Republic of the Philippines As ATHONA failed to pay the interest on the balance of US$307,209.
02, the entire amount
SUPREME COURT
Manila
SECOND DIVISION
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 1 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.
CONFLICTS
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-visCivil 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.
2
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
CONFLICTS
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 offorum 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.
3 opposed by the defendant if the foreign judgment is sought to be enforced against him in a
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
CONFLICTS
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
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 429, 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
CONFLICTS
21
impleaded Guevarra as defendant in Civil Case No. 16563. 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.
Regalado, Romero, Puno and Torres, Jr., JJ., concur.
PHILSEC INVESTMENT et al vs.CA et al
G.R. No. 103493
June 19, 1997
FACTS: Private respondent Ducat obtained separate loans from petitioners Ayala
International Finance Limited (AYALA) and Philsec Investment Corp (PHILSEC), secured by
shares of stock owned by Ducat.
In order to facilitate the payment of the loans, private respondent 1488, Inc., through its
president, private respondent Daic, assumed Ducats obligation under an Agreement,
whereby 1488, Inc. executed a Warranty Deed with Vendors Lien by which it sold to
petitioner Athona Holdings, N.V. (ATHONA) a parcel of land in Texas, U.S.A., while
PHILSEC and AYALA extended a loan to ATHONA as initial payment of the purchase price.
The balance was to be paid by means of a promissory note executed by ATHONA in favor
of 1488, Inc. Subsequently, upon their receipt of the money 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, the entire amount covered by the note
became due and demandable. Accordingly, private respondent 1488, Inc. sued petitioners
PHILSEC, AYALA, and ATHONA in the United States for payment of the balance 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.
While the Civil Case 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 RTC Makati. The complaint reiterated the allegation of petitioners in their
respective counterclaims in the Civil Action in 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.
Ducat moved to dismiss the Civil Case in the RTC-Makati on the grounds of (1) litis
pendentia, vis-a-vis the Civil Action in the U.S., (2) forum non conveniens, and (3) failure of
petitioners PHILSEC and BPI-IFL to state a cause of action.
The trial court granted Ducats MTD, 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.
Petitioners appealed to the CA, arguing that the trial court erred in applying the principle of
litis pendentia and forum non conveniens.
The CA affirmed the dismissal of Civil Case against Ducat, 1488, Inc., and Daic on the
ground of litis pendentia.
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.
Second. Nor is the trial courts refusal to take cognizance of the case justifiable under the
principle of forum non conveniens:
First, a MTD is limited to the grounds under Rule 16, sec.1, which does not include forum
non conveniens. 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 courts desistance.

ISSUE: is the Civil Case in the RTC-Makati barred by the judgment of the U.S. court?

HELD: CA reversed. Case remanded to RTC-Makati

NO

While this Court has given the effect of res judicata to foreign judgments in several cases, it
was after the parties opposed to the judgment had been given ample opportunity to repel
them on grounds allowed under the law. 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. 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:

