without examination because there does not exist any reciprocity between the
Philippines and the United Kingdom regarding the practice of accountancy." cralaw virtua1aw l ibra ry

Upon perusal of the pleadings and for a clear understanding of the issue raised by
petitioner the following facts, which we believe are not disputed, shall be stated: chanrob1es vi rtua l 1aw lib rary

Pursuant to the provisions of Act No. 3105 as amended by Commonwealth Act No. 342,
several persons, British subjects, and the possessors of certificates as chartered
accountants issued by various incorporated private accountants’ societies in England
and other parts of the British Empire, were, without examination, granted by the
respondent Board of Accountancy, certificates as public accountants to practice their
profession in this jurisdiction. The respondent Robert Orr Ferguson was granted
certificate No. 713-W on January 14, 1939 pursuant to resolution No. 24 of the Board of
Accountancy, series of 1938.

Subsequently, the Board of Accountancy, upon the examination of the case of those
British accountants who were registered as certified public accountants without
examination, came to the conclusion that, there being no law which regulates the
practice of accountancy in England, and that the practice of accountancy in said country
being limited only to the members of incorporated private accountants’ societies, the
certificates issued by the institute of chartered accountants and other similar societies
in England and Wales cannot be considered on a par with the public accountants’
certificates issued by the Philippine Board of Accountancy, which is a government
entity. In view thereof, the respondent Board of Accountancy "resolved to suspend, . . .
the validity of the C.P.A. certificates of the above- mentioned candidates pending the
final revocation thereof should they fail to prove to the satisfaction of the Board within
sixty days’ notice that: (a) Filipinos are allowed to take the professional accountant
examination given by the British government, if any, and (b) Filipino certified public
accountants can, upon application, be registered as chartered accountants or granted
similar degrees by the British Government." (Annex B.)

Such action of the Board of Accountancy was based on an opinion rendered by the
Secretary of Justice, on October 1, 1946 (Annex A), to the effect that the certificate
issued by the Institute of Chartered Accountants in England and Wales does not meet
the requirement of section 41 of Rule 123 of the Rules of Court and that the negative
statement therein, as quoted above, does not establish the existence of reciprocity,
which induced the board to hold that the registration, without examination, of those
British subjects as certified public accountants, is in accordance with the provisions of
section 12 of Act No. 3105 as amended by Commonwealth Act No. 342.

However, the Secretary of Justice, answering a query from the Secretary of Finance, in
an opinion rendered on February 10, 1947 "on the legality of the suspension or
revocation" of the certificates issued to those British subjects as contemplated in
resolution No. 5, series of 1946 of the Board of Accountancy, was of the opinion that
"the board may not suspend or revoke the certificates previously granted to the ten
British accountants herein involved, including respondent Robert Orr Ferguson, because
such action is in contravention of section 13 of Act No. 3105 as amended which
explicitly provides that the suspension or revocation of a certificate issued under the
said Act may be done by the board for unprofessional conduct of the holder or other
sufficient cause. The Secretary of Justice further said that he believes that "the change
in administrative interpretation with respect to the existence of reciprocity between the
Philippines and Great Britain as to the practice of accountancy," does not constitute
sufficient cause for the suspension or revocation of the certificates in question within
the meaning of said provision. The opinion of the Secretary of Justice further said that if
those certificates were issued to those British persons on the assumption that there is
"reciprocity between Great Britain and the Philippines as to the practice of certified
public accountancy in the Philippines" a change of administrative interpretation is not
favored (42 Am. Jur., 412). While in the instant case the public policy with respect to
the practice of foreign accountants in this country remains unchanged, the action
intended by the Board of Accountancy, to suspend or revoke the certificates already
issued to such persons must be based on some other grounds, such as ignorance,
incapacity, deception or fraud on the part of the holder of the certificate.

In the light of the above, the petitioner brought this action mainly on the ground that
there is no reciprocity "between the Philippines and the United Kingdom" as regards the
practice of the profession of certified public accountant, because the certificate
submitted by respondent Robert Orr Ferguson "is not a public or official record, and
does not meet the requirements of section 41, Rule 21 [123] of the Rules of Court."
And that furthermore, the negative statement that "there is nothing in the laws of the
United Kingdom to restrict the right of a Filipino certified public accountant to practice
as professional accountant therein," does not establish the existence of reciprocity.

Section 12 of Act No. 3105, as amended, reads: jgc:chanrobles. com.ph

"SEC. 12. Any person who has been engaged in the professional accountancy work in
the Philippine Islands for a period of five years or more prior to the date of his
application, and who holds certificates as certified public accountant, or as chartered
accountant, or other similar certificates or degrees in the country of his nationality,
shall be entitled to registration as certified public accountant and to receive a certificate
of registration as such certified public accountant from the Board, Provided such
country or state does not restrict the right of Filipino certified public accountants to
practice therein or grants reciprocal rights to Filipinos, and provided that application for
their registration shall be filed with the Board not later than December 31, 1938." cralaw virtua1aw l ibra ry

From the text of the above-quoted section 12 of the Accountancy Law, it is inferred that
the registration as certified public accountant and the issuance of the corresponding
certificate as such certified public accountant, to a person who for five years has been
engaged in professional accountancy work in the Philippines and is a holder of a
certificate as certified public accountant, or as a chartered accountant, or other similar
degrees in the country of his origin, is predicated on the fact that the country of origin
of such foreign applicant (a) "does not restrict the right of Filipino certified public
accountants to practice therein," (b) "grants reciprocal rights to Filipinos," and (c) the
application for registration "be filed with the Board not later than December 31, 1938."
virtua 1aw lib rary
cralaw

In the case at bar, while the profession of certified public accountant is not controlled or
regulated by the Government of Great Britain, the country of origin of respondent
Robert Orr Ferguson, according to the record, said respondent had been admitted in
this country to the practice of his profession as certified public accountant on the
strength of his membership of the Institute of Accountants and Actuaries in Glasgow
(England), incorporated by Royal Charter, 1855. The question of his entitlement to
admission to the practice of his profession in this jurisdiction, does not, therefore, come
under reciprocity, as this principle is known in International Law, but is included in the
meaning of comity, as expressed in the alternative condition of the proviso of the
abovequoted section 12 which says: such country or state does not restrict the right of
Filipino certified public accountants to practice therein.

"Mutuality, reciprocity, and comity as bases or elements. — International Law is

founded largely upon mutuality, reciprocity, and the principle of comity of nations.
Comity, in this connection, is neither a matter of absolute obligation on the one hand,
nor of mere courtesy and good will on the other; it is the recognition which one nation
allows within its territory to the acts of foreign governments and their tribunals, having
due regard both to international duty and convenience and to the rights of its own
citizens or of other persons who are under the protection of its laws. The fact of
reciprocity does not necessarily influence the application of the doctrine of comity,
although it may do so and has been given consideration in some instances." (30 Am.
Jur., 178; Hilton v. Guyot, 159 U.S., 113, 40 Law. ed., 95; 16 S. Ct., 139.)

In Hilton v. Guyot (supra), the highest court of the United States said that comity "is
the recognition which one nation allows within its territory to the legislative, executive,
or judicial acts of another nation, having due regard both to international duty and
convenience, and to the rights of its own citizens or of other persons who are under the
protection of its laws." Again, in Bank of Augusta v. Earle, 38 U.S., 13 Pet. 519, 589,
Chief Justice Taney, speaking for the court while Mr. Justice Story — well-known author
of the treatise on Conflict of Laws — was a member of it, and largely adopting his
words, said: jgc:chanroble s.com.p h

". . . It is needless to enumerate here the instances in which by the general practice of
civilized countries, the laws of the one will, by the comity of nations, be recognized and
executed in another, where the rights of individuals are concerned . . . The comity thus
extended to other nations is no impeachment of sovereignty. It is the voluntary act of
the nation by which it is offered, and is inadmissible when contrary to its policy, or
prejudicial to its interest. But it contributes so largely to promote justice between
individuals, and to produce a friendly intercourse between the sovereignties to which
they belong, that courts of justice have continually acted upon it, as a part of the
voluntary law of nations . . . It is not the comity of the courts, but the comity of the
nation, which is administered and ascertained in the same way, and guided by the
same reasoning, by which all other principles of municipal law are ascertained and
guided."cralaw virtua 1aw lib rary

The record shows that the British Minister accredited to the Philippine Republic in two
notes concerning this question, addressed to the President of the Philippines in his
capacity as Head of the Department of Foreign Affairs, said: jgc:chanrob les.co m.ph

". . . there is no governmental control of the accounting profession in the United

Kingdom and any resident of the United Kingdom, of whatever nationality, may engage
in the profession of accounting without formality; and . . . that the high standards of
the accounting profession in the United Kingdom are maintained by a number of private
societies whose membership is restricted to persons who have passed a different
professional examination but impose no restriction whatsoever on membership with
respect of nationality." (Note of November 5, 1946.)

Again, the British Minister, in his note of April 15, 1947, further said: jgc:chanrob les.c om.ph

"Your Excellency will recall that doubt had been expressed by the Philippine authorities
concerned as to whether qualified public accountants would be allowed to practice
income tax accounting in the United Kingdom. Accordingly, I requested a ruling on this
point, and I am happy to inform Your Excellency that I have been authorized by His
Majesty’s Principal Secretary of State for Foreign Affairs to state, for the information of
the Government of the Philippines, that qualified Philippine citizens are allowed to
practice the profession of accountancy, including income tax accounting, in the United
Kingdom." cralaw virt ua1aw lib ra ry

We are bound to take notice of the fact that the Philippines and the United Kingdom,
are bound by a treaty of friendship and commerce, and each nation is represented in
the other by the corresponding diplomatic envoy. There is no reason whatsoever to
doubt the statement and assurance made by the diplomatic representative of the
British Government in the Philippines, regarding the practice of the accountancy
profession in the United Kingdom and the fact that Filipino certified public accountants
will be admitted to practice their profession in the United Kingdom should they choose
to do so.

Under such circumstances, and without necessarily construing that such attitude of the
British Government in the premises, as represented by the British Minister, amounts to
reciprocity, we may at least state that it comes within the realm of comity, as
contemplated in our law.

It appearing that the record fails to show that the suspension of this respondent is . . .
based on any of the causes provided by the Accountancy Law, we find no reason why
Robert Orr Ferguson, who had previously been registered as certified public accountant
and issued the corresponding certificate which authorizes him to practice his profession
as certified public accountant in the Philippine Islands, should be suspended from the
practice of his profession in these Islands.
The petition is denied, with costs.

C. DETERMINATION OF APPLICABLE LAW: CHARACTERIZATION

1. Characterization of Conflicts Rules/Connecting Factors
a. Definition
b. Theories of Characterization
c. Sources of Problem of Characterization 

d. Steps in Characterization
2. Subject Matter Characterization
3. Substantive law v. Procedural law; Borrowing Statute 

4. Other Theories on Characterization
a. Definition
b. Center of Gravity / Grouping of Contacts 

c. State-Interest Analysis
d. Caver‗s Principle
e. German Rule of Elective Concurrence

G.R. No. L-35694 December 23, 1933

ALLISON G. GIBBS, petitioner-appelle,

vs.
THE GOVERNMENT OF THE PHILIPPINE ISLANDS, oppositor-appellant.
THE REGISTER OF DEEDS OF THE CITY OF MANILA, respondent-appellant.

Office of the Solicitor-General Hilado for appellants.

Allison D. Gibbs in his own behalf.

BUTTE, J.:

This is an appeal from a final order of the Court of First Instance of Manila, requiring the register of
deeds of the City of Manila to cancel certificates of title Nos. 20880, 28336 and 28331, covering
lands located in the City of Manila, Philippine Islands, and issue in lieu thereof new certificates of
transfer of title in favor of Allison D. Gibbs without requiring him to present any document showing
that the succession tax due under Article XI of Chapter 40 of the Administrative Code has been paid.

The said order of the court of March 10, 1931, recites that the parcels of land covered by said
certificates of title formerly belonged to the conjugal partnership of Allison D. Gibbs and Eva
Johnson Gibbs; that the latter died intestate in Palo Alto, California, on November 28, 1929; that at
the time of her death she and her husband were citizens of the State of California and domiciled
therein.

It appears further from said order that Allison D. Gibbs was appointed administrator of the state of
his said deceased wife in case No. 36795 in the same court, entitled "In the Matter of the Intestate
Estate of Eva Johnson Gibbs, Deceased"; that in said intestate proceedings, the said Allison D.
Gibbs, on September 22,1930, filed an ex parte petition in which he alleged "that the parcels of land
hereunder described belong to the conjugal partnership of your petitioner and his wife, Eva Johnson
Gibbs", describing in detail the three facts here involved; and further alleging that his said wife, a
citizen and resident of California, died on November 28,1929; that in accordance with the law of
California, the community property of spouses who are citizens of California, upon the death of the
wife previous to that of the husband, belongs absolutely to the surviving husband without
administration; that the conjugal partnership of Allison D. Gibbs and Eva Johnson Gibbs, deceased,
has no obligations or debts and no one will be prejudiced by adjucating said parcels of land (and
seventeen others not here involved) to be the absolute property of the said Allison D. Gibbs as sole
owner. The court granted said petition and on September 22, 1930, entered a decree adjucating the
said Allison D. Gibbs to be the sole and absolute owner of said lands, applying section 1401 of the
Civil Code of California. Gibbs presented this decree to the register of deeds of Manila and
demanded that the latter issue to him a "transfer certificate of title".

Section 1547 of Article XI of Chapter 40 of the Administrative Code provides in part that:

Registers of deeds shall not register in the registry of property any document transferring real
property or real rights therein or any chattel mortgage, by way of gifts mortis causa, legacy or
inheritance, unless the payment of the tax fixed in this article and actually due thereon shall
be shown. And they shall immediately notify the Collector of Internal Revenue or the
corresponding provincial treasurer of the non payment of the tax discovered by them. . . .

Acting upon the authority of said section, the register of deeds of the City of Manila, declined to
accept as binding said decree of court of September 22,1930, and refused to register the transfer of
title of the said conjugal property to Allison D. Gibbs, on the ground that the corresponding
inheritance tax had not been paid. Thereupon, under date of December 26, 1930, Allison D. Gibbs
filed in the said court a petition for an order requiring the said register of deeds "to issue the
corresponding titles" to the petitioner without requiring previous payment of any inheritance tax. After
due hearing of the parties, the court reaffirmed said order of September 22, 1930, and entered the
order of March 10, 1931, which is under review on this appeal.

On January 3, 1933, this court remanded the case to the court of origin for new trial upon additional
evidence in regard to the pertinent law of California in force at the time of the death of Mrs. Gibbs,
also authorizing the introduction of evidence with reference to the dates of the acquisition of the
property involved in this suit and with reference to the California law in force at the time of such
acquisition. The case is now before us with the supplementary evidence.

For the purposes of this case, we shall consider the following facts as established by the evidence or
the admissions of the parties: Allison D. Gibbs has been continuously, since the year 1902, a citizen
of the State of California and domiciled therein; that he and Eva Johnson Gibbs were married at
Columbus, Ohio, in July 1906; that there was no antenuptial marriage contract between the parties;
that during the existence of said marriage the spouses acquired the following lands, among others,
in the Philippine Islands, as conjugal property:law phil.net

1. A parcel of land in the City of Manila represented by transfer certificate of title No. 20880, dated
March 16, 1920, and registered in the name of "Allison D. Gibbs casado con Eva Johnson Gibbs".

2. A parcel of land in the City of Manila, represented by transfer certificate of title No. 28336, dated
May 14, 1927, in which it is certified "that spouses Allison D. Gibbs and Eva Johnson Gibbs are the
owners in fee simple" of the land therein described.

3. A parcel of land in the City of Manila, represented by transfer certificate of title No. 28331, dated
April 6, 1927, which it states "that Allison D. Gibbs married to Eva Johnson Gibbs" is the owner of
the land described therein; that said Eva Johnson Gibbs died intestate on November 28, 1929, living
surviving her her husband, the appellee, and two sons, Allison J. Gibbs , now age 25 and Finley J.
Gibbs, now aged 22, as her sole heirs of law.

Article XI of Chapter 40 of the Administrative Code entitled "Tax on inheritances, legacies and other
acquisitions mortis causa" provides in section 1536 that "Every transmission by virtue of inheritance
... of real property ... shall be subject to the following tax." It results that the question for
determination in this case is as follows: Was Eva Johnson Gibbs at the time of her death the owner
of a descendible interest in the Philippine lands above-mentioned?

The appellee contends that the law of California should determine the nature and extent of the title, if
any, that vested in Eva Johnson Gibbs under the three certificates of title Nos. 20880, 28336 and
28331 above referred to, citing article 9 of the Civil Code. But that, even if the nature and extent of
her title under said certificates be governed by the law of the Philippine Islands, the laws of
California govern the succession to such title, citing the second paragraph of article 10 of the Civil
Code.

Article 9 of the Civil Code is as follows:

The laws relating to family rights and duties, or to the status, condition, and legal capacity of
persons, are binding upon Spaniards even though they reside in a foreign country." It is
argued that the conjugal right of the California wife in community real estate in the Philippine
Islands is a personal right and must, therefore, be settled by the law governing her personal
status, that is, the law of California. But our attention has not been called to any law of
California that incapacitates a married woman from acquiring or holding land in a foreign
jurisdiction in accordance with the lex rei sitae. There is not the slightest doubt that a
California married woman can acquire title to land in a common law jurisdiction like the State
of Illinois or the District of Columbia, subject to the common-law estate by the courtesy which
would vest in her husband. Nor is there any doubt that if a California husband acquired land
in such a jurisdiction his wife would be vested with the common law right of dower, the
prerequisite conditions obtaining. Article 9 of the Civil Code treats of purely personal
relations and status and capacity for juristic acts, the rules relating to property, both personal
and real, being governed by article 10 of the Civil Code. Furthermore, article 9, by its very
terms, is applicable only to "Spaniards" (now, by construction, to citizens of the Philippine
Islands).

The Organic Act of the Philippine Islands (Act of Congress, August 29, 1916, known as the
"Jones Law") as regards the determination of private rights, grants practical autonomy to the
Government of the Philippine Islands. This Government, therefore, may apply the principles
and rules of private international law (conflicts of laws) on the same footing as an organized
territory or state of the United States. We should, therefore, resort to the law of California, the
nationality and domicile of Mrs. Gibbs, to ascertain the norm which would be applied here as
law were there any question as to her status.

But the appellant's chief argument and the sole basis of the lower court's decision rests upon the
second paragraph of article 10 of the Civil Code which is as follows:

Nevertheless, legal and testamentary successions, in respect to the order of succession as

well as to the amount of the successional rights and the intrinsic validity of their provisions,
shall be regulated by the national law of the person whose succession is in question,
whatever may be the nature of the property or the country in which it may be situated.
In construing the above language we are met at the outset with some difficulty by the expression
"the national law of the person whose succession is in question", by reason of the rather anomalous
political status of the Philippine Islands. (Cf. Manresa, vol. 1, Codigo Civil, pp. 103, 104.) We
encountered no difficulty in applying article 10 in the case of a citizen of Turkey. (Miciano vs. Brimo,
50 Phil., 867.) Having regard to the practical autonomy of the Philippine Islands, as above stated, we
have concluded that if article 10 is applicable and the estate in question is that of a deceased
American citizen, the succession shall be regulated in accordance with the norms of the State of his
domicile in the United States. (Cf. Babcock Templeton vs. Rider Babcock, 52 Phil., 130, 137; In
re Estate of Johnson, 39 Phil., 156, 166.)

The trial court found that under the law of California, upon the death of the wife, the entire
community property without administration belongs to the surviving husband; that he is the absolute
owner of all the community property from the moment of the death of his wife, not by virtue of
succession or by virtue of her death, but by virtue of the fact that when the death of the wife
precedes that of the husband he acquires the community property, not as an heir or as the
beneficiary of his deceased wife, but because she never had more than an inchoate interest or
expentancy which is extinguished upon her death. Quoting the case of Estate of Klumpke (167 Cal.,
415, 419), the court said: "The decisions under this section (1401 Civil Code of California) are
uniform to the effect that the husband does not take the community property upon the death of the
wife by succession, but that he holds it all from the moment of her death as though required by
himself. ... It never belonged to the estate of the deceased wife."

The argument of the appellee apparently leads to this dilemma: If he takes nothing by succession
from his deceased wife, how can the second paragraph of article 10 be invoked? Can the appellee
be heard to say that there is a legal succession under the law of the Philippine Islands and no legal
succession under the law of California? It seems clear that the second paragraph of article 10
applies only when a legal or testamentary succession has taken place in the Philippines and in
accordance with the law of the Philippine Islands; and the foreign law is consulted only in regard to
the order of succession or the extent of the successional rights; in other words, the second
paragraph of article 10 can be invoked only when the deceased was vested with a descendible
interest in property within the jurisdiction of the Philippine Islands.

In the case of Clarke vs. Clarke (178 U. S., 186, 191; 44 Law ed., 1028, 1031), the court said:

It is principle firmly established that to the law of the state in which the land is situated we
must look for the rules which govern its descent, alienation, and transfer, and for the effect
and construction of wills and other conveyances. (United States vs. Crosby, 7 Cranch, 115; 3
L. ed., 287; Clark vs. Graham, 6 Wheat., 577; 5 L. ed., 334; McGoon vs. Scales, 9 Wall., 23;
19 L. ed., 545; Brine vs. Hartford F. Ins. Co., 96 U. S., 627; 24 L. ed., 858.)" (See also Estate
of Lloyd, 175 Cal., 704, 705.) This fundamental principle is stated in the first paragraph of
article 10 of our Civil Code as follows: "Personal property is subject to the laws of the nation
of the owner thereof; real property to the laws of the country in which it is situated.

It is stated in 5 Cal. Jur., 478:

In accord with the rule that real property is subject to the lex rei sitae, the respective rights of
husband and wife in such property, in the absence of an antenuptial contract, are determined
by the law of the place where the property is situated, irrespective of the domicile of the
parties or to the place where the marriage was celebrated. (See also Saul vs. His Creditors,
5 Martin [N. S.], 569; 16 Am. Dec., 212 [La.]; Heidenheimer vs. Loring, 26 S. W., 99 [Texas].)
Under this broad principle, the nature and extent of the title which vested in Mrs. Gibbs at the time of
the acquisition of the community lands here in question must be determined in accordance with
the lex rei sitae.

It is admitted that the Philippine lands here in question were acquired as community property of the
conjugal partnership of the appellee and his wife. Under the law of the Philippine Islands, she was
vested of a title equal to that of her husband. Article 1407 of the Civil Code provides:

All the property of the spouses shall be deemed partnership property in the absence of proof
that it belongs exclusively to the husband or to the wife. Article 1395 provides:

"The conjugal partnership shall be governed by the rules of law applicable to the contract of
partnership in all matters in which such rules do not conflict with the express provisions of this
chapter." Article 1414 provides that "the husband may dispose by will of his half only of the property
of the conjugal partnership." Article 1426 provides that upon dissolution of the conjugal partnership
and after inventory and liquidation, "the net remainder of the partnership property shall be divided
share and share alike between the husband and wife, or their respective heirs." Under the provisions
of the Civil Code and the jurisprudence prevailing here, the wife, upon the acquisition of any conjugal
property, becomes immediately vested with an interest and title therein equal to that of her husband,
subject to the power of management and disposition which the law vests in the husband.
Immediately upon her death, if there are no obligations of the decedent, as is true in the present
case, her share in the conjugal property is transmitted to her heirs by succession. (Articles 657, 659,
661, Civil Code; cf. also Coronel vs. Ona, 33 Phil., 456, 469.)

It results that the wife of the appellee was, by the law of the Philippine Islands, vested of a
descendible interest, equal to that of her husband, in the Philippine lands covered by certificates of
title Nos. 20880, 28336 and 28331, from the date of their acquisition to the date of her death. That
appellee himself believed that his wife was vested of such a title and interest in manifest from the
second of said certificates, No. 28336, dated May 14, 1927, introduced by him in evidence, in which
it is certified that "the spouses Allison D. Gibbs and Eva Johnson Gibbs are the owners in fee simple
of the conjugal lands therein described."

The descendible interest of Eva Johnson Gibbs in the lands aforesaid was transmitted to her heirs
by virtue of inheritance and this transmission plainly falls within the language of section 1536 of
Article XI of Chapter 40 of the Administrative Code which levies a tax on inheritances. (Cf. Re Estate
of Majot, 199 N. Y., 29; 92 N. E., 402; 29 L. R. A. [N. S.], 780.) It is unnecessary in this proceeding to
determine the "order of succession" or the "extent of the successional rights" (article 10, Civil
Code, supra) which would be regulated by section 1386 of the Civil Code of California which was in
effect at the time of the death of Mrs. Gibbs.

The record does not show what the proper amount of the inheritance tax in this case would be nor
that the appellee (petitioner below) in any way challenged the power of the Government to levy an
inheritance tax or the validity of the statute under which the register of deeds refused to issue a
certificate of transfer reciting that the appellee is the exclusive owner of the Philippine lands included
in the three certificates of title here involved.

The judgment of the court below of March 10, 1931, is reversed with directions to dismiss the
petition, without special pronouncement as to the costs.

G.R. No. L-104776 December 5, 1994

 BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B.
EVANGELISTA, and the rest of 1,767 NAMED-
COMPLAINANTS, thru and by their Attorney-in-fact, Atty.
GERARDO A. DEL MUNDO, Petitioners, v. PHILIPPINE
OVERSEAS EMPLOYMENT ADMINISTRATION'S
ADMINISTRATOR, NATIONAL LABOR RELATIONS
COMMISSION, BROWN & ROOT INTERNATIONAL, INC.
AND/OR ASIA INTERNATIONAL BUILDERS
CORPORATION, Respondents.

G.R. Nos. 104911-14 December 5, 1994

BIENVENIDO M. CADALIN, ET AL., Petitioners, v. HON.

NATIONAL LABOR RELATIONS COMMISSION, BROWN &
ROOT INTERNATIONAL, INC. and/or ASIA INTERNATIONAL
BUILDERS CORPORATION, Respondents.

G.R. Nos. 105029-32 December 5, 1994

ASIA INTERNATIONAL BUILDER CORPORATION and BROWN

& ROOT INTERNATIONAL, INC., Petitioners, v. NATIONAL
LABOR RELATIONS COMMISSION, BIENVENIDO M. CADALIN,
ROLANDO M. AMUL, DONATO B. EVANGELISTA, ROMEO
PATAG, RIZALINO REYES, IGNACIO DE VERA, SOLOMON B.
REYES, JOSE M. ABAN, EMIGDIO N. ABARQUEZ, ANTONIO
ACUPAN, ROMEO ACUPAN, BENJAMIN ALEJANDRE,
WILFREDO D. ALIGADO, MARTIN AMISTAD, JR., ROLANDO B.
AMUL, AMORSOLO ANADING, ANTONIO T. ANGLO, VICENTE
ARLITA, HERBERT AYO, SILVERIO BALATAZO, ALFREDO
BALOBO, FALCONERO BANAAG, RAMON BARBOSA, FELIX
BARCENA, FERNANDO BAS, MARIO BATACLAN, ROBERTO S.
BATICA, ENRICO BELEN, ARISTEO BICOL, LARRY C. BICOL,
PETRONILLO BISCOCHO, FELIX M. BOBIER, DIONISIO
BOBONGO, BAYANI S. BRACAMANTE, PABLITO BUSTILLO,
GUILLERMO CABEZAS, BIENVENIDO CADALIN, RODOLFO
CAGATAN, AMANTE CAILAO, IRENEO CANDOR, JOSE
CASTILLO, MANUEL CASTILLO, REMAR CASTROJERES,
REYNALDO CAYAS, ROMEO CECILIO, TEODULO CREUS,
BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO T. DELA CRUZ,
FRANCISCO DE GUZMAN, ONOFRE DE RAMA, IGNACIO DE
 VERA, MODESTO DIZON, REYNALDO DIZON, ANTONIO S.
DOMINGUEZ, GILBERT EBRADA, RICARDO EBRADA, ANTONIO
EJERCITO, JR., EDUARTE ERIDAO, ELADIO ESCOTOTO, JOHN
ESGUERRA, EDUARDO ESPIRITU, ERNESTO ESPIRITU,
RODOLFO ESPIRITU, NESTOR M. ESTEVA, BENJAMIN
ESTRADA, VALERIO EVANGELISTA, OLIGARIO FRANCISCO,
JESUS GABAWAN, ROLANDO GARCIA, ANGEL GUDA, PACITO
HERNANDEZ, ANTONIO HILARIO, HENRY L. JACOB, HONESTO
JARDINIANO, ANTONIO JOCSON, GERARDO LACSAMANA,
EFREN U. LIRIO LORETO LONTOC, ISRAEL LORENZO,
ALEJANDRO LORINO, JOSE MABALAY, HERMIE MARANAN,
LEOVIGILDO MARCIAL, NOEL MARTINEZ, DANTE MATREO,
LUCIANO MELENDEZ, RENATO MELO, FRANCIS MEDIODIA,
JOSE C. MILANES, RAYMUNDO C. MILAY, CRESENCIANO
MIRANDA, ILDEFONSO C. MOLINA, ARMANDO B. MONDEJAR
RESURRECCION D. NAZARENO, JUAN OLINDO, FRANCISCO R.
OLIVARES, PEDRO ORBISTA, JR., RICARDO ORDONEZ, ERNIE
PANCHO, JOSE PANCHO, GORGONIO P. PARALA, MODESTO
PINPIN, JUANITO PAREA, ROMEO I. PATAG, FRANCISCO
PINPIN, LEONARDO POBLETE, JAIME POLLOS, DOMINGO
PONDALIS, EUGENIO RAMIREZ, LUCIEN M. RESPALL,
GAUDENCIO RETANAN, JR., TOMAS B. RETENER, ALVIN C.
REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO G.
RICAZA, RODELIO RIETA, JR., BENITO RIVERA, JR.,
BERNARDO J. ROBILLOS, PABLO A. ROBLES, JOSE ROBLEZA,
QUIRINO RONQUILLO, AVELINO M. ROQUE, MENANDRO L.
SABINO, PEDRO SALGATAR, EDGARDO SALONGA,
NUMERIANO SAN MATEO, FELIZARDO DE LOS SANTOS, JR.,
GABRIEL SANTOS, JUANITO SANTOS, PAQUITO SOLANTE,
CONRADO A. SOLIS, JR., RODOLFO SULTAN, ISAIAS
TALACTAC, WILLIAM TARUC, MENANDRO TEMPROSA,
BIENVENIDO S. TOLENTINO, BENEDICTO TORRES,
MAXIMIANO TORRES, FRANCISCO G. TRIAS, SERGIO A.
URSOLINO, ROGELIO VALDEZ, LEGORIO E. VERGARA, DELFIN
VICTORIA, GILBERT VICTORIA, HERNANE VICTORIANO,
FRANCISCO VILLAFLORES, DOMINGO VILLAHERMOSA,
ROLANDO VILLALOBOS, ANTONIO VILLAUZ, DANILO
VILLANUEVA, ROGELIO VILLANUEVA, ANGEL VILLARBA,
JUANITO VILLARINO, FRANCISCO ZARA, ROGELIO AALAGOS,
 NICANOR B. ABAD, ANDRES ABANES, REYNALDO ABANES,
EDUARDO ABANTE, JOSE ABARRO, JOSEFINO ABARRO,
CELSO S. ABELANIO, HERMINIO ABELLA, MIGUEL ABESTANO,
RODRIGO G. ABUBO, JOSE B. ABUSTAN, DANTE ACERES,
REYNALDO S. ACOJIDO, LEOWILIN ACTA, EUGENIO C.
ACUEZA, EDUARDO ACUPAN, REYNALDO ACUPAN, SOLANO
ACUPAN, MANUEL P. ADANA, FLORENTINO R. AGNE,
QUITERIO R. AGUDO, MANUEL P. AGUINALDO, DANTE
AGUIRRE, HERMINIO AGUIRRE, GONZALO ALBERTO, JR.,
CONRADO ALCANTARA, LAMBERTO Q. ALCANTARA,
MARIANITO J. ALCANTARA, BENCIO ALDOVER, EULALIO V.
ALEJANDRO, BENJAMIN ALEJANDRO, EDUARDO L.
ALEJANDRO, MAXIMINO ALEJANDRO, ALBERTO ALMENAR,
ARNALDO ALONZO, AMADO ALORIA, CAMILO ALVAREZ,
MANUEL C. ALVAREZ, BENJAMIN R. AMBROCIO, CARLOS
AMORES, BERNARD P. ANCHETA, TIMOTEO O. ANCHETA,
JEOFREY ANI, ELINO P. ANTILLON, ARMANDRO B.
ANTIPONO, LARRY T. ANTONIO, ANTONIO APILADO, ARTURO
P. APILADO, FRANCISCO APOLINARIO, BARTOLOME M.
AQUINO, ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M.
AQUINO, ROBERTO ARANGORIN, BENJAMIN O. ARATEA,
ARTURO V. ARAULLO, PRUDENCIO ARAULLO, ALEXANDER
ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO, JUANTO
AREVALO, RAMON AREVALO, RODOLFO AREVALO, EULALIO
ARGUELLES, WILFREDO P. ARICA, JOSE M. ADESILLO,
ANTONIO ASUNCION, ARTEMIO M. ASUNCION, EDGARDO
ASUNCION, REXY M. ASUNCION, VICENTE AURELIO, ANGEL
AUSTRIA, RICARDO P. AVERILLA, JR., VIRGILIO AVILA,
BARTOLOME AXALAN, ALFREDO BABILONIA, FELIMON
BACAL, JOSE L. BACANI, ROMULO R. BALBIERAN, VICENTE
BALBIERAN, RODOLFO BALITBIT, TEODORO Y. BALOBO,
DANILO O. BARBA, BERNARDO BARRO, JUAN A. BASILAN,
CEFERINO BATITIS, VIVENCIO C. BAUAN, GAUDENCIO S.
BAUTISTA, LEONARDO BAUTISTA, JOSE D. BAUTISTA,
ROSTICO BAUTISTA, RUPERTO B. BAUTISTA, TEODORO S.
BAUTISTA, VIRGILIO BAUTISTA, JESUS R. BAYA,
WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G. BELIR,
ERIC B. BELTRAN, EMELIANO BENALES, JR., RAUL BENITEZ,
PERFECTO BENSAN, IRENEO BERGONIO, ISABELO
 BERMUDEZ, ROLANDO I. BERMUDEZ, DANILO BERON,
BENJAMIN BERSAMIN, ANGELITO BICOL, ANSELMO BICOL,
CELESTINO BICOL, JR., FRANCISCO BICOL, ROGELIO BICOL,
ROMULO L. BICOL, ROGELIO BILLIONES, TEOFILO N. BITO,
FERNANDO BLANCO, AUGUSTO BONDOC, DOMINGO BONDOC,
PEPE S. BOOC, JAMES R. BORJA, WILFREDO BRACEROS,
ANGELES C. BRECINO, EURECLYDON G. BRIONES, AMADO
BRUGE, PABLITO BUDILLO, ARCHIMEDES BUENAVENTURA,
BASILIO BUENAVENTURA, GUILLERMO BUENCONSEJO,
ALEXANDER BUSTAMANTE, VIRGILIO BUTIONG, JR.,
HONESTO P. CABALLA, DELFIN CABALLERO, BENEDICTO
CABANIGAN, MOISES CABATAY, HERMANELI CABRERA,
PEDRO CAGATAN, JOVEN C. CAGAYAT, ROGELIO L. CALAGOS,
REYNALDO V. CALDEJON, OSCAR C. CALDERON, NESTOR D.
CALLEJA, RENATO R. CALMA, NELSON T. CAMACHO, SANTOS
T. CAMACHO, ROBERTO CAMANA, FLORANTE C. CAMANAG
EDGARDO M. CANDA, SEVERINO CANTOS, EPIFANIO A.
CAPONPON, ELIAS D. CARILLO, JR., ARMANDO CARREON,
MENANDRO M. CASTAÑEDA, BENIGNO A. CASTILLO,
CORNELIO L. CASTILLO, JOSEPH B. CASTILLO, ANSELMO
CASTILLO, JOAQUIN CASTILLO, PABLO L. CASTILLO, ROMEO
P. CASTILLO, SESINANDO CATIBOG, DANILO CASTRO,
PRUDENCIO A. CASTRO, RAMO CASTRO, JR., ROMEO A. DE
CASTRO, JAIME B. CATLI, DURANA D. CEFERINO, RODOLFO
B. CELIS, HERMINIGILDO CEREZO, VICTORIANO CELESTINO,
BENJAMIN CHAN, ANTONIO C. CHUA, VIVENCIO B. CIABAL,
RODRIGO CLARETE, AUGUSTO COLOMA, TURIANO
CONCEPCION, TERESITO CONSTANTINO, ARMANDO
CORALES, RENATO C. CORCUERA, APOLINAR CORONADO,
ABELARDO CORONEL, FELIX CORONEL, JR., LEONARDO
CORPUZ, JESUS M. CORRALES, CESAR CORTEMPRATO,
FRANCISCO O. CORVERA, FRANCISCO COSTALES, SR.,
CELEDONIO CREDITO, ALBERTO A. CREUS, ANACLETO V.
CRUZ, DOMINGO DELA CRUZ, AMELIANO DELA CRUZ, JR.,
PANCHITO CRUZ, REYNALDO B. DELA CRUZ, ROBERTO P.
CRUZ, TEODORO S. CRUZ, ZOSIMO DELA CRUZ, DIONISIO A.
CUARESMA, FELIMON CUIZON, FERMIN DAGONDON,
RICHARD DAGUINSIN, CRISANTO A. DATAY, NICASIO
DANTINGUINOO, JOSE DATOON, EDUARDO DAVID, ENRICO
 T. DAVID, FAVIO DAVID, VICTORIANO S. DAVID, EDGARDO
N. DAYACAP, JOSELITO T. DELOSO, CELERINO DE GUZMAN,
ROMULO DE GUZMAN, LIBERATO DE GUZMAN, JOSE DE LEON,
JOSELITO L. DE LUMBAN, NAPOLEON S. DE LUNA, RICARDO
DE RAMA, GENEROSO DEL ROSARIO, ALBERTO DELA CRUZ,
JOSE DELA CRUZ, LEONARDO DELOS REYES, ERNESTO F.
DIATA, EDUARDO A. DIAZ, FELIX DIAZ, MELCHOR DIAZ,
NICANOR S. DIAZ, GERARDO C. DIGA, CLEMENTE
DIMATULAC, ROLANDO DIONISIO, PHILIPP G. DISMAYA,
BENJAMIN DOCTOLERO, ALBERTO STO. DOMINGO,
BENJAMIN E. DOZA, BENJAMIN DUPA, DANILO C. DURAN,
GREGORIO D. DURAN, RENATO A. EDUARTE, GODOFREDO E.
EISMA, ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO,
REYNALDO ENCARNACION, EDGARDO ENGUANCIO, ELIAS
EQUIPANO, FELIZARDO ESCARMOSA, MIGUEL ESCARMOSA,
ARMANDO ESCOBAR, ROMEO T. ESCUYOS, ANGELITO
ESPIRITU, EDUARDO S. ESPIRITU, REYNALDO ESPIRITU,
ROLANDO ESPIRITU, JULIAN ESPREGANTE, IGMIDIO
ESTANISLAO, ERNESTO M. ESTEBAN, MELANIO R. ESTRO,
ERNESTO M. ESTEVA, CONRADO ESTUAR, CLYDE ESTUYE,
ELISEO FAJARDO, PORFIRIO FALQUEZA, WILFREDO P.
FAUSTINO, EMILIO E. FERNANDEZ, ARTEMIO FERRER,
MISAEL M. FIGURACION, ARMANDO F. FLORES, BENJAMIN
FLORES, EDGARDO C. FLORES, BUENAVENTURA FRANCISCO,
MANUEL S. FRANCISCO, ROLANDO FRANCISCO, VALERIANO
FRANCISCO, RODOLFO GABAWAN, ESMERALDO GAHUTAN,
CESAR C. GALANG, SANTIAGO N. GALOSO, GABRIEL GAMBOA,
BERNARDO GANDAMON, JUAN GANZON, ANDRES GARCIA,
JR., ARMANDO M. GARCIA, EUGENIO GARCIA, MARCELO L.
GARCIA, PATRICIO L. GARCIA, JR., PONCIANO G. GARCIA,
PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA, ROBERTO S.
GARCIA, OSIAS G. GAROFIL, RAYMUNDO C. GARON,
ROLANDO G. GATELA, AVELINO GAYETA, RAYMUNDO GERON,
PLACIDO GONZALES, RUPERTO H. GONZALES, ROGELIO D.
GUANIO, MARTIN V. GUERRERO, JR., ALEXIS GUNO,
RICARDO L. GUNO, FRANCISCO GUPIT, DENNIS J.
GUTIERREZ, IGNACIO B. GUTIERREZ, ANGELITO DE GUZMAN,
JR., CESAR H. HABANA, RAUL G. HERNANDEZ, REYNALDO
HERNANDEZ, JOVENIANO D. HILADO, JUSTO HILAPO,
 ROSTITO HINAHON, FELICISIMO HINGADA, EDUARDO
HIPOLITO, RAUL L. IGNACIO, MANUEL L. ILAGAN, RENATO L.
ILAGAN, CONRADO A. INSIONG, GRACIANO G. ISLA, ARNEL
L. JACOB, OSCAR J. JAPITENGA, CIRILO HICBAN,
MAXIMIANO HONRADES, GENEROSO IGNACIO, FELIPE
ILAGAN, EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO
JAVIER, ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE
JESUS, CARLOS A. JIMENEZ, DANILO E. JIMENEZ, PEDRO C.
JOAQUIN, FELIPE W. JOCSON, FELINO M. JOCSON, PEDRO N.
JOCSON, VALENTINO S. JOCSON, PEDRO B. JOLOYA,
ESTEBAN P. JOSE, JR., RAUL JOSE, RICARDO SAN JOSE,
GERTRUDO KABIGTING, EDUARDO S. KOLIMLIM, SR., LAURO
J. LABAY, EMMANUEL C. LABELLA, EDGARDO B. LACERONA,
JOSE B. LACSON, MARIO J. LADINES, RUFINO LAGAC,
RODRIGO LAGANAPAN, EFREN M. LAMADRID, GUADENCIO
LATANAN, VIRGILIO LATAYAN, EMILIANO LATOJA,
WENCESLAO LAUREL, ALFREDO LAXAMANA, DANIEL R.
LAZARO, ANTONIO C. LEANO, ARTURO S. LEGASPI, BENITO
DE LEMOS, JR., PEDRO G. DE LEON, MANOLITO C. LILOC,
GERARDO LIMUACO, ERNESTO S. LISING, RENATO LISING,
WILFREDO S. LISING, CRISPULO LONTOC, PEDRO M.
LOPERA, ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY
LOPEZ, GARLITO LOPEZ, GEORGE F. LOPEZ, VIRGILIO M.
LOPEZ, BERNARDITO G. LOREJA, DOMINGO B. LORICO,
DOMINGO LOYOLA, DANTE LUAGE, ANTONIO M. LUALHATI,
EMMANUEL LUALHATI, JR., LEONIDEZ C. LUALHATI,
SEBASTIAN LUALHATI, FRANCISCO LUBAT, ARMANDO
LUCERO, JOSELITO L. DE LUMBAN, THOMAS VICENTE O.
LUNA, NOLI MACALADLAD, ALFREDO MACALINO, RICARDO
MACALINO, ARTURO V. MACARAIG, ERNESTO V. MACARAIG,
RODOLFO V. MACARAIG, BENJAMIN MACATANGAY,
HERMOGENES MACATANGAY, RODEL MACATANGAY, ROMULO
MACATANGAY, OSIAS Q. MADLANGBAYAN, NICOLAS P.
MADRID, EDELBERTO G. MAGAT, EFREN C. MAGBANUA,
BENJAMIN MAGBUHAT, ALFREDO C. MAGCALENG, ANTONIO
MAGNAYE, ALFONSO MAGPANTAY, RICARDO C. MAGPANTAY,
SIMEON M. MAGPANTAY, ARMANDO M. MAGSINO, MACARIO
S. MAGSINO, ANTONIO MAGTIBAY, VICTOR V. MAGTIBAY,
GERONIMO MAHILUM, MANUEL MALONZO, RICARDO
 MAMADIS, RODOLFO MANA, BERNARDO A. MANALILI,
MANUEL MANALILI, ANGELO MANALO, AGUILES L. MANALO,
LEOPOLDO MANGAHAS, BAYANI MANIGBAS, ROLANDO C.
MANIMTIM, DANIEL MANONSON, ERNESTO F. MANUEL,
EDUARDO MANZANO, RICARDO N. MAPA, RAMON MAPILE,
ROBERTO C. MARANA, NEMESIO MARASIGAN, WENCESLAO
MARASIGAN, LEONARDO MARCELO, HENRY F. MARIANO,
JOEL MARIDABLE, SANTOS E. MARINO, NARCISO A.
MARQUEZ, RICARDO MARTINEZ, DIEGO MASICAMPO,
AURELIO MATABERDE, RENATO MATILLA, VICTORIANO
MATILLA, VIRGILIO MEDEL, LOLITO M. MELECIO, BENIGNO
MELENDEZ, RENER J. MEMIJE, REYNALDO F. MEMIJE, RODEL
MEMIJE, AVELINO MENDOZA, JR., CLARO MENDOZA,
TIMOTEO MENDOZA, GREGORIO MERCADO, ERNANI DELA
MERCED, RICARDO MERCENA, NEMESIO METRELLO, RODEL
MEMIJE, GASPAR MINIMO, BENJAMIN MIRANDA,
FELIXBERTO D. MISA, CLAUDIO A. MODESTO, JR., OSCAR
MONDEDO, GENEROSO MONTON, RENATO MORADA,
RICARDO MORADA, RODOLFO MORADA, ROLANDO M.
MORALES, FEDERICO M. MORENO, VICTORINO A. MORTEL,
JR., ESPIRITU A. MUNOZ, IGNACIO MUNOZ, ILDEFONSO
MUNOZ, ROGELIO MUNOZ, ERNESTO NAPALAN, MARCELO A.
NARCIZO, REYNALDO NATALIA, FERNANDO C. NAVARETTE,
PACIFICO D. NAVARRO, FLORANTE NAZARENO, RIZAL B.
NAZARIO, JOSUE NEGRITE, ALFREDO NEPUMUCENO,
HERBERT G. NG, FLORENCIO NICOLAS, ERNESTO C. NINON,
AVELINO NUQUI, NEMESIO D. OBA, DANILO OCAMPO,
EDGARDO OCAMPO, RODRIGO E. OCAMPO, ANTONIO B.
OCCIANO, REYNALDO P. OCSON, BENJAMIN ODESA, ANGEL
OLASO, FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN
V. ORALLO, ROMEO S. ORIGINES, DANILO R. ORTANEZ,
WILFREDO OSIAS, VIRGILIO PA-A, DAVID PAALAN, JESUS N.
PACHECO, ALFONSO L. PADILLA, DANILO PAGSANJAN,
NUMERIANO PAGSISIHAN, RICARDO T. PAGUIO, EMILIO
PAKINGAN, LEANDRO PALABRICA, QUINCIANO PALO, JOSE
PAMATIAN, GONZALO PAN, PORFIRIO PAN, BIENVENIDO
PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA,
EDILBERTO PASIMIO, JR., JOSE V. PASION, ANGELITO M.
PENA, DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDO
 M. PERALTA, ANTONIO PEREZ, ANTOLIANO E. PEREZ, JUAN
PEREZ, LEON PEREZ, ROMEO E. PEREZ, ROMULO PEREZ,
WILLIAM PEREZ, FERNANDO G. PERINO, FLORENTINO DEL
PILAR, DELMAR F. PINEDA, SALVADOR PINEDA, ELIZALDE
PINPIN, WILFREDO PINPIN, ARTURO POBLETE, DOMINADOR
R. PRIELA, BUENAVENTURA PRUDENTE, CARMELITO
PRUDENTE, DANTE PUEYO, REYNALDO Q. PUEYO, RODOLFO
O. PULIDO, ALEJANDRO PUNIO, FEDERICO QUIMAN,
ALFREDO L. QUINTO, ROMEO QUINTOS, EDUARDO W.
RACABO, RICARDO C. DE RAMA, RICARDO L. DE RAMA,
ROLANDO DE RAMA, FERNANDO A. RAMIREZ, LITO S.
RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V. RAMIREZ,
ALBERTO RAMOS, ANSELMO C. RAMOS, TOBIAS RAMOS,
WILLARFREDO RAYMUNDO, REYNALDO RAQUEDAN, MANUEL
F. RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E.
RECOLASO, ALBERTO REDAZA, ARTHUR REJUSO, TORIBIO M.
RELLAMA, JAIME RELLOSA, EUGENIO A. REMOQUILLO,
GERARDO RENTOZA, REDENTOR C. REY, ALFREDO S. REYES,
AMABLE S. REYES, BENEDICTO R. REYES, GREGORIO B.
REYES, JOSE A. REYES, JOSE C. REYES, ROMULO M. REYES,
SERGIO REYES, ERNESTO F. RICO, FERNANDO M. RICO,
EMMANUEL RIETA, RICARDO RIETA, LEO B. ROBLES, RUBEN
ROBLES, RODOLFO ROBLEZA, RODRIGO ROBLEZA, EDUARDO
ROCABO, ANTONIO R. RODRIGUEZ, BERNARDO RODRIGUEZ,
ELIGIO RODRIGUEZ, ALMONTE ROMEO, ELIAS RONQUILLO,
ELISE RONQUILLO, LUIS VAL B. RONQUILLO, REYNOSO P.
RONQUILLO, RODOLFO RONQUILLO, ANGEL ROSALES,
RAMON ROSALES, ALBERTO DEL ROSARIO, GENEROSO DEL
ROSARIO, TEODORICO DEL ROSARIO, VIRGILIO L. ROSARIO,
CARLITO SALVADOR, JOSE SAMPARADA, ERNESTO SAN
PEDRO, ADRIANO V. SANCHA, GERONIMO M. SANCHA,
ARTEMIO B. SANCHEZ, NICASIO SANCHEZ, APOLONIO P.
SANTIAGO, JOSELITO S. SANTIAGO, SERGIO SANTIAGO,
EDILBERTO C. SANTOS, EFREN S. SANTOS, RENATO D.
SANTOS, MIGUEL SAPUYOT, ALEX S. SERQUINA, DOMINADOR
P. SERRA, ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D.
SILANG, RODOLFO B. DE SILOS, ANICETO G. SILVA,
EDGARDO M. SILVA, ROLANDO C. SILVERTO, ARTHUR B.
SIMBAHON, DOMINGO SOLANO, JOSELITO C. SOLANTE,
 CARLITO SOLIS, CONRADO SOLIS, III, EDGARDO SOLIS,
ERNESTO SOLIS, ISAGANI M. SOLIS, EDUARDO L. SOTTO,
ERNESTO G. STA. MARIA, VICENTE G. STELLA, FELIMON
SUPANG, PETER TANGUINOO, MAXIMINO TALIBSAO,
FELICISMO P. TALUSIK, FERMIN TARUC, JR., LEVY S.
TEMPLO, RODOLFO S. TIAMSON, LEONILO TIPOSO, ARNEL
TOLENTINO, MARIO M. TOLENTINO, FELIPE TORRALBA,
JOVITO V. TORRES, LEONARDO DE TORRES, GAVINO U.
TUAZON, AUGUSTO B. TUNGUIA, FRANCISCO UMALI,
SIMPLICIO UNIDA, WILFREDO V. UNTALAN, ANTONIO
VALDERAMA, RAMON VALDERAMA, NILO VALENCIANO,
EDGARDO C. VASQUEZ, ELPIDIO VELASQUEZ, NESTOR DE
VERA, WILFREDO D. VERA, BIENVENIDO VERGARA, ALFREDO
VERGARA, RAMON R. VERZOSA, FELICITO P. VICMUNDO,
ALFREDO VICTORIANO, TEOFILO P. VIDALLO, SABINO N.
VIERNEZ, JESUS J. VILLA, JOVEN VILLABLANCO, EDGARDO G.
VILLAFLORES, CEFERINO VILLAGERA, ALEX VILLAHERMOZA,
DANILO A. VILLANUEVA, ELITO VILLANUEVA, LEONARDO M.
VILLANUEVA, MANUEL R. VILLANUEVA, NEPTHALI VILLAR,
JOSE V. VILLAREAL, FELICISIMO VILLARINO, RAFAEL
VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO,
ROBERTO YABUT, VICENTE YNGENTE, AND ORO C.
ZUNIGA, Respondents. chanrobles v irt ual law l ibra ry

Gerardo A. Del Mundo and Associates for petitioners. chanro bles vi rtua l law li bra ry

Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices

for BRII/AIBC.chanroble s virtual law lib rary

Florante M. De Castro for private respondents in 105029-32. chanrobles vi rtua l law lib rary

QUIASON, J.:

The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et.

al. v. Philippine Overseas Employment Administration's
Administrator, et. al.," was filed under Rule 65 of the Revised Rules
of Court:

(1) to modify the Resolution dated September 2, 1991 of the

National Labor Relations Commission (NLRC) in POEA Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to
render a new decision: (i) declaring private respondents as in
default; (ii) declaring the said labor cases as a class suit; (iii)
ordering Asia International Builders Corporation (AIBC) and Brown
and Root International Inc. (BRII) to pay the claims of the 1,767
claimants in said labor cases; (iv) declaring Atty. Florante M. de
Castro guilty of forum-shopping; and (v) dismissing POEA Case No.
L-86-05-460; and chanrob les vi rtua l law lib rary

(3) to reverse the Resolution dated March 24, 1992 of NLRC,

denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-288).

The petition in G.R. Nos. 104911-14, entitled "Bienvenido M.

Cadalin, et. al., v. Hon. National Labor Relations Commission, et.
al.," was filed under Rule 65 of the Revised Rules of Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in

POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive
period under the Labor Code of the Philippines instead of the ten-
year prescriptive period under the Civil Code of the Philippines; and
(ii) denied the
"three-hour daily average" formula in the computation of
petitioners' overtime pay; and chanrobles vi rtua l law lib rary

(2) to reverse the Resolution dated March 24, 1992 of NLRC,

denying the motion for reconsideration of its Resolution dated
September 2, 1991 (Rollo, pp. 8-25; 26-220).

The petition in G.R. Nos. 105029-32, entitled "Asia International

Builders Corporation, et. al., v. National Labor Relations
Commission, et. al." was filed under Rule 65 of the Revised Rules of
Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in

POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants; and
virtua l law lib rary
chanrob les
(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar
as it denied the motions for reconsideration of AIBC and BRII (Rollo,
pp. 2-59; 61-230).

The Resolution dated September 2, 1991 of NLRC, which modified

the decision of POEA in four labor cases: (1) awarded monetary
benefits only to 149 claimants and (2) directed Labor Arbiter Fatima
J. Franco to conduct hearings and to receive evidence on the claims
dismissed by the POEA for lack of substantial evidence or proof of
employment.

Consolidation of Cases

G.R. Nos. 104776 and 105029-32 were originally raffled to the Third
Division while G.R. Nos. 104911-14 were raffled to the Second
Division. In the Resolution dated July 26, 1993, the Second Division
referred G.R. Nos. 104911-14 to the Third Division (G.R. Nos.
104911-14, Rollo, p. 895). chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

In the Resolution dated September 29, 1993, the Third Division

granted the motion filed in G.R. Nos. 104911-14 for the
consolidation of said cases with G.R. Nos. 104776 and 105029-32,
which were assigned to the First Division (G.R. Nos. 104911-
14, Rollo, pp. 986-1,107; G.R. Nos. 105029-30, Rollo, pp. 369-377,
426-432). In the Resolution dated October 27, 1993, the First
Division granted the motion to consolidate G.R. Nos. 104911-14
with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo, p. 1109; G.R.
Nos. 105029-32, Rollo, p. 1562).

I
chan roble s virtual law l ib rary

On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and

Donato B. Evangelista, in their own behalf and on behalf of 728
other overseas contract workers (OCWs) instituted a class suit by
filing an "Amended Complaint" with the Philippine Overseas
Employment Administration (POEA) for money claims arising from
their recruitment by AIBC and employment by BRII (POEA Case No.
L-84-06-555). The claimants were represented by Atty. Gerardo del
Mundo. chanroblesvi rtualaw lib raryc han robles v irt ual law li bra ry
BRII is a foreign corporation with headquarters in Houston, Texas,
and is engaged in construction; while AIBC is a domestic
corporation licensed as a service contractor to recruit, mobilize and
deploy Filipino workers for overseas employment on behalf of its
foreign principals. ch anroble svirtualawl ibra ryc hanro bles vi rt ual law li bra ry

The amended complaint principally sought the payment of the

unexpired portion of the employment contracts, which was
terminated prematurely, and secondarily, the payment of the
interest of the earnings of the Travel and Reserved Fund, interest
on all the unpaid benefits; area wage and salary differential pay;
fringe benefits; refund of SSS and premium not remitted to the
SSS; refund of withholding tax not remitted to the BIR; penalties for
committing prohibited practices; as well as the suspension of the
license of AIBC and the accreditation of BRII (G.R. No.
104776, Rollo, pp. 13-14). chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

At the hearing on June 25, 1984, AIBC was furnished a copy of the
complaint and was given, together with BRII, up to July 5, 1984 to
file its answer. chanroblesvi rtua lawlib rary chan roble s virtual la w libra ry

On July 3, 1984, POEA Administrator, upon motion of AIBC and

BRII, ordered the claimants to file a bill of particulars within ten
days from receipt of the order and the movants to file their answers
within ten days from receipt of the bill of particulars. The POEA
Administrator also scheduled a pre-trial conference on July 25,
1984.chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

On July 13, 1984, the claimants submitted their "Compliance and

Manifestation." On July 23, 1984, AIBC filed a "Motion to Strike Out
of the Records", the "Complaint" and the "Compliance and
Manifestation." On July 25, 1984, the claimants filed their
"Rejoinder and Comments," averring, among other matters, the
failure of AIBC and BRII to file their answers and to attend the pre-
trial conference on July 25, 1984. The claimants alleged that AIBC
and BRII had waived their right to present evidence and had
defaulted by failing to file their answers and to attend the pre-trial
conference. chanroble svi rtualaw lib raryc hanrobles vi rt ual law li bra ry
On October 2, 1984, the POEA Administrator denied the "Motion to
Strike Out of the Records" filed by AIBC but required the claimants
to correct the deficiencies in the complaint pointed out in the
order.chanroble svirtualawl ibra ryc hanro bles vi rtua l law li bra ry

On October 10, 1984, claimants asked for time within which to

comply with the Order of October 2, 1984 and filed an "Urgent
Manifestation," praying that the POEA Administrator direct the
parties to submit simultaneously their position papers, after which
the case should be deemed submitted for decision. On the same
day, Atty. Florante de Castro filed another complaint for the same
money claims and benefits in behalf of several claimants, some of
whom were also claimants in POEA Case No. L-84-06-555 (POEA
Case No. 85-10-779). chanroblesv irt ualawli bra rycha nrob les vi rtual law lib rary

On October 19, 1984, claimants filed their "Compliance" with the

Order dated October 2, 1984 and an "Urgent Manifestation," praying
that the POEA direct the parties to submit simultaneously their
position papers after which the case would be deemed submitted for
decision. On the same day, AIBC asked for time to file its comment
on the "Compliance" and "Urgent Manifestation" of claimants. On
November 6, 1984, it filed a second motion for extension of time to
file the comment. chanroblesvi rtualaw lib raryc han robles v irt ual law l ibra ry

On November 8, 1984, the POEA Administrator informed AIBC that

its motion for extension of time was granted. chanroble svi rtualawl ib raryc hanrobles vi rt ual law li bra ry

On November 14, 1984, claimants filed an opposition to the motions

for extension of time and asked that AIBC and BRII be declared in
default for failure to file their answers. chanrob lesvi rtualaw lib raryc han robles v irt ual law l ibra ry

On November 20, 1984, AIBC and BRII filed a "Comment" praying,

among other reliefs, that claimants should be ordered to amend
their complaint. chanroblesv irtualawl ibra rycha nroble s virtual law l ib rary

On December 27, 1984, the POEA Administrator issued an order

directing AIBC and BRII to file their answers within ten days from
receipt of the order. chanro blesvi rt ualawlib ra rychan rob les vi rtual law lib rary
On February 27, 1985, AIBC and BRII appealed to NLRC seeking the
reversal of the said order of the POEA Administrator. Claimants
opposed the appeal, claiming that it was dilatory and praying that
AIBC and BRII be declared in default. chan roblesv irt ualawli bra rycha nrob les vi rtua l law lib rary

On April 2, 1985, the original claimants filed an "Amended

Complaint and/or Position Paper" dated March 24, 1985, adding new
demands: namely, the payment of overtime pay, extra night work
pay, annual leave differential pay, leave indemnity pay, retirement
and savings benefits and their share of forfeitures (G.R. No.
104776, Rollo, pp. 14-16). On April 15, 1985, the POEA
Administrator directed AIBC to file its answer to the amended
complaint (G.R. No. 104776, Rollo, p. 20). chanroblesvi rtua lawlib rary chan roble s virt ual law l ibra ry

On May 28, 1985, claimants filed an "Urgent Motion for Summary

Judgment." On the same day, the POEA issued an order directing
AIBC and BRII to file their answers to the "Amended Complaint,"
otherwise, they would be deemed to have waived their right to
present evidence and the case would be resolved on the basis of
complainant's evidence. chanroblesvi rt ualawlib ra rychan roble s virtual law lib rary

On June 5, 1985, AIBC countered with a "Motion to Dismiss as

Improper Class Suit and Motion for Bill of Particulars Re: Amended
Complaint dated March 24, 1985." Claimants opposed the
motions.chanroblesvi rt ualawlib ra rychan rob les vi rtual law lib rary

On September 4, 1985, the POEA Administrator reiterated his

directive to AIBC and BRII to file their answers in POEA Case No. L-
84-06-555. chanroblesvi rtua lawlib rary chan roble s virtual law l ib rary

On September 18, 1985, AIBC filed its second appeal to the NLRC,
together with a petition for the issuance of a writ of injunction. On
September 19, 1985, NLRC enjoined the POEA Administrator from
hearing the labor cases and suspended the period for the filing of
the answers of AIBC and BRII. chanrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

On September 19, 1985, claimants asked the POEA Administrator to

include additional claimants in the case and to investigate alleged
wrongdoings of BRII, AIBC and their respective lawyers. chanrob lesvi rtua lawlib raryc han robles v irt ual law l ibra ry
On October 10, 1985, Romeo Patag and two co-claimants filed a
complaint (POEA Case No. L-85-10-777) against AIBC and BRII with
the POEA, demanding monetary claims similar to those subject of
POEA Case No. L-84-06-555. In the same month, Solomon Reyes
also filed his own complaint (POEA Case No. L-85-10-779) against
AIBC and BRII. chanro blesvi rt ualawlib ra rychan roble s v irtua l law lib ra ry

On October 17, 1985, the law firm of Florante M. de Castro &

Associates asked for the substitution of the original counsel of
record and the cancellation of the special powers of attorney given
the original counsel. cha nro blesvi rtua lawlib rary chan roble s virtual law l ib rary

On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of

the claim to enforce attorney's lien. chanroble svirtualawl ibra ryc hanro bles vi rt ual law li bra ry

On May 29, 1986, Atty. De Castro filed a complaint for money

claims (POEA Case No. 86-05-460) in behalf of 11 claimants
including Bienvenido Cadalin, a claimant in POEA Case No. 84-06-
555.chanroblesvi rtualaw lib raryc han robles v irt ual law li bra ry

On December 12, 1986, the NLRC dismissed the two appeals filed
on February 27, 1985 and September 18, 1985 by AIBC and
BRII. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

In narrating the proceedings of the labor cases before the POEA

Administrator, it is not amiss to mention that two cases were filed in
the Supreme Court by the claimants, namely - G.R. No. 72132 on
September 26, 1985 and Administrative Case No. 2858 on March
18, 1986. On May 13, 1987, the Supreme Court issued a resolution
in Administrative Case No. 2858 directing the POEA Administrator to
resolve the issues raised in the motions and oppositions filed in
POEA Cases Nos. L-84-06-555 and L-86-05-460 and to decide the
labor cases with deliberate dispatch. chanro blesvi rt ualawlib ra rychan roble s virtual law lib rary

AIBC also filed a petition in the Supreme Court (G.R. No. 78489),
questioning the Order dated September 4, 1985 of the POEA
Administrator. Said order required BRII and AIBC to answer the
amended complaint in POEA Case No. L-84-06-555. In a resolution
dated November 9, 1987, we dismissed the petition by informing
AIBC that all its technical objections may properly be resolved in the
hearings before the POEA. chanroblesv irtualawli bra rycha nrob les vi rtua l law lib rary

Complaints were also filed before the Ombudsman. The first was
filed on September 22, 1988 by claimant Hermie Arguelles and 18
co-claimants against the POEA Administrator and several NLRC
Commissioners. The Ombudsman merely referred the complaint to
the Secretary of Labor and Employment with a request for the early
disposition of POEA Case No. L-84-06-555. The second was filed on
April 28, 1989 by claimants Emigdio P. Bautista and Rolando R.
Lobeta charging AIBC and BRII for violation of labor and social
legislations. The third was filed by Jose R. Santos, Maximino N.
Talibsao and Amado B. Bruce denouncing AIBC and BRII of
violations of labor laws.
chanrob lesvi rtua lawlib rary chan robles v irt ual law l ibra ry

On January 13, 1987, AIBC filed a motion for reconsideration of the

NLRC Resolution dated December 12, 1986. chanroblesvi rtualaw lib raryc han robles v irt ual law l ibra ry

On January 14, 1987, AIBC reiterated before the POEA

Administrator its motion for suspension of the period for filing an
answer or motion for extension of time to file the same until the
resolution of its motion for reconsideration of the order of the NLRC
dismissing the two appeals. On April 28, 1987, NLRC en banc denied
the motion for reconsideration. chanroble svirtualawl ibra rycha nro bles vi rtua l law lib ra ry

At the hearing on June 19, 1987, AIBC submitted its answer to the
complaint. At the same hearing, the parties were given a period of
15 days from said date within which to submit their respective
position papers. On June 24, 1987 claimants filed their "Urgent
Motion to Strike Out Answer," alleging that the answer was filed out
of time. On June 29, 1987, claimants filed their "Supplement to
Urgent Manifestational Motion" to comply with the POEA Order of
June 19, 1987. On February 24, 1988, AIBC and BRII submitted
their position paper. On March 4, 1988, claimants filed their "Ex-
Parte Motion to Expunge from the Records" the position paper of
AIBC and BRII, claiming that it was filed out of time. chanroble svirt ualawli bra rycha nrob les vi rtual law lib rary

On September 1, 1988, the claimants represented by Atty. De

Castro filed their memorandum in POEA Case No. L-86-05-460. On
September 6, 1988, AIBC and BRII submitted their Supplemental
Memorandum. On September 12, 1988, BRII filed its "Reply to
Complainant's Memorandum." On October 26, 1988, claimants
submitted their "Ex-Parte Manifestational Motion and Counter-
Supplemental Motion," together with 446 individual contracts of
employments and service records. On October 27, 1988, AIBC and
BRII filed a "Consolidated Reply." chanrobles v irt ual law li bra ry

On January 30, 1989, the POEA Administrator rendered his decision

in POEA Case No. L-84-06-555 and the other consolidated cases,
which awarded the amount of $824,652.44 in favor of only 324
complainants. chanroblesvi rtua lawlib raryc han robles v irt ual law l ibra ry

On February 10, 1989, claimants submitted their "Appeal

Memorandum For Partial Appeal" from the decision of the POEA. On
the same day, AIBC also filed its motion for reconsideration and/or
appeal in addition to the "Notice of Appeal" filed earlier on February
6, 1989 by another counsel for AIBC. chanroble svi rtualaw lib raryc han robles vi rt ual law li bra ry

On February 17, 1989, claimants filed their "Answer to Appeal,"

praying for the dismissal of the appeal of AIBC and BRII. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

On March 15, 1989, claimants filed their "Supplement to

Complainants' Appeal Memorandum," together with their "newly
discovered evidence" consisting of payroll records. chanroble svi rtualawl ib raryc hanro bles virtual law lib rary

On April 5, 1989, AIBC and BRII submitted to NLRC their

"Manifestation," stating among other matters that there were only
728 named claimants. On April 20, 1989, the claimants filed their
"Counter-Manifestation," alleging that there were 1,767 of them.
libra ry
chanroble svi rtualawl ib raryc hanrobles vi rt ual law

On July 27, 1989, claimants filed their "Urgent Motion for Execution"
of the Decision dated January 30, 1989 on the grounds that BRII
had failed to appeal on time and AIBC had not posted the
supersedeas bond in the amount of $824,652.44. chanroblesvi rtualaw lib raryc han robles v irt ual law li bra ry

On December 23, 1989, claimants filed another motion to resolve

the labor cases. chanroblesvi rt ualawlib ra rycha nroble s virtual law l ib rary

On August 21, 1990, claimants filed their "Manifestational Motion,"

praying that all the 1,767 claimants be awarded their monetary
claims for failure of private respondents to file their answers within
the reglamentary period required by law. chanrob lesvi rtua lawlib raryc han robles v irt ual law l ibra ry

On September 2, 1991, NLRC promulgated its Resolution, disposing

as follows:

WHEREFORE, premises considered, the Decision of the POEA in

these consolidated cases is modified to the extent and in accordance
with the following dispositions:

1. The claims of the 94 complainants identified and listed in Annex

"A" hereof are dismissed for having prescribed; chan robles v irt ual law l ibra ry

2. Respondents AIBC and Brown & Root are hereby ordered, jointly
and severally, to pay the 149 complainants, identified and listed in
Annex "B" hereof, the peso equivalent, at the time of payment, of
the total amount in US dollars indicated opposite their respective
names; chanrobles vi rtua l law li bra ry

3. The awards given by the POEA to the 19 complainants classified

and listed in Annex "C" hereof, who appear to have worked
elsewhere than in Bahrain are hereby set aside. chanro blesvi rtu alawlib ra rychan roble s virtual law lib rary

4. All claims other than those indicated in Annex "B", including

those for overtime work and favorably granted by the POEA, are
hereby dismissed for lack of substantial evidence in support thereof
or are beyond the competence of this Commission to pass upon.

In addition, this Commission, in the exercise of its powers and

authority under Article 218(c) of the Labor Code, as amended by
R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this
Commission to summon parties, conduct hearings and receive
evidence, as expeditiously as possible, and thereafter submit a
written report to this Commission (First Division) of the proceedings
taken, regarding the claims of the following:

(a) complainants identified and listed in Annex "D" attached and

made an integral part of this Resolution, whose claims were
dismissed by the POEA for lack of proof of employment in Bahrain
(these complainants numbering 683, are listed in pages 13 to 23 of
the decision of POEA, subject of the appeals) and, chanrobles vi rtua l law lib ra ry

(b) complainants identified and listed in Annex "E" attached and

made an integral part of this Resolution, whose awards decreed by
the POEA, to Our mind, are not supported by substantial evidence"
(G.R. No. 104776; Rollo, pp. 113-115; G.R. Nos. 104911-14, pp.
85-87; G.R. Nos. 105029-31, pp. 120-122).

On November 27, 1991, claimant Amado S. Tolentino and 12

co-claimants, who were former clients of Atty. Del Mundo, filed a
petition for certiorari with the Supreme Court (G.R. Nos. 120741-
44). The petition was dismissed in a resolution dated January 27,
1992. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

Three motions for reconsideration of the September 2, 1991

Resolution of the NLRC were filed. The first, by the claimants
represented by Atty. Del Mundo; the second, by the claimants
represented by Atty. De Castro; and the third, by AIBC and BRII.
law libra ry
chanrob lesvi rtua lawlib rary chan roble s virtual

In its Resolution dated March 24, 1992, NLRC denied all the motions
for reconsideration. chanroblesv irt ualawli bra rycha nrob les vi rtua l law lib rary

Hence, these petitions filed by the claimants represented by Atty.

Del Mundo (G.R. No. 104776), the claimants represented by Atty.
De Castro (G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos.
105029-32).

II

Compromise Agreements

Before this Court, the claimants represented by Atty. De Castro and

AIBC and BRII have submitted, from time to time, compromise
agreements for our approval and jointly moved for the dismissal of
their respective petitions insofar as the claimants-parties to the
compromise agreements were concerned (See Annex A for list of
claimants who signed quitclaims). chanroble svirtualawl ibra ry chanrobles vi rt ual law li bra ry
Thus the following manifestations that the parties had arrived at a
compromise agreement and the corresponding motions for the
approval of the agreements were filed by the parties and approved
by the Court:

1) Joint Manifestation and Motion involving claimant Emigdio

Abarquez and 47 co-claimants dated September 2, 1992 (G.R. Nos.
104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32, Rollo, pp.
470-615); chanroble s virtual l aw lib rary

2) Joint Manifestation and Motion involving petitioner Bienvenido

Cadalin and 82 co-petitioners dated September 3, 1992 (G.R. No.
104776, Rollo, pp. 364-507); chanrobles vi rtua l law li bra ry

3) Joint Manifestation and Motion involving claimant Jose

M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos.
105029-32, Rollo, pp. 613-722; G.R. No. 104776, Rollo, pp. 518-
626; G.R. Nos. 104911-14, Rollo, pp. 407-516); chanrobles v irt ual law l ibra ry

4) Joint Manifestation and Motion involving claimant Antonio T.

Anglo and 17 co-claimants dated October 14, 1992 (G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-
713; G.R. Nos. 104911-14, Rollo, pp. 530-590); chanrobles v irt ual law l ibra ry

5) Joint Manifestation and Motion involving claimant Dionisio

Bobongo and 6 co-claimants dated January 15, 1993 (G.R. No.
104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo, pp. 629-
652);chanrobles vi rtua l law lib rary

6) Joint Manifestation and Motion involving claimant Valerio A.

Evangelista and 4 co-claimants dated March 10, 1993 (G.R. Nos.
104911-14, Rollo, pp. 731-746; G.R. No. 104776, Rollo, pp. 1815-
1829); chanroble s virtual law l ibra ry

7) Joint Manifestation and Motion involving claimants Palconeri

Banaag and 5 co-claimants dated March 17, 1993 (G.R. No.
104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo, pp.
655-675); chanroble s virtual l aw lib rary
8) Joint Manifestation and Motion involving claimant Benjamin
Ambrosio and 15 other co-claimants dated May 4, 1993 (G.R. Nos.
105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-14, Rollo, pp.
679-729; G.R. No. 104776, Rollo, pp. 1773-1814); chanrobles v irt ual law li bra ry

9) Joint Manifestation and Motion involving Valerio Evangelista and

3 co-claimants dated May 10, 1993 (G.R. No. 104776, Rollo, pp.
1815-1829); chanroble s virtual law lib rary

10) Joint Manifestation and Motion involving petitioner Quiterio R.

Agudo and 36 co-claimants dated June 14, 1993 (G.R. Nos.
105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp.
748-864; G.R. No. 104776, Rollo, pp. 1066-1183); chanrobles v irt ual law li bra ry

11) Joint Manifestation and Motion involving claimant Arnaldo J.

Alonzo and 19 co-claimants dated July 22, 1993 (G.R. No.
104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp.
1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959); chanrob les vi rtua l law lib rary

12) Joint Manifestation and Motion involving claimant Ricardo C.

Dayrit and 2 co-claimants dated September 7, 1993 (G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp.
1243-1254; G.R. Nos. 104911-14, Rollo, pp. 972-984); chanrob les vi rtua l law lib rary

13) Joint Manifestation and Motion involving claimant Dante C.

Aceres and 37 co-claimants dated September 8, 1993 (G.R. No.
104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp.
987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397); chanroble s virtual law l ibra ry

14) Joint Manifestation and Motion involving Vivencio V. Abella and

27 co-claimants dated January 10, 1994 (G.R. Nos. 105029-
32, Rollo, Vol. II); chan robles v irt ual law li bra ry

15) Joint Manifestation and Motion involving Domingo B. Solano and

six co-claimants dated August 25, 1994 (G.R. Nos. 105029-32; G.R.
No. 104776; G.R. Nos. 104911-14).

III
c han robles v irt ual law li bra ry

The facts as found by the NLRC are as follows:

We have taken painstaking efforts to sift over the more than fifty
volumes now comprising the records of these cases. From the
records, it appears that the complainants-appellants allege that they
were recruited by respondent-appellant AIBC for its accredited
foreign principal, Brown & Root, on various dates from 1975 to
1983. They were all deployed at various projects undertaken by
Brown & Root in several countries in the Middle East, such as Saudi
Arabia, Libya, United Arab Emirates and Bahrain, as well as in
Southeast Asia, in Indonesia and Malaysia. chanroble svirtualawl ibra ryc hanro bles vi rt ual law li bra ry

Having been officially processed as overseas contract workers by

the Philippine Government, all the individual complainants signed
standard overseas employment contracts (Records, Vols. 25-32.
Hereafter, reference to the records would be sparingly made,
considering their chaotic arrangement) with AIBC before their
departure from the Philippines. These overseas employment
contracts invariably contained the following relevant terms and
conditions.chanroble s virtual law l ibra ry

PART B -

(1) Employment Position Classification :---------

(Code) :---------

(2) Company Employment Status :---------

(3) Date of Employment to Commence on :---------
(4) Basic Working Hours Per Week :---------
(5) Basic Working Hours Per Month :---------
(6) Basic Hourly Rate :---------
(7) Overtime Rate Per Hour :---------
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :---------
Months and/or
Job Completion

xxx xxx xxx chanroble s virtual law l ibrary

3. HOURS OF WORK AND COMPENSATION chanroble s virtual law l ibra ry

a) The Employee is employed at the hourly rate and overtime rate
as set out in Part B of this Document. chanroble svi rtualawl ib raryc hanrobles vi rt ual law li bra ry

b) The hours of work shall be those set forth by the Employer, and
Employer may, at his sole option, change or adjust such hours as
maybe deemed necessary from time to time. chanroble svirtualawl ibra ryc hanro bles vi rtua l law lib ra ry

4. TERMINATION chanroble s virtual law li bra ry

a) Notwithstanding any other terms and conditions of this

agreement, the Employer may, at his sole discretion, terminate
employee's service with cause, under this agreement at any time. If
the Employer terminates the services of the Employee under this
Agreement because of the completion or termination, or suspension
of the work on which the Employee's services were being utilized, or
because of a reduction in force due to a decrease in scope of such
work, or by change in the type of construction of such work. The
Employer will be responsible for his return transportation to his
country of origin. Normally on the most expeditious air route,
economy class accommodation.

xxx xxx xxx chanroble s virtual law l ibrary

10. VACATION/SICK LEAVE BENEFITS chanroble s virtual law l ibra ry

a) After one (1) year of continuous service and/or satisfactory

completion of contract, employee shall be entitled to 12-days
vacation leave with pay. This shall be computed at the basic wage
rate. Fractions of a year's service will be computed on a pro-
rata basis. chanrob lesvi rtua lawlib rary chan roble s virtual law l ibra ry

b) Sick leave of 15-days shall be granted to the employee for every

year of service for non-work connected injuries or illness. If the
employee failed to avail of such leave benefits, the same shall be
forfeited at the end of the year in which said sick leave is
granted.chanroble svirtualawl ibra rycha nro bles vi rtua l law lib ra ry

11. BONUS chanrobles vi rtual law lib rary

A bonus of 20% (for offshore work) of gross income will be accrued
and payable only upon satisfactory completion of this contract. chanroble svi rtualawl ib raryc hanrobles vi rt ual law li bra ry

12. OFFDAY PAY chanrobles vi rtua l law libra ry

The seventh day of the week shall be observed as a day of rest with
8 hours regular pay. If work is performed on this day, all hours
work shall be paid at the premium rate. However, this offday pay
provision is applicable only when the laws of the Host Country
require payments for rest day. chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

In the State of Bahrain, where some of the individual complainants

were deployed, His Majesty Isa Bin Salman Al Kaifa, Amir of
Bahrain, issued his Amiri Decree No. 23 on June 16, 1976,
otherwise known as the Labour Law for the Private Sector (Records,
Vol. 18). This decree took effect on August 16, 1976. Some of the
provisions of Amiri Decree No. 23 that are relevant to the claims of
the complainants-appellants are as follows (italics supplied only for
emphasis):

Art. 79: . . . A worker shall receive payment for each extra hour
equivalent to his wage entitlement increased by a minimum of
twenty-five per centum thereof for hours worked during the day;
and by a minimum of fifty per centum thereof for hours worked
during the night which shall be deemed to being from seven o'clock
in the evening until seven o'clock in the morning. . . . chanroble svi rtualaw lib raryc hanrobles vi rt ual law li bra ry

Art. 80: Friday shall be deemed to be a weekly day of rest on full

pay.chanroblesv irtualawli bra rycha nrob les vi rtua l law lib rary

. . . an employer may require a worker, with his consent, to work on

his weekly day of rest if circumstances so require and in respect of
which an additional sum equivalent to 150% of his normal wage
shall be paid to him. . . . chanroblesvi rtua lawlib rary chan roble s virtual law lib rary

Art. 81: . . . When conditions of work require the worker to work on

any official holiday, he shall be paid an additional sum equivalent to
150% of his normal wage. chanroblesvi rtualaw lib raryc han robles v irt ual law li bra ry
Art. 84: Every worker who has completed one year's continuous
service with his employer shall be entitled to leave on full pay for a
period of not less than 21 days for each year increased to a period
not less than 28 days after five continuous years of service. chanroblesvi rtualaw lib raryc han robles v irt ual law l ibra ry

A worker shall be entitled to such leave upon a quantum meruit in

respect of the proportion of his service in that year. chanroble svirt ualawlib rary chan roble s virt ual law l ibra ry

Art. 107: A contract of employment made for a period of indefinite

duration may be terminated by either party thereto after giving the
other party thirty days' prior notice before such termination, in
writing, in respect of monthly paid workers and fifteen days' notice
in respect of other workers. The party terminating a contract
without giving the required notice shall pay to the other party
compensation equivalent to the amount of wages payable to the
worker for the period of such notice or the unexpired portion
thereof.

