Bank of The Philippine Islands Securities Corporation vs. Guevara

5/23/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 752
G.R. No. 167052. March 11, 2015.*

BANK OF THE PHILIPPINE ISLANDS SECURITIES
CORPORATION, petitioner, vs. EDGARDO V. GUEVARA,
respondent.
Remedial Law; Civil Procedure; Judgments; Foreign Judgments; An

action for the enforcement of a foreign judgment or final order in this
jurisdiction is governed by Rule 39, Section 48 of the Rules of Court.—It is
an established international legal principle
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* FIRST DIVISION.
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VOL. 752, MARCH 11, 2015 343

Bank of the Philippine Islands Securities Corporation vs. Guevara
that final judgments of foreign courts of competent jurisdiction are

reciprocally respected and rendered efficacious subject to certain conditions
that vary in different countries. In the Philippines, a judgment or final order
of a foreign tribunal cannot be enforced simply by execution. Such
judgment or order merely creates a right of action, and its non-satisfaction is
the cause of action by which a suit can be brought upon for its enforcement.
An action for the enforcement of a foreign judgment or final order in this
jurisdiction is governed by Rule 39, Section 48 of the Rules of Court, which
provides: SEC. 48. Effect of foreign judgments or final orders.—The effect
of a judgment or final order of a tribunal of a foreign country, having
jurisdiction to render the judgment or final order is as follows: (a) In case of
a judgment or final order upon a specific thing, the judgment or final order is
conclusive upon the title to the thing; and (b) In case of a judgment or final
order against a person, the judgment or final order is presumptive evidence
of a right as between the parties and their successors-in-interest by a
subsequent title. In either case, the judgment or final order 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.
https://central.com.ph/sfsreader/session/000001799901c92ab6b1a89c000d00d40059004a/t/?o=False 1/31
Same; Same; Same; Same; A Philippine court will not substitute its
own interpretation of any provision of the law or rules of procedure of
another country, nor review and pronounce its own judgment on the
sufficiency of evidence presented before a competent court of another
jurisdiction.—In complete disregard of the limited review by Philippine
courts of foreign judgments or final orders, petitioner opposes the
enforcement of the Order dated March 13, 1990 of the U.S. District Court
on the very same allegations, arguments, and evidence presented before and
considered by the U.S. District Court when it rendered its verdict imposing
the Rule 11 sanction against petitioner. Petitioner attempts to convince the
Court that it is necessary to look into the merits of the Order dated March
13, 1990 because the U.S. District Court committed clear mistake of law
and fact in issuing the same. The Court, however, is not convinced. A
Philippine court will not substitute its own interpretation of any provision of
the law or rules of procedure of another country, nor review and pronounce
its own judgment on the sufficiency of evidence presented before a
competent court of another jurisdiction. Any purported mistake petitioner
attributes to the U.S. District Court in the latter’s issuance of the Order
dated March 13,
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344 SUPREME COURT REPORTS ANNOTATED

1990 would merely constitute an error of judgment in the exercise of

its legitimate jurisdiction, which could have been corrected by a timely
appeal before the U.S. Court of Appeals.
Attorney-Client Relationship; The general rule is that a client is bound
by the acts, even mistakes, of his counsel in the realm of procedural
technique.—Petitioner is bound by the negligence of its counsel. The
declarations of the Court in Gotesco Properties, Inc. v. Moral, 686 SCRA
102 (2012), is applicable to petitioner: The general rule is that a client is
bound by the acts, even mistakes, of his counsel in the realm of procedural
technique. The basis is the tenet that an act performed by counsel within the
scope of a “general or implied authority” is regarded as an act of the client.
While the application of this general rule certainly depends upon the
surrounding circumstances of a given case, there are exceptions recognized
by this Court: “(1) where reckless or gross negligence of counsel deprives
the client of due process of law; (2) when its application will result in
outright deprivation of the client’s liberty or property; or (3) where the
interests of justice so require.” The present case does not fall under the said
exceptions. In Amil v. Court of Appeals, the Court held that “to fall within
the exceptional circumstance relied upon x x x, it must be shown that the
negligence of counsel must be so gross that the client is deprived of his day
in court. Thus, “where a party was given the opportunity to defend [its]
interests in due course, [it] cannot be said to have been denied due process
of law, for this opportunity to be heard is the very essence of due process.”
To properly claim gross negligence on the part of the counsel, the petitioner
must show that the counsel was guilty of nothing short of a clear
abandonment of the client’s cause.
PETITION for review on certiorari of the decision and resolution of

the Court of Appeals.
The facts are stated in the opinion of the Court.
Padilla Law Office for petitioner.
Salonga, Hernandez & Mendoza for respondent.
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LEONARDO-DE CASTRO, J.:

Before the Court is a Petition for Review under Rule 45 of the
Rules of Court seeking the reversal and setting aside of the
Decision1 dated December 19, 2003 and Resolution2 dated February
9, 2005 of the Court Appeals in C.A.-G.R. CV No. 69348, affirming
the Decision3 dated September 11, 2000 of the Regional Trial Court
(RTC) of Makati City, Branch 57 in Civil Case No. 92-1445. The
RTC acted favorably on the action instituted by respondent Edgardo
V. Guevara for the enforcement of a foreign judgment, particularly,
the Order4 dated March 13, 1990 of the United States (U.S.) District
Court for the Southern District of Texas, Houston Division (U.S.
District Court), in Civil Action No. H-86-440, and ordered petitioner
Bank of the Philippine Islands (BPI) Securities Corporation to pay
respondent (a) the sum of US$49,500.00 with legal interest; (b)
P250,000.00 attorney’s fees and litigation expenses; and (c) costs of
suit.
The facts are culled from the records of the case.
Ayala Corporation, a holding company, and its subsidiaries are
engaged in a wide array of businesses including real estate, financial
services, telecommunications, water and used water, electronics
manufacturing services, automotive dealership and distributorship,
business process outsourcing, power, renewable energy, and
transport infrastructure.5
_______________
1 Rollo, pp. 87-103; penned by Associate Justice Eugenio S. Labitoria, with

Associate Justices Mercedes Gozo-Dadole and Rosmari D. Carandang, concurring.
2 Id., at pp. 105-112; penned by Associate Justice Marina L. Buzon, with
Associate Justices Mario L. Guariña III and Santiago Javier Ranada, concurring.
3 Id., at pp. 113-117.
4 Records (Vol. I), pp. 7-9; penned by U.S. District Judge Kenneth M. Hoyt.
5 http://www.ayala.com.ph/about_us/page/about-ayala (last visited on March 3,
2015).
346

In the 1980s, Ayala Corporation was the majority stockholder of

Ayala Investment and Development Corporation (AIDC). AIDC, in
turn, wholly owned Philsec Investment Corporation (PHILSEC), a
domestic stock brokerage firm, which was subsequently bought by
petitioner; and Ayala International Finance Limited (AIFL), a Hong
Kong deposit-taking corporation, which eventually became BPI-
International Finance Limited (BPI-IFL). PHILSEC was a member
of the Makati Stock Exchange and the rules of the said organization
required that a stockbroker maintain an amount of security equal to
at least 50% of a client’s outstanding debt.
Respondent was hired by Ayala Corporation in 1958. Respondent
later became the Head of the Legal Department of Ayala
Corporation and then the President of PHILSEC from September 1,
1980 to December 31, 1983. Thereafter, respondent served as Vice
President of Ayala Corporation until his retirement on August 31,
1997.
While PHILSEC President, one of respondent’s obligations was
to resolve the outstanding loans of Ventura O. Ducat (Ducat), which
the latter obtained separately from PHILSEC and AIFL. Although
Ducat constituted a pledge of his stock portfolio valued at
approximately US$1.4 million, Ducat’s loans already amounted to
US$3.1 million. Because the security for Ducat’s debts fell below
the 50% requirement of the Makati Stock Exchange, the trading
privileges of PHILSEC was in peril of being suspended.
Ducat proposed to settle his debts by an exchange of assets.
Ducat owned several pieces of real estate in Houston, Texas, in
partnership with Drago Daic (Daic), President of 1488, Inc., a U.S.-
based corporation. Respondent relayed Ducat’s proposal to Enrique
Zobel (Zobel), the Chief Executive Officer of Ayala Corporation.
Zobel was amenable to Ducat’s proposal but advised respondent to
send Thomas Gomez (Gomez), an AIFL employee who traveled
often to the U.S., to evaluate Ducat’s properties.
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VOL. 752, MARCH 11, 2015 347