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

CONFLICTS
 EN BANC
[G.R. No. L-24170. December 16, 1968.]
ILLUH ASAALI, HATIB ABDURASID, INGKOH BANTALA, BASOK INGKIN, and
MOHAMMAD BANTALA, Petitioners, v. THE COMMISSIONER OF
CUSTOMS, Respondent.
SYLLABUS
1. COURTS; COURT OF TAX APPEALS; APPEAL FROM DECISIONS THEREOF TO
SUPREME COURT; FINDINGS OF FACT BY SUBSTANTIAL EVIDENCE, BINDING
There is no plausible reason not to accept in its entirety the conclusion reached by the Court
of Tax Appeals. Nor even if the persuasive element therein were not so overwhelming, could
we alter the decisive facts as found by it. For it is now beyond question that its finding, if
supported by substantial evidence, binds us, only questions of law being for us to resolve.
Where the issue raised belongs to the former category, we lack the power to review.
2. TAXATION; SEIZURE AND FORFEITURE OF VESSELS AND CARGO FOR
SMUGGLING; JURISDICTION OF THE COMMISSIONER OF CUSTOMS IN RELATION
THERETO From the apprehension and seizure of the vessel in question on the high seas
beyond the territorial waters of the Philippines, the absence of jurisdiction of Commissioner
of Customs is predicated. Such contention of petitioners-appellants is without merit. It is
unquestioned that all vessels seized are of Philippine registry. The Revised Penal Code
leaves no doubt as to its applicability and enforceability not only within the Philippines, its
interior waters and maritime zone, but also outside of its jurisdiction against those
committing offense while on a Philippine ship . . . . The principle of law that sustains the
validity of such a provision equally supplies a firm foundation for the seizure of the five
sailing vessels found thereafter to have violated the applicable provisions of the Revised
Administrative Code.
3. ID.; ID.; ID.; EXPIRATION OF R.A. 650 DID NOT DIVEST THE COMMISSIONER OF
CUSTOMS OF JURISDICTION Despite the expiration of Republic Act 650 the
Commissioner of Customs retained his jurisdiction over the case and could continue to take
cognizance thereof until its final determination, for the main question brought in by the
6
appeal from the decision of the Collector of Customs was the legality or illegality of the
decision of the Collector of Customs and that question could not have been abated by the
mere expiration of R.A. No. 650. We firmly believe that the expiration of R.A. 650 could not
have produced the effect: (1) of declaring legal the importation of the cotton counterpanes
which were illegally imported, and (2) of declaring the seizure and forfeiture ordered by the
Collector of Customs illegal or null and void; in other words, it could not have the effect of
annulling or setting aside the decision of the Collector of Customs which was rendered while
the law was in force and which should stand until it is revoked by the appellate tribunal.
CONFLICTS
4. CONSTITUTIONAL LAW; BILL OF RIGHTS; SEIZURE IN INSTANT CASE DOES NOT
CONSTITUTE DENIAL OF DUE PROCESS There could be no denial of due process.
There was nothing arbitrary about the manner in which such seizure and forfeiture were
effected. The right to a hearing of petitioners-appellants was respected. They could not have
been unaware of what they were doing. It would be an affront to reason if under the
circumstances they could be allowed to raise in all seriousness a due process question.
Such a conditional guaranty, basic and fundamental, certainly should not be allowed to lend
itself as an instrument for escaping a liability arising from ones own nefarious acts.
DECISION
FERNANDO, J.:
The policy relentlessly adhered to and unhesitatingly pursued to minimize, if not to do away
entirely, with the evil and corruption that smuggling brings in its wake would be frustrated
and set at naught if the action taken by respondent Commissioner of Customs in this case,
as affirmed by the Court of Tax Appeals, were to be set aside and this appeal from the
decision of the latter were to succeed. Fortunately, the controlling principles of law do not
call for a contrary conclusion. It cannot be otherwise if the legitimate authority vested in the
government were not to be reduced to futility and impotence in the face of an admittedly
serious malady, that at times has assumed epidemic proportions.
The principal question raised by petitioners, owners of five sailing vessels and the cargo
loaded therein declared forfeited by respondent Commissioner of Customs for smuggling, is
the validity of their interception and seizure by customs officials on high seas, the contention
being raised that importation had not yet begun and that the seizure was affected outside
our territorial waters.
Why such a plea could not be given the least credence without doing violence to common
sense and placing the law in disrepute would be apparent from a statement of the case and
the findings of facts as set forth in the decision now under review, of the Court of Tax
Appeals, dated November 19, 1964, the opinion being penned by the late Associate Judge
Augusto M. Luciano.
His opinion starts thus: "This is an appeal from the decision of the Acting Commissioner of
Customs in Customs Case No. 113, dated September 26,1961, (Jolo Seizure Identification
Cases Nos. 38, 39, 40, 41, & 42) decreeing the forfeiture of five (5) sailing vessels (kumpits)
named Iroc-Iroc, Lahat-lahat, Liberal Wing 111, Sulu Area Command, and Business,
with their respective cargoes of blue seal cigarettes and rattan chairs, for violation of
Section 1363(a) of the Revised Administrative Code and Section 20 of Republic Act No. 426
in relation with Section 1363(f) of The Revised Administrative Code."
The facts according to the above opinion "are not controverted." Thus: "It appears that on
September 10, 1950, at about noon time, a customs patrol team on board Patrol Boat ST-23
intercepted the five (5) sailing vessels in question on the high seas, between British North
Borneo and Sulu while they were heading towards Tawi-tawi, Sulu. After ordering the
vessels to stop, the customs officers boarded and found on board, 181 cases of Herald
cigarettes, 9 cases of Camel cigarettes, and some pieces of rattan chairs. The sailing
vessels are all of Philippine registry, owned and manned by Filipino residents of Sulu, and of
less than thirty (30) tons burden. They came from Sandakan, British North Borneo, but did
not possess any permit from the Commissioner of Customs to engage in the importation of
merchandise into any Port of the Sulu sea, as required by Section 1363(a) of the Revised
Administrative Code. Their cargoes were not covered by the required import license under
Republic Act No. 426, otherwise known as the Import Control Law.
Respondent Commissioner of Customs, as noted at the outset, affirmed the decision
rendered by the Collector of Customs of Jolo, who found cause for forfeiture under the law
of the vessels and the cargo contained therein. He was, as also already made known,
sustained by the Court of Tax Appeals. Hence this petition for review.
The first two errors assigned by petitioners would impugn the jurisdiction of the Bureau of
Customs to institute seizure proceedings and thereafter to declare the forfeiture of the
vessels in question and their cargo. They would justify their stand thus:" In the light of the
fact that the vessels involved with the articles laden therein were apprehended and seized
on the high seas, beyond the territorial waters of the Philippines, the said vessels could not
have touched any place or port in the Philippines, whether a port or place of entry or not,
consequently, the said vessels could not have been engaged in the importation of the
articles laden therein into any Philippine port or place, whether a port or place of entry or
not, to have incurred the liability of forfeiture under Section 1363(a) of the Revised
Administrative Code."
Such a contention was advanced by petitioners before the Court of Tax Appeals. It met the
repudiation that it deserved. Thus: "We perfectly see the point of the petitioners but
considering the circumstances surrounding the apprehension of the vessels in question, we
believe that Section 1363(a) of the Revised Administrative Code should be apprehended to
the case at bar. It has been established that the five vessels came from Sandakan, British
North Borneo, a foreign port, and when intercepted, all of them were heading towards Tawi-
tawi, a domestic port within the Sulu sea. Laden with foreign manufactured cigarettes, they
did not possess the import license required by the Republic Act No. 426, nor did they carry a
permit from the Commissioner of Customs to engage in importation into any port 7 in the Sulu
sea. Their course announced loudly their intention not merely to skirt along the territorial
boundary of the Philippines but to come within our limits and land somewhere in Tawi-tawi
towards which their prows were pointed. As a matter of fact, they were about to cross our
aquatic boundary but for the intervention of a customs patrol which, from all appearances,
was more than eager to accomplish its mission." 4 The sense of realism and the vigorous
language employed by the late Judge Luciano in rejecting such a plea deserve to be
quoted. Thus: "To entertain even for a moment the thought that these vessels were probably
CONFLICTS
not bound for a Philippine port would be too much a concession even for a simpleton or a
perennial optimist. It is quite irrational for Filipino sailors manning five Philippines vessels to
sneak out of the Philippines and go to British North Borneo, and come a long way back
laden with highly taxable goods only to turn about upon reaching the brink of our territorial
waters and head for another foreign port."
1. We find no plausible reason not to accept in its entirety such a conclusion reached by the
Court of Tax Appeals. Nor, even if the persuasive element in the above view were not so
overwhelming, could we alter the decisive facts as found by it. For it is now beyond question
that its finding, if supported by substantial evidence, binds us, only questions of law being
for us to resolve. Where the issue raised belongs to the former category, we lack the power
of review.
Moreover, for understandable reasons, we feel extreme reluctance to substitute our own
discretion for that of the Court of Tax Appeals in its appreciation of the relevant facts and its
appraisal of their significance. As we had occasion to state in a relatively recent decision:
"Nor as a matter of principle is it advisable for this Court to set aside the conclusion reached
by an agency such as the Court of Tax Appeals which is, by the very nature of its function,