Art. 111: . . . the employer concerned shall pay to such worker,

upon termination of employment, a leaving indemnity for the period
of his employment calculated on the basis of fifteen days' wages for
each year of the first three years of service and of one month's
wages for each year of service thereafter. Such worker shall be
entitled to payment of leaving indemnity upon a quantum meruit in
proportion to the period of his service completed within a year. chanroblesv irt ualawli bra rycha nrob les vi rtual law lib rary

All the individual complainants-appellants have already been

repatriated to the Philippines at the time of the filing of these cases
(R.R. No. 104776, Rollo, pp. 59-65).

IV

The issues raised before and resolved by the NLRC were:

First: - Whether or not complainants are entitled to the benefits

provided by Amiri Decree No. 23 of Bahrain;

(a) Whether or not the complainants who have worked in Bahrain

are entitled to the above-mentioned benefits. chanroble svirtualawl ibra rycha nro bles vi rtua l law lib ra ry
(b) Whether or not Art. 44 of the same Decree (allegedly
prescribing a more favorable treatment of alien employees) bars
complainants from enjoying its benefits.

Second: - Assuming that Amiri Decree No. 23 of Bahrain is

applicable in these cases, whether or not complainants' claim for the
benefits provided therein have prescribed.

Third: - Whether or not the instant cases qualify as a class suit.

Fourth: - Whether or not the proceedings conducted by the POEA,

as well as the decision that is the subject of these appeals,
conformed with the requirements of due process;

(a) Whether or not the respondent-appellant was denied its right to

due process; chanroble s virtual law l ibra ry

(b) Whether or not the admission of evidence by the POEA after

these cases were submitted for decision was valid; chan roble s virtual law l ibra ry

(c) Whether or not the POEA acquired jurisdiction over Brown &
Root International, Inc.; chanrob les vi rtual law lib rary

(d) Whether or not the judgment awards are supported by

substantial evidence; chanrobles vi rtua l law li bra ry

(e) Whether or not the awards based on the averages and formula
presented by the complainants-appellants are supported by
substantial evidence; chanrobles vi rtua l law li bra ry

(f) Whether or not the POEA awarded sums beyond what the
complainants-appellants prayed for; and, if so, whether or not these
awards are valid.

Fifth: - Whether or not the POEA erred in holding respondents AIBC

and Brown & Root jointly are severally liable for the judgment
awards despite the alleged finding that the former was the employer
of the complainants;

(a) Whether or not the POEA has acquired jurisdiction over Brown &
Root;chanroble s virtual law l ibra ry
(b) Whether or not the undisputed fact that AIBC was a licensed
construction contractor precludes a finding that Brown & Root is
liable for complainants claims.

Sixth: - Whether or not the POEA Administrator's failure to hold

respondents in default constitutes a reversible error.

Seventh: - Whether or not the POEA Administrator erred in

dismissing the following claims:

a. Unexpired portion of contract; chanroble s virtual law lib rary

b. Interest earnings of Travel and Reserve Fund; chanroble s virtual law l ibra ry

c. Retirement and Savings Plan benefits; chanroble s virtual law lib rary

d. War Zone bonus or premium pay of at least 100% of basic pay; chanrobles v irt ual law li bra ry

e. Area Differential Pay; chanrobles v irt ual law li bra ry

f. Accrued interests on all the unpaid benefits; chanroble s virtual law lib rary

g. Salary differential pay; chanrob les vi rtual law lib rary

h. Wage differential pay; chanroble s virtual law l ibra ry

i. Refund of SSS premiums not remitted to SSS; chanrobles vi rtual law lib rary

j. Refund of withholding tax not remitted to BIR; chanrobles vi rtual law lib rary

k. Fringe benefits under B & R's "A Summary of Employee Benefits"

(Annex "Q" of Amended Complaint); chan robles v irt ual law li bra ry

l. Moral and exemplary damages; chanrobles v irt ual law l ibra ry

m. Attorney's fees of at least ten percent of the judgment award; chanrobles vi rt ual law li bra ry

n. Other reliefs, like suspending and/or cancelling the license to

recruit of AIBC and the accreditation of B & R issued by POEA; chanrobles vi rtua l law lib rary
o. Penalty for violations of Article 34 (prohibited practices), not
excluding reportorial requirements thereof.

Eighth: - Whether or not the POEA Administrator erred in not

dismissing POEA Case No. (L) 86-65-460 on the ground of
multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55).

Anent the first issue, NLRC set aside Section 1, Rule 129 of the
1989 Revised Rules on Evidence governing the pleading and proof
of a foreign law and admitted in evidence a simple copy of the
Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private
Sector). NLRC invoked Article 221 of the Labor Code of the
Philippines, vesting on the Commission ample discretion to use
every and all reasonable means to ascertain the facts in each case
without regard to the technicalities of law or procedure. NLRC
agreed with the POEA Administrator that the Amiri Decree No. 23,
being more favorable and beneficial to the workers, should form
part of the overseas employment contract of the complainants. chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

NLRC, however, held that the Amiri Decree No. 23 applied only to
the claimants, who worked in Bahrain, and set aside awards of the
POEA Administrator in favor of the claimants, who worked
elsewhere. chanrob lesvi rtua lawlib rary chan roble s virtual law l ibrary

On the second issue, NLRC ruled that the prescriptive period for the
filing of the claims of the complainants was three years, as provided
in Article 291 of the Labor Code of the Philippines, and not ten years
as provided in Article 1144 of the Civil Code of the Philippines nor
one year as provided in the Amiri Decree No. 23 of 1976. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

On the third issue, NLRC agreed with the POEA Administrator that
the labor cases cannot be treated as a class suit for the simple
reason that not all the complainants worked in Bahrain and
therefore, the subject matter of the action, the claims arising from
the Bahrain law, is not of common or general interest to all the
complainants. chanroblesvi rtua lawlib raryc han robles v irt ual law l ibra ry

On the fourth issue, NLRC found at least three infractions of the

cardinal rules of administrative due process: namely, (1) the failure
of the POEA Administrator to consider the evidence presented by
AIBC and BRII; (2) some findings of fact were not supported by
substantial evidence; and (3) some of the evidence upon which the
decision was based were not disclosed to AIBC and BRII during the
hearing. chanroblesvi rt ualawlib ra rychan roble s virtual law lib rary

On the fifth issue, NLRC sustained the ruling of the POEA

Administrator that BRII and AIBC are solidarily liable for the claims
of the complainants and held that BRII was the actual employer of
the complainants, or at the very least, the indirect employer, with
AIBC as the labor contractor. chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

NLRC also held that jurisdiction over BRII was acquired by the POEA
Administrator through the summons served on AIBC, its local
agent.chanroblesv irtualawli bra rycha nrob les vi rtua l law lib rary

On the sixth issue, NLRC held that the POEA Administrator was
correct in denying the Motion to Declare AIBC in default. chanroble svirtualawl ibra ryc hanro bles vi rtua l law lib ra ry

On the seventh issue, which involved other money claims not based
on the Amiri Decree No. 23, NLRC ruled:

(1) that the POEA Administrator has no jurisdiction over the claims
for refund of the SSS premiums and refund of withholding taxes and
the claimants should file their claims for said refund with the
appropriate government agencies; chanro bles vi rtua l law libra ry

(2) the claimants failed to establish that they are entitled to the
claims which are not based on the overseas employment contracts
nor the Amiri Decree No. 23 of 1976; chanrob les vi rtual law lib rary

(3) that the POEA Administrator has no jurisdiction over claims for
moral and exemplary damages and nonetheless, the basis for
granting said damages was not established; chanrob les vi rtua l law lib rary

(4) that the claims for salaries corresponding to the unexpired

portion of their contract may be allowed if filed within the three-
year prescriptive period; chan roble s virtual law lib rary
(5) that the allegation that complainants were prematurely
repatriated prior to the expiration of their overseas contract was not
established; and chanrobles vi rtua l la w libra ry

(6) that the POEA Administrator has no jurisdiction over the

complaint for the suspension or cancellation of the AIBC's
recruitment license and the cancellation of the accreditation of BRII.

NLRC passed sub silencio the last issue, the claim that POEA Case
No. (L) 86-65-460 should have been dismissed on the ground that
the claimants in said case were also claimants in POEA Case No. (L)
84-06-555. Instead of dismissing POEA Case No. (L) 86-65-460, the
POEA just resolved the corresponding claims in POEA Case No. (L)
84-06-555. In other words, the POEA did not pass upon the same
claims twice.

G.R. No. 104776

Claimants in G.R. No. 104776 based their petition for certiorari on

the following grounds:

(1) that they were deprived by NLRC and the POEA of their right to
a speedy disposition of their cases as guaranteed by Section 16,
Article III of the 1987 Constitution. The POEA Administrator allowed
private respondents to file their answers in two years (on June 19,
1987) after the filing of the original complaint (on April 2, 1985) and
NLRC, in total disregard of its own rules, affirmed the action of the
POEA Administrator; chanroble s virtual law lib rary

(2) that NLRC and the POEA Administrator should have declared
AIBC and BRII in default and should have rendered summary
judgment on the basis of the pleadings and evidence submitted by
claimants; chanrobles v irt ual law l ibra ry

(3) the NLRC and POEA Administrator erred in not holding that the
labor cases filed by AIBC and BRII cannot be considered a class
suit;
chanrobles v irt ual law l ibra ry
(4) that the prescriptive period for the filing of the claims is ten
years; and chanroble s virtual law l ibra ry

(5) that NLRC and the POEA Administrator should have dismissed
POEA Case No. L-86-05-460, the case filed by Atty. Florante de
Castro (Rollo, pp. 31-40).

AIBC and BRII, commenting on the petition in G.R. No. 104776,

argued:

(1) that they were not responsible for the delay in the disposition of
the labor cases, considering the great difficulty of getting all the
records of the more than 1,500 claimants, the piece-meal filing of
the complaints and the addition of hundreds of new claimants by
petitioners; chanrobles vi rtua l law lib rary

(2) that considering the number of complaints and claimants, it was

impossible to prepare the answers within the ten-day period
provided in the NLRC Rules, that when the motion to declare AIBC
in default was filed on July 19, 1987, said party had already filed its
answer, and that considering the staggering amount of the claims
(more than US$50,000,000.00) and the complicated issues raised
by the parties, the ten-day rule to answer was not fair and
reasonable; chan roble s virtual law l ib rary

(3) that the claimants failed to refute NLRC's finding that

there was no common or general interest in the subject matter of
the controversy - which was the applicability of the Amiri Decree
No. 23. Likewise, the nature of the claims varied, some being based
on salaries pertaining to the unexpired portion of the contracts while
others being for pure money claims. Each claimant demanded
separate claims peculiar only to himself and depending upon the
particular circumstances obtaining in his case; chanrobles vi rtua l law lib ra ry

(4) that the prescriptive period for filing the claims is that
prescribed by Article 291 of the Labor Code of the Philippines (three
years) and not the one prescribed by Article 1144 of the Civil Code
of the Philippines (ten years); and chanrobles vi rtual law libra ry
(5) that they are not concerned with the issue of whether POEA
Case No. L-86-05-460 should be dismissed, this being a private
quarrel between the two labor lawyers (Rollo, pp. 292-305).

Attorney's Lien

On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike

out the joint manifestations and motions of AIBC and BRII dated
September 2 and 11, 1992, claiming that all the claimants who
entered into the compromise agreements subject of said
manifestations and motions were his clients and that Atty. Florante
M. de Castro had no right to represent them in said agreements. He
also claimed that the claimants were paid less than the award given
them by NLRC; that Atty. De Castro collected additional attorney's
fees on top of the 25% which he was entitled to receive; and that
the consent of the claimants to the compromise agreements and
quitclaims were procured by fraud (G.R. No. 104776, Rollo, pp.
838-810). In the Resolution dated November 23, 1992, the Court
denied the motion to strike out the Joint Manifestations and Motions
dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp.
608-609). chanroble svirtualawl ibra rycha nro bles vi rtua l law lib ra ry

On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim
to Enforce Attorney's Lien," alleging that the claimants who entered
into compromise agreements with AIBC and BRII with the
assistance of Atty. De Castro, had all signed a retainer agreement
with his law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535).

Contempt of Court

On February 18, 1993, an omnibus motion was filed by Atty. Del

Mundo to cite Atty. De Castro and Atty. Katz Tierra for contempt of
court and for violation of Canons 1, 15 and 16 of the Code of
Professional Responsibility. The said lawyers allegedly misled this
Court, by making it appear that the claimants who entered into the
compromise agreements were represented by Atty. De Castro, when
in fact they were represented by Atty. Del Mundo (G.R. No.
104776, Rollo, pp. 1560-1614). chanroblesvi rtua lawlib rary chan roble s virtual law l ib rary
On September 23, 1994, Atty. Del Mundo reiterated his charges
against Atty. De Castro for unethical practices and moved for the
voiding of the quitclaims submitted by some of the claimants.

G.R. Nos. 104911-14

The claimants in G.R. Nos. 104911-14 based their petition

for certiorari on the grounds that NLRC gravely abused its discretion
when it: (1) applied the three-year prescriptive period under the
Labor Code of the Philippines; and (2) it denied the claimant's
formula based on an average overtime pay of three hours a day
(Rollo, pp. 18-22).
chanro blesvi rt ualawlib ra rychan roble s virtual law lib rary

The claimants argue that said method was proposed by BRII itself
during the negotiation for an amicable settlement of their money
claims in Bahrain as shown in the Memorandum dated April 16,
1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22). chanroble svirtualawl ibra rycha nrob les vi rtua l law lib rary

BRII and AIBC, in their Comment, reiterated their contention in G.R.

No. 104776 that the prescriptive period in the Labor Code of the
Philippines, a special law, prevails over that provided in the Civil
Code of the Philippines, a general law. chanrob lesvi rtualaw lib raryc han robles v irt ual law l ibra ry

As to the memorandum of the Ministry of Labor of Bahrain on the

method of computing the overtime pay, BRII and AIBC claimed that
they were not bound by what appeared therein, because such
memorandum was proposed by a subordinate Bahrain official and
there was no showing that it was approved by the Bahrain Minister
of Labor. Likewise, they claimed that the averaging method was
discussed in the course of the negotiation for the amicable
settlement of the dispute and any offer made by a party therein
could not be used as an admission by him (Rollo, pp. 228-236).

G.R. Nos. 105029-32

In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely
abused its discretion when it: (1) enforced the provisions of the
Amiri Decree No. 23 of 1976 and not the terms of the employment
contracts; (2) granted claims for holiday, overtime and leave
indemnity pay and other benefits, on evidence admitted in
contravention of petitioner's constitutional right to due process; and
(3) ordered the POEA Administrator to hold new hearings for the
683 claimants whose claims had been dismissed for lack of proof by
the POEA Administrator or NLRC itself. Lastly, they allege that
assuming that the Amiri Decree No. 23 of 1976 was applicable,
NLRC erred when it did not apply the one-year prescription provided
in said law (Rollo, pp. 29-30).

VI

G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32

All the petitions raise the common issue of prescription although

they disagreed as to the time that should be embraced within the
prescriptive period.
chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

To the POEA Administrator, the prescriptive period was ten years,

applying Article 1144 of the Civil Code of the Philippines. NLRC
believed otherwise, fixing the prescriptive period at three years as
provided in Article 291 of the Labor Code of the Philippines. chanro blesvi rtua lawlib rary chan roble s virtual law lib rary

The claimants in G.R. No. 104776 and G.R. Nos. 104911-14,

invoking different grounds, insisted that NLRC erred in ruling that
the prescriptive period applicable to the claims was three years,
instead of ten years, as found by the POEA Administrator. chanroblesv irt ualawli bra rycha nrob les vi rtua l law lib rary

The Solicitor General expressed his personal view that the

prescriptive period was one year as prescribed by the Amiri Decree
No. 23 of 1976 but he deferred to the ruling of NLRC that Article
291 of the Labor Code of the Philippines was the operative law.

The POEA Administrator held the view that:

These money claims (under Article 291 of the Labor Code) refer to
those arising from the employer's violation of the employee's right
as provided by the Labor Code. chanroblesvi rtua lawlib rary chan robles v irt ual law l ibra ry

In the instant case, what the respondents violated are not the rights
of the workers as provided by the Labor Code, but the provisions of
the Amiri Decree No. 23 issued in Bahrain, which ipso
facto amended the worker's contracts of employment. Respondents
consciously failed to conform to these provisions which specifically
provide for the increase of the worker's rate. It was only after June
30, 1983, four months after the brown builders brought a suit
against B & R in Bahrain for this same claim, when respondent
AIBC's contracts have undergone amendments in Bahrain for the
new hires/renewals (Respondent's Exhibit 7). chanroblesv irtualawl ibra rycha nrob les vi rtua l law lib rary

Hence, premises considered, the applicable law of prescription to

this instant case is Article 1144 of the Civil Code of the Philippines,
which provides:

Art. 1144. The following actions may be brought within ten years
from the time the cause of action accrues: chanrobles v irt ual law l ibra ry

(1) Upon a written contract; chanrobles vi rtua l law lib ra ry

(2) Upon an obligation created by law;

Thus, herein money claims of the complainants against the

respondents shall prescribe in ten years from August 16, 1976.
Inasmuch as all claims were filed within the ten-year prescriptive
period, no claim suffered the infirmity of being prescribed (G.R. No.
104776, Rollo, 89-90).

In overruling the POEA Administrator, and holding that the

prescriptive period is three years as provided in Article 291 of the
Labor Code of the Philippines, the NLRC argued as follows:

The Labor Code provides that "all money claims arising from
employer-employee relations . . . shall be filed within three years
from the time the cause of action accrued; otherwise they shall be
forever barred" (Art. 291, Labor Code, as amended). This three-
year prescriptive period shall be the one applied here and which
should be reckoned from the date of repatriation of each individual
complainant, considering the fact that the case is having (sic) filed
in this country. We do not agree with the POEA Administrator that
this three-year prescriptive period applies only to money claims
specifically recoverable under the Philippine Labor Code. Article 291
gives no such indication. Likewise, We can not consider
complainants' cause/s of action to have accrued from a violation of
their employment contracts. There was no violation; the claims
arise from the benefits of the law of the country where they worked.
(G.R. No. 104776, Rollo, pp.
90-91).

Anent the applicability of the one-year prescriptive period as

provided by the Amiri Decree No. 23 of 1976, NLRC opined that the
applicability of said law was one of characterization, i.e., whether to
characterize the foreign law on prescription or statute of limitation
as "substantive" or "procedural." NLRC cited the decision
in Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir.
[1955], where the issue was the applicability of the Panama Labor
Code in a case filed in the State of New York for claims arising from
said Code. In said case, the claims would have prescribed under the
Panamanian Law but not under the Statute of Limitations of New
York. The U.S. Circuit Court of Appeals held that the Panamanian
Law was procedural as it was not "specifically intended to be
substantive," hence, the prescriptive period provided in the law of
the forum should apply. The Court observed:

. . . And where, as here, we are dealing with a statute of limitations

of a foreign country, and it is not clear on the face of the statute
that its purpose was to limit the enforceability, outside as well as
within the foreign country concerned, of the substantive rights to
which the statute pertains, we think that as a yardstick for
determining whether that was the purpose this test is the most
satisfactory one. It does not lead American courts into the necessity
of examining into the unfamiliar peculiarities and refinements of
different foreign legal systems. . .

The court further noted:

xxx xxx xxx chanroble s virtual law l ibrary

Applying that test here it appears to us that the libelant is entitled

to succeed, for the respondents have failed to satisfy us that the
Panamanian period of limitation in question was specifically aimed
against the particular rights which the libelant seeks to enforce. The
Panama Labor Code is a statute having broad objectives, viz: "The
present Code regulates the relations between capital and labor,
placing them on a basis of social justice, so that, without injuring
any of the parties, there may be guaranteed for labor the necessary
conditions for a normal life and to capital an equitable return to its
investment." In pursuance of these objectives the Code gives
laborers various rights against their employers. Article 623
establishes the period of limitation for all such rights, except certain
ones which are enumerated in Article 621. And there is nothing in
the record to indicate that the Panamanian legislature gave special
consideration to the impact of Article 623 upon the particular rights
sought to be enforced here, as distinguished from the other rights
to which that Article is also applicable. Were we confronted with the
question of whether the limitation period of Article 621 (which
carves out particular rights to be governed by a shorter limitation
period) is to be regarded as "substantive" or "procedural" under the
rule of "specifity" we might have a different case; but here on the
surface of things we appear to be dealing with a "broad," and not a
"specific," statute of limitations (G.R. No. 104776, Rollo, pp.
92-94).

Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of
the Labor Code of the Philippines, which was applied by NLRC,
refers only to claims "arising from the employer's violation of the
employee's right as provided by the Labor Code." They assert that
their claims are based on the violation of their employment
contracts, as amended by the Amiri Decree No. 23 of 1976 and
therefore the claims may be brought within ten years as provided
by Article 1144 of the Civil Code of the Philippines (Rollo, G.R. Nos.
104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine
Airlines, Inc., 70 SCRA 244 (1976). chanro blesvi rt ualawlib ra rychan roble s virtual law lib rary

AIBC and BRII, insisting that the actions on the claims have
prescribed under the Amiri Decree No. 23 of 1976, argue that there
is in force in the Philippines a "borrowing law," which is Section 48
of the Code of Civil Procedure and that where such kind of law
exists, it takes precedence over the common-law conflicts rule (G.R.
No. 104776, Rollo, pp. 45-46). chanroble svirtualawl ibra ryc hanro bles vi rtu al law li bra ry
First to be determined is whether it is the Bahrain law on
prescription of action based on the Amiri Decree No. 23 of 1976 or a
Philippine law on prescription that shall be the governing law. chanroble svirtualawl ibra ryc hanro bles vi rtua l law li bra ry

Article 156 of the Amiri Decree No. 23 of 1976 provides:

A claim arising out of a contract of employment shall not be

actionable after the lapse of one year from the date of the expiry of
the contract. (G.R. Nos. 105029-31, Rollo, p. 226).

As a general rule, a foreign procedural law will not be applied in the

forum. Procedural matters, such as service of process, joinder of
actions, period and requisites for appeal, and so forth, are governed
by the laws of the forum. This is true even if the action is based
upon a foreign substantive law (Restatement of the Conflict of Laws,
Sec. 685; Salonga, Private International Law, 131 [1979]). chanroble svirtualawl ibra rycha nrob les vi rtua l law lib rary

A law on prescription of actions is sui generis in Conflict of Laws in

the sense that it may be viewed either as procedural or substantive,
depending on the characterization given such a law. chanrobl esvirt ualawli bra rychan rob les vi rtual law lib rary

Thus in Bournias v. Atlantic Maritime Company, supra, the American

court applied the statute of limitations of New York, instead of the
Panamanian law, after finding that there was no showing that the
Panamanian law on prescription was intended to be substantive.
Being considered merely a procedural law even in Panama, it has to
give way to the law of the forum on prescription of actions. chanroble svirtualawl ibra rycha nrob les vi rtua l law lib ra ry

However, the characterization of a statute into a procedural or

substantive law becomes irrelevant when the country of the forum
has a "borrowing statute." Said statute has the practical effect of
treating the foreign statute of limitation as one of substance
(Goodrich, Conflict of Laws 152-153 [1938]). A "borrowing statute"
directs the state of the forum to apply the foreign statute of
limitations to the pending claims based on a foreign law (Siegel,
Conflicts, 183 [1975]). While there are several kinds of "borrowing
statutes," one form provides that an action barred by the laws of
the place where it accrued, will not be enforced in the forum even
though the local statute has not run against it (Goodrich and Scoles,
Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil
Procedure is of this kind. Said Section provides:

If by the laws of the state or country where the cause of action

arose, the action is barred, it is also barred in the Philippines
Islands.

Section 48 has not been repealed or amended by the Civil Code of

the Philippines. Article 2270 of said Code repealed only those
provisions of the Code of Civil Procedures as to which were
inconsistent with it. There is no provision in the Civil Code of the
Philippines, which is inconsistent with or contradictory to Section 48
of the Code of Civil Procedure (Paras, Philippine Conflict of Laws 104
[7th ed.]). chanroblesvi rtua lawlib rary chan roble s virtual law lib rary

In the light of the 1987 Constitution, however, Section 48 cannot be

enforced ex proprio vigore insofar as it ordains the application in
this jurisdiction of Section 156 of the Amiri Decree No. 23 of
1976. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

The courts of the forum will not enforce any foreign claim obnoxious
to the forum's public policy (Canadian Northern Railway Co. v.
Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To
enforce the one-year prescriptive period of the Amiri Decree No. 23
of 1976 as regards the claims in question would contravene the
public policy on the protection to labor. chanroblesvi rt ualawlib ra rychan roble s virtual law lib rary

In the Declaration of Principles and State Policies, the 1987

Constitution emphasized that:

The state shall promote social justice in all phases of national

development. (Sec. 10). chanroblesv irtualawli bra rycha nrob les vi rtua l law lib rary

The state affirms labor as a primary social economic force. It shall

protect the rights of workers and promote their welfare (Sec. 18).

In article XIII on Social Justice and Human Rights, the 1987

Constitution provides:
Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full employment
and equality of employment opportunities for all.

Having determined that the applicable law on prescription is the

Philippine law, the next question is whether the prescriptive period
governing the filing of the claims is three years, as provided by the
Labor Code or ten years, as provided by the Civil Code of the
Philippines.
chanroble svi rtualaw lib raryc han robles v irt ual law li bra ry

The claimants are of the view that the applicable provision is Article
1144 of the Civil Code of the Philippines, which provides:

The following actions must be brought within ten years from the
time the right of action accrues: chanrobles v irt ual law l ibra ry

(1) Upon a written contract; chanrobles vi rtua l law lib ra ry

(2) Upon an obligation created by law; chanrob les vi rtua l law lib rary

(3) Upon a judgment.

NLRC, on the other hand, believes that the applicable provision is

Article 291 of the Labor Code of the Philippines, which in pertinent
part provides:

Money claims-all money claims arising from employer-employee

relations accruing during the effectivity of this Code shall be filed
within three (3) years from the time the cause of action accrued,
otherwise they shall be forever barred.

xxx xxx xxx

The case of Philippine Air Lines Employees Association v. Philippine

Air Lines, Inc., 70 SCRA 244 (1976) invoked by the claimants in
G.R. Nos. 104911-14 is inapplicable to the cases at bench (Rollo, p.
21). The said case involved the correct computation of overtime pay
as provided in the collective bargaining agreements and not the
Eight-Hour Labor Law. chanroblesv irtualawl ibra rycha nrob les vi rtua l law lib rary
As noted by the Court: "That is precisely why petitioners did not
make any reference as to the computation for overtime work under
the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and instead
insisted that work computation provided in the collective bargaining
agreements between the parties be observed. Since the claim for
pay differentials is primarily anchored on the written contracts
between the litigants, the ten-year prescriptive period provided by
Art. 1144(1) of the New Civil Code should govern." chanrobles vi rtual law lib rary

Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended
by R.A. No. 19933) provides:

Any action to enforce any cause of action under this Act shall be
commenced within three years after the cause of action accrued
otherwise such action shall be forever barred, . . . .

The court further explained:

The three-year prescriptive period fixed in the Eight-Hour Labor Law

(CA No. 444 as amended) will apply, if the claim for differentials for
overtime work is solely based on said law, and not on a collective
bargaining agreement or any other contract. In the instant case, the
claim for overtime compensation is not so much because of
Commonwealth Act No. 444, as amended but because the claim is
demandable right of the employees, by reason of the above-
mentioned collective bargaining agreement.

Section 7-a of the Eight-Hour Labor Law provides the prescriptive

period for filing "actions to enforce any cause of action under said
law." On the other hand, Article 291 of the Labor Code of the
Philippines provides the prescriptive period for filing "money claims
arising from employer-employee relations." The claims in the cases
at bench all arose from the employer-employee relations, which is
broader in scope than claims arising from a specific law or from the
collective bargaining agreement. chanroble svi rtualaw lib raryc han robles vi rt ual law libra ry

The contention of the POEA Administrator, that the three-year

prescriptive period under Article 291 of the Labor Code of the
Philippines applies only to money claims specifically recoverable
under said Code, does not find support in the plain language of the
provision. Neither is the contention of the claimants in G.R. Nos.
104911-14 that said Article refers only to claims "arising from the
employer's violation of the employee's right," as provided by the
Labor Code supported by the facial reading of the provision.

VII

G.R. No. 104776

A. As to the first two grounds for the petition in G.R. No. 104776,
claimants aver: (1) that while their complaints were filed on June 6,
1984 with POEA, the case was decided only on January 30, 1989, a
clear denial of their right to a speedy disposition of the case; and
(2) that NLRC and the POEA Administrator should have declared
AIBC and BRII in default (Rollo, pp.
31-35). chanroble svirtualawl ibra rycha nrob les vi rtua l law lib rary

Claimants invoke a new provision incorporated in the 1987

Constitution, which provides:

Sec. 16. All persons shall have the right to a speedy disposition of
their cases before all judicial, quasi-judicial, or administrative
bodies.

It is true that the constitutional right to "a speedy disposition of

cases" is not limited to the accused in criminal proceedings but
extends to all parties in all cases, including civil and administrative
cases, and in all proceedings, including judicial and quasi-judicial
hearings. Hence, under the Constitution, any party to a case may
demand expeditious action on all officials who are tasked with the
administration of justice. chanroble svirtualawl ibra rych anro bles vi rtua l law lib ra ry

However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987),

"speedy disposition of cases" is a relative term. Just like the
constitutional guarantee of "speedy trial" accorded to the accused in
all criminal proceedings, "speedy disposition of cases" is a flexible
concept. It is consistent with delays and depends upon the
circumstances of each case. What the Constitution prohibits are
unreasonable, arbitrary and oppressive delays which render rights
nugatory.
Caballero laid down the factors that may be taken into consideration
in determining whether or not the right to a "speedy disposition of
cases" has been violated, thus:

In the determination of whether or not the right to a "speedy trial"

has been violated, certain factors may be considered and balanced
against each other. These are length of delay, reason for the delay,
assertion of the right or failure to assert it, and prejudice caused by
the delay. The same factors may also be considered in answering
judicial inquiry whether or not a person officially charged with the
administration of justice has violated the speedy disposition of
cases.

Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we

held:

It must be here emphasized that the right to a speedy disposition of

a case, like the right to speedy trial, is deemed violated only when
the proceeding is attended by vexatious, capricious, and oppressive
delays; or when unjustified postponements of the trial are asked for
and secured, or when without cause or justified motive a long
period of time is allowed to elapse without the party having his case
tried.

Since July 25, 1984 or a month after AIBC and BRII were served
with a copy of the amended complaint, claimants had been asking
that AIBC and BRII be declared in default for failure to file their
answers within the ten-day period provided in Section 1, Rule III of
Book VI of the Rules and Regulations of the POEA. At that time,
there was a pending motion of AIBC and BRII to strike out of the
records the amended complaint and the "Compliance" of claimants
to the order of the POEA, requiring them to submit a bill of
particulars.
chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

The cases at bench are not of the run-of-the-mill variety, such that
their final disposition in the administrative level after seven years
from their inception, cannot be said to be attended by
unreasonable, arbitrary and oppressive delays as to violate the
constitutional rights to a speedy disposition of the cases of
complainants. chanroblesvi rtua lawlib raryc han robles v irt ual law l ibra ry
The amended complaint filed on June 6, 1984 involved a total of
1,767 claimants. Said complaint had undergone several
amendments, the first being on April 3, 1985. chanroble svirtualawl ibra ryc hanro bles vi rtua l law lib ra ry

The claimants were hired on various dates from 1975 to 1983. They
were deployed in different areas, one group in and the other groups
outside of, Bahrain. The monetary claims totalling more than US$65
million according to Atty. Del Mundo, included:

1. Unexpired portion of contract; chanroble s virtual law l ib rary

2. Interest earnings of Travel and Fund; chanrob les vi rtual law lib rary

3. Retirement and Savings Plan benefit; chanrobles v irt ual law li bra ry

4. War Zone bonus or premium pay of at least 100% of basic pay; chanrobles v irt ual law li bra ry

5. Area Differential pay; chanroble s virtual law l ibra ry

6. Accrued Interest of all the unpaid benefits; chanroble s virtual law lib rary

7. Salary differential pay; chanrob les vi rtual law lib rary

8. Wage Differential pay; chan roble s virtual law l ibra ry

9. Refund of SSS premiums not remitted to Social Security

System; chanrobles vi rt ual law li bra ry

10. Refund of Withholding Tax not remitted to Bureau of Internal

Revenue (B.I.R.); chanroble s virtual law l ib rary

11. Fringe Benefits under Brown & Root's "A Summary of Employees
Benefits consisting of 43 pages (Annex "Q" of Amended
Complaint); chanroble s virtual law lib rary

12. Moral and Exemplary Damages; chanrob les vi rtua l law lib rary

13. Attorney's fees of at least ten percent of amounts; chanrob les vi rtua l law lib rary

14. Other reliefs, like suspending and/or cancelling the license to

recruit of AIBC and issued by the POEA; and chanrobles v irt ual law l ibra ry
15. Penalty for violation of Article 34 (Prohibited practices) not
excluding reportorial requirements thereof (NLRC Resolution,
September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74).

Inasmuch as the complaint did not allege with sufficient definiteness

and clarity of some facts, the claimants were ordered to comply
with the motion of AIBC for a bill of particulars. When claimants
filed their "Compliance and Manifestation," AIBC moved to strike out
the complaint from the records for failure of claimants to submit a
proper bill of particulars. While the POEA Administrator denied the
motion to strike out the complaint, he ordered the claimants "to
correct the deficiencies" pointed out by AIBC. chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

Before an intelligent answer could be filed in response to the

complaint, the records of employment of the more than 1,700
claimants had to be retrieved from various countries in the Middle
East. Some of the records dated as far back as 1975. chanroblesvi rtualaw lib raryc han robles vi rt ual law li bra ry

The hearings on the merits of the claims before the POEA

Administrator were interrupted several times by the various
appeals, first to NLRC and then to the Supreme Court. chanroble svirtualawl ibra rycha nro bles vi rtua l law lib ra ry

Aside from the inclusion of additional claimants, two new cases were
filed against AIBC and BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May
29, 1986 (POEA Case No. L-86-05-460). NLRC, in exasperation,
noted that the exact number of claimants had never been
completely established (Resolution, Sept. 2, 1991, G.R. No.
104776, Rollo, p. 57). All the three new cases were consolidated
with POEA Case No. L-84-06-555. chanroble svirtualawl ibra ryc hanrob les vi rtua l law lib rary

NLRC blamed the parties and their lawyers for the delay in
terminating the proceedings, thus:

These cases could have been spared the long and arduous route
towards resolution had the parties and their counsel been more
interested in pursuing the truth and the merits of the claims rather
than exhibiting a fanatical reliance on technicalities. Parties and
counsel have made these cases a litigation of emotion. The
intransigence of parties and counsel is remarkable. As late as last
month, this Commission made a last and final attempt to bring the
counsel of all the parties (this Commission issued a special order
directing respondent Brown & Root's resident agent/s to appear) to
come to a more conciliatory stance. Even this failed (Rollo,
p. 58).

The squabble between the lawyers of claimants added to the delay

in the disposition of the cases, to the lament of NLRC, which
complained:

It is very evident from the records that the protagonists in these

consolidated cases appear to be not only the individual
complainants, on the one hand, and AIBC and Brown & Root, on the
other hand. The two lawyers for the complainants, Atty. Gerardo Del
Mundo and Atty. Florante De Castro, have yet to settle the right of
representation, each one persistently claiming to appear in behalf of
most of the complainants. As a result, there are two appeals by the
complainants. Attempts by this Commission to resolve counsels'
conflicting claims of their respective authority to represent the
complainants prove futile. The bickerings by these two counsels are
reflected in their pleadings. In the charges and countercharges of
falsification of documents and signatures, and in the disbarment
proceedings by one against the other. All these have, to a large
extent, abetted in confounding the issues raised in these cases,
jumble the presentation of evidence, and even derailed the
prospects of an amicable settlement. It would not be far-fetched to
imagine that both counsel, unwittingly, perhaps, painted a rainbow
for the complainants, with the proverbial pot of gold at its end
containing more than US$100 million, the aggregate of the claims in
these cases. It is, likewise, not improbable that their misplaced zeal
and exuberance caused them to throw all caution to the wind in the
matter of elementary rules of procedure and evidence (Rollo, pp.
58-59).

Adding to the confusion in the proceedings before NLRC, is the

listing of some of the complainants in both petitions filed by the two
lawyers. As noted by NLRC, "the problem created by this situation is
that if one of the two petitions is dismissed, then the parties and the
public respondents would not know which claim of which petitioner
was dismissed and which was not." chanroble s virtual law l ib rary

B. Claimants insist that all their claims could properly be

consolidated in a "class suit" because "all the named complainants
have similar money claims and similar rights sought irrespective of
whether they worked in Bahrain, United Arab Emirates or in Abu
Dhabi, Libya or in any part of the Middle East" (Rollo, pp. 35-38).
virtua l law lib rary
chanroble svi rtualawl ib raryc hanrobles

A class suit is proper where the subject matter of the controversy is

one of common or general interest to many and the parties are so
numerous that it is impracticable to bring them all before the court
(Revised Rules of Court, Rule 3, Sec. 12). chanroblesv irtualawli bra rycha nrob les vi rtua l law lib rary

While all the claims are for benefits granted under the Bahrain Law,
many of the claimants worked outside Bahrain. Some of the
claimants were deployed in Indonesia and Malaysia under different
terms and conditions of employment. chanroble svi rtualawl ib raryc hanrobles vi rt ual law li bra ry

NLRC and the POEA Administrator are correct in their stance that
inasmuch as the first requirement of a class suit is not present
(common or general interest based on the Amiri Decree of the State
of Bahrain), it is only logical that only those who worked in Bahrain
shall be entitled to file their claims in a class suit. chanrob lesvi rtualaw lib raryc han robles v irt ual law l i brary

While there are common defendants (AIBC and BRII) and the
nature of the claims is the same (for employee's benefits), there is
no common question of law or fact. While some claims are based on
the Amiri Law of Bahrain, many of the claimants never worked in
that country, but were deployed elsewhere. Thus, each claimant is
interested only in his own demand and not in the claims of the other
employees of defendants. The named claimants have a special or
particular interest in specific benefits completely different from the
benefits in which the other named claimants and those included as
members of a "class" are claiming (Berses v. Villanueva, 25 Phil.
473 [1913]). It appears that each claimant is only interested in
collecting his own claims. A claimants has no concern in protecting
the interests of the other claimants as shown by the fact, that
hundreds of them have abandoned their co-claimants and have
entered into separate compromise settlements of their respective
claims. A principle basic to the concept of "class suit" is that
plaintiffs brought on the record must fairly represent and protect
the interests of the others (Dimayuga v. Court of Industrial
Relations, 101 Phil. 590 [1957]). For this matter, the claimants who
worked in Bahrain can not be allowed to sue in a class suit in a
judicial proceeding. The most that can be accorded to them under
the Rules of Court is to be allowed to join as plaintiffs in one
complaint (Revised Rules of Court, Rule 3, Sec. 6). chanroble svi rtualawl ib raryc hanrobles vi rtual law lib rary

The Court is extra-cautious in allowing class suits because they are

the exceptions to the condition sine qua non, requiring the joinder
of all indispensable parties. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

In an improperly instituted class suit, there would be no problem if

the decision secured is favorable to the plaintiffs. The problem
arises when the decision is adverse to them, in which case the
others who were impleaded by their self-appointed representatives,
would surely claim denial of due process. chanroblesv irt ualawli bra rycha nrob les vi rtua l law lib rary

C. The claimants in G.R. No. 104776 also urged that the POEA
Administrator and NLRC should have declared Atty. Florante De
Castro guilty of "forum shopping, ambulance chasing activities,
falsification, duplicity and other unprofessional activities" and his
appearances as counsel for some of the claimants as illegal (Rollo,
pp. 38-40). chanroblesvi rt ualawlib ra rychan roble s virtual law lib rary

The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is

intended to put a stop to the practice of some parties of filing
multiple petitions and complaints involving the same issues, with
the result that the courts or agencies have to resolve the same
issues. Said Rule, however, applies only to petitions filed with the
Supreme Court and the Court of Appeals. It is entitled "Additional
Requirements For Petitions Filed with the Supreme Court and the
Court of Appeals To Prevent Forum Shopping or Multiple Filing of
Petitioners and Complainants." The first sentence of the circular
expressly states that said circular applies to an governs the filing of
petitions in the Supreme Court and the Court of Appeals. chan roblesv irt ualawli bra rycha nrob les vi rtua l law lib rary
While Administrative Circular No. 04-94 extended the application of
the anti-forum shopping rule to the lower courts and administrative
agencies, said circular took effect only on April 1, 1994. chanroblesvi rtualaw lib raryc han robles v irt ual law li bra ry

POEA and NLRC could not have entertained the complaint for
unethical conduct against Atty. De Castro because NLRC and POEA
have no jurisdiction to investigate charges of unethical conduct of
lawyers.

Attorney's Lien

The "Notice and Claim to Enforce Attorney's Lien" dated December

14, 1992 was filed by Atty. Gerardo A. Del Mundo to protect his
claim for attorney's fees for legal services rendered in favor of the
claimants (G.R. No. 104776, Rollo, pp. 841-844). chanroblesvi rt ualawlib ra rychan roble s vi rtual law lib rary

A statement of a claim for a charging lien shall be filed with the

court or administrative agency which renders and executes the
money judgment secured by the lawyer for his clients. The lawyer
shall cause written notice thereof to be delivered to his clients and
to the adverse party (Revised Rules of Court, Rule 138, Sec. 37).
The statement of the claim for the charging lien of Atty. Del Mundo
should have been filed with the administrative agency that rendered
and executed the judgment.

Contempt of Court

The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante

De Castro and Atty. Katz Tierra for violation of the Code of
Professional Responsibility should be filed in a separate and
appropriate proceeding.

G.R. No. 104911-14

Claimants charge NLRC with grave abuse of discretion in not

accepting their formula of "Three Hours Average Daily Overtime" in
computing the overtime payments. They claim that it was BRII itself
which proposed the formula during the negotiations for the
settlement of their claims in Bahrain and therefore it is in estoppel
to disclaim said offer (Rollo, pp. 21-22).
chanroblesv irt ualawli bra rycha nrob les vi rtual law lib rary
Claimants presented a Memorandum of the Ministry of Labor of
Bahrain dated April 16, 1983, which in pertinent part states:

After the perusal of the memorandum of the Vice President and the
Area Manager, Middle East, of Brown & Root Co. and the Summary
of the compensation offered by the Company to the employees in
respect of the difference of pay of the wages of the overtime and
the difference of vacation leave and the perusal of the documents
attached thereto i.e., minutes of the meetings between the
Representative of the employees and the management of the
Company, the complaint filed by the employees on 14/2/83 where
they have claimed as hereinabove stated, sample of the Service
Contract executed between one of the employees and the company
through its agent in (sic) Philippines, Asia International Builders
Corporation where it has been provided for 48 hours of work per
week and an annual leave of 12 days and an overtime wage of 1 &
1/4 of the normal hourly wage.

xxx xxx xxx chanroble s virtual law l ibrary

The Company in its computation reached the following averages: chanroble s virtual law lib rary

A. 1. The average duration of the actual service of the employee is

35 months for the Philippino (sic) employees . . . . chanroblesvi rtua lawlib rary chan roble s virtua l law lib rary

2. The average wage per hour for the Philippino (sic) employee is
US$2.69 . . . .
chanroble svirtualawl ibra rycha nrob les vi rtua l law lib rary

3. The average hours for the overtime is 3 hours plus in all public
holidays and weekends. chanroblesvi rt ualawlib ra rychan roble s virtual law lib rary

4. Payment of US$8.72 per months (sic) of service as compensation

for the difference of the wages of the overtime done for each
Philippino (sic) employee . . . (Rollo, p.22).

BRII and AIBC countered: (1) that the Memorandum was not
prepared by them but by a subordinate official in the Bahrain
Department of Labor; (2) that there was no showing that the
Bahrain Minister of Labor had approved said memorandum; and (3)
that the offer was made in the course of the negotiation for an
amicable settlement of the claims and therefore it was not
admissible in evidence to prove that anything is due to the
claimants. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

While said document was presented to the POEA without observing

the rule on presenting official documents of a foreign government as
provided in Section 24, Rule 132 of the 1989 Revised Rules on
Evidence, it can be admitted in evidence in proceedings before an
administrative body. The opposing parties have a copy of the said
memorandum, and they could easily verify its authenticity and
accuracy.chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

The admissibility of the offer of compromise made by BRII as

contained in the memorandum is another matter. Under Section 27,
Rule 130 of the 1989 Revised Rules on Evidence, an offer to settle a
claim is not an admission that anything is due. chanroble svirtualawl ibra rycha nrob les vi rtua l law lib rary

Said Rule provides:

Offer of compromise not admissible. - In civil cases, an offer of

compromise is not an admission of any liability, and is not
admissible in evidence against the offeror.

This Rule is not only a rule of procedure to avoid the cluttering of

the record with unwanted evidence but a statement of public policy.
There is great public interest in having the protagonists settle their
differences amicable before these ripen into litigation. Every effort
must be taken to encourage them to arrive at a settlement. The
submission of offers and counter-offers in the negotiation table is a
step in the right direction. But to bind a party to his offers, as what
claimants would make this Court do, would defeat the salutary
purpose of the Rule.

G.R. Nos. 105029-32

A. NLRC applied the Amiri Decree No. 23 of 1976, which provides

for greater benefits than those stipulated in the overseas-
employment contracts of the claimants. It was of the belief that
"where the laws of the host country are more favorable and
beneficial to the workers, then the laws of the host country shall
form part of the overseas employment contract." It quoted with
approval the observation of the POEA Administrator that ". . . in
labor proceedings, all doubts in the implementation of the
provisions of the Labor Code and its implementing regulations shall
be resolved in favor of labor" (Rollo, pp. 90-94). chanroble svirtualawl ibra ryc hanro bles vi rtu al law li bra ry

AIBC and BRII claim that NLRC acted capriciously and whimsically
when it refused to enforce the overseas-employment contracts,
which became the law of the parties. They contend that the
principle that a law is deemed to be a part of a contract applies only
to provisions of Philippine law in relation to contracts executed in
the Philippines.
chanrob lesvi rtua lawlib rary chan robles virtua l law lib rary

The overseas-employment contracts, which were prepared by AIBC

and BRII themselves, provided that the laws of the host country
became applicable to said contracts if they offer terms and
conditions more favorable that those stipulated therein. It was
stipulated in said contracts that:

The Employee agrees that while in the employ of the Employer, he

will not engage in any other business or occupation, nor seek
employment with anyone other than the Employer; that he shall
devote his entire time and attention and his best energies, and
abilities to the performance of such duties as may be assigned to
him by the Employer; that he shall at all times be subject to the
direction and control of the Employer; and that the benefits
provided to Employee hereunder are substituted for and in lieu of all
other benefits provided by any applicable law, provided of course,
that total remuneration and benefits do not fall below that of the
host country regulation or custom, it being understood that should
applicable laws establish that fringe benefits, or other such benefits
additional to the compensation herein agreed cannot be waived,
Employee agrees that such compensation will be adjusted
downward so that the total compensation hereunder, plus the non-
waivable benefits shall be equivalent to the compensation herein
agreed (Rollo, pp. 352-353).

The overseas-employment contracts could have been drafted more

felicitously. While a part thereof provides that the compensation to
the employee may be "adjusted downward so that the total
computation (thereunder) plus the non-waivable benefits shall be
equivalent to the compensation" therein agreed, another part of the
same provision categorically states "that total remuneration and
benefits do not fall below that of the host country regulation and
custom." chanrobles vi rt ual law li bra ry

Any ambiguity in the overseas-employment contracts should be

interpreted against AIBC and BRII, the parties that drafted it
(Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA
257 [1979]). chanroble svi rtualawl ib raryc hanrobles vi rt ual law li bra ry

Article 1377 of the Civil Code of the Philippines provides:

The interpretation of obscure words or stipulations in a contract

shall not favor the party who caused the obscurity.

Said rule of interpretation is applicable to contracts of adhesion

where there is already a prepared form containing the stipulations
of the employment contract and the employees merely "take it or
leave it." The presumption is that there was an imposition by one
party against the other and that the employees signed the contracts
out of necessity that reduced their bargaining power (Fieldmen's
Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]). chanroble svirtualawl ibra ryc hanro bles vi rt ual law li bra ry

Applying the said legal precepts, we read the overseas-employment

contracts in question as adopting the provisions of the Amiri Decree
No. 23 of 1976 as part and parcel thereof. chanroblesv irt ualawli bra rychan rob les vi rtual law lib rary

The parties to a contract may select the law by which it is to be

governed (Cheshire, Private International Law, 187 [7th ed.]). In
such a case, the foreign law is adopted as a "system" to regulate
the relations of the parties, including questions of their capacity to
enter into the contract, the formalities to be observed by them,
matters of performance, and so forth (16 Am Jur 2d,
150-161). chanroble svirtualawl ibra rycha nro bles vi rtua l law lib ra ry

Instead of adopting the entire mass of the foreign law, the parties
may just agree that specific provisions of a foreign statute shall be
deemed incorporated into their contract "as a set of terms." By such
reference to the provisions of the foreign law, the contract does not
become a foreign contract to be governed by the foreign law. The
said law does not operate as a statute but as a set of contractual
terms deemed written in the contract (Anton, Private International
Law, 197 [1967]; Dicey and Morris, The Conflict of Laws, 702-703,
[8th ed.]). chanroblesvi rtua lawlib rary chan roble s virtual law lib rary

A basic policy of contract is to protect the expectation of the parties

(Reese, Choice of Law in Torts and Contracts, 16 Columbia Journal
of Transnational Law 1, 21 [1977]). Such party expectation is
protected by giving effect to the parties' own choice of the
applicable law (Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465,
467 [1957]). The choice of law must, however, bear some
relationship to the parties or their transaction (Scoles and Hayes,
Conflict of Law 644-647 [1982]). There is no question that the
contracts sought to be enforced by claimants have a direct
connection with the Bahrain law because the services were rendered
in that country. chanroblesvi rtua lawlib rary chan rob les virtual law l ibra ry

In Norse Management Co. (PTE) v. National Seamen Board, 117

SCRA 486 (1982), the "Employment Agreement," between Norse
Management Co. and the late husband of the private respondent,
expressly provided that in the event of illness or injury to the
employee arising out of and in the course of his employment and
not due to his own misconduct, "compensation shall be paid to
employee in accordance with and subject to the limitation of the
Workmen's Compensation Act of the Republic of the Philippines or
the Worker's Insurance Act of registry of the vessel, whichever is
greater." Since the laws of Singapore, the place of registry of the
vessel in which the late husband of private respondent served at the
time of his death, granted a better compensation package, we
applied said foreign law in preference to the terms of the
contract.chanroblesvi rt ualawlib ra rychan roble s virtual law lib rary

The case of Bagong Filipinas Overseas Corporation v. National Labor

Relations Commission, 135 SCRA 278 (1985), relied upon by AIBC
and BRII is inapposite to the facts of the cases at bench. The issue
in that case was whether the amount of the death compensation of
a Filipino seaman should be determined under the shipboard
employment contract executed in the Philippines or the Hongkong
law. Holding that the shipboard employment contract was
controlling, the court differentiated said case from Norse
Management Co. in that in the latter case there was an express
stipulation in the employment contract that the foreign law would be
applicable if it afforded greater compensation. chanroblesvi rtualaw lib raryc han robles v irt ual law l ibra ry

B. AIBC and BRII claim that they were denied by NLRC of their right
to due process when said administrative agency granted Friday-pay
differential, holiday-pay differential, annual-leave differential and
leave indemnity pay to the claimants listed in Annex B of the
Resolution. At first, NLRC reversed the resolution of the POEA
Administrator granting these benefits on a finding that the POEA
Administrator failed to consider the evidence presented by AIBC and
BRII, that some findings of fact of the POEA Administrator were not
supported by the evidence, and that some of the evidence were not
disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead
of remanding the case to the POEA Administrator for a new hearing,
which means further delay in the termination of the case, NLRC
decided to pass upon the validity of the claims itself. It is this
procedure that AIBC and BRII complain of as being irregular and a
"reversible error."
chanrob les vi rtua l law lib rary

They pointed out that NLRC took into consideration evidence

submitted on appeal, the same evidence which NLRC found to have
been "unilaterally submitted by the claimants and not disclosed to
the adverse parties" (Rollo, pp. 37-39). chanroblesv irtualawli bra rycha nrob les vi rtua l law lib rary

NLRC noted that so many pieces of evidentiary matters were

submitted to the POEA administrator by the claimants after the
cases were deemed submitted for resolution and which were taken
cognizance of by the POEA Administrator in resolving the cases.
While AIBC and BRII had no opportunity to refute said evidence of
the claimants before the POEA Administrator, they had all the
opportunity to rebut said evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII
themselves were able to present before NLRC additional evidence
which they failed to present before the POEA Administrator. chanroble svi rtualaw lib raryc hanrobles vi rt ual law li bra ry

Under Article 221 of the Labor Code of the Philippines, NLRC is

enjoined to "use every and all reasonable means to ascertain the
facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due
process." chanrobles vi rtua l law lib ra ry

In deciding to resolve the validity of certain claims on the basis of

the evidence of both parties submitted before the POEA
Administrator and NLRC, the latter considered that it was not
expedient to remand the cases to the POEA Administrator for that
would only prolong the already protracted legal controversies. chanroblesvi rt ualawlib ra rychan rob les vi rtual law lib rary

Even the Supreme Court has decided appealed cases on the merits
instead of remanding them to the trial court for the reception of
evidence, where the same can be readily determined from the
uncontroverted facts on record (Development Bank of the
Philippines v. Intermediate Appellate Court, 190 SCRA 653 [1990];
Pagdonsalan v. National Labor Relations Commission, 127 SCRA 463
[1984]).chanroble svirtualawl ibra rycha nro bles vi rtua l law lib ra ry

C. AIBC and BRII charge NLRC with grave abuse of discretion when
it ordered the POEA Administrator to hold new hearings for 683
claimants listed in Annex D of the Resolution dated September 2,
1991 whose claims had been denied by the POEA Administrator "for
lack of proof" and for 69 claimants listed in Annex E of the same
Resolution, whose claims had been found by NLRC itself as not
"supported by evidence" (Rollo, pp. 41-45). chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

NLRC based its ruling on Article 218(c) of the Labor Code of the
Philippines, which empowers it "[to] conduct investigation for the
determination of a question, matter or controversy, within its
jurisdiction, . . . ." chanrob les vi rtual law lib rary

It is the posture of AIBC and BRII that NLRC has no authority under
Article 218(c) to remand a case involving claims which had already
been dismissed because such provision contemplates only situations
where there is still a question or controversy to be resolved (Rollo,
pp. 41-42). chanroblesvi rt ualawlib ra rychan roble s virtual law lib rary

A principle well embedded in Administrative Law is that the

technical rules of procedure and evidence do not apply to the
proceedings conducted by administrative agencies (First Asian
Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986];
Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]).
This principle is enshrined in Article 221 of the Labor Code of the
Philippines and is now the bedrock of proceedings before NLRC. chanroblesvi rt ualawlib ra rychan roble s virtual law lib rary

Notwithstanding the non-applicability of technical rules of procedure

and evidence in administrative proceedings, there are cardinal rules
which must be observed by the hearing officers in order to comply
with the due process requirements of the Constitution. These
cardinal rules are collated in Ang Tibay v. Court of Industrial
Relations, 69 Phil. 635 (1940).

VIII

The three petitions were filed under Rule 65 of the Revised Rules of
Court on the grounds that NLRC had committed grave abuse of
discretion amounting to lack of jurisdiction in issuing the questioned
orders. We find no such abuse of discretion. chanroblesvi rtua lawlib rary chan roble s virtual law l ibra ry

WHEREFORE, all the three petitions are DISMISSED. chanroble svirtualawlib ra rychan roble s virtual law lib rary

SO ORDERED.
G.R. No. L-4718 March 19, 1920

SY JOC LIENG, SY YOC CHAY, SY JUI NIU and SY CHUA NIU, plaintiffs, appellees-appellants,
vs.
PETRONILA ENCARNACION, GREGORIO SY QUIA, PEDRO SY QUIA, JUAN SY QUIA and
GENEROSO MENDOZA SY QUIA, defendants, appellants-appellees.

Bishop and O'Brien, for plaintiffs, appellees and appellants.

Rosado, Sanz and Opisso, M. Legaspi, and Ledesma and Sumulong, for defendants, appellants and
appellees.

TORRES, J.:

On the 4th day of December, 1905, the said Sy Joc Lieng, Sy Joc Chay, Sy Jui Niu and Sy Chua Niu
filed an amended complaint against the said defendants, alleging: That in or about the year 1847
was married in the city of Amoy to Yap Puan Niu, of which marriage the following male children were
born, to wit; Sy By Bo and Sy By Guit, they being the only legitimate heirs of the said Vicente
Romero Sy Quia; that in or about the year 1882 Sy By Bo died intestate in China, leaving as his only
surviving children and legitimate heirs the plaintiffs Sy Yoc Chay and Sy Jui Niu; that in about the
year 1880 the other child of Sy Quia, Sy By Guit, also died intestate in China, leaving as his only
surviving children and legitimate heirs the other plaintiffs, Sy Joc Lieng and Sy Chua Niu; that in or
about the year 1891 Yap Puan Niu died intestate in grandchildren, who are the plaintiffs in this case;
that in the year 1894 Vicente Romero Sy Quia died intestate in this city of Manila, leaving his
surviving grandchildren, the plaintiffs, as his only legitimate heirs.

That Vicente Romero Sy Quia acquired during his lifetime a large amount of property, consisting of
personal and real property in the Philippine Islands, mostly located in the city of Manila, amounting
to P1,000,000 Philippine currency; that on or about the 3rd of August, 1990, the defendants illegally,
without any rights, and in the absence of the plaintiffs herein, took possession of all the said
personal and real property left by the said Sy Quia, deceased, and since then have managed and
administered the same, alleging to be the owners thereof; that since the said 3rd day of August,
1900, the defendants and each of them have converted and are converting part of the property of
the said Sy Quia, deceased, to the use and benefit of each of them, and a large part of the said
property, consisting of real property unknown to the plaintiffs, they being in possession thereof as
owners, exercising over them acts of ownership, and converting them to their own use; that it has
been impossible for the plaintiffs to discover, ascertain, and have knowledge of each and all the
items of real and personal property belonging to the said Vicente Romero Sy Quia, deceased, at the
time of his death, nor the amount of personal and real property converted by the defendants, except
such as is described in the accompanying document marked: "Exhibit A," which is a part of the
complaint; that the property described in said document is a part of the estate left by the deceased
Sy Quia at the time of his death, aside and apart from the personal and real property converted by
the defendants, who are, and each one of them is, in possession and custody of all the deeds,
instruments, contracts, books, and papers relating to the title and conversion of the said real and
personal property, which titles and the description thereof could not be proven without sworn
statements of the defendants and of each one of them; that the plaintiffs are informed and believe
that the said real and personal property belonging to the estate of the said Sy Quia, and which is
now held and controlled by the defendants, has a value of approximately P1,000,000, Philippine
currency.

That the plaintiffs are the only descendants and legitimate heirs of the deceased Sy Quia, they being
entitled to the possession of all the property of his estate, as well as of the real and personal
property converted as aforesaid, and the defendants having appropriated the same, with all the rents
and profits thereof, it is impossible for the plaintiffs to ascertain and discover the true amount of the
said rents and profits, which aggregate several thousand pesos, all of which said property is in
danger of being lost, to the irreparable damage of the plaintiffs, unless and except a receiver is
appointed to take charge of the preservation and custody of the same in order to protect the
interests of the said plaintiffs, and enable the court to determine the actual value of the real and
personal property of the estate at the time of the death of the said Sy Quia, as well as the value of
the real and personal property subsequently converted by the defendants, together with the rents
and profits of the whole estate, converted by the defendants to their own use and benefit; wherefore
it is necessary that said defendants be required to render detailed accounts of the real and personal
property and rents and profits of the estate, and that it be ascertained by the sworn statement of the
said defendants what the actual value of the real and personal property of the said estate, with the
rents and profits, thus converted and held by them, is.

They accordingly prayed that defendants be directed to render under oath a complete and detailed
account of all the property left by Sy Quia at the time of his death, of the administration, custody,
control, conversion and disposal thereof, of the conversion of the same, and of the rents and profits
of the original property, as well as of the property thus converted, including in the said accounting
both such properties with the rents and profits; that, upon the giving of the necessary bond, a
receiver be appointed to administer the original property, as well as the property converted, during
the pendency of the present litigation, the said complete and detailed account under oath as
aforesaid to be submitted to the court, covering the original property as well as the property
converted, with all the rents and profits, and that thereupon a receiver be appointed to take charge
and control of the administration of the whole of said property.
They further prayed that it be adjudged and decreed that the defendants are the only descendants
and heirs of the said Vicente Romero Sy Quia from and since the time of his death, and that they are
the only legitimate owners of the real and personal property left by him, and of the whole said
property converted by the defendants, and that they are entitled to the possession of the whole of
the said property and the rents and profits accruing therefrom; that it be decreed that the defendants
have not and never had any right, title, or interest to the said property, nor to the rents and profits
thereof, the same being held by them as mere trustees for the benefit of the plaintiffs and each of
them, further praying for any other relief which the court may deem just and equitable, and for the
costs of this action.

ANSWER

The defendants, Petronila Encarnacion, Pedro Sy Quia, and Juan Sy Quia, answering the foregoing
complaint, specifically deny the paragraphs 1,2,3, 4, 5, and 6 of the complaint, which relate to the
paternity and status of the plaintiffs, and to the death of their grandmother and parents, and also
deny generally all and each of the allegations contained in paragraphs 7, 8, 9, 10, 11, 12, 13, 14, 15,
and 16 of the complaint relating to the succession and actual condition of the estate of the deceased
Sy Quia, except as otherwise expressly admitted as true in the said answer.

As a special defense and in opposition to the complaint, the defendants allege that prior to the year
1852 Vicente Ruperto Romero Sy Quia was an infidel known only by the name of Sy Quia, he
having resided in the Philippine Islands for many years prior thereto; that on June 8, 1852, the said
infidel Chinaman Sy Quia was converted to the Christian religion, and was baptized in the parish
church of San Vicente, Province of Ilocos Sur, Philippine Islands, under the name of Vicente Ruperto
Romero Sy Quia, as shown by his certificate of baptism marked "Exhibit 1," and made an integral
part of the answer; that on June 9, 1853, the Christian Chinaman Vicente Ruperto Romero Sy Quia
contracted canonical marriage in accordance with the laws then if force in these Islands, with the
defendant Petronila Encarnacion, a native of Vigan, Ilocos Sur, as shown by his certificate of
marriage marked "Exhibit 2," which is made an integral part of the answer; that the said Vicente Sy
Quia and his wife, Petronila Encarnacion, fixed their residence and conjugal domicile in these
Islands until the dissolution of the conjugal partnership by the death of the husband on January 9,
1984; that at the time of their marriage Vicente Romero Sy Quia had no property, and brought no
property into the marriage, but that the wife brought to the marriage a small capital which was the
foundation of the subsequent fortune acquired by the spouses by their labor and industry, and by the
labor and industry of the children, five in number, named Apolinaria, Maria, Gregorio, Pedro and
Juan, all of whom have always been in continuous possession of baptism marked "Exhibits 3, 4, 5,
6, and 7," to be considered as an integral part of the answer.

That on January 9, 1894, Vicente Romero Sy Quia died intestate in the city of Manila, and after the
necessary legal proceedings under the legislation then in force, his surviving children, Apolinaria,
Gregorio, Pedro and Juan, and his grandchildren Generoso Mendoza, representing his mother,
Maria Romero Sy Quia, deceased, were declared by a decree of the Court of First Instance of the
district of Quiapo, dated January 26 of the said year, to be the heirs abintestate of the said
deceased, as shown by a copy of the said decree, marked "Exhibit 3," as an integral part of the
answer, Apolinaria Romero Sy Quia, one of the children recognized as heirs of their deceased
father, having died on the 1st of May, 1900, leaving as her only legitimate heir her surviving mother,
Petronila Encarnacion.

That since January 9, 1894, when Vicente Romero Sy Quia, died the defendants have been in quiet,
peaceful, and uninterrupted possession as owners in good faith and with a just title, of the property
which constitutes the estate of their deceased father, they never having been heretofore disturbed
therein by the plaintiffs or any of them, notwithstanding the fact that the said plaintiffs were here in
the Philippine Islands, and all the property included in the inventory made at the time of the partition
of the estate of the deceased Sy Quia, was acquired by him subsequent to the year 1853 when he
married the defendant Petronila Encarnacion; that a great portion of the real property included in the
said inventory was acquired by Petronila Encarnacion after the death of her husband, and that in the
title deeds of a considerable portion of the property bought during the lifetime of Sy Quia, Petronila
Encarnacion appears as the vendee, wherefore the defendants Pedro Sy Quia, and Petronila
Encarnacion prayed the court that they be acquitted of the complaint, with the costs against the
plaintiffs, and that they, the defendants, be granted such other and further relief as might be just and
equitable.

The other defendant, Gregorio Sy Quia, answering the complaint, denied all and each of the
allegations therein contained, and further specifically denied that Sy Quia had married in or about
the year 1847 at Amoy, China, the Chinese woman Yap Puan Niu, and that said Sy Bi Bo and Sy By
Guit were the legitimate children and heirs of the deceased Sy Quia, also that the plaintiffs Sy Joc
Lieng, Sy Joc Chay, Sy Jui Niu and Sy Chua Niu were the grandchildren and legitimate heirs of the
deceased Vicente Romero Sy Quia; that as a special defense he alleged that the deceased Sy Quia,
many years prior to 1852, while a non-Christian Chinese subject, definitely fixed his residence and
domicile in the Philippine Islands, subjecting himself to the laws then therein force; that in the year
1852 Sy Quia was baptized, having been converted to the Catholic faith, on the 11th of June of that
year, the ceremony taking place at the parish church of San Vicente, he being then named Vicente
Ruperto Romero Sy Quia, and on June 9 of the following year he contracted marriage with Petronila
Encarnacion in accordance with the rites of the Catholic Church, and in conformity with the laws then
in the force in the Philippine islands, as shown by the church certificates marked "Exhibits A and B."

That Sy Quia and his wife Petronila Encarnacion since their marriage continuously resided in the
Philippine Islands until the 9th of January, 1894, when the husband died intestate, they having had
since their marriage five children, among the, Gregorio, who subscribes this answer, according to
canonical certificate Exhibit C; that the deceased Sy Quia brought no property into the conjugal
partnership, but Petronila Encarnacion did bring with her the small capital of P5,000, with which,
through their labor and industry at first, and subsequently by the labor and industry of their children,
they had acquired the large amount of property existing at the time of the death of the husband, said
property so acquired being located in the Philippine Islands; that on the 23d of January, 1894, by an
order of the Court of First Instance of the district of Quiapo, the surviving children of Sy Quia, named
Apolinaria, Gregorio, Pedro, and Juan, and Sy Quia's grandchild Generoso Mendoza, representing
his (Generoso's) deceased mother, Maria Romero Sy Quia, were declared to be the heirs
abintestate of the said Sy Quia, as shown by a copy of the said decree, marked "Exhibit D," the
defendants having taken possession from that date of the property left by the deceased Sy Quia,
they having continued so in possession in the quality of owners, with just title and good faith,
adversely, publicly, quietly and peacefully, until the plaintiffs presented their complaint to the court;
that on the 1st day of May, 1900, Apolinaria Romero Sy Quia died a spinster and intestate, leaving
as her only legitimate heir her mother, Petronila Encarnacion; that the plaintiffs at the time of death
of Vicente Romero Sy Quia had knowledge of his demise, and had notice that the defendants had
petitioned to the court for a declaration, which they obtained, to the effect that they were the heirs of
the said Vicente Romero Sy Quia, deceased; and that at no time were the plaintiffs or their parents
recognized or considered by the said Vicente Ruperto Romero Sy Quia, as his descendants, heirs or
relatives; wherefore defendant prayed that judgment be entered declaring that the plaintiffs had no
right or interest to or in the estate of the deceased Vicente Romero Sy Quia, and that the defendants
are the only legitimate heirs of the said Sy Quia, taxing the costs against the plaintiffs.

The last of the defendants, Generoso Mendoza Sy Quia, answering the complaint on the 18th of
January, 1906, alleged that he denied all and each of the allegations contained in paragraphs 1 to
16, inclusive, of the complaint, and that he also specifically denied that the deceased Sy Quia,
whose Christian name is Vicente Ruperto Romero Sy Quia, had married at Amoy, China, the woman
Yap Puan Niu, in or about the year 1847, or at any time previous or subsequent thereto; that the said
Sy By Bo and Sy By Guit were the legitimate children and heirs of the deceased Sy Quia; that the
plaintiffs Sy Joc Lieng, Sy Joc Chay, Sy Jui Niu, and Sy Chua Niu were the legitimate descendants
or heirs of the deceased Sy Quia.

As a special defense, defendant alleged that the Chinaman Sy Quia came to the Philippine Islands
as an immigrant a long time prior to 1852, fixing his residence and domicile therein, and subjecting
himself to the laws then in force in this country; that in the said year 1852, Sy Quia having been
converted to Christianity, was baptized in the parish church of San Vicente, Ilocos Sur, and named
Vicente Ruperto Romero Sy Quia, as shown by the canonical certificates exhibited by the
defendants, and marked "Exhibits 1 and A," which are made a part of this answer; that on June 9,
Vicente Ruperto Romero Sy Quia was married by the Church to Petronila Encarnacion in
accordance with the canonical laws, as shown by the certified copies of the marriage certificate,
marked "Exhibits 2 and B," introduced by the other defendants; that Sy Quia and his wife Petronila
Encarnacion established themselves and fixed their conjugal domicile in the Philippine Islands,
where they continued to reside until the 9th of January, 1894, when the marriage was dissolved by
the death of the husband in Manila; that the said spouses since their marriage had five children, of
whom Apolinaria died a spinster, and Maria, who had married, died leaving of a child, the defendant
Generoso Mendoza and the other children of the deceased Sy Quia, named Gregorio, Pedro, and
Juan, having survived; that Vicente Romero Sy Quia at the time of his marriage owned no property,
while Petronila Encarnacion brought to the conjugal partnership a small capital, amounting to
P5,000, which was the foundation of the large fortune subsequently acquired by them through their
labor and industry, subsequently augmented with the aid of their own children.

That on the 9th of January, 1894, Vicente Romero Sy Quia died, and after the necessary legal
proceedings under the law of civil procedure then in force in these Islands, the Court of the First
Instance by a decree dated the 26th of the said month and year, declared that the surviving children,
Apolinaria, Gregorio, Pedro, and Juan, and his grandchild Generoso Mendoza, representing his
mother, Maria, deceased, were the heirs of the deceased Sy Quia, intestate, as shown by Exhibits 8
and D, introduced by the other defendants; that on May, 1, 1900, the oldest daughter, Apolinaria,
died intestate and single, leaving as her only heir mother Petronila Encarnacion; that since the death
of the said Vicente Romero Sy Quia the defendants had been in quiet, public, peaceful, and
uninterrupted possession of the property left by the deceased Sy Quia, having held the same
adversely, with good faith and just title; and that they have never disturbed by the plaintiffs in such
possession, notwithstanding the fact that they, the plaintiffs, were in the Philippine Islands at the time
of the death of Vicente Romero Sy Quia, and had knowledge of the fact that the defendants had
applied to the Court of First Instance for and secured a declaration to the effect that they were the
heirs of the deceased Sy Quia; and that neither the plaintiffs nor the said Sy By Bio and Sy By Guit
had ever been recognized or considered by the deceased Vicente Romero Sy Quia as his
descendants, heirs or relatives, they never having been in possession of the legal status of children
or legitimate descendants of the said Sy Quia; wherefore this defendant prayed that judgment be
rendered in favor of all the defendants, acquitting them of the complaint, and directing that the
plaintiffs pay the costs.

AMENDMENT TO THE COMPLAINT.

The plaintiffs on the 31st of January, 1906, presented by way of reply to the answers of the various
defendants an amendment to the original complaint, denying generally and specifically all and each
of the material allegations set out in the answers of the defendants and alleging that the pretended
marriage between Vicente Romero Sy Quia and Petronila Encarnacion was not a lawful marriage,
but a false and fraudulent one, without any force, efficacy, or legal validity, the certificate of marriage
presented by the defendants not being a true and correct certificate of marriage, the same being
false, fraudulent, and without any force, efficacy, or legal validity, for the reason that on June 9,
1853, Vicente Romero Sy Quia was and thereafter continued to be the lawful husband of one Yap
Puan Niu, until the year 1891, when she died, and that the marriage of Sy Quia with the said Yap
Puan Niu, since 1847 and until her death in 1891, was continuously in full force and effect, Sy Quia
not having married again after the death of the said wife; and that Apolinaria, Maria, Gregorio, Pedro
and Juan, the alleged legitimate children of Vicente Romero Sy Quia and Petronila Encarnacion,
were not and never had been the legitimate children of Sy Quia, and that they were not and never
had been his legitimate heirs and descendants, the certificates of baptism produced by the
defendants, and marked "exhibits 3, 4, 5, 6, and 7," not being true nor proper, but false and
fraudulent, and of no force, efficacy, or legal validity, the said children not being the legitimate
descendants of the deceased Sy Quia. Paragraphs 9 and 10 of the amended complaint are a
repetition of similar paragraphs contained in the original.

ANSWER TO THE AMENDED COMPLAINT.

The defendants, Generoso Mendoza, Petronila Encarnacion, Pedro Sy Quia, Gregorio Sy Quia, and
Juan Sy Quia, filed their answers to the amended complaint on the 7th and 3th of February, 1906,
denying all and each of the allegations contained in paragraphs 2, 3, 4, and 5 of the amended
complaint, stating that they ratified each and all of the allegations, denials and defenses contained in
their previous answer, which they reproduced therein, and that they renewed their prayer that
judgment be rendered acquitting them of the said complaint, with the costs against the plaintiffs.

On June 19, 1906, counsel for Petronila Encarnacion notified the court in writing of the death of the
said Petronila Encarnacion, who died in this city on the 6th of the said month, and as counsel for the
other defendants, Pedro and Juan Sy Quia, moved the court that in accordance with section 119 of
the Code of Civil Procedure, an order be made directing that the action be proceeded with in the
name of the administrator of her estate, Pedro Sy Quia, which motion was granted without any
objection on the part of the plaintiffs' attorney, on June 21, 1906.

On August 20, 1906, it was stipulated between counsel for both parties that by order of the court of
deposition of several witnesses then designated by the plaintiffs be taken at Amoy, China, before the
consul, vice-consul, or a consular agent of the United States in the said city, during the days and in
manner agreed upon, in accordance with section 362 of the Code of Civil Procedure, the defendants
being authorized to take the deposition of such witnesses as they might desire to present in the
manner agreed upon.

On November 8, 1906, counsel for plaintiffs informed the court of the death of one of the plaintiffs,
Sy Jui Niu, at Amoy, China, on or about the 28th of July of the said year, and she having died
intestate, the court on November 8, appointed C. W. O'Brien as special administrator of her estate,
and said counsel thereupon asked the court to allow the action to be continued by him, and by a
subsequent petition filed on the 13th of the same month, the administrator C. W. O' Brien, appointed
as aforesaid, filed a written appearance as such administrator of the estate of the deceased Sy Jui
Niu.

On a petition filed on the 17th of November, 1906, counsel for both parties informed the court that
the documents presented by the defendants, and marked "Exhibits 1, 2, 3, 4, 5, 6, and 7, and A, B,
C," which are certificates of baptism, marriage, and burial, should be considered as original and
authentic documents, so as to avoid the necessity of presenting the originals themselves, which
were bound in book form, together with other documents relating to persons who had no connection
with this litigation.

On the 4rth of January, 1907, the defendants presented a motion to the Court of First Instance,
asking that the depositions taken before the consul of the United States at Amoy, China, as given by
the witnesses for the plaintiffs, named Li Ung Bing, Sy Peng, Lim Chio, Yap Si Tan, Yap Chia, Sy
Kay Tit, Yap Chong, Sy Boan, Sy Kong Len, and Sy Hong Oan, whose testimony the plaintiffs
attempted to introduce in this action, be not admitted, defendants' motion being based on the ground
that the said depositions contained a formal defect concerning the manner in which the oath was
administered to the witnesses.

In a petition filed on a same date, January 4, the defendants reproduced their former motion,
alleging as a further ground in support thereof that the certificates by the officer who took the said
depositions did not comply with the essential requisites by law, and after due notice to the plaintiffs,
a hearing was had upon the said petition on January 7, 1907. After the recital of the evidence
introduced by both parties, and after the documents exhibited by them, together with the depositions
taken at Vigan of various witnesses for the defendants, and of the depositions taken at Amoy, China,
had been united to the record, the Court of First Instance on the 26th of February, 1908, rendered a
judgment declaring that the plaintiffs Sy Joc Lieng, Sy Yoc Chay, Sy Chua Niu, and C. W. O' Brien,
the latter as guardian of Sian Han, and the defendants Gregorio Sy Quia, Pedro Sy Quia, Juan Sy
Quia, and Generoso Mendoza Sy Quia, and the heirs of the deceased Petronila Encarnacion,
presented by the one of the defendants, Pedro Sy Quia, as the administrator of the property, were
the heirs of the property of the estate of Vicente Romero Sy Quia, now deceased, consisting of one-
half of the property distributed by the order of the Court of the First Instance of the district of Quiapo
of the 3rd of August, 1900, in the following form: To Sy Joc Lieng, one-ninth; Sy Yoc Chay, one-
ninth; Sy Chua Niu, one-ninth; C. W. O' Brien, as the guardian of Sian Han, one-ninth; Pedro Sy
Quia, one-ninth; Juan Sy Quia, one-ninth, Gregorio Sy Quia, one-ninth; Generoso Mendoza Sy
Quia, one-ninth, and the heirs of Petronila Encarnacion, represented by Pedro Sy Quia as the
administrator of the latter's estate, one-ninth; the heirs of the said Petronila Encarnacion,
represented by the administrator of her estate, being the owners with the right to possession of the
other half of the property left by Vicente Romero Sy Quia at the time of his death.