In December of 1982, Gomez examined several parcels of real

estate that were being offered by Ducat and 1488, Inc. for the
exchange. Gomez, in a telex to respondent, recommended the
acceptance of a parcel of land in Harris County, Texas (Harris
County property), which was believed to be worth around US$2.9
million. Gomez further opined that the “swap would be fair and
reasonable” and that it would be better to take this opportunity rather
than pursue a prolonged legal battle with Ducat. Gomez’s
recommendation was brought to Zobel’s attention. The property-for-
debt exchange was subsequently approved by the AIFL Board of
Directors even without a prior appraisal of the Harris County
property. However, before the exchange actually closed, an AIFL
director asked respondent to obtain such an appraisal.
William Craig (Craig), a former owner of the Harris County
property, conducted the appraisal of the market value of the said
property. In his January 1983 appraisal, Craig estimated the fair
market value of the Harris County property at US$3,365,000.
Negotiations finally culminated in an Agreement,6 executed on
January 27, 1983 in Makati City, Philippines, among 1488, Inc.,
represented by Daic; Ducat, represented by Precioso Perlas (Perlas);
AIFL, represented by Joselito Gallardo (Gallardo); and PHILSEC
and Athona Holdings, N. V. (ATHONA), both represented by
respondent. Under the Agreement, the total amount of Ducat’s debts
was reduced from US$3.1 million to US$2.5 million; ATHONA, a
company wholly owned by PHILSEC and AIFL, would buy the
Harris County property from 1488, Inc. for the price of
US$2,807,209.02; PHILSEC and AIFL would grant ATHONA a
loan of US$2.5 million, which ATHONA would entirely use as
initial payment for the purchase price of the Harris County property;
ATHONA would execute a promissory note in favor of 1488, Inc. in
the sum of US$307,209.02 to cover the balance of the purchase
_______________
6 Records (Vol. I), pp. 58-69.
348

price for the Harris County property; upon its receipt of the initial
payment of US$2.5 million from ATHONA, 1488, Inc. would then
fully pay Ducat’s debts to PHILSEC and AIFL in the same amount;
for their part, PHILSEC and AIFL would release and transfer
possession of Ducat’s pledged stock portfolio to 1488, Inc.; and
1488, Inc. would become the new creditor of Ducat, subject to such
other terms as they might agree upon.
The series of transactions per the Agreement was eventually

executed. However, after acquiring the Harris County property,
ATHONA had difficulty selling the same. Despite repeated demands
by 1488, Inc., ATHONA failed to pay its promissory note for the
balance of the purchase price for the Harris County property, and
PHILSEC and AIFL refused to release the remainder of Ducat’s
stock portfolio, claiming that they were defrauded into believing that
the said property had a fair market value higher than it actually had.

Civil Action No. H-86-440 before the U.S. District Court of
Southern District of Texas, Houston Division

On October 17, 1985, 1488, Inc. instituted a suit against
PHILSEC, AIFL, and ATHONA for (a) misrepresenting that an
active market existed for two shares of stock included in Ducat’s
portfolio when, in fact, said shares were to be withdrawn from the
trading list; (b) conversion of the stock portfolio; (c) fraud, as
ATHONA had never intended to abide by the provisions of its
promissory note when they signed it; and (d) acting in concert as a
common enterprise or in the alternative, that ATHONA was the alter
ego of PHILSEC and AIFL. The suit was docketed as Civil Action
No. H-86-440 before the U.S. District Court.
PHILSEC, AIFL, and ATHONA filed counterclaims against
1488, Inc., Daic, Craig, Ducat, and respondent, for the recovery of
damages and excess payment or, in the alternative, the
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VOL. 752, MARCH 11, 2015 349

rescission of the sale of the Harris County property, alleging

fraud, negligence, and conspiracy on the part of counter-defendants
who knew or should have known that the value of said property was
less than the appraisal value assigned to it by Craig.
Before the referral of the case to the jury for verdict, the U.S.
District Court dropped respondent as counter-defendant for lack of
evidence to support the allegations against him. Respondent then
moved in open court to sanction petitioner (formerly PHILSEC),
AIFL, and ATHONA based on Rule 11 of the U.S. Federal Rules of
Civil Procedure.7
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7 Rule 11. Signing of Pleadings, Motions, and Other Papers; Sanctions.—

Every pleading, motion, and other paper of a party represented by an attorney shall
be signed by at least one attorney of record in the attorney’s individual name, whose
address shall be stated. A party who is not represented by an attorney shall sign the
party’s pleading, motion, or other paper and state the party’s address. Except when
otherwise specifically provided by rule or statute, pleadings need not be verified or
accompanied by affidavit. The rule in equity that the averments of an answer under
oath must be overcome by the testimony of two witnesses or of one witness sustained
by corroborating circumstances is abolished. The signature of an attorney or party
constitutes a certificate by the signer that the signer has read the pleading, motion, or
other paper, that to the best of the signer’s knowledge, information, and belief formed
after reasonable inquiry it is well grounded in fact and is warranted by existing law or
a good faith argument for the extension, modification, or reversal of existing law, and
that it is not interposed for any improper purpose, such as to harass or to cause
unnecessary delay or needless increase in the cost of litigation. If a pleading, motion,
or other paper is not signed, it shall be stricken unless it is signed promptly after the
omission is called to the attention of the pleader or movant. If a pleading, motion, or
other paper is signed in violation of this rule, the court, upon motion or upon its own
initiative, shall impose upon the person who signed it, a represented party, or both, an
appropriate sanction, which may include an order to pay to the other party or parties
the amount of the reasonable expenses in-
350


In its Order dated March 13, 1990, the U.S. District Court stated
that on February 14, 1990, after trial, the jury returned a verdict for
1488, Inc. In the same Order, the U.S. District Court ruled favorably
on respondent’s pending motion for sanction, thus:
During the course of the trial, the Court was required to review plaintiff’s
Exhibit No. 91 to determine whether the exhibit should be admitted. After
reviewing the exhibit and hearing the evidence, the Court concluded that the
defendants’ counterclaims against Edgardo V. Guevara are frivolous and
brought against him simply to humiliate and embarrass him. It is the opinion
of the Court that the defendants, Philsec Investment Corporation, A/K/A
BPI Securities, Inc., and Ayala International Finance Limited, should be
sanctioned appropriately based on Fed. R. Civ. P. 11 and the Court’s
inherent powers to punish unconscionable conduct. Based upon the motion
and affidavit of Edgardo V. Guevara, the Court finds that $49,450 is
reasonable punishment.
ORDERED that defendants, Philsec Investment Corporation A/K/A BPI
Securities, Inc., and Ayala International Finance Limited, jointly and
severally, shall pay to Edgardo V. Guevara $49,450 within 30 days of the
entry of this order.8

Petitioner, AIFL, and ATHONA appealed the jury verdict, as
well as the aforementioned order of the U.S. District Court for them
to pay respondent US$49,450.00; while 1488, Inc. appealed a post-

judgment decision of the U.S. District Court to amend the amount of
attorney’s fees awarded. The appeals were docketed as Case No. 90-
2370 before the U.S. Court of Appeals, Fifth Circuit.
_______________
curred because of the filing of the pleading, motion, or other paper, including a
reasonable attorney’s fee. (Records [Vol. I], p. 636)
8 Records (Vol. I), p. 9.
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The U.S. Court of Appeals rendered its Decision on September 3,