dedicated exclusively to the study and consideration of tax problems and has necessarily
developed an expertise on the subject .,. there has been an abuse or improvident exercise
of its authority."
2. We thus could rest our decision affirming that of the Court of Tax Appeals on the above
consideration. It might not be amiss however to devote some degree of attention to the legal
points raised in the above two assignment of errors, discussed jointly by petitioners-
appellants, alleging the absence of jurisdiction, the deprivation of property without due
process of law and the abatement of liability consequent upon the repeal of Republic Act
No. 426. Not one of the principles of law relied upon suffices to call for reversal of the action
taken by the respondent Commissioner of Customs, even if the facts presented a situation
less conclusive against the pretension of Petitioners-Appellants.
From the apprehension and seizure of the vessels in question on the high seas beyond the
territorial waters of the Philippines, the absence of jurisdiction of Commissioner of Customs
is predicated. Such contention of petitioners-appellants is without merit.
It is unquestioned that all vessels seized are of Philippine registry. The Revised Penal Code
leaves no doubt as to its applicability and enforceability not only within the Philippines, its
interior waters and maritime zone, but also outside of its jurisdiction against those
committing offense while on a Philippine ship . . . 8 The principle of law that sustains the
validity of such a provision equally supplies a firm foundation for the seizure of the five
sailing vessels found thereafter to have violated the applicable provisions of the Revised
Administrative Code.
Moreover, it is a well settled doctrine of International Law that goes back to Chief Justice
Marshalls opinion in Church v. Hubbart, 10 an 1804 decision, that a state has the right to
protect itself and its revenues, a right not limited to its own territory but extending to the high
seas. In the language of Chief Justice Marshall: "The authority of a nation within its own
territory is absolute and exclusive. The seizure of a vessel within the range of its cannon by
a foreign force is an invasion of that territory, and is a hostile act which it is its duty to repel.
But its power to secure itself from injury may certainly be exercised beyond the limits of its
territory."
The question asked in the brief of petitioners-appellants as to whether the seizure of the
vessels in question and the cargoes on the high seas and thus beyond the territorial waters
of the Philippines was legal must be answered in the affirmative.
4. The next question raised is the alleged denial of due process arising from such forfeiture
and seizure. The argument on the alleged lack of validity of the action taken by the
Commissioner of Customs is made to rest on the fact that the alleged offense imputed to
petitioners-appellants is a violation of Section 1363(a) and not Section 1363(f). The title of
Section 1363 is clear. "Property subject to forfeiture under customs laws." The first
subsection thereof, (a), covers any vessel including cargo unlawfully engaged in the
importation of merchandise except a port of entry. Subsection (f) speaks of any
merchandise of any prohibited importation, the importation of which is effected or attempted
contrary to law and all other merchandise which in the opinion of the Collector of Customs
have been used are or were intended to be used as instrument in the importation or
exportation of the former.
From the above recital of the legal provisions relied upon, it would appear most clearly that
the due process question raised is insubstantial. Certainly, the facts on which the seizure
was based were not unknown to petitioners-appellants. On those facts the liability of the
vessels and merchandise under the above terms of the statute would appear to be
undeniable. The action taken then by the Commissioner of Customs was in accordance with
law.
How could there be a denial of due process? There was nothing arbitrary about the manner
in which such seizure and forfeiture were effected. The right to a hearing of petitioners-
appellants was respected. They could not have been unaware of what they were doing. It
would be an affront to reason if under the above circumstances they could be allowed to
raise in all seriousness a due process question. Such a constitutional guaranty, basic and
fundamental, certainly should not be allowed to lend itself as an instrument for8 escaping a
liability arising from ones own nefarious acts.
5. Petitioners-appellants would further assail the validity of the action taken by the
respondent Commissioner of Customs by the plea that the repeal of Republic Act No. 426
abated whatever liability could have been incurred thereunder. This argument raised before
the Court of Tax Appeals was correctly held devoid of any persuasive force. The decision
under review cited our opinion in Golay-Buchel & Cie v. Commissioner of Customs to the
CONFLICTS
effect that the expiration of the Import Control Law "did not produce the effect of declaring
legal the importation of goods which were illegally imported and the seizure and forfeiture
thereof as ordered by the Collector of Customs illegal or null and void."
Roxas v. Sayoc announced that principle earlier. Thus: "Herein, we are concerned with the
effect of the expiration of a law, not with the abrogation of a law, and we hold the view that
once the Commissioner of Customs has acquired jurisdiction over the case, the mere
expiration of Republic Act No. 650 will not divest him of his jurisdiction thereon duly acquired
while said law was still in force. In other words, we believe that despite the expiration of
Republic Act No. 650 the Commissioner of Customs retained his jurisdiction over the case
and could continue to take cognizance thereof until its final determination, for the main
question brought in by the appeal from the decision of the Collector of Customs was the
legality or illegality of the decision of the Collector of Customs, and that question could not
have been abated by the mere expiration of Republic Act No. 650. We firmly believe that the
expiration of Republic Act No. 650 could not have produced the effect (1) of declaring legal
the importation of the cotton counterpanes which were illegally imported, and (2) of
declaring the seizure and forfeiture ordered by the Collector of Customs illegal or null and
void; in other words, it could not have the effect of annulling or setting aside the decision of
the Collector of Customs which was rendered while the law was in force and which should
stand until it is revoked by the appellate tribunal."
As late as 1965, in Bombay Dept. Store v. Commissioner of Customs, we had occasion to
reaffirm the doctrine in the above two decisions, the present Chief Justice, speaking for the
Court, stating that such expiration of the period of effectivity of Republic Act No. 650 "did not
have the effect of depriving the Commissioner of Customs of the jurisdiction, acquired by
him prior thereto, to act on cases of forfeiture pending before him, which are in the nature of
proceedings in rem. . . ."
It is thus most evident that the Court of Tax Appeals had not in any wise refused to adhere
faithfully to controlling legal principles when it sustained the action taken by respondent
Commissioner of Customs. It would be a reproach and a reflection on the law if on the facts
as they had been shown to exist, the seizure and forfeiture of the vessels and cargo in
question were to be characterized as outside the legal competence of our government and
violative of the constitutional rights of petitioners-appellants. Fortunately, as had been made
clear above, that would be an undeserved reflection and an unwarranted reproach. The
vigor of the war against smuggling must not be hampered by a misreading of international
law concepts and a misplaced reliance on a constitutional guaranty that has not in any wise
been infringed.
WHEREFORE, the decision of respondent Court of Tax Appeals of November 19, 1964, is
affirmed. With costs against Petitioners-Appellants.
ILLUH ASAALI, HATIB ABDURASID, INGKOH BANTALA, BASOK INGKIN, and
MOHAMMAD BANTALA, petitioners, v. THE COMMISSIONER OF CUSTOMS,
 respondent. the apprehension and seizure of the items, of the petitioner-appellant is without merit. The
No. L-24170, December 16, 1968 vessels are all Philippine registered and are therefore under the jurisdiction of the
Philippines as expressed in the Revised Penal Code. The petitioners also violated Section
Facts:
1363(a). Therefore, the action taken then by the Commissioner of Customs was in
accordance to the law.
At noontime of September 10, 1950, five sailing vessels, from Borneo toward the ports of
Tawi-tawi and Sulu, were spotted and intercepted in high seas by the Custom Patrol Team.
The Court also ruled that The expiration of the Import Control Law did not produce the
The said patrol team aboard Boat ST-23 found out that the five vessels contained 181 cases
effect the declaring legal the importation of goods which were illegallyimported and the
of Herald cigarettes, 9 cases of Camel cigarettes, and some rattan chairs. The sailing
seizure and forefeiture thereof as ordered by the Collector of Customs illegal or null and
vessels were all Philippine registered, owned and manned by Filipino residents from Sulu.
void. The expiration of the law does not mean that the law had been abrogated, meaning
Petitioners, however, possessed no permit from the Commissioner of Customs so that they
even if the law had already expired, the Philippines should still have jurisdiction over this
can engage in the importation of the goods they carry (as required by Section 1363 [a] of
kinds of cases until their final determination.
the Revised Administrative Code). Also, the goods the petitioners carry were not covered by
RA 426 or the Import Control Law. The Custom Patrol Team then seized the goods even if
they were in the high seas. Petitioners claim that the interception and seizure of the items
were illegal because they were intercepted outside the territory of the Philippines. Also, the
petitioners contend that they could not have been engaged to the importation of the above-
mentioned items to incur the forfeiture under Section 1363 of the Revised Administrative
Code. The Court of Tax Appeals held that Section 1363 should be applied because all the
vessels were all headed to Tawi-tawi. No import license and permit were carried violating
RA 426. Their course, that isthey are about to enter the Philippine territory, announced
loudly that they were about to import these items in the Philippines.