That the defendants, Gregorio, Pedro, Juan, and Generoso, and Pedro Sy Quia, as the administrator
of the property of his mother Petronila Encarnacion and as a representative of the latter's heirs,
render a statement of the property which was distributed among them under and by virtue of the
order of the Court of First Instance of the 3rd of August, 1900.

That the said defendants and each of them render an accounting of the rents and profits of all the
property respectively received by them from the dates when they were delivered to them, it being
understood that if upon making the inventory of the property it appears that the portion thereof
assigned to Petronila Encarnacion as her share does not exceed one-half of all the property left by
Vicente Romero Sy Quia, at the time of his death, it will not be necessary to render an accounting of
the rents and profits of the portion to her thus assigned.

That a receiver, to be selected later, be appointed upon the giving of a sufficient bond, the amount of
which will be hereafter fixed, to take charge and possession of all the property known as aforesaid, it
being understood that if upon making a list of the said property it appears that the part thereof
assigned to Petronila Encarnacion as her share does not exceed one-half of all the property of the
estate of Vicente Romero Sy Quia at the time of his death, the said receiver shall only take
possession of one-half of the property assigned to the other persons who have accounted for them.
The Court of First Instance made no special order as to costs.

To this decision of the trial court counsel for the defendants, Pedro Sy Quia, by himself and as
administrator of the estate of Petronila Encarnacion, Juan Sy Quia, Gregorio Sy Quia, and Generoso
Mendoza, duly excepted, and by a motion presented to the court asked that the said judgment be
set aside and a new trial granted, on the ground that the evidence was insufficient to justify the
decision in favor of the plaintiffs, and because the decision of the trial court was contrary to law, the
findings of the fact being plainly and manifestly against the weight of the evidence. Upon notice to
counsel for plaintiffs, a hearing was had upon said motions, which were subsequently overruled by
the court. Defendants having duly excepted to the order of the court overruling the same, and upon
filing their bill of exceptions, asked the court to unite to the same all of the evidence taken and
introduced by both parties, with the documents and pleadings presented during the course of the
trial, the transcript of the stenographic notes containing the testimony of the witnesses, and the
depositions taken at Vigan and Amoy, which said bill of exceptions defendants asked the court to
approved and certify to the Supreme Court, with all of the said evidence which was made an integral
part thereof.

By an order entered on the 28th of March, 1908, the court upon certifying the bill of exceptions,
directed that the execution of the judgment be not stayed in so far as it required the defendants to
submit a statement showing the property received by them, and to render an account of all the rents
and profits, upon giving a bond satisfactory to the court, to secure the fulfillment of the judgment in
case the same be totally or partially affirmed by the Supreme Court.

The trial court in deciding the motion for appointment of a receiver, and after hearing both parties,
made an order on the 17th of March, 1908, appointing Gregorio Sy Quia as receiver of the property
in question, upon the giving of the bond in the sum of P400,000, to be approved by the court, and in
case that the person thus appointed did not accept, the appointment would be set aside, and a
stranger duly qualified substituted. To this order of the court the defendants Pedro Sy Quia and Juan
Sy Quia duly excepted, and on the 27th of March, 1908, there was united to the proper files the
personal bond for P400,000 given by the receiver.

By another order made on the said 17th day of March, the court deciding the motion that a time be
fixed within which the defendants should report to the court whatever property belonging to the
deceased Vicente Romero Sy Quia was distributed among them, directed that the defendants Juan
Sy Quia, Generoso Mendoza and Pedro Sy Quia, the latter by himself and as administrator of the
estate of Petronila Encarnacion, submit a statement of the property distributed among them under
and by virtue of the order of the 3rd day of August, 1900, on or before the 23rd day of March, 1908,
and that Gregorio Sy Quia submit a similar statement on or before the 31st day of the said month
and year.

Pedro Sy Quia and Juan Sy Quia excepted to this order of the court dated March 17 as aforesaid,
requiring them to submit a statement of the property they had received, and asked to the court to
approve and to have united to the original bill of exceptions, the additional one duly presented by
them, and notwithstanding the objection of counsel for plaintiffs, the court by an order dated April 4,
1908, certified the supplementary bill of exceptions; and considering that the appointment of
Gregorio Sy Quia as receiver was made at the suggestion of the defendants in open court, at which
time the amount of the bond was fixed with the knowledge of the defendants, also the order of the
court directing that a statement of the property received by the defendants be submitted to the court
within a specified time, the court ordered that the execution of the judgment be not stayed in so far
as the latter order of the court was concerned, and the original bill of exceptions, together with the
supplementary one, was duly forwarded to the clerk of this court in connection with the appeal taken
and allowed.

The plaintiffs, upon being notified of the said judgment of the court, excepted thereto, and requested
in writing that the court modify its decision and conclusions of law by declaring that the plaintiffs Sy
Joc Lieng, Sy Yoc Chay, Sy Chua Niu, and C. W. O'Brien, as the guardian of Sian Han, were they
were entitled to all the property left by the latter, and distributed under the order of the court of the
3rd of August, 1900; that Petronila Encarnacion, deceased, and her children and heirs had no
interest in the said estate of Sy Quia; that they were not the heirs of the deceased Vicente Romero
Sy Quia; that the receiver appointed by the court be authorized to take possession of all the property
left by the said deceased, especially the property which was distributed by the decree of the court of
the 3rd of August, 1900, together with the rents and profits, and that the said judgment be modified,
awarding the plaintiffs the costs of the action, and directing that defendants submit an accounting of
the property in litigation.

This action has its purpose primarily to recover from the present possessors the property left at the
time of his death in this city by the Christian Chinaman, Vicente Romero Sy Quia, the plaintiffs
alleging that three of them are the grandchildren and one the great-grandson of the deceased Sy
Quia by his lawful marriage in his own country with their deceased grandmother, yap Puan Niu. So
that the marriage of the said Sy Quia with this woman in China is practically the fundamental basis of
the action brought by the plaintiffs for the recovery of the inheritance against the defendants, who
appear to be the children of the deceased Sy Quia by his marriage in these Islands with the native,
Petronila Encarnacion.

Does the record show that the Chinaman Sy Quia removed from Vigan, Philippine Islands, to his
native town or village of Am Thau, Amoy, China, in 1847, and then married in accordance with the
rites and ceremonies of his native country, Yap Puan Niu?

Plaintiffs having failed to present at the trial the matrimonial letters which should have been
exchanged between the contracting parties at the time the said marriage was performed, according
to the ancient laws and customs of the Celestial Kingdom, and there being no allegation in the
complaint as to the day and month of the common calendar year, or of the Chinese calendar year,
when the said marriage took place, there is no ground on which to base the conclusion that such an
important act in the life of Sy Quia has been duly established by authentic documents, nor is his
alleged voyage to China from the port of Manila for the purpose of contracting such marriage,
satisfactorily proven thereby, for the plaintiffs have likewise failed to introduce in evidence the
passport, required by the legislation then in force, which should and would have been then issued to
Sy Quia in order to enable him to leave this country and return to his own. (See superior decree of
December 20, 1849.)

Seven witnesses, named Sy Peng, Lim Chio, yap Si Tan, Yap Chia, Sy Kai Tit, Yap Chong, and Sy
Boan, whose respective ages are not less than 71 nor more than 80 years, in their testimony or
depositions before the vice-consul of the United States at Amoy, having promised to tell the truth,
affirmed through an interpreter that they were present at the ceremony of the wedding of the said Sy
Quia with the Chinese woman Yap Puan Niu; that Sy Quia, who was in these Islands, having been
expressly called to China by his father for the purpose of marrying the said Yap Puan Niu,
accordingly returned to his native town or village of Am Thau, and, after being married to Yap Puan
Niu, remained in the said village three of four years with his wife, by whom he had two children, Sy
By Bo and Sy By Guit, the latter having been born one year after the birth of the former.

To overcome the testimony of the witnesses for the plaintiffs, the defendants presented nine
witnesses, to wit: Felix Millan, Aniceto Singson, Norberta Feril, Remigio Tongson, Estefania
Crisologo, Alejandra Singson, Benita Encarnacion, Paulino Revilla, and Silveria Damian, whose
respective ages were not less than 71 nor more than 87 years, except Aniceto Singson, who was
only 66 years of age, who testified, some of them in the Court of First Instance of Manila, and the
others before the justice of the peace of Vigan by virtue of a commission, that they knew Sy Quia
when he was an unmarried resident of the city of Vigan, for six or seven years according to most of
the said witnesses, and for five years according to others, prior to his marriage with Petronila
Encarnacion, they having known him when he was a clerk of Jose Gloria Lecaroz, a resident of
Manila, the witness Revilla stating that he was a gobernadorcillo in 1852, when Sy Quia, after being
converted to the Christian religion, was baptized in the church of San Vicente, the priest of which,
who was his (Revilla's) uncle, being frequently visited by the said Sy Quia for the purpose of the
latter's instruction in the new religion, and that Sy Quia upon being baptized was named Vicente
Ruperto Romero, after his godfather Romero, who was at that time the clerk of the court; Silveria
Damian further testified that to the best of her recollection Sy Quia arrived in Vigan in the year 1848,
stopping at her house, Sy Quia being a friend and countryman of her husband, who was also a
Chinaman, and that she knew that Sy Quia was then bachelor, that he was baptized some years
later, and on the following year was married to Petronila Encarnacion. Silveria Damian, her husband
and other witnesses in the case attended the wedding.

It will be seen therefore that the record contains strikingly conflicting evidence, that is to say, the
evidence introduced by the plaintiffs is directly in conflict with that adduced by the defendants for
while the witnesses for the plaintiffs asserted that Sy Quia was at Am Thau, Amoy, in 1847, and
contracted marriage in that year with Yap Puan Niu, with whom be continued to live for about three
or four years thereafter, during which time the children Sy By Bo and Sy By Guit were born; the
witnesses for the defendants on the other hand affirmed that Sy Quia was at the time in Vigan, and
that he did not leave that city during the six or seven years, according to most of the witnesses, and
during the five years, according to the others, which immediately preceded his marriage with
Petronila Encarnacion in 1853.

In order to determine whether the weight and preponderance of the evidence is with the plaintiffs or
in favor of the defendants, in accordance with the provisions of section 273 of the Code of Civil
Procedure, it becomes necessary to examine and analyze each of the declarations of the respective
witnesses presented at the trial, and ascertain the result of their various declarations taken as a
whole, bearing in mind the circumstances of the case, the probability or improbability of their
testimony, with due regard to the nature of the facts as to which they testified, their degree of
intelligence, and the manner in which they testified.

The presence of Sy Quia in Vigan, and his presence at the same time at Am Thau, Province of
Amoy, China, for a period of four years, to wit, from 1847 to 1850, two facts which are directly
inconsistent with each other, might have been satisfactorily established by the testimony of
witnesses, but the only proof of the fact of the marriage alleged to have been contracted Sy Quia at
the said Chinese town in 1847 could only have consisted of the matrimonial letters or cards which
should have been exchanged between the families or the two contracting parties in the manner
referred to by the witness Li Ung Bing, the interpreter of the American Consulate, who was called by
the plaintiffs themselves, and whose testimony in this respect is uniformly corroborated by Nicolay in
his book entitled "Historia de las Creencias," by Ratzel in his book entitled "Las Razas Humanas," by
Cantu in his work entitled "Historia Universal," and by the authors of the "Spanish American
Encyclopedia Dictionary." These matrimonial letters, once they have been mutually exchanged by
the contracting parties constitute the essential requisite required by laws of that country in order that
a Chinese marriage may be considered duly solemnized, and at the same time are the best proof of
its having actually taken place.

The party obliged to exhibit these letters can only be relieved from the necessity of so doing by
proving that the same have been lost or disappeared, for in the absence of such proof (there being
none of this character in the record), they must be produced at the trial in order to establish the fact
of the marriage alleged to have taken place, and only in the cases expressly excepted by law can
any other proof, such as testimony of witnesses, be allowed, but the letters themselves must be
produced as evidence of the contract to which they relate, in accordance with the provisions of
section 285 of the Code of Civil Procedure.

The failure to produce the said matrimonial letters which according to some of the witnesses for the
plaintiffs, were exchanged between both families prior to the celebration of the marriage of Sy Quia
with yap Puan Niu, and the lack of proof that they had been destroyed or lost, give rise to the legal
presumption can not be overcome by the testimony of witnesses, some of them incompetent, while
the testimony of others is conflicting, not to say contradictory, in itself, a s well as highly improbable;
for this is a most important contract, which, according to the ancient laws and customs of China,
must be evidenced by such letter or cards, and the fact that these letters have not been produced
shows that the marriage never took place; if they actually exist they should be exhibited, for it is a
well-known rule that where the evidence is wilfully suppressed, it is presumed that it would be
adverse to the party presenting the same, if produced. (Sec. 334, par. 5, Code of Civil Procedure.)

Entering upon the an analysis of the testimony of the witness for the plaintiffs, it will be notice that Sy
Peng stated that upon the death of Sy Quia, the women of his house extended their sympathy, as
customary, to his widow in China. This, however, is not true, because it appears in the record as a
proved fact that Yap Puan Niu died in 1891, while that Sy Quia died in this city in 1894. Lim Chio
affirmed that Sy By Bo, the alleged son of Sy Quia, had two children by his wife, one of them being
Sy Yoc Chay.

This is not true, because Sy Yoc Chay was only an adopted son. The witness Yap Si Tan testified
that Yap Puan Niu lost a natural child, whose name she did not remember, and in his place adopted
Sy Hoc Chay as her son. This fact is not testified to by any of the other witnesses, who simply said
that the adoption had been made by Sy By Bo. The witness Yap Chio, 72 years of age, who testified
that he had been present at the wedding of Sy Quia with Yap Puan Niu, must have been 8 years old
at the time. The other witness, Sy Kai Tit, who was 71 years of age, and who according to himself,
was about 12 years old at that time, stated that he had taken part in the investigation made as to the
status and condition of the bride, Yap Puan Niu, having assisted Sy Quia's parents and the mediator
in the investigation. Another witness by the name of Sy Boan testified that by Sy Quia, when he died
in this city, was survived by his wife, Yap Puan Niu, who was still living in China, this being in direct
contradiction with the established fact that Yap Puan Niu died before Sy Quia. This witness further
said that when Sy Quia returned for the second time to China, in order to attend his parent's funeral,
his alleged wife, Yap Puan Niu, was still living, his testimony in this respect being in contradiction
with that of the other witness, Lim Chio, Yap Si Tan, Yap Chio and Sy Kai Tit.

The testimony of these witnesses, most of whom have seriously contradicted themselves upon
important points in the course of their examination, and some of them, considering the fact that they
were very young in 1847, having told a very improbable story, claiming that they had assisted Sy
Quias's parents in bringing about the latter's marriage, can be given no credence by the courts to
sustain a finding that Sy Quia actually married Yap Puan Niu, much less so the marriages of Sy By
Bo and Sy By Guit, who are alleged to be the legitimate children of the said Sy Quia and Yap Puan
Niu, and the marriage of Sy Jui Niu, the mother of Sian Han, a grandson of Sy By Bo and a great-
grandson of Sy Quia, for the reason that there were not introduced in evidence at the trial the
matrimonial letters that must have been exchanged before the celebration of these marriages, all of
these witnesses having simply said that they attended the wedding of Sy Quia and Yap Puan Niu,
that their said sons were also subsequently married and each had two children, and that Sy By Bo
adopted Sy Yoc Chay in place of one of his deceased children. From the testimony of these
witnesses, taken as a whole, it is impossible to arrive at the truth and to lay the foundation of a just
judgment in accordance with the law.

The witness Sy Hien, who claims to be a younger of Sy Quia., and was a witness for the plaintiffs,
among the many conflicting statements, as may be seen from his testimony, said that this
certificates of marriage, which presumably consisted of similar matrimonial letters or cards, were
unkept in his own town, and that he was unable to state the difference in age between himself, who
was 59 years old, and his brother Sy Quia, who, had hew lived, would to-day be about 80 years old,
unless he was permitted to examine a certain book kept in his own home in China (p. 116 of the
record). His testimony clearly shows that such matrimonial letters are duly preserved and that the
date of birth of the members of a family is noted or entered in a book kept in the paternal residence,
in like manner as the death of such members of the family is recorded by mortuary inscriptions on
tablets, a practice which is very natural among people who live in civilized communities and cities
with a civilization of their own and who, like the Chinese, notwithstanding their remarkable
backwardness with reference to more advanced and cultured races, generally speaking are not
barbarians and do not lived a nomad or savage life.

The mortuary inscription upon one of the tablets presented in evidence at the time of taking the
evidence of some of the witnesses who were called by the plaintiffs for the purpose of establishing
that the deceased, Sy Quia, had in his lifetime married Yap Puan Niu, an English translation of which
appears in the records, are not conclusive or supplementary proof of the said marriage, because
they are absolutely false and contrary to the actual facts with reference to Sy Quia, for the latter was
still alive in 1891, when he was presumed to be dead according to the said inscription, he having
actually died in January, 1894; therefore the said mortuary tablet, and the inscriptions appearing
thereon, can not serve to corroborate the testimony of the witnesses who testified to the celebration
of the marriage, because such tablet and inscriptions are glaringly false, the fact that the witness Sy
Peng said that this tablet, together with others, was taken by him from the temple or sanctuary of Sy
Quia's family at Am Thau, to be introduced as evidence in this action, to the contrary
notwithstanding. The falsity of the inscription of Sy Quia's death, when he was still alive, made upon
a tablet which was evidently prepared with remarkable haste and temerity, is borne out by the
witness Li Ung Bing, the interpreter of the American consulate, who claimed to be familiar with the
laws and customs of his country, for, according to him, where Chinese die out of China no inscription
is made at the place of their former residence in China, upon such tablets, of the fact of their death;
and as it is a fact, admitted by the plaintiffs, that Sy Quia died in Manila and was buried in La Loma
cemetery, there is no doubt that the tablet in question was fraudulently prepared and fabricated to
supply the lack of documentary proof as to the so-much-talked-about marriage in China which is the
fundamental basis of plaintiff's claim.

In the administrative proceedings that Sy Quia must have instituted for the purpose of securing the
necessary permission to marry Petronila Encarnacion, and at the investigation which, after the
obtaining of such permission, must have been conducted by the ecclesiastical court of the bishopric
of Vigan, he, Sy Quia, necessarily must have declared that he was single, as evidently he did,
according to the testimony of the witness Roman Gray, 72 years of age, then a clerk of that court,
whose testimony under oath is supported by that of other witnesses, two of them being of the same
race as Sy Quia, and in view of the result of the said proceedings and investigation, conducted as
aforesaid, the parish priest of the said city of Vigan was authorized to marry Vicente Sy Quia to
Petronila Encarnacion, the certificate of marriage reciting the fact that there was no impediment
whatever to the performance of the marriage.

Without the aforesaid permission of the Governor-General, sought and obtained in accordance with
sections 34 and 35 of the superior decree of the 20th of December, 1849, the vicar-general of the
bishopric of Vigan would no have admitted the testimony given by the witnesses in the investigation
for the purpose of proving that Vicente Sy Quia was single and free to marry, nor could the parish
priest have performed the marriage ceremony without first securing the necessary authority from the
court of the vicar-general in the name of the bishop.

Therefore the result of those proceedings and the canonical certificate, evidencing the marriage of
Vicente Sy Quia and Petronila Encarnacion, corroborate to the effect that Sy Quia was single and
had resided for many years in that city before he married Petronila Encarnacion, and that he could
not have spent four years at Am Thau, province of Amoy, China, during that period, as alleged.
With reference to the validity of the efficacy of the canonical certificates and the certified copies
thereof introduced here in evidence, we adhere to and follow the doctrine laid down by this court in
the case of the United States vs. Nicolas Arceo (11 Phil. Rep., 530), No. 4539, wherein this court
said:

The canonical entries in parochial books have not lost the character of public documents for
the purpose of proving such acts as are therein related, inasmuch as, since the change of
sovereignty in these Islands, no legal provision has been promulgated to destroy the official
and public character that the said entries had under the former regime.

Parish priests continue in the legal custody of the parochial books kept during the former
sovereignty, and as such legal custodians kept during the former sovereignty, and as such
legal custodians they may issue literal copies in the form of certificates of the entries
contained therein, in like manner as custodians of archives.

To strengthen the proof introduced by the plaintiffs as to Sy Quia's marriage to Yap Puan Niu, an
attempt was made to establish that the said Yap Puan Niu had been twice in Manila, the last time in
1886; that on these two occasions she stopped for five or six months at the house of Sy Tay, Sy
Quia's brother, and that Sy Quia frequently called on her at the said house; but notwithstanding the
testimony of some witnesses who testified to this effect, particularly Sy Hien, who claimed to be one
of Sy Quia's brothers, and who testified long after Sy Quia's death, we have in he record the sworn
statement to the contrary by the Chinese woman, Ana Quang Su, the wife of the said Sy Tay, who
positively testified that upon the two occasions that the said Yap Puan Niu stopped as a guest at the
house of her husband for a period of five or six months, she had never seen Sy Quia call on her,
Yap Puan Niu, and that the said Yap Puan Niu never went out of the house but remained at home as
was customary with Chinese women, adding that she would have been otherwise, because said Yap
Puan Niu occupied a room adjoining hers in the same house, the witness being always at home,
further saying that her husband Sy Tay supported the said guest, Yap Puan Niu, and paid for her
transportation both ways between Manila and China, and that Sy Joc Lien and Sy Yoc Chay, who on
successive dates came to Manila from China, also stopped at her, the witness's house, where they
lived at the expense and under the orders of her husband Sy Tay. The testimony of this witness is of
the utmost importance, and has not been impugned or discredited in any way in this case.

The witness, Roman Gray, above referred to, affirmed that while he was clerk of the ecclesiastical
court of Vigan, which position he had held since 1850, he met the Chinaman Sy Quia when the latter
went to his court for the purpose of being baptized as a Christian, stating that the said Sy Quia
several years thereafter, in 1853, presented a petition for permission to marry, whereupon the
necessary proceedings were instituted, in which said proceedings two Chinese witnesses and Sy
Quia was single and free to marry, and a decree was subsequently entered authorizing the
performance of the marriage with Petronila Encarnacion, the witness further stating that he had read
the proceedings but that in 1898 the papers were destroyed by the insurgents, who removed
everything from the place where the archives were kept and occupied the premises for some length
of time.

Aside from what has been said before, there is no other evidence in the record to show that the
plaintiffs, particularly Sy Chua Niu, Sy Joc Lieng and Sy Yoc Chay, were ever recognized as
legitimate grandchildren and adopted grandchild, respectively, and that Sian Han is the great-
grandchild of the said Sy Quia, nor is there any proof to show that the plaintiffs Sy Joc Lieng and Sy
Chua Niu have been continuously in possession of the legal status of children of the said Sy By Guit,
and the said Sy Yoc Chay as the adopted child of Sy By Bo, and Sian Han as the grandchild of the
said of Sy By Bo, and Sian Han as Sy By Guit, is said to be the legitimate son of Sy Quia by his wife,
Yap Puan Niu.
Further, there is no evidence to the effect that Sy Quia had ever provided for the support of Yap
Puan Niu, nor that Petronila Encarnacion at any time delivered money, as alleged, to Sy Joc Lieng
and Sy Yoc Chay by reason of their hereditary income, inasmuch as the delivery of the sum of
P4,000 to the said Sy Joc Lieng, entered in a book kept by Sy Tay, as per the copy of the entries
appearing on page 300 of the book marked "A. S.," is no proof of the payment of a part of the
inheritance, and without any express declaration on the part of Petronila Encarnacion, an entry in a
book kept by the firm of Sy Tay could not be binding upon the said Encarnacion, this, aside from the
fact the entries do not show the reason why this sum of P4,000 was charged to the account of
Petronila Encarnacion and credited to Sy Joc Lieng; and, even if we admit as true the statement of
the witness Emilio Medina that in his presence, the said Sy Joc Lieng received an additional sum of
P2,000 from Petronila Encarnacion there is no evidence to show why this sum was paid to and
received by the said Sy Joc Lieng; the witness himself said that the receipt made out at the time set
forth that the money was for commercial purposes.

It likewise appears from the record that the plaintiffs, who now seek to be recognized as the
grandchildren, and Sian Han as the great-grandchild of the deceased Sy Quia, incidentally
attempting to recover the property which the said Quia left at the time of his death, have not shown
by competent documentary proof that Sy By Bo and Sy By Guit were in fact the children of Sy Quia
by his wife Yap Puan Niu; that Sy Yoc Lieng and Sy Chua Niu are the children of Sy By Guit; that Sy
Yoc Chay is the adopted child of Sy By Bo, and Sian Han the son of Sy Jui Niu, who was the
daughter of the said Sy By Bo, for the parentage and affiliation of the said parties, as well as the
marriage of Sy By Bo and Sy By Guit, the adoption of Sy Yoc Chay, and the marriage of Sy Jui Niu,
should have been established by means of the documents in which such facts are customarily
recorded, as stated by Sy Hien, one of the witnesses for the plaintiffs and who also alleged to be a
brother of Sy Quia; the testimony of the witnesses, the most dangerous and risky of evidence, not
being sufficient to sustain a finding that the court erred in its estimation of the facts, since the
preponderance of the evidence must be fixed precisely where the judge believes the truth lies, taking
into consideration the facts which were sought to be established, together with the nature of the
same and the circumstances of the case; and it should be noted that for the lack of documentary
evidence it is impossible to determine on what date Sy Quia was actually married, if he was married
at all, to Yap Puan Niu; and considering as a whole the evidence introduced by the plaintiffs as to
stay and residence of the said Sy Quia in the city of Vigan, Philippine Islands, during the three or
four years when it is alleged he was at Amoy and there married, it can not be said that the
preponderance of the evidence lies with the plaintiffs.

It further appears that the record while the body of the deceased Vicente Romero Sy Quia was lying
in state at the house where he died, in January, 1894, for the purpose of performing the ceremony of
robing a descendant of the deceased with the nine silk suits which had been prepared for the corpse
in accordance with the Chinese custom, and although Sy Hien, a brother of the deceased, was in
charge of the ceremonies, it did not occur to him to dress Sy Yoc Chay in these garments, he, Sy
Yoc Chay, being the son of Sy By Bo, and if the said Sy Hien thought that this would not be proper
for the reason that Sy Yoc Chay was merely an adopted son, it is significant that Sy Joc Lieng, who
was also present or at least in the house, was not dressed in the said nine suits, but the same were
worn by Tomas Sy Quia, the eldest son of Gregorio, who for this purpose was expressly taken out of
the college where he was at the time, as testified to by the several witnesses, among them Macario
Pavila, a resident merchant of Pangasinan, who chanced to be at house on that occasion. The
statement of Sy Hien to the effect that he did not remember the said ceremony, is not worthy of
credit in view of the positive testimony of the defendants Pedro and Juan and of the witness Pavila,
who, together with several Chinese, among them Sy Yoc Chay and Sy Joc Lieng, witnessed the
same. The latter's statement that he was not present at the ceremony on account of his having
temporarily left the house in order to carry out certain instructions received by him, can not be
believed, for, if it is a fact that he was the proper person to wear the said nine silk suits according to
the customs of his country, the master of the ceremonies would have suspended the same until he,
Sy Joc Lieng, returned to the house; but instead of this eldest son of Gregorio Sy Quia was brought,
it is alleged, from the college where he was, his father Gregorio being at the time in Vigan, for the
investiture of the nine robes before they were placed upon the corpse. From all this it may be
inferred that Sy Yoc Chay, who denied that the said ceremony took place, and Sy Joc Lieng, were
not, as a matter of fact, the grandsons of Sy Quia, as Sy Hien, a brother of the deceased, who
conducted the ceremony well knew, and that the only descendant to be designated in accordance
with traditional customs of the Chinese was Gregorio Sy Quia, the eldest son of the deceased, and,
in his absence, the latter's eldest son, Tomas Sy Quia, which designation was accordingly made.

In the addition to the foregoing considerations it should be stated that the sworn statement by
Vicente Romero Sy Quia before the civil and ecclesiastica authorities of the city of Vigan in the
proceedings which were instituted in 1853 in connection with his marriage in the parish church of
that city, the continued possession for a period of many years of the status of a single man enjoyed
by him and recognized and accepted by the whole community of the capital of the Province of Ilocos
Sur, the belief on the part of his townsmen and neighbors that he was in fact a single man, all these
facts being corroborated, as they are, by the uniform testimony of the witnesses for the defendants,
and the unexplained silence on the part of his alleged wife, Yap Puan Niu, who might have asserted
whatever rights she may had as the legitimate wife of Sy Quia before the tribunals of this country, if
she really had any, completely overcome and destroy the improvised parol evidence as to the
pretended marriage of Sy Quia in China, the performance of which was for the first time alleged in
December, 1905, after Sy Quia's death and the demise of the latter's brother, Joaquin Martinez Sy
Tiong Tay, who, having sheltered in his house the woman Yap Puan Niu on the two occasions
aforesaid, as well as the plaintiffs Sy Yoc Chay and Sy Joc Lieng since these latter landed in the
Philippines, might have testified to the existence of the marriage, thus supporting the plaintiff's claim
to the Sy Quia estate.

It is admitted by the plaintiffs in this case that the two of them, Sy Yoc Chay and Sy Joc Lieng, and
the woman Yap Puan Niu, when they came to this country stopped at the house of the said Sy Tiong
Tay, who provided for their support and maintenance, gave employment to the first two in his own
business and paid for the transportation of the woman to Manila and back to China on the two
occasions when she came to this country; and, notwithstanding the truth and certainty of these facts,
the plaintiffs, nevertheless, did not even endeavor to show that the said Sy Tiong Tay had defrayed
all these expenses by order and on account of his brother Sy Quia, a fact which would appear from
the entries in the books kept by him as a merchant, of such payments were really made in behalf of
the said Sy Quia. The plaintiffs introduced in evidence a certain book alleged to belong to the firm of
Sy Tay for the purpose of establishing a certain payment made by Petronila Encarnacion to the said
plaintiffs. They, however, were unable to produce any book to show that the expenses incurred by
the said Sy Tay for the maintenance and support of the said plaintiffs and of the woman, Yap Puan
Niu, as well as the latter's travelling expenses were paid by and on account of Sy Quia.

They were unable to explain the reason for these disbursements made by Sy Tay for the benefit of
two of the plaintiffs and their alleged grandmother, notwithstanding the fact that death had forever
stilled the lips of the two brothers, Sy Tay and Sy Quia, plaintiffs having confined themselves to
attributing to him whom they believed to be the wealthier of the two brothers, who unfortunately can
not now speak, the paternity and parentage of a family which is not proved to be his.

This court, in the strictest administration of justice and in conformity with the law, can not admit that
plaintiffs have proved four marriages and three generations, since the evidence introduced by them
in support of these facts only consists of the testimony of witnesses, most of whom have made
conflicting statements and some have contradicted themselves, as for instance the brother of Sy
Quia, Sy Hien, whose testimony is absolutely unworthy of credence, and other witnesses have told
improbable stories and testified as to things which are not likely to occur in the natural and ordinary
course of human events.
Even assuming that Sy Quia before he became a Christina actually married Yap Puan Niu in 1847,
as alleged, and that his second marriage in 1853 with a Christian woman, by whom he had five
children and with whom he lived contentedly in these Islands since the marriage until he died,
covering a period of forty-one years, while the first marriage was still in full force and effect, was null
and void, he, Vicente Romero Sy Quia, having therefore married twice in violation of the law, the
plaintiffs, nevertheless, would not be entitled to the relief sought by them in their complaint.

There is not the slightest evidence in the record which even tends to indicate that Sy Quia, at the
time of his marriage at Vigan in 1853 with Petronila Encarnacion, brought at Vigan in 1853 with
Petronila Encarnacion, brought any property or money into the conjugal partnership. The fact that he
dud not is not surprising, as he was then a mere clerk in the employment of another Chinaman by
the name of Jose Gloria, who was a resident of this city, with a salary of P200 per annum, as per
testimony of Silveria Damian, an aged woman, whose husband was also a Chinaman and worked
for the same man that Sy Quia did and for the same salary; while, on the other hand, there is
evidence in the record to the effect that Petronila Encarnacion, who belonged to a wealthy family of
Vigan, brought to the marriage, as a gift from her parents, the sum of P5,000, which, together with
their common labor and industry, was the basis of the fortune accumulated by both husband and
wife in the course of years.

Therefore, even assuming that the second marriage which was contracted by Sy Quia at Vigan was
void, while a former marriage alleged to have been performed at Amoy, China, was still in full force
and effect, and upon which the plaintiffs in this case base their contention, the second marriage,
however, produced civil effects under the laws here in force in 1853, the time when it was
performed. These laws are as follows:

Law 3, title 3, Partida 4, provides in part as follows:

Further, if people marry advisably, knowing that such impediment existed, and that for this
reason they should not have married, the children which may be born will not be legitimate;
but if only one of the contradicting parties, and not both, was cognizant of the existence of
such impediment, the children will be legitimate, for the ignorance of one of the contracting
parties excuses them, and no one can say that they are not legitimate children.

Law 1, title 13, Partida 4 provides in part as follows:

And even if it should happen that between those who are married manifestly in facie
ecclesia such impediment exists which would require that the marriage be set aside, the
children which may be born to them before the contracting parties knew that the impediment
existed, will be legitimate. And this would also be if neither of the contracting parties knew
that the impediment existed, will be legitimate. And this would also be the case if neither of
the contracting parties knew that the impediment existed, as well as if only one of them had
knowledge thereof, for the ignorance on the part of one of them, would make the children
legitimate. But if after knowing with certainty that the impediment existed between them, they
should have children, any that should be born subsequent thereto will not be legitimate. But,
if while such impediments exists without the knowledge of both parties or of either of them,
they should be accused before the judges of the Holy Church, and before the impediment is
duly established and final judgment entered, children be born to them, such children as may
be born while the doubt exists, will be legitimate.

The Civil Code has merely reproduced with certain modifications to the provisions of the old
legislation in force in 1853 as to the civil effects of a void marriage where both parties married in
good faith, as well as where only one of them acted in good faith, for whether one or both married in
good faith, the marriage will produce civil effects only in favor of the innocent spouse, and of the
children born of this void marriage.

If in all the acts of life good faith is to be presumed unless the contrary is proven, it can no be denied
that Petronila Encarnacion acted in good faith when she married Vicente Romero Sy Quia in 1853,
since there is no evidence in the record to the effect that she knew before or after her marriage that
the said Vicente Romero Sy Quia was married in China to another woman.

The marriage contracted by a Christian Chinese at the time when Sy Quia was married in the
Philippines, was preceded by such formalities, and so many requisites had first to be complied with,
that it was difficult, not to say impossible, that in the natural and ordinary course of things the
marriage could have been performed if there were any impediment at all thereto. In the case of Sy
Quia, not only for many years was he considered in the city of Vigan by the community at large as a
bachelor, his name appearing as such in the municipal census, but it must be fairly assumed that
when he instituted the proceedings before the civil authorities, and ecclesiastical proceedings in the
ecclesiastical court of Vigan, in order to secure permission and authority to marry in accordance with
the various decrees then in force, among them the decree of the 20th of December, 1849, he must
have positively said then that he was a bachelor, and this fact must have appeared from the
summary investigation conducted by the ecclesiastical authorities of Vigan for the purpose of
ascertaining whether or not he was a bachelor and free to marry, and when at last the parish priest
of Vigan was authorized to proceed with the marriage ceremony, there is little room for doubt that
Petronila Encarnacion, as well as her family, relying upon the result of both proceedings, and upon
the license or authority granted by the government, and the authority given by the vicar-general in
the name of the bishop, for the performance of the marriage, they consented thereto in the best of
good faith, particularly Petronila Encarnacion, to the latter's union to Vicente Romero Sy Quia in
lawful wedlock.

If, on the contrary, it were true that Sy Quia had married in China many years before, there is no
doubt that he acted in bad faith by deceiving his wife Petronila Encarnacion, as well as the civil and
ecclesiastical authorities of this country, perjuring himself. And upon the assumption that the
marriage with Petronila Encarnacion was void by reason of the existence of a prior undissolved
marriage, the second marriage, nevertheless, produced its civil effects in favor of the deceived
spouse, and of the children born to them, who, notwithstanding the nullity of the second marriage,
are in the eyes of the law legitimate, as though they had been born of parents lawfully married.

Therefore, assuming that Vicente Romero Sy Quia acted in bad faith by concealing the fact of his
marriage at the investigation made by the authorities for the purpose of determining whether or not
he was a bachelor and free to marry, one of the civil effects produced by the marriage thus rendered
void was that Sy Quia thereby absolutely forfeited all his rights and interest to one-half of the
conjugal property appearing in the instrument partition, Exhibit A. F., and by operation of law all the
property which would otherwise have belonged to him, became the property of his wife, Petronila
Encarnacion, in accordance with the provisions of the Civil Code applicable provisions.

Law 16, title 17, Partida 7, with reference to this subject, provides:

Notorious wickedness is committed by men who knowingly marry twice while their first wife is living,
and the same may be said of women who marry twice knowing that their first husband is still alive.
Because such marriages give offense to God, and bring about great damages and dishonor to those
who are deceived, and they should be careful to marry well and properly, as directed by the holy
Church, for they would otherwise be married to persons with whom they would later live in sin, and
while they endeavor to be happy in their marriage, and have children, the first wife or first husband
appears when least expected, and disrupts the marriage, and on account of this rupture many
women are dishonored and ruined forever, and men are disgraced in many ways. We therefore
command that everyone who should knowingly enter into such a marriage, in any manners specified
in this law, be hence banished to some island for five years, and that he forfeit whatever he may own
at the place where the marriage was performed, and that it be given to his children or his
grandchildren, if he has any, and if he has no children or grandchildren, one-half of such property
should go to the persons deceived, and the other half to the king's chamber; and if both parties knew
the one of them was married, and wilfully married to him or her, then both shall be banished, each to
a separate island, and the property of either of them who may have no children should go to the
king's chamber."

Article 1417 of the Civil Code provides as follows:

The conjugal partnership expires on the dissolution of the marriage or when it is declared
void.

The spouse who, by reason of his or her bad faith, caused the annulment, shall not receive
any share of the property of the partnership.

This article embodies and reproduces under different aspects the provisions contained in articles 72,
1333, subsection 3, 1373, 1378, and 1429 of the same code, and a mere reading of this article,
together with the provisions of law 16 of the Partidas above quoted, will show the difference between
the two. It will be noticed that the code contains more favorable and less strict provisions on this
subject than the law of the Partidas, wherefore, in accordance with the rule 3 of the transitory
provisions of the said code, the intestate succession of the deceased Vicente Romero Sy Quia
should be governed and regulated by the new code, which was in force on January 9, 1894, the date
of Sy Quia's death.

True, article 72 of the said code is included in title 4, the application and enforcement of which in
these Islands was suspended under the former sovereignty; but there is no doubt that article 1417
and the other sections cited are now in force, said article 1417 providing that the spouse who by
reason of his or her bad faith causes the annulment of the marriage, shall not receive any share of
the property of the conjugal partnership.

It should be born in mind that on account of the unexplained silence of Yap Puan Niu during her
lifetime, and the silence of the plaintiffs during Sy Quia's lifetime, the conjugal partnership constituted
in 1853 between Sy Quia and Petronila Encarnacion was dissolved in 1894 by the death of the
husband, and only then, when the Civil Code was already in operation, would their presumptive heirs
have acquired a right to claim the inheritance, for the right to inherit while the deceased was still
living is a mere right in expectancy, and not until after the decease of the person whose succession
is in concern can such a right be said to exist or to be duly acquired. See the preamble to the Civil
Code and the doctrine laid down by the supreme court of Spain on the subject in its judgment of the
24th of June, 1897, wherein the court said:

That upon the settlement and distribution of the estate of a person who dies subsequent to
the promulgation of the Civil Code, any action for the recovery of the property of the estate
should be governed by the provisions of the said code, in conformity with the first rule and
the one preceding the last, of the transitory provisions, because the rule as to the
nonretroactivity of the new law only applies to rights acquired under the former legislation;
and it is a well-known fact that hereditary rights exist only after the demise of the decedent;
and the trial court having so decided, it did not infringe the provisions of laws 11 and 12, title
13, Partida 6, and the general provisions of the transitory rules for the application of the Civil
Code.
However, as a matter of fact the action instituted by plaintiffs in 1905, claiming the property left by Sy
Quia at the time of his death, is based especially upon the alleged nullity of the second marriage on
account of the existence of the former performed in China. Therefore, the rights claimed by the
plaintiffs should be determined in accordance with the provisions of the Civil Code which has been in
operation since 1899 and under which the rights now asserted by the plaintiffs might have sprung
and been acquired by them, this assuming that the alleged first marriage was actually performed in
China and that the claimants were in fact the issue of the said pretended marriage of Sy Quia and
Yap Puan Niu.

Since the 9th of June, 1853, when Vicente Romero Sy Quia married Petronila Encarnacion, the
conjugal partnership commenced to exist between the two spouses. All the property acquired by
them up to the time of the dissolution of the said partnership on account of the death of Sy Quia on
January 9, 1894, belonged to this partnership. (law 1, title 3, of the Fuero Real; Laws 1, 3 and 4, title
4, book 10, of the Novisima Recopilacion; and arts. 1393, 1401, 1403-1407, Civil Code.)

During the Sy Quia's lifetime the validity of his marriage with Petronila Encarnacion, as has been
said before, was never questioned, no one having indicated any defect which rendered the same
void. It was only after his death that the plaintiffs ventured to attack the validity of the same by
claiming that they were his legitimate heirs and as such entitled to his estate.

The Laws of the Partidas above cited, as well as the Civil Code, both recognize as a fact that a
marriage contracted in good faith, by one at least of the parties to the same, produces the same civil
effects as a valid marriage with reference to the innocent spouse and the children born of such
marriage, even though the same be subsequently declared null and void.

It can not be denied that Petronila Encarnacion married Sy Quia in the best of good faith, there being
not the slightest proof to the contrary so far as the records shows. Therefore, being innocent, she
must be held to have acquired all the rights to which a wife is ordinarily entitled, and neither she nor
her children can be made to suffer the consequences of the nullity of such marriage, this, assuming
that the marriage was void; nor can they in any event be made to suffer the consequences of the
bad faith of her husband Sy Quia.

The nullity of the marriage, once declared by the courts, may deprive the partnership created by the
marriage of the alleged spouses of its otherwise legal character, but can not destroy the legal
consequences of the marital union while it is existed. Consequently the children are considered
legitimate, and the innocent spouse is unquestionably entitled to one-half of the conjugal property
acquired during the marriage.

From the legal provisions above cited, especially the sections of the Civil Code referred to, it
necessarily follows that the half of the conjugal property to which Vicente Romero Sy Quia would
have been otherwise entitled, on account of the alleged nullity of his marriage with Petronila
Encarnacion and of his bad faith in contracting the same, was forfeited by him and by operation of
the law passed to the other spouse, Encarnacion; and the plaintiffs, in their alleged capacity as
legitimate descendants of the said Sy Quia, deceased, can not now claim the said property, as the
decedent, by the express provisions of the law, absolutely forfeited his right to the said half of the
property acquired during the marriage. Such marriage must be considered null and void if it is true,
as alleged by the plaintiffs, that Sy Quia's marriage with Yap Puan Niu was still in full force and effect
when he married Petronila Encarnacion.

Counsel for plaintiffs now ask this court to modify the judgment appealed from and declare that the
said plaintiffs are the only legitimate heirs of Sy Quia and consequently entitled to his entire estate,
together with all rents and profits, for which judgment should be entered in their favor with costs. In
support of their contention they have assigned various errors as committed by the trial court, among
them that the court erred in finding as a conclusion of law that the said Sy Quia was a subject of the
Chinese Empire and that his estate should be distributed in accordance with the laws of China.

It is an admitted fact that Sy Quia was a native Chinaman and therefore a foreigner; that he came to
this country in 1839 or 1840, when he was 12 years of age. He having resided in these Islands since
then and until January, 1894, when he died, that is to say, for a period of more than 53 years, having
obtained for this purpose the necessary license or permission, and having been converted to the
Catholic religion, marrying a native woman in the city of Vigan and establishing his domicile first in
the Province of Ilocos and later in this city of Manila, with the intention of residing here permanently,
engaging in his business generally and acquiring real estate, it is unquestionable that by virtue of all
these acts he acquired a residence and became definitely domiciled in these Islands with the same
rights as any nationalized citizen in accordance with the laws in force in these Islands while he lived
here and until his death.

It should be noticed that, as the laws have no retroactive effect, in order to determine what rights Sy
Quia had actually since he removed to the Philippines in 1839 or 1840, it will be necessary to resort
to the laws in force at that time; and the provisions of the Civil Code promulgated in November,
1889, could not affect in the least rights thus acquired by virtue of his long residence in these
Islands. Article 3 of the Civil Code is as follows; "Laws shall not have retroactive effect unless
otherwise prescribed therein." This provision is in accordance with the provisions of law 15, title
14, Partida 3.

The legislation then in force on the subject of naturalization and residence of foreigners in the
Philippine Islands will be found in the following laws. Law 1, title 11, book 6 of the Novisima
Recopilacion, is as follows:

We permit that the subjects of other kingdoms (provided they are Catholics and friendly to
our Crown) who may desire to come here to practice their trade or profession may do so,
and we command that if they do now practice some trade or profession and live twenty
leagues inland from any port, they shall be forever exempt from the payment of taxes, and
shall be likewise exempt for a period of six years, from the payment of municipal taxes and
from the performance of any ordinary or extraordinary services, as well as from holding office
as members of municipal councils at the place where they may reside; and they, like other
residents, shall be permitted to use the common pastures and enjoy all the privileges
accorded to the latter; and we hereby command the authorities to provide them with house
and lands, if necessary. And other foreigners, whether they have any trade or
profession, provided they have lived in this kingdom for a period of ten years in a home of
their own, and have been married to native women for a period of six years, shall be
admitted to all the offices of the republic except to those of magistrate, governor, mayor,
elderman, warden, treasurer, revenue collector, secretary of city council, or any other
government position of trust. As to these latter offices, as well as to all ecclesiastical offices,
all existing laws shall continue in full force and effect, etc.

And law 3 of the same title and book of the Novisima Recopilacion provides:

There shall be considered as denizens, in the first place, all foreigners who obtain the
privilege of naturalization and those who are born in these kingdoms; those who residing
therein may be converted to our Holy faith; those who, being self-supporting, establishes
their domicile therein; those who ask for and obtain residence in any town thereof; those who
marry a native woman of the said kingdoms and are domiciled therein; and in the case of a
foreign woman who marries a native man, she thereby becomes subject to the same laws
 and acquires the same domicile as her husband; those who establish themselves in the
country by acquiring real property; those who have a trade or profession and go there to
practice the same; also those who practice some mechanical trade therein or keep a retail
store; those who hold public or honorary offices or any such position whatever which can
only be held by natives; those who enjoy the privilege of the common pastures and other
privileges usually accorded to other residents; those who shall reside in the said kingdoms
for a period of ten years in a home of their own; and also those foreigners who, in
accordance with the common law, royal orders and other laws of the kingdoms, may have
become naturalized or acquired residence therein, they being obliged to pay the same taxes
as the natives for the legal and fundamental reason that they also participate in their
privileges, etc.

Article 18 of the Code of Commerce of May 30, 1829, which was in operation until 1888 , is as
follows:

Foreigners who have become naturalized or have the acquired residence in Spain in the
manner provided by law may freely engage in commerce with the same rights and under the
same conditions as natives of the kingdom.

Although the royal decree to the colonies, with the exception of section 28 thereof, nevertheless, it is
only proper to call attention to the provisions of the said decree in so far as they have any bearing
upon the case at bar, in view of the provisions of laws 1 and 2, title 1, book 2, of the Compilation of
the Laws of the Indies, which direct that the laws of Castile shall be observed in all cases not
otherwise covered by said laws. Section 2 of the said royal decree of 1852 is as follows:

Foreigners who have gained or obtained a residence, in accordance with the laws, shall be
considered Spanish subjects.

Section 3 provides that all other foreigners who reside in Spain without having taken out
naturalization papers, or otherwise gained a residence therein, shall continue to be foreigners. And
section 12 provides:

Those persons shall not be legally considered as foreigners, under any circumstances, who
have failed to register as such in the registry or transients or domiciled persons kept by the
civil authorities of the provinces or with the consuls of the respective nations.

It is a proven and undeniable fact that Sy Quia resided in the Philippines for more than fifty years, he
having only absented himself occasionally for a short time with the intention of immediately returning
to the Islands; and it is also a fact that in various documents and public instruments executed before
notaries public, which have been introduced in evidence marked as "Exhibits 1, 2, and 3," he was a
resident of the district of Binondo having declared in one of the said documents that he was a
freeholder. If continuous residence in these Islands for a period of more than fifty years, and by
virtue of the fact that he had permanently established himself in this country, living in a house of his
own, with his wife and children, and having acquired real estate therein, did become a domiciled
denizen under the laws then in force, even if it be held that the royal decree of the 17th of
November, 1852, was applicable to these Islands by virtue of the provision contained in the Laws of
the Indies, the legal status of Vicente Rometro Sy Quia has not changed, because the provisions of
the said decree does not in any way affect the rights acquired by him and the supreme court of
Spain in a judgment of the 30th of April, 1861, in construing this provision of the law, declared and
held that the purpose of the royal decree of the 17th of November, 1852, was not to promulgate a
new law, but merely to condense and embody in one single act the various provisions then in force
with reference to foreigners, and to preserve the fuero de estranjeria (the rights which foreigners had
in certain cases to invoke their own laws) in the same manner as it existed before. In another
judgment of the 29th of August of the same year the said supreme court of Spain held that under the
provisions of law 3, title 11, book 6, of the Novisima Recopilacion, there should be considered as
domiciled denizens of Spain all foreigners who, being self-supporting, established their domicile in
the country; the double inscription in the registry, as required by the royal decree of the 17th of
November, 1852, being no obstacle thereto.

Many years prior to promulgation of the Civil Code in these Islands, there was published in the
Official Gazette of this city on September 18, 1870, the decretal law of the 4th of July of the said
relating to foreigners, section 2 of which provides:

Foreigners who, in accordance with the laws, shall be come naturalized beyond the seas, in
any town of the Spanish provinces beyond the seas, shall be considered as Spanish
subjects.

After dividing into three different classes the foreigners who should come into and establish
themselves in the provinces beyond the seas, classifying them respectively as domiciled, transient,
and immigrant foreigners, the said section provided that — "Domiciled foreigners are those who
have a regular residence and have lived for three years in any province or who may have lived for
such residents in the registry of domiciled persons kept for this purpose," etc.

Section 7 of the said decree provides as follows:

Any foreign residing in the provinces beyond the seas, in order to be considered as such
foreigner under the laws of the country, shall register in the registry of foreigners to be kept
for this purpose by the civil supreme authorities and by the consuls of their respective
nations.

The above-quoted sections of the said decree are in harmony with similar sections contained in the
decree of the 17th of November, 1852, which, as has been said, was never extended to these
Islands — with the exception of section 28 thereof relating to the settlement of the estates of
deceased foreigners. The doctrine laid down by the supreme court of Spain with reference to the
interpretation and proper construction of the said decree is not, therefore, inconsistent with the
provisions of the decree or law of 1870, also relating to foreigners.

True that prior to 1870 there existed in these Islands no registry of foreigners and that even the civil
registry was not then in operation of titles 4 and 12 of the Civil Code relating thereto having been
suspended by telegraphic order of the 29th of December, 1889. It is also true that no registry was
kept by the foreign consulates and that there was no Chinese consul here at that time. However, if
the Chinaman Sy Quia had really intended to preserve his nationality and the protection of the laws
of this country, he would have registered in the registry which was kept by the Government here
after the publication in these Islands of the said decree of 1870; and under the theory of the law a
foreigner, in order to have the right to invoke the laws of his own country, must register in the proper
registries as such foreigner; if Sy Quia did not see fit to so register at any time prior to his death in
1894, we must presume that he did not do so because he desired to preserve the rights which he
had acquired as a resident of Manila.

Continuous and permanent residence in this country for a period of years, and the rights thereby
acquired as a denizen of any town, were always taken into consideration by the Spanish legislators
in determining the rights of a foreigner residing in Spanish territory. The constitution of 1812 provides
in section 5 that there shall be considered as Spanish subjects:
 2. Foreigners who have obtained from the cortes a certificate of naturalization; and, 3. Those
who have otherwise gained residence in accordance with the laws of the country and lived
as such residents for a period of ten years in any town of the kingdom.

A similar provision is contained in section 1 of the constitution of 1845, paragraph 4 of which is as

follows:

Spanish subjects are those who, having otherwise obtained a certificate of naturalization,
have, nevertheless, gained residence in any town of the kingdom.

It becomes necessary to refer to the Spanish laws which were applicable or in operation in these
Islands at the time that Vicente Romero Sy Quia gained residence and acquired the status of a
domiciled denizen of the municipality of Vigan and subsequently of this city of Manila, for the reason
that they were the only laws regulating his personal rights.

In addition to what has been said for the purpose of demonstrating that Vicente Romero Sy Quia
acquired the legal status of a domiciled resident of these Islands, we should not forget to say that the
Chinese residents of these Islands under the former sovereignty, and particularly at the time that Sy
Quia gained a residence in this Archipelago, were governed by the Laws of the Indies and other
special laws, some of them quite ancient; although they had no consul or any other representative of
the Chinese Government, they, nevertheless, had a gobernadorcillo who was elected by their most
prominent citizens, subject to the approval of the Governor-General. They were governed by laws
different from the general laws of the country and paid a tax different from that which was paid by the
natives and foreigners, and, upon their landing for the purpose of establishing themselves in the
Islands, they had to obtain what was known as a resident's license and secure passports and
permits whenever they desired to leave the Islands, and not only had they to obtain such permission
from the Government, but also from their native wife, if they were married. It should be noticed also
that they were not permitted to land in Manila without first obtaining a permit from the Government,
and that they had to state before the Chinese immigration authorities whether they came here as
mere transients, or visitors for a period of three months, which could be extended if they really
intended to establish themselves in the country. For this purpose certain proceedings were instituted
before the immigrant was given the said resident's license. This license entitled them to more liberty
and privileges in their business journeys and excursions through the provinces than the other
transients who merely had permission to stay here three months. All this may be verified by
reference to the decrees of the 31st of August, 1839; 16th of September, 1840; 13th of December,
1843; and 20th of December, 1849.

It should be noticed further that section 19 of the said decree of the 16th of September, 1840,
provided that the children always follow the status of their father and pay the same taxes, except the
children of Chinese who, according to the decree of the 2nd of May, 1786, were considered as
Chinese mestizos. These decrees may be found In the work entitled "Legislacion Ultra Marina," by
Rodriguez San Pedro, vol. 2, pp. 471-483, and vol. 8, p. 401.

The foregoing will clearly show that Vicente Romero Sy Quia gained residence in these Islands
under the laws of the Novisima Recopilacion. Therefore the questions raised by those who now
claimed to be his descendants should be decided in accordance with the laws in force in the
Philippines to which Sy Quia submitted himself from the time he applied for a resident's license and
abstained from registering in 1870 as a foreigner. Most of the property left by him being the real, the
same is subject to the laws of the country in which it is located.

In support of what has been said with reference to the special laws governing in the Philippines
concerning Chinese, we will cite the decision in a case where a Chinese Christian by the name of
Bonifacio Lim Tuaco requested that the children of Chinese married to native women, whether pure
relatives or half-castes, pay the same taxes as their father and be permitted to wear the same
costume as the latter up to the age of 25. The Spanish Government, inspired by the traditional spirit
of the ancient special laws relating to Chinese residents in these islands, after consulting various
heads of departments and obtaining in a royal order of the 24th of February, 1880, which was
communicated to the Governor-General of these islands and published in the Official Gazette April
17, 1880.

The plaintiffs in this case have invoked certain provisions of the Chinese laws as one of the grounds
of the action by them instituted and now contend that the estate of Vicente Romero Sy Quia,
deceased, should be distributed in accordance with the laws of that country. Even disregarding the
fact that the plaintiffs should have, but have not, alleged in their complaint, as one of the facts
constituting their cause of action, the existence of a law passed and promulgated in China, the
existence of which law, being foreign, should have been alleged in the complaint, the fact remains
that there is absolutely no evidence in the record as to the existence of the Chinese laws referred to
by plaintiffs in their subsequent pleadings, the evidence of this character introduced by them
consisting of books or pamphlets written in Chinese characters and marked "Exhibits AH, AI, AJ, and
AK," which they claim contain a compilation of the laws of China, being useless and of no value.

It may be that they contain, as plaintiffs claim, the laws of China, but we have no Spanish translation
of them, they being the written with characters which are absolutely unknown to this court and to the
defendants. Further, the plaintiffs have not introduced expert testimony in the manner and form
prescribed by section 292 of the Code of Civil Procedure, and, finally, there is no evidence that these
four books or pamphlets were printed by authority of the Chinese Government or that they have
been duly authenticated by the certificate of competent authorities or that they are properly sealed
with the seal of the nation to which they belong. For this reason the said books or pamphlets can
not, under any circumstance, be considered as documentary proof of the laws of China.

Section 300 of the Code of Civil Procedure reads as follows:

Books printed or published under the authority of the United States, or of one of the States of
the United States, or a foreign country, and purporting to contain statutes, codes, or other
written law of such State or country, or proved to be commonly admitted in the tribunals of
such State or country as evidence of the written law thereof, are admissible in the Philippine
Islands as evidence of such law.

Section 301 of the same code provides:

A copy of the written law, or other public writing of any State or country, attested by the
certificate of the officer having been charge of the original, under the seal of the State or
country, is admissible as evidence of such law or writing.

Section 302 provides as follows:

The oral testimony of the witnesses, skilled herein, is admissible as evidence of he unwritten
law of the United States or of any State of the United States, or foreign country, as are also
printed and published books of reports of decisions of the courts of the United States or of
such State or country, or proved to be commonly admitted in such courts.

The jurisprudence of American and Spanish tribunals is uniform on this subject. For he purposes of
this decision however it will be sufficient to refer to the judgment of the supreme court of Spain of the
26th of May, 1887, wherein it is said:
 Whenever a foreign law is invoked in our Tribunals, its existence must be satisfactorily
established as any other fact.

If the pamphlets or books, written in Chinese characters, do not satisfactorily establish the existence
of certain Chinese laws invoked by the plaintiffs, no only because such pamphlets or books lack the
aforesaid formalities and requisites, but further because there is no evidence as to the nature of the
laws contained in those books or pamphlets and the subjects with which they deal; on the introduced
for the purpose of establishing the authenticity of the laws which, according to the plaintiffs, are
contained in the said books, were unable to say positively at least that the book marked Exhibit AH
consul of this city, Sy Int Chu, after stating that he had never made a regular study of the laws of his
country, simply consulting the same in connection with his official reports, admitted that he had
never read or seen the original copy of this alleged compilation, the books not being duly certified,
adding that he could not say whether the book marked "Exhibit AH" was a exact copy of the original.

The testimony of the witness Ly Ung Bing, the interpreter, as to the written and unwritten laws of
China, does not show, as required by the Code of Civil Procedure, that he knew such laws alleged to
be contained in the said books. He merely confined himself to expressing his own opinion with
reference to two classes thoroughly conversant with the laws of China, his testimony, considering
the manner in which he testified, can not even be accepted as partial evidence that the said four
books really contain the written and unwritten laws of China.

From the foregoing facts and provisions of law referred to we conclude:

First. That it has not been duly established in this case that the Chinaman Sy Quia, married in 1847
at Am Thau, Amoy, China, the woman Yap Puan Niu, or that the plaintiffs are the descendants of the
said Sy Quia, for the reason that the marriage of Sy By Bo, Sy By Guit and Sy Jui Niu, respectively,
the affiliation and parentage of the latter and of Sy Chua Niu and Sian Han, and the adoption of Sy
Yoc Chay have not been proven.

Second. That, even assuming that Sy Quia actually married Yap Puan Niu, in 1847, and that the
second marriage with Petronila Encarnacion in 1853 is, therefore, void, Sy Quia having contracted
this second marriage in bad faith by concealing the fact that his former wife was still living his half of
the property of the conjugal partnership between him and his second wife, who married him in good
faith, was forfeited by operation of law in favor of his said second wife, for although the law
recognizes civil effects to a void marriage, it nevertheless, deprives the party who married in bad
faith of his share in the community property acquired during the existence of the marriage up to the
time of its annulment.

Third. That, as a consequence of the foregoing conclusion and under the same hypothesis, the
plaintiffs, as the descendants of Sy Quia by his first marriage, have no right to claim Sy Quia's share
in the conjugal property acquired during his second marriage with Petronila Encarnacion for the
reason that by the express provision of the law the half of the said conjugal property which would
have otherwise belonged to the husband was transmitted to Petronila Encarnacion, together with the
other half of the said property to which she was rightfully entitled under the law as the deceived wife.

Fourth. That, under the same hypothesis that the marriage of Sy Quia with Petronila Encarnacion is
void, his former marriage not having been dissolved when he married the said Petronila
Encarnacion, the children by the second marriage are, nevertheless, legitimate, this being one of the
civil effects of a marriage contracted in good faith, as in this case, at least on the part of one of the
contracting parties, Petronila Encarnacion.
Fifth. That Vicente Romero Sy Quia, having become a regularly domiciled denizen under the laws
above cited by reason of his long residence in this country for more than fifty years and by reason of
the further fact that he married a native woman, established himself in this city with a home of his
own, acquired real property and engaged in business generally, most of the property left by him at
the time of his death being the real property, the questions raised by plaintiff's petition must be
determined in accordance with the laws of the Philippines to which Sy Quia submitted himself when
he came to the Islands and secured a residence therein, and not in accordance with any other
foreign or unknown law.

Sixth. That, aside from the fact that it does not specifically appear from the record what are the
Chinese laws applicable to the issues of this case, there is no proof of the existence of the Chinese
laws referred to by the plaintiffs, nor is there anything to show that the books or pamphlets
introduced by them in evidence contain any specific laws of the Celestial.

The foregoing disposes explicitly or implicitly, affirmatively or otherwise, of all the questions raised by
the various assignments of error submitted by both parties; and in our opinion it is not necessary to
dispose of each of them in detail in view of the conclusion at which the court has arrived in this most
important litigation.

For the reasons hereinbefore stated, we are of the opinion, and so hold, that the judgment of the trial
court, appealed from both parties, should be reversed, and that we should, and do hereby, absolve
the defendants of the complaint upon which this action was instituted, without any special order as to
the costs of both instances. The bond given by the receiver, Gregorio Sy Quia, is hereby discharged
and the petition heretofore made for the appointment of a new receiver is hereby denied. It is so
ordered.

Carson and Elliot, JJ., concur.

G.R. No. L-12767 November 16, 1918

In the matter of the estate of EMIL H. JOHNSON. EBBA INGEBORG JOHNSON, applicant-
appellant,

Hartigan & Welch for applicant and appellant.

Hartford Beaumont for Victor Johnson and others as appellees.
Chas. E. Tenney for Alejandra Ibañez de Johnson, personally and as guardian,
and for Simeona Ibañez, appellees.

STREET, J.:

On February 4, 1916, Emil H. Johnson, a native of Sweden and a naturalized citizen of the United
States, died in the city of Manila, leaving a will, dated September 9, 1915, by which he disposed of
an estate, the value of which, as estimated by him, was P231,800. This document is an holographic
instrument, being written in the testator's own handwriting, and is signed by himself and two
witnesses only, instead of three witnesses required by section 618 of the Code of Civil Procedure.
This will, therefore, was not executed in conformity with the provisions of law generally applicable to
wills executed by inhabitants of these Islands, and hence could not have been proved under section
618.
On February 9, 1916, however, a petition was presented in the Court of First Instance of the city of
Manila for the probate of this will, on the ground that Johnson was at the time of his death a citizen
of the State of Illinois, United States of America; that the will was duly executed in accordance with
the laws of that State; and hence could properly be probated here pursuant to section 636 of the
Code of Civil Procedure. This section reads as follows:

Will made here by alien. — A will made within the Philippine Islands by a citizen or subject of
another state or country, which is executed in accordance with the law of the state or country
of which he is a citizen or subject, and which might be proved and allowed by the law of his
own state or country, may be proved, allowed, and recorded in the Philippine Islands, and
shall have the same effect as if executed according to the laws of these Islands.

The hearing on said application was set for March 6, 1916, and three weeks publication of notice
was ordered in the "Manila Daily Bulletin." Due publication was made pursuant to this order of the
court. On March 6, 1916, witnesses were examined relative to the execution of the will; and upon
March 16th thereafter the document was declared to be legal and was admitted to probate. At the
same time an order was made nominating Victor Johnson and John T. Pickett as administrators of
the estate, with the sill annexed. Shortly thereafter Pickett signified his desire not to serve, and Victor
Johnson was appointed sole administrator.

By the will in question the testator gives to his brother Victor one hundred shares of the corporate
stock in the Johnson-Pickett Rope Company; to his father and mother in Sweden, the sum of
P20,000; to his daughter Ebba Ingeborg, the sum of P5,000; to his wife, Alejandra Ibañez, the sum
of P75 per month, if she remains single; to Simeona Ibañez, spinster, P65 per month, if she remains
single. The rest of the property is left to the testator's five children — Mercedes, Encarnacion, Victor,
Eleonor and Alberto.

The biographical facts relative to the deceased necessary to an understanding of the case are these:
Emil H. Johnson was born in Sweden, May 25, 1877, from which country he emigrated to the United
States and lived in Chicago, Illinois, from 1893 to 1898. On May 9, 1898, at Chicago, he was married
to Rosalie Ackeson, and immediately thereafter embarked for the Philippine Islands as a soldier in
the Army of the United States. As a result of relations between Johnson and Rosalie Ackeson a
daughter, named Ebba Ingeborg, was born a few months after their marriage. This child was
christened in Chicago by a pastor of the Swedish Lutheran Church upon October 16, 1898.

After Johnson was discharged as a soldier from the service of the United States he continued to live
in the Philippine Islands, and on November 20, 1902, the wife, Rosalie Johnson, was granted a
decree of divorce from him in the Circuit Court of Cook County, Illinois, on the ground of desertion. A
little later Johnson appeared in the United States on a visit and on January 10, 1903, procured a
certificate of naturalization at Chicago. From Chicago he appears to have gone to Sweden, where a
photograph, exhibited in evidence in this case, was taken in which he appeared in a group with his
father, mother, and the little daughter, Ebba Ingeborg, who was then living with her grandparents in
Sweden. When this visit was concluded, the deceased returned to Manila, where he prospered in
business and continued to live until his death.

In this city he appears to have entered into marital relations with Alejandra Ibañez, by whom he had
three children, to wit, Mercedes, baptized May 31, 1903; Encarnacion, baptized April 29, 1906; and
Victor, baptized December 9, 1907. The other two children mentioned in the will were borne to the
deceased by Simeona Ibañez.

On June 12, 1916, or about three months after the will had been probated, the attorneys for Ebba
Ingeborg Johnson entered an appearance in her behalf and noted an exception to the other
admitting the will to probate. On October 31, 1916, the same attorneys moved the court to vacate
the order of March 16 and also various other orders in the case. On February 20, 1917, this motion
was denied, and from this action of the trial court the present appeal has been perfected.

As will be discerned, the purpose of the proceeding on behalf of the petitioner is to annul the decree
of probate and put the estate into intestate administration, thus preparing the way for the
establishment of the claim of the petitioner as the sole legitimate heir of her father.

The grounds upon which the petitioner seeks to avoid the probate are four in number and may be
stated, in the same sequence in which they are set forth in the petition, as follows:

(1) Emil H. Johnson was a resident of the city of Manila and not a resident of the State of Illinois at
the time the will in question was executed;

(2) The will is invalid and inadequate to pass real and personal property in the State of Illinois;

(3) The order admitting the will to probate was made without notice to the petitioner; and

(4) The order in question was beyond the jurisdiction of the court.

It cannot of course be maintained that a court of first instance lacks essential jurisdiction over the
probate of wills. The fourth proposition above stated must, accordingly, be interpreted in relation with
the third and must be considered as a corollary deduced from the latter. Moreover, both the third and
fourth grounds stated take precedence, by reason of their more fundamental implications, over the
first two; and a logical exposition of the contentions of the petitioner is expressed in the two following
propositions:

(I) The order admitting the will to probate was beyond the jurisdiction of the court and void
because made without notice to the petitioner;

(II) The judgment from which the petitioner seeks relief should be set aside because the
testator was not a resident of the State of Illinois and the will was not in conformity with the
laws of that State.

In the discussion which is to follow we shall consider the problems arising in this cae in the order last
above indicated. Upon the question, then, of the jurisdiction of the court, it is apparent from an
inspection of the record of the proceedings in the court below that all the steps prescribed by law as
prerequisites to the probate of a will were complied with in every respect and that the probate was
effected in external conformity with all legal requirements. This much is unquestioned. It is, however,
pointed out in the argument submitted in behalf of the petitioner, that, at the time the court made the
order of publication, it was apprised of the fact that the petitioner lived in the United States and that
as daughter and heir she was necessarily interested in the probate of the will. It is, therefore, insisted
that the court should have appointed a date for the probate of the will sufficiently far in the future to
permit the petitioner to be present either in person or by representation; and it is said that the failure
of the court thus to postpone the probate of the will constitutes an infringement of that provision of
the Philippine Bill which declared that property shall not be taken without due process of law.

On this point we are of the opinion that the proceedings for the probate of the will were regular and
that the publication was sufficient to give the court jurisdiction to entertain the proceeding and to
allow the will to be probated.
As was said in the case of In re Davis (136 Cal., 590, 596), "the proceeding as to the probate of a
will is essentially one in rem, and in the very nature of things the state is allowed a wide latitude in
determining the character of the constructive notice to be given to the world in a proceeding where it
has absolute possession of the res. It would be an exceptional case where a court would declare a
statute void, as depriving a party of his property without due process of law, the proceeding being
strictly in rem, and the res within the state, upon the ground that the constructive notice prescribed
by the statute was unreasonably short."

In that case the petitioner had been domiciled in the Hawaiian Islands at the time of the testator's
death; and it was impossible, in view of the distance and means of communication then existing, for
the petitioner to appear and oppose the probate on the day set for the hearing in California. It was
nevertheless held that publication in the manner prescribed by statute constituted due process of
law. (See Estate of Davis, 151 Cal., 318; Tracy vs. Muir, 151 Cal., 363.)

In the Davis case (136 Cal., 590) the court commented upon the fact that, under the laws of
California, the petitioner had a full year within which she might have instituted a proceeding to
contest the will; and this was stated as one of the reasons for holding that publication in the manner
provided by statute was sufficient. The same circumstance was commented upon in
O'Callaghan vs. O'Brien (199 U. S., 89), decided in the Supreme Court of the United States. This
case arose under the laws of the State of Washington, and it was alleged that a will had been there
probated without the notice of application for probate having been given as required by law. It was
insisted that this was an infringement of the Fourteenth Amendment of the Constitution of the United
States. This contention was, however, rejected and it was held that the statutory right to contest the
will within a year was a complete refutation of the argument founded on the idea of a violation of the
due process provision.

The laws of these Islands, in contrast with the laws in force in perhaps all of the States of the
American Union, contain no special provision, other than that allowing an appeal in the probate
proceedings, under which relief of any sort can be obtained from an order of a court of first instance
improperly allowing or disallowing a will. We do, however, have a provision of a general nature
authorizing a court under certain circumstances to set aside any judgment, order, or other
proceeding whatever. This provision is found in section 113 of the Code of Civil Procedure, which
reads as follows:

Upon such terms as may be just the court may relieve a party or his legal representative
from a judgment, order or other proceeding taken against him through his mistake,
inadvertence, surprise or excusable neglect; Provided, That application therefor be made
within a reasonable time, but in no case exceeding six months after such judgment, order, or
proceeding was taken.

The use of the word "judgment, order or other proceeding" in this section indicates an intention on
the part of the Legislature to give a wide latitude to the remedy here provided, and in our opinion its
operation is not to be restricted to judgments or orders entered in ordinary contentious litigation
where a plaintiff impleads a defendant and brings him into court by personal service of process. In
other words the utility of the provision is not limited to actions proper but extends to all sorts of
judicial proceedings.

In the second section of the Code of Civil Procedure it is declared that the provisions of this Code
shall be liberally construed to promote its object and to assist the parties in obtaining speedy justice.
We think that the intention thus exhibited should be applied in the interpretation of section 113; and
we hold that the word "party," used in this section, means any person having an interest in the
subject matter of the proceeding who is in a position to be concluded by the judgment, order, to
other proceeding taken.

The petitioner, therefore, in this case could have applied, under the section cited, at any time within
six months for March 16, 1916, and upon showing that she had been precluded from appearing in
the probate proceedings by conditions over which she had no control and that the order admitting
the will to probate had been erroneously entered upon insufficient proof or upon a supposed state of
facts contrary to the truth, the court would have been authorized to set the probate aside and grant a
rehearing. It is no doubt true that six months was, under the circumstances, a very short period of
time within which to expect the petitioner to appear and be prepared to contest the probate with the
proof which she might have desired to collect from remote countries. Nevertheless, although the
time allowed for the making of such application was inconveniently short, the remedy existed; and
the possibility of its use is proved in this case by the circumstance that on June 12, 1916, she in fact
here appeared in court by her attorneys and excepted to the order admitting the will to probate.

It results that, in conformity with the doctrine announced in the Davis case, above cited, the
proceedings in the court below were conducted in such manner as to constitute due process of law.
The law supplied a remedy by which the petitioner might have gotten a hearing and have obtained
relief from the order by which she is supposed to have been injured; and though the period within
which the application should have been made was short, the remedy was both possible and
practicable.

From what has been said it follows that the order of March 16, 1916, admitting the will of Emil H.
Johnson to probate cannot be declared null and void merely because the petitioner was unavoidably
prevented from appearing at the original hearing upon the matter of the probate of the will in
question. Whether the result would have been the same if our system of procedure had contained no
such provision as that expressed in section 113 is a matter which we need not here consider.

Intimately connected with the question of the jurisdiction of the court, is another matter which may be
properly discussed at this juncture. This relates to the interpretation to be placed upon section 636 of
the Code of Civil Procedure. The position is taken by the appellant that this section is applicable only
to wills of liens; and in this connection attention is directed to the fact that the epigraph of this section
speaks only of the will made here by an alien and to the further fact that the word "state" in the body
of the section is not capitalized. From this it is argued that section 636 is not applicable to the will of
a citizen of the United States residing in these Islands. lawphil.net

We consider these suggestions of little weight and are of the opinion that, by the most reasonable
interpretation of the language used in the statute, the words "another state or country" include the
United States and the States of the American Union, and that the operation of the statute is not
limited to wills of aliens. It is a rule of hermeneutics that punctuation and capitalization are aids of
low degree in interpreting the language of a statute and can never control against the intelligible
meaning of the written words. Furthermore, the epigraph, or heading,, of a section, being nothing
more than a convenient index to the contents of the provision, cannot have the effect of limiting the
operative words contained in the body of the text. It results that if Emil H. Johnson was at the time of
his death a citizen of the United States and of the State of Illinois, his will was provable under this
section in the courts of the Philippine Islands, provided the instrument was so executed as to be
admissible to probate under the laws of the State of Illinois.

We are thus brought to consider the second principal proposition stated at the outset of this
discussion, which raises the question whether the order f probate can be set aside in this proceeding
on the other ground stated in the petition, namely, that the testator was not a resident of the State of
Illinois and that the will was not made in conformity with the laws of that State.
The order of the Court of First Instance admitting the will to probate recites, among other things:

That upon the date when the will in question was executed Emil H. Johnson was a citizen of
the United States, naturalized in the State of Illinois, County of Cook, and that the will in
question was executed in conformity with the dispositions of the law f the State of Illinois.

We consider this equivalent to a finding that upon the date of the execution of the will the testator
was a citizen of the State of Illinois and that the will was executed in conformity with the laws of that
State. Upon the last point the finding is express; and in our opinion the statement that the testator
was a citizen of the United States, naturalized in the State of Illinois, should be taken to imply that he
was a citizen of the State of Illinois, as well as of the United States.

The naturalization laws of the United States require, as a condition precedent to the granting of the
certificate of naturalization, that the applicant should have resided at least five years in the United
States and for one year within the State or territory where the court granting the naturalization
papers is held; and in the absence of clear proof to the contrary it should be presumed that a person
naturalized in a court of a certain State thereby becomes a citizen of that State as well as of the
United States.

In this connection it should be remembered that the Fourteenth Amendment to the Constitution of
the United States declares, in its opening words, that all persons naturalized in the United States,
and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they
reside.

It is noteworthy that the petition by which it is sought to annul the probate of this will does not assert
that the testator was not a citizen of Illinois at the date when the will was executed. The most that is
said on this point is he was "never a resident of the State of Illinois after the year 1898, but became
and was a resident of the city of Manila," etc. But residence in the Philippine Islands is compatible
with citizenship in Illinois; and it must be considered that the allegations of the petition on this point
are, considered in their bearing as an attempt to refute citizenship in Illinois, wholly insufficient.

As the Court of First Instance found that the testator was a citizen of the State of Illinois and that the
will was executed in conformity with the laws of that State, the will was necessarily and properly
admitted to probate. And how is it possible to evade the effect of these findings?

In Section 625 of the Code of Civil Procedure it is declared that "the allowance by the court of a will
of real or personal property shall be conclusive as to its due execution."

The due execution of a will involves conditions relating to a number of matters, such as the age and
mental capacity of the testator, the signing of the document by the testator, or by someone in his
behalf, and the acknowledgment of the instrument by him in the presence of the required number of
witnesses who affix their signatures to the will to attest the act. The proof of all these requisites is
involved in the probate; and as to each and all of them the probate is conclusive.
(Castañeda vs. Alemany, 3 Phil. Rep., 426; Pimentel vs. Palanca, 5 Phil. Rep., 436; Chiong Joc-
Soy vs. Vaño, 8 Phil. Rep., 119; Sanchez vs. Pascual, 11 Phil. Rep., 395; Montañano vs. Suesa, 14
Phil. Rep., 676.)

Our reported cases do not contain the slightest intimation that a will which has been probated
according to law, and without fraud, can be annulled, in any other proceeding whatever, on account
of any supposed irregularity or defect in the execution of the will or on account of any error in the
action of the court upon the proof adduced before it. This court has never been called upon to decide
whether, in case the probate of a will should be procured by fraud, relief could be granted in some
other proceeding; and no such question is now presented. But it is readily seen that if fraud were
alleged, this would introduce an entirely different factor in the cae. In Austrua vs. Ventenilla (21 Phil.
Rep., 180, 184), it was suggested but not decided that relief might be granted in case the probate of
a will were procured by fraud.

The circumstance that the judgment of the trial court recites that the will was executed in conformity
with the law of Illinois and also, in effect, that the testator was a citizen of that State places the
judgment upon an unassailable basis so far as any supposed error apparent upon the fact of the
judgment is concerned. It is, however, probable that even if the judgment had not contained these
recitals, there would have been a presumption from the admission of the will to probate as the will of
a citizen of Illinois that the facts were as recited in the order of probate.