1991 affirming the verdict in favor of 1488, Inc. The U.S. Court of
Appeals found no basis for the allegations of fraud made by
petitioner, AIFL, and ATHONA against 1488, Inc., Daic, Craig, and
Ducat:
[2] To state a cause of action for fraud under Texas law, a plaintiff must
allege sufficient facts to show:
(1) that a material representation was made;
(2) that it was false;
(3) that when the speaker made it he knew that it was false or made it
recklessly without any knowledge of the truth and as a positive assertion;
(4) that he made it with the intention that it should be acted on by the
party;
(5) that the party acted in reliance upon it;
(6) that he thereby suffered injury.
Stone v. Lawyers Title Ins. Corp., 554 S.W.2d 183, 185 (Tex.1977). We
agree with the district court’s decision to grant a directed verdict against the
defendants. The defendants failed to allege sufficient facts to establish the
elements necessary to demonstrate fraud. In particular, the defendants have
failed to allege any facts that would tend to show that the plaintiff or any of
the third party defendants made a false representation or a representation
with reckless disregard as to its truth.
The Houston real estate market was extremely volatile during the late
1970’s and the early 1980’s. Like a stream of hot air, property values rose
rapidly as the heat and fury generated by speculation and construction plans
mounted, but, just as rapidly, the climate cooled and the high-flying market
came crashing to an all time low. The real estate transaction involved in this
case was certainly affected by this environment of capriciousness.
Moreover, a number of additional variables may have contributed to the
uncertainty of its value. For instance,
352

the land abutted a two-lane asphalt road that had been targeted by the
state for conversion into a major multi-lane divided highway. Water and
sewage treatment facilities were located near the boundary lines of the
property. In addition, Houston’s lack of conventional zoning ordinances
meant that the value of the property could fluctuate depending upon the use
(commercial or residential) for which the property would ultimately be used.
[3] The fact that the defendants were unable to sell the property at the
price for which it had been appraised does not demonstrate that the plaintiff
or the third party defendants knew that the value of the property was less
than the appraised value, nor does it establish that the opposing parties were
guilty of negligent misrepresentation or negligence.
[4] In support of their allegation of fraud, the defendants rely heavily
on a loan application completed by 1488 shortly before the subject property
was transferred to Athona. See Defendant’s Exhibit 29. At the time, 1488
still owed approximately $300,000 to Republic of Texas Savings
Association on its original loan for the subject property. The debt had
matured and 1488 was planning to move the loan to Home Savings
Association of Houston, that is, take out a loan from Home Savings to pay
off the debt to Republic. 1488 had planned to borrow $350,000 for that
purpose. A line item on the Home Savings loan application form asked for
the amount of the loan as a percentage of the appraised value of the land. A
figure of thirty-nine percent was typed into that space, and the defendants
suggest that this proves that the plaintiff knew Craig’s appraisal was
erroneous. The defendants reason that if the $350,000 loan amount was only
thirty-nine percent of the land’s appraised value, then the real estate must
have been worth approximately $897,436.
Although their analysis is sound, the conclusion reached by the
defendants cannot withstand additional scrutiny. At the time that the loan
application was completed, 1488 did not request to have a new appraisal
done for the property. Instead, 1488 planned to use the num-
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VOL. 752, MARCH 11, 2015 353

bers that had been generated for a quasi-appraisal done in 1977. The
1977 report purported only to “supplement” an earlier appraisal that had
been conducted in 1974, and the supplement described its function as
estimating market value “for mortgage loan purposes” only. See Defendant’s
Trial Exhibit 4. The two-page supplement was based on such old

information that even the Home Savings Association would not accept it
without additional collateral as security for the loan. See Record on Appeal,
Vol. 17 at pp. 5-29 to 5-30. The loan, however, was never made because the
property was transferred to Athona, and the outstanding loan to Republic
was paid off as part of that transaction. In addition, the loan application
itself was never signed by anyone affiliated with 1488. The district court
was correct in dismissing this argument in support of the defendant’s fraud
allegations.
[5] The defendants also allege that the plaintiff and counter defendants
knew that Craig’s appraisal was fraudulent because the purchaser’s
statement signed by their own representative, and the seller’s statement,
signed by the plaintiff, as well as the title insurance policy all recited a
purchase price of $643,416.12. Robert Higgs, general counsel for 1488,
explained that because of the nature of the transaction, 1488, for tax
purposes, wanted the purchase price on the closing statement to reflect only
that amount of cash actually exchanged at the closing as well as the
promissory note given at the closing. See Record on Appeal, Vol. 17 at p.
5-127. Although the closing documents recite a purchase price well under
the actual sales price, nothing indicates that any of the parties actually
believed the property to be worth less than the sales amount.
The defendants also assert that it was error for the district court to deny
them permission to designate O. Frank McPherson, a Houston appraiser, as
an expert witness after the cutoff date established by a pretrial order for such
designations. The defendants contend that the error prevented them from
presenting facts that would support their fraud allegations. Although the
defendants were allowed to present the testimony of an-
354

other expert witness on the subject of valuation, they argue that

McPherson’s testimony was critical because he had performed an appraisal
of the property for the Texas Highway Department close to the time period
during which Craig had made his appraisal. McPherson’s appraisal was
performed as part of the State’s condemnation proceedings that preceded the
planned highway expansion next to the subject property.
x x x x
[9] In their briefs, the defendants fail to provide an adequate
explanation for their failure to identify their expert witness in accordance
with the district court’s pretrial order. This law suit was initiated in 1985,
and the defendants had until November of 1988 to designate their expert
witnesses. The defendants were aware of the condemnation proceedings,
and they, therefore, had approximately three years to determine the identity
of any appraiser used by the state. The defendants simply failed to make this
inquiry.
Enforcement of the district court’s pretrial order did not leave the
defendants without an expert witness on the issue of valuation, and the
available expert had also conducted appraisals for the Texas Highway
Department in the area surrounding the subject property. x x x
Although the degree of prejudice suffered by the plaintiff due to the late
designation of an expert would not have been great, a district court still has
the discretion to control pretrial discovery and sanction a party’s failure to
follow a scheduling order. See id. at 791. Such action is particularly
appropriate here, where the defendants have failed to provide an adequate
explanation for their failure to identify their expert within the designated
timetable.
x x x x
The defendants failed to produce enough evidence from which fraud
could be inferred to justify the submission of the issue to a jury.
Conclusional allegations or
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VOL. 752, MARCH 11, 2015 355

speculation regarding what the plaintiff knew or did not know

concerning the value of the subject property are insufficient to withstand a
motion for a directed verdict. The district court committed no error in
granting the motion.
x x x x
Since the defendants failed to present the district court with any facts that
would tend to show that the plaintiffs committed a fraud against them, their
claim of a conspiracy to commit fraud must also fail.9

The U.S. Court of Appeals likewise adjudged that petitioner,
AIFL, and ATHONA failed to prove negligence on the part of 1488,
Inc., Daic, Craig, and Ducat in the appraisal of the market value of
the said property:
[10, 11] The defendants have likewise failed to present any facts that
would tend to support their claim of negligent misrepresentation or
negligence. The defendants rely on assumptions and unsupportable
conclusions of law in establishing their case for negligence: “Assuming the
Property’s true value is less than $800,000, it is reasonable to assume that
the counter defendants failed to exercise reasonable care or competence . . .”
Brief for Athona at 45-46 x x x. A party may not rely on assumptions of fact
to carry their case forward. The defendants have presented no facts to
suggest that the plaintiff was negligent in acquiring its appraisal. The
plaintiff hired Craig, a real estate broker, to perform the appraisal after the
defendants had already given their initial approval for the transaction. Craig
had performed real estate appraisals in the past, and Texas law permits real
estate brokers to conduct such appraisals, see Tex.Rev.Civ.Stat.Ann. art.