Issues:
EN BANC

Whether or not the interception and seizure by customs officials of the vessels valid in the
contention that importation had not yet begun and that the seizure was effected outside our
territorial waters.
Whether or not the Import Control Law was violated since it had expired when the offense
was committed.
9
Ruling:
The Court affirmed the decision of the Court of Tax Appeals stating that it is quite irrational
for Filipino sailors to sneak out of the Philippinesand come a long way back laden with
highly taxable goods only to turn about upon reaching the brink of our territorial waters and
head for another country. Further, the Court said that the contention, regarding
[G.R. No. L-5887. December 16, 1910.]
THE UNITED STATES, Plaintiff-Appellee, v. LOOK CHAW (alias LUK CHIU), Defendant-
Appellant.
Thos. D. Aitken for Appellant.
Attorney-General Villamor for Appellee.
SYLLABUS
1. SHIPS AND SHIPPING; OPIUM IN TRANSIT; LANDING OF CONTRABAND GOODS;
JURISDICTION. Although the mere possession of an article of prohibited use in the
Philippine Islands, aboard a foreign vessel in transit, in any local port, does not, as a
general rule, constitute a crime triable by the courts of the Islands, such vessel being

CONFLICTS
considered as an extension of its own nationality, the same rule does not apply when the as Exhibit C, was the subject matter of investigation at the trial, and with respect to which
article, the use of which is prohibited in the Islands, is landed from the vessel upon the chief of the department of the port of Cebu testified that they were found in the part of
Philippine soil; in such a case an open violation of the laws of the land is committed, with the ship where the firemen habitually sleep, and that they were delivered to the first officer
respect to which, as it is a violation of the penal law in force at the place of the commission of the ship to be returned to the said firemen after the vessel should have left the
of the crime, no court other than that established in the said place has jurisdiction of the Philippines, because the firemen and crew of foreign vessels, pursuant to the instructions
offense, in the absence of an agreement under an international treaty. he had from the Manila custom-house, were permitted to retain certain amounts of opium,
always provided it should not be taken shore.
DECISION
And, finally, another can of opium, marked "Exhibit D," is also corpus delicti and important
ARELLANO, C.J. : as evidence in this cause. With regard to this the internal-revenue agent testified as follows:
The first complaint filed against the defendant, in the Court of First Instance of Cebu, stated "FISCAL. What is it?
that he "carried, kept, possessed and had in his possession and control, 96 kilograms of
opium," and that "he had been surprised in the act of selling 1,000 pesos worth prepared "WITNESS. It is a can opium which was bought from the defendant by a secret-service
opium." agent and taken to the office of the governor to prove that the accused had opium in his
possession to sell."
The defense presented a demurrer based on two grounds, the second of which was the
more than one crime was charged in the complaint. The demurrer was sustained, as the
court found that the complaint contained two charges, one, for the unlawful possession of On motion by the defense, the court ruled that this answer might be stricken out "because it
opium, and the other, for the unlawful sale of opium, and, consequence of that ruling, it refers to a sale." But, with respect to this answer, the chief of the department of customs
ordered that the fiscal should separated one charge from the other and file a complaint for had already given this testimony, to wit:
each violation; this, the fiscal did, and this cause concerns only the unlawful possession of
opium. It is registered as No. 375, in the Court of First Instance of Cebu, and as No. 5887 "FISCAL. Who asked you to search the vessel?
on the general docket of this court.
"WITNESS. The internal-revenue agent came to my office and said that a party brought him
The facts of the case are contained in the following finding of the trial court: a sample of opium and that the same party knew that there was more opium on board the
steamer, and the agent asked that the vessel be searched."
"The evidence, it says, shows that between 11 and 12 oclock a. m. on the present month
(stated as August 19, 1909), several persons, among them Messrs. Jacks and Milliron, chief The defense moved that this testimony be rejected, on the ground of its being hearsay
of the department of the port of Cebu and internal-revenue agent of Cebu, respectively, evidence, and the court only ordered that the part thereof "that there was more opium, on
went abroad the steamship Erroll to inspect and search its cargo, and found, first in a cabin board the vessel" be stricken out.
near the saloon, one sack (Exhibit A) and afterwards in the hold, another sack (Exhibit B).
The sack referred to as Exhibit A contained 49 cans of opium, and the other, Exhibit B, the The defense, to abbreviate proceedings, admitted that the receptacles mentioned as
larger sack, also contained several cans of the same substance. The hold, in which the sack Exhibits A, B, and C, contained opium and were found on board the steamship Erroll, a
mentioned in Exhibit B was found, was under the defendants control, who moreover, freely vessel of English nationality, and that it was true that the defendant stated that these sacks
and of his own will and accord admitted that this sack, as well as the other referred to in of opium were his and that he had them in his possession.
Exhibit B and found in the cabin, belonged to him. The said defendant also stated,
10 freely
and voluntarily, that he had bought these sacks of opium, in Hongkong with the intention of According to the testimony of the internal-revenue agent, the defendant stated to him, in the
selling them as contraband in Mexico or Vera Cruz, and that, as his hold had already been presence of the provincial fiscal, of a Chinese interpreter (who afterwards was not needed,
searched several times for opium, he ordered two other Chinamen to keep the sack. Exhibit because the defendant spoke English), the warden of the jail, and four guards, that the
A." opium seized in the vessel had been bought by him in Hongkong, at three pesos for each
round can and five pesos for each one of the others, for the purpose of selling it, as
It is to be taken into account that the two sacks of opium, designated as Exhibits A and B, contraband, in Mexico and Puerto de Vera Cruz; that on the 15th the vessel arrived at Cebu,
properly constitute the corpus delicti. Moreover, another lot of four cans of opium, marked, and on the same day he sold opium; that he had tried to sell opium for P16 a can; that he
CONFLICTS
had a contract to sell an amount of the value of about P500; that the opium found in the
room of the other two Chinamen prosecuted in another cause, was his, and that he had left
it in their stateroom to avoid its being found in his room, which had already been searched
many times; and that, according to the defendant, the contents of the large sack was 80
cans of opium, and of the small one, 49, and the total number, 129.
It was established that the steamship Erroll was of English nationality, that it came from
Hongkong, and that it was bound for Mexico, via the call ports of Manila and Cebu.
The defense moved for a dismissal of the case, on the grounds that the court had no
jurisdiction to try the same and the facts concerned therein did not constitute a crime. The
fiscal, at the conclusion of his argument, asked that the maximum penalty of the law be
imposed upon the defendant, in view of the considerable amount of opium seized. The court
ruled that it did not lack jurisdiction, inasmuch as the crime had been committed within its
district, on the wharf of Cebu.
The court sentenced the defendant to five years imprisonment, to pay a fine of P10,000,
with additional subsidiary imprisonment in case of insolvency, though not to exceed one
third of the principal penalty, and to the payment of the costs. It further ordered the
confiscation, in favor of the Insular Government, of the exhibits presented in the case, and
that, in the event of an appeal being taken or a bond given, or when the sentenced should
have been served, the defendant be not released from custody, but turned over to the
customs authorities for the purpose of the fulfillment of the existing laws on immigration.
From this judgment, the defendant appealed to this court.
The appeal having been heard, together with the allegations made therein by the parties, it
is found: That, although the mere possession of a thing of prohibited use in these Islands,
aboard a foreign vessel in transit, in any of their ports, does not, as a general rule, constitute
a crime triable by the courts of this country, on account of such vessel being considered as
an extension of its own nationality, the same rule does not apply when the article, whose
use is prohibited within the Philippine Islands, in the present case a can of opium, is landed
from the vessel upon Philippine soil, thus committing an open violation of the laws of the
land, with respect to which, as it is a violation of the penal law in force at the place of the
commission of the crime, only the court established in that said place itself had competent
jurisdiction, in the absence of an agreement under an international treaty.
11
It is also found: That, even admitting that the quantity of the drug seized, the subject matter
of the present case, was considerable, it does not appear that, on such account, the two
penalties fixed by the law on the subject, should be imposed in the maximum degree.
Therefore, reducing the imprisonment and the fine imposed to six months and P1,000,
respectively, we affirm in all other respects the judgment appealed from, with the costs of
this instance against the Appellant. So ordered.
CONFLICTS
Torres, Mapa, Johnson, Carson, Moreland and Trent, JJ., concur.
US vs Look Chow, 18 Phil 573
Subject Matter: Applicability of the provisions of Art 2 of the Revised Penal Code
Facts:
Between 11 and 12 o'clock a.m. in August 19, 1909, the Port of Cebu and internal revenue
agent of Cebu, respectively, went aboard the steamship Erroll to inspect and search its
cargo, and found two sacks containing opium. The defendant stated freely and voluntarily
that he had bought these sacks of opium in Hong Kong with the intention of selling them as
contraband in Mexico or Vera Cruz, and that as his hold had already been searched several
times for opium he ordered two other Chinamen to keep the sack. All the evidence found
properly constitutes corpus delicti.
It was established that the steamship Erroll was of English nationality, that it came from
Hong Kong, and that it was bound for Mexico, via the call ports in Manila and Cebu.
Issue:
Whether or not courts of local state can exercise its jurisdiction over foreign vessels
stationed in its port.
Held:
Yes. The Philippine courts have jurisdiction over the matter. The mere possession of a thing
of prohibited use in these Islands, aboard a foreign vessel in transit, in any of their ports,
does not, as a general rule, constitute a crime triable by the courts of this country, on
account of such vessel being considered as an extension of its own nationality. However,
the same rule does not apply when the article, whose use is prohibited within the
Philippines, in the present case, a can of opium, is landed from the vessel upon the
Philippine soil, thus committing an open violation of the penal law in force at the place of the
commission of the crime. Only the court established in the said place itself has competent
jurisdiction, in the absence of an agreement under an international treaty.
THE UNITED STATES, plaintiff-appellee, vs. LOOK CHAW (alias LUK CHIU),
defendant-appellant.
Facts: During, August 19, 1909, government agents went abroad the steamship Erroll to
inspect and search its cargo, and found, first in a cabin near the saloon, one sack (Exhibit A)