As was said by this court in the case of Banco Español-Filipino vs. Palanca (37 Phil. Rep., 921),
"There is no principle of law better settled than that after jurisdiction has once been acquired, every
act of a court of general jurisdiction shall be presumed to have been rightly done. This rule is applied
to every judgment or decree rendered in the various stages of the proceedings from their initiation to
their completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S., 449); and if the record is
silent with respect to any fact which must have established before the court could have rightly acted,
it will be presumed that such fact was properly brought to its knowledge."

The Court of First Instance is a court of original and general jurisdiction; and there is no difference in
its faculties in this respect whether exercised in matters of probate or exerted in ordinary contentious
litigation. The trial court therefore necessarily had the power to determine the facts upon which the
propriety of admitting the will to probate depended; and the recital of those facts in the judgment was
probably not essential to its validity. No express ruling is, however, necessary on this point.

What has been said effectually disposes of the petition considered in its aspect as an attack upon
the order of probate for error apparent on the face of the record. But the petitioner seeks to have the
judgment reviewed, it being asserted that the findings of the trial court — especially on the question
of the citizenship of the testator — are not supported by the evidence. It needs but a moment's
reflection, however, to show that in such a proceeding as this it is not possible to reverse the original
order on the ground that the findings of the trial court are unsupported by the proof adduced before
that court. The only proceeding in which a review of the evidence can be secured is by appeal, and
the case is not before us upon appeal from the original order admitting the will to probate. The
present proceedings by petition to set aside the order of probate, and the appeal herein is from the
order denying this relief. It is obvious that on appeal from an order refusing to vacate a judgment it is
not possible to review the evidence upon which the original judgment was based. To permit this
would operate unduly to protract the right of appeal.

However, for the purpose of arriving at a just conception of the case from the point of view of the
petitioner, we propose to examine the evidence submitted upon the original hearing, in connection
with the allegations of the petition, in order to see, first, whether the evidence submitted to the trial
court was sufficient to justify its findings, and, secondly, whether the petition contains any matter
which would justify the court in setting the judgment, aside. In this connection we shall for a moment
ignore the circumstance that the petition was filed after the expiration of the six months allowed by
section 113 of the Code of Civil Procedure.

The principal controversy is over the citizenship of the testator. The evidence adduced upon this
point in the trial court consists of the certificate of naturalization granted upon January 10, 1903, in
the Circuit Court of Cook County, Illinois, in connection with certain biographical facts contained in
the oral evidence. The certificate of naturalization supplies incontrovertible proof that upon the date
stated the testator became a citizen of the United States, and inferentially also a citizen of said
State. In the testimony submitted to the trial court it appears that, when Johnson first came to the
United States as a boy, he took up his abode in the State of Illinois and there remained until he
came as a soldier in the United States Army to the Philippine Islands. Although he remained in these
Islands for sometime after receiving his discharge, no evidence was adduced showing that at the
time he returned to the United States, in the autumn of 1902, he had then abandoned Illinois as the
State of his permanent domicile, and on the contrary the certificate of naturalization itself recites that
at that time he claimed to be a resident of Illinois.

Now, if upon January 10, 1903, the testator became a citizen of the United States and of the State of
Illinois, how has he lost the character of citizen with respect to either of these jurisdictions? There is
no law in force by virtue of which any person of foreign nativity can become a naturalized citizen of
the Philippine Islands; and it was, therefore, impossible for the testator, even if he had so desired, to
expatriate himself from the United States and change his political status from a citizen of the United
States to a citizen of these Islands. This being true, it is to be presumed that he retained his
citizenship in the State of Illinois along with his status as a citizen of the United States. It would be
novel doctrine to Americans living in the Philippine Islands to be told that by living here they lose
their citizenship in the State of their naturalization or nativity.

We are not unmindful of the fact that when a citizen of one State leaves it and takes up his abode in
another State with no intention of returning, he immediately acquires citizenship in the State of his
new domicile. This is in accordance with that provision of the Fourteenth Amendment to the
Constitution of the United States which says that every citizen of the United States is a citizen of the
State where in he resides. The effect of this provision necessarily is that a person transferring his
domicile from one State to another loses his citizenship in the State of his original above upon
acquiring citizenship in the State of his new abode. The acquisition of the new State citizenship
extinguishes the old. That situation, in our opinion, has no analogy to that which arises when a
citizen of an American State comes to reside in the Philippine Islands. Here he cannot acquire a new
citizenship; nor by the mere change of domicile does he lose that which he brought with him.

The proof adduced before the trial court must therefore be taken as showing that, at the time the will
was executed, the testator was, as stated in the order of probate, a citizen of the State of Illinois.
This, in connection with the circumstance that the petition does not even so much as deny such
citizenship but only asserts that the testator was a resident of the Philippine Islands, demonstrates
the impossibility of setting the probate aside for lack of the necessary citizenship on the part of the
testator. As already observed, the allegation of the petition on this point is wholly insufficient to justify
any relief whatever.

Upon the other point — as to whether the will was executed in conformity with the statutes of the
State of Illinois — we note that it does not affirmatively appear from the transaction of the testimony
adduced in the trial court that any witness was examined with reference to the law of Illinois on the
subject of the execution of will. The trial judge no doubt was satisfied that the will was properly
executed by examining section 1874 of the Revised Statutes of Illinois, as exhibited in volume 3 of
Starr & Curtis's Annotated Illinois Statutes, 2nd ed., p. 426; and he may have assumed that he could
take judicial notice of the laws of Illinois under section 275 of the Code of Civil Procedure. If so, he
was in our opinion mistaken. that section authorizes the courts here to take judicial notice, among
other things, of the acts of the legislative department of the United States. These words clearly have
reference to Acts of the Congress of the United States; and we would hesitate to hold that our courts
can, under this provision, take judicial notice of the multifarious laws of the various American States.
Nor do we think that any such authority can be derived from the broader language, used in the same
action, where it is said that our courts may take judicial notice of matters of public knowledge
"similar" to those therein enumerated. The proper rule we think is to require proof of the statutes of
the States of the American Union whenever their provisions are determinative of the issues in any
action litigated in the Philippine courts.
Nevertheless, even supposing that the trial court may have erred in taking judicial notice of the law
of Illinois on the point in question, such error is not now available to the petitioner, first, because the
petition does not state any fact from which it would appear that the law of Illinois is different from
what the court found, and, secondly, because the assignment of error and argument for the
appellant in this court raises no question based on such supposed error. Though the trial court may
have acted upon pure conjecture as to the law prevailing in the State of Illinois, its judgment could
not be set aside, even upon application made within six months under section 113 of the Code of
Civil procedure, unless it should be made to appear affirmatively that the conjecture was wrong. The
petitioner, it is true, states in general terms that the will in question is invalid and inadequate to pass
real and personal property in the State of Illinois, but this is merely a conclusion of law. The affidavits
by which the petition is accompanied contain no reference to the subject, and we are cited to no
authority in the appellant's brief which might tent to raise a doubt as to the correctness of the
conclusion of the trial court. It is very clear, therefore, that this point cannot be urged as of serious
moment.

But it is insisted in the brief for the appellant that the will in question was not properly admissible to
probate because it contains provisions which cannot be given effect consistently with the laws of the
Philippine Islands; and it is suggested that as the petitioner is a legitimate heir of the testator she
cannot be deprived of the legitime to which she is entitled under the law governing testamentary
successions in these Islands. Upon this point it is sufficient to say that the probate of the will does
not affect the intrinsic validity of its provisions, the decree of probate being conclusive only as
regards the due execution of the will. (Code of Civil Procedure, secs. 625, 614; Sahagun vs. De
Gorostiza, 7 Phil. Rep., 347, 349; Chiong Joc-Soy vs. Vaño, 8 Phil. Rep., 119, 121;
Limjuco vs. Ganara, 11 Phil. Rep., 393, 395.)

If, therefore, upon the distribution of this estate, it should appear that any legacy given by the will or
other disposition made therein is contrary to the law applicable in such case, the will must
necessarily yield upon that point and the law must prevail. Nevertheless, it should not be forgotten
that the intrinsic validity of the provisions of this will must be determined by the law of Illinois and not,
as the appellant apparently assumes, by the general provisions here applicable in such matters; for
in the second paragraph of article 10 of the Civil Code it is declared that "legal and testamentary
successions, with regard to the order of succession, as well as to the amount of the successional
rights and to the intrinsic validity of their provisions, shall be regulated by the laws of the nation of
the person whose succession is in question, whatever may be the nature of the property and the
country where it may be situate."

From what has been said, it is, we think, manifest that the petition submitted to the court below on
October 31, 1916, was entirely insufficient to warrant the setting aside of the other probating the will
in question, whether said petition be considered as an attack on the validity of the decree for error
apparent, or whether it be considered as an application for a rehearing based upon the new
evidence submitted in the affidavits which accompany the petition. And in this latter aspect the
petition is subject to the further fatal defect that it was not presented within the time allowed by law.

It follows that the trial court committed no error in denying the relief sought. The order appealed from
is accordingly affirmed with costs. So ordered.

G.R. No. L-32636 March 17, 1930

In the matter Estate of Edward Randolph Hix, deceased.

A.W. FLUEMER, petitioner-appellant,
vs.
ANNIE COUSHING HIX, oppositor-appellee.
C.A. Sobral for appellant.
Harvey & O' Brien and Gibbs & McDonough for appellee.

MALCOLM, J.:

The special administrator of the estate of Edward Randolph Hix appeals from a decision of Judge of
First Instance Tuason denying the probate of the document alleged to by the last will and testament
of the deceased. Appellee is not authorized to carry on this appeal. We think, however, that the
appellant, who appears to have been the moving party in these proceedings, was a "person
interested in the allowance or disallowance of a will by a Court of First Instance," and so should be
permitted to appeal to the Supreme Court from the disallowance of the will (Code of Civil Procedure,
sec. 781, as amended; Villanueva vs. De Leon [1925], 42 Phil., 780).

It is theory of the petitioner that the alleged will was executed in Elkins, West Virginia, on November
3, 1925, by Hix who had his residence in that jurisdiction, and that the laws of West Verginia Code,
Annotated, by Hogg, Charles E., vol. 2, 1914, p. 1690, and as certified to by the Director of the
National Library. But this was far from a compliance with the law. The laws of a foreign jurisdiction
do not prove themselves in our courts. the courts of the Philippine Islands are not authorized to take
American Union. Such laws must be proved as facts. (In re Estate of Johnson [1918], 39 Phil., 156.)
Here the requirements of the law were not met. There was no was printed or published under the
authority of the State of West Virginia, as provided in section 300 of the Code of Civil Procedure. Nor
was the extract from the law attested by the certificate of the officer having charge of the original,
under the sale of the State of West Virginia, as provided in section 301 of the Code of Civil
Procedure. No evidence was introduced to show that the extract from the laws of West Virginia was
in force at the time the alleged will was executed.

In addition, the due execution of the will was not established. The only evidence on this point is to be
found in the testimony of the petitioner. Aside from this, there was nothing to indicate that the will
was acknowledged by the testator in the presence of two competent witnesses, of that these
witnesses subscribed the will in the presence of the testator and of each other as the law of West
Virginia seems to require. On the supposition that the witnesses to the will reside without the
Philippine Islands, it would then the duty of the petitioner to prove execution by some other means
(Code of Civil Procedure, sec. 633.)

It was also necessary for the petitioner to prove that the testator had his domicile in West Virginia
and not establish this fact consisted of the recitals in the CATHY will and the testimony of the
petitioner. Also in beginning administration proceedings orginally in the Philippine Islands, the
petitioner violated his own theory by attempting to have the principal administration in the Philippine
Islands.

While the appeal pending submission in this court, the attorney for the appellant presented an
unverified petition asking the court to accept as part of the evidence the documents attached to the
petition. One of these documents discloses that a paper writing purporting to be the was presented
for probate on June 8, 1929, to the clerk of Randolph Country, State of West Virginia, in vacation,
and was duly proven by the oaths of Dana Wamsley and Joseph L. MAdden, the subscribing
witnesses thereto , and ordered to be recorded and filed. It was shown by another document that, in
vacation, on June 8, 1929, the clerk of court of Randolph Country, West Virginia, appointed Claude
W. Maxwell as administrator, cum testamento annexo, of the estate of Edward Randolph Hix,
deceased. In this connection, it is to be noted that the application for the probate of the will in the
Philippines was filed on February 20, 1929, while the proceedings in West Virginia appear to have
been initiated on June 8, 1929. These facts are strongly indicative of an intention to make the
Philippines the principal administration and West Virginia the ancillary administration. However this
may be, no attempt has been made to comply with Civil Procedure, for no hearing on the question of
the allowance of a will said to have been proved and allowed in West Virginia has been requested.
There is no showing that the deceased left any property at any place other than the Philippine
Islands and no contention that he left any in West Virginia.

Reference has been made by the parties to a divorce purported to have been awarded Edward
Randolph Hix from Annie Cousins Hix on October 8, 1925, in the State of West specific
pronouncements on the validity or validity of this alleged divorce.

For all of the foregoing, the judgment appealed from will be affirmed, with the costs of this instance
against the appellant.

G.R. No. L-42538 May 21, 1935

WILLAMETTE IRON & STEEL WORKS, plaintiff-appellee,

vs.
A.H. MUZZAL, defendant-appellant.

Sidney C. Schwarzkopf and Eduardo D. Enriquez for appellant.

John R. McFie, Jr., for appellee.

GODDARD, J.:

This is an appeal from a decision of the Court of First Instance of Zamboanga, the dispositive part of
which reads:

In view of the considerations above stated, judgment is hereby entered in favor of the
plaintiff, ordering the defendant, for the first cause of action, to pay to plaintiff the sum of
P2,837.34, with interest thereon at the rate of 6 per cent per annum from March 11, 1929,
until paid, and to pay also the amount of P1,590.63, for the second cause of action, with
interest thereon at 7 per cent per annum from April 8, 1929, until paid. The defendant is
further ordered to pay the amount of P500 as reasonable attorney's fees in prosecuting this
action, and to pay the costs of these proceedings.

This case involves the liability of the defendant, a former resident of the State of California, now
residing in the Philippine Islands, for obligations contracted by a California corporation of which he
was a stockholder at the time said obligations were contracted with the plaintiff-appellee in this case.

The section of the Civil Code of California under which the plaintiff seeks to recover reads:

SEC. 322. Each stockholder of a corporation is individually and personally liable for such
proportion of all its debts and liabilities contracted or incurred during the time he was a
stockholder as the amount of stock or shares owned by him bears to the whole of the
subscribed capital stock or shares of the corporation. Any creditor of the corporation may
institute joint or several actions against any of its stockholders, for the proportion of his claim
payable by each, and in such action the court must (1) ascertain the proportion of the claim
or debt for which each defendant is liable, and (2) a several judgment must be rendered
against each, in conformity therewith. If any stockholder pays his proportion of any debt due
from the corporation, incurred while he was such stockholder, he is relieved from any further
personal liability for such debt, and if an action has been brought against him upon such
debt, it must be dismissed, as to him, upon his paying the costs, or such proportion thereof
 as may be properly chargeable against him. The liability of each stockholder is determined
by the amount of stock or shares owned by him at the time the debt or liability was incurred;
and such liability is not released by any subsequent transfer of stock.

The defendant-appellant makes the following assignments of error:

I. The lower court erred in holding that the defendant was the holder of 1,432 shares of the
capital stock of the Meyer-Muzzal Company.

II. The lower court erred in finding that plaintiff has proven the existence of the foreign law
involved in this action.

III. The lower court erred in enforcing the law of California.

IV. The lower court erred in rendering judgment against the defendant.

As to the first assignment of error the witness Stanley H. Hermann, a certified public accountant,
testified that he knows that the Meyer-Muzzal Company is a corporation and further testified as
follows:

I became acquainted with the corporation by reason of being employed by it in October,

November and December of 1929 as a certified public accountant and auditor to personally
examine the company's books of account, stock and other records of the company for the
purpose of certifying, if possible, to the correctness of a statement of the financial condition
of the company on March 31, 1929.

xxx xxx xxx

8. Please state, if you know, whether or not one A.H. Muzzal was a stockholder of Meyer-
Muzzal Company on November 5, 1928 and December 22, 1928, and if he was, please state
the number and value of the shares of capital stock of Meyer-Muzzal Company subscribed
and owned by said A.H. Muzzal on November 5, 1928 and December 22, 1928?

A. Yes, Mr. A.H. Muzzal was a stockholder of the Meyer-Muzzal Company on the dates
specified. Fourteen hundred thirty-three shares of the capital stock of Meyer-Muzzal
Company of the par value of $10 each were subscribed and owned by said A.H. Muzzal on
November 5th, 1928 and on December 22nd, 1928, and said shares were issued to and
standing in the name of A. H. Muzzal on the books of said company at said times.

9. If, by reason of the loss, destruction and/or disappearance of the stock and other
corporate records of the Meyer-Muzzal Company since the time you had occasion to
examine them, you have been unable to make reference thereto in answering the questions
asked of you in this deposition, please answer each and all of said questions by reference to
any documents or working sheets which you may be prepared upon the occasion of your
examining and/or auditing the books of account, stock and other records of the Meyer-
Muzzal Company.

A. By reference to my working papers which I made at the time I examined the books of
account and stock records of Meyer-Muzzal Company in October, November, December,
1929, and which working papers are in my possession, I find and can state accordingly that
these working papers show what the stock and other records of said Meyer-Muzzal
 Company recorded in regard to the matters contained in questions No. 6, No. 7 and No. 8
and I can state accordingly from my examination of said records and by reference to my
working papers that I know who the stockholders of Meyer-Muzzal company were; that the
amount of the subscribed capital stock of said Meyer-Muzzal Company on said dates was
5,000 shares of the par value of $10 each, and that A.H. Muzzal was a stockholder of the
Meyer-Muzzal Company on the dates specified and that fourteen hundred thirty-three shares
of the capital stock of Meyer-Muzzal Company of the par value of $10 each were subscribed
and owned by A.H. Muzzal on November 5, 1928 and on December 22nd, 1928 and said
shares were issued to and standing in the name of A.H. Muzzal on the books of said
company at said times.

The above sufficiently establishes the fact that the defendant was the owner of 1,433 shares of stock
of the corporation Meyer-Muzzal Company when it contracted the obligations alleged in the
complaint.

As to the second assignment of error Mr. Arthur W. Bolton, an attorney-at-law of San Francisco,
California, since the year 1918, under oath, quoted verbatim section 322 of the California Civil Code
and stated that said section was in force at the time the obligations of the defendant to the plaintiff
were incurred, i. e., on November 5, 1928 and December 22, 1928. This evidence sufficiently
established the fact that the section in question was the law of the State of California on the above
dates. A reading of sections 300 and 301 of our Code of Civil Procedure will convince one that these
sections do not exclude the presentation of other competent evidence to prove the existence of a
foreign law.

"The foreign law is a matter of fact ... You ask the witness what the law is; he may from his
recollection, or on producing and referring to books, say what it is." (Lord Campbell concurring in an
opinion of Lord Chief Justice Denman in a well known English case where a witness was called
upon to prove the Roman laws of marriage and was permitted to testify, though he referred to a book
containing the decrees of the Council of Trent as controlling, Jones on Evidence, Second Edition,
Volume 4, pages 3148-3152.) Aside from the testimony of Attorney Bolton Ragland's Annotated Civil
Code of California was presented as evidence. This book contains that State's Civil Code as
adopted March 21, 1872, with the subsequent official statute amendments to and including the year
1929.

In the third and fourth assignments of error the appellant argues that since the law of California, as
to the liability of stockholders of a corporation, is different from and inconsistent with the Philippine
Corporation Law the courts here should not impose liability provided in that law upon a resident of
these Islands who is a stockholder of a California corporation. The herein defendant is chargeable
with notice of the law of California as to the liability of stockholders for debt of a corporation
proportionate to their stock holdings, in view of the fact that he was one of the incorporators of the
Meyer-Muzzal Company in the year 1924 and was still a stockholder in that company in the year
1928. Exhibit 10 of the plaintiff is a certified company of the articles of incorporation of Meyer-Muzzal
Company in which it appears that that company was incorporated on August 22, 1924, and that the
incorporators were A.H. Muzzal, Leo W. Meyer and James Rolph, Jr., "all of whom are residents and
citizens of the State of California." The defendant cannot now escape liability by alleging that the
California law is unjust and different from the inconsistent with the Philippine Corporation Law.

The judgment of the trial court is affirmed with costs in both instances against the defendant-
appellant.

Malcolm, Abad Santos, Hull, Vickers, and Diaz, JJ., concur.

G.R. No. L-11622 January 28, 1961

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
DOUGLAS FISHER AND BETTINA FISHER, and the COURT OF TAX APPEALS, respondents.

x---------------------------------------------------------x

G.R. No. L-11668 January 28, 1961.

DOUGLAS FISHER AND BETTINA FISHER, petitioner,

vs.
THE COLLECTOR OF INTERNAL REVENUE, and the COURT OF TAX APPEALS, respondents.

BARRERA, J.:

This case relates to the determination and settlement of the hereditary estate left by the deceased
Walter G. Stevenson, and the laws applicable thereto. Walter G. Stevenson (born in the Philippines
on August 9, 1874 of British parents and married in the City of Manila on January 23, 1909 to
Beatrice Mauricia Stevenson another British subject) died on February 22, 1951 in San Francisco,
California, U.S.A. whereto he and his wife moved and established their permanent residence since
May 10, 1945. In his will executed in San Francisco on May 22, 1947, and which was duly probated
in the Superior Court of California on April 11, 1951, Stevenson instituted his wife Beatrice as his
sole heiress to the following real and personal properties acquired by the spouses while residing in
the Philippines, described and preliminary assessed as follows:

Gross Estate
Real Property — 2 parcels of land in
Baguio, covered by T.C.T. Nos. 378 and
379 P43,500.00
Personal Property
(1) 177 shares of stock of Canacao Estate
at P10.00 each 1,770.00
(2) 210,000 shares of stock of Mindanao
Mother Lode Mines, Inc. at P0.38 per
share 79,800.00
(3) Cash credit with Canacao Estate Inc. 4,870.88
(4) Cash, with the Chartered Bank of India,
Australia & China 851.97
Total Gross Assets P130,792.85

On May 22, 1951, ancillary administration proceedings were instituted in the Court of First Instance
of Manila for the settlement of the estate in the Philippines. In due time Stevenson's will was duly
admitted to probate by our court and Ian Murray Statt was appointed ancillary administrator of the
estate, who on July 11, 1951, filed a preliminary estate and inheritance tax return with the
reservation of having the properties declared therein finally appraised at their values six months after
the death of Stevenson. Preliminary return was made by the ancillary administrator in order to
secure the waiver of the Collector of Internal Revenue on the inheritance tax due on the 210,000
shares of stock in the Mindanao Mother Lode Mines Inc. which the estate then desired to dispose in
the United States. Acting upon said return, the Collector of Internal Revenue accepted the valuation
of the personal properties declared therein, but increased the appraisal of the two parcels of land
located in Baguio City by fixing their fair market value in the amount of P52.200.00, instead of
P43,500.00. After allowing the deductions claimed by the ancillary administrator for funeral expenses
in the amount of P2,000.00 and for judicial and administration expenses in the sum of P5,500.00, the
Collector assessed the state the amount of P5,147.98 for estate tax and P10,875,26 or inheritance
tax, or a total of P16,023.23. Both of these assessments were paid by the estate on June 6, 1952.

On September 27, 1952, the ancillary administrator filed in amended estate and inheritance tax
return in pursuance f his reservation made at the time of filing of the preliminary return and for the
purpose of availing of the right granted by section 91 of the National Internal Revenue Code.

In this amended return the valuation of the 210,000 shares of stock in the Mindanao Mother Lode
Mines, Inc. was reduced from 0.38 per share, as originally declared, to P0.20 per share, or from a
total valuation of P79,800.00 to P42,000.00. This change in price per share of stock was based by
the ancillary administrator on the market notation of the stock obtaining at the San Francisco
California) Stock Exchange six months from the death of Stevenson, that is, As of August 22, 1931.
In addition, the ancillary administrator made claim for the following deductions:

Funeral expenses ($1,04326) P2,086.52

Judicial Expenses:
(a) Administrator's Fee P1,204.34
(b) Attorney's Fee 6.000.00
(c) Judicial and Administration
expenses as of August 9, 1952 1,400.05
8,604.39
Real Estate Tax for 1951 on Baguio
real properties (O.R. No. B-1
686836) 652.50
Claims against the estate:
($5,000.00) P10,000.00 P10,000.00
Plus: 4% int. p.a. from Feb. 2 to 22,
1951 22.47 10,022.47
Sub-Total P21,365.88

In the meantime, on December 1, 1952, Beatrice Mauricia Stevenson assigned all her rights and
interests in the estate to the spouses, Douglas and Bettina Fisher, respondents herein.

On September 7, 1953, the ancillary administrator filed a second amended estate and inheritance
tax return (Exh. "M-N"). This return declared the same assets of the estate stated in the amended
return of September 22, 1952, except that it contained new claims for additional exemption and
deduction to wit: (1) deduction in the amount of P4,000.00 from the gross estate of the decedent as
provided for in Section 861 (4) of the U.S. Federal Internal Revenue Code which the ancillary
administrator averred was allowable by way of the reciprocity granted by Section 122 of the National
Internal Revenue Code, as then held by the Board of Tax Appeals in case No. 71 entitled "Housman
vs. Collector," August 14, 1952; and (2) exemption from the imposition of estate and inheritance
taxes on the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. also pursuant to the
reciprocity proviso of Section 122 of the National Internal Revenue Code. In this last return, the
estate claimed that it was liable only for the amount of P525.34 for estate tax and P238.06 for
inheritance tax and that, as a consequence, it had overpaid the government. The refund of the
amount of P15,259.83, allegedly overpaid, was accordingly requested by the estate. The Collector
denied the claim. For this reason, action was commenced in the Court of First Instance of Manila by
respondents, as assignees of Beatrice Mauricia Stevenson, for the recovery of said amount.
Pursuant to Republic Act No. 1125, the case was forwarded to the Court of Tax Appeals which court,
after hearing, rendered decision the dispositive portion of which reads as follows:

In fine, we are of the opinion and so hold that: (a) the one-half (½) share of the surviving
spouse in the conjugal partnership property as diminished by the obligations properly
chargeable to such property should be deducted from the net estate of the deceased Walter
G. Stevenson, pursuant to Section 89-C of the National Internal Revenue Code; (b) the
intangible personal property belonging to the estate of said Stevenson is exempt from
inheritance tax, pursuant to the provision of section 122 of the National Internal Revenue
Code in relation to the California Inheritance Tax Law but decedent's estate is not entitled to
an exemption of P4,000.00 in the computation of the estate tax; (c) for purposes of estate
and inheritance taxation the Baguio real estate of the spouses should be valued at
P52,200.00, and 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. should
be appraised at P0.38 per share; and (d) the estate shall be entitled to a deduction of
P2,000.00 for funeral expenses and judicial expenses of P8,604.39.

From this decision, both parties appealed.

The Collector of Internal Revenue, hereinafter called petitioner assigned four errors allegedly
committed by the trial court, while the assignees, Douglas and Bettina Fisher hereinafter called
respondents, made six assignments of error. Together, the assigned errors raise the following main
issues for resolution by this Court:

(1) Whether or not, in determining the taxable net estate of the decedent, one-half (½) of the net
estate should be deducted therefrom as the share of tile surviving spouse in accordance with our law
on conjugal partnership and in relation to section 89 (c) of the National Internal revenue Code;

(2) Whether or not the estate can avail itself of the reciprocity proviso embodied in Section 122 of the
National Internal Revenue Code granting exemption from the payment of estate and inheritance
taxes on the 210,000 shares of stock in the Mindanao Mother Lode Mines Inc.;

(3) Whether or not the estate is entitled to the deduction of P4,000.00 allowed by Section 861, U.S.
Internal Revenue Code in relation to section 122 of the National Internal Revenue Code;

(4) Whether or not the real estate properties of the decedent located in Baguio City and the 210,000
shares of stock in the Mindanao Mother Lode Mines, Inc., were correctly appraised by the lower
court;

(5) Whether or not the estate is entitled to the following deductions: P8,604.39 for judicial and
administration expenses; P2,086.52 for funeral expenses; P652.50 for real estate taxes; and
P10,0,22.47 representing the amount of indebtedness allegedly incurred by the decedent during his
lifetime; and

(6) Whether or not the estate is entitled to the payment of interest on the amount it claims to have
overpaid the government and to be refundable to it.

In deciding the first issue, the lower court applied a well-known doctrine in our civil law that in the
absence of any ante-nuptial agreement, the contracting parties are presumed to have adopted the
system of conjugal partnership as to the properties acquired during their marriage. The application of
this doctrine to the instant case is being disputed, however, by petitioner Collector of Internal
Revenue, who contends that pursuant to Article 124 of the New Civil Code, the property relation of
the spouses Stevensons ought not to be determined by the Philippine law, but by the national law of
the decedent husband, in this case, the law of England. It is alleged by petitioner that English laws
do not recognize legal partnership between spouses, and that what obtains in that jurisdiction is
another regime of property relation, wherein all properties acquired during the marriage pertain and
belong Exclusively to the husband. In further support of his stand, petitioner cites Article 16 of the
New Civil Code (Art. 10 of the old) to the effect that in testate and intestate proceedings, the amount
of successional rights, among others, is to be determined by the national law of the decedent.

In this connection, let it be noted that since the mariage of the Stevensons in the Philippines took
place in 1909, the applicable law is Article 1325 of the old Civil Code and not Article 124 of the New
Civil Code which became effective only in 1950. It is true that both articles adhere to the so-called
nationality theory of determining the property relation of spouses where one of them is a foreigner
and they have made no prior agreement as to the administration disposition, and ownership of their
conjugal properties. In such a case, the national law of the husband becomes the dominant law in
determining the property relation of the spouses. There is, however, a difference between the two
articles in that Article 1241 of the new Civil Code expressly provides that it shall be applicable
regardless of whether the marriage was celebrated in the Philippines or abroad while Article 13252 of
the old Civil Code is limited to marriages contracted in a foreign land.

It must be noted, however, that what has just been said refers to mixed marriages between a Filipino
citizen and a foreigner. In the instant case, both spouses are foreigners who married in the
Philippines. Manresa,3 in his Commentaries, has this to say on this point:

La regla establecida en el art. 1.315, se refiere a las capitulaciones otorgadas en Espana y

entre espanoles. El 1.325, a las celebradas en el extranjero cuando alguno de los conyuges
es espanol. En cuanto a la regla procedente cuando dos extranjeros se casan en Espana, o
dos espanoles en el extranjero hay que atender en el primer caso a la legislacion de pais a
que aquellos pertenezean, y en el segundo, a las reglas generales consignadas en los
articulos 9 y 10 de nuestro Codigo. (Emphasis supplied.)

If we adopt the view of Manresa, the law determinative of the property relation of the Stevensons,
married in 1909, would be the English law even if the marriage was celebrated in the Philippines,
both of them being foreigners. But, as correctly observed by the Tax Court, the pertinent English law
that allegedly vests in the decedent husband full ownership of the properties acquired during the
marriage has not been proven by petitioner. Except for a mere allegation in his answer, which is not
sufficient, the record is bereft of any evidence as to what English law says on the matter. In the
absence of proof, the Court is justified, therefore, in indulging in what Wharton calls "processual
presumption," in presuming that the law of England on this matter is the same as our law.4

Nor do we believe petitioner can make use of Article 16 of the New Civil Code (art. 10, old Civil
Code) to bolster his stand. A reading of Article 10 of the old Civil Code, which incidentally is the one
applicable, shows that it does not encompass or contemplate to govern the question of property
relation between spouses. Said article distinctly speaks of amount of successional rights and this
term, in speaks in our opinion, properly refers to the extent or amount of property that each heir is
legally entitled to inherit from the estate available for distribution. It needs to be pointed out that
the property relation of spouses, as distinguished from their successional rights, is governed
differently by the specific and express provisions of Title VI, Chapter I of our new Civil Code (Title III,
Chapter I of the old Civil Code.) We, therefore, find that the lower court correctly deducted the half of
the conjugal property in determining the hereditary estate left by the deceased Stevenson.
On the second issue, petitioner disputes the action of the Tax Court in the exempting the
respondents from paying inheritance tax on the 210,000 shares of stock in the Mindanao Mother
Lode Mines, Inc. in virtue of the reciprocity proviso of Section 122 of the National Internal Revenue
Code, in relation to Section 13851 of the California Revenue and Taxation Code, on the ground that:
(1) the said proviso of the California Revenue and Taxation Code has not been duly proven by the
respondents; (2) the reciprocity exemptions granted by section 122 of the National Internal Revenue
Code can only be availed of by residents of foreign countries and not of residents of a state in the
United States; and (3) there is no "total" reciprocity between the Philippines and the state of
California in that while the former exempts payment of both estate and inheritance taxes on
intangible personal properties, the latter only exempts the payment of inheritance tax..

To prove the pertinent California law, Attorney Allison Gibbs, counsel for herein respondents,
testified that as an active member of the California Bar since 1931, he is familiar with the 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 personal properties, the witness cited article 4,
section 13851 (a) and (b) of the California Internal and Revenue Code as published in Derring's
California Code, a publication of the Bancroft-Whitney Company inc. And as part of his testimony, a
full quotation of the cited section was offered in evidence as Exhibits "V-2" by the respondents.

It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are not
authorized to take judicial notice of them.5 Like any other fact, they must be alleged and proved.6

Section 41, Rule 123 of our Rules of Court prescribes the manner of proving foreign laws before our
tribunals. However, although we believe it desirable that these laws be proved in accordance with
said rule, we held in the case of Willamette Iron and Steel Works v. Muzzal, 61 Phil. 471, that "a
reading of sections 300 and 301 of our Code of Civil Procedure (now section 41, Rule 123) will
convince one that these sections do not exclude the presentation of other competent evidence to
prove the existence of a foreign law." In that case, we considered the testimony of an attorney-at-law
of San Francisco, California who quoted verbatim a section of California Civil Code and who stated
that the same was in force at the time the obligations were contracted, as sufficient evidence to
establish the existence of said law. In line with this view, we find no error, therefore, on the part of
the Tax Court in considering the pertinent California law as proved by respondents' witness.

We now take up the question of reciprocity in exemption from transfer or death taxes, between the
State of California and the Philippines.F

Section 122 of our National Internal Revenue Code, in pertinent part, provides:

... And, provided, further, That no tax shall be collected under this Title in respect of
intangible personal property (a) if the decedent at the time of his death was a resident of a
foreign country which at the time of his death did not impose a transfer of tax or death tax of
any character in respect of intangible personal property of citizens of the Philippines not
residing in that foreign country, or (b) if the laws of the foreign country of which the decedent
was a resident at the time of his death allow a similar exemption from transfer taxes or death
taxes of every character in respect of intangible personal property owned by citizens of the
Philippines not residing in that foreign country." (Emphasis supplied).

On the other hand, Section 13851 of the California Inheritance Tax Law, insofar as pertinent, reads:.

"SEC. 13851, Intangibles of nonresident: Conditions. Intangible personal property is exempt

from the tax imposed by this part if the decedent at the time of his death was a resident of a
territory or another State of the United States or of a foreign state or country which then
 imposed a legacy, succession, or death tax in respect to intangible personal property of its
own residents, but either:.

(a) Did not impose a legacy, succession, or death tax of any character in respect to
intangible personal property of residents of this State, or

(b) Had in its laws a reciprocal provision under which intangible personal property of a non-
resident was exempt from legacy, succession, or death taxes of every character if the
Territory or other State of the United States or foreign state or country in which the
nonresident resided allowed a similar exemption in respect to intangible personal property of
residents of the Territory or State of the United States or foreign state or country of residence
of the decedent." (Id.)

It is clear from both these quoted provisions that the reciprocity must be total, that is, with respect to
transfer or death taxes of any and every character, in the case of the Philippine law, and to legacy,
succession, or death taxes of any and every character, in the case of the California law. Therefore, if
any of the two states collects or imposes and does not exempt any transfer, death, legacy, or
succession tax of any character, the reciprocity does not work. This is the underlying principle of the
reciprocity clauses in both laws.

In the Philippines, upon the death of any citizen or resident, or non-resident with properties therein,
there are imposed upon his estate and its settlement, both an estate and an inheritance tax. Under
the laws of California, only inheritance tax is imposed. On the other hand, the Federal Internal
Revenue Code imposes an estate tax on non-residents not citizens of the United States,7 but does
not provide for any exemption on the basis of reciprocity. Applying these laws in the manner the
Court of Tax Appeals did in the instant case, we will have a situation where a Californian, who is
non-resident in the Philippines but has intangible personal properties here, will the subject to the
payment of an estate tax, although exempt from the payment of the inheritance tax. This being the
case, will a Filipino, non-resident of California, but with intangible personal properties there, be
entitled to the exemption clause of the California law, since the Californian has not been exempted
from every character of legacy, succession, or death tax because he is, under our law, under
obligation to pay an estate tax? Upon the other hand, if we exempt the Californian from paying the
estate tax, we do not thereby entitle a Filipino to be exempt from a similar estate tax in California
because under the Federal Law, which is equally enforceable in California he is bound to pay the
same, there being no reciprocity recognized in respect thereto. In both instances, the Filipino citizen
is always at a disadvantage. We do not believe that our legislature has intended such an unfair
situation to the detriment of our own government and people. We, therefore, find and declare that
the lower court erred in exempting the estate in question from payment of the inheritance tax.

We are not unaware of our ruling in the case of Collector of Internal Revenue vs. Lara (G.R. Nos. L-
9456 & L-9481, prom. January 6, 1958, 54 O.G. 2881) exempting the estate of the deceased Hugo
H. Miller from payment of the inheritance tax imposed by the Collector of Internal Revenue. It will be
noted, however, that the issue of reciprocity between the pertinent provisions of our tax law and that
of the State of California was not there squarely raised, and the ruling therein cannot control the
determination of the case at bar. Be that as it may, we now declare that in view of the express
provisions of both the Philippine and California laws that the exemption would apply only if the law of
the other grants an exemption from legacy, succession, or death taxes of every character, there
could not be partial reciprocity. It would have to be total or none at all.

With respect to the question of deduction or reduction in the amount of P4,000.00 based on the U.S.
Federal Estate Tax Law which is also being claimed by respondents, we uphold and adhere to our
ruling in the Lara case (supra) that the amount of $2,000.00 allowed under the Federal Estate Tax
Law is in the nature of a deduction and not of an exemption regarding which reciprocity cannot be
claimed under the provision of Section 122 of our National Internal Revenue Code. Nor is reciprocity
authorized under the Federal Law. .

On the issue of the correctness of the appraisal of the two parcels of land situated in Baguio City, it
is contended that their assessed values, as appearing in the tax rolls 6 months after the death of
Stevenson, ought to have been considered by petitioner as their fair market value, pursuant to
section 91 of the National Internal Revenue Code. It should be pointed out, however, that in
accordance with said proviso the properties are required to be appraised at their fair market value
and the assessed value thereof shall be considered as the fair market value only when evidence to
the contrary has not been shown. After all review of the record, we are satisfied that such evidence
exists to justify the valuation made by petitioner which was sustained by the tax court, for as the tax
court aptly observed:

"The two parcels of land containing 36,264 square meters were valued by the administrator
of the estate in the Estate and Inheritance tax returns filed by him at P43,500.00 which is the
assessed value of said properties. On the other hand, defendant appraised the same at
P52,200.00. It is of common knowledge, and this Court can take judicial notice of it, that
assessments for real estate taxation purposes are very much lower than the true and fair
market value of the properties at a given time and place. In fact one year after decedent's
death or in 1952 the said properties were sold for a price of P72,000.00 and there is no
showing that special or extraordinary circumstances caused the sudden increase from the
price of P43,500.00, if we were to accept this value as a fair and reasonable one as of 1951.
Even more, the counsel for plaintiffs himself admitted in open court that he was willing to
purchase the said properties at P2.00 per square meter. In the light of these facts we believe
and therefore hold that the valuation of P52,200.00 of the real estate in Baguio made by
defendant is fair, reasonable and justified in the premises." (Decision, p. 19).

In respect to the valuation of the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc.,
(a domestic corporation), respondents contend that their value should be fixed on the basis of the
market quotation obtaining at the San Francisco (California) Stock Exchange, on the theory that the
certificates of stocks were then held in that place and registered with the said stock exchange. We
cannot agree with respondents' argument. The situs of the shares of stock, for purposes of taxation,
being located here in the Philippines, as respondents themselves concede and considering that they
are sought to be taxed in this jurisdiction, consistent with the exercise of our government's taxing
authority, their fair market value should be taxed on the basis of the price prevailing in our country.

Upon the other hand, we find merit in respondents' other contention that the said shares of stock
commanded a lesser value at the Manila Stock Exchange six months after the death of Stevenson.
Through Atty. Allison Gibbs, respondents have shown that at that time a share of said stock was bid
for at only P.325 (p. 103, t.s.n.). Significantly, the testimony of Atty. Gibbs in this respect has never
been questioned nor refuted by petitioner either before this court or in the court below. In the
absence of evidence to the contrary, we are, therefore, constrained to reverse the Tax Court on this
point and to hold that the value of a share in the said mining company on August 22, 1951 in the
Philippine market was P.325 as claimed by respondents..

It should be noted that the petitioner and the Tax Court valued each share of stock of P.38 on the
basis of the declaration made by the estate in its preliminary return. Patently, this should not have
been the case, in view of the fact that the ancillary administrator had reserved and availed of his
legal right to have the properties of the estate declared at their fair market value as of six months
from the time the decedent died..
On the fifth issue, we shall consider the various deductions, from the allowance or disallowance of
which by the Tax Court, both petitioner and respondents have appealed..

Petitioner, in this regard, contends that no evidence of record exists to support the allowance of the
sum of P8,604.39 for the following expenses:.

1) Administrator's fee P1,204.34

2) Attorney's fee 6,000.00
3) Judicial and Administrative expenses 2,052.55
Total Deductions P8,604.39

An examination of the record discloses, however, that the foregoing items were considered
deductible by the Tax Court on the basis of their approval by the probate court to which said
expenses, we may presume, had also been presented for consideration. It is to be supposed that the
probate court would not have approved said items were they not supported by evidence presented
by the estate. In allowing the items in question, the Tax Court had before it the pertinent order of the
probate court which was submitted in evidence by respondents. (Exh. "AA-2", p. 100, record). As the
Tax Court said, it found no basis for departing from the findings of the probate court, as it must have
been satisfied that those expenses were actually incurred. Under the circumstances, we see no
ground to reverse this finding of fact which, under Republic Act of California National Association,
which it would appear, that while still living, Walter G. Stevenson obtained we are not inclined to
pass upon the claim of respondents in respect to the additional amount of P86.52 for funeral
expenses which was disapproved by the court a quo for lack of evidence.

In connection with the deduction of P652.50 representing the amount of realty taxes paid in 1951 on
the decedent's two parcels of land in Baguio City, which respondents claim was disallowed by the
Tax Court, we find that this claim has in fact been allowed. What happened here, which a careful
review of the record will reveal, was that the Tax Court, in itemizing the liabilities of the estate, viz:

1) Administrator's fee P1,204.34

2) Attorney's fee 6,000.00
3) Judicial and Administration expenses as of August
9, 1952 2,052.55
Total P9,256.89

added the P652.50 for realty taxes as a liability of the estate, to the P1,400.05 for judicial and
administration expenses approved by the court, making a total of P2,052.55, exactly the same figure
which was arrived at by the Tax Court for judicial and administration expenses. Hence, the
difference between the total of P9,256.98 allowed by the Tax Court as deductions, and the
P8,604.39 as found by the probate court, which is P652.50, the same amount allowed for realty
taxes. An evident oversight has involuntarily been made in omitting the P2,000.00 for funeral
expenses in the final computation. This amount has been expressly allowed by the lower court and
there is no reason why it should not be. .

We come now to the other claim of respondents that pursuant to section 89(b) (1) in relation to
section 89(a) (1) (E) and section 89(d), National Internal Revenue Code, the amount of P10,022.47
should have been allowed the estate as a deduction, because it represented an indebtedness of the
decedent incurred during his lifetime. In support thereof, they offered in evidence a duly certified
claim, presented to the probate court in California by the Bank of California National Association,
which it would appear, that while still living, Walter G. Stevenson obtained a loan of $5,000.00
secured by pledge on 140,000 of his shares of stock in the Mindanao Mother Lode Mines, Inc.
(Exhs. "Q-Q4", pp. 53-59, record). The Tax Court disallowed this item on the ground that the local
probate court had not approved the same as a valid claim against the estate and because it
constituted an indebtedness in respect to intangible personal property which the Tax Court held to
be exempt from inheritance tax.

For two reasons, we uphold the action of the lower court in disallowing the deduction.

Firstly, we believe that the approval of the Philippine probate court of this particular indebtedness of
the decedent is necessary. This is so although the same, it is averred has been already admitted
and approved by the corresponding probate court in California, situs of the principal or domiciliary
administration. It is true that we have here in the Philippines only an ancillary administration in this
case, but, it has been held, the distinction between domiciliary or principal administration and
ancillary administration serves only to distinguish one administration from the other, for the two
proceedings are separate and independent.8 The reason for the ancillary administration is that, a
grant of administration does not ex proprio vigore, have any effect beyond the limits of the country in
which it was granted. Hence, we have the requirement that before a will duly probated outside of the
Philippines can have effect here, it must first be proved and allowed before our courts, in much the
same manner as wills originally presented for allowance therein.9 And the estate shall be
administered under letters testamentary, or letters of administration granted by the court, and
disposed of according to the will as probated, after payment of just debts and expenses of
administration.10 In other words, there is a regular administration under the control of the court,
where claims must be presented and approved, and expenses of administration allowed before
deductions from the estate can be authorized. Otherwise, we would have the actuations of our own
probate court, in the settlement and distribution of the estate situated here, subject to the
proceedings before the foreign court over which our courts have no control. We do not believe such
a procedure is countenanced or contemplated in the Rules of Court.

Another reason for the disallowance of this indebtedness as a deduction, springs from the provisions
of Section 89, letter (d), number (1), of the National Internal Revenue Code which reads:

(d) Miscellaneous provisions — (1) No deductions shall be allowed in the case of a non-
resident not a citizen of the Philippines unless the executor, administrator or anyone of the
heirs, as the case may be, includes in the return required to be filed under section ninety-
three the value at the time of his death of that part of the gross estate of the non-resident not
situated in the Philippines."

In the case at bar, no such statement of the gross estate of the non-resident Stevenson not situated
in the Philippines appears in the three returns submitted to the court or to the office of the petitioner
Collector of Internal Revenue. The purpose of this requirement is to enable the revenue officer to
determine how much of the indebtedness may be allowed to be deducted, pursuant to (b), number
(1) of the same section 89 of the Internal Revenue Code which provides:

(b) Deductions allowed to non-resident estates. — In the case of a non-resident not a citizen
of the Philippines, by deducting from the value of that part of his gross estate which at the
time of his death is situated in the Philippines —

(1) Expenses, losses, indebtedness, and taxes. — That proportion of the deductions
specified in paragraph (1) of subjection (a) of this section11 which the value of such part
bears the value of his entire gross estate wherever situated;"
In other words, the allowable deduction is only to the extent of the portion of the indebtedness which
is equivalent to the proportion that the estate in the Philippines bears to the total estate wherever
situated. Stated differently, if the properties in the Philippines constitute but 1/5 of the entire assets
wherever situated, then only 1/5 of the indebtedness may be deducted. But since, as heretofore
adverted to, there is no statement of the value of the estate situated outside the Philippines, no part
of the indebtedness can be allowed to be deducted, pursuant to Section 89, letter (d), number (1) of
the Internal Revenue Code.

For the reasons thus stated, we affirm the ruling of the lower court disallowing the deduction of the
alleged indebtedness in the sum of P10,022.47.

In recapitulation, we hold and declare that:

(a) only the one-half (1/2) share of the decedent Stevenson in the conjugal partnership
property constitutes his hereditary estate subject to the estate and inheritance taxes;

(b) the intangible personal property is not exempt from inheritance tax, there existing no
complete total reciprocity as required in section 122 of the National Internal Revenue Code,
nor is the decedent's estate entitled to an exemption of P4,000.00 in the computation of the
estate tax;

(c) for the purpose of the estate and inheritance taxes, the 210,000 shares of stock in the
Mindanao Mother Lode Mines, Inc. are to be appraised at P0.325 per share; and

(d) the P2,000.00 for funeral expenses should be deducted in the determination of the net
asset of the deceased Stevenson.

In all other respects, the decision of the Court of Tax Appeals is affirmed.

Respondent's claim for interest on the amount allegedly overpaid, if any actually results after a
recomputation on the basis of this decision is hereby denied in line with our recent decision
in Collector of Internal Revenue v. St. Paul's Hospital (G.R. No. L-12127, May 29, 1959) wherein we
held that, "in the absence of a statutory provision clearly or expressly directing or authorizing such
payment, and none has been cited by respondents, the National Government cannot be required to
pay interest."

WHEREFORE, as modified in the manner heretofore indicated, the judgment of the lower court is
hereby affirmed in all other respects not inconsistent herewith. No costs. So ordered.

Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Gutierrez David,
Paredes and Dizon, JJ., concur.

EN BANC

[G.R. No. L-2248. January 23, 1950.]

In the matter of the petition of Vicente Rosal Pardo to be admitted a citizen of

the Philippines. VICENTE ROSAL PARDO, Petitioner-Appellee, v. THE REPUBLIC
OF THE PHILIPPINES, Oppositor-Appellant.

First Assistant Solicitor General Roberto A. Gianzon and Solicitor Florencio

 Villamor for Appellant.

J. Perez Cardenas for Appellee.

SYLLABUS

1. CITIZENSHIP; LANGUAGE REQUIREMENTS; THIRTY-FOUR YEAR’S RESIDENCE IN

THE PHILIPPINES. — Thirty-four years’ residence in the Philippines and mingling and
dealing by reason of work with people who use Tagalog in their daily intercourse lends
credence to applicant’s claim that he has acquired a good working knowledge of that
language.

2. EVIDENCE; JUDICIAL NOTICE; CERTIFICATION OF SPANISH CONSUL ABOUT

SPANISH LAWS. — That Filipinos are eligible to Spanish citizenship in Spain, is a matter
within judicial notice. Moreover, authentication or certification of the nationality laws of
Spain by the Consul General of Spain in the Philippines is competent proof of Spanish
laws to that effect.

3. CITIZENSHIP; NATURALIZATION; WHEN STRICT OBSERVANCE OF RULES OF COURT

NOT OBLIGATORY. — By reason of the provisions of Rule 132 of the Rules of Court,
literal adherence to the latter which include rules of evidence, is not obligatory in a
proceeding in naturalization. While said proceeding under the Philippine law is judicial in
character, and strict compliance with the process prescribed by statute, if there were
one, would be essential, yet when, as here, no specific procedure is indicated in the
premises, it is only necessary that the merits of the petition be passed on and a
decision reached on a fair consideration of the evidence on satisfactory proof.

4. ID.; ID.; EVIDENCE OF FOREIGN LAW ON RECIPROCITY. — Evidence of the law of a

foreign country an reciprocity regarding the acquisition of citizenship, although not
meeting the prescribed rule of practice by section 41 of rule 123, may be allowed and
used as basis for a favorable action if, in the light of all the circumstances, the court is
satisfied of the authenticity if the written proof offered.

DECISION

TUASON, J.:

Vicente Rosal Pardo, a Spanish citizen born in Spain in 1895 and residing in the
Philippines since 1905, where he married a Filipino woman and where he is at present
employed, in Manila, with an annual salary of P4,800, has been adjudged by the Court
of First Instance of Manila entitled to become a Filipino citizen. That the appellee is
unable to speak and write any of the principal Filipino languages is the first ground of
appeal by the Government.

The applicant testified that he knows enough Tagalog to be understood in that

language. Lino Gutierrez, a respectable citizen who has intimately known the applicant
for 27 years, having had business relations with him, confirmed the applicant’s
testimony. And the trial judge, who has heard the applicant translate into Tagalog, "He
venido residiendo en Filipinas por el periodo de 36 años," appears to have been
satisfied with the correctness of the translation (which was not transcribed.) The fact
that the applicant arrived in the Philippines when he was only 10 years old and has
lived here for 44 years continuously except for a few months’ visit in Spain, mingling
and dealing by reason of his work with people who use Tagalog in their daily
intercourse, lends credence to his testimony that he has acquired a good working
knowledge of that language. At one time, according to the evidence he owned or
managed two stores successively on the Escolta, and lately he has been a foreman and
warehouseman at Soriano & Co.

The portion of the applicant’s testimony which is copied in appellant’s brief should not
be taken isolatedly and at face value. This testimony is obviously an extravagant
understatement of the reality, typifying an extreme modesty which is thought by some
to be a virtue. We do not believe that this statement represents appellant’s sincere
conviction of its literal meaning.

The other assignment of error goes to the sufficiency of the evidence on whether the
laws of Spain grant Filipinos the right to become naturalized citizens of that country.
The applicant introduced a certificate signed by the Consul General of Spain in the
Philippines, stating that in accordance with articles 17 and 25 of the Spanish Civil Code,
among other Spanish legislation, Filipinos are eligible to Spanish citizenship in Spain.
Article 17 provides that foreigners who have obtained a certificate of naturalization and
those who have not obtained such certificate but have acquired domicile in any town of
the Monarchy are Spaniards. No discrimination being made in these provisions, they
apply to persons of any nationality.

As the Spanish Civil Code has been and still is "the basic code in force in the
Philippines," articles 17 et seq. thereof may be regarded as matters known to judges of
the Philippines by reason of their judicial functions and may be judicially recognized by
them without the introduction of proof. (Section 5, Rule 123.) Moreover, in a number of
decisions mere authentication of the Chinese Naturalization Law by the Chinese
Consulate General of Manila has been held to be competent proof of that law. (Yap v.
Solicitor General, L-1602, 46 Off. Gaz. [Supp. to No. 1], p. 250; 1 Leelin v. Republic of
the Philippines, L-1761; 2 Yee Bo Mann v. Republic of the Philippines, L-1606, 46 Off.
Gaz. [Supp. to No. 11], 201; 3 Jose Go alias Joseph Gotianuy v. Anti-Chinese League of
the Philippines and Felipe Fernandez, L-1563.) 4

The judgment of the lower court is affirmed without costs.

Moran, C.J., Ozaeta, Paras, Pablo, Bengzon, Padilla, Montemayor, Reyes and
Torres, JJ., concur.

RESOLUTION ON MOTION FOR RECONSIDERATION

April 28, 1950 - TUASON, J.:

This case is again before the court, this time on a motion for reconsideration.
In our decision we say: "As the Spanish Civil Code has been and still is ’the basic code
in force in the Philippines,’ articles 17 et seq. thereof may be regarded as matters
known to judges of the Philippines by reason of their judicial functions and may be
judicially recognized by them without the introduction of proof." (Section 5, Rule 123.)

The court is supposed to know that the Civil Code is the Code of Spain, and this judicial
knowledge embraces all its provisions, including those which have ceased to be in
operation in the Philippines. This court has said that it is not, by reason of an opinion
expressed by an expert witness, precluded from advising itself as to the common law of
England. (Bryan v. Eastern and Western Asso. Co., 28 Phil., 310.) If the court may take
cognizance of the common law of England, there is perhaps at least as much reason
that it may do so of the Spanish citizenship law, which was our own citizenship law until
Spain relinquished its sovereignty over the Philippines and which is a part of the code
that is still the major branch of law of our country although the said part is no longer
applicable here.

In the matter of the application of Rafael Roa Yrostoza for naturalization, L-1394 (46
Off. Gaz. [Supp. to No. 11], 179), 1 we said that "There was no proof that Spain had a
law which grants Filipinos the right to become naturalized citizens of that country," and
returned the case to the court of origin with instruction to reopen the hearing and give
the parties new opportunity to establish or disprove the existence of such law. We have
to confess that the remand for further proceeding was unnecessary. Oversight is the
explanation, made possible by the failure of either party to direct our attention to the
articles of the Civil Code of which we have been, in the present case, apprised by the
applicant.

In the decision sought to be reconsidered we also say that in a number of decisions,

which we cite, mere authentication of the Chinese naturalization law by the Chinese
Consulate General in Manila has been taken as competent proof of that law. The
Solicitor General takes exception to this passage, in the following observation: jgc:chanrobles. com.ph

"With regard to the second question under consideration as to whether the certification
of the supposed naturalization laws of Spain made by the Spanish Consul General
constitutes competent proof of that law, this court cites in support of its opinion the
cases of: Jose Leelin v. Republic of the Philippines, 1 G.R. No. L-1761; Bienvenido Yap
v. The Solicitor General 2 G.R. No. L-1602; Yee Boo Mann v. Republic of the Philippines,
3 G.R. No. L-1606; and Jose Go alias Joseph Gotianuy v. Anti-Chinese League of the
Philippines and Felipe Fernandez, 4 G.R. No. L-1563. We have carefully gone over these
cases and we beg leave to point out that in each of them this court did not rule that the
mere authentication of the Chinese Naturalization Law by the Chinese Consulate
General of Manila constitute competent proof of that law, but that the question as to
whether or not the copy of the Chinese Nationality Law presented in said cases were
properly authenticated and admissible in evidence to prove reciprocity, as required in
section 4 (h) of the Revised Naturalization Law, has become academic because of the
admission made by counsel for the oppositor (Republic of the Philippines) to the effect
that in another case, there has been presented a copy of the naturalization laws of
China duly authenticated in accordance with the Rules of Court." cralaw virtua 1aw lib rary

The decisions referred to seem to have been misread. In Yap v. Solicitor General, L-
1602 (46 Off. Gaz. [Supp. to No. 1], p. 250), 2 the document admitted, Exhibit E,
purported to be "a copy of the Chinese law of citizenship, where it appears that Filipinos
can acquire Chinese citizenship by naturalization." There was nothing in that decision
which would show that the certificate or authentication was made by a Philippine
diplomatic or consular representative in China. In Jose Leelin v. Republic of the
Philippines, G.R. No. L- 1761, 1 we said that "in previous cases, a translation of the
Chinese Naturalization Law, made and certified to be correct by the Chinese Consulate
General in Manila, was admitted and considered sufficient evidence to establish that the
laws of China permit Filipinos to become citizens of that country." In Yee Boo Mann v.
Republic of the Philippines, L-1606 (46 Off. Gaz. [Supp. to No. 11], 201), 3 the
petitioner introduced in evidence a translation of the Chinese Naturalization Law,
certified to be correct by the Chinese Consul General in Manila. The court held in that
case that the objection to the evidence "is of no moment, since this court has already
accepted it as fact in previous naturalization cases that the laws of China permit
Filipinos to naturalize in that country." And the court disposed of Lock Ben Ping v.
Republic of the Philippines, L-1675 (47 Off. Gaz., 176), 1 on the strength of the
pronouncement, just quoted, in the Yee Boo Mann decision.

If it be true, as the Solicitor General notes, that in the Yap case the ratio decidendi was
that "there has been presented a copy of the Naturalization Laws of China duly
authenticated in accordance with the Rules of Court," then the decision recognized as a
fact the existence of a law of China under which Filipinos may be naturalized. Of this
fact the court properly assumed judicial knowledge in the cases that came up before it
soon after. 2

We realize that a copy of a foreign law certified only by the local consul of the
applicant’s country does not conform to the requirement concerning the certification
and authentication of such law (sec. 41, Rule 123). But the case at bar and the cases
cited therein as precedents are not governed by the Rules of Court. Rule 132, entitled
"Applicability of the Rules," provides that "These rules shall not apply to land
registration, cadastral and election cases, naturalization and insolvency proceedings,
and other cases not herein provided for, except by analogy or in a suppletory character
and whenever practicable and convenient." By reason of this provision, literal
adherence to the Rules of Court, which include rules of evidence, is not obligatory in a
proceeding like that under consideration. While naturalization proceeding under the
Philippine law is judicial in character, and strict compliance with the process prescribed
by statute, if there were one, would be essential, yet when, as here, no specific
procedure is indicated in the premises, it is only necessary that the merits of the
petition be passed on and a decision reached on a fair consideration of the evidence on
satisfactory proof. Accordingly, evidence of the law of a foreign country on reciprocity
regarding the acquisition of citizenship, although not meeting the prescribed rule of
practice by section 41 of Rule 123, may be allowed and used as basis for a favorable
action if, in the light of all the circumstances, the court is satisfied of the authenticity of
the written proof offered.

The motion for reconsideration is therefore denied.

G.R. Nos. L-27860 and L-27896 March 29, 1974

PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, Administrator of the Testate Estate of
Charles Newton Hodges (Sp. Proc. No. 1672 of the Court of First Instance of Iloilo), petitioner,
vs.
THE HONORABLE VENICIO ESCOLIN, Presiding Judge of the Court of First Instance of Iloilo,
Branch II, and AVELINA A. MAGNO, respondents.

G.R. Nos. L-27936 & L-27937 March 29, 1974

TESTATE ESTATE OF THE LATE LINNIE JANE HODGES (Sp. Proc. No. 1307). TESTATE
ESTATE OF THE LATE CHARLES NEWTON HODGES (Sp. Proc. No. 1672). PHILIPPINE
COMMERCIAL AND INDUSTRIAL BANK, administrator-appellant,
vs.
LORENZO CARLES, JOSE PABLICO, ALFREDO CATEDRAL, SALVADOR GUZMAN,
BELCESAR CAUSING, FLORENIA BARRIDO, PURIFICACION CORONADO, GRACIANO
LUCERO, ARITEO THOMAS JAMIR, MELQUIADES BATISANAN, PEPITO IYULORES,
ESPERIDION PARTISALA, WINIFREDO ESPADA, ROSARIO ALINGASA, ADELFA
PREMAYLON, SANTIAGO PACAONSIS, and AVELINA A. MAGNO, the last as Administratrix in
Sp. Proc. No. 1307, appellees, WESTERN INSTITUTE OF TECHNOLOGY, INC., movant-
appellee.

San Juan, Africa, Gonzales and San Agustin for Philippine Commercial and Industrial Bank.

Manglapus Law Office, Antonio Law Office and Rizal R. Quimpo for private respondents and
appellees Avelina A. Magno, etc., et al.

BARREDO, J.:p

Certiorari and prohibition with preliminary injunction; certiorari to "declare all acts of the respondent
court in the Testate Estate of Linnie Jane Hodges (Sp. Proc. No. 1307 of the Court of First Instance
of Iloilo) subsequent to the order of December 14, 1957 as null and void for having been issued
without jurisdiction"; prohibition to enjoin the respondent court from allowing, tolerating, sanctioning,
or abetting private respondent Avelina A. Magno to perform or do any acts of administration, such as
those enumerated in the petition, and from exercising any authority or power as Regular
Administratrix of above-named Testate Estate, by entertaining manifestations, motion and pleadings
filed by her and acting on them, and also to enjoin said court from allowing said private respondent
to interfere, meddle or take part in any manner in the administration of the Testate Estate of Charles
Newton Hodges (Sp. Proc. No. 1672 of the same court and branch); with prayer for preliminary
injunction, which was issued by this Court on August 8, 1967 upon a bond of P5,000; the petition
being particularly directed against the orders of the respondent court of October 12, 1966 denying
petitioner's motion of April 22, 1966 and its order of July 18, 1967 denying the motion for
reconsideration of said order.

Related to and involving basically the same main issue as the foregoing petition, thirty-three (33)
appeals from different orders of the same respondent court approving or otherwise sanctioning the
acts of administration of the respondent Magno on behalf of the testate Estate of Mrs. Hodges.

THE FACTS
On May 23, 1957, Linnie Jane Hodges died in Iloilo City leaving a will executed on November 22,
1952 pertinently providing as follows:

FIRST: I direct that all my just debts and funeral expenses be first paid out of my
estate.

SECOND: I give, devise and bequeath all of the rest, residue and remainder of my
estate, both personal and real, wherever situated, or located, to my beloved
husband, Charles Newton Hodges, to have and to hold unto him, my said husband,
during his natural lifetime.

THIRD: I desire, direct and provide that my husband, Charles Newton Hodges, shall
have the right to manage, control, use and enjoy said estate during his lifetime, and
he is hereby given the right to make any changes in the physical properties of said
estate, by sale or any part thereof which he may think best, and the purchase of any
other or additional property as he may think best; to execute conveyances with or
without general or special warranty, conveying in fee simple or for any other term or
time, any property which he may deem proper to dispose of; to lease any of the real
property for oil, gas and/or other minerals, and all such deeds or leases shall pass
the absolute fee simple title to the interest so conveyed in such property as he may
elect to sell. All rents, emoluments and income from said estate shall belong to him,
and he is further authorized to use any part of the principal of said estate as he may
need or desire. It is provided herein, however, that he shall not sell or otherwise
dispose of any of the improved property now owned by us located at, in or near the
City of Lubbock, Texas, but he shall have the full right to lease, manage and enjoy
the same during his lifetime, above provided. He shall have the right to subdivide any
farm land and sell lots therein. and may sell unimproved town lots.

FOURTH: At the death of my said husband, Charles Newton Hodges, I give, devise
and bequeath all of the rest, residue and remainder of my estate, both real and
personal, wherever situated or located, to be equally divided among my brothers and
sisters, share and share alike, namely:

Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Saddie Rascoe, Era
Roman and Nimroy Higdon.

FIFTH: In case of the death of any of my brothers and/or sisters named in item
Fourth, above, prior to the death of my husband, Charles Newton Hodges, then it is
my will and bequest that the heirs of such deceased brother or sister shall take jointly
the share which would have gone to such brother or sister had she or he survived.

SIXTH: I nominate and appoint my said husband, Charles Newton Hodges, to be

executor of this, my last will and testament, and direct that no bond or other security
be required of him as such executor.

SEVENTH: It is my will and bequest that no action be had in the probate court, in the
administration of my estate, other than that necessary to prove and record this will
and to return an inventory and appraisement of my estate and list of claims. (Pp. 2-4,
Petition.)
This will was subsequently probated in aforementioned Special Proceedings No. 1307 of respondent
court on June 28, 1957, with the widower Charles Newton Hodges being appointed as Executor,
pursuant to the provisions thereof.

Previously, on May 27, 1957, the said widower (hereafter to be referred to as Hodges) had been
appointed Special Administrator, in which capacity he filed a motion on the same date as follows:

URGENT EX-PARTE MOTION TO ALLOW OR AUTHORIZE PETITIONER TO

CONTINUE THE BUSINESS IN WHICH HE WAS ENGAGED AND TO PERFORM
ACTS WHICH HE HAD BEEN DOING WHILE DECEASED WAS LIVING

Come petitioner in the above-entitled special proceedings, thru his undersigned attorneys, to the
Hon. Court, most respectfully states:

1. — That Linnie Jane Hodges died leaving her last will and testament, a copy of
which is attached to the petition for probate of the same.

2. — That in said last will and testament herein petitioner Charles Newton Hodges is
directed to have the right to manage, control use and enjoy the estate of deceased
Linnie Jane Hodges, in the same way, a provision was placed in paragraph two, the
following: "I give, devise and bequeath all of the rest, residue and remainder of my
estate, to my beloved husband, Charles Newton Hodges, to have and (to) hold unto
him, my said husband, during his natural lifetime."

3. — That during the lifetime of Linnie Jane Hodges, herein petitioner was engaged
in the business of buying and selling personal and real properties, and do such acts
which petitioner may think best.

4. — That deceased Linnie Jane Hodges died leaving no descendants or

ascendants, except brothers and sisters and herein petitioner as executor surviving
spouse, to inherit the properties of the decedent.

5. — That the present motion is submitted in order not to paralyze the business of
petitioner and the deceased, especially in the purchase and sale of properties. That
proper accounting will be had also in all these transactions.

WHEREFORE, it is most respectfully prayed that, petitioner C. N. Hodges (Charles

Newton Hodges) be allowed or authorized to continue the business in which he was
engaged and to perform acts which he had been doing while deceased Linnie Jane
Hodges was living.

City of Iloilo, May 27, 1957. (Annex "D", Petition.)

which the respondent court immediately granted in the following order:

It appearing in the urgent ex-parte motion filed by petitioner C. N. Hodges, that the
business in which said petitioner and the deceased were engaged will be paralyzed,
unless and until the Executor is named and appointed by the Court, the said
petitioner is allowed or authorized to continue the business in which he was engaged
and to perform acts which he had been doing while the deceased was living.
 SO ORDERED.

City of Iloilo May 27, 1957. (Annex "E", Petition.)

Under date of December 11, 1957, Hodges filed as such Executor another motion thus:

MOTION TO APPROVE ALL SALES, CONVEYANCES, LEASES, MORTGAGES

THAT THE EXECUTOR HAD MADE FURTHER AND SUBSEQUENT
TRANSACTIONS WHICH THE EXECUTOR MAY DO IN ACCORDANCE WITH THE
LAST WISH OF THE DECEASED LINNIE JANE HODGES.

Comes the Executor in the above-entitled proceedings, thru his undersigned

attorney, to the Hon. Court, most respectfully states:

1. — That according to the last will and testament of the deceased Linnie Jane
Hodges, the executor as the surviving spouse and legatee named in the will of the
deceased; has the right to dispose of all the properties left by the deceased, portion
of which is quoted as follows:

Second: I give, devise and bequeath all of the rest, residue and remainder of my
estate, both personal and real, wherever situated, or located, to my beloved
husband, Charles Newton Hodges, to have and to hold unto him, my said husband,
during his natural lifetime.

Third: I desire, direct and provide that my husband, Charles Newton Hodges, shall
have the right to manage, control, use and enjoy said estate during his lifetime, and
he is hereby given the right to make any changes in the physical properties of said
estate, by sale or any part thereof which he may think best, and the purchase of any
other or additional property as he may think best; to execute conveyances with or
without general or special warranty, conveying in fee simple or for any other term or
time, any property which he may deem proper to dispose of; to lease any of the real
property for oil, gas and/or other minerals, and all such deeds or leases shall pass
the absolute fee simple title to the interest so conveyed in such property as he may
elect to sell. All rents, emoluments and income from said estate shall belong to him,
and he is further authorized to use any part of the principal of said estate as he may
need or desire. ...

2. — That herein Executor, is not only part owner of the properties left as conjugal,
but also, the successor to all the properties left by the deceased Linnie Jane Hodges.
That during the lifetime of herein Executor, as Legatee has the right to sell, convey,
lease or dispose of the properties in the Philippines. That inasmuch as C.N. Hodges
was and is engaged in the buy and sell of real and personal properties, even before
the death of Linnie Jane Hodges, a motion to authorize said C.N. Hodges was filed in
Court, to allow him to continue in the business of buy and sell, which motion was
favorably granted by the Honorable Court.

3. — That since the death of Linnie Jane Hodges, Mr. C.N. Hodges had been buying
and selling real and personal properties, in accordance with the wishes of the late
Linnie Jane Hodges.
 4. — That the Register of Deeds for Iloilo, had required of late the herein Executor to
have all the sales, leases, conveyances or mortgages made by him, approved by the
Hon. Court.

5. — That it is respectfully requested, all the sales, conveyances leases and

mortgages executed by the Executor, be approved by the Hon. Court. and
subsequent sales conveyances, leases and mortgages in compliances with the
wishes of the late Linnie Jane Hodges, and within the scope of the terms of the last
will and testament, also be approved;

6. — That the Executor is under obligation to submit his yearly accounts, and the
properties conveyed can also be accounted for, especially the amounts received.

WHEREFORE, it is most respectfully prayed that, all the sales, conveyances, leases,
and mortgages executed by the Executor, be approved by the Hon. Court, and also
the subsequent sales, conveyances, leases, and mortgages in consonance with the
wishes of the deceased contained in her last will and testament, be with authorization
and approval of the Hon. Court.

City of Iloilo, December 11, 1967.

(Annex "G", Petition.)

which again was promptly granted by the respondent court on December 14, 1957 as follows:

ORDER

As prayed for by Attorney Gellada, counsel for the Executor for the reasons stated in
his motion dated December 11, 1957, which the Court considers well taken all the
sales, conveyances, leases and mortgages of all properties left by the deceased
Linnie Jane Hodges executed by the Executor Charles N. Hodges are hereby
APPROVED. The said Executor is further authorized to execute subsequent sales,
conveyances, leases and mortgages of the properties left by the said deceased
Linnie Jane Hodges in consonance with the wishes conveyed in the last will and
testament of the latter.

So ordered.

Iloilo City. December 14, 1957.

(Annex "H", Petition.)

On April 14, 1959, in submitting his first statement of account as Executor for approval, Hodges
alleged:

Pursuant to the provisions of the Rules of Court, herein executor of the deceased,
renders the following account of his administration covering the period from January
1, 1958 to December 31, 1958, which account may be found in detail in the individual
income tax return filed for the estate of deceased Linnie Jane Hodges, to wit:
 That a certified public accountant has examined the statement of net worth of the
estate of Linnie Jane Hodges, the assets and liabilities, as well as the income and
expenses, copy of which is hereto attached and made integral part of this statement
of account as Annex "A".

IN VIEW OF THE FOREGOING, it is most respectfully prayed that, the statement of

net worth of the estate of Linnie Jane Hodges, the assets and liabilities, income and
expenses as shown in the individual income tax return for the estate of the deceased
and marked as Annex "A", be approved by the Honorable Court, as substantial
compliance with the requirements of the Rules of Court.

That no person interested in the Philippines of the time and place of examining the
herein accounts be given notice, as herein executor is the only devisee or legatee of
the deceased, in accordance with the last will and testament already probated by the
Honorable court.

City of Iloilo April 14, 1959.

(Annex "I", Petition.)

The respondent court approved this statement of account on April 21, 1959 in its order worded thus:

Upon petition of Atty. Gellada, in representation of the Executor, the statement of net
worth of the estate of Linnie Jane Hodges, assets and liabilities, income and
expenses as shown in the individual income tax return for the estate of the deceased
and marked as Annex "A" is approved.

SO ORDERED.

City of Iloilo April 21, 1959.

(Annex "J", Petition.)

His accounts for the periods January 1, 1959 to December 31, 1959 and January 1, 1960 to
December 31, 1960 were submitted likewise accompanied by allegations identical mutatis
mutandis to those of April 14, 1959, quoted above; and the respective orders approving the same,
dated July 30, 1960 and May 2, 1961, were substantially identical to the above-quoted order of April
21, 1959. In connection with the statements of account just mentioned, the following assertions
related thereto made by respondent-appellee Magno in her brief do not appear from all indications
discernible in the record to be disputable:

Under date of April 14, 1959, C.N. Hodges filed his first "Account by the Executor" of
the estate of Linnie Jane Hodges. In the "Statement of Networth of Mr. C.N. Hodges
and the Estate of Linnie Jane Hodges" as of December 31, 1958 annexed thereto,
C.N. Hodges reported that the combined conjugal estate earned a net income of
P328,402.62, divided evenly between him and the estate of Linnie Jane Hodges.
Pursuant to this, he filed an "individual income tax return" for calendar year 1958 on
the estate of Linnie Jane Hodges reporting, under oath, the said estate as having
earned income of P164,201.31, exactly one-half of the net income of his combined
personal assets and that of the estate of Linnie Jane Hodges. (p. 91, Appellee's
Brief.)
 xxx xxx xxx

Under date of July 21, 1960, C.N. Hodges filed his second "Annual Statement of
Account by the Executor" of the estate of Linnie Jane Hodges. In the "Statement of
Networth of Mr. C.N. Hodges and the Estate of Linnie Jane Hodges" as of December
31, 1959 annexed thereto, C.N. Hodges reported that the combined conjugal estate
earned a net income of P270,623.32, divided evenly between him and the estate of
Linnie Jane Hodges. Pursuant to this, he filed an "individual income tax return" for
calendar year 1959 on the estate of Linnie Jane Hodges reporting, under oath, the
said estate as having earned income of P135,311.66, exactly one-half of the net
income of his combined personal assets and that of the estate of Linnie Jane
Hodges. (pp. 91-92. Appellee's Brief.)

xxx xxx xxx

Under date of April 20, 1961, C.N. Hodges filed his third "Annual Statement of
Account by the Executor for the Year 1960" of the estate of Linnie Jane Hodges. In
the "Statement of Net Worth of Mr. C.N. Hodges and the Estate of Linnie Jane
Hodges" as of December 31, 1960 annexed thereto, C.N. Hodges reported that the
combined conjugal estate earned a net income of P314,857.94, divided evenly
between him and the estate of Linnie Jane Hodges. Pursuant to this, he filed an
"individual income tax return" for calendar year 1960 on the estate of Linnie Jane
Hodges reporting, under oath, the said estate as having earned income of
P157,428.97, exactly one-half of the net income of his combined personal assets and
that of the estate of Linnie Jane Hodges. (Pp. 92-93, Appellee's Brief.)

Likewise the following:

In the petition for probate that he (Hodges) filed, he listed the seven brothers and
sisters of Linnie Jane as her "heirs" (see p. 2, Green ROA). The order of the court
admitting the will to probate unfortunately omitted one of the heirs, Roy Higdon (see
p. 14, Green ROA). Immediately, C.N. Hodges filed a verified motion to have Roy
Higdon's name included as an heir, stating that he wanted to straighten the records
"in order the heirs of deceased Roy Higdon may not think or believe they were
omitted, and that they were really and are interested in the estate of deceased Linnie
Jane Hodges. .

As an executor, he was bound to file tax returns for the estate he was administering
under American law. He did file such as estate tax return on August 8, 1958. In
Schedule "M" of such return, he answered "Yes" to the question as to whether he
was contemplating "renouncing the will". On the question as to what property
interests passed to him as the surviving spouse, he answered:

"None, except for purposes of administering the Estate, paying debts,

taxes and other legal charges. It is the intention of the surviving
husband of deceased to distribute the remaining property and
interests of the deceased in their Community estate to the devisees
and legatees named in the will when the debts, liabilities, taxes and
expenses of administration are finally determined and paid."
 Again, on August 9, 1962, barely four months before his death, he executed an
"affidavit" wherein he ratified and confirmed all that he stated in Schedule "M" of his
estate tax returns as to his having renounced what was given him by his wife's will.1

As appointed executor, C.N. Hodges filed an "Inventory" dated May 12, 1958. He
listed all the assets of his conjugal partnership with Linnie Jane Hodges on a
separate balance sheet and then stated expressly that her estate which has come
into his possession as executor was "one-half of all the items" listed in said balance
sheet. (Pp. 89-90, Appellee's Brief.)

Parenthetically, it may be stated, at this juncture, that We are taking pains to quote wholly or at least,
extensively from some of the pleadings and orders whenever We feel that it is necessary to do so for
a more comprehensive and clearer view of the important and decisive issues raised by the parties
and a more accurate appraisal of their respective positions in regard thereto.

The records of these cases do not show that anything else was done in the above-mentioned
Special Proceedings No. 1307 until December 26, 1962, when on account of the death of Hodges
the day before, the same lawyer, Atty. Leon P. Gellada, who had been previously acting as counsel
for Hodges in his capacity as Executor of his wife's estate, and as such had filed the aforequoted
motions and manifestations, filed the following:

URGENT EX-PARTE MOTION FOR THE APPOINTMENT OF A

SPECIAL ADMINISTRATRIX

COMES the undersigned attorney for the Executor in the above-entitled proceedings,
to the Honorable Court, most respectfully states:

1. That in accordance with the Last Will and Testament of Linnie Jane Hodges
(deceased), her husband, Charles Newton Hodges was to act as Executor, and in
fact, in an order issued by this Hon. Court dated June 28, 1957, the said Charles
Newton Hodges was appointed Executor and had performed the duties as such.

2. That last December 22, 1962, the said Charles Newton Hodges was stricken ill,
and brought to the Iloilo Mission Hospital for treatment, but unfortunately, he died on
December 25, 1962, as shown by a copy of the death certificate hereto attached and
marked as Annex "A".

3. That in accordance with the provisions of the last will and testament of Linnie Jane
Hodges, whatever real and personal properties that may remain at the death of her
husband Charles Newton Hodges, the said properties shall be equally divided among
their heirs. That there are real and personal properties left by Charles Newton
Hodges, which need to be administered and taken care of.