6573a, §2(2)(E) (Vernon Supp. 1988) (Original version at
Tex.Rev.Civ.Stat.Ann. art. 6573a, §4(1)(e) (Vernon 1969). These facts do
not support a claim of negligence.
_______________
9 Id., at pp. 268-271.
356

For the foregoing reasons the district court committed no error in

granting a directed verdict against the counterclaims advanced by the
defendants.10

The U.S. Court of Appeals, however, vacated the award of
exemplary damages in favor of 1488, Inc. for the fraudulent
misrepresentation regarding the marketability of the two shares of
stock in Ducat’s portfolio. Under Texas law, a jury may not award
damages unless it was determined that the plaintiff had also
sustained actual damages. The U.S. Court of Appeals agreed with
petitioner, AIFL, and ATHONA that 1488, Inc. brought its suit
alleging fraudulent misrepresentation after the two-year statute of
limitation had expired. The misrepresentation issue should never
have gone to the jury. Therefore, the jury’s finding of actual damages
is nullified; and since the jury verdict is left without a specific
finding of actual damages, the award of exemplary damages must be
vacated.
The U.S. Court of Appeals also vacated the award of Rule 11
sanctions in favor of respondent and against petitioner, AIFL, and
ATHONA for being rendered without due process, and remanded the
issue to the U.S. District Court:
[18-20] The Rule 11 motion was first made by Guevara on February

14, 1990, and the court immediately ruled on the issue without giving the
defendants an opportunity to prepare a written response. See Record on
Appeal, Vol. 22 at pp. 10-25 to 10-37. Although, the defendants were given
an opportunity to speak, we conclude that the hearing failed to comport with
the requirements of due process, which demand that the defendants be
provided with adequate notice and an opportunity to prepare a response. See
Henderson v. Department of Public Safety and Corrections, 901 F.2d 1288,
1293-94 (5th Cir.1990) Providing specific notice and an opportunity to
respond is particularly important in cases,
_______________
10 Id., at pp. 271-272.
357
VOL. 752, MARCH 11, 2015 357

such as the one before us, in which the sanctions have been imposed on
the clients and not the attorneys. See Donaldson v. Clark, 819 F.2d 1551,
1560 (11th Cir.1987) (“If sanctions are proposed to be imposed on the client,
due process will demand more specific notice because the client is likely
unaware of the existence of Rule 11 and should be given the opportunity to
prepare a defense.”) A separate hearing is not a prerequisite to the
imposition of Rule 11 sanctions, see Donaldson, 819 F.2d at 1560 n. 12, but
the defendants in this case, should have been given more of an opportunity
to respond to the motion than that provided at the hearing in which the
motion was first raised. Providing the defendant with an opportunity to
mount a defense “on the spot” does not comport with due process. Given
that the defendants were not provided with adequate notice or an
opportunity to be heard, we vacate the award of sanctions and remand so
that the district court can provide the defendants with an adequate
opportunity to be heard.11
Finally, the U.S. Court of Appeals similarly vacated the award of

attorney’s fees and remanded the matter to the U.S. District Court
for recalculation to conform with the requirements provided in the
promissory note.
In accordance with the Decision dated September 3, 1991 of the
U.S. Court of Appeals, the U.S. District Court issued an Order12
dated October 28, 1991 giving petitioner, AIFL, and ATHONA 20
days to formally respond to respondent’s motion for Rule 11
sanctions. Petitioner, AIFL, and ATHONA jointly filed before the
U.S. District Court their opposition to respondent’s motion for Rule
11 sanctions.13 Respondent filed his reply to the opposition, to which
petitioner, AIFL, and ATHONA, in turn, filed a reply-brief.14
_______________
11 Id., at pp. 274-275.

12 Id., at pp. 277-278.
13 Id., at pp. 279-288.
14 Id., at pp. 289-298 and 591-598.
358

In an Order15 dated December 31, 1991, the U.S. District Court

still found respondent’s motion for Rule 11 sanctions meritorious
and reinstated its Order dated March 13, 1990:
The basis of the Court’s prior decision as well as now is the fact that the
defendants filed suit against Guevara with knowledge that the basis of the
suit was unfounded. In the defendants’ file was an appraisal from an
international appraisal firm, which the defendants refused to disclose during
discovery and was only discovered at a bench conference during a
discussion about appraisers. Based on the defendants’ own appraisers, no
basis existed for a suit by the defendants against their employee.
The previous judgment entered by this Court is REINSTATED.

The above quoted Order of the U.S. District Court attained
finality as it was no longer appealed by petitioner, AIFL, and
ATHONA.
Through a letter dated February 18, 1992, respondent demanded
that petitioner pay the amount of US$49,450.00 awarded by the U.S.
District Court in its Order dated March 13, 1990. Given the
continuous failure and/or refusal of petitioner to comply with the
said Order of the U.S. District Court, respondent instituted an action
for the enforcement of the same, which was docketed as Civil Case
No. 92-1445 and raffled to the RTC of Makati City, Branch 57.

Civil Case No. 92-1445 before Branch 57 of the RTC of Makati
City

In his Complaint for the enforcement of the Order dated March
13, 1990 of the U.S. District Court in Civil Action No.
_______________
15 Id., at pp. 10-11.
359
VOL. 752, MARCH 11, 2015 359

H-86-440, respondent prayed that petitioner be ordered to pay:
1. The sum of US$49,450.00 or its equivalent in Philippine Pesos x x x

with interest from date of demand;
2. Attorney’s fees and litigation expenses in the sum of P250,000.00;
3. Exemplary damages of P200,000.00; and

4. Costs of the suit.16

In its Amended Answer Ad Cautelam,17 petitioner opposed the
enforcement of the Order dated March 13, 1990 of the U.S. District
Court on the grounds that it was rendered upon a clear mistake of
law or fact and/or in violation of its right to due process.
In the course of the pretrial and scheduled trial proceedings, the
parties respectively manifested before the court that they were
dispensing with the presentation of their witnesses since the subject
matter of their testimonies had already been stipulated upon.18
Thereafter, the parties formally offered their respective evidence
which entirely consisted of documentary exhibits. Respondent
submitted authenticated and certified true copies of Rule 11 of the
U.S. Federal Rules of Civil Procedure;19 the Orders dated March 13,
1990, October 28, 1991, and December 31, 1991 of the U.S. District
Court in Civil Action No. H-86-440;20 the Decision dated
September 3, 1991 of the U.S. Court of Appeals in Case No. 90-
2370;21 and the opposition to
_______________
16 Id., at p. 3.
17 Id., at p. 328.
18 Id., at pp. 574, 651, and 665.
19 Id., at p. 636.
20 Id., at pp. 578-580, 589-590, and 619-620.
21 Id., at pp. 581-588.
360

respondent’s motion for Rule 11 sanctions and reply-brief filed

by PHILSEC, AIFL, and ATHONA before the U.S. District Court.22
Petitioner presented photocopies of pleadings, documents, and
transcripts of stenographic notes in Civil Action No. H-86-440
before the U.S. District Court;23 the pleadings filed in other cases
related to Civil Case No. 92-1440;24 and a summary of lawyer’s fees
incurred by petitioner in the U.S.25 The RTC admitted in evidence
the documentary exhibits of the parties in its Orders dated
September 21, 1998 and February 8, 1999,26 and then deemed the
case submitted for decision.
The RTC rendered a Decision on September 11, 2000 with the
following dispositive portion:
WHEREFORE, judgment is hereby rendered in favor of [respondent]

Edgardo V. Guevara ordering [petitioner] BPI Securities Corporation to pay
[respondent] the following:
1. the sum of US$49,500.00 with legal interest from the filing of this
case until fully paid;
2. the sum of P250,000.00 as attorney’s fees and litigation expenses; and
3. the costs of suit.
An award of exemplary damages for P200,000.00 is denied for being
speculative.27

Petitioner appealed to the Court of Appeals, assigning the
following errors on the part of the RTC:
_______________
22 Id., at pp. 609-618 and 591-598.