and afterwards in the hold, another sack (Exhibit B). The sack referred to as Exhibit A
contained 49 cans of opium, and the other, Exhibit B, the larger sack, also contained several
cans of the same substance. The hold, in which the sack mentioned in Exhibit B was found,
was under the defendant's control, who moreover, freely and of his own will and accord
admitted that this sack, as well as the other referred to in Exhibit B and found in the cabin,
belonged to him. The said defendant also stated, freely and voluntarily, that he had bought
these sacks of opium, in Hongkong with the intention of selling them as contraband in
Mexico or Vera Cruz, and that, as his hold had already been searched several times for
opium, he ordered two other Chinamen to keep the sack.
It is to be taken into account that the two sacks of opium, designated as Exhibits A and B,
properly constitute the corpus delicti. Moreover, another lot of four cans of opium, marked,
as Exhibit C, was the subject matter of investigation at the trial, and with respect to which
the chief of the department of the port of Cebu testified that they were found in the part of
the ship where the firemen habitually sleep, and that they were delivered to the first officer
of the ship to be returned to the said firemen after the vessel should have left the
Philippines, because the firemen and crew of foreign vessels, pursuant to the instructions
he had from the Manila custom-house, were permitted to retain certain amounts of opium,
always provided it should not be taken shore.
And, finally, another can of opium, marked "Exhibit D," which the witness related as a can of
opium which was bought from the defendant by a secret-service agent and taken to the
office of the governor to prove that the accused had opium in his possession to sell.
The internal-revenue agent said that a party brought him a sample of opium and that the
same party knew that there was more opium on board the steamer, and the agent asked
that the vessel be searched.
The defense moved that this testimony be rejected, on the ground of its being hearsay
evidence, and the court only ordered that the part thereof "that there was more opium, on
board the vessel" be stricken out.
Issue: WON the Philippine court has jurisdiction over the crime and the facts concerned.
Held: the court found that the complaint contained two charges, one, for the unlawful
possession of opium, and the other, for the unlawful sale of opium, and, consequence of
that ruling, it ordered that the fiscal should separated one charge from the other and file a
complaint for each violation; this, the fiscal did, and this cause concerns only the unlawful
possession of opium.
12
Even admitting that the quantity of the drug seized, the subject matter of the present case,
was considerable, it does not appear that, on such account, the two penalties fixed by the
law on the subject, should be imposed in the maximum degree.
Therefore, reducing the imprisonment and the fine imposed to six months and P1,000,
respectively, we affirm in all other respects the judgment appealed from, with the costs of
this instance against the appellant.
CONFLICTS
The court ruled that it did not lack jurisdiction, inasmuch as the crime had been committed
within its district, on the wharf of Cebu. Mere possession of opium (a thing of prohibited use
in these Islands), aboard a foreign vessel in transit, in any of their ports, does not, as a
general rule, constitute a crime triable by the courts of this country, on account of such
vessel being considered as an extension of its own nationality (in this case, the vessel is of
English nationality), because that fact alone does not constitute a breach of order. Mere
possession of opium on such a ship, without being used in our territory, does not bring
about in this country those disastrous effects that our law contemplated avoiding. However,
said courts acquire jurisdiction when the tins of opium are landed from the vessel upon
Philippine soil, thus committing an open violation of the laws of the land, with respect to
which, as it is a violation of the penal law in force at the place of the commission of the
crime and only the court established in that said place itself had competent jurisdiction, in
the absence of an agreement under an international treaty.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-18924 October 19, 1922
THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,
vs.
WONG CHENG (alias WONG CHUN), defendant-appellee.
Attorney-General Villa-Real for appellant.
Eduardo Gutierrez Repide for appellee.
ROMUALDEZ, J.:
In this appeal the Attorney-General urges the revocation of the order of the Court of First
Instance of Manila, sustaining the demurrer presented by the defendant to the information
that initiated this case and in which the appellee is accused of having illegally smoked
opium, aboard the merchant vessel Changsa of English nationality while said vessel was
anchored in Manila Bay two and a half miles from the shores of the city.
The demurrer alleged lack of jurisdiction on the part of the lower court, which so held and
dismissed the case.
The question that presents itself for our consideration is whether such ruling is erroneous or
not; and it will or will not be erroneous according as said court has or has no jurisdiction
over said offense.
The point at issue is whether the courts of the Philippines have jurisdiction over crime, like
the one herein involved, committed aboard merchant vessels anchored in our jurisdiction
waters.
There are two fundamental rules on this particular matter in connection with International
Law; to wit, the French rule, according to which crimes committed aboard a foreign
merchant vessels should not be prosecuted in the courts of the country within whose
territorial jurisdiction they were committed, unless their commission affects the peace and
security of the territory; and the English rule, based on the territorial principle and followed in
the United States, according to which, crimes perpetrated under such circumstances are in
general triable in the courts of the country within territory they were committed. Of this two
rules, it is the last one that obtains in this jurisdiction, because at present the theories and
jurisprudence prevailing in the United States on this matter are authority in the Philippines
which is now a territory of the United States.
In the cases of The Schooner Exchange vs. M'Faddon and Others (7 Cranch [U. S.], 116),
Chief Justice Marshall said:
. . . When merchant vessels enter for the purposes of trade, it would be obviously
inconvenient and dangerous to society, and would subject the laws to continual
infraction, and the government to degradation, if such individuals or merchants did
not owe temporary and local allegiance, and were not amenable to the jurisdiction
of the country. . . .
In United States vs. Bull (15 Phil., 7), this court held:
. . . No court of the Philippine Islands had jurisdiction over an offense or crime
committed on the high seas or within the territorial waters of any other country, but
when she came within three miles of a line drawn from the headlands, which
embrace the entrance to Manila Bay, she was within territorial waters, and a new
set of principles became applicable. (Wheaton, International Law [Dana ed.], p. 255,
13
note 105; Bonfils, Le Droit Int., secs. 490 et seq.; Latour, La Mer Ter., ch. 1.) The
ship and her crew were then subject to the jurisdiction of the territorial sovereign
subject to such limitations as have been conceded by that sovereignty through the
proper political agency. . . .
It is true that in certain cases the comity of nations is observed, as in Mali and Wildenhus
vs. Keeper of the Common Jail (120 U.., 1), wherein it was said that:
CONFLICTS
. . . The principle which governs the whole matter is this: Disorder which disturb only
the peace of the ship or those on board are to be dealt with exclusively by the
sovereignty of the home of the ship, but those which disturb the public peace may
be suppressed, and, if need be, the offenders punished by the proper authorities of
the local jurisdiction. It may not be easy at all times to determine which of the two
jurisdictions a particular act of disorder belongs. Much will undoubtedly depend on
the attending circumstances of the particular case, but all must concede that
felonious homicide is a subject for the local jurisdiction, and that if the proper
authorities are proceeding with the case in the regular way the consul has no right
to interfere to prevent it.
Hence in United States vs. Look Chaw (18 Phil., 573), this court held that:
Although the mere possession of an article of prohibited use in the Philippine
Islands, aboard a foreign vessel in transit in any local port, does not, as a general
rule, constitute a crime triable by the courts of the Islands, such vessels being
considered as an extension of its own nationality, the same rule does not apply
when the article, the use of which is prohibited in the Islands, is landed from the
vessels upon Philippine soil; in such a case an open violation of the laws of the land
is committed with respect to which, as it is a violation of the penal law in force at the
place of the commission of the crime, no court other than that established in the
said place has jurisdiction of the offense, in the absence of an agreement under an
international treaty.
As to whether the United States has ever consented by treaty or otherwise to renouncing
such jurisdiction or a part thereof, we find nothing to this effect so far as England is
concerned, to which nation the ship where the crime in question was committed belongs.
Besides, in his work "Treaties, Conventions, etc.," volume 1, page 625, Malloy says the
following:
There shall be between the territories of the United States of America, and all the
territories of His Britanic Majesty in Europe, a reciprocal liberty of commerce. The
inhabitants of the two countries, respectively, shall have liberty freely and securely
to come with their ships and cargoes to all such places, ports and rivers, in the
territories aforesaid, to which other foreigners are permitted to come, to enter into
the same, and to remain and reside in any parts of the said territories, respectively;
also to hire and occupy houses and warehouses for the purposes of their
commerce; and, generally, the merchants and traders of each nation respectively
shall enjoy the most complete protection and security for their commerce, but
subject always to the laws and statutes of the two countries, respectively. (Art. 1,
Commerce and Navigation Convention.)
We have seen that the mere possession of opium aboard a foreign vessel in transit was Whether or not the Philippine courts have jurisdiction over the crime committed aboard
held by this court not triable by or courts, because it being the primary object of our Opium merchant vessels anchored in our jurisdictional waters.
Law to protect the inhabitants of the Philippines against the disastrous effects entailed by
the use of this drug, its mere possession in such a ship, without being used in our territory, Held:
does not being about in the said territory those effects that our statute contemplates
avoiding. Hence such a mere possession is not considered a disturbance of the public Yes. The crime in the case at bar was committed in our internal waters thus the Philippine
order. courts have a right of jurisdiction over the said offense. The Court said that having the
opium smoked within our territorial waters even though aboard a foreign merchant ship is a
breach of the public order because it causes such drugs to produce pernicious effects within
But to smoke opium within our territorial limits, even though aboard a foreign merchant ship,
our territory. Therefore, the demurrer is revoked and the Court ordered further proceedings.
is certainly a breach of the public order here established, because it causes such drug to
produce its pernicious effects within our territory. It seriously contravenes the purpose that
our Legislature has in mind in enacting the aforesaid repressive statute. Moreover, as the
Attorney-General aptly observes:

. . . The idea of a person smoking opium securely on board a foreign vessel at Wong Cheng, 46 Phil. 729
anchor in the port of Manila in open defiance of the local authorities, who are
impotent to lay hands on him, is simply subversive of public order. It requires no FACTS:
unusual stretch of the imagination to conceive that a foreign ship may come into the
port of Manila and allow or solicit Chinese residents to smoke opium on board. appellee is accused of having illegally smoked opium, aboard the merchant
vessel Changsa of English nationality while said vessel was anchored in Manila Bay
two and a half miles from the shores of the city.
The order appealed from is revoked and the cause ordered remanded to the court of origin
for further proceedings in accordance with law, without special findings as to costs. So Lower court dismissed the case
ordered.

ISSUE: W/N the courts of the Philippines have jurisdiction over crime committed aboard
People vs Wong Cheng, 46 Phil 729 merchant vessels anchored in our jurisdiction waters

Subject Matter: Applicability of Art. 2 of the Revised Penal Code

Facts:
The appellant, in representation of the Attorney General, filed an appeal that urges the
revocation of a demurrer sustained by the Court of First Instance of Manila presented by the
defendant. The defendant, accused of having illegally smoked opium aboard the merchant
vessel Changsa of English nationality while the said vessel was anchored in Manila Bay,
14
two and a half miles from the shores of the city. In the said demurrer, the defendant
contended the lack of jurisdiction of the lower court of the said crime, which resulted to the
dismissal of the case.
Issue:
HELD: The order appealed from is revoked and the cause ordered remanded to the court of
origin for further proceedings in accordance with law, without special findings as to costs.
YES.
2 fundamental rules on this particular matter in connection with International Law
a) French rule
according to which crimes committed aboard a foreign merchant vessels
should not be prosecuted in the courts of the country within whose territorial
jurisdiction they were committed

CONFLICTS
 UNLESS: their commission affects the peace and security of the territory

b) English rule

based on the territorial principle and followed in the United States

according to which crimes perpetrated under such circumstances are in Republic of the Philippines
general triable in the courts of the country within territory they were SUPREME COURT
committed. Manila