4. That the estate of deceased Linnie Jane Hodges, as well as that of Charles
Newton Hodges, have not as yet been determined or ascertained, and there is
necessity for the appointment of a general administrator to liquidate and distribute
the residue of the estate to the heirs and legatees of both spouses. That in
accordance with the provisions of Section 2 of Rule 75 of the Rules of Court, the
conjugal partnership of Linnie Jane Hodges and Charles Newton Hodges shall be
liquidated in the testate proceedings of the wife.
 5. That the undersigned counsel, has perfect personal knowledge of the existence of
the last will and testament of Charles Newton Hodges, with similar provisions as that
contained in the last will and testament of Linnie Jane Hodges. However, said last
will and testament of Charles Newton Hodges is kept inside the vault or iron safe in
his office, and will be presented in due time before this honorable Court.

6. That in the meantime, it is imperative and indispensable that, an Administratrix be

appointed for the estate of Linnie Jane Hodges and a Special Administratrix for the
estate of Charles Newton Hodges, to perform the duties required by law, to
administer, collect, and take charge of the goods, chattels, rights, credits, and estate
of both spouses, Charles Newton Hodges and Linnie Jane Hodges, as provided for
in Section 1 and 2, Rule 81 of the Rules of Court.

7. That there is delay in granting letters testamentary or of administration, because

the last will and testament of deceased, Charles Newton Hodges, is still kept in his
safe or vault, and in the meantime, unless an administratrix (and,) at the same time,
a Special Administratrix is appointed, the estate of both spouses are in danger of
being lost, damaged or go to waste.

8. That the most trusted employee of both spouses Linnie Jane Hodges and C.N.
Hodges, who had been employed for around thirty (30) years, in the person of Miss
Avelina Magno, (should) be appointed Administratrix of the estate of Linnie Jane
Hodges and at the same time Special Administratrix of the estate of Charles Newton
Hodges. That the said Miss Avelina Magno is of legal age, a resident of the
Philippines, the most fit, competent, trustworthy and well-qualified person to serve
the duties of Administratrix and Special Administratrix and is willing to act as such.

9. That Miss Avelina Magno is also willing to file bond in such sum which the Hon.
Court believes reasonable.

WHEREFORE, in view of all the foregoing, it is most respectfully prayed that, Miss
AVELINA A. MAGNO be immediately appointed Administratrix of the estate of Linnie
Jane Hodges and as Special Administratrix of the estate of Charles Newton Hodges,
with powers and duties provided for by law. That the Honorable Court fix the
reasonable bond of P1,000.00 to be filed by Avelina A. Magno.

(Annex "O", Petition.)

which respondent court readily acted on in its order of even date thus: .

For the reasons alleged in the Urgent Ex-parte Motion filed by counsel for the
Executor dated December 25, 1962, which the Court finds meritorious, Miss
AVELINA A. MAGNO, is hereby appointed Administratrix of the estate of Linnie Jane
Hodges and as Special Administratrix of the estate of Charles Newton Hodges, in the
latter case, because the last will of said Charles Newton Hodges is still kept in his
vault or iron safe and that the real and personal properties of both spouses may be
lost, damaged or go to waste, unless a Special Administratrix is appointed.

Miss Avelina A. Magno is required to file bond in the sum of FIVE THOUSAND
PESOS (P5,000.00), and after having done so, let letters of Administration be issued
to her." (Annex "P", Petition.)
 On December 29, 1962, however, upon urgent ex-parte petition of respondent
Magno herself, thru Atty. Gellada, Harold, R. Davies, "a representative of the heirs of
deceased Charles Newton Hodges (who had) arrived from the United States of
America to help in the administration of the estate of said deceased" was appointed
as Co-Special Administrator of the estate of Hodges, (pp. 29-33, Yellow - Record on
Appeal) only to be replaced as such co-special administrator on January 22, 1963 by
Joe Hodges, who, according to the motion of the same attorney, is "the nephew of
the deceased (who had) arrived from the United States with instructions from the
other heirs of the deceased to administer the properties or estate of Charles Newton
Hodges in the Philippines, (Pp. 47-50, id.)

Meanwhile, under date of January 9, 1963, the same Atty. Gellada filed in Special Proceedings 1672
a petition for the probate of the will of Hodges,2 with a prayer for the issuance of letters of
administration to the same Joe Hodges, albeit the motion was followed on February 22, 1963 by a
separate one asking that Atty. Fernando Mirasol be appointed as his co-administrator. On the same
date this latter motion was filed, the court issued the corresponding order of probate and letters of
administration to Joe Hodges and Atty. Mirasol, as prayed for.

At this juncture, again, it may also be explained that just as, in her will, Mrs. Hodges bequeathed her
whole estate to her husband "to have and to hold unto him, my said husband, during his natural
lifetime", she, at the same time or in like manner, provided that "at the death of my said husband — I
give devise and bequeath all of the rest, residue and remainder of my estate, both real and personal,
wherever situated or located, to be equally divided among my brothers and sisters, share and share
alike —". Accordingly, it became incumbent upon Hodges, as executor of his wife's will, to duly
liquidate the conjugal partnership, half of which constituted her estate, in order that upon the
eventuality of his death, "the rest, residue and remainder" thereof could be determined and
correspondingly distributed or divided among her brothers and sisters. And it was precisely because
no such liquidation was done, furthermore, there is the issue of whether the distribution of her estate
should be governed by the laws of the Philippines or those of Texas, of which State she was a
national, and, what is more, as already stated, Hodges made official and sworn statements or
manifestations indicating that as far as he was concerned no "property interests passed to him as
surviving spouse — "except for purposes of administering the estate, paying debts, taxes and other
legal charges" and it was the intention of the surviving husband of the deceased to distribute the
remaining property and interests of the deceased in their Community Estate to the devisees and
legatees named in the will when the debts, liabilities, taxes and expenses of administration are finally
determined and paid", that the incidents and controversies now before Us for resolution arose. As
may be observed, the situation that ensued upon the death of Hodges became rather unusual and
so, quite understandably, the lower court's actuations presently under review are apparently wanting
in consistency and seemingly lack proper orientation.

Thus, We cannot discern clearly from the record before Us the precise perspective from which the
trial court proceeded in issuing its questioned orders. And, regretably, none of the lengthy briefs
submitted by the parties is of valuable assistance in clearing up the matter.

To begin with, We gather from the two records on appeal filed by petitioner, as appellant in the
appealed cases, one with green cover and the other with a yellow cover, that at the outset, a sort of
modus operandi had been agreed upon by the parties under which the respective administrators of
the two estates were supposed to act conjointly, but since no copy of the said agreement can be
found in the record before Us, We have no way of knowing when exactly such agreement was
entered into and under what specific terms. And while reference is made to said modus operandi in
the order of September 11, 1964, on pages 205-206 of the Green Record on Appeal, reading thus:
 The present incident is to hear the side of administratrix, Miss Avelina A. Magno, in
answer to the charges contained in the motion filed by Atty. Cesar Tirol on
September 3, 1964. In answer to the said charges, Miss Avelina A. Magno, through
her counsel, Atty. Rizal Quimpo, filed a written manifestation.

After reading the manifestation here of Atty. Quimpo, for and in behalf of the
administratrix, Miss Avelina A. Magno, the Court finds that everything that happened
before September 3, 1964, which was resolved on September 8, 1964, to the
satisfaction of parties, was simply due to a misunderstanding between the
representative of the Philippine Commercial and Industrial Bank and Miss Magno
and in order to restore the harmonious relations between the parties, the Court
ordered the parties to remain in status quo as to their modus operandi before
September 1, 1964, until after the Court can have a meeting with all the parties and
their counsels on October 3, as formerly agreed upon between counsels, Attys.
Ozaeta, Gibbs and Ozaeta, Attys. Tirol and Tirol and Atty. Rizal Quimpo.

In the meantime, the prayers of Atty. Quimpo as stated in his manifestation shall not
be resolved by this Court until October 3, 1964.

SO ORDERED.

there is nothing in the record indicating whatever happened to it afterwards, except that again,
reference thereto was made in the appealed order of October 27, 1965, on pages 292-295 of the
Green Record on Appeal, as follows:

On record is an urgent motion to allow PCIB to open all doors and locks in the
Hodges Office at 206-208 Guanco Street, Iloilo City, to take immediate and exclusive
possession thereof and to place its own locks and keys for security purposes of the
PCIB dated October 27, 1965 thru Atty. Cesar Tirol. It is alleged in said urgent
motion that Administratrix Magno of the testate estate of Linnie Jane Hodges refused
to open the Hodges Office at 206-208 Guanco Street, Iloilo City where PCIB holds
office and therefore PCIB is suffering great moral damage and prejudice as a result
of said act. It is prayed that an order be issued authorizing it (PCIB) to open all doors
and locks in the said office, to take immediate and exclusive possession thereof and
place thereon its own locks and keys for security purposes; instructing the clerk of
court or any available deputy to witness and supervise the opening of all doors and
locks and taking possession of the PCIB.

A written opposition has been filed by Administratrix Magno of even date (Oct. 27)
thru counsel Rizal Quimpo stating therein that she was compelled to close the office
for the reason that the PCIB failed to comply with the order of this Court signed by
Judge Anacleto I. Bellosillo dated September 11, 1964 to the effect that both estates
should remain in status quo to their modus operandi as of September 1, 1964.

To arrive at a happy solution of the dispute and in order not to interrupt the operation
of the office of both estates, the Court aside from the reasons stated in the urgent
motion and opposition heard the verbal arguments of Atty. Cesar Tirol for the PCIB
and Atty. Rizal Quimpo for Administratix Magno.

After due consideration, the Court hereby orders Magno to open all doors and locks
in the Hodges Office at 206-208 Guanco Street, Iloilo City in the presence of the
PCIB or its duly authorized representative and deputy clerk of court Albis of this
 branch not later than 7:30 tomorrow morning October 28, 1965 in order that the office
of said estates could operate for business.

Pursuant to the order of this Court thru Judge Bellosillo dated September 11, 1964, it
is hereby ordered:

(a) That all cash collections should be deposited in the joint account of the estates of
Linnie Jane Hodges and estates of C.N. Hodges;

(b) That whatever cash collections that had been deposited in the account of either of
the estates should be withdrawn and since then deposited in the joint account of the
estate of Linnie Jane Hodges and the estate of C.N. Hodges;

(c) That the PCIB should countersign the check in the amount of P250 in favor of
Administratrix Avelina A. Magno as her compensation as administratrix of the Linnie
Jane Hodges estate chargeable to the testate estate of Linnie Jane Hodges only;

(d) That Administratrix Magno is hereby directed to allow the PCIB to inspect
whatever records, documents and papers she may have in her possession in the
same manner that Administrator PCIB is also directed to allow Administratrix Magno
to inspect whatever records, documents and papers it may have in its possession;

(e) That the accountant of the estate of Linnie Jane Hodges shall have access to all
records of the transactions of both estates for the protection of the estate of Linnie
Jane Hodges; and in like manner the accountant or any authorized representative of
the estate of C.N. Hodges shall have access to the records of transactions of the
Linnie Jane Hodges estate for the protection of the estate of C.N. Hodges.

Once the estates' office shall have been opened by Administratrix Magno in the
presence of the PCIB or its duly authorized representative and deputy clerk Albis or
his duly authorized representative, both estates or any of the estates should not
close it without previous consent and authority from this court.

SO ORDERED.

As may be noted, in this order, the respondent court required that all collections from the properties
in the name of Hodges should be deposited in a joint account of the two estates, which indicates that
seemingly the so-called modus operandi was no longer operative, but again there is nothing to show
when this situation started.

Likewise, in paragraph 3 of the petitioner's motion of September 14, 1964, on pages 188-201 of the
Green Record on Appeal, (also found on pp. 83-91 of the Yellow Record on Appeal) it is alleged
that:

3. On January 24, 1964 virtually all of the heirs of C.N. Hodges, Joe Hodges and
Fernando P. Mirasol acting as the two co-administrators of the estate of C.N.
Hodges, Avelina A. Magno acting as the administratrix of the estate of Linnie Jane
Hodges and Messrs. William Brown and Ardell Young acting for all of the Higdon
family who claim to be the sole beneficiaries of the estate of Linnie Jane Hodges and
various legal counsel representing the aforementioned parties entered into an
amicable agreement, which was approved by this Honorable Court, wherein the
 parties thereto agreed that certain sums of money were to be paid in settlement of
different claims against the two estates and that the assets (to the extent they
existed) of both estates would be administered jointly by the PCIB as administrator of
the estate of C.N. Hodges and Avelina A. Magno as administratrix of the estate of
Linnie Jane Hodges, subject, however, to the aforesaid October 5, 1963 Motion,
namely, the PCIB's claim to exclusive possession and ownership of one hundred
percent (100%) (or, in the alternative, seventy-five percent (75%) of all assets owned
by C.N. Hodges or Linnie Jane Hodges situated in the Philippines. On February 1,
1964 (pp. 934-935, CFI Rec., S.P. No. 1672) this Honorable Court amended its order
of January 24, 1964 but in no way changed its recognition of the afore-described
basic demand by the PCIB as administrator of the estate of C.N. Hodges to one
hundred percent (100%) of the assets claimed by both estates.

but no copy of the mentioned agreement of joint administration of the two estates exists in the
record, and so, We are not informed as to what exactly are the terms of the same which could be
relevant in the resolution of the issues herein.

On the other hand, the appealed order of November 3, 1965, on pages 313-320 of the Green
Record on Appeal, authorized payment by respondent Magno of, inter alia, her own fees as
administratrix, the attorney's fees of her lawyers, etc., as follows:

Administratrix Magno thru Attys. Raul S. Manglapus and Rizal. R. Quimpo filed a
Manifestation and Urgent Motion dated June 10, 1964 asking for the approval of the
Agreement dated June 6, 1964 which Agreement is for the purpose of retaining their
services to protect and defend the interest of the said Administratrix in these
proceedings and the same has been signed by and bears the express conformity of
the attorney-in-fact of the late Linnie Jane Hodges, Mr. James L. Sullivan. It is further
prayed that the Administratrix of the Testate Estate of Linnie Jane Hodges be
directed to pay the retailers fee of said lawyers, said fees made chargeable as
expenses for the administration of the estate of Linnie Jane Hodges (pp. 1641-1642,
Vol. V, Sp. 1307).

An opposition has been filed by the Administrator PCIB thru Atty. Herminio Ozaeta
dated July 11, 1964, on the ground that payment of the retainers fee of Attys.
Manglapus and Quimpo as prayed for in said Manifestation and Urgent Motion is
prejudicial to the 100% claim of the estate of C. N. Hodges; employment of Attys.
Manglapus and Quimpo is premature and/or unnecessary; Attys. Quimpo and
Manglapus are representing conflicting interests and the estate of Linnie Jane
Hodges should be closed and terminated (pp. 1679-1684, Vol, V, Sp. 1307).

Atty. Leon P. Gellada filed a memorandum dated July 28, 1964 asking that the
Manifestation and Urgent Motion filed by Attys. Manglapus and Quimpo be denied
because no evidence has been presented in support thereof. Atty. Manglapus filed a
reply to the opposition of counsel for the Administrator of the C. N. Hodges estate
wherein it is claimed that expenses of administration include reasonable counsel or
attorney's fees for services to the executor or administrator. As a matter of fact the
fee agreement dated February 27, 1964 between the PCIB and the law firm of
Ozaeta, Gibbs & Ozaeta as its counsel (Pp. 1280-1284, Vol. V, Sp. 1307) which
stipulates the fees for said law firm has been approved by the Court in its order dated
March 31, 1964. If payment of the fees of the lawyers for the administratrix of the
estate of Linnie Jane Hodges will cause prejudice to the estate of C. N. Hodges, in
like manner the very agreement which provides for the payment of attorney's fees to
the counsel for the PCIB will also be prejudicial to the estate of Linnie Jane Hodges
(pp. 1801-1814, Vol. V, Sp. 1307).

Atty. Herminio Ozaeta filed a rejoinder dated August 10, 1964 to the reply to the
opposition to the Manifestation and Urgent Motion alleging principally that the estates
of Linnie Jane Hodges and C. N. Hodges are not similarly situated for the reason that
C. N. Hodges is an heir of Linnie Jane Hodges whereas the latter is not an heir of the
former for the reason that Linnie Jane Hodges predeceased C. N. Hodges (pp. 1839-
1848, Vol. V, Sp. 1307); that Attys. Manglapus and Quimpo formally entered their
appearance in behalf of Administratrix of the estate of Linnie Jane Hodges on June
10, 1964 (pp. 1639-1640, Vol. V, Sp. 1307).

Atty. Manglapus filed a manifestation dated December 18, 1964 stating therein that
Judge Bellosillo issued an order requiring the parties to submit memorandum in
support of their respective contentions. It is prayed in this manifestation that the
Manifestation and Urgent Motion dated June 10, 1964 be resolved (pp. 6435-6439,
Vol. VII, Sp. 1307).

Atty. Roman Mabanta, Jr. for the PCIB filed a counter- manifestation dated January
5, 1965 asking that after the consideration by the court of all allegations and
arguments and pleadings of the PCIB in connection therewith (1) said manifestation
and urgent motion of Attys. Manglapus and Quimpo be denied (pp. 6442-6453, Vol.
VII, Sp. 1307). Judge Querubin issued an order dated January 4, 1965 approving the
motion dated June 10, 1964 of the attorneys for the administratrix of the estate of
Linnie Jane Hodges and agreement annexed to said motion. The said order further
states: "The Administratrix of the estate of Linnie Jane Hodges is authorized to issue
or sign whatever check or checks may be necessary for the above purpose and the
administrator of the estate of C. N. Hodges is ordered to countersign the same. (pp.
6518-6523, Vol VII, Sp. 1307).

Atty. Roman Mabanta, Jr. for the PCIB filed a manifestation and motion dated
January 13, 1965 asking that the order of January 4, 1965 which was issued by
Judge Querubin be declared null and void and to enjoin the clerk of court and the
administratrix and administrator in these special proceedings from all proceedings
and action to enforce or comply with the provision of the aforesaid order of January
4, 1965. In support of said manifestation and motion it is alleged that the order of
January 4, 1965 is null and void because the said order was never delivered to the
deputy clerk Albis of Branch V (the sala of Judge Querubin) and the alleged order
was found in the drawer of the late Judge Querubin in his office when said drawer
was opened on January 13, 1965 after the death of Judge Querubin by Perfecto
Querubin, Jr., the son of the judge and in the presence of Executive Judge Rovira
and deputy clerk Albis (Sec. 1, Rule 36, New Civil Code) (Pp. 6600-6606, Vol. VIII,
Sp. 1307).

Atty. Roman Mabanta, Jr. for the PCIB filed a motion for reconsideration dated
February 23, 1965 asking that the order dated January 4, 1964 be reversed on the
ground that:

1. Attorneys retained must render services to the estate not to the personal heir;

2. If services are rendered to both, fees should be pro-rated between them;

 3. Attorneys retained should not represent conflicting interests; to the prejudice of the
other heirs not represented by said attorneys;

4. Fees must be commensurate to the actual services rendered to the estate;

5. There must be assets in the estate to pay for said fees (Pp. 6625-6636, Vol. VIII,
Sp. 1307).

Atty. Quimpo for Administratrix Magno of the estate of Linnie Jane Hodges filed a
motion to submit dated July 15, 1965 asking that the manifestation and urgent motion
dated June 10, 1964 filed by Attys. Manglapus and Quimpo and other incidents
directly appertaining thereto be considered submitted for consideration and approval
(pp. 6759-6765, Vol. VIII, Sp. 1307).

Considering the arguments and reasons in support to the pleadings of both the
Administratrix and the PCIB, and of Atty. Gellada, hereinbefore mentioned, the Court
believes that the order of January 4, 1965 is null and void for the reason that the said
order has not been filed with deputy clerk Albis of this court (Branch V) during the
lifetime of Judge Querubin who signed the said order. However, the said
manifestation and urgent motion dated June 10, 1964 is being treated and
considered in this instant order. It is worthy to note that in the motion dated January
24, 1964 (Pp. 1149- 1163, Vol. V, Sp. 1307) which has been filed by Atty. Gellada
and his associates and Atty. Gibbs and other lawyers in addition to the stipulated
fees for actual services rendered. However, the fee agreement dated February 27,
1964, between the Administrator of the estate of C. N. Hodges and Atty. Gibbs which
provides for retainer fee of P4,000 monthly in addition to specific fees for actual
appearances, reimbursement for expenditures and contingent fees has also been
approved by the Court and said lawyers have already been paid. (pp. 1273-1279,
Vol. V, Sp. Proc. 1307 pp. 1372-1373, Vol. V, Sp. Proc. 1307).

WHEREFORE, the order dated January 4, 1965 is hereby declared null and void.

The manifestation and motion dated June 10, 1964 which was filed by the attorneys
for the administratrix of the testate estate of Linnie Jane Hodges is granted and the
agreement annexed thereto is hereby approved.

The administratrix of the estate of Linnie Jane Hodges is hereby directed to be

needed to implement the approval of the agreement annexed to the motion and the
administrator of the estate of C. N. Hodges is directed to countersign the said check
or checks as the case may be.

SO ORDERED.

thereby implying somehow that the court assumed the existence of independent but simultaneous
administrations.

Be that as it may, again, it appears that on August 6, 1965, the court, acting on a motion of petitioner
for the approval of deeds of sale executed by it as administrator of the estate of Hodges, issued the
following order, also on appeal herein:
 Acting upon the motion for approval of deeds of sale for registered land of the PCIB,
Administrator of the Testate Estate of C. N. Hodges in Sp. Proc. 1672 (Vol. VII, pp.
2244-2245), dated July 16, 1965, filed by Atty. Cesar T. Tirol in representation of the
law firms of Ozaeta, Gibbs and Ozaeta and Tirol and Tirol and the opposition thereto
of Atty. Rizal R. Quimpo (Vol. VIII, pp. 6811-6813) dated July 22, 1965 and
considering the allegations and reasons therein stated, the court believes that the
deeds of sale should be signed jointly by the PCIB, Administrator of the Testate
Estate of C. N. Hodges and Avelina A. Magno, Administratrix of the Testate Estate of
Linnie Jane Hodges and to this effect the PCIB should take the necessary steps so
that Administratrix Avelina A. Magno could sign the deeds of sale.

SO ORDERED. (p. 248, Green Record on Appeal.)

Notably this order required that even the deeds executed by petitioner, as administrator of the Estate
of Hodges, involving properties registered in his name, should be co-signed by respondent
Magno.3 And this was not an isolated instance.

In her brief as appellee, respondent Magno states:

After the lower court had authorized appellee Avelina A. Magno to execute final
deeds of sale pursuant to contracts to sell executed by C. N. Hodges on February
20, 1963 (pp. 45-46, Green ROA), motions for the approval of final deeds of sale
(signed by appellee Avelina A. Magno and the administrator of the estate of C. N.
Hodges, first Joe Hodges, then Atty. Fernando Mirasol and later the appellant) were
approved by the lower court upon petition of appellee Magno's counsel, Atty. Leon P.
Gellada, on the basis of section 8 of Rule 89 of the Revised Rules of Court.
Subsequently, the appellant, after it had taken over the bulk of the assets of the two
estates, started presenting these motions itself. The first such attempt was a "Motion
for Approval of Deeds of Sale for Registered Land and Cancellations of Mortgages"
dated July 21, 1964 filed by Atty. Cesar T. Tirol, counsel for the appellant, thereto
annexing two (2) final deeds of sale and two (2) cancellations of mortgages signed
by appellee Avelina A. Magno and D. R. Paulino, Assistant Vice-President and
Manager of the appellant (CFI Record, Sp. Proc. No. 1307, Vol. V, pp. 1694-1701).
This motion was approved by the lower court on July 27, 1964. It was followed by
another motion dated August 4, 1964 for the approval of one final deed of sale again
signed by appellee Avelina A. Magno and D. R. Paulino (CFI Record, Sp. Proc. No.
1307. Vol. V, pp. 1825-1828), which was again approved by the lower court on
August 7, 1964. The gates having been opened, a flood ensued: the appellant
subsequently filed similar motions for the approval of a multitude of deeds of sales
and cancellations of mortgages signed by both the appellee Avelina A. Magno and
the appellant.

A random check of the records of Special Proceeding No. 1307 alone will show Atty.
Cesar T. Tirol as having presented for court approval deeds of sale of real properties
signed by both appellee Avelina A. Magno and D. R. Paulino in the following
numbers: (a) motion dated September 21, 1964 — 6 deeds of sale; (b) motion dated
November 4, 1964 — 1 deed of sale; (c) motion dated December 1, 1964 — 4 deeds
of sale; (d) motion dated February 3, 1965 — 8 deeds of sale; (f) motion dated May
7, 1965 — 9 deeds of sale. In view of the very extensive landholdings of the Hodges
spouses and the many motions filed concerning deeds of sale of real properties
executed by C. N. Hodges the lower court has had to constitute special separate
 expedientes in Special Proceedings Nos. 1307 and 1672 to include mere motions for
the approval of deeds of sale of the conjugal properties of the Hodges spouses.

As an example, from among the very many, under date of February 3, 1965, Atty.
Cesar T. Tirol, as counsel for the appellant, filed "Motion for Approval of Deeds of
Sale for Registered Land and Cancellations of Mortgages" (CFI Record, Sp. Proc.
No. 1307, Vol. VIII, pp. 6570-6596) the allegations of which read:

"1. In his lifetime, the late C. N. Hodges executed "Contracts to Sell" real property,
and the prospective buyers under said contracts have already paid the price and
complied with the terms and conditions thereof;

"2. In the course of administration of both estates, mortgage debtors have already
paid their debts secured by chattel mortgages in favor of the late C. N. Hodges, and
are now entitled to release therefrom;

"3. There are attached hereto documents executed jointly by the Administratrix in Sp.
Proc. No. 1307 and the Administrator in Sp. Proc. No. 1672, consisting of deeds of
sale in favor —

Fernando Cano, Bacolod City, Occ. Negros

Fe Magbanua, Iloilo City
Policarpio M. Pareno, La Paz, Iloilo City
Rosario T. Libre, Jaro, Iloilo City
Federico B. Torres, Iloilo City
Reynaldo T. Lataquin, La Paz, Iloilo City
Anatolio T. Viray, Iloilo City
Benjamin Rolando, Jaro, Iloilo City

and cancellations of mortgages in favor of —

Pablo Manzano, Oton, Iloilo

Ricardo M. Diana, Dao, San Jose, Antique
Simplicio Tingson, Iloilo City
Amado Magbanua, Pototan, Iloilo
Roselia M. Baes, Bolo, Roxas City
William Bayani, Rizal Estanzuela, Iloilo City
Elpidio Villarete, Molo, Iloilo City
Norma T. Ruiz, Jaro, Iloilo City

"4. That the approval of the aforesaid documents will not reduce the
assets of the estates so as to prevent any creditor from receiving his
full debt or diminish his dividend."

And the prayer of this motion is indeed very revealing:

"WHEREFORE, it is respectfully prayed that, under Rule 89, Section 8 of the Rules
of Court, this honorable court approve the aforesaid deeds of sale and cancellations
of mortgages." (Pp. 113-117, Appellee's Brief.)

None of these assertions is denied in Petitioner's reply brief.

Further indicating lack of concrete perspective or orientation on the part of the respondent court and
its hesitancy to clear up matters promptly, in its other appealed order of November 23, 1965, on
pages 334-335 of the Green Record on Appeal, said respondent court allowed the movant Ricardo
Salas, President of appellee Western Institute of Technology (successor of Panay Educational
Institutions, Inc.), one of the parties with whom Hodges had contracts that are in question in the
appeals herein, to pay petitioner, as Administrator of the estate of Hodges and/or respondent
Magno, as Administrator of the estate of Mrs. Hodges, thus:

Considering that in both cases there is as yet no judicial declaration of heirs nor
distribution of properties to whomsoever are entitled thereto, the Court believes that
payment to both the administrator of the testate estate of C. N. Hodges and the
administratrix of the testate estate of Linnie Jane Hodges or to either one of the two
estates is proper and legal.

WHEREFORE, movant Ricardo T. Salas can pay to both estates or either of them.

SO ORDERED.

(Pp. 334-335, Green Record on Appeal.)

On the other hand, as stated earlier, there were instances when respondent Magno was given
authority to act alone. For instance, in the other appealed order of December 19, 1964, on page 221
of the Green Record on Appeal, the respondent court approved payments made by her of overtime
pay to some employees of the court who had helped in gathering and preparing copies of parts of
the records in both estates as follows:

Considering that the expenses subject of the motion to approve payment of overtime
pay dated December 10, 1964, are reasonable and are believed by this Court to be a
proper charge of administration chargeable to the testate estate of the late Linnie
Jane Hodges, the said expenses are hereby APPROVED and to be charged against
the testate estate of the late Linnie Jane Hodges. The administrator of the testate
estate of the late Charles Newton Hodges is hereby ordered to countersign the check
or checks necessary to pay the said overtime pay as shown by the bills marked
Annex "A", "B" and "C" of the motion.

SO ORDERED.

(Pp. 221-222, Green Record on Appeal.)

Likewise, the respondent court approved deeds of sale executed by respondent Magno alone, as
Administratrix of the estate of Mrs. Hodges, covering properties in the name of Hodges, pursuant to
"contracts to sell" executed by Hodges, irrespective of whether they were executed by him before or
after the death of his wife. The orders of this nature which are also on appeal herein are the
following:

1. Order of March 30, 1966, on p. 137 of the Green Record on Appeal, approving the deed of sale
executed by respondent Magno in favor of appellee Lorenzo Carles on February 24, 1966, pursuant
to a "contract to sell" signed by Hodges on June 17, 1958, after the death of his wife, which contract
petitioner claims was cancelled by it for failure of Carles to pay the installments due on January 7,
1965.
2. Order of April 5, 1966, on pp. 139-140, id., approving the deed of sale executed by respondent
Magno in favor of appellee Salvador Guzman on February 28, 1966 pursuant to a "contract to sell"
signed by Hodges on September 13, 1960, after the death of his wife, which contract petitioner
claims it cancelled on March 3, 1965 in view of failure of said appellee to pay the installments on
time.

3. Order of April 20, 1966, on pp. 167-168, id., approving the deed of sale executed by respondent
Magno in favor of appellee Purificacion Coronado on March 28, 1966 pursuant to a "contract to sell"
signed by Hodges on August 14, 1961, after the death of his wife.

4. Order of April 20, 1966, on pp. 168-169, id., approving the deed of sale executed by respondent
Magno in favor of appellee Florenia Barrido on March 28, 1966, pursuant to a "contract to sell"
signed by Hodges on February 21, 1958, after the death of his wife.

5. Order of June 7, 1966, on pp. 184-185, id., approving the deed of sale executed by respondent
Magno in favor of appellee Belcezar Causing on May 2, 1966, pursuant to a "contract to sell" signed
by Hodges on February 10, 1959, after the death of his wife.

6. Order of June 21, 1966, on pp. 211-212, id., approving the deed of sale executed by respondent
Magno in favor of appellee Artheo Thomas Jamir on June 3, 1966, pursuant to a "contract to sell"
signed by Hodges on May 26, 1961, after the death of his wife.

7. Order of June 21, 1966, on pp. 212-213, id., approving the deed of sale executed by respondent
Magno in favor of appellees Graciano Lucero and Melquiades Batisanan on June 6 and June 3,
1966, respectively, pursuant to "contracts to sell" signed by Hodges on June 9, 1959 and November
27, 1961, respectively, after the death of his wife.

8. Order of December 2, 1966, on pp. 303-304, id., approving the deed of sale executed by
respondent Magno in favor of appellees Espiridion Partisala, Winifredo Espada and Rosario
Alingasa on September 6, 1966, August 17, 1966 and August 3, 1966, respectively, pursuant to
"contracts to sell" signed by Hodges on April 20, 1960, April 18, 1960 and August 25, 1958,
respectively, that is, after the death of his wife.

9. Order of April 5, 1966, on pp. 137-138, id., approving the deed of sale executed by respondent
Magno in favor of appellee Alfredo Catedral on March 2, 1966, pursuant to a "contract to sell" signed
by Hodges on May 29, 1954, before the death of his wife, which contract petitioner claims it had
cancelled on February 16, 1966 for failure of appellee Catedral to pay the installments due on time.

10. Order of April 5, 1966, on pp. 138-139, id., approving the deed of sale executed by respondent
Magno in favor of appellee Jose Pablico on March 7, 1966, pursuant to a "contract to sell" signed by
Hodges on March 7, 1950, after the death of his wife, which contract petitioner claims it had
cancelled on June 29, 1960, for failure of appellee Pablico to pay the installments due on time.

11. Order of December 2, 1966, on pp. 303-304, id., insofar as it approved the deed of sale
executed by respondent Magno in favor of appellee Pepito Iyulores on September 6, 1966, pursuant
to a "contract to sell" signed by Hodges on February 5, 1951, before the death of his wife.

12. Order of January 3, 1967, on pp. 335-336, id., approving three deeds of sale executed by
respondent Magno, one in favor of appellees Santiago Pacaonsis and two in favor of appellee Adelfa
Premaylon on December 5, 1966 and November 3, 1966, respectively, pursuant to separate
"promises to sell" signed respectively by Hodges on May 26, 1955 and January 30, 1954, before the
death of his wife, and October 31, 1959, after her death.
In like manner, there were also instances when respondent court approved deeds of sale executed
by petitioner alone and without the concurrence of respondent Magno, and such approvals have not
been the subject of any appeal. No less than petitioner points this out on pages 149-150 of its brief
as appellant thus:

The points of fact and law pertaining to the two abovecited assignments of error have
already been discussed previously. In the first abovecited error, the order alluded to
was general, and as already explained before, it was, as admitted by the lower court
itself, superseded by the particular orders approving specific final deeds of sale
executed by the appellee, Avelina A. Magno, which are subject of this appeal, as well
as the particular orders approving specific final deeds of sale executed by the
appellant, Philippine Commercial and Industrial Bank, which were never appealed by
the appellee, Avelina A. Magno, nor by any party for that matter, and which are now
therefore final.

Now, simultaneously with the foregoing incidents, others of more fundamental and all embracing
significance developed. On October 5, 1963, over the signature of Atty. Allison J. Gibbs in
representation of the law firm of Ozaeta, Gibbs & Ozaeta, as counsel for the co-administrators Joe
Hodges and Fernando P. Mirasol, the following self-explanatory motion was filed:

URGENT MOTION FOR AN ACCOUNTING AND DELIVERY TO

ADMINISTRATION OF THE ESTATE OF C. N. HODGES OF ALL
OF THE ASSETS OF THE CONJUGAL PARTNERSHIP OF THE
DECEASED LINNIE JANE HODGES AND C N. HODGES EXISTING
AS OF MAY 23, 1957 PLUS ALL THE RENTS, EMOLUMENTS AND
INCOME THEREFROM.

COMES NOW the co-administrator of the estate of C. N. Hodges, Joe Hodges,

through his undersigned attorneys in the above-entitled proceedings, and to this
Honorable Court respectfully alleges:

(1) On May 23, 1957 Linnie Jane Hodges died in Iloilo City.

(2) On June 28, 1957 this Honorable Court admitted to probate the Last Will and
Testament of the deceased Linnie Jane Hodges executed November 22, 1952 and
appointed C. N. Hodges as Executor of the estate of Linnie Jane Hodges (pp. 24-25,
Rec. Sp. Proc. 1307).

(3) On July 1, 1957 this Honorable Court issued Letters Testamentary to C. N.

Hodges in the Estate of Linnie Jane Hodges (p. 30, Rec. Sp. Proc. 1307).

(4) On December 14, 1957 this Honorable Court, on the basis of the following
allegations in a Motion dated December 11, 1957 filed by Leon P. Gellada as
attorney for the executor C. N. Hodges:

"That herein Executor, (is) not only part owner of the properties left as
conjugal, but also, the successor to all the properties left by the
deceased Linnie Jane Hodges."

(p. 44, Rec. Sp. Proc. 1307; emphasis supplied.)

issued the following order:

"As prayed for by Attorney Gellada, counsel for the Executory, for the
reasons stated in his motion dated December 11, 1957 which the
court considers well taken, all the sales, conveyances, leases and
mortgages of all properties left by the deceased Linnie Jane Hodges
are hereby APPROVED. The said executor is further authorized to
execute subsequent sales, conveyances, leases and mortgages of
the properties left by the said deceased Linnie Jane Hodges in
consonance with the wishes contained in the last will and testament
of the latter."

(p. 46, Rec. Sp. Proc. 1307; emphasis supplied.)

(5) On April 21, 1959 this Honorable Court approved the inventory and accounting
submitted by C. N. Hodges through his counsel Leon P. Gellada on April 14, 1959
wherein he alleged among other things

"That no person interested in the Philippines of the time and place of

examining the herein account, be given notice, as herein executor is
the only devisee or legatee of the deceased, in accordance with the
last will and testament already probated by the Honorable Court."

(pp. 77-78, Rec. Sp. Proc. 1307; emphasis supplied.).

(6) On July 30, 1960 this Honorable Court approved the "Annual Statement of
Account" submitted by C. N. Hodges through his counsel Leon P. Gellada on July 21,
1960 wherein he alleged among other things:

"That no person interested in the Philippines of the time and place of

examining the herein account, be given notice as herein executor is
the only devisee or legatee of the deceased Linnie Jane Hodges, in
accordance with the last will and testament of the deceased, already
probated by this Honorable Court."

(pp. 81-82. Rec. Sp. Proc. 1307; emphasis supplied.)

(7) On May 2, 1961 this Honorable court approved the "Annual Statement of Account
By The Executor for the Year 1960" submitted through Leon P. Gellada on April 20,
1961 wherein he alleged:

That no person interested in the Philippines be given notice, of the

time and place of examining the herein account, as herein Executor is
the only devisee or legatee of the deceased Linnie Jane Hodges, in
accordance with the last will and testament of the deceased, already
probated by this Honorable Court.

(pp. 90-91. Rec. Sp. Proc. 1307; emphasis supplied.)

(8) On December 25, 1962, C.N. Hodges died.

(9) On December 25, 1962, on the Urgent Ex-parte Motion of Leon P. Gellada filed
only in Special Proceeding No. 1307, this Honorable Court appointed Avelina A.
Magno

"Administratrix of the estate of Linnie Jane Hodges and as Special Administratrix of

the estate of Charles Newton Hodges, in the latter case, because the last will of said
Charles Newton Hodges is still kept in his vault or iron safe and that the real and
personal properties of both spouses may be lost, damaged or go to waste, unless a
Special Administratrix is appointed."

(p. 100. Rec. Sp. Proc. 1307)

(10) On December 26, 1962 Letters of Administration were issued to Avelina Magno
pursuant to this Honorable Court's aforesaid Order of December 25, 1962

"With full authority to take possession of all the property of said

deceased in any province or provinces in which it may be situated
and to perform all other acts necessary for the preservation of said
property, said Administratrix and/or Special Administratrix having filed
a bond satisfactory to the Court."

(p. 102, Rec. Sp. Proc. 1307)

(11) On January 22, 1963 this Honorable Court on petition of Leon P. Gellada of
January 21, 1963 issued Letters of Administration to:

(a) Avelina A. Magno as Administratrix of the estate of Linnie Jane Hodges;

(b) Avelina A. Magno as Special Administratrix of the Estate of Charles Newton

Hodges; and

(c) Joe Hodges as Co-Special Administrator of the Estate of Charles Newton

Hodges.

(p. 43, Rec. Sp. Proc. 1307)

(12) On February 20, 1963 this Honorable Court on the basis of a motion filed by
Leon P. Gellada as legal counsel on February 16, 1963 for Avelina A. Magno acting
as Administratrix of the Estate of Charles Newton Hodges (pp. 114-116, Sp. Proc.
1307) issued the following order:

"... se autoriza a aquella (Avelina A. Magno) a firmar escrituras de

venta definitiva de propiedades cubiertas por contratos para vender,
firmados, en vida, por el finado Charles Newton Hodges, cada vez
que el precio estipulado en cada contrato este totalmente pagado. Se
autoriza igualmente a la misma a firmar escrituras de cancelacion de
hipoteca tanto de bienes reales como personales cada vez que la
consideracion de cada hipoteca este totalmente pagada.

"Cada una de dichas escrituras que se otorguen debe ser sometida

para la aprobacion de este Juzgado."
 (p. 117, Sp. Proc. 1307).

[Par 1 (c), Reply to Motion For Removal of Joe Hodges]

(13) On September l6, 1963 Leon P. Gellada, acting as attorney for Avelina A.
Magno as Administratrix of the estate of Linnie Jane Hodges, alleges:

3. — That since January, 1963, both estates of Linnie Jane Hodges

and Charles Newton Hodges have been receiving in full, payments
for those "contracts to sell" entered into by C. N. Hodges during his
lifetime, and the purchasers have been demanding the execution of
definite deeds of sale in their favor.

4. — That hereto attached are thirteen (13) copies deeds of sale

executed by the Administratrix and by the co-administrator (Fernando
P. Mirasol) of the estate of Linnie Jane Hodges and Charles Newton
Hodges respectively, in compliance with the terms and conditions of
the respective "contracts to sell" executed by the parties thereto."

(14) The properties involved in the aforesaid motion of September 16, 1963 are all
registered in the name of the deceased C. N. Hodges.

(15) Avelina A. Magno, it is alleged on information and belief, has been advertising in
the newspaper in Iloilo thusly:

For Sale

Testate Estate of Linnie Jane Hodges and Charles Newton Hodges.

All Real Estate or Personal Property will be sold on First Come First Served Basis.

Avelina
A.
Magno
Admini
stratrix

(16) Avelina A. Magno, it is alleged on information and belief, has paid and still is
paying sums of money to sundry persons.

(17) Joe Hodges through the undersigned attorneys manifested during the hearings
before this Honorable Court on September 5 and 6, 1963 that the estate of C. N.
Hodges was claiming all of the assets belonging to the deceased spouses Linnie
Jane Hodges and C. N. Hodges situated in Philippines because of the aforesaid
election by C. N. Hodges wherein he claimed and took possession as sole owner of
all of said assets during the administration of the estate of Linnie Jane Hodges on the
ground that he was the sole devisee and legatee under her Last Will and Testament.

(18) Avelina A. Magno has submitted no inventory and accounting of her

administration as Administratrix of the estate of Linnie Jane Hodges and Special
Administratrix of the estate of C. N. Hodges. However, from manifestations made by
 Avelina A. Magno and her legal counsel, Leon P. Gellada, there is no question she
will claim that at least fifty per cent (50%) of the conjugal assets of the deceased
spouses and the rents, emoluments and income therefrom belong to the Higdon
family who are named in paragraphs Fourth and Fifth of the Will of Linnie Jane
Hodges (p. 5, Rec. Sp. Proc. 1307).

WHEREFORE, premises considered, movant respectfully prays that this Honorable

Court, after due hearing, order:

(1) Avelina A. Magno to submit an inventory and accounting of all of the funds,
properties and assets of any character belonging to the deceased Linnie Jane
Hodges and C. N. Hodges which have come into her possession, with full details of
what she has done with them;

(2) Avelina A. Magno to turn over and deliver to the Administrator of the estate of C.
N. Hodges all of the funds, properties and assets of any character remaining in her
possession;

(3) Pending this Honorable Court's adjudication of the aforesaid issues, Avelina A.
Magno to stop, unless she first secures the conformity of Joe Hodges (or his duly
authorized representative, such as the undersigned attorneys) as the Co-
administrator and attorney-in-fact of a majority of the beneficiaries of the estate of C.
N. Hodges:

(a) Advertising the sale and the sale of the properties of the estates:

(b) Employing personnel and paying them any compensation.

(4) Such other relief as this Honorable Court may deem just and equitable in the
premises. (Annex "T", Petition.)

Almost a year thereafter, or on September 14, 1964, after the co-administrators Joe Hodges and
Fernando P. Mirasol were replaced by herein petitioner Philippine Commercial and Industrial Bank
as sole administrator, pursuant to an agreement of all the heirs of Hodges approved by the court,
and because the above motion of October 5, 1963 had not yet been heard due to the absence from
the country of Atty. Gibbs, petitioner filed the following:

MANIFESTATION AND MOTION, INCLUDING MOTION TO SET

FOR HEARING AND RESOLVE "URGENT MOTION FOR AN
ACCOUNTING AND DELIVERY TO ADMINISTRATORS OF THE
ESTATE OF C. N. HODGES OF ALL THE ASSETS OF THE
CONJUGAL PARTNERSHIP OF THE DECEASED LINNIE JANE
HODGES AND C. N. HODGES EXISTING AS OF MAY 23, 1957
PLUS ALL OF THE RENTS, EMOLUMENTS AND INCOME
THEREFROM OF OCTOBER 5, 1963.

COMES NOW Philippine Commercial and Industrial Bank (hereinafter referred to as

PCIB), the administrator of the estate of C. N. Hodges, deceased, in Special
Proceedings No. 1672, through its undersigned counsel, and to this Honorable Court
respectfully alleges that:
1. On October 5, 1963, Joe Hodges acting as the co-administrator of the estate of C.
N. Hodges filed, through the undersigned attorneys, an "Urgent Motion For An
Accounting and Delivery To Administrator of the Estate of C. N. Hodges of all Of The
Assets Of The Conjugal Partnership of The Deceased Linnie Jane Hodges and C. N.
Hodges Existing as Of May, 23, 1957 Plus All Of The Rents, Emoluments and
Income Therefrom" (pp. 536-542, CFI Rec. S. P. No. 1672).

2. On January 24, 1964 this Honorable Court, on the basis of an amicable agreement
entered into on January 23, 1964 by the two co-administrators of the estate of C. N.
Hodges and virtually all of the heirs of C. N. Hodges (p. 912, CFI Rec., S. P. No.
1672), resolved the dispute over who should act as administrator of the estate of C.
N. Hodges by appointing the PCIB as administrator of the estate of C. N. Hodges
(pp. 905-906, CFI Rec. S. P. No. 1672) and issuing letters of administration to the
PCIB.

3. On January 24, 1964 virtually all of the heirs of C. N. Hodges, Joe Hodges and
Fernando P. Mirasol acting as the two co-administrators of the estate of C. N.
Hodges, Avelina A. Magno acting as the administratrix of the estate of Linnie Jane
Hodges, and Messrs. William Brown and Ardel Young Acting for all of the Higdon
family who claim to be the sole beneficiaries of the estate of Linnie Jane Hodges and
various legal counsel representing the aforenamed parties entered into an amicable
agreement, which was approved by this Honorable Court, wherein the parties thereto
agreed that certain sums of money were to be paid in settlement of different claims
against the two estates and that the assets (to the extent they existed)of both estates
would be administrated jointly by the PCIB as administrator of the estate of C. N.
Hodges and Avelina A. Magno as administratrix of the estate of Linnie Jane Hodges,
subject, however, to the aforesaid October 5, 1963 Motion, namely, the PCIB's claim
to exclusive possession and ownership of one-hundred percent (10017,) (or, in the
alternative, seventy-five percent [75%] of all assets owned by C. N. Hodges or Linnie
Jane Hodges situated in the Philippines. On February 1, 1964 (pp. 934-935, CFI
Rec., S. P. No. 1672) this Honorable Court amended its order of January 24, 1964
but in no way changes its recognition of the aforedescribed basic demand by the
PCIB as administrator of the estate of C. N. Hodges to one hundred percent (100%)
of the assets claimed by both estates.

4. On February 15, 1964 the PCIB filed a "Motion to Resolve" the aforesaid Motion of
October 5, 1963. This Honorable Court set for hearing on June 11, 1964 the Motion
of October 5, 1963.

5. On June 11, 1964, because the undersigned Allison J. Gibbs was absent in the
United States, this Honorable Court ordered the indefinite postponement of the
hearing of the Motion of October 5, 1963.

6. Since its appointment as administrator of the estate of C. N. Hodges the PCIB has
not been able to properly carry out its duties and obligations as administrator of the
estate of C. N. Hodges because of the following acts, among others, of Avelina A.
Magno and those who claim to act for her as administratrix of the estate of Linnie
Jane Hodges:

(a) Avelina A. Magno illegally acts as if she is in exclusive control of

all of the assets in the Philippines of both estates including those
claimed by the estate of C. N. Hodges as evidenced in part by her
 locking the premises at 206-208 Guanco Street, Iloilo City on August
31, 1964 and refusing to reopen same until ordered to do so by this
Honorable Court on September 7, 1964.

(b) Avelina A. Magno illegally acts as though she alone may decide
how the assets of the estate of C.N. Hodges should be administered,
who the PCIB shall employ and how much they may be paid as
evidenced in party by her refusal to sign checks issued by the PCIB
payable to the undersigned counsel pursuant to their fee agreement
approved by this Honorable Court in its order dated March 31, 1964.

(c) Avelina A. Magno illegally gives access to and turns over

possession of the records and assets of the estate of C.N. Hodges to
the attorney-in-fact of the Higdon Family, Mr. James L. Sullivan, as
evidenced in part by the cashing of his personal checks.

(d) Avelina A. Magno illegally refuses to execute checks prepared by

the PCIB drawn to pay expenses of the estate of C. N. Hodges as
evidenced in part by the check drawn to reimburse the PCIB's
advance of P48,445.50 to pay the 1964 income taxes reported due
and payable by the estate of C.N. Hodges.

7. Under and pursuant to the orders of this Honorable Court, particularly those of
January 24 and February 1, 1964, and the mandate contained in its Letters of
Administration issued on January 24, 1964 to the PCIB, it has

"full authority to take possession of all the property of

the deceased C. N. Hodges

"and to perform all other acts necessary for the preservation of said
property." (p. 914, CFI Rec., S.P. No. 1672.)

8. As administrator of the estate of C. N. Hodges, the PCIB claims the right to the
immediate exclusive possession and control of all of the properties, accounts
receivables, court cases, bank accounts and other assets, including the documentary
records evidencing same, which existed in the Philippines on the date of C. N.
Hodges' death, December 25, 1962, and were in his possession and registered in his
name alone. The PCIB knows of no assets in the Philippines registered in the name
of Linnie Jane Hodges, the estate of Linnie Jane Hodges, or, C. N. Hodges, Executor
of the Estate of Linnie Jane Hodges on December 25, 1962. All of the assets of
which the PCIB has knowledge are either registered in the name of C. N. Hodges,
alone or were derived therefrom since his death on December 25, 1962.

9. The PCIB as the current administrator of the estate of C. N. Hodges, deceased,

succeeded to all of the rights of the previously duly appointed administrators of the
estate of C. N. Hodges, to wit:

(a) On December 25, 1962, date of C. N. Hodges' death, this

Honorable Court appointed Miss Avelina A. Magno simultaneously
as:
 (i) Administratrix of the estate of Linnie Jane Hodges (p. 102, CFI
Rec., S.P. No. 1307) to replace the deceased C. N. Hodges who on
May 28, 1957 was appointed Special Administrator (p. 13. CFI Rec.
S.P. No. 1307) and on July 1, 1957 Executor of the estate of Linnie
Jane Hodges (p. 30, CFI Rec., S. P. No. 1307).

(ii) Special Administratrix of the estate of C. N. Hodges (p. 102, CFI

Rec., S.P. No. 1307).

(b) On December 29, 1962 this Honorable Court appointed Harold K.

Davies as co-special administrator of the estate of C.N. Hodges along
with Avelina A. Magno (pp. 108-111, CFI Rec., S. P. No. 1307).

(c) On January 22, 1963, with the conformity of Avelina A. Magno,

Harold K. Davies resigned in favor of Joe Hodges (pp. 35-36, CFI
Rec., S.P. No. 1672) who thereupon was appointed on January 22,
1963 by this Honorable Court as special co-administrator of the
estate of C.N. Hodges (pp. 38-40 & 43, CFI Rec. S.P. No. 1672)
along with Miss Magno who at that time was still acting as special co-
administratrix of the estate of C. N. Hodges.

(d) On February 22, 1963, without objection on the part of Avelina A.

Magno, this Honorable Court appointed Joe Hodges and Fernando P.
Mirasol as co-administrators of the estate of C.N. Hodges (pp. 76-78,
81 & 85, CFI Rec., S.P. No. 1672).

10. Miss Avelina A. Magno, pursuant to the orders of this Honorable Court of
December 25, 1962, took possession of all Philippine Assets now claimed by the two
estates. Legally, Miss Magno could take possession of the assets registered in the
name of C. N. Hodges alone only in her capacity as Special Administratrix of the
Estate of C.N. Hodges. With the appointment by this Honorable Court on February
22, 1963 of Joe Hodges and Fernando P. Mirasol as the co-administrators of the
estate of C.N. Hodges, they legally were entitled to take over from Miss Magno the
full and exclusive possession of all of the assets of the estate of C.N. Hodges. With
the appointment on January 24, 1964 of the PCIB as the sole administrator of the
estate of C.N. Hodges in substitution of Joe Hodges and Fernando P. Mirasol, the
PCIB legally became the only party entitled to the sole and exclusive possession of
all of the assets of the estate of C. N. Hodges.

11. The PCIB's predecessors submitted their accounting and this Honorable Court
approved same, to wit:

(a) The accounting of Harold K. Davies dated January 18, 1963 (pp.
16-33, CFI Rec. S.P. No. 1672); which shows or its face the:

(i) Conformity of Avelina A. Magno acting as "Administratrix of the

Estate of Linnie Jane Hodges and Special Administratrix of the Estate
of C. N. Hodges";

(ii) Conformity of Leslie Echols, a Texas lawyer acting for the heirs of
C.N. Hodges; and
 (iii) Conformity of William Brown, a Texas lawyer acting for the
Higdon family who claim to be the only heirs of Linnie Jane Hodges
(pp. 18, 25-33, CFI Rec., S. P. No. 1672).

Note: This accounting was approved by this Honorable Court on January 22, 1963
(p. 34, CFI Rec., S. P. No. 1672).

(b) The accounting of Joe Hodges and Fernando P. Mirasol as of

January 23, 1964, filed February 24, 1964 (pp. 990-1000, CFI Rec.
S.P. No. 1672 and pp. 1806-1848, CFI Rec. S.P. No. 1307).

Note: This accounting was approved by this Honorable Court on March 3, 1964.

(c) The PCIB and its undersigned lawyers are aware of no report or
accounting submitted by Avelina A. Magno of her acts as
administratrix of the estate of Linnie Jane Hodges or special
administratrix of the estate of C.N. Hodges, unless it is the accounting
of Harold K. Davies as special co-administrator of the estate of C.N.
Hodges dated January 18, 1963 to which Miss Magno manifested her
conformity (supra).

12. In the aforesaid agreement of January 24, 1964, Miss Avelina A. Magno agreed to receive
P10,000.00

"for her services as administratrix of the estate of Linnie Jane

Hodges"

and in addition she agreed to be employed, starting February 1, 1964, at

"a monthly salary of P500.00 for her services as an employee of both

estates."

24 ems.

13. Under the aforesaid agreement of January 24, 1964 and the orders of this
Honorable Court of same date, the PCIB as administrator of the estate of C. N.
Hodges is entitled to the exclusive possession of all records, properties and assets in
the name of C. N. Hodges as of the date of his death on December 25, 1962 which
were in the possession of the deceased C. N. Hodges on that date and which then
passed to the possession of Miss Magno in her capacity as Special Co-Administratrix
of the estate of C. N. Hodges or the possession of Joe Hodges or Fernando P.
Mirasol as co-administrators of the estate of C. N. Hodges.

14. Because of Miss Magno's refusal to comply with the reasonable request of PCIB
concerning the assets of the estate of C. N. Hodges, the PCIB dismissed Miss
Magno as an employee of the estate of C. N. Hodges effective August 31, 1964. On
September 1, 1964 Miss Magno locked the premises at 206-208 Guanco Street and
denied the PCIB access thereto. Upon the Urgent Motion of the PCIB dated
September 3, 1964, this Honorable Court on September 7, 1964 ordered Miss
Magno to reopen the aforesaid premises at 206-208 Guanco Street and permit the
PCIB access thereto no later than September 8, 1964.
15. The PCIB pursuant to the aforesaid orders of this Honorable Court is again in
physical possession of all of the assets of the estate of C. N. Hodges. However, the
PCIB is not in exclusive control of the aforesaid records, properties and assets
because Miss Magno continues to assert the claims hereinabove outlined in
paragraph 6, continues to use her own locks to the doors of the aforesaid premises
at 206-208 Guanco Street, Iloilo City and continues to deny the PCIB its right to know
the combinations to the doors of the vault and safes situated within the premises at
206-208 Guanco Street despite the fact that said combinations were known to only
C. N. Hodges during his lifetime.

16. The Philippine estate and inheritance taxes assessed the estate of Linnie Jane
Hodges were assessed and paid on the basis that C. N. Hodges is the sole
beneficiary of the assets of the estate of Linnie Jane Hodges situated in the
Philippines. Avelina A. Magno and her legal counsel at no time have questioned the
validity of the aforesaid assessment and the payment of the corresponding Philippine
death taxes.

17. Nothing further remains to be done in the estate of Linnie Jane Hodges except to
resolve the aforesaid Motion of October 5, 1963 and grant the PCIB the exclusive
possession and control of all of the records, properties and assets of the estate of C.
N. Hodges.

18. Such assets as may have existed of the estate of Linnie Jane Hodges were
ordered by this Honorable Court in special Proceedings No. 1307 to be turned over
and delivered to C. N. Hodges alone. He in fact took possession of them before his
death and asserted and exercised the right of exclusive ownership over the said
assets as the sole beneficiary of the estate of Linnie Jane Hodges.

WHEREFORE, premises considered, the PCIB respectfully petitions that this

Honorable court:

(1) Set the Motion of October 5, 1963 for hearing at the earliest possible date with
notice to all interested parties;

(2) Order Avelina A. Magno to submit an inventory and accounting as Administratrix

of the Estate of Linnie Jane Hodges and Co-Administratrix of the Estate of C. N.
Hodges of all of the funds, properties and assets of any character belonging to the
deceased Linnie Jane Hodges and C. N. Hodges which have come into her
possession, with full details of what she has done with them;

(3) Order Avelina A. Magno to turn over and deliver to the PCIB as administrator of
the estate of C. N. Hodges all of the funds, properties and assets of any character
remaining in her possession;

(4) Pending this Honorable Court's adjudication of the aforesaid issues, order Avelina
A. Magno and her representatives to stop interferring with the administration of the
estate of C. N. Hodges by the PCIB and its duly authorized representatives;

(5) Enjoin Avelina A. Magno from working in the premises at 206-208 Guanco Street,
Iloilo City as an employee of the estate of C. N. Hodges and approve her dismissal
as such by the PCIB effective August 31, 1964;
 (6) Enjoin James L. Sullivan, Attorneys Manglapus and Quimpo and others allegedly
representing Miss Magno from entering the premises at 206-208 Guanco Street,
Iloilo City or any other properties of C. N. Hodges without the express permission of
the PCIB;

(7) Order such other relief as this Honorable Court finds just and equitable in the
premises. (Annex "U" Petition.)

On January 8, 1965, petitioner also filed a motion for "Official Declaration of Heirs of Linnie Jane
Hodges Estate" alleging:

COMES NOW Philippine Commercial and Industrial Bank (hereinafter referred to as PCIB), as
administrator of the estate of the late C. N. Hodges, through the undersigned counsel, and to this
Honorable Court respectfully alleges that:

1. During their marriage, spouses Charles Newton Hodges and Linnie Jane Hodges,
American citizens originally from the State of Texas, U.S.A., acquired and
accumulated considerable assets and properties in the Philippines and in the States
of Texas and Oklahoma, United States of America. All said properties constituted
their conjugal estate.

2. Although Texas was the domicile of origin of the Hodges spouses, this Honorable
Court, in its orders dated March 31 and December 12, 1964 (CFI Record, Sp. Proc.
No. 1307, pp. ----; Sp. Proc. No. 1672, p. ----), conclusively found and categorically
ruled that said spouses had lived and worked for more than 50 years in Iloilo City and
had, therefore, acquired a domicile of choice in said city, which they retained until the
time of their respective deaths.

3. On November 22, 1952, Linnie Jane Hodges executed in the City of Iloilo her Last
Will and Testament, a copy of which is hereto attached as Annex "A". The bequests
in said will pertinent to the present issue are the second, third, and fourth provisions,
which we quote in full hereunder.

SECOND: I give, devise and bequeath all of the rest, residue and
remainder of my estate, both personal and real, wherever situated, or
located, to my husband, Charles Newton Hodges, to have and to hold
unto him, my said husband during his natural lifetime.

THIRD: I desire, direct and provide that my husband, Charles Newton

Hodges, shall have the right to manage, control, use and enjoy said
estate during his lifetime, and he is hereby given the right to make
any changes in the physical properties of said estate by sale of any
part thereof which he think best, and the purchase of any other or
additional property as he may think best; to execute conveyances
with or without general or special warranty, conveying in fee simple or
for any other term or time, any property which he may deem proper to
dispose of; to lease any of the real property for oil, gas and/or other
minerals, and all such deeds or leases shall pass the absolute fee
simple title to the interest so conveyed in such property as he may
elect to sell. All rents, emoluments and income from said estate shall
belong to him, and he is further authorized to use any part of the
principal of said estate as he may need or desire. It is provided
 herein, however, that he shall not sell or otherwise dispose of any of
the improved property now owned by us located at, in or near the City
of Lubbock, Texas, but he shall have the full right to lease, manage
and enjoy the same during his lifetime, as above provided. He shall
have the right to sub-divide any farmland and sell lots therein, and
may sell unimproved town lots.

FOURTH: At the death of my said husband, Charles Newton Hodges,

I give, devise and bequeath all of the rest, residue and remainder of
my estate both real and personal, wherever situated or located, to be
equally divided among my brothers and sisters, share and share
alike, namely:

"Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie

Rascoe, Era Boman and Nimray Higdon."

4. On November 14, 1953, C. N. Hodges executed in the City of Iloilo his Last Will
and Testament, a copy of which is hereto attached as Annex "B ". In said Will, C. N.
Hodges designated his wife, Linnie Jane Hodges, as his beneficiary using the
identical language she used in the second and third provisos of her Will, supra.

5. On May 23, 1957 Linnie Jane Hodges died in Iloilo City, predeceasing her
husband by more than five (5) years. At the time of her death, she had no forced or
compulsory heir, except her husband, C. N. Hodges. She was survived also by
various brothers and sisters mentioned in her Will (supra), which, for convenience,
we shall refer to as the HIGDONS.

6. On June 28, 1957, this Honorable Court admitted to probate the Last Will and
Testament of the deceased Linnie Jane Hodges (Annex "A"), and appointed C. N.
Hodges as executor of her estate without bond. (CFI Record, Sp. Proc. No. 1307, pp.
24-25). On July 1, 1957, this Honorable Court issued letters testamentary to C. N.
Hodges in the estate of Linnie Jane Hodges. (CFI Record, Sp. Proc. No. 1307, p.
30.)

7. The Will of Linnie Jane Hodges, with respect to the order of succession, the
amount of successional rights, and the intrinsic of its testamentary provisions, should
be governed by Philippine laws because:

(a) The testatrix, Linnie Jane Hodges, intended Philippine laws to

govern her Will;

(b) Article 16 of the Civil Code provides that "the national law of the
person whose succession is under consideration, whatever may be
the nature of the property and regardless of the country wherein said
property may be found", shall prevail. However, the Conflict of Law of
Texas, which is the "national law" of the testatrix, Linnie Jane
Hodges, provide that the domiciliary law (Philippine law — see
paragraph 2, supra) should govern the testamentary dispositions and
successional rights over movables (personal properties), and the law
of the situs of the property (also Philippine law as to properties
located in the Philippines) with regards immovable (real properties).
Thus applying the "Renvoi Doctrine", as approved and applied by our
 Supreme Court in the case of "In The Matter Of The Testate Estate of
Eduard E. Christensen", G.R. No.
L-16749, promulgated January 31, 1963, Philippine law should apply
to the Will of Linnie Jane Hodges and to the successional rights to
her estate insofar as her movable and immovable assets in the
Philippines are concerned. We shall not, at this stage, discuss what
law should govern the assets of Linnie Jane Hodges located in
Oklahoma and Texas, because the only assets in issue in this motion
are those within the jurisdiction of this motion Court in the two above-
captioned Special Proceedings.

8. Under Philippine and Texas law, the conjugal or community estate of spouses
shall, upon dissolution, be divided equally between them. Thus, upon the death of
Linnie Jane Hodges on May 23, 1957, one-half (1/2) of the entirety of the assets of
the Hodges spouses constituting their conjugal estate pertained automatically to
Charles Newton Hodges, not by way of inheritance, but in his own right as partner in
the conjugal partnership. The other one-half (1/2) portion of the conjugal estate
constituted the estate of Linnie Jane Hodges. This is the only portion of the conjugal
estate capable of inheritance by her heirs.

9. This one-half (1/2) portion of the conjugal assets pertaining to Linnie Jane Hodges
cannot, under a clear and specific provision of her Will, be enhanced or increased by
income, earnings, rents, or emoluments accruing after her death on May 23, 1957.
Linnie Jane Hodges' Will provides that "all rents, emoluments and income from said
estate shall belong to him (C. N. Hodges) and he is further authorized to use any part
of the principal of said estate as he may need or desire." (Paragraph 3, Annex "A".)
Thus, by specific provision of Linnie Jane Hodges' Will, "all rents, emoluments and
income" must be credited to the one-half (1/2) portion of the conjugal estate
pertaining to C. N. Hodges. Clearly, therefore, the estate of Linnie Jane Hodges,
capable of inheritance by her heirs, consisted exclusively of no more than one-half
(1/2) of the conjugal estate, computed as of the time of her death on May 23, 1957.

10. Articles 900, 995 and 1001 of the New Civil Code provide that the surviving
spouse of a deceased leaving no ascendants or descendants is entitled, as a matter
of right and by way of irrevocable legitime, to at least one-half (1/2) of the estate of
the deceased, and no testamentary disposition by the deceased can legally and
validly affect this right of the surviving spouse. In fact, her husband is entitled to said
one-half (1/2) portion of her estate by way of legitime. (Article 886, Civil Code.)
Clearly, therefore, immediately upon the death of Linnie Jane Hodges, C. N. Hodges
was the owner of at least three-fourths (3/4) or seventy-five (75%) percent of all of
the conjugal assets of the spouses, (1/2 or 50% by way of conjugal partnership share
and 1/4 or 25% by way of inheritance and legitime) plus all "rents, emoluments and
income" accruing to said conjugal estate from the moment of Linnie Jane Hodges'
death (see paragraph 9, supra).

11. The late Linnie Jane Hodges designated her husband C.N. Hodges as her sole
and exclusive heir with full authority to do what he pleased, as exclusive heir and
owner of all the assets constituting her estate, except only with regards certain
properties "owned by us, located at, in or near the City of Lubbock, Texas". Thus,
even without relying on our laws of succession and legitime, which we have cited
above, C. N. Hodges, by specific testamentary designation of his wife, was entitled to
the entirely to his wife's estate in the Philippines.
12. Article 777 of the New Civil Code provides that "the rights of the successor are
transmitted from the death of the decedent". Thus, title to the estate of Linnie Jane
Hodges was transmitted to C. N. Hodges immediately upon her death on May 23,
1957. For the convenience of this Honorable Court, we attached hereto as Annex "C"
a graph of how the conjugal estate of the spouses Hodges should be divided in
accordance with Philippine law and the Will of Linnie Jane Hodges.

13. In his capacity as sole heir and successor to the estate of Linnie Jane Hodges as
above-stated, C. N. Hodges, shortly after the death of Linnie Jane Hodges,
appropriated to himself the entirety of her estate. He operated all the assets,
engaged in business and performed all acts in connection with the entirety of the
conjugal estate, in his own name alone, just as he had been operating, engaging and
doing while the late Linnie Jane Hodges was still alive. Upon his death on December
25, 1962, therefore, all said conjugal assets were in his sole possession and control,
and registered in his name alone, not as executor, but as exclusive owner of all said
assets.

14. All these acts of C. N. Hodges were authorized and sanctioned expressly and
impliedly by various orders of this Honorable Court, as follows:

(a) In an Order dated May 27, 1957, this Honorable Court ruled that C. N. Hodges "is
allowed or authorized to continue the business in which he was engaged, and to
perform acts which he had been doing while the deceased was living." (CFI Record,
Sp. Proc. No. 1307, p. 11.)

(b) On December 14, 1957, this Honorable Court, on the basis of the following fact,
alleged in the verified Motion dated December 11, 1957 filed by Leon P. Gellada as
attorney for the executor C. N. Hodges:

That herein Executor, (is) not only part owner of the properties left as conjugal, but
also, the successor to all the properties left by the deceased Linnie Jane Hodges.'
(CFI Record, Sp. Proc. No. 1307, p. 44; emphasis supplied.)

issued the following order:

"As prayed for by Attorney Gellada, counsel for the Executor, for the reasons stated
in his motion dated December 11, 1957, which the Court considers well taken, all the
sales, conveyances, leases and mortgages of all the properties left by the deceased
Linnie Jane Hodges executed by the Executor, Charles Newton Hodges are hereby
APPROVED. The said Executor is further authorized to execute subsequent sales,
conveyances, leases and mortgages of the properties left by the said deceased
Linnie Jane Hodges in consonance with the wishes contained in the last will and
testament of the latter." (CFI Record. Sp. Proc. No. 1307, p. 46; emphasis supplied.)

24 ems

(c) On April 21, 1959, this Honorable Court approved the verified inventory and
accounting submitted by C. N. Hodges through his counsel Leon P. Gellada on April
14, 1959 wherein he alleged among other things,

"That no person interested in the Philippines of the time and place of

examining the herein account, be given notice, as herein executor is
 the only devisee or legatee of the deceased, in accordance with the
last will and testament already probated by the Honorable Court."
(CFI Record, Sp. Proc. No. 1307, pp. 77-78; emphasis supplied.)

(d) On July 20, 1960, this Honorable Court approved the verified "Annual Statement
of Account" submitted by C. N. Hodges through his counsel Leon P. Gellada on July
21, 1960 wherein he alleged, among other things.

"That no person interested in the Philippines of the time and place of

examining the herein account, be given notice as herein executor is
the only devisee or legatee of the deceased Linnie Jane Hodges, in
accordance with the last will and testament ofthe deceased, already
probated by this Honorable Court." (CFI Record, Sp. Proc. No. 1307,
pp. 81-82; emphasis supplied.)

(e) On May 2, 1961, this Honorable Court approved the verified "Annual Statement of
Account By The Executor For the Year 1960" submitted through Leon P. Gellada on
April 20, 1961 wherein he alleged:

"That no person interested in the Philippines be given notice, ofthe time and place of
examining the herein account, as herein executor is the only devisee or legatee of
the deceased Linnie Jane Hodges, in accordance with the last will and testament
ofthe deceased, already probated by this Honorable Court." (CFI Record, Sp. Proc.
No. 1307, pp. 90-91; emphasis supplied.)

15. Since C. N. Hodges was the sole and exclusive heir of Linnie Jane Hodges, not
only by law, but in accordance with the dispositions of her will, there was, in fact, no
need to liquidate the conjugal estate of the spouses. The entirely of said conjugal
estate pertained to him exclusively, therefore this Honorable Court sanctioned and
authorized, as above-stated, C. N. Hodges to manage, operate and control all the
conjugal assets as owner.

16. By expressly authorizing C. N. Hodges to act as he did in connection with the

estate of his wife, this Honorable Court has (1) declared C. N. Hodges as the sole
heir of the estate of Linnie Jane Hodges, and (2) delivered and distributed her estate
to C. N. Hodges as sole heir in accordance with the terms and conditions of her Will.
Thus, although the "estate of Linnie Jane Hodges" still exists as a legal and juridical
personality, it had no assets or properties located in the Philippines registered in its
name whatsoever at the time of the death of C. N. Hodges on December 25, 1962.

17. The Will of Linnie Jane Hodges (Annex "A"), fourth paragraph, provides as
follows:

"At the death of my said husband, Charles Newton Hodges, I give,

devise and bequeath all of the rest, residue and remainder of my
estate both real and personal, wherever situated or located, to be
equally divided among my brothers and sisters, share and share
alike, namely:

"Esta Higdon, Emma Howell, Leonard Higdon, Roy

Higdon, Sadie Rascoe, Era Boman and Nimray
Higdon."
Because of the facts hereinabove set out there is no "rest, residue and remainder", at
least to the extent of the Philippine assets, which remains to vest in the HIGDONS,
assuming this proviso in Linnie Jane Hodges' Will is valid and binding against the
estate of C. N. Hodges.

18. Any claims by the HIGDONS under the above-quoted provision of Linnie Jane
Hodges' Will is without merit because said provision is void and invalid at least as to
the Philippine assets. It should not, in anyway, affect the rights of the estate of C. N.
Hodges or his heirs to the properties, which C. N. Hodges acquired by way of
inheritance from his wife Linnie Jane Hodges upon her death.

(a) In spite of the above-mentioned provision in the Will of Linnie

Jane Hodges, C. N. Hodges acquired, not merely a usufructuary
right, but absolute title and ownership to her estate. In a recent case
involving a very similar testamentary provision, the Supreme Court
held that the heir first designated acquired full ownership of the
property bequeathed by the will, not mere usufructuary rights.
(Consolacion Florentino de Crisologo, et al., vs. Manuel Singson, G.
R. No. L-13876, February 28, 1962.)

(b) Article 864, 872 and 886 of the New Civil Code clearly provide
that no charge, condition or substitution whatsoever upon the legitime
can be imposed by a testator. Thus, under the provisions of Articles
900, 995 and 1001 of the New Civil Code, the legitime of a surviving
spouse is 1/2 of the estate of the deceased spouse. Consequently,
the above-mentioned provision in the Will of Linnie Jane Hodges is
clearly invalid insofar as the legitime of C. N. Hodges was concerned,
which consisted of 1/2 of the 1/2 portion of the conjugal estate, or 1/4
of the entire conjugal estate of the deceased.

(c) There are generally only two kinds of substitution provided for and
authorized by our Civil Code (Articles 857-870), namely, (1) simple or
common substitution, sometimes referred to as vulgar substitution
(Article 859), and (2) fideicommissary substitution (Article 863). All
other substitutions are merely variations of these. The substitution
provided for by paragraph four of the Will of Linnie Jane Hodges is
not fideicommissary substitution, because there is clearly no
obligation on the part of C. N. Hodges as the first heir designated, to
preserve the properties for the substitute heirs. (Consolacion
Florentino de Crisologo et al. vs. Manuel Singson, G. R. No.
L-13876.) At most, it is a vulgar or simple substitution. However, in
order that a vulgar or simple substitution can be valid, three
alternative conditions must be present, namely, that the first
designated heir (1) should die before the testator; or (2) should not
wish to accept the inheritance; or (3) should be incapacitated to do
so. None of these conditions apply to C. N. Hodges, and, therefore,
the substitution provided for by the above-quoted provision of the Will
is not authorized by the Code, and, therefore, it is void. Manresa,
commenting on these kisses of substitution, meaningfully stated that:
"... cuando el testador instituyeun primer heredero, y por fallecimiento
de este nombra otro u otros, ha de entenderse que estas segundas
designaciones solo han de llegar a tener efectividad en el caso de
que el primer instituido muera antes que el testador, fuera o no esta
 su verdadera intencion. ...". (6 Manresa, 7 a ed., pag. 175.) In other
words, when another heir is designated to inherit upon the death of a
first heir, the second designation can have effect only in case the first
instituted heir dies before the testator, whether or not that was the
true intention of said testator. Since C. N. Hodges did not die before
Linnie Jane Hodges, the provision for substitution contained in Linnie
Jane Hodges' Willis void.

(d) In view of the invalidity of the provision for substitution in the Will,
C. N. Hodges' inheritance to the entirety of the Linnie Jane Hodges
estate is irrevocable and final.

19. Be that as it may, at the time of C. N. Hodges' death, the entirety of the conjugal
estate appeared and was registered in him exclusively as owner. Thus, the
presumption is that all said assets constituted his estate. Therefore —

(a) If the HIGDONS wish to enforce their dubious rights as substituted heirs to 1/4 of
the conjugal estate (the other 1/4 is covered by the legitime of C. N. Hodges which
can not be affected by any testamentary disposition), their remedy, if any, is to file
their claim against the estate of C. N. Hodges, which should be entitled at the
present time to full custody and control of all the conjugal estate of the spouses.

(b) The present proceedings, in which two estates exist under separate
administration, where the administratrix of the Linnie Jane Hodges estate exercises
an officious right to object and intervene in matters affecting exclusively the C. N.
Hodges estate, is anomalous.

WHEREFORE, it is most respectfully prayed that after trial and reception of

evidence, this Honorable Court declare:

1. That the estate of Linnie Jane Hodges was and is composed exclusively of one-
half (1/2) share in the conjugal estate of the spouses Hodges, computed as of the
date of her death on May 23, 1957;

2. That the other half of the conjugal estate pertained exclusively to C. N. Hodges as
his share as partner in the conjugal partnership;

3. That all "rents, emoluments and income" of the conjugal estate accruing after
Linnie Jane Hodges' death pertains to C. N. Hodges;

4. That C. N. Hodges was the sole and exclusive heir of the estate of Linnie Jane
Hodges;

5. That, therefore, the entire conjugal estate of the spouses located in the
Philippines, plus all the "rents, emoluments and income" above-mentioned, now
constitutes the estate of C. N. Hodges, capable of distribution to his heirs upon
termination of Special Proceedings No. 1672;

6. That PCIB, as administrator of the estate of C. N. Hodges, is entitled to full and

exclusive custody, control and management of all said properties; and
 7. That Avelina A. Magno, as administratrix of the estate of Linnie Jane Hodges, as
well as the HIGDONS, has no right to intervene or participate in the administration of
the C. N. Hodges estate.

PCIB further prays for such and other relief as may be deemed just and equitable in
the premises."

(Record, pp. 265-277)

Before all of these motions of petitioner could be resolved, however, on December 21, 1965, private
respondent Magno filed her own "Motion for the Official Declaration of Heirs of the Estate of Linnie
Jane Hodges" as follows:

COMES NOW the Administratrix of the Estate of Linnie Jane Hodges and, through
undersigned counsel, unto this Honorable Court most respectfully states and
manifests:

1. That the spouses Charles Newton Hodges and Linnie Jane Hodges were
American citizens who died at the City of Iloilo after having amassed and
accumulated extensive properties in the Philippines;

2. That on November 22, 1952, Linnie Jane Hodges executed a last will and
testament (the original of this will now forms part of the records of these proceedings
as Exhibit "C" and appears as Sp. Proc. No. 1307, Folio I, pp. 17-18);

3. That on May 23, 1957, Linnie Jane Hodges died at the City of Iloilo at the time
survived by her husband, Charles Newton Hodges, and several relatives named in
her last will and testament;

4. That on June 28, 1957, a petition therefor having been priorly filed and duly heard,
this Honorable Court issued an order admitting to probate the last will and testament
of Linnie Jane Hodges (Sp. Proc. No. 1307, Folio I, pp. 24-25, 26-28);

5. That the required notice to creditors and to all others who may have any claims
against the decedent, Linnie Jane Hodges has already been printed, published and
posted (Sp. Proc. No. 1307, Folio I. pp. 34-40) and the reglamentary period for filing
such claims has long ago lapsed and expired without any claims having been
asserted against the estate of Linnie Jane Hodges, approved by the
Administrator/Administratrix of the said estate, nor ratified by this Honorable Court;

6. That the last will and testament of Linnie Jane Hodges already admitted to probate
contains an institution of heirs in the following words:

"SECOND: I give, devise and bequeath all of the rest, residue and
remainder of my estate, both personal and real, wherever situated or
located, to my beloved husband, Charles Newton Hodges to have
and to hold unto him, my said husband, during his natural lifetime.