23 Records (Vols. II-V); Exhibits 1-46.
24 Id.; Exhibits 47-51.
25 Id.; Exhibit 52.
26 Records (Vol. I), pp. 575 and 640; 679 and 714.
27 Rollo, p. 117.
361
VOL. 752, MARCH 11, 2015 361

A. The trial court erred in not passing upon the merit or validity of
[petitioner’s] defenses against the enforcement of the foreign judgment in
the Philippines.
Had the trial court considered [petitioner’s] defenses, it would have
concluded that the foreign judgment was not enforceable because it was
made upon a clear mistake of law or fact and/or was made in violation of the
[petitioner’s] right to due process.
B. The trial court erred in not utilizing the standard for determining the
enforceability of the foreign award that was agreed upon by the parties to
this case during the pretrial, namely, did the defendants in the Houston case
(PHILSEC, AIFL, AND ATHONA) have reasonable grounds to implead
[respondent] in the Houston case based upon the body of the evidence
submitted therein. Thus, whether or not PHILSEC, AIFL and ATHONA
ultimately prevailed against [respondent] was immaterial or irrelevant; the
question only was whether they had reasonable grounds to proceed against
him, for if they had, then there was admittedly no basis for the Rule 11
award against them by the Houston Court.
x x x x
C. In the light of its ruling, the trial court failed to pass upon and resolve
the other issues and/or defenses expressly raised by [petitioner], including
the defense that PHILSEC, AIFL, and ATHONA were deprived of their
right to defend themselves against the Rule 11 sanction and the main
decision because of the prohibitive cost of legal representation in the us and
also because of the gross negligence of its US counsel. x x x.28
_______________
28 CA Rollo, pp. 20-21.
362

In its Decision dated December 19, 2003, the Fifth Division of

the Court of Appeals decreed:
WHEREFORE, the Decision dated 11 September 2000 in Civil Case

No. 92-1445 of the Regional Trial Court of Makati, Branch 57, is hereby
AFFIRMED in all respect with costs against [petitioner].29

In its Motion for Reconsideration,30 petitioner lamented that the
Fifth Division of the Court of Appeals failed to resolve on its own
petitioner’s appeal as the Decision dated December 19, 2003 of the
said Division was copied almost verbatim from respondent’s brief.
Thus, petitioner prayed that the Fifth Division of the Court of
Appeals recuse itself from deciding petitioner’s Motion for
Reconsideration and that the case be re-raffled to another division.
The Fifth Division of the Court of Appeals maintained in its
Resolution dated May 25, 2004 that the issues and contentions of the
parties were all duly passed upon and that the case was decided
according to its merits. The said Division, nonetheless, abstained
from resolving petitioner’s Motion for Reconsideration and directed
the re-raffle of the case.31
Petitioner’s Motion for Reconsideration was re-raffled to and
subsequently resolved by the Tenth Division of the Court of
Appeals. In its Resolution dated February 9, 2005, the Tenth
Division of the appellate court denied the said Motion for lack of
merit.32
Hence, petitioner seeks recourse from this Court via the instant
Petition for Review, insisting that the Court of Appeals erred in
affirming the RTC judgment which enforced the
_______________
29 Rollo, p. 102.
30 CA Rollo, pp. 180-197.
31 Id., at pp. 250-251.
32 Id., at pp. 260-267.
363
VOL. 752, MARCH 11, 2015 363

Order dated March 13, 1990 of the U.S. District Court in Civil
Action No. H-86-440.
Petitioner contends that it was not accorded by the Court of
Appeals the right to refute the foreign judgment pursuant to Rule 39,
Section 48 of the Rules of Court because the appellate court gave the
effect of res judicata to the said foreign judgment. The Court of
Appeals copied wholesale or verbatim the respondent’s brief without
addressing the body of evidence adduced by petitioner showing that
it had reasonable grounds to implead respondent in Civil Action No.
H-86-440.
Petitioner asserts that the U.S. District Court committed a clear
mistake of law and fact in its issuance of the Order dated March 13,
1990, thus, said Order is unenforceable in this jurisdiction. Petitioner
discusses in detail its evidence proving that respondent, together
with 1488, Inc., Ducat, Craig, and Daic, induced petitioner to agree
to a fraudulent deal. Petitioner points out that respondent had the
duty of looking for an independent and competent appraiser of the
market value of the Harris County property; that instead of choosing
an unbiased and skilled appraiser, respondent connived with 1488,
Inc., Ducat, and Daic in selecting Craig, who turned out to be the
former owner of the Harris County property and a close associate of
1488, Inc. and Daic; and that respondent endorsed to petitioner
Craig’s appraisal of the market value of the Harris County property,
which was overvalued by more than 400%.
According to petitioner, it had reasonable grounds to implead
respondent in Civil Action No. H-86-440 so the sanction imposed
upon it under Rule 11 of the U.S. Federal Rules of Civil Procedure
was unjustified. Petitioner additionally argues that there is no basis
for the U.S. District Court to impose upon it the Rule 11 sanction as
there is nothing in the said provision which allows “the imposition
of sanctions for simply bringing a meritless lawsuit.” If the Rule 11
sanction was imposed upon petitioner as punishment for impleading
a party (when it had reasonable basis for doing so) and not
364

prevailing against said party, then, petitioner claims that such a

sanction is against Philippine public policy and should not be
enforced in this jurisdiction. Settled in this jurisdiction that there
should be no premium attached to the right to litigate, otherwise
parties would be very hesitant to assert a claim in court.
Petitioner further alleges that it was denied due process in Civil
Action No H-86-440 because: (1) the U.S. District Court imposed
the Rule 11 sanction on the basis of a single document, i.e., the letter
dated September 26, 1983 of Bruce C. Bossom, a partner at Jones
Lang Wooton, a firm of chartered surveyors and international real
estate consultants, addressed to a Mr. Senen L. Matoto of AIFL
(marked as Exhibit 91 before the U.S. District Court), which was
never admitted into evidence; (2) in said letter, Jones Lang Wooton
was “soliciting a listing agreement” and in which the “said firm
unilaterally, without being asked as to the value of the [Harris
County] property, indicated a value for the [same] which
approximate[d] with the value given in the Craig appraisal,” hence,
it cannot be used as basis to conclude that petitioner, AIFL, and
ATHONA assented to Craig’s appraisal of the Harris County
property; (3) the counsel who represented petitioner, AIFL, and
ATHONA in Civil Action No. H-86-440 before the U.S. District
Court was grossly ignorant and/or negligent in the prosecution of
their counterclaims and/or in proving their defenses, such as when
said counsel failed to present an expert witness who could have
testified as to the actual market value of the Harris County property
or when said counsel failed to discredit respondent’s credibility
despite the availability of evidence that respondent had been
previously fined by the Philippine Securities and Exchange
Commission for “stock manipulation”; and (4) the excessive and
unconscionable legal fees charged by their U.S. counsel effectively
prevented them from making further appeal.
The Court finds the Petition bereft of merit.
365
VOL. 752, MARCH 11, 2015 365

In Mijares v. Rañada,33 the Court extensively discussed the

underlying principles for the recognition and enforcement of foreign
judgments in Philippine jurisdiction:
There is no obligatory rule derived from treaties or conventions that

requires the Philippines to recognize foreign judgments, or allow a
procedure for the enforcement thereof. However, generally accepted
principles of international law, by virtue of the incorporation clause of the
Constitution, form part of the laws of the land even if they do not derive
from treaty obligations. The classical formulation in international law sees
those customary rules accepted as binding result from the combination two
elements: the established, widespread, and consistent practice on the part of
States; and a psychological element known as the opinion juris sive
necessitates (opinion as to law or necessity). Implicit in the latter element is
a belief that the practice in question is rendered obligatory by the existence
of a rule of law requiring it.
While the definite conceptual parameters of the recognition and
enforcement of foreign judgments have not been authoritatively established,
the Court can assert with certainty that such an undertaking is among those
generally accepted principles of international law. As earlier demonstrated,
there is a widespread practice among states accepting in principle the need
for such recognition and enforcement, albeit subject to limitations of
varying degrees. The fact that there is no binding universal treaty governing
the practice is not indicative of a widespread rejection of the principle, but
only a disagreement as to the imposable specific rules governing the
procedure for recognition and enforcement.
Aside from the widespread practice, it is indubitable that the procedure
for recognition and enforcement is embodied in the rules of law, whether
statutory or jurisprudential, adopted in various foreign jurisdictions. In
_______________
33 495 Phil. 372, 395-397; 455 SCRA 397, 421 (2005).
366

the Philippines, this is evidenced primarily by Section 48, Rule 39 of the

Rules of Court which has existed in its current form since the early 1900s.
Certainly, the Philippine legal system has long ago accepted into its
jurisprudence and procedural rules the viability of an action for enforcement
of foreign judgment, as well as the requisites for such valid enforcement, as
derived from internationally accepted doctrines. Again, there may be
distinctions as to the rules adopted by each particular state, but they all
prescind from the premise that there is a rule of law obliging states to allow
for, however generally, the recognition and enforcement of a foreign
judgment. The bare principle, to our mind, has attained the status of opinio
juris in international practice.
This is a significant proposition, as it acknowledges that the procedure
and requisites outlined in Section 48, Rule 39 derive their efficacy not
merely from the procedural rule, but by virtue of the incorporation clause of
the Constitution. Rules of procedure are promulgated by the Supreme Court,
and could very well be abrogated or revised by the high court itself. Yet the
Supreme Court is obliged, as are all State components, to obey the laws of
the land, including generally accepted principles of international law which
form part thereof, such as those ensuring the qualified recognition and
enforcement of foreign judgments. (Citations omitted)