As to whether the United States has ever consented by treaty or otherwise to

SECOND DIVISION
renouncing such jurisdiction or a part thereof, we find nothing to this effect so far as
England is concerned, to which nation the ship where the crime in question was
committed belongs. G.R. No. 120135 March 31, 2003

mere possession of opium aboard a foreign vessel in transit was held by this court not BANK OF AMERICA NT & SA, BANK OF AMERICA INTERNATIONAL, LTD., petitioners,
triable by or courts, because it being the primary object of our Opium Law to protect the
vs.
inhabitants of the Philippines against the disastrous effects entailed by the use of this
drug, its mere possession in such a ship, without being used in our territory, does not COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO LITONJUA, SR., and
being about in the said territory those effects that our statute contemplates avoiding. AURELIO K. LITONJUA, JR., respondents.
Hence such a mere possession is not considered a disturbance of the public order.
AUSTRIA-MARTINEZ, J.:
to smoke opium within our territorial limits, even though aboard a foreign merchant
ship, is certainly a breach of the public order here established, because it causes such
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
drug to produce its pernicious effects within our territory. It seriously contravenes the
November 29, 1994 decision of the Court of Appeals 1 and the April 28, 1995 resolution
purpose that our Legislature has in mind in enacting the aforesaid repressive statute.
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
15 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
CONFLICTS
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:
16
"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.
CONFLICTS
"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 applying17English 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:
CONFLICTS
"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
18
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
CONFLICTS
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 in19one 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 defendants 52, still the other requirements necessary
for litis pendentia were not shown by petitioner. It merely mentioned that civil cases were
CONFLICTS
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.
Bank Of America V. CA (2003)
G.R. No. 120135 March 31, 2003
Lessons Applicable: forum non conveniens (conflicts of laws)
FACTS:
Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas) were engaged in the
shipping business owning 2 vessels: Don Aurelio and El Champion
Because their business where doing well, Bank of America (BA) offered them to take a
loan for them to increase their ships.
BA acquired through them as borrowers four more ships: (a) El Carrier; (b) El General;
(c) El Challenger; and (d) El Conqueror. The registration, operation, income, funds,
possession of the vessel belonged to the corporation.
 May 10, 1993: Litonjuas filed a complaint to the RTC Pasig claming that during its propriety of dismissing a case based on this principle of forum non conveniens requires a
operations and the foreclosure sale, BA as trutees failed to fully render an account of factual determination, hence it is more properly considered a matter of defense
the income. They lost all their 6 vessels and 10% of their personal funds and they still
have an unpaid balance of their loans. 2. NO.

BA NT&SA, and BA international filed a Motion to Dismiss on grounds of forum non litis pendentia to be a ground for the dismissal of an action there must be:
conveniens and lack of cause of action against them
(a) identity of the parties or at least such as to represent the same interest in both
RTC and CA: Dismissed actions -present

ISSUE: (b) identity of rights asserted and relief prayed for, the relief being founded on the
1. W/N there is grounds of forum non conveniens same acts - not shown
2. W/N there is litis pendentia
(c) the identity in the two cases should be such that the judgment which may be
HELD: Denied rendered in one would, regardless of which party is successful, amount to res
judicata in the other - not shown
1. NO.
It merely mentioned that civil cases were filed in Hongkong and England
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 Bank of America, NT & SA v. Litonjua

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.
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; -
present
(2) that the Philippine Court is in a position to make an intelligent decision as to the
law and the facts; and, - present
20
(3) that the Philippine Court has or is likely to have power to enforce its decision -
present
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
G.R. No. 120135 March 31, 2003
Ponente: Austria-Martinez, J.
Facts:
1. The Litonjuas (Eduardo and Aurelio), private respondents, were engaged in the shipping
business. They owned 2 vesselsthrough their company and deposited their revenues with
the petitioner banks in both Hongkong and UK. The respondents alleged that the petitioner
offered easy loans to help them acquire additional three (3) vessels through their company.
The operation and the funds were then placed under the control of the petitioner while the
possession of the vessels were left in the hands of persons designated.
2. The said vessels were subsequently foreclosed when the business of respondents
declined. However, the bank as trustee failed to render an accounting of the incomes of the
said vessels. This prompted the Litonjuas to file a complaint. The petitioner bank filed a
motion to dismiss on the ground of forum non conveniens and lack of cause of action. The
MD was denied by the lower court. The petitioner filed a petition for review on certiorari with
the CA. The Court of Appeals dismissed. It was treated by the CA as a petition for certiorari.
Issue: Whether or not the case should have been dismissed on the ground of FNC.
HELD:

CONFLICTS
NO. Whether a suit is to be dismissed on the ground of FNC depends largely upon the facts
of the case and is addressed to the sound discretion of the courts. The following requisites
must be met:
- The Philippine court must be one to which the parties may conveniently resort to
- The Philippine courts is in the position to make intelligent decisions as to law and facts
- It has or likely have the power to enforce its decision.
As to the issue on forum shopping, the court held that there is no forum shopping due to the
pendency of the foreign action. Forum shopping exists where elements of litis pendentia are
present and where a final judgement is one case will amount to res judicata in the other.
Litis pendentia presuposses the existence of these elements; identity of parties, identity of
righs asserted and relief prayed for (founded on the same acts) and the identity of the two
cases is such that judgement in one case would amount to res judicata in the other.
Not all the elements for litis pendentia are present here. The petitioner failed to show these
as it merely mentioned that civil cases were filed in Hongkong and UK without showing the
identity of the rights asserted or reliefs sought, as well as the presence of elements of res
judicata should one of the case be adjudged.
Republic of the Philippines
SUPREME COURT
21
FIRST DIVISION
G.R. No. 120077 October 13, 2000
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners,
vs.
CONFLICTS
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND
MARCELO G. SANTOS, respondents.
PARDO, J.:
The case before the Court is a petition for certiorari 1 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
22
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing
Press.
On July 1, 1988, respondent Santos arrived in Manila.
CONFLICTS
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;
23
"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.
CONFLICTS
"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
24
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
CONFLICTS
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 25 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.
CONFLICTS
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.
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.

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
26
"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.

CONFLICTS
MHC AND MHICL vs. NLRC et al China. The Palace Hotel terminated the employment of Santos and paid all benefits due
G.R. No. 120077 him, including his plane fare back to the Philippines. Santos was repatriated to the
October 13, 2000 Philippines.

Santos filed a complaint for illegal dismissal with the Arbitration Branch, NCR, NLRC. He
FACTS: Private respondent Santos was an overseas worker employed as a printer at the
prayed for an award of AD, ED and AF for. The complaint named MHC, MHICL, the Palace
Mazoon Printing Press, Sultanate of Oman. Subsequently he was directly hired by the
Hotel and Mr. Shmidt as respondents. The Palace Hotel and Mr. Shmidt were not served
Palace Hotel, Beijing, Peoples Republic of China and later terminated due to retrenchment.
with summons and neither participated in the proceedings before the LA.
Petitioners are the Manila Hotel Corporation (MHC) and the Manila Hotel International
The LA decided the case against petitioners. Petitioners appealed to the NLRC, arguing that
Company, Limited (MHICL).
the POEA, not the NLRC had jurisdiction over the case. The NLRC promulgated a
resolution, stating that the appealed Decision be declared null and void for want of
When the case was filed in 1990, MHC was still a government-owned and controlled jurisdiction
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. MHC is an
Santos moved for reconsideration of the afore-quoted resolution. He argued that the case
incorporator of MHICL, owning 50% of its capital stock.
was not cognizable by the POEA as he was not an overseas contract worker. The NLRC
granted the motion and reversed itself. The NLRC directed another LA to hear the case on
By virtue of a management agreement with the Palace Hotel, MHICL trained the personnel the question of whether private respondent was retrenched or dismissed. The La found that
and staff of the Palace Hotel at Beijing, China. 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. The NLRC ruled
Now the facts. in favor of private respondent. Petitioners filed an MR arguing that the LAs recommendation
had no basis in law and in fact, however it was denied. Hence, this petition.
During his employment with the Mazoon Printing Press, respondent Santos received a letter
from Mr. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed ISSUE: Is the NLRC a proper forum to decide this case?
respondent Santos that he was recommended by one Buenio, a friend of his. Mr. Shmidt
offered respondent Santos the same position as printer, but with a higher monthly salary
and increased benefits. Respondent Santos wrote to Mr. Shmidt and signified his
acceptance of the offer.