THIRD: I desire, direct and provide that my husband, Charles Newton

Hodges, shall have the right to manage, control, use and enjoy said
estate during his lifetime, and, he is hereby given the right to make
 any changes in the physical properties of said estate, by sale of any
part thereof which he may think best, and the purchase of any other
or additional property as he may think best; to execute conveyances
with or without general or special warranty, conveying in fee simple or
for any other term or time, any property which he may deem proper to
dispose of; to lease any of the real property for oil, gas and/or other
minerals, and all such deeds or leases shall pass the absolute fee
simple title to the interest so conveyed in such property as he elect to
sell. All rents, emoluments and income from said estate shall belong
to him, and he is further authorized to use any part of the principal of
said estate as he may need or desire. It is provided herein, however,
that he shall not sell or otherwise dispose of any of the improved
property now owned by us located at, in or near the City of Lubbock
Texas, but he shall have the full right to lease, manage and enjoy the
same during his lifetime, above provided. He shall have the right to
subdivide any farm land and sell lots therein, and may sell
unimproved town lots.

FOURTH: At the death of my said husband, Charles Newton Hodges,

I give, devise and bequeath all of the rest, residue and remainder of
my estate, both real and personal, wherever situated or located, to be
equally divided among my brothers and sisters, share and share
alike, namely:

Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie

Rascoe, Era Boman and Nimroy Higdon.

FIFTH: In case of the death of any of my brothers and/or sisters

named in item Fourth, above, prior to the death of my husband,
Charles Newton Hodges, then it is my will and bequest that the heirs
of such deceased brother or sister shall take jointly the share which
would have gone to such brother or sister had she or he survived."

7. That under the provisions of the last will and testament already above-quoted,
Linnie Jane Hodges gave a life-estate or a usufruct over all her estate to her
husband, Charles Newton Hodges, and a vested remainder-estate or the naked title
over the same estate to her relatives named therein;

8. That after the death of Linnie Jane Hodges and after the admission to probate of
her last will and testament, but during the lifetime of Charles Newton Hodges, the
said Charles Newton Hodges with full and complete knowledge of the life-estate or
usufruct conferred upon him by the will since he was then acting as Administrator of
the estate and later as Executor of the will of Linnie Jane Hodges, unequivocably and
clearly through oral and written declarations and sworn public statements,
renounced, disclaimed and repudiated his life-estate and usufruct over the estate of
Linnie Jane Hodges;

9. That, accordingly, the only heirs left to receive the estate of Linnie Jane Hodges
pursuant to her last will and testament, are her named brothers and sisters, or their
heirs, to wit: Esta Higdon, Emma Howell, Leonard Higdon, Aline Higdon and David
Higdon, the latter two being the wife and son respectively of the deceased Roy
Higdon, Sadie Rascoe Era Boman and Nimroy Higdon, all of legal ages, American
citizens, with residence at the State of Texas, United States of America;

10. That at the time of the death of Linnie Jane Hodges on May 23, 1957, she was
the co-owner (together with her husband Charles Newton Hodges) of an undivided
one-half interest in their conjugal properties existing as of that date, May 23, 1957,
which properties are now being administered sometimes jointly and sometimes
separately by the Administratrix of the estate of Linnie Jane Hodges and/or the
Administrator of the estate of C. N. Hodges but all of which are under the control and
supervision of this Honorable Court;

11. That because there was no separation or segregation of the interests of husband
and wife in the combined conjugal estate, as there has been no such separation or
segregation up to the present, both interests have continually earned exactly the
same amount of "rents, emoluments and income", the entire estate having been
continually devoted to the business of the spouses as if they were alive;

12. That the one-half interest of Linnie Jane Hodges in the combined conjugal estate
was earning "rents, emoluments and income" until her death on May 23, 1957, when
it ceased to be saddled with any more charges or expenditures which are purely
personal to her in nature, and her estate kept on earning such "rents, emoluments
and income" by virtue of their having been expressly renounced, disclaimed and
repudiated by Charles Newton Hodges to whom they were bequeathed for life under
the last will and testament of Linnie Jane Hodges;

13. That, on the other hand, the one-half interest of Charles Newton Hodges in the
combined conjugal estate existing as of May 23, 1957, while it may have earned
exactly the same amount of "rents, emoluments and income" as that of the share
pertaining to Linnie Jane Hodges, continued to be burdened by charges,
expenditures, and other dispositions which are purely personal to him in nature, until
the death of Charles Newton Hodges himself on December 25, 1962;

14. That of all the assets of the combined conjugal estate of Linnie Jane Hodges and
Charles Newton Hodges as they exist today, the estate of Linnie Jane Hodges is
clearly entitled to a portion more than fifty percent (50%) as compared to the portion
to which the estate of Charles Newton Hodges may be entitled, which portions can
be exactly determined by the following manner:

a. An inventory must be made of the assets of the combined conjugal

estate as they existed on the death of Linnie Jane Hodges on May
23, 1957 — one-half of these assets belong to the estate of Linnie
Jane Hodges;

b. An accounting must be made of the "rents, emoluments and

income" of all these assets — again one-half of these belong to the
estate of Linnie Jane Hodges;

c. Adjustments must be made, after making a deduction of charges,

disbursements and other dispositions made by Charles Newton
Hodges personally and for his own personal account from May 23,
1957 up to December 25, 1962, as well as other charges,
 disbursements and other dispositions made for him and in his behalf
since December 25, 1962 up to the present;

15. That there remains no other matter for disposition now insofar as the estate of
Linnie Jane Hodges is concerned but to complete the liquidation of her estate,
segregate them from the conjugal estate, and distribute them to her heirs pursuant to
her last will and testament.

WHEREFORE, premises considered, it is most respectfully moved and prayed that

this Honorable Court, after a hearing on the factual matters raised by this motion,
issue an order:

a. Declaring the following persons, to wit: Esta Higdon, Emma Howell, Leonard
Higdon, Aline Higdon, David Higdon, Sadie Rascoe, Era Boman and Nimroy Higdon,
as the sole heirs under the last will and testament of Linnie Jane Hodges and as the
only persons entitled to her estate;

b. Determining the exact value of the estate of Linnie Jane Hodges in accordance
with the system enunciated in paragraph 14 of this motion;

c. After such determination ordering its segregation from the combined conjugal
estate and its delivery to the Administratrix of the estate of Linnie Jane Hodges for
distribution to the heirs to whom they properly belong and appertain.

(Green Record on Appeal, pp. 382-391)

whereupon, instead of further pressing on its motion of January 8, 1965 aforequoted, as it had been
doing before, petitioner withdrew the said motion and in addition to opposing the above motion of
respondent Magno, filed a motion on April 22, 1966 alleging in part that:

1. That it has received from the counsel for the administratrix of the supposed estate
of Linnie Jane Hodges a notice to set her "Motion for Official Declaration of Heirs of
the Estate of Linnie Jane Hodges";

2. That before the aforesaid motion could be heard, there are matters pending before
this Honorable Court, such as:

a. The examination already ordered by this Honorable Court of

documents relating to the allegation of Avelina Magno that Charles
Newton Hodges "through ... written declarations and sworn public
statements, renounced, disclaimed and repudiated life-estate and
usufruct over the estate of Linnie Jane Hodges';

b. That "Urgent Motion for An Accounting and Delivery to the Estate

of C. N. Hodges of All the Assets of the Conjugal Partnership of the
Deceased Linnie Jane Hodges and C. N. Hodges Existing as of May
23, 1957 Plus All the Rents, Emoluments and Income Therefrom";

c. Various motions to resolve the aforesaid motion;

 d. Manifestation of September 14, 1964, detailing acts of interference
of Avelina Magno under color of title as administratrix of the Estate of
Linnie Jane Hodges;

which are all prejudicial, and which involve no issues of fact, all facts involved therein
being matters of record, and therefore require only the resolution of questions of law;

3. That whatever claims any alleged heirs or other persons may have could be very
easily threshed out in the Testate Estate of Charles Newton Hodges;

4. That the maintenance of two separate estate proceedings and two administrators
only results in confusion and is unduly burdensome upon the Testate Estate of
Charles Newton Hodges, particularly because the bond filed by Avelina Magno is
grossly insufficient to answer for the funds and property which she has inofficiously
collected and held, as well as those which she continues to inofficiously collect
and hold;

5. That it is a matter of record that such state of affairs affects and inconveniences
not only the estate but also third-parties dealing with it;" (Annex "V", Petition.)

and then, after further reminding the court, by quoting them, of the relevant allegations of its earlier
motion of September 14, 1964, Annex U, prayed that:

1. Immediately order Avelina Magno to account for and deliver to the administrator of
the Estate of C. N. Hodges all the assets of the conjugal partnership of the deceased
Linnie Jane Hodges and C. N. Hodges, plus all the rents, emoluments and income
therefrom;

2. Pending the consideration of this motion, immediately order Avelina Magno to turn
over all her collections to the administrator Philippine Commercial & Industrial Bank;

3. Declare the Testate Estate of Linnie Jane Hodges (Sp. Proc. No. 1307) closed;

4. Defer the hearing and consideration of the motion for declaration of heirs in the
Testate Estate of Linnie Jane Hodges until the matters hereinabove set forth are
resolved.
(Prayer, Annex "V" of Petition.)

On October 12, 1966, as already indicated at the outset of this opinion, the respondent court denied
the foregoing motion, holding thus:

ORDER

On record is a motion (Vol. X, Sp. 1672, pp. 4379-4390) dated April 22, 1966 of
administrator PCIB praying that (1) Immediately order Avelina Magno to account for
and deliver to the administrator of the estate of C. N. Hodges all assets of the
conjugal partnership of the deceased Linnie Jane Hodges and C. N. Hodges, plus all
the rents, emoluments and income therefrom; (2) Pending the consideration of this
motion, immediately order Avelina Magno to turn over all her collections to the
administrator PCIB; (3) Declare the Testate Estate of Linnie Jane Hodges (Sp. Proc.
No. 1307) closed; and (4) Defer the hearing and consideration of the motion for
declaration of heirs in the Testate Estate of Linnie Jane Hodges until the matters
hereinabove set forth are resolved.

This motion is predicated on the fact that there are matters pending before this court
such as (a) the examination already ordered by this Honorable Court of documents
relating to the allegation of Avelina Magno that Charles Newton Hodges thru written
declaration and sworn public statements renounced, disclaimed and repudiated his
life-estate and usufruct over the estate of Linnie Jane Hodges (b) the urgent motion
for accounting and delivery to the estate of C. N. Hodges of all the assets of the
conjugal partnership of the deceased Linnie Jane Hodges and C. N. Hodges existing
as of May 23, 1957 plus all the rents, emoluments and income therefrom; (c) various
motions to resolve the aforesaid motion; and (d) manifestation of September 14,
1964, detailing acts of interference of Avelina Magno under color of title as
administratrix of the estate of Linnie Jane Hodges.

These matters, according to the instant motion, are all pre-judicial involving no issues
of facts and only require the resolution of question of law; that in the motion of
October 5, 1963 it is alleged that in a motion dated December 11, 1957 filed by Atty.
Leon Gellada as attorney for the executor C. N. Hodges, the said executor C. N.
Hodges is not only part owner of the properties left as conjugal but also the
successor to all the properties left by the deceased Linnie Jane Hodges.

Said motion of December 11, 1957 was approved by the Court in consonance with
the wishes contained in the last will and testament of Linnie Jane Hodges.

That on April 21, 1959 this Court approved the inventory and accounting submitted
by C. N. Hodges thru counsel Atty. Leon Gellada in a motion filed on April 14, 1959
stating therein that executor C. N. Hodges is the only devisee or legatee of Linnie
Jane Hodges in accordance with the last will and testament already probated by the
Court.

That on July 13, 1960 the Court approved the annual statement of accounts
submitted by the executor C. N. Hodges thru his counsel Atty. Gellada on July 21,
1960 wherein it is stated that the executor, C. N. Hodges is the only devisee or
legatee of the deceased Linnie Jane Hodges; that on May 2, 1961 the Court
approved the annual statement of accounts submitted by executor, C. N. Hodges for
the year 1960 which was submitted by Atty. Gellada on April 20, 1961 wherein it is
stated that executor Hodges is the only devisee or legatee of the deceased Linnie
Jane Hodges;

That during the hearing on September 5 and 6, 1963 the estate of C. N. Hodges
claimed all the assets belonging to the deceased spouses Linnie Jane Hodges and
C. N. Hodges situated in the Philippines; that administratrix Magno has executed
illegal acts to the prejudice of the testate estate of C. N. Hodges.

An opposition (Sp. 1672, Vol. X, pp. 4415-4421) dated April 27, 1966 of
administratrix Magno has been filed asking that the motion be denied for lack of merit
and that the motion for the official declaration of heirs of the estate of Linnie Jane
Hodges be set for presentation and reception of evidence.

It is alleged in the aforesaid opposition that the examination of documents which are
in the possession of administratrix Magno can be made prior to the hearing of the
motion for the official declaration of heirs of the estate of Linnie Jane Hodges, during
said hearing.

That the matters raised in the PCIB's motion of October 5, 1963 (as well as the other
motion) dated September 14, 1964 have been consolidated for the purpose of
presentation and reception of evidence with the hearing on the determination of the
heirs of the estate of Linnie Jane Hodges. It is further alleged in the opposition that
the motion for the official declaration of heirs of the estate of Linnie Jane Hodges is
the one that constitutes a prejudicial question to the motions dated October 5 and
September 14, 1964 because if said motion is found meritorious and granted by the
Court, the PCIB's motions of October 5, 1963 and September 14, 1964 will become
moot and academic since they are premised on the assumption and claim that the
only heir of Linnie Jane Hodges was C. N. Hodges.

That the PCIB and counsel are estopped from further questioning the determination
of heirs in the estate of Linnie Jane Hodges at this stage since it was PCIB as early
as January 8, 1965 which filed a motion for official declaration of heirs of Linnie Jane
Hodges that the claim of any heirs of Linnie Jane Hodges can be determined only in
the administration proceedings over the estate of Linnie Jane Hodges and not that of
C. N. Hodges, since the heirs of Linnie Jane Hodges are claiming her estate and not
the estate of C. N. Hodges.

A reply (Sp. 1672, Vol. X, pp. 4436-4444) dated May 11, 1966 of the PCIB has been
filed alleging that the motion dated April 22, 1966 of the PCIB is not to seek
deferment of the hearing and consideration of the motion for official declaration of
heirs of Linnie Jane Hodges but to declare the testate estate of Linnie Jane Hodges
closed and for administratrix Magno to account for and deliver to the PCIB all assets
of the conjugal partnership of the deceased spouses which has come to her
possession plus all rents and income.

A rejoinder (Sp. 1672, Vol. X, pp. 4458-4462) of administratrix Magno dated May 19,
1966 has been filed alleging that the motion dated December 11, 1957 only sought
the approval of all conveyances made by C. N. Hodges and requested the Court
authority for all subsequent conveyances that will be executed by C. N. Hodges; that
the order dated December 14, 1957 only approved the conveyances made by C. N.
Hodges; that C. N. Hodges represented by counsel never made any claim in the
estate of Linnie Jane Hodges and never filed a motion to declare himself as the heir
of the said Linnie Jane Hodges despite the lapse of more than five (5) years after the
death of Linnie Jane Hodges; that it is further alleged in the rejoinder that there can
be no order of adjudication of the estate unless there has been a prior express
declaration of heirs and so far no declaration of heirs in the estate of Linnie Jane
Hodges (Sp. 1307) has been made.

Considering the allegations and arguments in the motion and of the PCIB as well as
those in the opposition and rejoinder of administratrix Magno, the Court finds the
opposition and rejoinder to be well taken for the reason that so far there has been no
official declaration of heirs in the testate estate of Linnie Jane Hodges and therefore
no disposition of her estate.

WHEREFORE, the motion of the PCIB dated April 22, 1966 is hereby DENIED.
(Annex "W", Petition)
In its motion dated November 24, 1966 for the reconsideration of this order, petitioner alleged inter
alia that:

It cannot be over-stressed that the motion of December 11, 1957 was based on the
fact that:

a. Under the last will and testament of the deceased, Linnie Jane
Hodges, the late Charles Newton Hodges was the sole heir instituted
insofar as her properties in the Philippines are concerned;

b. Said last will and testament vested upon the said late Charles
Newton Hodges rights over said properties which, in sum, spell
ownership, absolute and in fee simple;

c. Said late Charles Newton Hodges was, therefore, "not only part
owner of the properties left as conjugal, but also, the successor to all
the properties left by the deceased Linnie Jane Hodges.

Likewise, it cannot be over-stressed that the aforesaid motion was granted by this
Honorable Court "for the reasons stated" therein.

Again, the motion of December 11, 1957 prayed that not only "all the sales,
conveyances, leases, and mortgages executed by" the late Charles Newton Hodges,
but also all "the subsequent sales, conveyances, leases, and mortgages ..." be
approved and authorized. This Honorable Court, in its order of December 14, 1957,
"for the reasons stated" in the aforesaid motion, granted the same, and not only
approved all the sales, conveyances, leases and mortgages of all properties left by
the deceased Linnie Jane Hodges executed by the late Charles Newton Hodges, but
also authorized "all subsequent sales, conveyances, leases and mortgages of the
properties left by the said deceased Linnie Jane Hodges. (Annex "X", Petition)

and reiterated its fundamental pose that the Testate Estate of Linnie Jane Hodges had already been
factually, although not legally, closed with the virtual declaration of Hodges and adjudication to him,
as sole universal heir of all the properties of the estate of his wife, in the order of December 14,
1957, Annex G. Still unpersuaded, on July 18, 1967, respondent court denied said motion for
reconsideration and held that "the court believes that there is no justification why the order of
October 12, 1966 should be considered or modified", and, on July 19, 1967, the motion of
respondent Magno "for official declaration of heirs of the estate of Linnie Jane Hodges", already
referred to above, was set for hearing.

In consequence of all these developments, the present petition was filed on August 1, 1967 (albeit
petitioner had to pay another docketing fee on August 9, 1967, since the orders in question were
issued in two separate testate estate proceedings, Nos. 1307 and 1672, in the court below).

Together with such petition, there are now pending before Us for resolution herein, appeals from the
following:

1. The order of December 19, 1964 authorizing payment by respondent Magno of

overtime pay, (pp. 221, Green Record on Appeal) together with the subsequent
orders of January 9, 1965, (pp. 231-232, id.) October 27, 1965, (pp. 227, id.) and
February 15, 1966 (pp. 455-456, id.) repeatedly denying motions for reconsideration
thereof.
 2. The order of August 6, 1965 (pp. 248, id.) requiring that deeds executed by
petitioner to be co-signed by respondent Magno, as well as the order of October 27,
1965 (pp. 276-277) denying reconsideration.

3. The order of October 27, 1965 (pp. 292-295, id.) enjoining the deposit of all
collections in a joint account and the same order of February 15, 1966 mentioned in
No. 1 above which included the denial of the reconsideration of this order of October
27, 1965.

4. The order of November 3, 1965 (pp. 313-320, id.) directing the payment of
attorney's fees, fees of the respondent administratrix, etc. and the order of February
16, 1966 denying reconsideration thereof.

5. The order of November 23, 1965 (pp. 334-335, id.) allowing appellee Western
Institute of Technology to make payments to either one or both of the administrators
of the two estates as well as the order of March 7, 1966 (p. 462, id.) denying
reconsideration.

6. The various orders hereinabove earlier enumerated approving deeds of sale

executed by respondent Magno in favor of appellees Carles, Catedral, Pablito,
Guzman, Coronado, Barrido, Causing, Javier, Lucero and Batisanan, (see pp. 35 to
37 of this opinion), together with the two separate orders both dated December 2,
1966 (pp. 306-308, and pp. 308-309, Yellow Record on Appeal) denying
reconsideration of said approval.

7. The order of January 3, 1967, on pp. 335-336, Yellow Record on Appeal,

approving similar deeds of sale executed by respondent Magno, as those in No. 6, in
favor of appellees Pacaonsis and Premaylon, as to which no motion for
reconsideration was filed.

8. Lastly, the order of December 2, 1966, on pp. 305-306, Yellow Record on Appeal,
directing petitioner to surrender to appellees Lucero, Batisanan, Javier, Pablito,
Barrido, Catedral, Causing, Guzman, and Coronado, the certificates of title covering
the lands involved in the approved sales, as to which no motion for reconsideration
was filed either.

Strictly speaking, and considering that the above orders deal with different matters, just as they
affect distinctly different individuals or persons, as outlined by petitioner in its brief as appellant on
pp. 12-20 thereof, there are, therefore, thirty-three (33) appeals before Us, for which reason,
petitioner has to pay also thirty-one (31) more docket fees.

It is as well perhaps to state here as elsewhere in this opinion that in connection with these appeals,
petitioner has assigned a total of seventy-eight (LXXVIII) alleged errors, the respective discussions
and arguments under all of them covering also the fundamental issues raised in respect to the
petition for certiorari and prohibition, thus making it feasible and more practical for the Court to
dispose of all these cases together.4

The assignments of error read thus:

I to IV
 THE ORDER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN
FAVOR OF THE APPELLEES, PEPITO G. IYULORES, ESPIRIDION PARTISALA,
WINIFREDO C. ESPADA AND ROSARIO ALINGASA, EXECUTED BY THE
APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY
THE DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO
SELL COVERING WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.

V to VIII

THE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR

OF THE APPELLEES, PEPITO G. IYULORES, ESPIRIDION PARTISALA,
WINIFREDO C. ESPADA AND ROSARIO ALINGASA, COVERING PARCELS OF
LAND FOR WHICH THEY HAVE NEVER PAID IN FULL IN ACCORDANCE WITH
THE ORIGINAL CONTRACTS TO SELL.

IX to XII

THE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF OWNERSHIP

OVER REAL PROPERTY OF THE APPELLEES, PEPITO G. IYULORES,
ESPIRIDION PARTISALA, WINIFREDO C. ESPADA AND ROSARIO ALINGASA,
WHILE ACTING AS A PROBATE COURT.

XIII to XV

THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN

FAVOR OF THE APPELLEES ADELFA PREMAYLON (LOT NO. 102), SANTIAGO
PACAONSIS, AND ADELFA PREMAYLON (LOT NO. 104), EXECUTED BY THE
APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY
THE DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO
SELL COVERING WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.

XVI to XVIII

THE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR

OF THE APPELLEES ADELFA PREMAYLON (LOT NO. 102), SANTIAGO
PACAONSIS, AND ADELFA PREMAYLON (LOT NO. 104) COVERING PARCELS
OF LAND FOR WHICH THEY HAVE NEVER PAID IN FULL IN ACCORDANCE
WITH THE ORIGINAL CONTRACTS TO SELL.

XIX to XXI

THE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF OWNERSHIP

OVER REAL PROPERTY OF THE APPELLEES ADELFA PREMAYLON (LOT NO.
102), SANTIAGO PACAONSIS, AND ADELFA PREMAYLON (LOT NO. 104) WHILE
ACTING AS A PROBATE COURT.

XXII to XXV

THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN

FAVOR OF THE APPELLEES LORENZO CARLES, JOSE PABLICO, ALFREDO
CATEDRAL AND SALVADOR S. GUZMAN, EXECUTED BY THE APPELLEE,
 AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY THE
DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO SELL
COVERING WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.

XXVI to XXIX

THE LOWER COURT ERRED IN APPROVING THE FINAL DEED OF SALE

EXECUTED IN FAVOR OF THE APPELLEES, LORENZO CARLES, JOSE
PABLICO, ALFREDO CATEDRAL AND SALVADOR S. GUZMAN PURSUANT TO
CONTRACTS TO SPELL WHICH WERE CANCELLED AND RESCINDED.

XXX to XXXIV

THE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF OWNERSHIP

OVER REAL PROPERTY OF THE LORENZO CARLES, JOSE PABLICO,
ALFREDO CATEDRAL AND SALVADOR S. GUZMAN, WHILE ACTING AS A
PROBATE COURT.

XXXV to XXXVI

THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN

FAVOR OF THE APPELLEES, FLORENIA BARRIDO AND PURIFICACION
CORONADO, EXECUTED BY THE APPELLEE, AVELINA A. MAGNO, COVERING
PARCELS OF LAND OWNED BY THE DECEASED, CHARLES NEWTON
HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE
EXECUTED BY HIM DURING HIS LIFETIME.

XXXVII to XXXVIII

THE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR

OF THE APPELLEES, FLORENIA BARRIDO AND PURIFICACION CORONADO,
ALTHOUGH THEY WERE IN ARREARS IN THE PAYMENTS AGREED UPON IN
THE ORIGINAL CONTRACT TO SELL WHICH THEY EXECUTED WITH THE
DECEASED, CHARLES NEWTON HODGES, IN THE AMOUNT OF P10,680.00 and
P4,428.90, RESPECTIVELY.

XXXIX to XL

THE LOWER COURT ERRED IN DEPRIVING THE DECEASED, CHARLES

NEWTON HODGES, OF THE CONTRACTUAL RIGHT, EXERCISED THROUGH
HIS ADMINISTRATOR, THE INSTANT APPELLANT, TO CANCEL THE
CONTRACTS TO SELL OF THE APPELLEES, FLORENIA BARRIDO AND
PURIFICACION CORONADO.

XLI to XLIII

THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN

FAVOR OF THE APPELLEES, GRACIANO LUCERO, ARITEO THOMAS JAMIR
AND MELQUIADES BATISANAN, EXECUTED BY THE APPELLEE, AVELINA A.
MAGNO, COVERING PARCELS OF LAND OWNED BY THE DECEASED,
 CHARLES NEWTON HODGES, AND THE CONTRACTS TO SELL COVERING
WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.

XLIV to XLVI

THE LOWER COURT ERRED IN APPROVING THE FINAL DEED OF SALE IN

FAVOR OF THE APPELLEES, GRACIANO LUCERO, ARITEO THOMAS JAMIR
AND MELQUIADES BATISANAN, PURSUANT TO CONTRACTS TO SELL
EXECUTED BY THEM WITH THE DECEASED, CHARLES NEWTON HODGES,
THE TERMS AND CONDITIONS OF WHICH THEY HAVE NEVER COMPLIED
WITH.

XLVII to XLIX

THE LOWER COURT ERRED IN DEPRIVING THE DECEASED, CHARLES

NEWTON HODGES, OF HIS RIGHT, EXERCISED THROUGH HIS
ADMINISTRATION, THE INSTANT APPELLANT, TO CANCEL THE CONTRACTS
TO SELL OF THE APPELLEES, GRACIANO LUCERO, ARITEO THOMAS JAMIR
AND MELQUIADES BATISANAN, AND IN DETERMINING THE RIGHTS OF THE
SAID APPELLEES OVER REAL PROPERTY WHILE ACTING AS A PROBATE
COURT.

THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN

FAVOR OF THE APPELLEE, BELCESAR CAUSING, EXECUTED BY THE
APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY
THE DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO
SELL COVERING WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.

LI

THE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR

OF THE APPELLEE, BELCESAR CAUSING, ALTHOUGH HE WAS IN ARREARS
IN THE PAYMENTS AGREED UPON IN THE ORIGINAL CONTRACT TO SELL
WHICH HE EXECUTED WITH THE DECEASED, CHARLES NEWTON HODGES,
IN THE AMOUNT OF P2,337.50.

LII

THE LOWER COURT ERRED IN APPROVING THE DEED OF SALE IN FAVOR OF

THE APPELLEE, BELCESAR CAUSING, ALTHOUGH THE SAME WAS NOT
EXECUTED IN ACCORDANCE WITH THE RULES OF COURT.

LIII to LXI

THE LOWER COURT ERRED IN ORDERING THE APPELLANT, PHILIPPINE

COMMERCIAL AND INDUSTRIAL BANK TO SURRENDER THE OWNER'S
DUPLICATE CERTIFICATES OF TITLE OVER THE RESPECTIVE LOTS
COVERED BY THE DEEDS OF SALE EXECUTED BY THE APPELLEE, AVELINA
A. MAGNO, IN FAVOR OF THE OTHER APPELLEES, JOSE PABLICO, ALFREDO
 CATEDRAL, SALVADOR S. GUZMAN, FLRENIA BARRIDO, PURIFICACION
CORONADO, BELCESAR CAUSING, ARITEO THOMAS JAMIR, MAXIMA
BATISANAN AND GRACIANO L. LUCERO.

LXII

THE LOWER COURT ERRED IN RESOLVING THE MOTION OF THE APPELLEE,

WESTERN INSTITUTE OF TECHNOLOGY, DATED NOVEMBER 3, 1965,
WITHOUT ANY COPY THEREOF HAVING BEEN SERVED UPON THE
APPELLANT, PHILIPPINE COMMERCIAL & INDUSTRIAL BANK.

LXIII

THE LOWER COURT ERRED IN HEARING AND CONSIDERING THE MOTION OF

THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY, DATED NOVEMBER
3rd, 1965, ON NOVEMBER 23, 1965, WHEN THE NOTICE FOR THE HEARING
THEREOF WAS FOR NOVEMBER 20, 1965.

LXIV

THE LOWER COURT ERRED IN GRANTING THE APPELLEE, WESTERN

INSTITUTE OF TECHNOLOGY A RELIEF OTHER THAN THAT PRAYED FOR IN
ITS MOTION, DATED NOVEMBER 3, 1965, IN THE ABSENCE OF A PRAYER FOR
GENERAL RELIEF CONTAINED THEREIN.

LXV

THE LOWER COURT ERRED IN ALLOWING THE APPELLEE, WESTERN

INSTITUTE OF TECHNOLOGY, TO CONTINUE PAYMENTS UPON A CONTRACT
TO SELL THE TERMS AND CONDITIONS OF WHICH IT HAS FAILED TO
FULFILL.

LXVI

THE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF THE

APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY OVER THE REAL
PROPERTY SUBJECT MATTER OF THE CONTRACT TO SELL IT EXECUTED
WITH THE DECEASED, CHARLES NEWTON HODGES, WHILE ACTING AS A
PROBATE COURT.

LXVII

LOWER COURT ERRED IN ALLOWING THE CONTINUATION OF PAYMENTS BY

THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY, UPON A CONTRACT
TO SELL EXECUTED BY IT AND THE DECEASED, CHARLES NEWTON
HODGES, TO A PERSON OTHER THAN HIS LAWFULLY APPOINTED
ADMINISTRATOR.

LXVIII
 THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF RETAINER'S
FEES FROM THE SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE
HODGES, WHEN THERE IS NEITHER SUCH ESTATE NOR ASSETS THEREOF.

LXIX

THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF RETAINER'S

FEES OF LAWYERS OF ALLEGED HEIRS TO THE SUPPOSED ESTATE OF THE
DECEASED, LINNIE JANE HODGES.

LXX

THE LOWER COURT ERRED IN IMPLEMENTING THE ALLEGED AGREEMENT

BETWEEN THE HEIRS OF THE SUPPOSED ESTATE OF THE DECEASED,
LINNIE JANE HODGES, AND THEIR LAWYERS.

LXXI

THE LOWER COURT ERRED IN ORDERING THE PREMATURE DISTRIBUTION

OF ESTATE ASSETS TO ALLEGED HEIRS OR BENEFICIARIES THEREOF, BY
WAY OF RETAINER'S FEES.

LXXII

THE LOWER COURT ERRED IN ORDERING THAT ALL FINAL DEEDS OF SALE
EXECUTED PURSUANT TO CONTRACTS TO SELL ENTERED INTO BY THE
DECEASED, CHARLES NEWTON HODGES, DURING HIS LIFETIME, BE SIGNED
JOINTLY BY THE APPELLEE, AVELINA A. MAGNO, AND THE APPELLANT,
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, AND NOT BY THE LATTER
ONLY AS THE LAWFULLY APPOINTED ADMINISTRATOR OF HIS ESTATE.

LXXIII

THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF LEGAL

EXPENSES FROM THE SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE
HODGES, WHEN THERE IS NEITHER SUCH ESTATE NOR ASSETS THEREOF.

LXXIV

THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF LEGAL

EXPENSES OF LAWYERS OF ALLEGED HEIRS TO THE SUPPOSED ESTATE
OF THE DECEASED, LINNIE JANE HODGES.

LXXV

THE LOWER COURT ERRED IN ORDERING THE PREMATURE DISTRIBUTION

OF ESTATE ASSETS TO ALLEGED HEIRS OR BENEFICIARIES THEREOF, BY
WAY OF LEGAL EXPENSES.

LXXVI
 THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF
COMPENSATION TO THE PURPORTED ADMINISTRATRIX OF THE SUPPOSED
ESTATE OF THE DECEASED, LINNIE JANE HODGES, THE INSTANT APPELLEE,
AVELINA A. MAGNO, WHEN THERE IS NEITHER SUCH ESTATE NOR ASSETS
THEREOF.

LXXVII

THE LOWER COURT ERRED IN ORDERING THAT THE FUNDS OF THE

TESTATE ESTATE OF THE DECEASED, CHARLES NEWTON HODGES, BE
PLACED IN A JOINT ACCOUNT OF THE APPELLANT, PHILIPPINE
COMMERCIAL AND INDUSTRIAL BANK, AND THE APPELLEE, AVELINA A.
MAGNO, WHO IS A COMPLETE STRANGER TO THE AFORESAID ESTATE.

LXXVIII

THE LOWER COURT ERRED IN ORDERING THAT THE APPELLEE, AVELINA A.

MAGNO, BE GIVEN EQUAL ACCESS TO THE RECORDS OF THE TESTATE
ESTATE OF THE DECEASED, CHARLES NEWTON HODGES, WHEN SHE IS A
COMPLETE STRANGER TO THE AFORESAID ESTATE. (Pp. 73-83, Appellant's
Brief.)

To complete this rather elaborate, and unavoidably extended narration of the factual setting of these
cases, it may also be mentioned that an attempt was made by the heirs of Mrs. Hodges to have
respondent Magno removed as administratrix, with the proposed appointment of Benito J. Lopez in
her place, and that respondent court did actually order such proposed replacement, but the Court
declared the said order of respondent court violative of its injunction of August 8, 1967, hence
without force and effect (see Resolution of September 8, 1972 and February 1, 1973). Subsequently,
Atty. Efrain B. Trenas, one of the lawyers of said heirs, appeared no longer for the proposed
administrator Lopez but for the heirs themselves, and in a motion dated October 26, 1972 informed
the Court that a motion had been filed with respondent court for the removal of petitioner PCIB as
administrator of the estate of C. N. Hodges in Special Proceedings 1672, which removal motion
alleged that 22.968149% of the share of C. N. Hodges had already been acquired by the heirs of
Mrs. Hodges from certain heirs of her husband. Further, in this connection, in the answer of PCIB to
the motion of respondent Magno to have it declared in contempt for disregarding the Court's
resolution of September 8, 1972 modifying the injunction of August 8, 1967, said petitioner annexed
thereto a joint manifestation and motion, appearing to have been filed with respondent court,
informing said court that in addition to the fact that 22% of the share of C. N. Hodges had already
been bought by the heirs of Mrs. Hodges, as already stated, certain other heirs of Hodges
representing 17.343750% of his estate were joining cause with the heirs of Mrs. Hodges as against
PCIB, thereby making somewhat precarious, if not possibly untenable, petitioners' continuation as
administrator of the Hodges estate.

RESOLUTION OF ISSUES IN THE CERTIORARI AND

PROHIBITION CASES

As to the Alleged Tardiness

of the Present Appeals
The priority question raised by respondent Magno relates to the alleged tardiness of all the
aforementioned thirty-three appeals of PCIB. Considering, however, that these appeals revolve
around practically the same main issues and that it is admitted that some of them have been timely
taken, and, moreover, their final results hereinbelow to be stated and explained make it of no
consequence whether or not the orders concerned have become final by the lapsing of the
respective periods to appeal them, We do not deem it necessary to pass upon the timeliness of any
of said appeals.

II

The Propriety Here of Certiorari and

Prohibition instead of Appeal

The other preliminary point of the same respondent is alleged impropriety of the special civil action
of certiorari and prohibition in view of the existence of the remedy of appeal which it claims is proven
by the very appeals now before Us. Such contention fails to take into account that there is a
common thread among the basic issues involved in all these thirty-three appeals which, unless
resolved in one single proceeding, will inevitably cause the proliferation of more or less similar or
closely related incidents and consequent eventual appeals. If for this consideration alone, and
without taking account anymore of the unnecessary additional effort, expense and time which would
be involved in as many individual appeals as the number of such incidents, it is logical and proper to
hold, as We do hold, that the remedy of appeal is not adequate in the present cases. In determining
whether or not a special civil action of certiorari or prohibition may be resorted to in lieu of appeal, in
instances wherein lack or excess of jurisdiction or grave abuse of discretion is alleged, it is not
enough that the remedy of appeal exists or is possible. It is indispensable that taking all the relevant
circumstances of the given case, appeal would better serve the interests of justice. Obviously, the
longer delay, augmented expense and trouble and unnecessary repetition of the same work
attendant to the present multiple appeals, which, after all, deal with practically the same basic issues
that can be more expeditiously resolved or determined in a single special civil action, make the
remedies of certiorari and prohibition, pursued by petitioner, preferable, for purposes of resolving the
common basic issues raised in all of them, despite the conceded availability of appeal. Besides, the
settling of such common fundamental issues would naturally minimize the areas of conflict between
the parties and render more simple the determination of the secondary issues in each of them.
Accordingly, respondent Magno's objection to the present remedy of certiorari and prohibition must
be overruled.

We come now to the errors assigned by petitioner-appellant, Philippine Commercial & Industrial
Bank, (PCIB, for short) in the petition as well as in its main brief as appellant.

III

On Whether or Not There is Still Any Part of the Testate

Estate Mrs. Hodges that may be Adjudicated to her brothers
and sisters as her estate, of which respondent Magno is the
unquestioned Administratrix in special Proceedings 1307.

In the petition, it is the position of PCIB that the respondent court exceeded its jurisdiction or gravely
abused its discretion in further recognizing after December 14, 1957 the existence of the Testate
Estate of Linnie Jane Hodges and in sanctioning purported acts of administration therein of
respondent Magno. Main ground for such posture is that by the aforequoted order of respondent
court of said date, Hodges was already allowed to assert and exercise all his rights as universal heir
of his wife pursuant to the provisions of her will, quoted earlier, hence, nothing else remains to be
done in Special Proceedings 1307 except to formally close it. In other words, the contention of PCIB
is that in view of said order, nothing more than a formal declaration of Hodges as sole and exclusive
heir of his wife and the consequent formal unqualified adjudication to him of all her estate remain to
be done to completely close Special Proceedings 1307, hence respondent Magno should be
considered as having ceased to be Administratrix of the Testate Estate of Mrs. Hodges since then.

After carefully going over the record, We feel constrained to hold that such pose is patently
untenable from whatever angle it is examined.

To start with, We cannot find anywhere in respondent Order of December 14, 1957 the sense being
read into it by PCIB. The tenor of said order bears no suggestion at all to such effect. The
declaration of heirs and distribution by the probate court of the estate of a decedent is its most
important function, and this Court is not disposed to encourage judges of probate proceedings to be
less than definite, plain and specific in making orders in such regard, if for no other reason than that
all parties concerned, like the heirs, the creditors, and most of all the government, the devisees and
legatees, should know with certainty what are and when their respective rights and obligations
ensuing from the inheritance or in relation thereto would begin or cease, as the case may be,
thereby avoiding precisely the legal complications and consequent litigations similar to those that
have developed unnecessarily in the present cases. While it is true that in instances wherein all the
parties interested in the estate of a deceased person have already actually distributed among
themselves their respective shares therein to the satisfaction of everyone concerned and no rights of
creditors or third parties are adversely affected, it would naturally be almost ministerial for the court
to issue the final order of declaration and distribution, still it is inconceivable that the special
proceeding instituted for the purpose may be considered terminated, the respective rights of all the
parties concerned be deemed definitely settled, and the executor or administrator thereof be
regarded as automatically discharged and relieved already of all functions and responsibilities
without the corresponding definite orders of the probate court to such effect.

Indeed, the law on the matter is specific, categorical and unequivocal. Section 1 of Rule 90 provides:

SECTION 1. When order for distribution of residue made. — When the debts, funeral
charges, and expenses of administration, the allowance to the widow and inheritance
tax, if any, chargeable to the estate in accordance with law have been paid, the
court, on the application of the executor or administrator, or of a person interested in
the estate, and after hearing upon notice, shall assign the residue of the estate to the
persons entitled to the same, naming them and the proportions, or parts, to which
each is entitled, and such persons may demand and recover their respective shares
from the executor or administrator, or any other person having the same in his
possession. If there is a controversy before the court as to who are the lawful heirs of
the deceased person or as to the distributive shares to which each person is entitled
under the law, the controversy shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above mentioned
has been made or provided for, unless the distributees, or any of them give a bond,
in a sum to be fixed by the court, conditioned for the payment of said obligations
within such time as the court directs.

These provisions cannot mean anything less than that in order that a proceeding for the settlement
of the estate of a deceased may be deemed ready for final closure, (1) there should have been
issued already an order of distribution or assignment of the estate of the decedent among or to those
entitled thereto by will or by law, but (2) such order shall not be issued until after it is shown that the
"debts, funeral expenses, expenses of administration, allowances, taxes, etc. chargeable to the
estate" have been paid, which is but logical and proper. (3) Besides, such an order is usually issued
upon proper and specific application for the purpose of the interested party or parties, and not of the
court.

... it is only after, and not before, the payment of all debts, funeral charges, expenses
of administration, allowance to the widow, and inheritance tax shall have been
effected that the court should make a declaration of heirs or of such persons as are
entitled by law to the residue. (Moran, Comments on the Rules of Court, 2nd ed., Vol.
II, p. 397, citing Capistrano vs. Nadurata, 49 Phil., 726; Lopez vs. Lopez, 37 Off.
Gaz., 3091.) (JIMOGA-ON v. BELMONTE, 84 Phil. 545, 548) (p. 86, Appellee's Brief)

xxx xxx xxx

Under Section 753 of the Code of Civil Procedure, (corresponding to Section 1, Rule
90) what brings an intestate (or testate) proceeding to a close is the order of
distribution directing delivery of the residue to the persons entitled thereto after
paying the indebtedness, if any, left by the deceased. (Santiesteban vs.
Santiesteban, 68 Phil. 367, 370.)

In the cases at bar, We cannot discern from the voluminous and varied facts, pleadings and orders
before Us that the above indispensable prerequisites for the declaration of heirs and the adjudication
of the estate of Mrs. Hodges had already been complied with when the order of December 14, 1957
was issued. As already stated, We are not persuaded that the proceedings leading to the issuance
of said order, constituting barely of the motion of May 27, 1957, Annex D of the petition, the order of
even date, Annex E, and the motion of December 11, 1957, Annex H, all aforequoted, are what the
law contemplates. We cannot see in the order of December 14, 1957, so much relied upon by the
petitioner, anything more than an explicit approval of "all the sales, conveyances, leases and
mortgages of all the properties left by the deceased Linnie Jane Hodges executed by the Executor
Charles N. Hodges" (after the death of his wife and prior to the date of the motion), plus a general
advance authorization to enable said "Executor — to execute subsequent sales, conveyances,
leases and mortgages of the properties left the said deceased Linnie Jane Hodges in consonance
with wishes conveyed in the last will and testament of the latter", which, certainly, cannot amount to
the order of adjudication of the estate of the decedent to Hodges contemplated in the law. In fact, the
motion of December 11, 1957 on which the court predicated the order in question did not pray for
any such adjudication at all. What is more, although said motion did allege that "herein Executor
(Hodges) is not only part owner of the properties left as conjugal, but also, the successor to all the
properties left by the deceased Linnie Jane Hodges", it significantly added that "herein Executor, as
Legatee (sic), has the right to sell, convey, lease or dispose of the properties in the Philippines —
during his lifetime", thereby indicating that what said motion contemplated was nothing more than
either the enjoyment by Hodges of his rights under the particular portion of the dispositions of his
wife's will which were to be operative only during his lifetime or the use of his own share of the
conjugal estate, pending the termination of the proceedings. In other words, the authority referred to
in said motions and orders is in the nature of that contemplated either in Section 2 of Rule 109 which
permits, in appropriate cases, advance or partial implementation of the terms of a duly probated will
before final adjudication or distribution when the rights of third parties would not be adversely
affected thereby or in the established practice of allowing the surviving spouse to dispose of his own
share of he conjugal estate, pending its final liquidation, when it appears that no creditors of the
conjugal partnership would be prejudiced thereby, (see the Revised Rules of Court by Francisco,
Vol. V-B, 1970 ed. p. 887) albeit, from the tenor of said motions, We are more inclined to believe that
Hodges meant to refer to the former. In any event, We are fully persuaded that the quoted
allegations of said motions read together cannot be construed as a repudiation of the rights
unequivocally established in the will in favor of Mrs. Hodges' brothers and sisters to whatever have
not been disposed of by him up to his death.
Indeed, nowhere in the record does it appear that the trial court subsequently acted upon the
premise suggested by petitioner. On the contrary, on November 23, 1965, when the court resolved
the motion of appellee Western Institute of Technology by its order We have quoted earlier, it
categorically held that as of said date, November 23, 1965, "in both cases (Special Proceedings
1307 and 1672) there is as yet no judicial declaration of heirs nor distribution of properties to
whomsoever are entitled thereto." In this connection, it may be stated further against petitioner, by
way of some kind of estoppel, that in its own motion of January 8, 1965, already quoted in full on
pages 54-67 of this decision, it prayed inter alia that the court declare that "C. N. Hodges was the
sole and exclusive heir of the estate of Linnie Jane Hodges", which it would not have done if it were
really convinced that the order of December 14, 1957 was already the order of adjudication and
distribution of her estate. That said motion was later withdrawn when Magno filed her own motion for
determination and adjudication of what should correspond to the brothers and sisters of Mrs. Hodges
does not alter the indubitable implication of the prayer of the withdrawn motion.

It must be borne in mind that while it is true that Mrs. Hodges bequeathed her whole estate to her
husband and gave him what amounts to full powers of dominion over the same during his lifetime,
she imposed at the same time the condition that whatever should remain thereof upon his death
should go to her brothers and sisters. In effect, therefore, what was absolutely given to Hodges was
only so much of his wife's estate as he might possibly dispose of during his lifetime; hence, even
assuming that by the allegations in his motion, he did intend to adjudicate the whole estate to
himself, as suggested by petitioner, such unilateral act could not have affected or diminished in any
degree or manner the right of his brothers and sisters-in-law over what would remain thereof upon
his death, for surely, no one can rightly contend that the testamentary provision in question allowed
him to so adjudicate any part of the estate to himself as to prejudice them. In other words,
irrespective of whatever might have been Hodges' intention in his motions, as Executor, of May 27,
1957 and December 11, 1957, the trial court's orders granting said motions, even in the terms in
which they have been worded, could not have had the effect of an absolute and unconditional
adjudication unto Hodges of the whole estate of his wife. None of them could have deprived his
brothers and sisters-in-law of their rights under said will. And it may be added here that the fact that
no one appeared to oppose the motions in question may only be attributed, firstly, to the failure of
Hodges to send notices to any of them, as admitted in the motion itself, and, secondly, to the fact
that even if they had been notified, they could not have taken said motions to be for the final
distribution and adjudication of the estate, but merely for him to be able, pending such final
distribution and adjudication, to either exercise during his lifetime rights of dominion over his wife's
estate in accordance with the bequest in his favor, which, as already observed, may be allowed
under the broad terms of Section 2 of Rule 109, or make use of his own share of the conjugal estate.
In any event, We do not believe that the trial court could have acted in the sense pretended by
petitioner, not only because of the clear language of the will but also because none of the interested
parties had been duly notified of the motion and hearing thereof. Stated differently, if the orders of
May 27, 1957 and December 4, 1957 were really intended to be read in the sense contended by
petitioner, We would have no hesitancy in declaring them null and void.

Petitioner cites the case of Austria vs. Ventenilla, G. R. No. L-10018, September 19, 1956,
(unreported but a partial digest thereof appears in 99 Phil. 1069) in support of its insistence that with
the orders of May 27 and December 14, 1957, the closure of Mrs. Hodges' estate has become a
mere formality, inasmuch as said orders amounted to the order of adjudication and distribution
ordained by Section 1 of Rule 90. But the parallel attempted to be drawn between that case and the
present one does not hold. There the trial court had in fact issued a clear, distinct and express order
of adjudication and distribution more than twenty years before the other heirs of the deceased filed
their motion asking that the administratrix be removed, etc. As quoted in that decision, the order of
the lower court in that respect read as follows:
 En orden a la mocion de la administradora, el juzgado la encuentra procedente bajo
la condicion de que no se hara entrega ni adjudicacion de los bienes a los herederos
antes de que estos presten la fianza correspondiente y de acuerdo con lo prescrito
en el Art. 754 del Codigo de Procedimientos: pues, en autos no aparece que hayan
sido nombrados comisionados de avaluo y reclamaciones. Dicha fianza podra ser
por un valor igual al de los bienes que correspondan a cada heredero segun el
testamento. Creo que no es obice para la terminacion del expediente el hecho de
que la administradora no ha presentado hasta ahora el inventario de los bienes;
pues, segun la ley, estan exentos de esta formalidad os administradores que son
legatarios del residuo o remanente de los bienes y hayan prestado fianza para
responder de las gestiones de su cargo, y aparece en el testamento que la
administradora Alejandra Austria reune dicha condicion.

POR TODO LO EXPUESTO, el juzgado declara, 1.o: no haber lugar a la mocion de

Ramon Ventenilla y otros; 2.o, declara asimismo que los unicos herederos del finado
Antonio Ventenilla son su esposa Alejandra Austria, Maria Ventenilla, hermana del
testador, y Ramon Ventenilla, Maria Ventenilla, Ramon Soriano, Eulalio Soriano,
Jose Soriano, Gabriela Ventenilla, Lorenzo Ventenilla, Felicitas Ventenilla, Eugenio
Ventenilla y Alejandra Ventenilla, en representacion de los difuntos Juan, Tomas,
Catalino y Froilan, hermanos del testador, declarando, ademas que la heredera
Alejandra Austria tiene derecho al remanente de todos los bienes dejados por el
finado, despues de deducir de ellos la porcion que corresponde a cada uno de sus
coherederos, conforme esta mandado en las clausulas 8.a, 9.a, 10.a, 11.a, 12.a y
13.a del testamento; 3.o, se aprueba el pago hecho por la administradora de los
gastos de la ultima enfermedad y funerales del testador, de la donacion hecha por el
testador a favor de la Escuela a Publica del Municipio de Mangatarem, y de las
misas en sufragio del alma del finado; 4.o, que una vez prestada la fianza
mencionada al principio de este auto, se haga la entrega y adjudicacion de los
bienes, conforme se dispone en el testamento y se acaba de declarar en este auto;
5.o, y, finalmente, que verificada la adjudicacion, se dara por terminada la
administracion, revelandole toda responsabilidad a la administradora, y cancelando
su fianza.

ASI SE ORDENA.

Undoubtedly, after the issuance of an order of such tenor, the closure of any proceedings for the
settlement of the estate of a deceased person cannot be but perfunctory.

In the case at bar, as already pointed out above, the two orders relied upon by petitioner do not
appear ex-facie to be of the same tenor and nature as the order just quoted, and, what is more, the
circumstances attendant to its issuance do not suggest that such was the intention of the court, for
nothing could have been more violative of the will of Mrs. Hodges.

Indeed, to infer from Hodges' said motions and from his statements of accounts for the years 1958,
1959 and 1960, A Annexes I, K and M, respectively, wherein he repeatedly claimed that "herein
executor (being) the only devisee or legatee of the deceased, in accordance with the last will and
testament already probated," there is "no (other) person interested in the Philippines of the time and
place of examining herein account to be given notice", an intent to adjudicate unto himself the whole
of his wife's estate in an absolute manner and without regard to the contingent interests of her
brothers and sisters, is to impute bad faith to him, an imputation which is not legally permissible,
much less warranted by the facts of record herein. Hodges knew or ought to have known that, legally
speaking, the terms of his wife's will did not give him such a right. Factually, there are enough
circumstances extant in the records of these cases indicating that he had no such intention to ignore
the rights of his co-heirs. In his very motions in question, Hodges alleged, thru counsel, that the
"deceased Linnie Jane Hodges died leaving no descendants and ascendants, except brothers and
sisters and herein petitioner, as surviving spouse, to inherit the properties of the decedent", and
even promised that "proper accounting will be had — in all these transactions" which he had
submitted for approval and authorization by the court, thereby implying that he was aware of his
responsibilities vis-a-vis his co-heirs. As alleged by respondent Magno in her brief as appellee:

Under date of April 14, 1959, C. N. Hodges filed his first "Account by the Executor" of
the estate of Linnie Jane Hodges. In the "Statement of Networth of Mr. C. N. Hodges
and the Estate of Linnie Jane Hodges" as of December 31, 1958 annexed thereto, C.
N. Hodges reported that the combined conjugal estate earned a net income of
P328,402.62, divided evenly between him and the estate of Linnie Jane Hodges.
Pursuant to this, he filed an "individual income tax return" for calendar year 1958 on
the estate of Linnie Jane Hodges reporting, under oath, the said estate as having
earned income of P164,201.31, exactly one-half of the net income of his combined
personal assets and that of the estate of Linnie Jane Hodges. (p. 91, Appellee's
Brief.)

Under date of July 21, 1960, C. N. Hodges filed his second "Annual Statement of
Account by the Executor" of the estate of Linnie Jane Hodges. In the "Statement of
Networth of Mr. C. N. Hodges and the Estate of Linnie Jane Hodges" as of
December 31, 1959 annexed thereto, C. N. Hodges reported that the combined
conjugal estate earned a net income of P270,623.32, divided evenly between him
and the estate of Linnie Jane Hodges. Pursuant to this, he filed an "individual income
tax return" for calendar year 1959 on the estate of Linnie Jane Hodges reporting,
under oath, the said estate as having earned income of P135,311.66, exactly one-
half of the net income of his combined personal assets and that of the estate of
Linnie Jane Hodges. (pp. 91-92, id.)

Under date of April 20, 1961, C. N. Hodges filed his third "Annual Statement of
Account by the Executor for the year 1960" of the estate of Linnie Jane Hodges. In
the "Statement of Net Worth of Mr. C. N. Hodges and the Estate of Linnie Jane
Hodges" as of December 31, 1960 annexed thereto, C. N. Hodges reported that the
combined conjugal estate earned a net income of P314,857.94, divided of Linnie
Jane Hodges. Pursuant to this, he filed an "individual evenly between him and the
estate income tax return" for calendar year 1960 on the estate of Linnie Jane Hodges
reporting, under oath, the said estate as having earned income of P157,428.97,
exactly one-half of the net income of his combined personal assets and that of the
estate of Linnie Jane Hodges. (pp. 92-93, id.)

In the petition for probate that he (Hodges) filed, he listed the seven brothers and
sisters of Linnie Jane as her "heirs" (see p. 2, Green ROA). The order of the court
admitting the will to probate unfortunately omitted one of the heirs, Roy Higdon (see
p. 14, Green ROA). Immediately, C. N. Hodges filed a verified motion to have Roy
Higdon's name included as an heir, stating that he wanted to straighten the records
"in order (that) the heirs of deceased Roy Higdon may not think or believe they were
omitted, and that they were really and are interested in the estate of deceased Linnie
Jane Hodges".

Thus, he recognized, if in his own way, the separate identity of his wife's estate from his own share
of the conjugal partnership up to the time of his death, more than five years after that of his wife. He
never considered the whole estate as a single one belonging exclusively to himself. The only
conclusion one can gather from this is that he could have been preparing the basis for the eventual
transmission of his wife's estate, or, at least, so much thereof as he would not have been able to
dispose of during his lifetime, to her brothers and sisters in accordance with her expressed desire,
as intimated in his tax return in the United States to be more extensively referred to anon. And
assuming that he did pay the corresponding estate and inheritance taxes in the Philippines on the
basis of his being sole heir, such payment is not necessarily inconsistent with his recognition of the
rights of his co-heirs. Without purporting to rule definitely on the matter in these proceedings, We
might say here that We are inclined to the view that under the peculiar provisions of his wife's will,
and for purposes of the applicable inheritance tax laws, Hodges had to be considered as her sole
heir, pending the actual transmission of the remaining portion of her estate to her other heirs, upon
the eventuality of his death, and whatever adjustment might be warranted should there be any such
remainder then is a matter that could well be taken care of by the internal revenue authorities in due
time.

It is to be noted that the lawyer, Atty. Leon P. Gellada, who signed the motions of May 27, 1957 and
December 11, 1957 and the aforementioned statements of account was the very same one who also
subsequently signed and filed the motion of December 26, 1962 for the appointment of respondent
Magno as "Administratrix of the Estate of Mrs. Linnie Jane Hodges" wherein it was alleged that "in
accordance with the provisions of the last will and testament of Linnie Jane Hodges, whatever real
properties that may remain at the death of her husband, Charles Newton Hodges, the said
properties shall be equally divided among their heirs." And it appearing that said attorney was
Hodges' lawyer as Executor of the estate of his wife, it stands to reason that his understanding of the
situation, implicit in his allegations just quoted, could somehow be reflective of Hodges' own
understanding thereof.

As a matter of fact, the allegations in the motion of the same Atty. Gellada dated July 1, 1957, a
"Request for Inclusion of the Name of Roy Higdon in the Order of the Court dated July 19, 1957,
etc.", reference to which is made in the above quotation from respondent Magno's brief, are over the
oath of Hodges himself, who verified the motion. Said allegations read:

1. — That the Hon. Court issued orders dated June 29, 1957, ordering the probate of
the will.

2. — That in said order of the Hon. Court, the relatives of the deceased Linnie Jane
Hodges were enumerated. However, in the petition as well as in the testimony of
Executor during the hearing, the name Roy Higdon was mentioned, but deceased. It
was unintentionally omitted the heirs of said Roy Higdon who are his wife Aline
Higdon and son David Higdon, all of age, and residents of Quinlan, Texas, U.S.A.

3. — That to straighten the records, and in order the heirs of deceased Roy Higdon
may not think or believe they were omitted, and that they were really and are
interested in the estate of deceased Linnie Jane Hodges, it is requested of the Hon.
Court to insert the names of Aline Higdon and David Higdon, wife and son of
deceased Roy Higdon in the said order of the Hon. Court dated June 29, 1957. (pars.
1 to 3, Annex 2 of Magno's Answer — Record, p. 260)

As can be seen, these italicized allegations indicate, more or less, the real attitude of Hodges in
regard to the testamentary dispositions of his wife.

In connection with this point of Hodges' intent, We note that there are documents, copies of which
are annexed to respondent Magno's answer, which purportedly contain Hodges' own solemn
declarations recognizing the right of his co-heirs, such as the alleged tax return he filed with the
United States Taxation authorities, identified as Schedule M, (Annex 4 of her answer) and his
supposed affidavit of renunciation, Annex 5. In said Schedule M, Hodges appears to have answered
the pertinent question thus:

2a. Had the surviving spouse the right to declare an election between (1) the
provisions made in his or her favor by the will and (11) dower, curtesy or a statutory
interest? (X) Yes ( ) No

2d. Does the surviving spouse contemplate renouncing the will and electing to take
dower, curtesy, or a statutory interest? (X) Yes ( ) No

3. According to the information and belief of the person or persons filing the return, is
any action described under question 1 designed or contemplated? ( ) Yes (X) No
(Annex 4, Answer — Record, p. 263)

and to have further stated under the item, "Description of property interests passing to surviving
spouse" the following:

None, except for purposes of administering the Estate, paying debts, taxes and other
legal charges. It is the intention of the surviving husband of deceased to distribute
the remaining property and interests of the deceased in their Community Estate to
the devisees and legatees named in the will when the debts, liabilities, taxes and
expenses of administration are finally determined and paid. (Annex 4, Answer —
Record, p. 263)

In addition, in the supposed affidavit of Hodges, Annex 5, it is stated:

I, C. N. Hodges, being duly sworn, on oath affirm that at the time the United States
Estate Tax Return was filed in the Estate of Linnie Jane Hodges on August 8, 1958, I
renounced and disclaimed any and all right to receive the rents, emoluments and
income from said estate, as shown by the statement contained in Schedule M at
page 29 of said return, a copy of which schedule is attached to this affidavit and
made a part hereof.

The purpose of this affidavit is to ratify and confirm, and I do hereby ratify and
confirm, the declaration made in Schedule M of said return and hereby formally
disclaim and renounce any right on my part to receive any of the said rents,
emoluments and income from the estate of my deceased wife, Linnie Jane Hodges.
This affidavit is made to absolve me or my estate from any liability for the payment of
income taxes on income which has accrued to the estate of Linnie Jane Hodges
since the death of the said Linnie Jane Hodges on May 23, 1957. (Annex 5, Answer
— Record, p. 264)

Although it appears that said documents were not duly presented as evidence in the court below,
and We cannot, therefore, rely on them for the purpose of the present proceedings, still, We cannot
close our eyes to their existence in the record nor fail to note that their tenor jibes with Our
conclusion discussed above from the circumstances related to the orders of May 27 and December
14, 1957. 5 Somehow, these documents, considering they are supposed to be copies of their
originals found in the official files of the governments of the United States and of the Philippines,
serve to lessen any possible apprehension that Our conclusion from the other evidence of Hodges'
manifest intent vis-a-vis the rights of his co-heirs is without basis in fact.
Verily, with such eloquent manifestations of his good intentions towards the other heirs of his wife,
We find it very hard to believe that Hodges did ask the court and that the latter agreed that he be
declared her sole heir and that her whole estate be adjudicated to him without so much as just
annotating the contingent interest of her brothers and sisters in what would remain thereof upon his
demise. On the contrary, it seems to us more factual and fairer to assume that Hodges was well
aware of his position as executor of the will of his wife and, as such, had in mind the following
admonition made by the Court in Pamittan vs. Lasam, et al., 60 Phil., 908, at pp. 913-914:

Upon the death of Bernarda in September, 1908, said lands continued to be conjugal
property in the hands of the defendant Lasam. It is provided in article 1418 of the
Civil Code that upon the dissolution of the conjugal partnership, an inventory shall
immediately be made and this court in construing this provision in connection with
section 685 of the Code of Civil Procedure (prior to its amendment by Act No. 3176
of November 24, 1924) has repeatedly held that in the event of the death of the wife,
the law imposes upon the husband the duty of liquidating the affairs of the
partnership without delay (desde luego) (Alfonso vs. Natividad, 6 Phil., 240; Prado
vs. Lagera, 7 Phil., 395; De la Rama vs. De la Rama, 7 Phil., 745; Enriquez vs.
Victoria, 10 Phil., 10; Amancio vs. Pardo, 13 Phil., 297; Rojas vs. Singson Tongson,
17 Phil., 476; Sochayseng vs. Trujillo, 31 Phil., 153; Molera vs. Molera, 40 Phil., 566;
Nable Jose vs. Nable Jose, 41 Phil., 713.)

In the last mentioned case this court quoted with approval the case of Leatherwood
vs. Arnold (66 Texas, 414, 416, 417), in which that court discussed the powers of the
surviving spouse in the administration of the community property. Attention was
called to the fact that the surviving husband, in the management of the conjugal
property after the death of the wife, was a trustee of unique character who is liable
for any fraud committed by him with relation to the property while he is charged with
its administration. In the liquidation of the conjugal partnership, he had wide powers
(as the law stood prior to Act No. 3176) and the high degree of trust reposed in him
stands out more clearly in view of the fact that he was the owner of a half interest in
his own right of the conjugal estate which he was charged to administer. He could
therefore no more acquire a title by prescription against those for whom he was
administering the conjugal estate than could a guardian against his ward or a judicial
administrator against the heirs of estate. Section 38 of Chapter III of the Code of Civil
Procedure, with relation to prescription, provides that "this chapter shall not apply ...
in the case of a continuing and subsisting trust." The surviving husband in the
administration and liquidation of the conjugal estate occupies the position of a trustee
of the highest order and is not permitted by the law to hold that estate or any portion
thereof adversely to those for whose benefit the law imposes upon him the duty of
administration and liquidation. No liquidation was ever made by Lasam — hence, the
conjugal property which came into his possession on the death of his wife in
September, 1908, still remains conjugal property, a continuing and subsisting trust.
He should have made a liquidation immediately (desde luego). He cannot now be
permitted to take advantage of his own wrong. One of the conditions of title by
prescription (section 41, Code of Civil Procedure) is possession "under a claim of title
exclusive of any other right". For a trustee to make such a claim would be a manifest
fraud.

And knowing thus his responsibilities in the premises, We are not convinced that Hodges arrogated
everything unto himself leaving nothing at all to be inherited by his wife's brothers and sisters.

PCIB insists, however, that to read the orders of May 27 and December 14, 1957, not as
adjudicatory, but merely as approving past and authorizing future dispositions made by Hodges in a
wholesale and general manner, would necessarily render the said orders void for being violative of
the provisions of Rule 89 governing the manner in which such dispositions may be made and how
the authority therefor and approval thereof by the probate court may be secured. If We sustained
such a view, the result would only be that the said orders should be declared ineffective either way
they are understood, considering We have already seen it is legally impossible to consider them as
adjudicatory. As a matter of fact, however, what surges immediately to the surface, relative to PCIB's
observations based on Rule 89, is that from such point of view, the supposed irregularity would
involve no more than some non-jurisdictional technicalities of procedure, which have for their evident
fundamental purpose the protection of parties interested in the estate, such as the heirs, its
creditors, particularly the government on account of the taxes due it; and since it is apparent here
that none of such parties are objecting to said orders or would be prejudiced by the unobservance by
the trial court of the procedure pointed out by PCIB, We find no legal inconvenience in nor
impediment to Our giving sanction to the blanket approval and authority contained in said orders.
This solution is definitely preferable in law and in equity, for to view said orders in the sense
suggested by PCIB would result in the deprivation of substantive rights to the brothers and sisters of
Mrs. Hodges, whereas reading them the other way will not cause any prejudice to anyone, and,
withal, will give peace of mind and stability of rights to the innocent parties who relied on them in
good faith, in the light of the peculiar pertinent provisions of the will of said decedent.

Now, the inventory submitted by Hodges on May 12, 1958 referred to the estate of his wife as
consisting of "One-half of all the items designated in the balance sheet, copy of which is hereto
attached and marked as "Annex A"." Although, regrettably, no copy of said Annex A appears in the
records before Us, We take judicial notice, on the basis of the undisputed facts in these cases, that
the same consists of considerable real and other personal kinds of properties. And since, according
to her will, her husband was to be the sole owner thereof during his lifetime, with full power and
authority to dispose of any of them, provided that should there be any remainder upon his death,
such remainder would go to her brothers and sisters, and furthermore, there is no pretension, much
less any proof that Hodges had in fact disposed of all of them, and, on the contrary, the indications
are rather to the effect that he had kept them more or less intact, it cannot truthfully be said that,
upon the death of Hodges, there was no more estate of Mrs. Hodges to speak of. It is Our
conclusion, therefore, that properties do exist which constitute such estate, hence Special
Proceedings 1307 should not yet be closed.

Neither is there basis for holding that respondent Magno has ceased to be the Administratrix in said
proceeding. There is no showing that she has ever been legally removed as such, the attempt to
replace her with Mr. Benito Lopez without authority from the Court having been expressly held
ineffective by Our resolution of September 8, 1972. Parenthetically, on this last point, PCIB itself is
very emphatic in stressing that it is not questioning said respondent's status as such administratrix.
Indeed, it is not clear that PCIB has any standing to raise any objection thereto, considering it is a
complete stranger insofar as the estate of Mrs. Hodges is concerned.

It is the contention of PCIB, however, that as things actually stood at the time of Hodges' death, their
conjugal partnership had not yet been liquidated and, inasmuch as the properties composing the
same were thus commingled pro indiviso and, consequently, the properties pertaining to the estate
of each of the spouses are not yet identifiable, it is PCIB alone, as administrator of the estate of
Hodges, who should administer everything, and all that respondent Magno can do for the time being
is to wait until the properties constituting the remaining estate of Mrs. Hodges have been duly
segregated and delivered to her for her own administration. Seemingly, PCIB would liken the Testate
Estate of Linnie Jane Hodges to a party having a claim of ownership to some properties included in
the inventory of an administrator of the estate of a decedent, (here that of Hodges) and who normally
has no right to take part in the proceedings pending the establishment of his right or title; for which
as a rule it is required that an ordinary action should be filed, since the probate court is without
jurisdiction to pass with finality on questions of title between the estate of the deceased, on the one
hand, and a third party or even an heir claiming adversely against the estate, on the other.

We do not find such contention sufficiently persuasive. As We see it, the situation obtaining herein
cannot be compared with the claim of a third party the basis of which is alien to the pending probate
proceedings. In the present cases what gave rise to the claim of PCIB of exclusive ownership by the
estate of Hodges over all the properties of the Hodges spouses, including the share of Mrs. Hodges
in the community properties, were the orders of the trial court issued in the course of the very
settlement proceedings themselves, more specifically, the orders of May 27 and December 14, 1957
so often mentioned above. In other words, the root of the issue of title between the parties is
something that the court itself has done in the exercise of its probate jurisdiction. And since in the
ultimate analysis, the question of whether or not all the properties herein involved pertain exclusively
to the estate of Hodges depends on the legal meaning and effect of said orders, the claim that
respondent court has no jurisdiction to take cognizance of and decide the said issue is incorrect. If it
was within the competence of the court to issue the root orders, why should it not be within its
authority to declare their true significance and intent, to the end that the parties may know whether
or not the estate of Mrs. Hodges had already been adjudicated by the court, upon the initiative of
Hodges, in his favor, to the exclusion of the other heirs of his wife instituted in her will?

At this point, it bears emphasis again that the main cause of all the present problems confronting the
courts and the parties in these cases was the failure of Hodges to secure, as executor of his wife's
estate, from May, 1957 up to the time of his death in December, 1962, a period of more than five
years, the final adjudication of her estate and the closure of the proceedings. The record is bare of
any showing that he ever exerted any effort towards the early settlement of said estate. While, on
the one hand, there are enough indications, as already discuss that he had intentions of leaving
intact her share of the conjugal properties so that it may pass wholly to his co-heirs upon his death,
pursuant to her will, on the other hand, by not terminating the proceedings, his interests in his own
half of the conjugal properties remained commingled pro-indiviso with those of his co-heirs in the
other half. Obviously, such a situation could not be conducive to ready ascertainment of the portion
of the inheritance that should appertain to his co-heirs upon his death. Having these considerations
in mind, it would be giving a premium for such procrastination and rather unfair to his co-heirs, if the
administrator of his estate were to be given exclusive administration of all the properties in question,
which would necessarily include the function of promptly liquidating the conjugal partnership, thereby
identifying and segregating without unnecessary loss of time which properties should be considered
as constituting the estate of Mrs. Hodges, the remainder of which her brothers and sisters are
supposed to inherit equally among themselves.

To be sure, an administrator is not supposed to represent the interests of any particular party and his
acts are deemed to be objectively for the protection of the rights of everybody concerned with the
estate of the decedent, and from this point of view, it maybe said that even if PCIB were to act alone,
there should be no fear of undue disadvantage to anyone. On the other hand, however, it is
evidently implicit in section 6 of Rule 78 fixing the priority among those to whom letters of
administration should be granted that the criterion in the selection of the administrator is not his
impartiality alone but, more importantly, the extent of his interest in the estate, so much so that the
one assumed to have greater interest is preferred to another who has less. Taking both of these
considerations into account, inasmuch as, according to Hodges' own inventory submitted by him as
Executor of the estate of his wife, practically all their properties were conjugal which means that the
spouses have equal shares therein, it is but logical that both estates should be administered jointly
by representatives of both, pending their segregation from each other. Particularly is such an
arrangement warranted because the actuations so far of PCIB evince a determined, albeit
groundless, intent to exclude the other heirs of Mrs. Hodges from their inheritance. Besides, to allow
PCIB, the administrator of his estate, to perform now what Hodges was duty bound to do as
executor is to violate the spirit, if not the letter, of Section 2 of Rule 78 which expressly provides that
"The executor of an executor shall not, as such, administer the estate of the first testator." It goes
without saying that this provision refers also to the administrator of an executor like PCIB here.

We are not unmindful of the fact that under Section 2 of Rule 73, "When the marriage is dissolved by
the death of the husband or wife, the community property shall be inventoried, administered, and
liquidated, and the debts thereof paid, in the testate or intestate proceedings of the deceased
spouse. If both spouses have died, the conjugal partnership shall be liquidated in the testate or
intestate proceedings of either." Indeed, it is true that the last sentence of this provision allows or
permits the conjugal partnership of spouses who are both deceased to be settled or liquidated in the
testate or intestate proceedings of either, but precisely because said sentence allows or permits that
the liquidation be made in either proceeding, it is a matter of sound judicial discretion in which one it
should be made. After all, the former rule referring to the administrator of the husband's estate in
respect to such liquidation was done away with by Act 3176, the pertinent provisions of which are
now embodied in the rule just cited.

Thus, it can be seen that at the time of the death of Hodges, there was already the pending judicial
settlement proceeding of the estate of Mrs. Hodges, and, more importantly, that the former was the
executor of the latter's will who had, as such, failed for more than five years to see to it that the same
was terminated earliest, which was not difficult to do, since from ought that appears in the record,
there were no serious obstacles on the way, the estate not being indebted and there being no
immediate heirs other than Hodges himself. Such dilatory or indifferent attitude could only spell
possible prejudice of his co-heirs, whose rights to inheritance depend entirely on the existence of
any remainder of Mrs. Hodges' share in the community properties, and who are now faced with the
pose of PCIB that there is no such remainder. Had Hodges secured as early as possible the
settlement of his wife's estate, this problem would not arisen. All things considered, We are fully
convinced that the interests of justice will be better served by not permitting or allowing PCIB or any
administrator of the estate of Hodges exclusive administration of all the properties in question. We
are of the considered opinion and so hold that what would be just and proper is for both
administrators of the two estates to act conjointly until after said estates have been segregated from
each other.

At this juncture, it may be stated that we are not overlooking the fact that it is PCIB's contention that,
viewed as a substitution, the testamentary disposition in favor of Mrs. Hodges' brothers and sisters
may not be given effect. To a certain extent, this contention is correct. Indeed, legally speaking, Mrs.
Hodges' will provides neither for a simple or vulgar substitution under Article 859 of the Civil Code
nor for a fideicommissary substitution under Article 863 thereof. There is no vulgar substitution
therein because there is no provision for either (1) predecease of the testator by the designated heir
or (2) refusal or (3) incapacity of the latter to accept the inheritance, as required by Article 859; and
neither is there a fideicommissary substitution therein because no obligation is imposed thereby
upon Hodges to preserve the estate or any part thereof for anyone else. But from these premises, it
is not correct to jump to the conclusion, as PCIB does, that the testamentary dispositions in question
are therefore inoperative and invalid.

The error in PCIB's position lies simply in the fact that it views the said disposition exclusively in the
light of substitutions covered by the Civil Code section on that subject, (Section 3, Chapter 2, Title
IV, Book III) when it is obvious that substitution occurs only when another heir is appointed in a will
"so that he may enter into inheritance in default of the heir originally instituted," (Article 857, id.) and,
in the present case, no such possible default is contemplated. The brothers and sisters of Mrs.
Hodges are not substitutes for Hodges because, under her will, they are not to inherit what Hodges
cannot, would not or may not inherit, but what he would not dispose of from his inheritance; rather,
therefore, they are also heirs instituted simultaneously with Hodges, subject, however, to certain
conditions, partially resolutory insofar as Hodges was concerned and correspondingly suspensive
with reference to his brothers and sisters-in-law. It is partially resolutory, since it bequeaths unto
Hodges the whole of her estate to be owned and enjoyed by him as universal and sole heir with
absolute dominion over them6 only during his lifetime, which means that while he could completely
and absolutely dispose of any portion thereof inter vivos to anyone other than himself, he was not
free to do so mortis causa, and all his rights to what might remain upon his death would cease
entirely upon the occurrence of that contingency, inasmuch as the right of his brothers and sisters-in-
law to the inheritance, although vested already upon the death of Mrs. Hodges, would automatically
become operative upon the occurrence of the death of Hodges in the event of actual existence of
any remainder of her estate then.

Contrary to the view of respondent Magno, however, it was not the usufruct alone of her estate, as
contemplated in Article 869 of the Civil Code, that she bequeathed to Hodges during his lifetime, but
the full ownership thereof, although the same was to last also during his lifetime only, even as there
was no restriction whatsoever against his disposing or conveying the whole or any portion thereof to
anybody other than himself. The Court sees no legal impediment to this kind of institution, in this
jurisdiction or under Philippine law, except that it cannot apply to the legitime of Hodges as the
surviving spouse, consisting of one-half of the estate, considering that Mrs. Hodges had no surviving
ascendants nor descendants. (Arts. 872, 900, and 904, New Civil Code.)

But relative precisely to the question of how much of Mrs. Hodges' share of the conjugal partnership
properties may be considered as her estate, the parties are in disagreement as to how Article 16 of
the Civil Code7 should be applied. On the one hand, petitioner claims that inasmuch as Mrs. Hodges
was a resident of the Philippines at the time of her death, under said Article 16, construed in relation
to the pertinent laws of Texas and the principle of renvoi, what should be applied here should be the
rules of succession under the Civil Code of the Philippines, and, therefore, her estate could consist
of no more than one-fourth of the said conjugal properties, the other fourth being, as already
explained, the legitime of her husband (Art. 900, Civil Code) which she could not have disposed of
nor burdened with any condition (Art. 872, Civil Code). On the other hand, respondent Magno denies
that Mrs. Hodges died a resident of the Philippines, since allegedly she never changed nor intended
to change her original residence of birth in Texas, United States of America, and contends that,
anyway, regardless of the question of her residence, she being indisputably a citizen of Texas, under
said Article 16 of the Civil Code, the distribution of her estate is subject to the laws of said State
which, according to her, do not provide for any legitime, hence, the brothers and sisters of Mrs.
Hodges are entitled to the remainder of the whole of her share of the conjugal partnership properties
consisting of one-half thereof. Respondent Magno further maintains that, in any event, Hodges had
renounced his rights under the will in favor of his co-heirs, as allegedly proven by the documents
touching on the point already mentioned earlier, the genuineness and legal significance of which
petitioner seemingly questions. Besides, the parties are disagreed as to what the pertinent laws of
Texas provide. In the interest of settling the estates herein involved soonest, it would be best,
indeed, if these conflicting claims of the parties were determined in these proceedings. The Court
regrets, however, that it cannot do so, for the simple reason that neither the evidence submitted by
the parties in the court below nor their discussion, in their respective briefs and memoranda before
Us, of their respective contentions on the pertinent legal issues, of grave importance as they are,
appear to Us to be adequate enough to enable Us to render an intelligent comprehensive and just
resolution. For one thing, there is no clear and reliable proof of what in fact the possibly applicable
laws of Texas are. 7* Then also, the genuineness of documents relied upon by respondent Magno is
disputed. And there are a number of still other conceivable related issues which the parties may wish
to raise but which it is not proper to mention here. In Justice, therefore, to all the parties concerned,
these and all other relevant matters should first be threshed out fully in the trial court in the
proceedings hereafter to be held therein for the purpose of ascertaining and adjudicating and/or
distributing the estate of Mrs. Hodges to her heirs in accordance with her duly probated will.