It is an established international legal principle that final
judgments of foreign courts of competent jurisdiction are
reciprocally respected and rendered efficacious subject to certain
conditions that vary in different countries.34 In the Philippines, a
judgment or final order of a foreign tribunal cannot be enforced
simply by execution. Such judgment or order merely creates a right
of action, and its non-satisfaction is the cause of action by which a
suit can be brought upon for
_______________
34 St. Aviation Services Co., Pte., Ltd. v. Grand International Airways, Inc., 535
Phil. 757, 762; 505 SCRA 30, 34 (2006).
367
VOL. 752, MARCH 11, 2015 367

its enforcement.35 An action for the enforcement of a foreign

judgment or final order in this jurisdiction is governed by Rule 39,
Section 48 of the Rules of Court, which provides:
SEC. 48. Effect of foreign judgments or final orders.—The effect of a

judgment or final order of a tribunal of a foreign country, having jurisdiction
to render the judgment or final order is as follows:
(a) In case of a judgment or final order upon a specific thing, the
judgment or final order is conclusive upon the title to the thing; and
(b) In case of a judgment or final order against a person, the judgment
or final order is presumptive evidence of a right as between the parties and
their successors-in-interest by a subsequent title.
In either case, the judgment or final order 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.

The Court expounded in Mijares on the application of the
aforequoted provision:
There is an evident distinction between a foreign judgment in an action

in rem and one in personam. For an action in rem, the foreign judgment is
deemed conclusive upon the title to the thing, while in an action in
personam, the foreign judgment is presumptive, and not conclusive, of a
right as between the parties and their successors-in-interest by a subsequent
title. However, in both cases, the foreign judgment is susceptible to
impeachment in our local courts on the grounds of want of jurisdiction or

notice to the party, collusion, fraud, or clear mistake of law or fact. Thus, the
party aggrieved by
_______________
35 See Regalado, Florenz D., Remedial Law Compendium, Volume II, p. 524
(Ninth Revised edition); citing Perkins v. Benguet Consolidated Mining Co., 93 Phil.
1035 (1953).
368

the foreign judgment is entitled to defend against the enforcement of

such decision in the local forum. It is essential that there should be an
opportunity to challenge the foreign judgment, in order for the court in this
jurisdiction to properly determine its efficacy.
It is clear then that it is usually necessary for an action to be filed in
order to enforce a foreign judgment, even if such judgment has
conclusive effect as in the case of in rem actions, if only for the purpose
of allowing the losing party an opportunity to challenge the foreign
judgment, and in order for the court to properly determine its efficacy.
Consequently, the party attacking a foreign judgment has the burden of
overcoming the presumption of its validity.
The rules are silent as to what initiatory procedure must be undertaken in
order to enforce a foreign judgment in the Philippines. But there is no
question that the filing of a civil complaint is an appropriate measure for
such purpose. A civil action is one by which a party sues another for the
enforcement or protection of a right, and clearly an action to enforce a
foreign judgment is in essence a vindication of a right prescinding either
from a “conclusive judgment upon title” or the “presumptive evidence of a
right.” Absent perhaps a statutory grant of jurisdiction to a quasi-judicial
body, the claim for enforcement of judgment must be brought before the
regular courts.
There are distinctions, nuanced but discernible, between the cause of
action arising from the enforcement of a foreign judgment, and that arising
from the facts or allegations that occasioned the foreign judgment. They
may pertain to the same set of facts, but there is an essential difference in
the right-duty correlatives that are sought to be vindicated. For example, in a
complaint for damages against a tortfeasor, the cause of action emanates
from the violation of the right of the complainant through the act or
omission of the respondent. On the other hand, in a complaint for the
enforcement of a foreign judgment awarding damages from the
369
VOL. 752, MARCH 11, 2015 369

same tortfeasor, for the violation of the same right through the same
manner of action, the cause of action derives not from the tortious act
but from the foreign judgment itself.
More importantly, the matters for proof are different. Using the above
example, the complainant will have to establish before the court the tortious
act or omission committed by the tortfeasor, who in turn is allowed to rebut
these factual allegations or prove extenuating circumstances. Extensive
litigation is thus conducted on the facts, and from there the right to and
amount of damages are assessed. On the other hand, in an action to enforce
a foreign judgment, the matter left for proof is the foreign judgment
itself, and not the facts from which it prescinds.
As stated in Section 48, Rule 39, the actionable issues are generally
restricted to a review of jurisdiction of the foreign court, the service of
personal notice, collusion, fraud, or mistake of fact or law. The
limitations on review [are] in consonance with a strong and pervasive
policy in all legal systems to limit repetitive litigation on claims and
issues. Otherwise known as the policy of preclusion, it seeks to protect
party expectations resulting from previous litigation, to safeguard
against the harassment of defendants, to insure that the task of courts
not be increased by never-ending litigation of the same disputes, and —
in a larger sense — to promote what Lord Coke in the Ferrer’s Case of
1599 stated to be the goal of all law: “rest and quietness.” If every
judgment of a foreign court were reviewable on the merits, the plaintiff
would be forced back on his/her original cause of action, rendering
immaterial the previously concluded litigation.36 (Emphases supplied,
citations omitted)
_______________
36 Mijares v. Rañada, supra note 33 at pp. 383-386; pp. 409-412.
370

Also relevant herein are the following pronouncements of the

Court in Minoru Fujiki v. Marinay:37
A petition to recognize a foreign judgment declaring a marriage void

does not require relitigation under a Philippine court of the case as if it were
a new petition for declaration of nullity of marriage. Philippine courts
cannot presume to know the foreign laws under which the foreign
judgment was rendered. They cannot substitute their judgment on the
status, condition and legal capacity of the foreign citizen who is under
the jurisdiction of another state. Thus, Philippine courts can only

recognize the foreign judgment as a fact according to the rules of
evidence.
Section 48(b), Rule 39 of the Rules of Court provides that a foreign
judgment or final order against a person creates a “presumptive evidence of
a right as between the parties and their successors-in-interest by a
subsequent title.” Moreover, Section 48 of the Rules of Court states that “the
judgment or final order 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, Philippine courts exercise limited review on foreign
judgments. Courts are not allowed to delve into the merits of a foreign
judgment. Once a foreign judgment is admitted and proven in a
Philippine court, it can only be repelled on grounds external to its
merits, i.e., “want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact.” The rule on limited review
embodies the policy of efficiency and the protection of party
expectations, as well as respecting the jurisdiction of other states.
(Emphases supplied, citations omitted)
_______________
37 G.R. No. 196049, June 26, 2013, 700 SCRA 69, 91-92.
371
VOL. 752, MARCH 11, 2015 371

As the foregoing jurisprudence had established, recognition and

enforcement of a foreign judgment or final order requires only proof
of fact of the said judgment or final order. In an action in personam,
as in the case at bar, the foreign judgment or final order enjoys the
disputable presumption of validity. It is the party attacking the
foreign judgment or final order that is tasked with the burden of
overcoming its presumptive validity.38 A foreign judgment or final
order may only be repelled on grounds external to its merits,
particularly, want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.
The fact of a foreign final order in this case is not disputed. It was
duly established by evidence submitted to the RTC that the U.S.
District Court issued an Order on March 13, 1990 in Civil Action
No. H-86-440 ordering petitioner, AIFL, and ATHONA, to pay
respondent the sum of US$49,450.00 as sanction for filing a
frivolous suit against respondent, in violation of Rule 11 of the U.S.
Federal Rules of Civil Procedure. The said Order became final when
its reinstatement in the Order dated December 31, 1991 of the U.S.
District Court was no longer appealed by petitioner, AIFL, and/or
ATHONA.
The Order dated March 13, 1990 of the U.S. District Court in
Civil Action No. H-86-440 is presumptive evidence of the right of
respondent to demand from petitioner the payment of US$49,450.00
even in this jurisdiction. The next question then is whether petitioner
was able to discharge the burden of overcoming the presumptive
validity of said Order.
The Court rules in the negative.
In complete disregard of the limited review by Philippine courts
of foreign judgments or final orders, petitioner opposes the
enforcement of the Order dated March 13, 1990 of the U.S. District
Court on the very same allegations, arguments, and evidence
presented before and considered by the U.S.
_______________
38 Philippine Aluminum Wheels, Inc. v. Fasgi Enterprises, Inc., 396 Phil. 893,
909-910; 342 SCRA 722, 735 (2000).
372

District Court when it rendered its verdict imposing the Rule 11

sanction against petitioner. Petitioner attempts to convince the Court
that it is necessary to look into the merits of the Order dated March
13, 1990 because the U.S. District Court committed clear mistake of
law and fact in issuing the same. The Court, however, is not
convinced. A Philippine court will not substitute its own
interpretation of any provision of the law or rules of procedure of
another country, nor review and pronounce its own judgment on the
sufficiency of evidence presented before a competent court of
another jurisdiction. Any purported mistake petitioner attributes to
the U.S. District Court in the latter’s issuance of the Order dated
March 13, 1990 would merely constitute an error of judgment in the
exercise of its legitimate jurisdiction, which could have been
corrected by a timely appeal before the U.S. Court of Appeals.
Petitioner cannot insist that the RTC and the Court of Appeals
resolve the issue of whether or not petitioner, AIFL, and ATHONA
had reasonable grounds to implead respondent as a counter-
defendant in Civil Action No. H-86-440. Although petitioner
submitted such an issue for resolution by the RTC in its Pre-Trial
Brief, the RTC did not issue any pretrial order actually adopting the
same. In addition, petitioner was also unable to lay the basis,
whether in U.S. or Philippine jurisdiction, for the use of the
“reasonable grounds standard” for determining a party’s liability for
or exemption from the sanctions imposed for violations of Rule 11
of the U.S. Federal Rules of Civil Procedure. Equally baseless is
petitioner’s assertion that the Rule 11 sanction is contrary to public

policy and in effect, puts a premium on the right to litigate. It bears
to stress that the U.S. District Court imposed the Rule 11 sanction
upon petitioner, AIFL, and ATHONA for their frivolous
counterclaims against respondent intended to simply humiliate and
embarrass respondent; and not because petitioner, AIFL, and
ATHONA impleaded but lost to respondent.
373
VOL. 752, MARCH 11, 2015 373

Contrary to the claims of petitioner, both the RTC and the Court
of Appeals carefully considered the allegations, arguments, and
evidence presented by petitioner to repel the Order dated March 13,
1990 of the U.S. District Court in Civil Action No. H-86-440.
Worthy of reproducing herein are the following portions of the RTC
judgment:
[Petitioner’s] contention that the judgment sought to be enforced herein

is violative of its right to due process and contrary to public policy because
the Houston Court relied upon Exhibit 91 (which is [petitioner BPI
Securities’] Exh. “1” in this case) and the US Court disregarded the
evidence on record in the Houston Action is unavailing. Whether or not
said Exhibit 91 (petitioner’s Exh. “1”) is inadmissible or is not entitled
to any weight is a question which should have been addressed to the US
of Court of Appeals by [petitioner]. To ask a Philippine court to pass
upon the admissibility or weight of Exh. 91 is violative of our public
policy not to substitute our judgment for that of a competent court of
another jurisdiction.
[Petitioner] does not deny the fact that the judgment awarding sanctions
based on [Rule 11 of the U.S.] Federal Rules of Civil Procedure was
elevated to the United States Court of Appeals for the Fifth Circuit which
remanded the case to the District Court precisely to give [petitioner] a
reasonable opportunity to be heard. After remand, the District Court ordered
[petitioner] to file its response to the motion of [respondent] for sanctions
and after the filing of their respective briefs, the District Court reinstated the
former judgment.
Certainly, under these circumstances, the claim of violation of due
process cannot be sustained since [petitioner] was given reasonable
opportunity to present its side before the imposition of sanctions.
x x x x
[Petitioner] likewise argued that the US District Court committed a clear
mistake of law or fact and in
374

support thereof presented Exhibits “10” to “18” to establish that the fair
market value of the Houston property in January 1983 was no longer
US$800,000.00 by the admissions against interest of 1488 itself, of Craig
who submitted the fraudulent appraisal, and by the previous owners of the
said property and to “show that [respondent] Guevara was either directly
involved in the conspiracy against the Houston defendants in submitting to
the latter a fraudulent appraisal of W. Craig (or was at least responsible to
the Houston defendants for the injury that they suffered) and that the
Houston defendants had reasonable basis to implead him as a defendant in
the Houston Case on account of his participation in the conspiracy or his
fault of responsibility for the injury suffered by them.”
However, none of these documents show that [respondent] had any
participation nor knowledge in the execution, custody or other intervention
with respect to the said. Thus, said Exhibits “10” to “18” are irrelevant
and immaterial to the issue of the enforceability of a foreign judgment.
It must be emphasized that the imposition of the sanctions under [Rule
11 of the U.S.] Federal Rules of Civil Procedure did not flow from the
merits of the civil case in the US District Court but from the lack of
even an iota of evidence against [respondent] Guevara. To quote the US
District Court:
THE COURT
x x x x
I am disturbed about that. I don’t see any evidence at all in this case,
after listening to all of this evidence, that there ever was a lawsuit that could
have been brought against Guevara, and even after all of the discovery was
done, there was still no evidence of a conspiracy. There is no evidence of
any conspiracy to this good day that he could have been, but there is no
proof of it, and that’s what we base these
375
VOL. 752, MARCH 11, 2015 375

lawsuits on. That’s what the Rule 11 is designed to do, to deal with the
circumstance.
So, I brought it up to Mr. Guevara because I know the frustration, and
irrespective as to whether or not he brought it up, it would have been my
position, my own position as an officer of this Court to sanction the
defendants in this case. That is my opinion, that they are to be sanctioned
because they have brought all of the power that they have in the Philippines
to bear and put pressure on this man so that he would have to come over
10,000 miles to defend himself or to hire lawyers to defend himself against a

totally frivolous claim.39 (Emphases supplied)

As for petitioner’s contention that the Fifth Division of the Court
of Appeals, in its Decision dated December 19, 2003, copied
verbatim or wholesale from respondent’s brief, the Court refers to its
ruling in Halley v. Printwell, Inc.,40 thus:
It is noted that the petition for review merely generally alleges that
starting from its page 5, the decision of the RTC “copied verbatim the
allegations of herein Respondents in its Memorandum before the said
court,” as if “the Memorandum was the draft of the Decision of the
Regional Trial Court of Pasig,” but fails to specify either the portions
allegedly lifted verbatim from the memorandum, or why she regards the
decision as copied. The omission renders the petition for review insufficient
to support her contention, considering that the mere similarity in language
or thought between Printwell’s memorandum and the trial court’s decision
did not necessarily justify the conclusion that the RTC simply lifted
verbatim or copied from the memorandum.
_______________
39 Rollo, pp. 115-117.

40 G.R. No. 157549, May 30, 2011, 649 SCRA 116, 130-131.
376

It is to be observed in this connection that a trial or appellate judge may

occasionally view a party’s memorandum or brief as worthy of due
consideration either entirely or partly. When he does so, the judge may
adopt and incorporate in his adjudication the memorandum or the parts of it
he deems suitable, and yet not be guilty of the accusation of lifting or
copying from the memorandum. This is because of the avowed objective of
the memorandum to contribute in the proper illumination and correct
determination of the controversy. Nor is there anything untoward in the
congruence of ideas and views about the legal issues between himself and
the party drafting the memorandum. The frequency of similarities in
argumentation, phraseology, expression, and citation of authorities between
the decisions of the courts and the memoranda of the parties, which may be
great or small, can be fairly attributable to the adherence by our courts of
law and the legal profession to widely know nor universally accepted
precedents set in earlier judicial actions with identical factual milieus or
posing related judicial dilemmas. (Citations omitted)