To be more explicit, all that We can and do decide in connection with the petition for certiorari and
prohibition are: (1) that regardless of which corresponding laws are applied, whether of the
Philippines or of Texas, and taking for granted either of the respective contentions of the parties as
to provisions of the latter,8 and regardless also of whether or not it can be proven by competent
evidence that Hodges renounced his inheritance in any degree, it is easily and definitely discernible
from the inventory submitted by Hodges himself, as Executor of his wife's estate, that there are
properties which should constitute the estate of Mrs. Hodges and ought to be disposed of or
distributed among her heirs pursuant to her will in said Special Proceedings 1307; (2) that, more
specifically, inasmuch as the question of what are the pertinent laws of Texas applicable to the
situation herein is basically one of fact, and, considering that the sole difference in the positions of
the parties as to the effect of said laws has reference to the supposed legitime of Hodges — it being
the stand of PCIB that Hodges had such a legitime whereas Magno claims the negative - it is now
beyond controversy for all future purposes of these proceedings that whatever be the provisions
actually of the laws of Texas applicable hereto, the estate of Mrs. Hodges is at least, one-fourth of
the conjugal estate of the spouses; the existence and effects of foreign laws being questions of fact,
and it being the position now of PCIB that the estate of Mrs. Hodges, pursuant to the laws of Texas,
should only be one-fourth of the conjugal estate, such contention constitutes an admission of fact,
and consequently, it would be in estoppel in any further proceedings in these cases to claim that
said estate could be less, irrespective of what might be proven later to be actually the provisions of
the applicable laws of Texas; (3) that Special Proceedings 1307 for the settlement of the testate
estate of Mrs. Hodges cannot be closed at this stage and should proceed to its logical conclusion,
there having been no proper and legal adjudication or distribution yet of the estate therein involved;
and (4) that respondent Magno remains and continues to be the Administratrix therein. Hence,
nothing in the foregoing opinion is intended to resolve the issues which, as already stated, are not
properly before the Court now, namely, (1) whether or not Hodges had in fact and in law waived or
renounced his inheritance from Mrs. Hodges, in whole or in part, and (2) assuming there had been
no such waiver, whether or not, by the application of Article 16 of the Civil Code, and in the light of
what might be the applicable laws of Texas on the matter, the estate of Mrs. Hodges is more than
the one-fourth declared above. As a matter of fact, even our finding above about the existence of
properties constituting the estate of Mrs. Hodges rests largely on a general appraisal of the size and
extent of the conjugal partnership gathered from reference made thereto by both parties in their
briefs as well as in their pleadings included in the records on appeal, and it should accordingly yield,
as to which exactly those properties are, to the more concrete and specific evidence which the
parties are supposed to present in support of their respective positions in regard to the foregoing
main legal and factual issues. In the interest of justice, the parties should be allowed to present such
further evidence in relation to all these issues in a joint hearing of the two probate proceedings
herein involved. After all, the court a quo has not yet passed squarely on these issues, and it is best
for all concerned that it should do so in the first instance.

Relative to Our holding above that the estate of Mrs. Hodges cannot be less than the remainder of
one-fourth of the conjugal partnership properties, it may be mentioned here that during the
deliberations, the point was raised as to whether or not said holding might be inconsistent with Our
other ruling here also that, since there is no reliable evidence as to what are the applicable laws of
Texas, U.S.A. "with respect to the order of succession and to the amount of successional rights" that
may be willed by a testator which, under Article 16 of the Civil Code, are controlling in the instant
cases, in view of the undisputed Texan nationality of the deceased Mrs. Hodges, these cases should
be returned to the court a quo, so that the parties may prove what said law provides, it is premature
for Us to make any specific ruling now on either the validity of the testamentary dispositions herein
involved or the amount of inheritance to which the brothers and sisters of Mrs. Hodges are entitled.
After nature reflection, We are of the considered view that, at this stage and in the state of the
records before Us, the feared inconsistency is more apparent than real. Withal, it no longer lies in
the lips of petitioner PCIB to make any claim that under the laws of Texas, the estate of Mrs. Hodges
could in any event be less than that We have fixed above.
It should be borne in mind that as above-indicated, the question of what are the laws of Texas
governing the matters herein issue is, in the first instance, one of fact, not of law. Elementary is the
rule that foreign laws may not be taken judicial notice of and have to be proven like any other fact in
dispute between the parties in any proceeding, with the rare exception in instances when the said
laws are already within the actual knowledge of the court, such as when they are well and generally
known or they have been actually ruled upon in other cases before it and none of the parties
concerned do not claim otherwise. (5 Moran, Comments on the Rules of Court, p. 41, 1970 ed.)
In Fluemer vs. Hix, 54 Phil. 610, it was held:

It is the theory of the petitioner that the alleged will was executed in Elkins West Virginia, on
November 3, 1925, by Hix who had his residence in that jurisdiction, and that the laws of West
Virginia govern. To this end, there was submitted a copy of section 3868 of Acts 1882, c. 84 as
found in West Virginia Code, Annotated, by Hogg Charles E., vol. 2, 1914, p. 1960, and as certified
to by the Director of the National Library. But this was far from a compliance with the law. The laws
of a foreign jurisdiction do not prove themselves in our courts. The courts of the Philippine Islands
are not authorized to take judicial notice of the laws of the various States of the American Union.
Such laws must be proved as facts. (In re Estate of Johnson [1918], 39 Phil., 156.) Here the
requirements of the law were not met. There was no showing that the book from which an extract
was taken was printed or published under the authority of the State of West Virginia, as provided in
section 300 of the Code of Civil Procedure. Nor was the extract from the law attested by the
certificate of the officer having charge of the original, under the seal of the State of West Virginia, as
provided in section 301 of the Code of Civil Procedure. No evidence was introduced to show that the
extract from the laws of West Virginia was in force at the time the alleged will was executed."

No evidence of the nature thus suggested by the Court may be found in the records of the cases at
bar. Quite to the contrary, the parties herein have presented opposing versions in their respective
pleadings and memoranda regarding the matter. And even if We took into account that in Aznar vs.
Garcia, the Court did make reference to certain provisions regarding succession in the laws of
Texas, the disparity in the material dates of that case and the present ones would not permit Us to
indulge in the hazardous conjecture that said provisions have not been amended or changed in the
meantime.

On the other hand, in In re Estate of Johnson, 39 Phil. 156, We held:

Upon the other point — as to whether the will was executed in conformity with the
statutes of the State of Illinois — we note that it does not affirmatively appear from
the transcription of the testimony adduced in the trial court that any witness was
examined with reference to the law of Illinois on the subject of the execution of will.
The trial judge no doubt was satisfied that the will was properly executed by
examining section 1874 of the Revised Statutes of Illinois, as exhibited in volume 3 of
Starr & Curtis's Annotated Illinois Statutes, 2nd ed., p. 426; and he may have
assumed that he could take judicial notice of the laws of Illinois under section 275 of
the Code of Civil Procedure. If so, he was in our opinion mistaken. That section
authorizes the courts here to take judicial notice, among other things, of the acts of
the legislative department of the United States. These words clearly have reference
to Acts of the Congress of the United States; and we would hesitate to hold that our
courts can, under this provision, take judicial notice of the multifarious laws of the
various American States. Nor do we think that any such authority can be derived
from the broader language, used in the same section, where it is said that our courts
may take judicial notice of matters of public knowledge "similar" to those therein
enumerated. The proper rule we think is to require proof of the statutes of the States
of the American Union whenever their provisions are determinative of the issues in
any action litigated in the Philippine courts.
 Nevertheless, even supposing that the trial court may have erred in taking judicial
notice of the law of Illinois on the point in question, such error is not now available to
the petitioner, first, because the petition does not state any fact from which it would
appear that the law of Illinois is different from what the court found, and, secondly,
because the assignment of error and argument for the appellant in this court raises
no question based on such supposed error. Though the trial court may have acted
upon pure conjecture as to the law prevailing in the State of Illinois, its judgment
could not be set aside, even upon application made within six months under section
113 of the Code of Civil Procedure, unless it should be made to appear affirmatively
that the conjecture was wrong. The petitioner, it is true, states in general terms that
the will in question is invalid and inadequate to pass real and personal property in the
State of Illinois, but this is merely a conclusion of law. The affidavits by which the
petition is accompanied contain no reference to the subject, and we are cited to no
authority in the appellant's brief which might tend to raise a doubt as to the
correctness of the conclusion of the trial court. It is very clear, therefore, that this
point cannot be urged as of serious moment.

It is implicit in the above ruling that when, with respect to certain aspects of the foreign laws
concerned, the parties in a given case do not have any controversy or are more or less in
agreement, the Court may take it for granted for the purposes of the particular case before it that the
said laws are as such virtual agreement indicates, without the need of requiring the presentation of
what otherwise would be the competent evidence on the point. Thus, in the instant cases wherein it
results from the respective contentions of both parties that even if the pertinent laws of Texas were
known and to be applied, the amount of the inheritance pertaining to the heirs of Mrs. Hodges is as
We have fixed above, the absence of evidence to the effect that, actually and in fact, under said
laws, it could be otherwise is of no longer of any consequence, unless the purpose is to show that it
could be more. In other words, since PCIB, the petitioner-appellant, concedes that upon application
of Article 16 of the Civil Code and the pertinent laws of Texas, the amount of the estate in
controversy is just as We have determined it to be, and respondent-appellee is only claiming, on her
part, that it could be more, PCIB may not now or later pretend differently.

To be more concrete, on pages 20-21 of its petition herein, dated July 31, 1967, PCIB states
categorically:

Inasmuch as Article 16 of the Civil Code provides that "intestate and testamentary
successions both with respect to the order of succession and to the amount of
successional rights and to the intrinsic validity of testamentary provisions, shall be
regulated by the national law of the person whose succession is under consideration,
whatever may be the nature of the property and regardless of the country wherein
said property may be found", while the law of Texas (the Hodges spouses being
nationals of U.S.A., State of Texas), in its conflicts of law rules, provides that the
domiciliary law (in this case Philippine law) governs the testamentary dispositions
and successional rights over movables or personal properties, while the law of the
situs (in this case also Philippine law with respect to all Hodges properties located in
the Philippines), governs with respect to immovable properties, and applying
therefore the 'renvoi doctrine' as enunciated and applied by this Honorable Court in
the case of In re Estate of Christensen (G.R. No. L-16749, Jan. 31, 1963), there can
be no question that Philippine law governs the testamentary dispositions contained in
the Last Will and Testament of the deceased Linnie Jane Hodges, as well as the
successional rights to her estate, both with respect to movables, as well as to
immovables situated in the Philippines.

In its main brief dated February 26, 1968, PCIB asserts:

 The law governing successional rights.

As recited above, there is no question that the deceased, Linnie Jane Hodges, was
an American citizen. There is also no question that she was a national of the State of
Texas, U.S.A. Again, there is likewise no question that she had her domicile of
choice in the City of Iloilo, Philippines, as this has already been pronounced by the
above-cited orders of the lower court, pronouncements which are by now res
adjudicata (par. [a], See. 49, Rule 39, Rules of Court; In re Estate of Johnson, 39
Phil. 156).

Article 16 of the Civil Code provides:

"Real property as well as personal property is subject to the law of the country where
it is situated.

However, intestate and testamentary successions, both with respect to the order of
succession and to the amount of successional rights and to the intrinsic validity of
testamentary provisions, shall be regulated by the national law of the person whose
succession is under consideration, whatever may be the nature of the property and
regardless of the country wherein said property may be found."

Thus the aforecited provision of the Civil Code points towards the national law of the
deceased, Linnie Jane Hodges, which is the law of Texas, as governing succession
"both with respect to the order of succession and to the amount of successional
rights and to the intrinsic validity of testamentary provisions ...". But the law of Texas,
in its conflicts of law rules, provides that the domiciliary law governs the testamentary
dispositions and successional rights over movables or personal property, while the
law of the situs governs with respect to immovable property. Such that with respect
to both movable property, as well as immovable property situated in the Philippines,
the law of Texas points to the law of the Philippines.

Applying, therefore, the so-called "renvoi doctrine", as enunciated and applied by this
Honorable Court in the case of "In re Christensen" (G.R. No. L-16749, Jan. 31,
1963), there can be no question that Philippine law governs the testamentary
provisions in the Last Will and Testament of the deceased Linnie Jane Hodges, as
well as the successional rights to her estate, both with respect to movables, as well
as immovables situated in the Philippines.

The subject of successional rights.

Under Philippine law, as it is under the law of Texas, the conjugal or community
property of the spouses, Charles Newton Hodges and Linnie Jane Hodges, upon the
death of the latter, is to be divided into two, one-half pertaining to each of the
spouses, as his or her own property. Thus, upon the death of Linnie Jane Hodges,
one-half of the conjugal partnership property immediately pertained to Charles
Newton Hodges as his own share, and not by virtue of any successional rights.
There can be no question about this.

Again, Philippine law, or more specifically, Article 900 of the Civil Code provides:
 If the only survivor is the widow or widower, she or he shall be
entitled to one-half of the hereditary estate of the deceased spouse,
and the testator may freely dispose of the other half.

If the marriage between the surviving spouse and the testator was
solemnized in articulo mortis, and the testator died within three
months from the time of the marriage, the legitime of the surviving
spouse as the sole heir shall be one-third of the hereditary estate,
except when they have been living as husband and wife for more
than five years. In the latter case, the legitime of the surviving spouse
shall be that specified in the preceding paragraph.

This legitime of the surviving spouse cannot be burdened by a fideicommisary

substitution (Art. 864, Civil code), nor by any charge, condition, or substitution (Art,
872, Civil code). It is clear, therefore, that in addition to one-half of the conjugal
partnership property as his own conjugal share, Charles Newton Hodges was also
immediately entitled to one-half of the half conjugal share of the deceased, Linnie
Jane Hodges, or one-fourth of the entire conjugal property, as his legitime.

One-fourth of the conjugal property therefore remains at issue.

In the summary of its arguments in its memorandum dated April 30, 1968, the following appears:

Briefly, the position advanced by the petitioner is:

a. That the Hodges spouses were domiciled legally in the Philippines (pp. 19-20,
petition). This is now a matter of res adjudicata (p. 20, petition).

b. That under Philippine law, Texas law, and the renvoi doctrine, Philippine law
governs the successional rights over the properties left by the deceased, Linnie Jane
Hodges (pp. 20-21, petition).

c. That under Philippine as well as Texas law, one-half of the Hodges properties
pertains to the deceased, Charles Newton Hodges (p. 21, petition). This is not
questioned by the respondents.

d. That under Philippine law, the deceased, Charles Newton Hodges, automatically
inherited one-half of the remaining one-half of the Hodges properties as his legitime
(p. 21, petition).

e. That the remaining 25% of the Hodges properties was inherited by the deceased,
Charles Newton Hodges, under the will of his deceased spouse (pp. 22-23, petition).
Upon the death of Charles Newton Hodges, the substitution 'provision of the will of
the deceased, Linnie Jane Hodges, did not operate because the same is void (pp.
23-25, petition).

f. That the deceased, Charles Newton Hodges, asserted his sole ownership of the
Hodges properties and the probate court sanctioned such assertion (pp. 25-29,
petition). He in fact assumed such ownership and such was the status of the
properties as of the time of his death (pp. 29-34, petition).
Of similar tenor are the allegations of PCIB in some of its pleadings quoted in the earlier part of this
option.

On her part, it is respondent-appellee Magno's posture that under the laws of Texas, there is no
system of legitime, hence the estate of Mrs. Hodges should be one-half of all the conjugal
properties.

It is thus unquestionable that as far as PCIB is concerned, the application to these cases of Article
16 of the Civil Code in relation to the corresponding laws of Texas would result in that the Philippine
laws on succession should control. On that basis, as We have already explained above, the estate
of Mrs. Hodges is the remainder of one-fourth of the conjugal partnership properties, considering
that We have found that there is no legal impediment to the kind of disposition ordered by Mrs.
Hodges in her will in favor of her brothers and sisters and, further, that the contention of PCIB that
the same constitutes an inoperative testamentary substitution is untenable. As will be recalled,
PCIB's position that there is no such estate of Mrs. Hodges is predicated exclusively on two
propositions, namely: (1) that the provision in question in Mrs. Hodges' testament violates the rules
on substitution of heirs under the Civil Code and (2) that, in any event, by the orders of the trial court
of May 27, and December 14, 1957, the trial court had already finally and irrevocably adjudicated to
her husband the whole free portion of her estate to the exclusion of her brothers and sisters, both of
which poses, We have overruled. Nowhere in its pleadings, briefs and memoranda does PCIB
maintain that the application of the laws of Texas would result in the other heirs of Mrs. Hodges not
inheriting anything under her will. And since PCIB's representations in regard to the laws of Texas
virtually constitute admissions of fact which the other parties and the Court are being made to rely
and act upon, PCIB is "not permitted to contradict them or subsequently take a position contradictory
to or inconsistent with them." (5 Moran, id, p. 65, citing Cunanan vs. Amparo, 80 Phil. 227; Sta. Ana
vs. Maliwat, L-23023, Aug. 31, 1968, 24 SCRA 1018).

Accordingly, the only question that remains to be settled in the further proceedings hereby ordered
to be held in the court below is how much more than as fixed above is the estate of Mrs. Hodges,
and this would depend on (1) whether or not the applicable laws of Texas do provide in effect for
more, such as, when there is no legitime provided therein, and (2) whether or not Hodges has validly
waived his whole inheritance from Mrs. Hodges.

In the course of the deliberations, it was brought out by some members of the Court that to avoid or,
at least, minimize further protracted legal controversies between the respective heirs of the Hodges
spouses, it is imperative to elucidate on the possible consequences of dispositions made by Hodges
after the death of his wife from the mass of the unpartitioned estates without any express indication
in the pertinent documents as to whether his intention is to dispose of part of his inheritance from his
wife or part of his own share of the conjugal estate as well as of those made by PCIB after the death
of Hodges. After a long discussion, the consensus arrived at was as follows: (1) any such
dispositions made gratuitously in favor of third parties, whether these be individuals, corporations or
foundations, shall be considered as intended to be of properties constituting part of Hodges'
inheritance from his wife, it appearing from the tenor of his motions of May 27 and December 11,
1957 that in asking for general authority to make sales or other disposals of properties under the
jurisdiction of the court, which include his own share of the conjugal estate, he was not invoking
particularly his right over his own share, but rather his right to dispose of any part of his inheritance
pursuant to the will of his wife; (2) as regards sales, exchanges or other remunerative transfers, the
proceeds of such sales or the properties taken in by virtue of such exchanges, shall be considered
as merely the products of "physical changes" of the properties of her estate which the will expressly
authorizes Hodges to make, provided that whatever of said products should remain with the estate
at the time of the death of Hodges should go to her brothers and sisters; (3) the dispositions made
by PCIB after the death of Hodges must naturally be deemed as covering only the properties
belonging to his estate considering that being only the administrator of the estate of Hodges, PCIB
could not have disposed of properties belonging to the estate of his wife. Neither could such
dispositions be considered as involving conjugal properties, for the simple reason that the conjugal
partnership automatically ceased when Mrs. Hodges died, and by the peculiar provision of her will,
under discussion, the remainder of her share descended also automatically upon the death of
Hodges to her brothers and sisters, thus outside of the scope of PCIB's administration. Accordingly,
these construction of the will of Mrs. Hodges should be adhered to by the trial court in its final order
of adjudication and distribution and/or partition of the two estates in question.

THE APPEALS

A cursory examination of the seventy-eight assignments of error in appellant PCIB's brief would
readily reveal that all of them are predicated mainly on the contention that inasmuch as Hodges had
already adjudicated unto himself all the properties constituting his wife's share of the conjugal
partnership, allegedly with the sanction of the trial court per its order of December 14, 1957, there
has been, since said date, no longer any estate of Mrs. Hodges of which appellee Magno could be
administratrix, hence the various assailed orders sanctioning her actuations as such are not in
accordance with law. Such being the case, with the foregoing resolution holding such posture to be
untenable in fact and in law and that it is in the best interest of justice that for the time being the two
estates should be administered conjointly by the respective administrators of the two estates, it
should follow that said assignments of error have lost their fundamental reasons for being. There are
certain matters, however, relating peculiarly to the respective orders in question, if commonly among
some of them, which need further clarification. For instance, some of them authorized respondent
Magno to act alone or without concurrence of PCIB. And with respect to many of said orders, PCIB
further claims that either the matters involved were not properly within the probate jurisdiction of the
trial court or that the procedure followed was not in accordance with the rules. Hence, the necessity
of dealing separately with the merits of each of the appeals.

Indeed, inasmuch as the said two estates have until now remained commingled pro-indiviso, due to
the failure of Hodges and the lower court to liquidate the conjugal partnership, to recognize appellee
Magno as Administratrix of the Testate Estate of Mrs. Hodges which is still unsegregated from that
of Hodges is not to say, without any qualification, that she was therefore authorized to do and
perform all her acts complained of in these appeals, sanctioned though they might have been by the
trial court. As a matter of fact, it is such commingling pro-indiviso of the two estates that should
deprive appellee of freedom to act independently from PCIB, as administrator of the estate of
Hodges, just as, for the same reason, the latter should not have authority to act independently from
her. And considering that the lower court failed to adhere consistently to this basic point of view, by
allowing the two administrators to act independently of each other, in the various instances already
noted in the narration of facts above, the Court has to look into the attendant circumstances of each
of the appealed orders to be able to determine whether any of them has to be set aside or they may
all be legally maintained notwithstanding the failure of the court a quo to observe the pertinent
procedural technicalities, to the end only that graver injury to the substantive rights of the parties
concerned and unnecessary and undesirable proliferation of incidents in the subject proceedings
may be forestalled. In other words, We have to determine, whether or not, in the light of the unusual
circumstances extant in the record, there is need to be more pragmatic and to adopt a rather
unorthodox approach, so as to cause the least disturbance in rights already being exercised by
numerous innocent third parties, even if to do so may not appear to be strictly in accordance with the
letter of the applicable purely adjective rules.

Incidentally, it may be mentioned, at this point, that it was principally on account of the confusion that
might result later from PCIB's continuing to administer all the community properties, notwithstanding
the certainty of the existence of the separate estate of Mrs. Hodges, and to enable both estates to
function in the meantime with a relative degree of regularity, that the Court ordered in the resolution
of September 8, 1972 the modification of the injunction issued pursuant to the resolutions of August
8, October 4 and December 6, 1967, by virtue of which respondent Magno was completely barred
from any participation in the administration of the properties herein involved. In the September 8
resolution, We ordered that, pending this decision, Special Proceedings 1307 and 1672 should
proceed jointly and that the respective administrators therein "act conjointly — none of them to act
singly and independently of each other for any purpose." Upon mature deliberation, We felt that to
allow PCIB to continue managing or administering all the said properties to the exclusion of the
administratrix of Mrs. Hodges' estate might place the heirs of Hodges at an unduly advantageous
position which could result in considerable, if not irreparable, damage or injury to the other parties
concerned. It is indeed to be regretted that apparently, up to this date, more than a year after said
resolution, the same has not been given due regard, as may be gleaned from the fact that recently,
respondent Magno has filed in these proceedings a motion to declare PCIB in contempt for alleged
failure to abide therewith, notwithstanding that its repeated motions for reconsideration thereof have
all been denied soon after they were filed.9

Going back to the appeals, it is perhaps best to begin first with what appears to Our mind to be the
simplest, and then proceed to the more complicated ones in that order, without regard to the
numerical sequence of the assignments of error in appellant's brief or to the order of the discussion
thereof by counsel.

Assignments of error numbers

LXXII, LXXVII and LXXVIII.

These assignments of error relate to (1) the order of the trial court of August 6, 1965 providing that
"the deeds of sale (therein referred to involving properties in the name of Hodges) should be signed
jointly by the PCIB, as Administrator of Testate Estate of C.N. Hodges, and Avelina A. Magno, as
Administratrix of the Testate Estate of Linnie Jane Hodges, and to this effect, the PCIB should take
the necessary steps so that Administratrix Avelina A. Magno could sign the deeds of sale," (p. 248,
Green Rec. on Appeal) (2) the order of October 27, 1965 denying the motion for reconsideration of
the foregoing order, (pp. 276-277, id.) (3) the other order also dated October 27, 1965 enjoining inter
alia, that "(a) all cash collections should be deposited in the joint account of the estate of Linnie Jane
Hodges and estate of C. N. Hodges, (b) that whatever cash collections (that) had been deposited in
the account of either of the estates should be withdrawn and since then (sic) deposited in the joint
account of the estate of Linnie Jane Hodges and the estate of C. N. Hodges; ... (d) (that)
Administratrix Magno — allow the PCIB to inspect whatever records, documents and papers she
may have in her possession, in the same manner that Administrator PCIB is also directed to allow
Administratrix Magno to inspect whatever records, documents and papers it may have in its
possession" and "(e) that the accountant of the estate of Linnie Jane Hodges shall have access to all
records of the transactions of both estates for the protection of the estate of Linnie Jane Hodges;
and in like manner, the accountant or any authorized representative of the estate of C. N. Hodges
shall have access to the records of transactions of the Linnie Jane Hodges estate for the protection
of the estate of C. N. Hodges", (pp. 292-295, id.) and (4) the order of February 15, 1966, denying,
among others, the motion for reconsideration of the order of October 27, 1965 last referred to. (pp.
455-456, id.)

As may be readily seen, the thrust of all these four impugned orders is in line with the Court's above-
mentioned resolution of September 8, 1972 modifying the injunction previously issued on August 8,
1967, and, more importantly, with what We have said the trial court should have always done
pending the liquidation of the conjugal partnership of the Hodges spouses. In fact, as already stated,
that is the arrangement We are ordering, by this decision, to be followed. Stated differently, since the
questioned orders provide for joint action by the two administrators, and that is precisely what We
are holding out to have been done and should be done until the two estates are separated from each
other, the said orders must be affirmed. Accordingly the foregoing assignments of error must be, as
they are hereby overruled.
Assignments of error Numbers LXVIII
to LXXI and LXXIII to LXXVI.

The orders complained of under these assignments of error commonly deal with expenditures made
by appellee Magno, as Administratrix of the Estate of Mrs. Hodges, in connection with her
administration thereof, albeit additionally, assignments of error Numbers LXIX to LXXI put into
question the payment of attorneys fees provided for in the contract for the purpose, as constituting,
in effect, premature advances to the heirs of Mrs. Hodges.

More specifically, assignment Number LXXIII refers to reimbursement of overtime pay paid to six
employees of the court and three other persons for services in copying the court records to enable
the lawyers of the administration to be fully informed of all the incidents in the proceedings. The
reimbursement was approved as proper legal expenses of administration per the order of December
19, 1964, (pp. 221-222, id.) and repeated motions for reconsideration thereof were denied by the
orders of January 9, 1965, (pp. 231-232, id.) October 27, 1965, (p. 277, id.) and February 15, 1966.
(pp. 455-456, id.) On the other hand, Assignments Numbers LXVIII to LXXI, LXXIV and LXXV
question the trial court's order of November 3, 1965 approving the agreement of June 6, 1964
between Administratrix Magno and James L. Sullivan, attorney-in-fact of the heirs of Mrs. Hodges,
as Parties of the First Part, and Attorneys Raul Manglapus and Rizal R. Quimpo, as Parties of the
Second Part, regarding attorneys fees for said counsel who had agreed "to prosecute and defend
their interests (of the Parties of the First Part) in certain cases now pending litigation in the Court of
First Instance of Iloilo —, more specifically in Special Proceedings 1307 and 1672 —" (pp. 126-
129, id.) and directing Administratrix Magno "to issue and sign whatever check or checks maybe
needed to implement the approval of the agreement annexed to the motion" as well as the
"administrator of the estate of C. N. Hodges — to countersign the said check or checks as the case
maybe." (pp. 313-320, id.), reconsideration of which order of approval was denied in the order of
February 16, 1966, (p. 456, id.) Assignment Number LXXVI imputes error to the lower court's order
of October 27, 1965, already referred to above, insofar as it orders that "PCIB should counter sign
the check in the amount of P250 in favor of Administratrix Avelina A. Magno as her compensation as
administratrix of Linnie Jane Hodges estate chargeable to the Testate Estate of Linnie Jane Hodges
only." (p. 294, id.)

Main contention again of appellant PCIB in regard to these eight assigned errors is that there is no
such estate as the estate of Mrs. Hodges for which the questioned expenditures were made, hence
what were authorized were in effect expenditures from the estate of Hodges. As We have already
demonstrated in Our resolution above of the petition for certiorari and prohibition, this posture is
incorrect. Indeed, in whichever way the remaining issues between the parties in these cases are
ultimately resolved, 10 the final result will surely be that there are properties constituting the estate of
Mrs. Hodges of which Magno is the current administratrix. It follows, therefore, that said appellee
had the right, as such administratrix, to hire the persons whom she paid overtime pay and to be paid
for her own services as administratrix. That she has not yet collected and is not collecting amounts
as substantial as that paid to or due appellant PCIB is to her credit.

Of course, she is also entitled to the services of counsel and to that end had the authority to enter
into contracts for attorney's fees in the manner she had done in the agreement of June 6, 1964. And
as regards to the reasonableness of the amount therein stipulated, We see no reason to disturb the
discretion exercised by the probate court in determining the same. We have gone over the
agreement, and considering the obvious size of the estate in question and the nature of the issues
between the parties as well as the professional standing of counsel, We cannot say that the fees
agreed upon require the exercise by the Court of its inherent power to reduce it.
PCIB insists, however, that said agreement of June 6, 1964 is not for legal services to the estate but
to the heirs of Mrs. Hodges, or, at most, to both of them, and such being the case, any payment
under it, insofar as counsels' services would redound to the benefit of the heirs, would be in the
nature of advances to such heirs and a premature distribution of the estate. Again, We hold that
such posture cannot prevail.

Upon the premise We have found plausible that there is an existing estate of Mrs. Hodges, it results
that juridically and factually the interests involved in her estate are distinct and different from those
involved in her estate of Hodges and vice versa. Insofar as the matters related exclusively to the
estate of Mrs. Hodges, PCIB, as administrator of the estate of Hodges, is a complete stranger and it
is without personality to question the actuations of the administratrix thereof regarding matters not
affecting the estate of Hodges. Actually, considering the obviously considerable size of the estate of
Mrs. Hodges, We see no possible cause for apprehension that when the two estates are segregated
from each other, the amount of attorney's fees stipulated in the agreement in question will prejudice
any portion that would correspond to Hodges' estate.

And as regards the other heirs of Mrs. Hodges who ought to be the ones who should have a say on
the attorney's fees and other expenses of administration assailed by PCIB, suffice it to say that they
appear to have been duly represented in the agreement itself by their attorney-in-fact, James L.
Sullivan and have not otherwise interposed any objection to any of the expenses incurred by Magno
questioned by PCIB in these appeals. As a matter of fact, as ordered by the trial court, all the
expenses in question, including the attorney's fees, may be paid without awaiting the determination
and segregation of the estate of Mrs. Hodges.

Withal, the weightiest consideration in connection with the point under discussion is that at this stage
of the controversy among the parties herein, the vital issue refers to the existence or non-existence
of the estate of Mrs. Hodges. In this respect, the interest of respondent Magno, as the appointed
administratrix of the said estate, is to maintain that it exists, which is naturally common and identical
with and inseparable from the interest of the brothers and sisters of Mrs. Hodges. Thus, it should not
be wondered why both Magno and these heirs have seemingly agreed to retain but one counsel. In
fact, such an arrangement should be more convenient and economical to both. The possibility of
conflict of interest between Magno and the heirs of Mrs. Hodges would be, at this stage, quite
remote and, in any event, rather insubstantial. Besides, should any substantial conflict of interest
between them arise in the future, the same would be a matter that the probate court can very well
take care of in the course of the independent proceedings in Case No. 1307 after the corresponding
segregation of the two subject estates. We cannot perceive any cogent reason why, at this stage,
the estate and the heirs of Mrs. Hodges cannot be represented by a common counsel.

Now, as to whether or not the portion of the fees in question that should correspond to the heirs
constitutes premature partial distribution of the estate of Mrs. Hodges is also a matter in which
neither PCIB nor the heirs of Hodges have any interest. In any event, since, as far as the records
show, the estate has no creditors and the corresponding estate and inheritance taxes, except those
of the brothers and sisters of Mrs. Hodges, have already been paid, 11 no prejudice can caused to
anyone by the comparatively small amount of attorney's fees in question. And in this connection, it
may be added that, although strictly speaking, the attorney's fees of the counsel of an administrator
is in the first instance his personal responsibility, reimbursable later on by the estate, in the final
analysis, when, as in the situation on hand, the attorney-in-fact of the heirs has given his conformity
thereto, it would be idle effort to inquire whether or not the sanction given to said fees by the probate
court is proper.

For the foregoing reasons, Assignments of Error LXVIII to LXXI and LXXIII to LXXVI should be as
they are hereby overruled.
Assignments of error I to IV,
XIII to XV, XXII to XXV, XXXV
to XXX VI, XLI to XLIII and L.

These assignments of error deal with the approval by the trial court of various deeds of sale of real
properties registered in the name of Hodges but executed by appellee Magno, as Administratrix of
the Estate of Mrs. Hodges, purportedly in implementation of corresponding supposed written
"Contracts to Sell" previously executed by Hodges during the interim between May 23, 1957, when
his wife died, and December 25, 1962, the day he died. As stated on pp. 118-120 of appellant's main
brief, "These are: the, contract to sell between the deceased, Charles Newton Hodges, and the
appellee, Pepito G. Iyulores executed on February 5, 1961; the contract to sell between the
deceased, Charles Newton Hodges, and the appellant Esperidion Partisala, executed on April 20,
1960; the contract to sell between the deceased, Charles Newton Hodges, and the appellee,
Winifredo C. Espada, executed on April 18, 1960; the contract to sell between the deceased,
Charles Newton Hodges, and the appellee, Rosario Alingasa, executed on August 25, 1958; the
contract to sell between the deceased, Charles Newton Hodges, and the appellee, Lorenzo Carles,
executed on June 17, 1958; the contract to sell between the deceased, Charles Newton Hodges,
and the appellee, Salvador S. Guzman, executed on September 13, 1960; the contract to sell
between the deceased, Charles Newton Hodges, and the appellee, Florenia Barrido, executed on
February 21, 1958; the contract to sell between the deceased, Charles Newton Hodges, and the
appellee, Purificacion Coronado, executed on August 14, 1961; the contract to sell between the
deceased, Charles Newton Hodges, and the appellee, Graciano Lucero, executed on November 27,
1961; the contract to sell between the deceased, Charles Newton Hodges, and the appellee, Ariteo
Thomas Jamir, executed on May 26, 1961; the contract to sell between the deceased, Charles
Newton Hodges, and the appellee, Melquiades Batisanan, executed on June 9, 1959; the contract to
sell between the deceased, Charles Newton Hodges, and the appellee, Belcezar Causing, executed
on February 10, 1959 and the contract to sell between the deceased, Charles Newton Hodges, and
the appellee, Adelfa Premaylon, executed on October 31, 1959, re Title No. 13815."

Relative to these sales, it is the position of appellant PCIB that, inasmuch as pursuant to the will of
Mrs. Hodges, her husband was to have dominion over all her estate during his lifetime, it was as
absolute owner of the properties respectively covered by said sales that he executed the
aforementioned contracts to sell, and consequently, upon his death, the implementation of said
contracts may be undertaken only by the administrator of his estate and not by the administratrix of
the estate of Mrs. Hodges. Basically, the same theory is invoked with particular reference to five
other sales, in which the respective "contracts to sell" in favor of these appellees were executed by
Hodges before the death of his wife, namely, those in favor of appellee Santiago Pacaonsis, Alfredo
Catedral, Jose Pablico, Western Institute of Technology and Adelfa Premaylon.

Anent those deeds of sale based on promises or contracts to sell executed by Hodges after the
death of his wife, those enumerated in the quotation in the immediately preceding paragraph, it is
quite obvious that PCIB's contention cannot be sustained. As already explained earlier, 11* all
proceeds of remunerative transfers or dispositions made by Hodges after the death of his wife
should be deemed as continuing to be parts of her estate and, therefore, subject to the terms of her
will in favor of her brothers and sisters, in the sense that should there be no showing that such
proceeds, whether in cash or property have been subsequently conveyed or assigned subsequently
by Hodges to any third party by acts inter vivos with the result that they could not thereby belong to
him anymore at the time of his death, they automatically became part of the inheritance of said
brothers and sisters. The deeds here in question involve transactions which are exactly of this
nature. Consequently, the payments made by the appellees should be considered as payments to
the estate of Mrs. Hodges which is to be distributed and partitioned among her heirs specified in the
will.
The five deeds of sale predicated on contracts to sell executed Hodges during the lifetime of his
wife, present a different situation. At first blush, it would appear that as to them, PCIB's position has
some degree of plausibility. Considering, however, that the adoption of PCIB's theory would
necessarily have tremendous repercussions and would bring about considerable disturbance of
property rights that have somehow accrued already in favor of innocent third parties, the five
purchasers aforenamed, the Court is inclined to take a pragmatic and practical view of the legal
situation involving them by overlooking the possible technicalities in the way, the non-observance of
which would not, after all, detract materially from what should substantially correspond to each and
all of the parties concerned.

To start with, these contracts can hardly be ignored. Bona fide third parties are involved; as much as
possible, they should not be made to suffer any prejudice on account of judicial controversies not of
their own making. What is more, the transactions they rely on were submitted by them to the probate
court for approval, and from already known and recorded actuations of said court then, they had
reason to believe that it had authority to act on their motions, since appellee Magno had, from time
to time prior to their transactions with her, been allowed to act in her capacity as administratrix of
one of the subject estates either alone or conjointly with PCIB. All the sales in question were
executed by Magno in 1966 already, but before that, the court had previously authorized or
otherwise sanctioned expressly many of her act as administratrix involving expenditures from the
estate made by her either conjointly with or independently from PCIB, as Administrator of the Estate
of Hodges. Thus, it may be said that said buyers-appellees merely followed precedents in previous
orders of the court. Accordingly, unless the impugned orders approving those sales indubitably
suffer from some clearly fatal infirmity the Court would rather affirm them.

It is quite apparent from the record that the properties covered by said sales are equivalent only to a
fraction of what should constitute the estate of Mrs. Hodges, even if it is assumed that the same
would finally be held to be only one-fourth of the conjugal properties of the spouses as of the time of
her death or, to be more exact, one-half of her estate as per the inventory submitted by Hodges as
executor, on May 12, 1958. In none of its numerous, varied and voluminous pleadings, motions and
manifestations has PCIB claimed any possibility otherwise. Such being the case, to avoid any
conflict with the heirs of Hodges, the said properties covered by the questioned deeds of sale
executed by appellee Magno may be treated as among those corresponding to the estate of Mrs.
Hodges, which would have been actually under her control and administration had Hodges complied
with his duty to liquidate the conjugal partnership. Viewing the situation in that manner, the only ones
who could stand to be prejudiced by the appealed orders referred to in the assignment of errors
under discussion and who could, therefore, have the requisite interest to question them would be
only the heirs of Mrs. Hodges, definitely not PCIB.

It is of no moment in what capacity Hodges made the "contracts to sell' after the death of his wife.
Even if he had acted as executor of the will of his wife, he did not have to submit those contracts to
the court nor follow the provisions of the rules, (Sections 2, 4, 5, 6, 8 and 9 of Rule 89 quoted by
appellant on pp. 125 to 127 of its brief) for the simple reason that by the very orders, much relied
upon by appellant for other purposes, of May 27, 1957 and December 14, 1957, Hodges was
"allowed or authorized" by the trial court "to continue the business in which he was engaged and to
perform acts which he had been doing while the deceased was living", (Order of May 27) which
according to the motion on which the court acted was "of buying and selling personal and real
properties", and "to execute subsequent sales, conveyances, leases and mortgages of the
properties left by the said deceased Linnie Jane Hodges in consonance with the wishes conveyed in
the last will and testament of the latter." (Order of December 14) In other words, if Hodges acted
then as executor, it can be said that he had authority to do so by virtue of these blanket orders, and
PCIB does not question the legality of such grant of authority; on the contrary, it is relying on the
terms of the order itself for its main contention in these cases. On the other hand, if, as PCIB
contends, he acted as heir-adjudicatee, the authority given to him by the aforementioned orders
would still suffice.

As can be seen, therefore, it is of no moment whether the "contracts to sell" upon which the deeds in
question were based were executed by Hodges before or after the death of his wife. In a word, We
hold, for the reasons already stated, that the properties covered by the deeds being assailed pertain
or should be deemed as pertaining to the estate of Mrs. Hodges; hence, any supposed irregularity
attending the actuations of the trial court may be invoked only by her heirs, not by PCIB, and since
the said heirs are not objecting, and the defects pointed out not being strictly jurisdictional in nature,
all things considered, particularly the unnecessary disturbance of rights already created in favor of
innocent third parties, it is best that the impugned orders are not disturbed.

In view of these considerations, We do not find sufficient merit in the assignments of error under
discussion.

Assignments of error V to VIII,

XVI to XVIII, XXVI to XXIX, XXXVII
to XXXVIII, XLIV to XLVI and LI.

All these assignments of error commonly deal with alleged non-fulfillment by the respective vendees,
appellees herein, of the terms and conditions embodied in the deeds of sale referred to in the
assignments of error just discussed. It is claimed that some of them never made full payments in
accordance with the respective contracts to sell, while in the cases of the others, like Lorenzo
Carles, Jose Pablico, Alfredo Catedral and Salvador S. Guzman, the contracts with them had
already been unilaterally cancelled by PCIB pursuant to automatic rescission clauses contained in
them, in view of the failure of said buyers to pay arrearages long overdue. But PCIB's posture is
again premised on its assumption that the properties covered by the deeds in question could not
pertain to the estate of Mrs. Hodges. We have already held above that, it being evident that a
considerable portion of the conjugal properties, much more than the properties covered by said
deeds, would inevitably constitute the estate of Mrs. Hodges, to avoid unnecessary legal
complications, it can be assumed that said properties form part of such estate. From this point of
view, it is apparent again that the questions, whether or not it was proper for appellee Magno to have
disregarded the cancellations made by PCIB, thereby reviving the rights of the respective buyers-
appellees, and, whether or not the rules governing new dispositions of properties of the estate were
strictly followed, may not be raised by PCIB but only by the heirs of Mrs. Hodges as the persons
designated to inherit the same, or perhaps the government because of the still unpaid inheritance
taxes. But, again, since there is no pretense that any objections were raised by said parties or that
they would necessarily be prejudiced, the contentions of PCIB under the instant assignments of error
hardly merit any consideration.

Assignments of error IX to XII, XIX

to XXI, XXX to XXIV, XXXIX to XL,
XLVII to XLIX, LII and LIII to LXI.

PCIB raises under these assignments of error two issues which according to it are fundamental,
namely: (1) that in approving the deeds executed by Magno pursuant to contracts to sell already
cancelled by it in the performance of its functions as administrator of the estate of Hodges, the trial
court deprived the said estate of the right to invoke such cancellations it (PCIB) had made and (2)
that in so acting, the court "arrogated unto itself, while acting as a probate court, the power to
determine the contending claims of third parties against the estate of Hodges over real property,"
since it has in effect determined whether or not all the terms and conditions of the respective
contracts to sell executed by Hodges in favor of the buyers-appellees concerned were complied with
by the latter. What is worse, in the view of PCIB, is that the court has taken the word of the appellee
Magno, "a total stranger to his estate as determinative of the issue".

Actually, contrary to the stand of PCIB, it is this last point regarding appellee Magno's having agreed
to ignore the cancellations made by PCIB and allowed the buyers-appellees to consummate the
sales in their favor that is decisive. Since We have already held that the properties covered by the
contracts in question should be deemed to be portions of the estate of Mrs. Hodges and not that of
Hodges, it is PCIB that is a complete stranger in these incidents. Considering, therefore, that the
estate of Mrs. Hodges and her heirs who are the real parties in interest having the right to oppose
the consummation of the impugned sales are not objecting, and that they are the ones who are
precisely urging that said sales be sanctioned, the assignments of error under discussion have no
basis and must accordingly be as they are hereby overruled.

With particular reference to assignments LIII to LXI, assailing the orders of the trial court requiring
PCIB to surrender the respective owner's duplicate certificates of title over the properties covered by
the sales in question and otherwise directing the Register of Deeds of Iloilo to cancel said certificates
and to issue new transfer certificates of title in favor of the buyers-appellees, suffice it to say that in
the light of the above discussion, the trial court was within its rights to so require and direct, PCIB
having refused to give way, by withholding said owners' duplicate certificates, of the corresponding
registration of the transfers duly and legally approved by the court.

Assignments of error LXII to LXVII

All these assignments of error commonly deal with the appeal against orders favoring appellee
Western Institute of Technology. As will be recalled, said institute is one of the buyers of real
property covered by a contract to sell executed by Hodges prior to the death of his wife. As of
October, 1965, it was in arrears in the total amount of P92,691.00 in the payment of its installments
on account of its purchase, hence it received under date of October 4, 1965 and October 20, 1965,
letters of collection, separately and respectively, from PCIB and appellee Magno, in their respective
capacities as administrators of the distinct estates of the Hodges spouses, albeit, while in the case of
PCIB it made known that "no other arrangement can be accepted except by paying all your past due
account", on the other hand, Magno merely said she would "appreciate very much if you can make
some remittance to bring this account up-to-date and to reduce the amount of the obligation." (See
pp. 295-311, Green R. on A.) On November 3, 1965, the Institute filed a motion which, after alleging
that it was ready and willing to pay P20,000 on account of its overdue installments but uncertain
whether it should pay PCIB or Magno, it prayed that it be "allowed to deposit the aforesaid amount
with the court pending resolution of the conflicting claims of the administrators." Acting on this
motion, on November 23, 1965, the trial court issued an order, already quoted in the narration of
facts in this opinion, holding that payment to both or either of the two administrators is "proper and
legal", and so "movant — can pay to both estates or either of them", considering that "in both cases
(Special Proceedings 1307 and 1672) there is as yet no judicial declaration of heirs nor distribution
of properties to whomsoever are entitled thereto."

The arguments under the instant assignments of error revolve around said order. From the
procedural standpoint, it is claimed that PCIB was not served with a copy of the Institute's motion,
that said motion was heard, considered and resolved on November 23, 1965, whereas the date set
for its hearing was November 20, 1965, and that what the order grants is different from what is
prayed for in the motion. As to the substantive aspect, it is contended that the matter treated in the
motion is beyond the jurisdiction of the probate court and that the order authorized payment to a
person other than the administrator of the estate of Hodges with whom the Institute had contracted.
The procedural points urged by appellant deserve scant consideration. We must assume, absent
any clear proof to the contrary, that the lower court had acted regularly by seeing to it that appellant
was duly notified. On the other hand, there is nothing irregular in the court's having resolved the
motion three days after the date set for hearing the same. Moreover, the record reveals that
appellants' motion for reconsideration wherein it raised the same points was denied by the trial court
on March 7, 1966 (p. 462, Green R. on A.) Withal, We are not convinced that the relief granted is not
within the general intent of the Institute's motion.

Insofar as the substantive issues are concerned, all that need be said at this point is that they are
mere reiterations of contentions We have already resolved above adversely to appellants' position.
Incidentally, We may add, perhaps, to erase all doubts as to the propriety of not disturbing the lower
court's orders sanctioning the sales questioned in all these appeal s by PCIB, that it is only when
one of the parties to a contract to convey property executed by a deceased person raises substantial
objections to its being implemented by the executor or administrator of the decedent's estate that
Section 8 of Rule 89 may not apply and, consequently, the matter has, to be taken up in a separate
action outside of the probate court; but where, as in the cases of the sales herein involved, the
interested parties are in agreement that the conveyance be made, it is properly within the jurisdiction
of the probate court to give its sanction thereto pursuant to the provisions of the rule just mentioned.
And with respect to the supposed automatic rescission clauses contained in the contracts to sell
executed by Hodges in favor of herein appellees, the effect of said clauses depend on the true
nature of the said contracts, despite the nomenclature appearing therein, which is not controlling, for
if they amount to actual contracts of sale instead of being mere unilateral accepted "promises to
sell", (Art. 1479, Civil Code of the Philippines, 2nd paragraph) the pactum commissorium or the
automatic rescission provision would not operate, as a matter of public policy, unless there has been
a previous notarial or judicial demand by the seller (10 Manresa 263, 2nd ed.) neither of which have
been shown to have been made in connection with the transactions herein involved.

Consequently, We find no merit in the assignments of error

Number LXII to LXVII.

SUMMARY

Considering the fact that this decision is unusually extensive and that the issues herein taken up and
resolved are rather numerous and varied, what with appellant making seventy-eight assignments of
error affecting no less than thirty separate orders of the court a quo, if only to facilitate proper
understanding of the import and extent of our rulings herein contained, it is perhaps desirable that a
brief restatement of the whole situation be made together with our conclusions in regard to its
various factual and legal aspects. .

The instant cases refer to the estate left by the late Charles Newton Hodges as well as that of his
wife, Linnie Jane Hodges, who predeceased him by about five years and a half. In their respective
wills which were executed on different occasions, each one of them provided mutually as follows: "I
give, devise and bequeath all of the rest, residue and remainder (after funeral and administration
expenses, taxes and debts) of my estate, both real and personal, wherever situated or located, to
my beloved (spouse) to have and to hold unto (him/her) — during (his/her) natural lifetime", subject
to the condition that upon the death of whoever of them survived the other, the remainder of what he
or she would inherit from the other is "give(n), devise(d) and bequeath(ed)" to the brothers and
sisters of the latter.

Mrs. Hodges died first, on May 23, 1957. Four days later, on May 27, Hodges was appointed special
administrator of her estate, and in a separate order of the same date, he was "allowed or authorized
to continue the business in which he was engaged, (buying and selling personal and real properties)
and to perform acts which he had been doing while the deceased was living." Subsequently, on
December 14, 1957, after Mrs. Hodges' will had been probated and Hodges had been appointed and
had qualified as Executor thereof, upon his motion in which he asserted that he was "not only part
owner of the properties left as conjugal, but also, the successor to all the properties left by the
deceased Linnie Jane Hodges", the trial court ordered that "for the reasons stated in his motion
dated December 11, 1957, which the Court considers well taken, ... all the sales, conveyances,
leases and mortgages of all properties left by the deceased Linnie Jane Hodges executed by the
Executor, Charles Newton Hodges are hereby APPROVED. The said Executor is further authorized
to execute subsequent sales, conveyances, leases and mortgages of the properties left by the said
deceased Linnie Jane Hodges in consonance with the wishes contained in the last will and
testament of the latter."

Annually thereafter, Hodges submitted to the court the corresponding statements of account of his
administration, with the particularity that in all his motions, he always made it point to urge the that
"no person interested in the Philippines of the time and place of examining the herein accounts be
given notice as herein executor is the only devisee or legatee of the deceased in accordance with
the last will and testament already probated by the Honorable Court." All said accounts approved as
prayed for.

Nothing else appears to have been done either by the court a quo or Hodges until December 25,
1962. Importantly to be the provision in the will of Mrs. Hodges that her share of the conjugal
partnership was to be inherited by her husband "to have and to hold unto him, my said husband,
during his natural lifetime" and that "at the death of my said husband, I give, devise and bequeath all
the rest, residue and remainder of my estate, both real and personal, wherever situated or located,
to be equally divided among my brothers and sisters, share and share alike", which provision
naturally made it imperative that the conjugal partnership be promptly liquidated, in order that the
"rest, residue and remainder" of his wife's share thereof, as of the time of Hodges' own death, may
be readily known and identified, no such liquidation was ever undertaken. The record gives no
indication of the reason for such omission, although relatedly, it appears therein:

1. That in his annual statement submitted to the court of the net worth of C. N.
Hodges and the Estate of Linnie Jane Hodges, Hodges repeatedly and consistently
reported the combined income of the conjugal partnership and then merely divided
the same equally between himself and the estate of the deceased wife, and, more
importantly, he also, as consistently, filed corresponding separate income tax returns
for each calendar year for each resulting half of such combined income, thus
reporting that the estate of Mrs. Hodges had its own income distinct from his own.

2. That when the court a quo happened to inadvertently omit in its order probating
the will of Mrs. Hodges, the name of one of her brothers, Roy Higdon then already
deceased, Hodges lost no time in asking for the proper correction "in order that the
heirs of deceased Roy Higdon may not think or believe they were omitted, and that
they were really interested in the estate of the deceased Linnie Jane Hodges".

3. That in his aforementioned motion of December 11, 1957, he expressly stated that
"deceased Linnie Jane Hodges died leaving no descendants or ascendants except
brothers and sisters and herein petitioner as the surviving spouse, to inherit the
properties of the decedent", thereby indicating that he was not excluding his wife's
brothers and sisters from the inheritance.

4. That Hodges allegedly made statements and manifestations to the United States
inheritance tax authorities indicating that he had renounced his inheritance from his
 wife in favor of her other heirs, which attitude he is supposed to have reiterated or
ratified in an alleged affidavit subscribed and sworn to here in the Philippines and in
which he even purportedly stated that his reason for so disclaiming and renouncing
his rights under his wife's will was to "absolve (him) or (his) estate from any liability
for the payment of income taxes on income which has accrued to the estate of Linnie
Jane Hodges", his wife, since her death.

On said date, December 25, 1962, Hodges died. The very next day, upon motion of herein
respondent and appellee, Avelina A. Magno, she was appointed by the trial court as Administratrix of
the Testate Estate of Linnie Jane Hodges, in Special Proceedings No. 1307 and as Special
Administratrix of the estate of Charles Newton Hodges, "in the latter case, because the last will of
said Charles Newton Hodges is still kept in his vault or iron safe and that the real and personal
properties of both spouses may be lost, damaged or go to waste, unless Special Administratrix is
appointed," (Order of December 26, 1962, p. 27, Yellow R. on A.) although, soon enough, on
December 29, 1962, a certain Harold K. Davies was appointed as her Co-Special Administrator, and
when Special Proceedings No. 1672, Testate Estate of Charles Newton Hodges, was opened, Joe
Hodges, as next of kin of the deceased, was in due time appointed as Co-Administrator of said
estate together with Atty. Fernando P. Mirasol, to replace Magno and Davies, only to be in turn
replaced eventually by petitioner PCIB alone.

At the outset, the two probate proceedings appear to have been proceeding jointly, with each
administrator acting together with the other, under a sort of modus operandi. PCIB used to secure at
the beginning the conformity to and signature of Magno in transactions it wanted to enter into and
submitted the same to the court for approval as their joint acts. So did Magno do likewise. Somehow,
however, differences seem to have arisen, for which reason, each of them began acting later on
separately and independently of each other, with apparent sanction of the trial court. Thus, PCIB had
its own lawyers whom it contracted and paid handsomely, conducted the business of the estate
independently of Magno and otherwise acted as if all the properties appearing in the name of
Charles Newton Hodges belonged solely and only to his estate, to the exclusion of the brothers and
sisters of Mrs. Hodges, without considering whether or not in fact any of said properties
corresponded to the portion of the conjugal partnership pertaining to the estate of Mrs. Hodges. On
the other hand, Magno made her own expenditures, hired her own lawyers, on the premise that
there is such an estate of Mrs. Hodges, and dealth with some of the properties, appearing in the
name of Hodges, on the assumption that they actually correspond to the estate of Mrs. Hodges. All
of these independent and separate actuations of the two administrators were invariably approved by
the trial court upon submission. Eventually, the differences reached a point wherein Magno, who
was more cognizant than anyone else about the ins and outs of the businesses and properties of the
deceased spouses because of her long and intimate association with them, made it difficult for PCIB
to perform normally its functions as administrator separately from her. Thus, legal complications
arose and the present judicial controversies came about.

Predicating its position on the tenor of the orders of May 27 and December 14, 1957 as well as the
approval by the court a quo of the annual statements of account of Hodges, PCIB holds to the view
that the estate of Mrs. Hodges has already been in effect closed with the virtual adjudication in the
mentioned orders of her whole estate to Hodges, and that, therefore, Magno had already ceased
since then to have any estate to administer and the brothers and sisters of Mrs. Hodges have no
interests whatsoever in the estate left by Hodges. Mainly upon such theory, PCIB has come to this
Court with a petition for certiorari and prohibition praying that the lower court's orders allowing
respondent Magno to continue acting as administratrix of the estate of Mrs. Hodges in Special
Proceedings 1307 in the manner she has been doing, as detailed earlier above, be set aside.
Additionally, PCIB maintains that the provision in Mrs. Hodges' will instituting her brothers and
sisters in the manner therein specified is in the nature of a testamentary substitution, but inasmuch
as the purported substitution is not, in its view, in accordance with the pertinent provisions of the
Civil Code, it is ineffective and may not be enforced. It is further contended that, in any event,
inasmuch as the Hodges spouses were both residents of the Philippines, following the decision of
this Court in Aznar vs. Garcia, or the case of Christensen, 7 SCRA 95, the estate left by Mrs.
Hodges could not be more than one-half of her share of the conjugal partnership, notwithstanding
the fact that she was citizen of Texas, U.S.A., in accordance with Article 16 in relation to Articles 900
and 872 of the Civil Code. Initially, We issued a preliminary injunction against Magno and allowed
PCIB to act alone.

At the same time PCIB has appealed several separate orders of the trial court approving individual
acts of appellee Magno in her capacity as administratrix of the estate of Mrs. Hodges, such as, hiring
of lawyers for specified fees and incurring expenses of administration for different purposes and
executing deeds of sale in favor of her co-appellees covering properties which are still registered in
the name of Hodges, purportedly pursuant to corresponding "contracts to sell" executed by Hodges.
The said orders are being questioned on jurisdictional and procedural grounds directly or indirectly
predicated on the principal theory of appellant that all the properties of the two estates belong
already to the estate of Hodges exclusively.

On the other hand, respondent-appellee Magno denies that the trial court's orders of May 27 and
December 14, 1957 were meant to be finally adjudicatory of the hereditary rights of Hodges and
contends that they were no more than the court's general sanction of past and future acts of Hodges
as executor of the will of his wife in due course of administration. As to the point regarding
substitution, her position is that what was given by Mrs. Hodges to her husband under the provision
in question was a lifetime usufruct of her share of the conjugal partnership, with the naked ownership
passing directly to her brothers and sisters. Anent the application of Article 16 of the Civil Code, she
claims that the applicable law to the will of Mrs. Hodges is that of Texas under which, she alleges,
there is no system of legitime, hence, the estate of Mrs. Hodges cannot be less than her share or
one-half of the conjugal partnership properties. She further maintains that, in any event, Hodges had
as a matter of fact and of law renounced his inheritance from his wife and, therefore, her whole
estate passed directly to her brothers and sisters effective at the latest upon the death of Hodges.

In this decision, for the reasons discussed above, and upon the issues just summarized, We
overrule PCIB's contention that the orders of May 27, 1957 and December 14, 1957 amount to an
adjudication to Hodges of the estate of his wife, and We recognize the present existence of the
estate of Mrs. Hodges, as consisting of properties, which, while registered in that name of Hodges,
do actually correspond to the remainder of the share of Mrs. Hodges in the conjugal partnership, it
appearing that pursuant to the pertinent provisions of her will, any portion of said share still existing
and undisposed of by her husband at the time of his death should go to her brothers and sisters
share and share alike. Factually, We find that the proven circumstances relevant to the said orders
do not warrant the conclusion that the court intended to make thereby such alleged final
adjudication. Legally, We hold that the tenor of said orders furnish no basis for such a conclusion,
and what is more, at the time said orders were issued, the proceedings had not yet reached the
point when a final distribution and adjudication could be made. Moreover, the interested parties were
not duly notified that such disposition of the estate would be done. At best, therefore, said orders
merely allowed Hodges to dispose of portions of his inheritance in advance of final adjudication,
which is implicitly permitted under Section 2 of Rule 109, there being no possible prejudice to third
parties, inasmuch as Mrs. Hodges had no creditors and all pertinent taxes have been paid.

More specifically, We hold that, on the basis of circumstances presently extant in the record, and on
the assumption that Hodges' purported renunciation should not be upheld, the estate of Mrs. Hodges
inherited by her brothers and sisters consists of one-fourth of the community estate of the spouses
at the time of her death, minus whatever Hodges had gratuitously disposed of therefrom during the
period from, May 23, 1957, when she died, to December 25, 1962, when he died provided, that with
regard to remunerative dispositions made by him during the same period, the proceeds thereof,
whether in cash or property, should be deemed as continuing to be part of his wife's estate, unless it
can be shown that he had subsequently disposed of them gratuitously.

At this juncture, it may be reiterated that the question of what are the pertinent laws of Texas and
what would be the estate of Mrs. Hodges under them is basically one of fact, and considering the
respective positions of the parties in regard to said factual issue, it can already be deemed as settled
for the purposes of these cases that, indeed, the free portion of said estate that could possibly
descend to her brothers and sisters by virtue of her will may not be less than one-fourth of the
conjugal estate, it appearing that the difference in the stands of the parties has reference solely to
the legitime of Hodges, PCIB being of the view that under the laws of Texas, there is such a legitime
of one-fourth of said conjugal estate and Magno contending, on the other hand, that there is none. In
other words, hereafter, whatever might ultimately appear, at the subsequent proceedings, to be
actually the laws of Texas on the matter would no longer be of any consequence, since PCIB would
anyway be in estoppel already to claim that the estate of Mrs. Hodges should be less than as
contended by it now, for admissions by a party related to the effects of foreign laws, which have to
be proven in our courts like any other controverted fact, create estoppel.

In the process, We overrule PCIB's contention that the provision in Mrs. Hodges' will in favor of her
brothers and sisters constitutes ineffective hereditary substitutions. But neither are We sustaining, on
the other hand, Magno's pose that it gave Hodges only a lifetime usufruct. We hold that by said
provision, Mrs. Hodges simultaneously instituted her brothers and sisters as co-heirs with her
husband, with the condition, however, that the latter would have complete rights of dominion over
the whole estate during his lifetime and what would go to the former would be only the remainder
thereof at the time of Hodges' death. In other words, whereas they are not to inherit only in case of
default of Hodges, on the other hand, Hodges was not obliged to preserve anything for them. Clearly
then, the essential elements of testamentary substitution are absent; the provision in question is a
simple case of conditional simultaneous institution of heirs, whereby the institution of Hodges is
subject to a partial resolutory condition the operative contingency of which is coincidental with that of
the suspensive condition of the institution of his brothers and sisters-in-law, which manner of
institution is not prohibited by law.

We also hold, however, that the estate of Mrs. Hodges inherited by her brothers and sisters could be
more than just stated, but this would depend on (1) whether upon the proper application of the
principle of renvoi in relation to Article 16 of the Civil Code and the pertinent laws of Texas, it will
appear that Hodges had no legitime as contended by Magno, and (2) whether or not it can be held
that Hodges had legally and effectively renounced his inheritance from his wife. Under the
circumstances presently obtaining and in the state of the record of these cases, as of now, the Court
is not in a position to make a final ruling, whether of fact or of law, on any of these two issues, and
We, therefore, reserve said issues for further proceedings and resolution in the first instance by the
court a quo, as hereinabove indicated. We reiterate, however, that pending such further
proceedings, as matters stand at this stage, Our considered opinion is that it is beyond cavil that
since, under the terms of the will of Mrs. Hodges, her husband could not have anyway legally
adjudicated or caused to be adjudicated to himself her whole share of their conjugal partnership,
albeit he could have disposed any part thereof during his lifetime, the resulting estate of Mrs.
Hodges, of which Magno is the uncontested administratrix, cannot be less than one-fourth of the
conjugal partnership properties, as of the time of her death, minus what, as explained earlier, have
been gratuitously disposed of therefrom, by Hodges in favor of third persons since then, for even if it
were assumed that, as contended by PCIB, under Article 16 of the Civil Code and
applying renvoi the laws of the Philippines are the ones ultimately applicable, such one-fourth share
would be her free disposable portion, taking into account already the legitime of her husband under
Article 900 of the Civil Code.
The foregoing considerations leave the Court with no alternative than to conclude that in predicating
its orders on the assumption, albeit unexpressed therein, that there is an estate of Mrs. Hodges to
be distributed among her brothers and sisters and that respondent Magno is the legal administratrix
thereof, the trial court acted correctly and within its jurisdiction. Accordingly, the petition
for certiorari and prohibition has to be denied. The Court feels however, that pending the liquidation
of the conjugal partnership and the determination of the specific properties constituting her estate,
the two administrators should act conjointly as ordered in the Court's resolution of September 8,
1972 and as further clarified in the dispositive portion of its decision.

Anent the appeals from the orders of the lower court sanctioning payment by appellee Magno, as
administratrix, of expenses of administration and attorney's fees, it is obvious that, with Our holding
that there is such an estate of Mrs. Hodges, and for the reasons stated in the body of this opinion,
the said orders should be affirmed. This We do on the assumption We find justified by the evidence
of record, and seemingly agreed to by appellant PCIB, that the size and value of the properties that
should correspond to the estate of Mrs. Hodges far exceed the total of the attorney's fees and
administration expenses in question.

With respect to the appeals from the orders approving transactions made by appellee Magno, as
administratrix, covering properties registered in the name of Hodges, the details of which are related
earlier above, a distinction must be made between those predicated on contracts to sell executed by
Hodges before the death of his wife, on the one hand, and those premised on contracts to sell
entered into by him after her death. As regards the latter, We hold that inasmuch as the payments
made by appellees constitute proceeds of sales of properties belonging to the estate of Mrs.
Hodges, as may be implied from the tenor of the motions of May 27 and December 14, 1957, said
payments continue to pertain to said estate, pursuant to her intent obviously reflected in the relevant
provisions of her will, on the assumption that the size and value of the properties to correspond to
the estate of Mrs. Hodges would exceed the total value of all the properties covered by the
impugned deeds of sale, for which reason, said properties may be deemed as pertaining to the
estate of Mrs. Hodges. And there being no showing that thus viewing the situation, there would be
prejudice to anyone, including the government, the Court also holds that, disregarding procedural
technicalities in favor of a pragmatic and practical approach as discussed above, the assailed orders
should be affirmed. Being a stranger to the estate of Mrs. Hodges, PCIB has no personality to raise
the procedural and jurisdictional issues raised by it. And inasmuch as it does not appear that any of
the other heirs of Mrs. Hodges or the government has objected to any of the orders under appeal,
even as to these parties, there exists no reason for said orders to be set aside.

DISPOSITIVE PART

IN VIEW OF ALL THE FOREGOING PREMISES, judgment is hereby rendered DISMISSING the
petition in G. R. Nos. L-27860 and L-27896, and AFFIRMING, in G. R. Nos. L-27936-37 and the
other thirty-one numbers hereunder ordered to be added after payment of the corresponding docket
fees, all the orders of the trial court under appeal enumerated in detail on pages 35 to 37 and 80 to
82 of this decision; the existence of the Testate Estate of Linnie Jane Hodges, with respondent-
appellee Avelina A. Magno, as administratrix thereof is recognized, and it is declared that, until final
judgment is ultimately rendered regarding (1) the manner of applying Article 16 of the Civil Code of
the Philippines to the situation obtaining in these cases and (2) the factual and legal issue of whether
or not Charles Newton Hodges had effectively and legally renounced his inheritance under the will of
Linnie Jane Hodges, the said estate consists of one-fourth of the community properties of the said
spouses, as of the time of the death of the wife on May 23, 1957, minus whatever the husband had
already gratuitously disposed of in favor of third persons from said date until his death, provided,
first, that with respect to remunerative dispositions, the proceeds thereof shall continue to be part of
the wife's estate, unless subsequently disposed of gratuitously to third parties by the husband, and
second, that should the purported renunciation be declared legally effective, no deductions
whatsoever are to be made from said estate; in consequence, the preliminary injunction of August 8,
1967, as amended on October 4 and December 6, 1967, is lifted, and the resolution of September 8,
1972, directing that petitioner-appellant PCIB, as Administrator of the Testate Estate of Charles
Newton Hodges, in Special Proceedings 1672, and respondent-appellee Avelina A. Magno, as
Administratrix of the Testate Estate of Linnie Jane Hodges, in Special Proceedings 1307, should act
thenceforth always conjointly, never independently from each other, as such administrators, is
reiterated, and the same is made part of this judgment and shall continue in force, pending the
liquidation of the conjugal partnership of the deceased spouses and the determination and
segregation from each other of their respective estates, provided, that upon the finality of this
judgment, the trial court should immediately proceed to the partition of the presently combined
estates of the spouses, to the end that the one-half share thereof of Mrs. Hodges may be properly
and clearly identified; thereafter, the trial court should forthwith segregate the remainder of the one-
fourth herein adjudged to be her estate and cause the same to be turned over or delivered to
respondent for her exclusive administration in Special Proceedings 1307, while the other one-fourth
shall remain under the joint administration of said respondent and petitioner under a joint
proceedings in Special Proceedings 1307 and 1672, whereas the half unquestionably pertaining to
Hodges shall be administered by petitioner exclusively in Special Proceedings 1672, without
prejudice to the resolution by the trial court of the pending motions for its removal as administrator12;
and this arrangement shall be maintained until the final resolution of the two issues of renvoi and
renunciation hereby reserved for further hearing and determination, and the corresponding complete
segregation and partition of the two estates in the proportions that may result from the said
resolution.

Generally and in all other respects, the parties and the court a quo are directed to adhere
henceforth, in all their actuations in Special Proceedings 1307 and 1672, to the views passed and
ruled upon by the Court in the foregoing opinion.

Appellant PCIB is ordered to pay, within five (5) days from notice hereof, thirty-one additional appeal
docket fees, but this decision shall nevertheless become final as to each of the parties herein after
fifteen (15) days from the respective notices to them hereof in accordance with the rules.

Costs against petitioner-appellant PCIB.

Zaldivar, Castro, Esguerra and Fernandez, JJ., concur.

Makasiar, Antonio, Muñoz Palma and Aquino, JJ., concur in the result.

G.R. No. 104235 November 18, 1993

SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners,

vs.
HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents.

Sycip, Salazar, Hernandez, Gatmaitan for petitioners.

Quisumbing, Torres & Evangelista for private-respondent.

NOCON, J.:
Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007
departing from New York to Los Angeles on June 6, 1984 despite possession of confirmed tickets,
petitioners filed an action for damages before the Regional Trial Court of Makati, Metro Manila,
Branch 145. Advocating petitioner's position, the trial court categorically ruled that respondent
TransWorld Airlines (TWA) breached its contract of carriage with petitioners and that said breach
was "characterized by bad faith." On appeal, however, the appellate court found that while there was
a breach of contract on respondent TWA's part, there was neither fraud nor bad faith because under
the Code of Federal Regulations by the Civil Aeronautics Board of the United States of America it is
allowed to overbook flights.

The factual backdrop of the case is as follows:

Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea,
purchased three (3) airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for
a flight to New York to Los Angeles on June 6, 1984. The tickets of petitioners-spouses were
purchased at a discount of 75% while that of their daughter was a full fare ticket. All three tickets
represented confirmed reservations.

While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their
reservations for said flight. On the appointed date, however, petitioners checked in at 10:00 a.m., an
hour earlier than the scheduled flight at 11:00 a.m. but were placed on the wait-list because the
number of passengers who had checked in before them had already taken all the seats available on
the flight. Liana Zalamea appeared as the No. 13 on the wait-list while the two other Zalameas were
listed as "No. 34, showing a party of two." Out of the 42 names on the wait list, the first 22 names
were eventually allowed to board the flight to Los Angeles, including petitioner Cesar Zalamea. The
two others, on the other hand, at No. 34, being ranked lower than 22, were not able to fly. As it were,
those holding full-fare tickets were given first priority among the wait-listed passengers. Mr.
Zalamea, who was holding the full-fare ticket of his daughter, was allowed to board the plane; while
his wife and daughter, who presented the discounted tickets were denied boarding. According to Mr.
Zalamea, it was only later when he discovered the he was holding his daughter's full-fare ticket.

Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be
accommodated because it was also fully booked. Thus, they were constrained to book in another
flight and purchased two tickets from American Airlines at a cost of Nine Hundred Eighteen
($918.00) Dollars.

Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of
contract of air carriage before the Regional Trial Court of Makati, Metro Manila, Branch 145. As
aforesaid, the lower court ruled in favor of petitioners in its decision 1 dated January 9, 1989 the
dispositive portion of which states as follows:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs

the following amounts:

(1) US $918.00, or its peso equivalent at the time of payment representing the price
of the tickets bought by Suthira and Liana Zalamea from American Airlines, to enable
them to fly to Los Angeles from New York City;

(2) US $159.49, or its peso equivalent at the time of payment, representing the price
of Suthira Zalamea's ticket for TWA Flight 007;
 (3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50,
Philippine Currency, representing the price of Liana Zalamea's ticket for TWA Flight
007,

(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral
damages for all the plaintiffs'

(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for
attorney's fees; and

(6) The costs of suit.

SO ORDERED. 2

On appeal, the respondent Court of Appeals held that moral damages are recoverable in a damage
suit predicated upon a breach of contract of carriage only where there is fraud or bad faith. Since it is
a matter of record that overbooking of flights is a common and accepted practice of airlines in the
United States and is specifically allowed under the Code of Federal Regulations by the Civil
Aeronautics Board, no fraud nor bad faith could be imputed on respondent TransWorld Airlines.

Moreover, while respondent TWA was remiss in not informing petitioners that the flight was
overbooked and that even a person with a confirmed reservation may be denied accommodation on
an overbooked flight, nevertheless it ruled that such omission or negligence cannot under the
circumstances be considered to be so gross as to amount to bad faith.

Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with forty-
eight (48) other passengers where full-fare first class tickets were given priority over discounted
tickets.

The dispositive portion of the decision of respondent Court of Appeals3 dated October 25, 1991
states as follows:

WHEREFORE, in view of all the foregoing, the decision under review is hereby
MODIFIED in that the award of moral and exemplary damages to the plaintiffs is
eliminated, and the defendant-appellant is hereby ordered to pay the plaintiff the
following amounts:

(1) US$159.49, or its peso equivalent at the time of the payment, representing the
price of Suthira Zalamea's ticket for TWA Flight 007;

(2) US$159.49, or its peso equivalent at the time of the payment, representing the
price of Cesar Zalamea's ticket for TWA Flight 007;

(3) P50,000.00 as and for attorney's fees.

(4) The costs of suit.

SO ORDERED.4

Not satisfied with the decision, petitioners raised the case on petition for review on certiorari and
alleged the following errors committed by the respondent Court of Appeals, to wit:
 I.

. . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART

OF RESPONDENT TWA BECAUSE IT HAS A RIGHT TO OVERBOOK FLIGHTS.

II.

. . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.

III.

. . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND

PAYMENT FOR THE AMERICAN AIRLINES
TICKETS.5

That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to
board their flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or
regulation allegedly authorizing overbooking has never been proved. Foreign laws do not prove
themselves nor can the courts take judicial notice of them. Like any other fact, they must be alleged
and proved.6 Written law may be evidenced by an official publication thereof or by a copy attested by
the officer having the legal custody of the record, or by his deputy, and accompanied with a
certificate that such officer has custody. The certificate may be made by a secretary of an embassy
or legation, consul general, consul, vice-consul, or consular agent or by any officer in the foreign
service of the Philippines stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office.7

Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service
agent, in her deposition dated January 27, 1986 that the Code of Federal Regulations of the Civil
Aeronautics Board allows overbooking. Aside from said statement, no official publication of said
code was presented as evidence. Thus, respondent court's finding that overbooking is specifically
allowed by the US Code of Federal Regulations has no basis in fact.

Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the
case at bar in accordance with the principle of lex loci contractus which require that the law of the
place where the airline ticket was issued should be applied by the court where the passengers are
residents and nationals of the forum and the ticket is issued in such State by the defendant
airline.8 Since the tickets were sold and issued in the Philippines, the applicable law in this case
would be Philippine law.

Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the
passengers concerned to an award of moral damages. In Alitalia Airways v. Court of
Appeals,9 where passengers with confirmed bookings were refused carriage on the last minute, this
Court held that when an airline issues a ticket to a passenger confirmed on a particular flight, on a
certain date, a contract of carriage arises, and the passenger has every right to expect that he would
fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for breach of
contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to
deprive some passengers of their seats in case all of them would show up for the check in. For the
indignity and inconvenience of being refused a confirmed seat on the last minute, said passenger is
entitled to an award of moral damages.

Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was not
allowed to board the plane because her seat had already been given to another passenger even
before the allowable period for passengers to check in had lapsed despite the fact that she had a
confirmed ticket and she had arrived on time, this Court held that petitioner airline acted in bad faith
in violating private respondent's rights under their contract of carriage and is therefore liable for the
injuries she has sustained as a result.

In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage amounts
to bad faith. In Pan American World Airways, Inc. v. Intermediate Appellate Court, 11 where a would-
be passenger had the necessary ticket, baggage claim and clearance from immigration all clearly
and unmistakably showing that she was, in fact, included in the passenger manifest of said flight,
and yet was denied accommodation in said flight, this Court did not hesitate to affirm the lower
court's finding awarding her damages.

A contract to transport passengers is quite different in kind and degree from any other contractual
relation. So ruled this Court in Zulueta v. Pan American World Airways, Inc. 12 This is so, for a
contract of carriage generates a relation attended with public duty — a duty to provide public service
and convenience to its passengers which must be paramount to self-interest or enrichment. Thus, it
was also held that the switch of planes from Lockheed 1011 to a smaller Boeing 707 because there
were only 138 confirmed economy class passengers who could very well be accommodated in the
smaller planes, thereby sacrificing the comfort of its first class passengers for the sake of economy,
amounts to bad faith. Such inattention and lack of care for the interest of its passengers who are
entitled to its utmost consideration entitles the passenger to an award of moral damages. 13

Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not
informing its passengers beforehand that it could breach the contract of carriage even if they have
confirmed tickets if there was overbooking. Respondent TWA should have incorporated stipulations
on overbooking on the tickets issued or to properly inform its passengers about these policies so that
the latter would be prepared for such eventuality or would have the choice to ride with another
airline.

Respondent TWA contends that Exhibit I, the detached flight coupon upon which were written the
name of the passenger and the points of origin and destination, contained such a notice. An
examination of Exhibit I does not bear this out. At any rate, said exhibit was not offered for the
purpose of showing the existence of a notice of overbooking but to show that Exhibit I was used for
flight 007 in first class of June 11, 1984 from New York to Los Angeles.

Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of
giving less priority to discounted tickets. While the petitioners had checked in at the same time, and
held confirmed tickets, yet, only one of them was allowed to board the plane ten minutes before
departure time because the full-fare ticket he was holding was given priority over discounted tickets.
The other two petitioners were left behind.

It is respondent TWA's position that the practice of overbooking and the airline system of boarding
priorities are reasonable policies, which when implemented do not amount to bad faith. But the issue
raised in this case is not the reasonableness of said policies but whether or not said policies were
incorporated or deemed written on petitioners' contracts of carriage. Respondent TWA failed to show
that there are provisions to that effect. Neither did it present any argument of substance to show that
petitioners were duly apprised of the overbooked condition of the flight or that there is a hierarchy of
boarding priorities in booking passengers. It is evident that petitioners had the right to rely upon the
assurance of respondent TWA, thru its agent in Manila, then in New York, that their tickets
represented confirmed seats without any qualification. The failure of respondent TWA to so inform
them when it could easily have done so thereby enabling respondent to hold on to them as
passengers up to the last minute amounts to bad faith. Evidently, respondent TWA placed its self-
interest over the rights of petitioners under their contracts of carriage. Such conscious disregard of
petitioners' rights makes respondent TWA liable for moral damages. To deter breach of contracts by
respondent TWA in similar fashion in the future, we adjudge respondent TWA liable for exemplary
damages, as well.

Petitioners also assail the respondent court's decision not to require the refund of Liana Zalamea's
ticket because the ticket was used by her father. On this score, we uphold the respondent court.
Petitioners had not shown with certainty that the act of respondent TWA in allowing Mr. Zalamea to
use the ticket of her daughter was due to inadvertence or deliberate act. Petitioners had also failed
to establish that they did not accede to said agreement. The logical conclusion, therefore, is that
both petitioners and respondent TWA agreed, albeit impliedly, to the course of action taken.

The respondent court erred, however, in not ordering the refund of the American Airlines tickets
purchased and used by petitioners Suthira and Liana. The evidence shows that petitioners Suthira
and Liana were constrained to take the American Airlines flight to Los Angeles not because they
"opted not to use their TWA tickets on another TWA flight" but because respondent TWA could not
accommodate them either on the next TWA flight which was also fully booked. 14 The purchase of the
American Airlines tickets by petitioners Suthira and Liana was the consequence of respondent
TWA's unjustifiable breach of its contracts of carriage with petitioners. In accordance with Article
2201, New Civil Code, respondent TWA should, therefore, be responsible for all damages which
may be reasonably attributed to the non-performance of its obligation. In the previously cited case
of Alitalia Airways v. Court of Appeals, 15 this Court explicitly held that a passenger is entitled to be
reimbursed for the cost of the tickets he had to buy for a flight to another airline. Thus, instead of
simply being refunded for the cost of the unused TWA tickets, petitioners should be awarded the
actual cost of their flight from New York to Los Angeles. On this score, we differ from the trial court's
ruling which ordered not only the reimbursement of the American Airlines tickets but also the refund
of the unused TWA tickets. To require both prestations would have enabled petitioners to fly from
New York to Los Angeles without any fare being paid.

The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil Code
which allows recovery when the defendant's act or omission has compelled plaintiff to litigate or to
incur expenses to protect his interest. However, the award for moral damages and exemplary
damages by the trial court is excessive in the light of the fact that only Suthira and Liana Zalamea
were actually "bumped off." An award of P50,000.00 moral damages and another P50,000.00
exemplary damages would suffice under the circumstances obtaining in the instant case.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of
Appeals is hereby MODIFIED to the extent of adjudging respondent TransWorld Airlines to pay
damages to petitioners in the following amounts, to wit:

(1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets
bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles
from New York City;

(2) P50,000.00 as moral damages;

(3) P50,000.00 as exemplary damages;

(4) P50,000.00 as attorney's fees; and

(5) Costs of suit.

SO ORDERED.

[ G.R. No. 136804, February 19, 2003 ]

MANUFACTURERS HANOVER TRUST CO. AND/OR CHEMICAL BANK,

PETITIONERS, VS. RAFAEL MA. GUERRERO, RESPONDENT.

DECISION
CARPIO, J.:
The Case

This is a petition for review under Rule 45 of the Rules of Court to set aside
the Court of Appeals'[1] Decision of August 24, 1998 and Resolution of
December 14, 1998 in CA-G.R. SP No. 42310[2] affirming the trial court's
denial of petitioners' motion for partial summary judgment.

The Antecedents

On May 17, 1994, respondent Rafael Ma. Guerrero ("Guerrero" for brevity)
filed a complaint for damages against petitioner Manufacturers Hanover
Trust Co. and/or Chemical Bank ("the Bank" for brevity) with the Regional
Trial Court of Manila ("RTC" for brevity). Guerrero sought payment of
damages allegedly for (1) illegally withheld taxes charged against interests
on his checking account with the Bank; (2) a returned check worth
US$18,000.00 due to signature verification problems; and (3)
unauthorized conversion of his account. Guerrero amended his complaint
on April 18, 1995.

On September 1, 1995, the Bank filed its Answer alleging, inter alia, that by
stipulation Guerrero's account is governed by New York law and this law
does not permit any of Guerrero's claims except actual damages.
Subsequently, the Bank filed a Motion for Partial Summary Judgment
seeking the dismissal of Guerrero's claims for consequential, nominal,
temperate, moral and exemplary damages as well as attorney's fees on the
same ground alleged in its Answer. The Bank contended that the trial
should be limited to the issue of actual damages. Guerrero opposed the
motion.

The affidavit of Alyssa Walden, a New York attorney, supported the Bank's
Motion for Partial Summary Judgment. Alyssa Walden's affidavit ("Walden
affidavit" for brevity) stated that Guerrero's New York bank account
stipulated that the governing law is New York law and that this law bars all
of Guerrero's claims except actual damages. The Philippine Consular Office
in New York authenticated the Walden affidavit.

The RTC denied the Bank's Motion for Partial Summary Judgment and its
motion for reconsideration on March 6, 1996 and July 17, 1996,
respectively. The Bank filed a petition for certiorari and prohibition with
the Court of Appeals assailing the RTC Orders. In its Decision dated August
24, 1998, the Court of Appeals dismissed the petition. On December 14,
1998, the Court of Appeals denied the Bank's motion for reconsideration.

Hence, the instant petition.

The Ruling of the Court of Appeals

The Court of Appeals sustained the RTC orders denying the motion for
partial summary judgment. The Court of Appeals ruled that the Walden
affidavit does not serve as proof of the New York law and jurisprudence
relied on by the Bank to support its motion. The Court of Appeals
considered the New York law and jurisprudence as public documents
defined in Section 19, Rule 132 of the Rules on Evidence, as follows:

"SEC. 19. Classes of Documents. For the purpose of their presentation in

evidence, documents are either public or private.
Public documents are:

The written official acts, or records of the official acts of the

(a) sovereign authority, official bodies and tribunals, and public
officers, whether of the Philippines, or of a foreign country;

x x x."

The Court of Appeals opined that the following procedure outlined in

Section 24, Rule 132 should be followed in proving foreign law:

"SEC. 24. Proof of official record. The record of public documents referred
to in paragraph (a) of Section 19, when admissible for any purpose, may be
evidenced by an official publication thereof or by a copy attested by the
officer having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a certificate
that such officer has the custody. If the office in which the record is kept is
in a foreign country, the certificate may be made by a secretary of the
embassy or legation, consul general, consul, vice consul, or consular agent
or by any officer in the foreign service of the Philippines stationed in the
foreign country in which the record is kept, and authenticated by the seal of
his office."

The Court of Appeals likewise rejected the Bank's argument that Section 2,
Rule 34 of the old Rules of Court allows the Bank to move with the
supporting Walden affidavit for partial summary judgment in its favor. The
Court of Appeals clarified that the Walden affidavit is not the supporting
affidavit referred to in Section 2, Rule 34 that would prove the lack of
genuine issue between the parties. The Court of Appeals concluded that
even if the Walden affidavit is used for purposes of summary judgment, the
Bank must still comply with the procedure prescribed by the Rules to prove
the foreign law.
 The Issues

The Bank contends that the Court of Appeals committed reversible error in
-

"x x x HOLDING THAT [THE BANK'S] PROOF OF FACTS TO SUPPORT

ITS MOTION FOR SUMMARY JUDGMENT MAY NOT BE GIVEN BY
AFFIDAVIT;

x x x HOLDING THAT [THE BANK'S] AFFIDAVIT, WHICH PROVES

FOREIGN LAW AS A FACT, IS "HEARSAY" AND THEREBY 'CANNOT
SERVE AS PROOF OF THE NEW YORK LAW RELIED UPON BY
PETITIONERS IN THEIR MOTION FOR SUMMARY JUDGMENT x x
x'."[3]

First, the Bank argues that in moving for partial summary judgment, it was
entitled to use the Walden affidavit to prove that the stipulated foreign law
bars the claims for consequential, moral, temperate, nominal and
exemplary damages and attorney's fees. Consequently, outright dismissal
by summary judgment of these claims is warranted.

Second, the Bank claims that the Court of Appeals mixed up the
requirements of Rule 35 on summary judgments and those of a trial on the
merits in considering the Walden affidavit as "hearsay." The Bank points
out that the Walden affidavit is not hearsay since Rule 35 expressly permits
the use of affidavits.

Lastly, the Bank argues that since Guerrero did not submit any opposing
affidavit to refute the facts contained in the Walden affidavit, he failed to
show the need for a trial on his claims for damages other than actual.
 The Court's Ruling

The petition is devoid of merit.

The Bank filed its motion for partial summary judgment pursuant to
Section 2, Rule 34 of the old Rules of Court which reads:

"Section 2. Summary judgment for defending party. A party against whom

a claim, counterclaim, or cross-claim is asserted or a declaratory relief is
sought may, at any time, move with supporting affidavits for a summary
judgment in his favor as to all or any part thereof."

A court may grant a summary judgment to settle expeditiously a case if, on

motion of either party, there appears from the pleadings, depositions,
admissions, and affidavits that no important issues of fact are involved,
except the amount of damages. In such event, the moving party is entitled
to a judgment as a matter of law.[4]

In a motion for summary judgment, the crucial question is: are the issues
raised in the pleadings genuine, sham or fictitious, as shown by affidavits,
depositions or admissions accompanying the motion?[5]

A genuine issue means an issue of fact which calls for the presentation of
evidence as distinguished from an issue which is fictitious or contrived so
as not to constitute a genuine issue for trial.[6]

A perusal of the parties' respective pleadings would show that there are
genuine issues of fact that necessitate formal trial. Guerrero's complaint
before the RTC contains a statement of the ultimate facts on which he relies
for his claim for damages. He is seeking damages for what he asserts as
"illegally withheld taxes charged against interests on his checking account
with the Bank, a returned check worth US$18,000.00 due to signature
verification problems, and unauthorized conversion of his account." In its
Answer, the Bank set up its defense that the agreed foreign law to govern
their contractual relation bars the recovery of damages other than actual.
Apparently, facts are asserted in Guerrero's complaint while specific denials
and affirmative defenses are set out in the Bank's answer.

True, the court can determine whether there are genuine issues in a case
based merely on the affidavits or counter-affidavits submitted by the
parties to the court. However, as correctly ruled by the Court of Appeals,
the Bank's motion for partial summary judgment as supported by the
Walden affidavit does not demonstrate that Guerrero's claims are sham,
fictitious or contrived. On the contrary, the Walden affidavit shows that the
facts and material allegations as pleaded by the parties are disputed and
there are substantial triable issues necessitating a formal trial.

There can be no summary judgment where questions of fact are in issue or

where material allegations of the pleadings are in dispute.[7] The resolution
of whether a foreign law allows only the recovery of actual damages is a
question of fact as far as the trial court is concerned since foreign laws do
not prove themselves in our courts.[8] Foreign laws are not a matter of
judicial notice.[9] Like any other fact, they must be alleged and proven.
Certainly, the conflicting allegations as to whether New York law or
Philippine law applies to Guerrero's claims present a clear dispute on
material allegations which can be resolved only by a trial on the merits.

Under Section 24 of Rule 132, the record of public documents of a sovereign

authority or tribunal may be proved by (1) an official
publication thereof or (2) a copy attested by the officer having the
legal custody thereof. Such official publication or copy must be
accompanied, if the record is not kept in the Philippines, with a certificate
that the attesting officer has the legal custody thereof. The certificate may
be issued by any of the authorized Philippine embassy or consular officials
stationed in the foreign country in which the record 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 original, or a specific part
thereof, as the case may be, and must be under the official seal of the
attesting officer.
Certain exceptions to this rule were recognized in Asiavest Limited v.
Court of Appeals[10] which held that:

"x x x:

Although it is desirable that foreign law be proved in accordance with the

above rule, however, the Supreme Court held in the case of Willamette Iron
and Steel Works v. Muzzal, that Section 41, Rule 123 (Section 25, Rule 132
of the Revised Rules of Court) does not exclude the presentation of other
competent evidence to prove the existence of a foreign law. In that case, the
Supreme Court considered the testimony under oath of an attorney-at-law
of San Francisco, California, who quoted verbatim a section of California
Civil Code and who stated that the same was in force at the time the
obligations were contracted, as sufficient evidence to establish the existence
of said law. Accordingly, in line with this view, the Supreme Court in
the Collector of Internal Revenue v. Fisher et al., upheld the Tax Court in
considering the pertinent law of California as proved by the respondents'
witness. In that case, the counsel for respondent "testified that as an active
member of the California Bar since 1951, he is familiar with the 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
personal properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the
California Internal and Revenue Code as published in Derring's California
Code, a publication of Bancroft-Whitney Co., Inc. And as part of his
testimony, a full quotation of the cited section was offered in evidence by
respondents." Likewise, in several naturalization cases, it was held by the
Court that evidence of the law of a foreign country on reciprocity regarding
the acquisition of citizenship, although not meeting the prescribed rule of
practice, may be allowed and used as basis for favorable action, if, in the
light of all the circumstances, the Court is "satisfied of the authenticity of
the written proof offered." Thus, in a number of decisions, mere
authentication of the Chinese Naturalization Law by the Chinese Consulate
General of Manila was held to be competent proof of that law." (Emphasis
supplied)
The Bank, however, cannot rely on Willamette Iron and Steel Works
v. Muzzal or Collector of Internal Revenue v. Fisher to support its
cause. These cases involved attorneys testifying in open court during the
trial in the Philippines and quoting the particular foreign laws sought to be
established. On the other hand, the Walden affidavit was taken abroad ex
parte and the affiant never testified in open court. The Walden affidavit
cannot be considered as proof of New York law on damages not only
because it is self-serving but also because it does not state the specific New
York law on damages. We reproduce portions of the Walden affidavit as
follows:

"3. In New York, "[n]ominal damages are damages in name only, trivial
sums such as six cents or $1. Such damages are awarded both in tort and
contract cases when the plaintiff establishes a cause of action against the
defendant, but is unable to prove" actual damages. Dobbs, Law of
Remedies, § 3.32 at 294 (1993). Since Guerrero is claiming for actual
damages, he cannot ask for nominal damages.

4. There is no concept of temperate damages in New York law. I have

reviewed Dobbs, a well-respected treatise, which does not use the phrase
"temperate damages" in its index. I have also done a computerized search
for the phrase in all published New York cases, and have found no cases
that use it. I have never heard the phrase used in American law.

5. The Uniform Commercial Code ("UCC") governs many aspects of a

Bank's relationship with its depositors. In this case, it governs Guerrero's
claim arising out of the non-payment of the $18,000 check. Guerrero
claims that this was a wrongful dishonor. However, the UCC states that
"justifiable refusal to pay or accept" as opposed to dishonor, occurs when a
bank refuses to pay a check for reasons such as a missing indorsement, a
missing or illegible signature or a forgery, § 3-510, Official Comment 2. …..
to the Complaint, MHT returned the check because it had no signature card
on …. and could not verify Guerrero's signature. In my opinion, consistent
with the UCC, that is a legitimate and justifiable reason not to pay.
6. Consequential damages are not available in the ordinary case of a
justifiable refusal to pay. UCC 1-106 provides that "neither consequential or
special or punitive damages may be had except as specifically provided in
the Act or by other rule of law". UCC 4-103 further provides that
consequential damages can be recovered only where there is bad faith. This
is more restrictive than the New York common law, which may allow
consequential damages in a breach of contract case (as does the UCC where
there is a wrongful dishonor).

7. Under New York law, requests for lost profits, damage to reputation and
mental distress are considered consequential damages. Kenford Co., Inc. v.
Country of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 4-5 (1989) (lost
profits); Motif Construction Corp. v. Buffalo Savings Bank, 50 A.D.2d 718,
374 N.Y.S..2d 868, 869-70 (4th Dep't 1975) damage to reputation); Dobbs,
Law of Remedies §12.4(1) at 63 (emotional distress).

8. As a matter of New York law, a claim for emotional distress cannot be

recovered for a breach of contract. Geler v. National Westminster Bank
U.S.A., 770 F. Supp. 210, 215 (S.D.N.Y. 1991); Pitcherello v. Moray Homes,
Ltd., 150 A.D.2d 860,540 N.Y.S.2d 387, 390 (3d Dep't 1989) Martin v.
Donald Park Acres, 54 A.D.2d 975, 389 N.Y.S..2d 31, 32 (2nd Dep't 1976).
Damage to reputation is also not recoverable for a contract. Motif
Construction Corp. v. Buffalo Savings Bank, 374 N.Y.S.2d at 869-70.

9. In cases where the issue is the breach of a contract to purchase stock,

New York courts will not take into consideration the performance of the
stock after the breach. Rather, damages will be based on the value of the
stock at the time of the breach, Aroneck v. Atkin, 90 A.D.2d 966, 456
N.Y.S.2d 558, 559 (4th Dep't 1982), app. den. 59 N.Y.2d 601, 449 N.E.2d
1276, 463 N.Y.S.2d 1023 (1983).

10. Under New York law, a party can only get consequential damages if they
were the type that would naturally arise from the breach and if they were
"brought within the contemplation of parties as the probable result of the
breach at the time of or prior to contracting." Kenford Co., Inc. v. Country
of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 3 (1989), (quoting Chapman v.
Fargo, 223 N.Y. 32, 36 (1918).

11. Under New York law, a plaintiff is not entitled to attorneys' fees unless
they are provided by contract or statute. E.g., Geler v. National
Westminster Bank, 770 F. Supp. 210, 213 (S.D.N.Y. 1991); Camatron
Sewing Mach, Inc. v. F.M. Ring Assocs., Inc., 179 A.D.2d 165, 582 N.Y.S.2d
396 (1st Dep't 1992); Stanisic v. Soho Landmark Assocs., 73 A.D.2d 268, 577
N.Y.S.2d 280, 281 (1st Dep't 1991). There is no statute that permits
attorney's fees in a case of this type.

12. Exemplary, or punitive damages are not allowed for a breach of

contract, even where the plaintiff claims the defendant acted with
malice. Geler v. National Westminster Bank, 770 F.Supp. 210, 215 (S.D.N.Y.
1991); Catalogue Service of …chester[11]_v. Insurance Co. of North
America, 74 A.D.2d 837, 838, 425 N.Y.S.2d 635, 637 (2d Dep't
1980); Senior v. Manufacturers Hanover Trust Co., 110 A.D.2d 833, 488
N.Y.S.2d 241, 242 (2d Dep't 1985).

13. Exemplary or punitive damages may be recovered only where it is

alleged and proven that the wrong supposedly committed by defendant
amounts to a fraud aimed at the public generally and involves a high moral
culpability. Walker v. Sheldon, 10 N.Y.2d 401, 179 N.E.2d 497, 223
N.Y.S.2d 488 (1961).

14. Furthermore, it has been consistently held under New York law that
exemplary damages are not available for a mere breach of contract for in
such a case, as a matter of law, only a private wrong and not a public right is
involved. Thaler v. The North Insurance Company, 63 A.D.2d 921, 406
N.Y.S.2d 66 (1st Dep't 1978)."[12]

The Walden affidavit states conclusions from the affiant's personal

interpretation and opinion of the facts of the case vis a vis the alleged laws
and jurisprudence without citing any law in particular. The citations in the
Walden affidavit of various U.S. court decisions do not constitute proof of
the official records or decisions of the U.S. courts. While the Bank attached
copies of some of the U.S. court decisions cited in the Walden affidavit,
these copies do not comply with Section 24 of Rule 132 on proof of official
records or decisions of foreign courts.

The Bank's intention in presenting the Walden affidavit is to prove New

York law and jurisprudence. However, because of the failure to comply with
Section 24 of Rule 132 on how to prove a foreign law and decisions of
foreign courts, the Walden affidavit did not prove the current state of New
York law and jurisprudence. Thus, the Bank has only alleged, but has not
proved, what New York law and jurisprudence are on the matters at issue.

Next, the Bank makes much of Guerrero's failure to submit an opposing

affidavit to the Walden affidavit. However, the pertinent provision of
Section 3, Rule 35 of the old Rules of Court did not make the submission of
an opposing affidavit mandatory, thus:

"SEC. 3. Motion and proceedings thereon. The motion shall be served at

least ten (10) days before the time specified for the hearing. The adverse
party prior to the day of hearing may serve opposing affidavits. After
the hearing, the judgment sought shall be rendered forthwith if the
pleadings, depositions and admissions on file, together with the affidavits,
show that, except as to the amount of damages, there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a
matter of law." (Emphasis supplied)

It is axiomatic that the term "may" as used in remedial law, is only

permissive and not mandatory.[13]

Guerrero cannot be said to have admitted the averments in the Bank's

motion for partial summary judgment and the Walden affidavit just
because he failed to file an opposing affidavit. Guerrero opposed the motion
for partial summary judgment, although he did not present an opposing
affidavit. Guerrero may not have presented an opposing affidavit, as there
was no need for one, because the Walden affidavit did not establish what
the Bank intended to prove. Certainly, Guerrero did not admit, expressly or
impliedly, the veracity of the statements in the Walden affidavit. The Bank
still had the burden of proving New York law and jurisprudence even if
Guerrero did not present an opposing affidavit. As the party moving for
summary judgment, the Bank has the burden of clearly demonstrating the
absence of any genuine issue of fact and that any doubt as to the existence
of such issue is resolved against the movant.[14]

Moreover, it would have been redundant and pointless for Guerrero to

submit an opposing affidavit considering that what the Bank seeks to be
opposed is the very subject matter of the complaint. Guerrero need not file
an opposing affidavit to the Walden affidavit because his complaint itself
controverts the matters set forth in the Bank's motion and the Walden
affidavit. A party should not be made to deny matters already averred in his
complaint.

There being substantial triable issues between the parties, the courts a quo
correctly denied the Bank's motion for partial summary judgment. There is
a need to determine by presentation of evidence in a regular trial if the
Bank is guilty of any wrongdoing and if it is liable for damages under the
applicable laws.

This case has been delayed long enough by the Bank's resort to a motion for
partial summary judgment. Ironically, the Bank has successfully defeated
the very purpose for which summary judgments were devised in our rules,
which is, to aid parties in avoiding the expense and loss of time involved in
a trial.

WHEREFORE, the petition is DENIED for lack of merit. The Decision

dated August 24, 1998 and the Resolution dated December 14, 1998 of the
Court of Appeals in CA-G.R. SP No. 42310 is AFFIRMED.

SO ORDERED.

SECOND DIVISION
 [G.R. NO. 155014 November 11, 2005]

CRESCENT PETROLEUM, LTD., Petitioner, v. M/V "LOK MAHESHWARI," THE

SHIPPING CORPORATION OF INDIA, and PORTSERV LIMITED and/or
TRANSMAR SHIPPING, INC., Respondents.

DECISION

PUNO, J.:

This Petition for Review on Certiorari under Rule 45 seeks the (a) reversal of the
November 28, 2001 Decision of the Court of Appeals in CA-G.R. No. CV-54920,1 which
dismissed for "want of jurisdiction" the instant case, and the September 3, 2002
Resolution of the same appellate court,2 which denied petitioner's motion for
reconsideration, and (b) reinstatement of the July 25, 1996 Decision3 of the Regional
Trial Court (RTC) in Civil Case No. CEB-18679, which held that respondents were
solidarily liable to pay petitioner the sum prayed for in the complaint.

The facts are as follows: Respondent M/V "Lok Maheshwari" (Vessel) is an oceangoing
vessel of Indian registry that is owned by respondent Shipping Corporation of India
(SCI), a corporation organized and existing under the laws of India and principally
owned by the Government of India. It was time-chartered by respondent SCI to Halla
Merchant Marine Co. Ltd. (Halla), a South Korean company. Halla, in turn, sub-
chartered the Vessel through a time charter to Transmar Shipping, Inc. (Transmar).
Transmar further sub-chartered the Vessel to Portserv Limited (Portserv). Both
Transmar and Portserv are corporations organized and existing under the laws of
Canada.

On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum, Ltd.

(Crescent), a corporation organized and existing under the laws of Canada that is
engaged in the business of selling petroleum and oil products for the use and operation
of oceangoing vessels, to deliver marine fuel oils (bunker fuels) to the Vessel. Petitioner
Crescent granted and confirmed the request through an advice via facsimile dated
November 2, 1995. As security for the payment of the bunker fuels and related
services, petitioner Crescent received two (2) checks in the amounts of US$100,000.00
and US$200,000.00. Thus, petitioner Crescent contracted with its supplier, Marine
Petrobulk Limited (Marine Petrobulk), another Canadian corporation, for the physical
delivery of the bunker fuels to the Vessel.

On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels amounting
to US$103,544 inclusive of barging and demurrage charges to the Vessel at the port of
Pioneer Grain, Vancouver, Canada. The Chief Engineer Officer of the Vessel duly
acknowledged and received the delivery receipt.Marine Petrobulk issued an invoice to
petitioner Crescent for the US$101,400.00 worth of the bunker fuels. Petitioner
Crescent issued a check for the same amount in favor of Marine Petrobulk, which check
was duly encashed.

Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated
November 21, 1995 to "Portserv Limited, and/or the Master, and/or Owners, and/or
Operators, and/or Charterers of M/V 'Lok Maheshwari' " in the amount of
US$103,544.00 with instruction to remit the amount on or before December 1, 1995.
The period lapsed and several demands were made but no payment was received. Also,
the checks issued to petitioner Crescent as security for the payment of the bunker fuels
were dishonored for insufficiency of funds.As a consequence, petitioner Crescent
incurred additional expenses of US$8,572.61 for interest, tracking fees, and legal fees.

On May 2, 1996, while the Vessel was docked at the port of Cebu City, petitioner
Crescent instituted before the RTC of Cebu City an action "for a sum of money with
prayer for temporary restraining order and writ of preliminary attachment" against
respondents Vessel and SCI, Portserv and/or Transmar. The case was raffled to Branch
10 and docketed as Civil Case No. CEB-18679.

On May 3, 1996, the trial court issued a writ of attachment against the Vessel with
bond at P2,710,000.00. Petitioner Crescent withdrew its prayer for a temporary
restraining order and posted the required bond.

On May 18, 1996, summonses were served to respondents Vessel and SCI, and
Portserv and/or Transmar through the Master of the Vessel.On May 28, 1996,
respondents Vessel and SCI, through Pioneer Insurance and Surety Corporation
(Pioneer), filed an urgent ex-parte motion to approve Pioneer's letter of undertaking, to
consider it as counter-bond and to discharge the attachment.On May 29, 1996, the trial
court granted the motion; thus, the letter of undertaking was approved as counter-
bond to discharge the attachment.

For failing to file their respective answers and upon motion of petitioner Crescent, the
trial court declared respondents Vessel and SCI, Portserv and/or Transmar in default.
Petitioner Crescent was allowed to present its evidence ex-parte.

On July 25, 1996, the trial court rendered its decision in favor of petitioner Crescent,
thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff

[Crescent] and against the defendants [Vessel, SCI, Portserv and/or Transmar].

Consequently, the latter are hereby ordered to pay plaintiff jointly and solidarily, the
following:

(a) the sum of US$103,544.00, representing the outstanding obligation;

(b) interest of US$10,978.50 as of July 3, 1996, plus additional interest at 18% per
annum for the period thereafter, until the principal account is fully paid;

(c) attorney's fees of P300,000.00; and cralawlibra ry

(d) P200,000.00 as litigation expenses.

SO ORDERED.
On August 19, 1996, respondents Vessel and SCI appealed to the Court of Appeals.
They attached copies of the charter parties between respondent SCI and Halla, between
Halla and Transmar, and between Transmar and Portserv. They pointed out that
Portserv was a time charterer and that there is a clause in the time charters between
respondent SCI and Halla, and between Halla and Transmar, which states that "the
Charterers shall provide and pay for all the fuel except as otherwise agreed." They
submitted a copy of Part II of the Bunker Fuel Agreement between petitioner Crescent
and Portserv containing a stipulation that New York law governs the "construction,
validity and performance" of the contract. They likewise submitted certified copies of
the Commercial Instruments and Maritime Lien Act of the United States (U.S.), some
U.S. cases, and some Canadian cases to support their defense.

On November 28, 2001, the Court of Appeals issued its assailed Decision, which
reversed that of the trial court, viz:

WHEREFORE, premises considered, the Decision dated July 25, 1996, issued by the
Regional Trial Court of Cebu City, Branch 10, is hereby REVERSED and SET ASIDE, and
a new one is entered DISMISSING the instant case for want of jurisdiction.

The appellate court denied petitioner Crescent's motion for reconsideration explaining
that it "dismissed the instant action primarily on the ground of forum non
conveniens considering that the parties are foreign corporations which are not doing
business in the Philippines."

Hence, this petition submitting the following issues for resolution, viz:

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

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

3. The trial court acquired jurisdiction over the subject matter of the instant case, as
well as over the res and over the persons of the parties;

4. The enforcement of a maritime lien on the subject vessel is expressly granted by

law. The Ship Mortgage Acts as well as the Code of Commerce provides for relief to
petitioner for its unpaid claim;

5. The arbitration clause in the contract was not rigid or inflexible but expressly allowed
petitioner to enforce its maritime lien in Philippine courts provided the vessel was in the
Philippines;

6. The law of the state of New York is inapplicable to the present controversy as the
same has not been properly pleaded and proved;

7. Petitioner has legal capacity to sue before Philippine courts as it is suing upon an
isolated business transaction;
8. Respondents were duly served summons although service of summons upon
respondents is not a jurisdictional requirement, the action being a suit quasi in rem;

9. The trial court's decision has factual and legal bases; and,

10. The respondents should be held jointly and solidarily liable.

In a nutshell, this case is for the satisfaction of unpaid supplies furnished by a foreign
supplier in a foreign port to a vessel of foreign registry that is owned, chartered and
sub-chartered by foreign entities.

Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, RTCs
exercise exclusive original jurisdiction "(i)n all actions in admiralty and maritime where
the demand or claim exceeds two hundred thousand pesos (P200,000) or in Metro
Manila, where such demand or claim exceeds four hundred thousand pesos
(P400,000)." Two (2) tests have been used to determine whether a case involving a
contract comes within the admiralty and maritime jurisdiction of a court -
the locational test and the subject matter test. The English rule follows the
locational test wherein maritime and admiralty jurisdiction, with a few exceptions, is
exercised only on contracts made upon the sea and to be executed thereon. This is
totally rejected under the American rule where the criterion in determining whether a
contract is maritime depends on the nature and subject matter of the contract, having
reference to maritime service and transactions.4 In International Harvester
Company of the Philippines v. Aragon,5 we adopted the American rule and held that
"(w)hether or not a contract is maritime depends not on the place where the contract is
made and is to be executed, making the locality the test, but on the subject matter of
the contract, making the true criterion a maritime service or a maritime transaction."

A contract for furnishing supplies like the one involved in this case is maritime and
within the jurisdiction of admiralty.6 It may be invoked before our courts through an
action in rem or quasi in rem or an action in personam. Thus:7

xxx

"Articles 579 and 584 [of the Code of Commerce] provide a method of collecting or
enforcing not only the liens created under Section 580 but also for the collection of any
kind of lien whatsoever."8 In the Philippines, we have a complete legislation, both
substantive and adjective, under which to bring an action in rem against a vessel for
the purpose of enforcing liens. The substantive law is found in Article 580 of the Code
of Commerce. The procedural law is to be found in Article 584 of the same Code. The
result is, therefore, that in the Philippines any vessel - even though it be a foreign
vessel - found in any port of this Archipelago may be attached and sold under the
substantive law which defines the right, and the procedural law contained in the Code
of Commerce by which this right is to be enforced.9 x x x.But where neither the law nor
the contract between the parties creates any lien or charge upon the vessel, the only
way in which it can be seized before judgment is by pursuing the remedy relating to
attachment under Rule 59 [now Rule 57] of the Rules of Court.10

But, is petitioner Crescent entitled to a maritime lien under our laws? Petitioner
Crescent bases its claim of a maritime lien on Sections 21, 22 and 23 of Presidential
Decree No. 1521 (P.D. No. 1521), also known as the Ship Mortgage Decree of
1978, viz:

Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. - Any person
furnishing repairs, supplies, towage, use of dry dock or maritime railway, or other
necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of
such vessel, or of a person authorized by the owner, shall have a maritime lien on the
vessel, which may be enforced by suit in rem, and it shall be necessary to allege or
prove that credit was given to the vessel.

Sec. 22. Persons Authorized to Procure Repairs, Supplies and Necessaries. - The
following persons shall be presumed to have authority from the owner to procure
repairs, supplies, towage, use of dry dock or marine railway, and other necessaries for
the vessel: The managing owner, ship's husband, master or any person to whom the
management of the vessel at the port of supply is entrusted. No person tortuously or
unlawfully in possession or charge of a vessel shall have authority to bind the vessel.

Sec. 23. Notice to Person Furnishing Repairs, Supplies and Necessaries. - The officers
and agents of a vessel specified in Section 22 of this Decree shall be taken to include
such officers and agents when appointed by a charterer, by an owner pro hac vice, or
by an agreed purchaser in possession of the vessel; but nothing in this Decree shall be
construed to confer a lien when the furnisher knew, or by exercise of reasonable
diligence could have ascertained, that because of the terms of a charter party,
agreement for sale of the vessel, or for any other reason, the person ordering the
repairs, supplies, or other necessaries was without authority to bind the vessel therefor.

Petitioner Crescent submits that these provisions apply to both domestic and foreign
vessels, as well as domestic and foreign suppliers of necessaries. It contends that the
use of the term "any person" in Section 21 implies that the law is not restricted to
domestic suppliers but also includes all persons who supply provisions and necessaries
to a vessel, whether foreign or domestic. It points out further that the law does not
indicate that the supplies or necessaries must be furnished in the Philippines in order to
give petitioner the right to seek enforcement of the lien with a Philippine court.11

Respondents Vessel and SCI, on the other hand, maintain that Section 21 of the P.D.
No. 1521 or the Ship Mortgage Decree of 1978 does not apply to a foreign supplier like
petitioner Crescent as the provision refers only to a situation where the person
furnishing the supplies is situated inside the territory of the Philippines and not where
the necessaries were furnished in a foreign jurisdiction like Canada.12

We find against petitioner Crescent.

I.

P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted "to accelerate the
growth and development of the shipping industry" and "to extend the benefits accorded
to overseas shipping under Presidential Decree No. 214 to domestic shipping."13 It is
patterned closely from the U.S. Ship Mortgage Act of 1920 and the Liberian Maritime
Law relating to preferred mortgages.14 Notably, Sections 21, 22 and 23 of P.D. No.
1521 or the Ship Mortgage Decree of 1978 are identical to Subsections P, Q, and R,
respectively, of the U.S. Ship Mortgage Act of 1920, which is part of the Federal
Maritime Lien Act. Hence, U.S. jurisprudence finds relevance to determining whether
P.D. No. 1521 or the Ship Mortgage Decree of 1978 applies in the present case.

The various tests used in the U.S. to determine whether a maritime lien exists are the
following:

One. "In a suit to establish and enforce a maritime lien for supplies furnished to a
vessel in a foreign port, whether such lien exists, or whether the court has or will
exercise jurisdiction, depends on the law of the country where the supplies were
furnished, which must be pleaded and proved."15 This principle was laid down in the
1888 case of The Scotia,16 reiterated in The Kaiser Wilhelm II17 (1916), in The
Woudrichem18 (1921) and in The City of Atlanta19 (1924).

Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-

factor methodologies as the law of the place of supply.20

In Lauritzen v. Larsen,21 a Danish seaman, while temporarily in New York, joined the
crew of a ship of Danish flag and registry that is owned by a Danish citizen. He signed
the ship's articles providing that the rights of the crew members would be governed by
Danish law and by the employer's contract with the Danish Seamen's Union, of which
he was a member. While in Havana and in the course of his employment, he was
negligently injured. He sued the shipowner in a federal district court in New York for
damages under the Jones Act. In holding that Danish law and not the Jones Act was
applicable, the Supreme Court adopted a multiple-contact test to determine, in the
absence of a specific Congressional directive as to the statute's reach, which
jurisdiction's law should be applied. The following factors were considered: (1) place
of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the
injured; (4) allegiance of the defendant shipowner; (5) place of contract; (6)
inaccessibility of foreign forum; and (7) law of the forum.

Several years after Lauritzen, the U.S. Supreme Court in the case of Romero v.
International Terminal Operating Co.22 again considered a foreign seaman's
personal injury claim under both the Jones Act and the general maritime law. The Court
held that the factors first announced in the case of Lauritzen were applicable not only
to personal injury claims arising under the Jones Act but to all matters arising
under maritime law in general.23

Hellenic Lines, Ltd. v. Rhoditis24 was also a suit under the Jones Act by a Greek
seaman injured aboard a ship of Greek registry while in American waters. The ship was
operated by a Greek corporation which has its largest office in New York and another
office in New Orleans and whose stock is more than 95% owned by a U.S. domiciliary
who is also a Greek citizen. The ship was engaged in regularly scheduled runs between
various ports of the U.S. and the Middle East, Pakistan, and India, with its entire
income coming from either originating or terminating in the U.S. The contract of
employment provided that Greek law and a Greek collective bargaining agreement
would apply between the employer and the seaman and that all claims arising out of
the employment contract were to be adjudicated by a Greek court. The U.S. Supreme
Court observed that of the seven factors listed in the Lauritzen test, four were in
favor of the shipowner and against jurisdiction. In arriving at the conclusion that
the Jones Act applies, it ruled that the application of the Lauritzen test is not a
mechanical one. It stated thus: "[t]he significance of one or more factors must be
considered in light of the national interest served by the assertion of Jones Act
jurisdiction. (footnote omitted) Moreover, the list of seven factors in Lauritzen was not
intended to be exhaustive. x x x [T]he shipowner's base of operations is another factor
of importance in determining whether the Jones Act is applicable; and there well may
be others."

The principles enunciated in these maritime tort cases have been extended to cases
involving unpaid supplies and necessaries such as the cases of Forsythe
International U.K., Ltd. v. M/V Ruth Venture,25 and Comoco Marine Services v.
M/V El Centroamericano.26

Three. The factors provided in Restatement (Second) of Conflicts of Law have

also been applied, especially in resolving cases brought under the Federal Maritime Lien
Act. Their application suggests that in the absence of an effective choice of law by the
parties, the forum contacts to be considered include: (a) the place of contracting; (b)
the place of negotiation of the contract; (c) the place of performance; (d) the location
of the subject matter of the contract; and (e) the domicile, residence, nationality, place
of incorporation and place of business of the parties.27

In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield,28 an

admiralty action in rem was brought by an American supplier against a vessel of
Norwegian flag owned by a Norwegian Company and chartered by a London time
charterer for unpaid fuel oil and marine diesel oil delivered while the vessel was in U.S.
territory. The contract was executed in London. It was held that because the bunker
fuel was delivered to a foreign flag vessel within the jurisdiction of the U.S., and
because the invoice specified payment in the U.S., the admiralty and maritime law of
the U.S. applied. The U.S. Court of Appeals recognized the modern approach to
maritime conflict of law problems introduced in the Lauritzen case. However, it
observed that Lauritzen involved a torts claim under the Jones Act while the present
claim involves an alleged maritime lien arising from unpaid supplies. It made a
disclaimer that its conclusion is limited to the unique circumstances surrounding a
maritime lien as well as the statutory directives found in the Maritime Lien Statute and
that the initial choice of law determination is significantly affected by the
statutory policies surrounding a maritime lien. It ruled that the facts in the case
call for the application of the Restatement (Second) of Conflicts of Law. The U.S. Court
gave much significance to the congressional intent in enacting the Maritime Lien Statute
to protect the interests of American supplier of goods, services or necessaries by
making maritime liens available where traditional services are routinely rendered. It
concluded that the Maritime Lien Statute represents a relevant policy of the forum that
serves the needs of the international legal system as well as the basic policies
underlying maritime law. The court also gave equal importance to the predictability of
result and protection of justified expectations in a particular field of law. In the
maritime realm, it is expected that when necessaries are furnished to a vessel in an
American port by an American supplier, the American Lien Statute will apply to protect
that supplier regardless of the place where the contract was formed or the nationality of
the vessel.
The same principle was applied in the case of Swedish Telecom Radio v. M/V
Discovery I29 where the American court refused to apply the Federal Maritime Lien Act
to create a maritime lien for goods and services supplied by foreign companies in
foreign ports. In this case, a Swedish company supplied radio equipment in a Spanish
port to refurbish a Panamanian vessel damaged by fire. Some of the contract
negotiations occurred in Spain and the agreement for supplies between the parties
indicated Swedish company's willingness to submit to Swedish law. The ship was later
sold under a contract of purchase providing for the application of New York law and was
arrested in the U.S. The U.S. Court of Appeals also held that while the contacts-based
framework set forth in Lauritzen was useful in the analysis of all maritime choice of law
situations, the factors were geared towards a seaman's injury claim. As in Gulf
Trading, the lien arose by operation of law because the ship's owner was not a party to
the contract under which the goods were supplied. As a result, the court found it more
appropriate to consider the factors contained in Section 6 of the Restatement (Second)
of Conflicts of Law. The U.S. Court held that the primary concern of the Federal
Maritime Lien Act is the protection of American suppliers of goods and services.

The same factors were applied in the case of Ocean Ship Supply, Ltd. v. M/V Leah.30

II.

Finding guidance from the foregoing decisions, the Court cannot sustain petitioner
Crescent's insistence on the application of P.D. No. 1521 or the Ship Mortgage Decree
of 1978 and hold that a maritime lien exists.

First. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only
falls under one - the law of the forum. All other elements are foreign - Canada is the
place of the wrongful act, of the allegiance or domicile of the injured and the place of
contract; India is the law of the flag and the allegiance of the defendant shipowner.
Balancing these basic interests, it is inconceivable that the Philippine court has any
interest in the case that outweighs the interests of Canada or India for that matter.

Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable following
the factors under Restatement (Second) of Conflict of Laws. Like the Federal Maritime
Lien Act of the U.S., P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted
primarily to protect Filipino suppliers and was not intended to create a lien from a
contract for supplies between foreign entities delivered in a foreign port.

Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and rule that a
maritime lien exists would not promote the public policy behind the enactment of the
law to develop the domestic shipping industry. Opening up our courts to foreign
suppliers by granting them a maritime lien under our laws even if they are not entitled
to a maritime lien under their laws will encourage forum shopping.

Finally. The submission of petitioner is not in keeping with the reasonable expectation
of the parties to the contract. Indeed, when the parties entered into a contract for
supplies in Canada, they could not have intended the laws of a remote country like the
Philippines to determine the creation of a lien by the mere accident of the Vessel's
being in Philippine territory.
 III.

But under which law should petitioner Crescent prove the existence of its maritime
lien?
cralawlib rary

In light of the interests of the various foreign elements involved, it is clear that Canada
has the most significant interest in this dispute. The injured party is a Canadian
corporation, the sub-charterer which placed the orders for the supplies is also
Canadian, the entity which physically delivered the bunker fuels is in Canada, the place
of contracting and negotiation is in Canada, and the supplies were delivered in Canada.

The arbitration clause contained in the Bunker Fuel Agreement which states that New
York law governs the "construction, validity and performance" of the contract is only a
factor that may be considered in the choice-of-law analysis but is not conclusive. As in
the cases of Gulf Trading and Swedish Telecom, the lien that is the subject matter
of this case arose by operation of law and not by contract because the shipowner was
not a party to the contract under which the goods were supplied.

It is worthy to note that petitioner Crescent never alleged and proved Canadian law as
basis for the existence of a maritime lien. To the end, it insisted on its theory that
Philippine law applies. Petitioner contends that even if foreign law applies, since the
same was not properly pleaded and proved, such foreign law must be presumed to be
the same as Philippine law pursuant to the doctrine of processual presumption.

Thus, we are left with two choices: (1) dismiss the case for petitioner's failure to
establish a cause of action31 or (2) presume that Canadian law is the same as Philippine
law. In either case, the case has to be dismissed.

It is well-settled that a party whose cause of action or defense depends upon a foreign
law has the burden of proving the foreign law. Such foreign law is treated as a question
of fact to be properly pleaded and proved.32 Petitioner Crescent's insistence on
enforcing a maritime lien before our courts depended on the existence of a maritime
lien under the proper law. By erroneously claiming a maritime lien under Philippine law
instead of proving that a maritime lien exists under Canadian law, petitioner Crescent
failed to establish a cause of action.33

Even if we apply the doctrine of processual presumption, the result will still be the
same. Under P.D. No. 1521 or the Ship Mortgage Decree of 1978, the following are the
requisites for maritime liens on necessaries to exist: (1) the "necessaries" must have
been furnished to and for the benefit of the vessel; (2) the "necessaries" must have
been necessary for the continuation of the voyage of the vessel; (3) the credit must
have been extended to the vessel; (4) there must be necessity for the extension of the
credit; and (5) the necessaries must be ordered by persons authorized to contract on
behalf of the vessel.34 These do not avail in the instant case.

First. It was not established that benefit was extended to the vessel. While this is
presumed when the master of the ship is the one who placed the order, it is not
disputed that in this case it was the sub-charterer Portserv which placed the orders to
petitioner Crescent.35 Hence, the presumption does not arise and it is incumbent upon
petitioner Crescent to prove that benefit was extended to the vessel. Petitioner did not.
Second. Petitioner Crescent did not show any proof that the marine products were
necessary for the continuation of the vessel.

Third. It was not established that credit was extended to the vessel. It is presumed
that "in the absence of fraud or collusion, where advances are made to a captain in a
foreign port, upon his request, to pay for necessary repairs or supplies to enable his
vessel to prosecute her voyage, or to pay harbor dues, or for pilotage, towage and like
services rendered to the vessel, that they are made upon the credit of the vessel as
well as upon that of her owners."36 In this case, it was the sub-charterer Portserv which
requested for the delivery of the bunker fuels. The issuance of two checks amounting to
US$300,000 in favor of petitioner Crescent prior to the delivery of the bunkers as
security for the payment of the obligation weakens petitioner Crescent's contention that
credit was extended to the Vessel.

We also note that when copies of the charter parties were submitted by respondents in
the Court of Appeals, the time charters between respondent SCI and Halla and between
Halla and Transmar were shown to contain a clause which states that "the Charterers
shall provide and pay for all the fuel except as otherwise agreed." This militates against
petitioner Crescent's position that Portserv is authorized by the shipowner to contract
for supplies upon the credit of the vessel.

Fourth. There was no proof of necessity of credit. A necessity of credit will be

presumed where it appears that the repairs and supplies were necessary for the ship
and that they were ordered by the master. This presumption does not arise in this case
since the fuels were not ordered by the master and there was no proof of necessity for
the supplies.

Finally. The necessaries were not ordered by persons authorized to contract in behalf
of the vessel as provided under Section 22 of P.D. No. 1521 or the Ship Mortgage
Decree of 1978 - the managing owner, the ship's husband, master or any person with
whom the management of the vessel at the port of supply is entrusted. Clearly,
Portserv, a sub-charterer under a time charter, is not someone to whom the
management of the vessel has been entrusted. A time charter is a contract for the use
of a vessel for a specified period of time or for the duration of one or more specified
voyages wherein the owner of the time-chartered vessel retains possession and control
through the master and crew who remain his employees.37 Not enjoying the
presumption of authority, petitioner Crescent should have proved that Portserv was
authorized by the shipowner to contract for supplies. Petitioner failed.

A discussion on the principle of forum non conveniens is unnecessary.

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. No. CV 54920,
dated November 28, 2001, and its subsequent Resolution of September 3, 2002 are
AFFIRMED. The instant Petition for Review on Certiorari is DENIED for lack of merit.
Cost against petitioner.

SO ORDERED.

G.R. No. 145587 October 26, 2007

EDI-STAFFBUILDERS INTERNATIONAL, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ELEAZAR S. GRAN, respondents.

DECISION

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari1 seeks to set aside the October 18, 2000 Decision2 of the Court
of Appeals (CA) in CA-G.R. SP No. 56120 which affirmed the January 15, 1999 Decision3 and
September 30, 1999 Resolution4 rendered by the National Labor Relations Commission (NLRC)
(Third Division) in POEA ADJ (L) 94-06-2194, ordering Expertise Search International (ESI), EDI-
Staffbuilders International, Inc. (EDI), and Omar Ahmed Ali Bin Bechr Est. (OAB) jointly and
severally to pay Eleazar S. Gran (Gran) the amount of USD 16,150.00 as unpaid salaries.

The Facts

Petitioner EDI is a corporation engaged in recruitment and placement of Overseas Filipino Workers
(OFWs).5 ESI is another recruitment agency which collaborated with EDI to process the
documentation and deployment of private respondent to Saudi Arabia.

Private respondent Gran was an OFW recruited by EDI, and deployed by ESI to work for OAB, in
Riyadh, Kingdom of Saudi Arabia.6

It appears that OAB asked EDI through its October 3, 1993 letter for curricula vitae of qualified
applicants for the position of "Computer Specialist."7 In a facsimile transmission dated November 29,
1993, OAB informed EDI that, from the applicants' curricula vitae submitted to it for evaluation, it
selected Gran for the position of "Computer Specialist." The faxed letter also stated that if Gran
agrees to the terms and conditions of employment contained in it, one of which was a monthly salary
of SR (Saudi Riyal) 2,250.00 (USD 600.00), EDI may arrange for Gran's immediate dispatch.8

After accepting OAB's offer of employment, Gran signed an employment contract9 that granted him a
monthly salary of USD 850.00 for a period of two years. Gran was then deployed to Riyadh,
Kingdom of Saudi Arabia on February 7, 1994.

Upon arrival in Riyadh, Gran questioned the discrepancy in his monthly salary—his employment
contract stated USD 850.00; while his Philippine Overseas Employment Agency (POEA) Information
Sheet indicated USD 600.00 only. However, through the assistance of the EDI office in Riyadh, OAB
agreed to pay Gran USD 850.00 a month.10

After Gran had been working for about five months for OAB, his employment was terminated through
OAB's July 9, 1994 letter,11 on the following grounds:

1. Non-compliance to contract requirements by the recruitment agency primarily on your

salary and contract duration.

2. Non-compliance to pre-qualification requirements by the recruitment agency[,] vide OAB

letter ref. F-5751-93, dated October 3, 1993.12
 3. Insubordination or disobedience to Top Management Order and/or instructions (non-
submittal of daily activity reports despite several instructions).

On July 11, 1994, Gran received from OAB the total amount of SR 2,948.00 representing his final
pay, and on the same day, he executed a Declaration13 releasing OAB from any financial obligation
or otherwise, towards him.

After his arrival in the Philippines, Gran instituted a complaint, on July 21, 1994, against ESI/EDI,
OAB, Country Bankers Insurance Corporation, and Western Guaranty Corporation with the NLRC,
National Capital Region, Quezon City, which was docketed as POEA ADJ (L) 94-06-2194 for
underpayment of wages/salaries and illegal dismissal.

The Ruling of the Labor Arbiter

In his February 10, 1998 Decision,14 Labor Arbiter Manuel R. Caday, to whom Gran's case was
assigned, ruled that there was neither underpayment nor illegal dismissal.

The Labor Arbiter reasoned that there was no underpayment of salaries since according to the
POEA-Overseas Contract Worker (OCW) Information Sheet, Gran's monthly salary was USD
600.00, and in his Confirmation of Appointment as Computer Specialist, his monthly basic salary
was fixed at SR 2,500.00, which was equivalent to USD 600.00.

Arbiter Caday also cited the Declaration executed by Gran, to justify that Gran had no claim for
unpaid salaries or wages against OAB.

With regard to the issue of illegal dismissal, the Labor Arbiter found that Gran failed to refute EDI's
allegations; namely, (1) that Gran did not submit a single activity report of his daily activity as
dictated by company policy; (2) that he was not qualified for the job as computer specialist due to his
insufficient knowledge in programming and lack of knowledge in ACAD system; (3) that Gran
refused to follow management's instruction for him to gain more knowledge of the job to prove his
worth as computer specialist; (4) that Gran's employment contract had never been substituted; (5)
and that Gran was paid a monthly salary of USD 850.00, and USD 350.00 monthly as food
allowance.

Accordingly, the Labor Arbiter decided that Gran was validly dismissed from his work due to
insubordination, disobedience, and his failure to submit daily activity reports.

Thus, on February 10, 1998, Arbiter Caday dismissed Gran's complaint for lack of merit.

Dissatisfied, Gran filed an Appeal15 on April 6, 1998 with the NLRC, Third Division. However, it
appears from the records that Gran failed to furnish EDI with a copy of his Appeal Memorandum.

The Ruling of the NLRC

The NLRC held that EDI's seemingly harmless transfer of Gran's contract to ESI is actually
"reprocessing," which is a prohibited transaction under Article 34 (b) of the Labor Code. This scheme
constituted misrepresentation through the conspiracy between EDI and ESI in misleading Gran and
even POEA of the actual terms and conditions of the OFW's employment. In addition, it was found
that Gran did not commit any act that constituted a legal ground for dismissal. The alleged non-
compliance with contractual stipulations relating to Gran's salary and contract duration, and the
absence of pre-qualification requirements cannot be attributed to Gran but to EDI, which dealt
directly with OAB. In addition, the charge of insubordination was not substantiated, and Gran was
not even afforded the required notice and investigation on his alleged offenses.

Thus, the NLRC reversed the Labor Arbiter's Decision and rendered a new one, the dispositive
portion of which reads:

WHEREFORE, the assailed decision is SET ASIDE. Respondents Expertise Search

International, Inc., EDI Staffbuilders Int'l., Inc. and Omar Ahmed Ali Bin Bechr Est. (OAB) are
hereby ordered jointly and severally liable to pay the complainant Eleazar Gran the
Philippine peso equivalent at the time of actual payment of SIXTEEN THOUSAND ONE
HUNDRED FIFTY US DOLLARS (US$16,150.00) representing his salaries for the unexpired
portion of his contract.

SO ORDERED.16

Gran then filed a Motion for Execution of Judgment17 on March 29, 1999 with the NLRC and
petitioner receiving a copy of this motion on the same date.18

To prevent the execution, petitioner filed an Opposition19 to Gran's motion arguing that the Writ of
Execution cannot issue because it was not notified of the appellate proceedings before the NLRC
and was not given a copy of the memorandum of appeal nor any opportunity to participate in the
appeal.

Seeing that the NLRC did not act on Gran's motion after EDI had filed its Opposition, petitioner filed,
on August 26, 1999, a Motion for Reconsideration of the NLRC Decision after receiving a copy of the
Decision on August 16, 1999.20

The NLRC then issued a Resolution21 denying petitioner's Motion for Reconsideration, ratiocinating
that the issues and arguments raised in the motion "had already been amply discussed, considered,
and ruled upon" in the Decision, and that there was "no cogent reason or patent or palpable error
that warrant any disturbance thereof."

Unconvinced of the NLRC's reasoning, EDI filed a Petition for Certiorari before the CA. Petitioner
claimed in its petition that the NLRC committed grave abuse of discretion in giving due course to the
appeal despite Gran's failure to perfect the appeal.

The Ruling of the Court of Appeals

The CA subsequently ruled on the procedural and substantive issues of EDI's petition.

On the procedural issue, the appellate court held that "Gran's failure to furnish a copy of his appeal
memorandum [to EDI was] a mere formal lapse, an excusable neglect and not a jurisdictional defect
which would justify the dismissal of his appeal."22 The court also held that petitioner EDI failed to
prove that private respondent was terminated for a valid cause and in accordance with due process;
and that Gran's Declaration releasing OAB from any monetary obligation had no force and effect.
The appellate court ratiocinated that EDI had the burden of proving Gran's incompetence; however,
other than the termination letter, no evidence was presented to show how and why Gran was
considered to be incompetent. The court held that since the law requires the recruitment agencies to
subject OFWs to trade tests before deployment, Gran must have been competent and qualified;
otherwise, he would not have been hired and deployed abroad.
As for the charge of insubordination and disobedience due to Gran's failure to submit a "Daily
Activity Report," the appellate court found that EDI failed to show that the submission of the "Daily
Activity Report" was a part of Gran's duty or the company's policy. The court also held that even if
Gran was guilty of insubordination, he should have just been suspended or reprimanded, but not
dismissed.

The CA also held that Gran was not afforded due process, given that OAB did not abide by the twin
notice requirement. The court found that Gran was terminated on the same day he received the
termination letter, without having been apprised of the bases of his dismissal or afforded an
opportunity to explain his side.

Finally, the CA held that the Declaration signed by Gran did not bar him from demanding benefits to
which he was entitled. The appellate court found that the Declaration was in the form of a quitclaim,
and as such is frowned upon as contrary to public policy especially where the monetary
consideration given in the Declaration was very much less than what he was legally entitled to—his
backwages amounting to USD 16,150.00.

As a result of these findings, on October 18, 2000, the appellate court denied the petition to set
aside the NLRC Decision.

Hence, this instant petition is before the Court.

The Issues

Petitioner raises the following issues for our consideration:

I. WHETHER THE FAILURE OF GRAN TO FURNISH A COPY OF HIS APPEAL

MEMORANDUM TO PETITIONER EDI WOULD CONSTITUTE A JURISDICTIONAL
DEFECT AND A DEPRIVATION OF PETITIONER EDI'S RIGHT TO DUE PROCESS AS
WOULD JUSTIFY THE DISMISSAL OF GRAN'S APPEAL.

II. WHETHER PETITIONER EDI HAS ESTABLISHED BY WAY OF SUBSTANTIAL

EVIDENCE THAT GRAN'S TERMINATION WAS JUSTIFIABLE BY REASON OF
INCOMPETENCE. COROLLARY HERETO, WHETHER THE PRIETO VS. NLRC RULING,
AS APPLIED BY THE COURT OF APPEALS, IS APPLICABLE IN THE INSTANT CASE.

III. WHETHER PETITIONER HAS ESTABLISHED BY WAY OF SUBSTANTIAL EVIDENCE

THAT GRAN'S TERMINATION WAS JUSTIFIABLE BY REASON OF INSUBORDINATION
AND DISOBEDIENCE.

IV. WHETHER GRAN WAS AFFORDED DUE PROCESS PRIOR TO TERMINATION.

V. WHETHER GRAN IS ENTITLED TO BACKWAGES FOR THE UNEXPIRED PORTION

OF HIS CONTRACT.23

The Court's Ruling

The petition lacks merit except with respect to Gran's failure to furnish EDI with his Appeal
Memorandum filed with the NLRC.

First Issue: NLRC's Duty is to Require Respondent to Provide Petitioner a Copy of the Appeal
Petitioner EDI claims that Gran's failure to furnish it a copy of the Appeal Memorandum constitutes a
jurisdictional defect and a deprivation of due process that would warrant a rejection of the appeal.

This position is devoid of merit.

In a catena of cases, it was ruled that failure of appellant to furnish a copy of the appeal to the
adverse party is not fatal to the appeal.

In Estrada v. National Labor Relations Commission,24 this Court set aside the order of the NLRC
which dismissed an appeal on the sole ground that the appellant did not furnish the appellee a
memorandum of appeal contrary to the requirements of Article 223 of the New Labor Code and
Section 9, Rule XIII of its Implementing Rules and Regulations.

Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the order of dismissal of an appeal to the
NLRC based on the ground that "there is no showing whatsoever that a copy of the appeal was
served by the appellant on the appellee"25 was annulled. The Court ratiocinated as follows:

The failure to give a copy of the appeal to the adverse party was a mere formal lapse, an
excusable neglect. Time and again We have acted on petitions to review decisions of the
Court of Appeals even in the absence of proof of service of a copy thereof to the Court of
Appeals as required by Section 1 of Rule 45, Rules of Court. We act on the petitions and
simply require the petitioners to comply with the rule.26 (Emphasis supplied.)

The J.D. Magpayo ruling was reiterated in Carnation Philippines Employees Labor Union-FFW v.
National Labor Relations Commission,27 Pagdonsalan v. NLRC,28 and in Sunrise Manning Agency,
Inc. v. NLRC.29

Thus, the doctrine that evolved from these cases is that failure to furnish the adverse party with a
copy of the appeal is treated only as a formal lapse, an excusable neglect, and hence, not a
jurisdictional defect. Accordingly, in such a situation, the appeal should not be dismissed; however, it
should not be given due course either. As enunciated in J.D. Magpayo, the duty that is imposed
on the NLRC, in such a case, is to require the appellant to comply with the rule that the
opposing party should be provided with a copy of the appeal memorandum.

While Gran's failure to furnish EDI with a copy of the Appeal Memorandum is excusable, the abject
failure of the NLRC to order Gran to furnish EDI with the Appeal Memorandum constitutes grave
abuse of discretion.

The records reveal that the NLRC discovered that Gran failed to furnish EDI a copy of the Appeal
Memorandum. The NLRC then ordered Gran to present proof of service. In compliance with the
order, Gran submitted a copy of Camp Crame Post Office's list of mail/parcels sent on April 7,
1998.30 The post office's list shows that private respondent Gran sent two pieces of mail on the same
date: one addressed to a certain Dan O. de Guzman of Legaspi Village, Makati; and the other
appears to be addressed to Neil B. Garcia (or Gran),31 of Ermita, Manila—both of whom are not
connected with petitioner.

This mailing list, however, is not a conclusive proof that EDI indeed received a copy of the Appeal
Memorandum.

Sec. 5 of the NLRC Rules of Procedure (1990) provides for the proof and completeness of service in
proceedings before the NLRC:
 Section 5.32 Proof and completeness of service.—The return is prima facie proof of the facts
indicated therein. Service by registered mail is complete upon receipt by the addressee
or his agent; but if the addressee fails to claim his mail from the post office within five (5)
days from the date of first notice of the postmaster, service shall take effect after such time.
(Emphasis supplied.)

Hence, if the service is done through registered mail, it is only deemed complete when the
addressee or his agent received the mail or after five (5) days from the date of first notice of the
postmaster. However, the NLRC Rules do not state what would constitute proper proof of service.

Sec. 13, Rule 13 of the Rules of Court, provides for proofs of service:

Section 13. Proof of service.—Proof of personal service shall consist of a written admission
of the party served or the official return of the server, or the affidavit of the party serving,
containing a full statement of the date, place and manner of service. If the service is by
ordinary mail, proof thereof shall consist of an affidavit of the person mailing of facts showing
compliance with section 7 of this Rule. If service is made by registered mail, proof shall
be made by such affidavit and registry receipt issued by the mailing office. The
registry return card shall be filed immediately upon its receipt by the sender, or in lieu
thereof the unclaimed letter together with the certified or sworn copy of the notice
given by the postmaster to the addressee (emphasis supplied).

Based on the foregoing provision, it is obvious that the list submitted by Gran is not conclusive proof
that he had served a copy of his appeal memorandum to EDI, nor is it conclusive proof that EDI
received its copy of the Appeal Memorandum. He should have submitted an affidavit proving that he
mailed the Appeal Memorandum together with the registry receipt issued by the post office;
afterwards, Gran should have immediately filed the registry return card.

Hence, after seeing that Gran failed to attach the proof of service, the NLRC should not have simply
accepted the post office's list of mail and parcels sent; but it should have required Gran to
properly furnish the opposing parties with copies of his Appeal Memorandum as prescribed
in J.D. Magpayo and the other cases. The NLRC should not have proceeded with the adjudication
of the case, as this constitutes grave abuse of discretion.

The glaring failure of NLRC to ensure that Gran should have furnished petitioner EDI a copy of the
Appeal Memorandum before rendering judgment reversing the dismissal of Gran's complaint
constitutes an evasion of the pertinent NLRC Rules and established jurisprudence. Worse, this
failure deprived EDI of procedural due process guaranteed by the Constitution which can serve as
basis for the nullification of proceedings in the appeal before the NLRC. One can only surmise the
shock and dismay that OAB, EDI, and ESI experienced when they thought that the dismissal of
Gran's complaint became final, only to receive a copy of Gran's Motion for Execution of Judgment
which also informed them that Gran had obtained a favorable NLRC Decision. This is not level
playing field and absolutely unfair and discriminatory against the employer and the job recruiters.
The rights of the employers to procedural due process cannot be cavalierly disregarded for they too
have rights assured under the Constitution.

However, instead of annulling the dispositions of the NLRC and remanding the case for further
proceedings we will resolve the petition based on the records before us to avoid a protracted
litigation.33

The second and third issues have a common matter—whether there was just cause for Gran's
dismissal—hence, they will be discussed jointly.
Second and Third Issues: Whether Gran's dismissal is justifiable by reason of incompetence,
insubordination, and disobedience

In cases involving OFWs, the rights and obligations among and between the OFW, the local
recruiter/agent, and the foreign employer/principal are governed by the employment contract. A
contract freely entered into is considered law between the parties; and hence, should be respected.
In formulating the contract, the parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.34

In the present case, the employment contract signed by Gran specifically states that Saudi Labor
Laws will govern matters not provided for in the contract (e.g. specific causes for termination,
termination procedures, etc.). Being the law intended by the parties (lex loci intentiones) to apply to
the contract, Saudi Labor Laws should govern all matters relating to the termination of the
employment of Gran.

In international law, the party who wants to have a foreign law applied to a dispute or case has the
burden of proving the foreign law. The foreign law is treated as a question of fact to be properly
pleaded and proved as the judge or labor arbiter cannot take judicial notice of a foreign law. He is
presumed to know only domestic or forum law.35

Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter; thus, the
International Law doctrine of presumed-identity approach or processual presumption comes into
play.36 Where a foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that
foreign law is the same as ours.37 Thus, we apply Philippine labor laws in determining the issues
presented before us.

Petitioner EDI claims that it had proven that Gran was legally dismissed due to incompetence and
insubordination or disobedience.

This claim has no merit.

In illegal dismissal cases, it has been established by Philippine law and jurisprudence that the
employer should prove that the dismissal of employees or personnel is legal and just.

Section 33 of Article 277 of the Labor Code38 states that:

ART. 277. MISCELLANEOUS PROVISIONS39

(b) Subject to the constitutional right of workers to security of tenure and their right to be
protected against dismissal except for a just and authorized cause and without prejudice to
the requirement of notice under Article 283 of this Code, the employer shall furnish the
worker whose employment is sought to be terminated a written notice containing a statement
of the causes for termination and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative if he so desires in accordance with
company rules and regulations promulgated pursuant to guidelines set by the Department of
Labor and Employment. Any decision taken by the employer shall be without prejudice to the
right of the workers to contest the validity or legality of his dismissal by filing a complaint with
the regional branch of the National Labor Relations Commission. The burden of proving
that the termination was for a valid or authorized cause shall rest on the employer. x x
x
In many cases, it has been held that in termination disputes or illegal dismissal cases, the employer
has the burden of proving that the dismissal is for just and valid causes; and failure to do so would
necessarily mean that the dismissal was not justified and therefore illegal.40 Taking into account the
character of the charges and the penalty meted to an employee, the employer is bound to adduce
clear, accurate, consistent, and convincing evidence to prove that the dismissal is valid and
legal.41 This is consistent with the principle of security of tenure as guaranteed by the Constitution
and reinforced by Article 277 (b) of the Labor Code of the Philippines.42

In the instant case, petitioner claims that private respondent Gran was validly dismissed for just
cause, due to incompetence and insubordination or disobedience. To prove its allegations, EDI
submitted two letters as evidence. The first is the July 9, 1994 termination letter,43 addressed to
Gran, from Andrea E. Nicolaou, Managing Director of OAB. The second is an unsigned April 11,
1995 letter44 from OAB addressed to EDI and ESI, which outlined the reasons why OAB had
terminated Gran's employment.

Petitioner claims that Gran was incompetent for the Computer Specialist position because he had
"insufficient knowledge in programming and zero knowledge of [the] ACAD system."45 Petitioner also
claims that Gran was justifiably dismissed due to insubordination or disobedience because he
continually failed to submit the required "Daily Activity Reports."46 However, other than the
abovementioned letters, no other evidence was presented to show how and why Gran was
considered incompetent, insubordinate, or disobedient. Petitioner EDI had clearly failed to overcome
the burden of proving that Gran was validly dismissed.

Petitioner's imputation of incompetence on private respondent due to his "insufficient knowledge in

programming and zero knowledge of the ACAD system" based only on the above mentioned letters,
without any other evidence, cannot be given credence.

An allegation of incompetence should have a factual foundation. Incompetence may be shown by

weighing it against a standard, benchmark, or criterion. However, EDI failed to establish any such
bases to show how petitioner found Gran incompetent.

In addition, the elements that must concur for the charge of insubordination or willful disobedience to
prosper were not present.

In Micro Sales Operation Network v. NLRC, we held that:

For willful disobedience to be a valid cause for dismissal, the following twin elements must
concur: (1) the employee's assailed conduct must have been willful, that is, characterized by
a wrongful and perverse attitude; and (2) the order violated must have been reasonable,
lawful, made known to the employee and must pertain to the duties which he had been
engaged to discharge.47

EDI failed to discharge the burden of proving Gran's insubordination or willful disobedience. As
indicated by the second requirement provided for in Micro Sales Operation Network, in order to
justify willful disobedience, we must determine whether the order violated by the employee is
reasonable, lawful, made known to the employee, and pertains to the duties which he had been
engaged to discharge. In the case at bar, petitioner failed to show that the order of the company
which was violated—the submission of "Daily Activity Reports"—was part of Gran's duties as a
Computer Specialist. Before the Labor Arbiter, EDI should have provided a copy of the company
policy, Gran's job description, or any other document that would show that the "Daily Activity
Reports" were required for submission by the employees, more particularly by a Computer
Specialist.
Even though EDI and/or ESI were merely the local employment or recruitment agencies and not the
foreign employer, they should have adduced additional evidence to convincingly show that Gran's
employment was validly and legally terminated. The burden devolves not only upon the foreign-
based employer but also on the employment or recruitment agency for the latter is not only an agent
of the former, but is also solidarily liable with the foreign principal for any claims or liabilities arising
from the dismissal of the worker.48

Thus, petitioner failed to prove that Gran was justifiably dismissed due to incompetence,
insubordination, or willful disobedience.

Petitioner also raised the issue that Prieto v. NLRC,49 as used by the CA in its Decision, is not
applicable to the present case.

In Prieto, this Court ruled that "[i]t is presumed that before their deployment, the petitioners were
subjected to trade tests required by law to be conducted by the recruiting agency to insure
employment of only technically qualified workers for the foreign principal."50 The CA, using the ruling
in the said case, ruled that Gran must have passed the test; otherwise, he would not have been
hired. Therefore, EDI was at fault when it deployed Gran who was allegedly "incompetent" for the
job.

According to petitioner, the Prieto ruling is not applicable because in the case at hand, Gran
misrepresented himself in his curriculum vitae as a Computer Specialist; thus, he was not qualified
for the job for which he was hired.

We disagree.

The CA is correct in applying Prieto. The purpose of the required trade test is to weed out
incompetent applicants from the pool of available workers. It is supposed to reveal applicants with
false educational backgrounds, and expose bogus qualifications. Since EDI deployed Gran to
Riyadh, it can be presumed that Gran had passed the required trade test and that Gran is qualified
for the job. Even if there was no objective trade test done by EDI, it was still EDI's responsibility to
subject Gran to a trade test; and its failure to do so only weakened its position but should not in any
way prejudice Gran. In any case, the issue is rendered moot and academic because Gran's
incompetency is unproved.

Fourth Issue: Gran was not Afforded Due Process

As discussed earlier, in the absence of proof of Saudi laws, Philippine Labor laws and regulations
shall govern the relationship between Gran and EDI. Thus, our laws and rules on the requisites of
due process relating to termination of employment shall apply.

Petitioner EDI claims that private respondent Gran was afforded due process, since he was allowed
to work and improve his capabilities for five months prior to his termination.51 EDI also claims that the
requirements of due process, as enunciated in Santos, Jr. v. NLRC,52 and Malaya Shipping Services,
Inc. v. NLRC,53 cited by the CA in its Decision, were properly observed in the present case.

This position is untenable.

In Agabon v. NLRC,54 this Court held that:

 Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer
must give the employee two written notices and a hearing or opportunity to be heard if
requested by the employee before terminating the employment: a notice specifying the
grounds for which dismissal is sought a hearing or an opportunity to be heard and after
hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal
is based on authorized causes under Articles 283 and 284, the employer must give the
employee and the Department of Labor and Employment written notices 30 days prior to the
effectivity of his separation.

Under the twin notice requirement, the employees must be given two (2) notices before their
employment could be terminated: (1) a first notice to apprise the employees of their fault, and (2) a
second notice to communicate to the employees that their employment is being terminated. In
between the first and second notice, the employees should be given a hearing or opportunity to
defend themselves personally or by counsel of their choice.55

A careful examination of the records revealed that, indeed, OAB's manner of dismissing Gran fell
short of the two notice requirement. While it furnished Gran the written notice informing him of his
dismissal, it failed to furnish Gran the written notice apprising him of the charges against him, as
prescribed by the Labor Code.56 Consequently, he was denied the opportunity to respond to said
notice. In addition, OAB did not schedule a hearing or conference with Gran to defend himself and
adduce evidence in support of his defenses. Moreover, the July 9, 1994 termination letter was
effective on the same day. This shows that OAB had already condemned Gran to dismissal, even
before Gran was furnished the termination letter. It should also be pointed out that OAB failed to give
Gran the chance to be heard and to defend himself with the assistance of a representative in
accordance with Article 277 of the Labor Code. Clearly, there was no intention to provide Gran with
due process. Summing up, Gran was notified and his employment arbitrarily terminated on the same
day, through the same letter, and for unjustified grounds. Obviously, Gran was not afforded due
process.

Pursuant to the doctrine laid down in Agabon,57 an employer is liable to pay nominal damages as
indemnity for violating the employee's right to statutory due process. Since OAB was in breach of the
due process requirements under the Labor Code and its regulations, OAB, ESI, and EDI, jointly and
solidarily, are liable to Gran in the amount of PhP 30,000.00 as indemnity.

Fifth and Last Issue: Gran is Entitled to Backwages

We reiterate the rule that with regard to employees hired for a fixed period of employment, in cases
arising before the effectivity of R.A. No. 804258 (Migrant Workers and Overseas Filipinos Act) on
August 25, 1995, that when the contract is for a fixed term and the employees are dismissed without
just cause, they are entitled to the payment of their salaries corresponding to the unexpired portion
of their contract.59 On the other hand, for cases arising after the effectivity of R.A. No. 8042, when
the termination of employment is without just, valid or authorized cause as defined by law or
contract, the worker shall be entitled to the full reimbursement of his placement fee with interest of
twelve percent (12%) per annum, plus his salaries for the unexpired portion of his employment
contract or for three (3) months for every year of the unexpired term whichever is less.60

In the present case, the employment contract provides that the employment contract shall be valid
for a period of two (2) years from the date the employee starts to work with the employer.61 Gran
arrived in Riyadh, Saudi Arabia and started to work on February 7, 1994;62 hence, his employment
contract is until February 7, 1996. Since he was illegally dismissed on July 9, 1994, before the
effectivity of R.A. No. 8042, he is therefore entitled to backwages corresponding to the unexpired
portion of his contract, which was equivalent to USD 16,150.
Petitioner EDI questions the legality of the award of backwages and mainly relies on the Declaration
which is claimed to have been freely and voluntarily executed by Gran. The relevant portions of the
Declaration are as follows:

I, ELEAZAR GRAN (COMPUTER SPECIALIST) AFTER RECEIVING MY FINAL

SETTLEMENT ON THIS DATE THE AMOUNT OF:

S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND NINE

HUNDRED FORTY EIGHT ONLY)

REPRESENTING COMPLETE PAYMENT (COMPENSATION) FOR THE SERVICES I

RENDERED TO OAB ESTABLISHMENT.

I HEREBY DECLARE THAT OAB EST. HAS NO FINANCIAL OBLIGATION IN MY FAVOUR

AFTER RECEIVING THE ABOVE MENTIONED AMOUNT IN CASH.

I STATE FURTHER THAT OAB EST. HAS NO OBLIGATION TOWARDS ME IN

WHATEVER FORM.

I ATTEST TO THE TRUTHFULNESS OF THIS STATEMENT BY AFFIXING MY

SIGNATURE VOLUNTARILY.

SIGNED.
ELEAZAR GRAN

Courts must undertake a meticulous and rigorous review of quitclaims or waivers, more particularly
those executed by employees. This requirement was clearly articulated by Chief Justice Artemio V.
Panganiban in Land and Housing Development Corporation v. Esquillo:

Quitclaims, releases and other waivers of benefits granted by laws or contracts in favor of
workers should be strictly scrutinized to protect the weak and the disadvantaged. The
waivers should be carefully examined, in regard not only to the words and terms used,
but also the factual circumstances under which they have been executed.63 (Emphasis
supplied.)

This Court had also outlined in Land and Housing Development Corporation, citing Periquet v.
NLRC,64 the parameters for valid compromise agreements, waivers, and quitclaims:

Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or the
terms of settlement are unconscionable on its face, that the law will step in to annul the
questionable transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for
the quitclaim is credible and reasonable, the transaction must be recognized as a valid
and binding undertaking. (Emphasis supplied.)

Is the waiver and quitclaim labeled a Declaration valid? It is not.

The Court finds the waiver and quitclaim null and void for the following reasons:

1. The salary paid to Gran upon his termination, in the amount of SR 2,948.00, is unreasonably low.
As correctly pointed out by the court a quo, the payment of SR 2,948.00 is even lower than his
monthly salary of SR 3,190.00 (USD 850.00). In addition, it is also very much less than the USD
16,150.00 which is the amount Gran is legally entitled to get from petitioner EDI as backwages.

2. The Declaration reveals that the payment of SR 2,948.00 is actually the payment for Gran's salary
for the services he rendered to OAB as Computer Specialist. If the Declaration is a quitclaim, then
the consideration should be much much more than the monthly salary of SR 3,190.00 (USD
850.00)—although possibly less than the estimated Gran's salaries for the remaining duration of his
contract and other benefits as employee of OAB. A quitclaim will understandably be lower than the
sum total of the amounts and benefits that can possibly be awarded to employees or to be earned
for the remainder of the contract period since it is a compromise where the employees will have to
forfeit a certain portion of the amounts they are claiming in exchange for the early payment of a
compromise amount. The court may however step in when such amount is unconscionably low or
unreasonable although the employee voluntarily agreed to it. In the case of the Declaration, the
amount is unreasonably small compared to the future wages of Gran.

3. The factual circumstances surrounding the execution of the Declaration would show that Gran did
not voluntarily and freely execute the document. Consider the following chronology of events:

a. On July 9, 1994, Gran received a copy of his letter of termination;

b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to pay his
plane ticket;65

c. On July 11, 1994, he signed the Declaration;

d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and

e. On July 21, 1994, Gran filed the Complaint before the NLRC.

The foregoing events readily reveal that Gran was "forced" to sign the Declaration and constrained
to receive the amount of SR 2,948.00 even if it was against his will—since he was told on July 10,
1994 to leave Riyadh on July 12, 1994. He had no other choice but to sign the Declaration as he
needed the amount of SR 2,948.00 for the payment of his ticket. He could have entertained some
apprehensions as to the status of his stay or safety in Saudi Arabia if he would not sign the
quitclaim.

4. The court a quo is correct in its finding that the Declaration is a contract of adhesion which should
be construed against the employer, OAB. An adhesion contract is contrary to public policy as it
leaves the weaker party—the employee—in a "take-it-or-leave-it" situation. Certainly, the employer is
being unjust to the employee as there is no meaningful choice on the part of the employee while the
terms are unreasonably favorable to the employer.66

Thus, the Declaration purporting to be a quitclaim and waiver is unenforceable under Philippine laws
in the absence of proof of the applicable law of Saudi Arabia.

In order to prevent disputes on the validity and enforceability of quitclaims and waivers of employees
under Philippine laws, said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;

2. The benefits of the employees if possible with the corresponding amounts, which the employees
are giving up in consideration of the fixed compromise amount;

3. A statement that the employer has clearly explained to the employee in English, Filipino, or in the
dialect known to the employees—that by signing the waiver or quitclaim, they are forfeiting or
relinquishing their right to receive the benefits which are due them under the law; and

4. A statement that the employees signed and executed the document voluntarily, and had fully
understood the contents of the document and that their consent was freely given without any threat,
violence, duress, intimidation, or undue influence exerted on their person.

It is advisable that the stipulations be made in English and Tagalog or in the dialect known to the
employee. There should be two (2) witnesses to the execution of the quitclaim who must also sign
the quitclaim. The document should be subscribed and sworn to under oath preferably before any
administering official of the Department of Labor and Employment or its regional office, the Bureau
of Labor Relations, the NLRC or a labor attaché in a foreign country. Such official shall assist the
parties regarding the execution of the quitclaim and waiver.67 This compromise settlement becomes
final and binding under Article 227 of the Labor Code which provides that:

[A]ny compromise settlement voluntarily agreed upon with the assistance of the Bureau of
Labor Relations or the regional office of the DOLE, shall be final and binding upon the parties
and the NLRC or any court "shall not assume jurisdiction over issues involved therein except
in case of non-compliance thereof or if there is prima facie evidence that the settlement was
obtained through fraud, misrepresentation, or coercion.

It is made clear that the foregoing rules on quitclaim or waiver shall apply only to labor contracts of
OFWs in the absence of proof of the laws of the foreign country agreed upon to govern said
contracts. Otherwise, the foreign laws shall apply.

WHEREFORE, the petition is DENIED. The October 18, 2000 Decision in CA-G.R. SP No. 56120 of
the Court of Appeals affirming the January 15, 1999 Decision and September 30, 1999 Resolution of
the NLRC

is AFFIRMED with the MODIFICATION that petitioner EDI-Staffbuilders International, Inc. shall pay
the amount of PhP 30,000.00 to respondent Gran as nominal damages for non-compliance with
statutory due process.

No costs.

SO ORDERED.