The Court is unmoved by petitioner’s allegations of denial of due

process because of its U.S. counsel’s exorbitant fees and negligence.
As aptly pointed out by respondent in his Memorandum:
On the specific claim that petitioner has been denied legal representation
in the United States in view of the exorbitant legal fees of US counsel,
petitioner is now estopped from asserting that the costs of litigation resulted
in a denial of due process because it was petitioner which impleaded
Guevara. If petitioner cannot prosecute a case to its final stages, then it
should not have filed a counterclaim against Guevara in the first place.
Moreover, there is no showing that petitioner could not find a less expensive
counsel. Surely, petitioner could have se-
377
VOL. 752, MARCH 11, 2015 377

cured the services of another counsel whose fees were more

“affordable.”41

Moreover, petitioner is bound by the negligence of its counsel.
The declarations of the Court in Gotesco Properties, Inc. v. Moral42
is applicable to petitioner:
The general rule is that a client is bound by the acts, even mistakes, of
his counsel in the realm of procedural technique. The basis is the tenet that
an act performed by counsel within the scope of a “general or implied
authority” is regarded as an act of the client. While the application of this
general rule certainly depends upon the surrounding circumstances of a
given case, there are exceptions recognized by this Court: “(1) where
reckless or gross negligence of counsel deprives the client of due process of
law; (2) when its application will result in outright deprivation of the client’s
liberty or property; or (3) where the interests of justice so require.”
The present case does not fall under the said exceptions. In Amil v. Court
of Appeals, the Court held that “to fall within the exceptional circumstance
relied upon x x x, it must be shown that the negligence of counsel must be
so gross that the client is deprived of his day in court. Thus, “where a party
was given the opportunity to defend [its] interests in due course, [it] cannot
be said to have been denied due process of law, for this opportunity to be
heard is the very essence of due process.” To properly claim gross
negligence on the part of the counsel, the petitioner must show that the
counsel was guilty of nothing short of a clear abandonment of the client’s
cause. (Citations omitted)

Finally, it is without question that the U.S. District Court, in its
Order dated March 13, 1990 in Civil Action No. H-86-440, ordered
petitioner, AIFL, and ATHONA to pay respon-
_______________
41 Rollo, p. 176.
42 G.R. No. 176834, November 21, 2012, 686 SCRA 102, 108.
378

dent US$49,450.00 as sanction for violating Rule 11 of the U.S.

Federal Rules of Civil Procedure. The Court noticed that throughout
its Decision dated September 11, 2000 in Civil Case No. 92-1445,
the RTC variably mentioned the amount of Rule 11 sanction
imposed by the U.S. District Court as US$49,450.00 and
US$49,500.00, the latter obviously being a typographical error. In
the dispositive portion, though, the RTC ordered petitioner to pay
respondent US$49,500.00, which the Court hereby corrects motu
proprio to US$49,450.00 in conformity with the U.S. District Court
Order being enforced.
The Court notes that during the pendency of the instant Petition
before this Court, respondent passed away on August 17, 2007, and
is survived and substituted by his heirs, namely: Ofelia B. Guevara,
Ma. Leticia G. Allado, Jose Edgardo B. Guevara, Jose Emmanuel B.
Guevara, and Ma. Joselina G. Gepuela.
WHEREFORE, the instant Petition is hereby DENIED for lack
of merit. The Decision dated December 19, 2003 and Resolution
dated February 9, 2005 of the Court Appeals in C.A.-G.R. CV No.
69348, affirming the Decision dated September 11, 2000 of the
Regional Trial Court of Makati City, Branch 57 in Civil Case No.
92-1445, is hereby AFFIRMED with MODIFICATION that
petitioner BPI Securities Corporation is ordered to pay respondent
Edgardo V. Guevara the sum of US$49,450.00 or its equivalent in
Philippine Peso, with interest at six percent (6%) per annum from
the filing of the case before the trial court on May 28, 1992 until
fully paid.43
_______________
43 Following the guidelines on interest in Eastern Shipping Lines, Inc. v. Court of

Appeals (G.R. No. 97412, July 12, 1994, 234 SCRA 78, 95-97) and Nacar v. Gallery
Frames (G.R. No. 189871, August 13, 2013, 703 SCRA 439, 457-459).
379
VOL. 752, MARCH 11, 2015 379

SO ORDERED.
Sereno (CJ., Chairperson), Bersamin, Perez and Perlas-

Bernabe, JJ., concur.
Petition denied, judgment and resolution affirmed with

modification.
Notes.—A client has the absolute right to terminate the attorney-

client relationship at any time with or without cause. (Malvar vs.
Kraft Food Phils., Inc., 705 SCRA 242 [2013])
Case law instructs that if a person, in respect to business affairs
or troubles of any kind, consults a lawyer with a view to obtaining
professional advice or assistance, and the attorney voluntarily
permits or acquiesces with the consultation, then the professional
employment is established. (Tria-Samonte vs. Obias, 707 SCRA 1
[2013])
——o0o——
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Bank of The Philippine Islands Securities Corporation vs. Guevara

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5/23/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 752

G.R. No. 167052. March 11, 2015.*

Remedial Law; Civil Procedure; Judgments; Foreign Judgments; An

VOL. 752, MARCH 11, 2015 343

that ﬁnal judgments of foreign courts of competent jurisdiction are

344 SUPREME COURT REPORTS ANNOTATED

1990 would merely constitute an error of judgment in the exercise of

PETITION for review on certiorari of the decision and resolution of

VOL. 752, MARCH 11, 2015 345

LEONARDO-DE CASTRO, J.:

1 Rollo, pp. 87-103; penned by Associate Justice Eugenio S. Labitoria, with

346 SUPREME COURT REPORTS ANNOTATED

In the 1980s, Ayala Corporation was the majority stockholder of

VOL. 752, MARCH 11, 2015 347

In December of 1982, Gomez examined several parcels of real

6 Records (Vol. I), pp. 58-69.

348 SUPREME COURT REPORTS ANNOTATED

The series of transactions per the Agreement was eventually

VOL. 752, MARCH 11, 2015 349

rescission of the sale of the Harris County property, alleging

7 Rule 11. Signing of Pleadings, Motions, and Other Papers; Sanctions.—

350 SUPREME COURT REPORTS ANNOTATED

to pay respondent US$49,450.00; while 1488, Inc. appealed a post-

VOL. 752, MARCH 11, 2015 351

The U.S. Court of Appeals rendered its Decision on September 3,

352 SUPREME COURT REPORTS ANNOTATED

VOL. 752, MARCH 11, 2015 353

Trial Exhibit 4. The two-page supplement was based on such old

354 SUPREME COURT REPORTS ANNOTATED

other expert witness on the subject of valuation, they argue that

VOL. 752, MARCH 11, 2015 355

speculation regarding what the plaintiff knew or did not know

estate brokers to conduct such appraisals, see Tex.Rev.Civ.Stat.Ann. art.

9 Id., at pp. 268-271.

356 SUPREME COURT REPORTS ANNOTATED

For the foregoing reasons the district court committed no error in

[18-20] The Rule 11 motion was ﬁrst made by Guevara on February

10 Id., at pp. 271-272.

VOL. 752, MARCH 11, 2015 357

Finally, the U.S. Court of Appeals similarly vacated the award of

11 Id., at pp. 274-275.

358 SUPREME COURT REPORTS ANNOTATED

In an Order15 dated December 31, 1991, the U.S. District Court

15 Id., at pp. 10-11.

VOL. 752, MARCH 11, 2015 359

H-86-440, respondent prayed that petitioner be ordered to pay:

1. The sum of US$49,450.00 or its equivalent in Philippine Pesos x x x

3. Exemplary damages of P200,000.00; and

360 SUPREME COURT REPORTS ANNOTATED

respondent’s motion for Rule 11 sanctions and reply-brief ﬁled

WHEREFORE, judgment is hereby rendered in favor of [respondent]

22 Id., at pp. 609-618 and 591-598.

VOL. 752, MARCH 11, 2015 361

28 CA Rollo, pp. 20-21.

362 SUPREME COURT REPORTS ANNOTATED

In its Decision dated December 19, 2003, the Fifth Division of

WHEREFORE, the Decision dated 11 September 2000 in Civil Case

32 Id., at pp. 260-267.

VOL. 752, MARCH 11, 2015 363

364 SUPREME COURT REPORTS ANNOTATED

prevailing against said party, then, petitioner claims that such a

VOL. 752, MARCH 11, 2015 365

In Mijares v. Rañada,33 the Court extensively discussed the