The Palace Hotel Manager, Mr. Henk mailed a ready to sign employment contract to
HELD: petition granted; the orders and resolutions of the NLRC are annulled.
respondent Santos. Santos resigned from the Mazoon Printing Press. Santos wrote the
Palace Hotel and acknowledged Mr. Henks letter. The employment contract stated that his
employment would be for a period of two years. He then started to work at the Palace Hotel. NO

Subsequently, respondent Santos signed an amended employment agreement with the
27 President
Palace Hotel. In the contract, Mr. Shmidt represented the Palace Hotel. The Vice
(Operations and Development) of petitioner MHICL Cergueda signed the employment
agreement under the word noted.
After working in the Palace hotel for less than 1 year, 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
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 Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations. Not
all cases involving our citizens can be tried here.

CONFLICTS
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.
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. 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).
The employment contract was not perfected in the Philippines. 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 Peoples 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, Peoples
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 Santos
retrenchment.
Principle of effectiveness, no power to execute decision. Even assuming that a proper
28
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
CONFLICTS
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. He is
not an overseas contract worker a fact which he admits with conviction.
__
Even assuming that the NLRC was the proper forum, even on the merits, the NLRCs
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 50% of its capital stock. However, this is
not enough to pierce the veil of corporate fiction between MHICL and MHC. In Traders
Royal Bank v. CA, 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.
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. Clear and convincing
evidence is needed to pierce the veil of corporate fiction. In this case, we find no evidence
to show that MHICL and MHC are one and the same entity.
III. MHICL not Liable
Santos predicates MHICLs 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, 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. In Sichangco v. Board of Commissioners of Immigration, 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.
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:
(1) the selection and engagement of the employee; ISSUE: Whether or not the NLRC has jurisdiction over the case.
(2) the payment of wages;
(3) the power to dismiss; and HELD: No. The NLRC is a very inconvenient forum for the following reasons:
(4) the power to control employees conduct.
1. The only link that the Philippines has in this case is the fact that Santos is a Filipino;
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 2. However, the Palace Hotel and MHIL are foreign corporations MHC cannot be
Hotel by his friend, Buenio. MHICL did not engage respondent Santos to work. The terms of held liable because it merely owns 50% of MHIL, it has no direct business in the affairs of
employment were negotiated and finalized through correspondence between Santos, Mr. the Palace Hotel. The veil of corporate fiction cant be pierced because it was not shown
Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel and not that MHC is directly managing the affairs of MHIL. Hence, they are separate entities.
MHICL. Neither did 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 3. Santos contract with the Palace Hotel was not entered into in the Philippines;
terminated respondent Santos services.
4. Santos contract was entered into without the intervention of the POEA (had POEA
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the intervened, NLRC still does not have jurisdiction because it will be the POEA which will hear
same entity. The fact that the Palace Hotel is a member of the Manila Hotel Group is not the case);
enough to pierce the corporate veil between MHICL and the Palace Hotel.
5. MHIL and the Palace Hotel are not doing business in the Philippines; their
agents/officers are not residents of the Philippines;
Considering that the NLRC was forum non-conveniens and considering further that no
employer-employee relationship existed between MHICL, MHC and Santos, the LA clearly
Due to the foregoing, the NLRC cannot possibly determine all the relevant facts pertaining
had no jurisdiction over respondents claim in the NLRC case. In all the cases under the
to the case. It is not competent to determine the facts because the acts complained of
exclusive and original jurisdiction of the LA, an employer-employee relationship is an
happened outside our jurisdiction. It cannot determine which law is applicable. And in case a
indispensable jurisdictional requirement.
judgment is rendered, it cannot be enforced against the Palace Hotel (in the first place, it
was not served any summons).
343 SCRA 1 Private International Law Forum Non Conveniens
The Supreme Court emphasized that under the rule of forum non conveniens, a Philippine
In May 1988, Marcelo Santos was an overseas worker in Oman. In June 1988, he was court or agency may assume jurisdiction over the case if it chooses to do so provided:
recruited by Palace Hotel in Beijing, China. Due to higher pay and benefits, Santos agreed
to the hotels job offer and so he started working there in November 1988. The employment
(1) that the Philippine court is one to which the parties may conveniently resort to;
contract between him and Palace Hotel was however without the intervention of the
Philippine Overseas Employment Administration (POEA). In August 1989, Palace Hotel
notified Santos that he will be laid off due to business reverses. In September 1989, he was (2) that the Philippine court is in a position to make an intelligent decision as to the law and
officially terminated. the facts; and

In February 1990, Santos filed a complaint for illegal dismissal against Manila Hotel (3) that the Philippine court has or is likely to have power to enforce its decision.
29
Corporation (MHC) and Manila Hotel International, Ltd. (MHIL). The Palace Hotel was
impleaded but no summons were served upon it. MHC is a government owned and None of the above conditions are apparent in the case at bar.
controlled corporation. It owns 50% of MHIL, a foreign corporation (Hong Kong). MHIL
manages the affair of the Palace Hotel. The labor arbiter who handled the case ruled in
favor of Santos. The National Labor Relations Commission (NLRC) affirmed the labor
arbiter.

CONFLICTS
 THIRD DIVISION

G.R. Nos. 90306-07 July 30, 1990

K.K. SHELL SEKIYU OSAKA HATSUBAISHO and FU HING OIL CO., LTD., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ATLANTIC VENUS CO., S.A., and THE
VESSEL M/V "ESTELLA",respondents.

Hernandez, Velicaria Vibar & Santiago for petitioners.

Cesar C. Cruz & Partners for private respondents

CORTES, J:

Ordinarily, the Court will not disturb the factual findings of the Court of Appeals, these being
considered final and conclusive. However, when its factual conclusions are manifestly
mistaken, the Court will step in to correct the misapprehension [De la Cruz v. Sosing, 94
Phil. 26 (1953); Castillo v. Court of Appeals, G.R. No. L-48290, September 29, 1983, 124
SCRA 808.] This case is one such instance calling for the Court's review of the facts.

On January 7,1987, Kumagai Kaiun Kaisha, Ltd. (hereinafter referred to as Kumagai), a

corporation formed and existing under the laws of Japan, filed a complaint for the collection
of a sum of money with preliminary attachment against Atlantic Venus Co., S.A. (hereinafter
referred to as "Atlantic"), a corporation registered in Panama, the vessel MV Estella and
Crestamonte Shipping Corporation (hereinafter referred to as "Crestamonte"), a Philippine
corporation. Atlantic is the owner of the MV Estella. The complaint, docketed as Civil Case
No. 8738930 of the Regional Trial Court, Branch XIV, Manila alleged that Crestamonte, as
bareboat charterer and operator of the MV Estella, appointed N.S. Shipping Corporation
(hereinafter referred to as "NSS"), a Japanese corporation, as its general agent in Japan.
The appointment was formalized in an Agency Agreement. NSS in turn appointed Kumagai
as its local agent in Osaka, Japan. Kumagai supplied the MV Estella with supplies and
services but despite repeated demands Crestamonte failed to pay the amounts due.

30 NSS and Keihin Narasaki Corporation (hereinafter referred to a Keihin filed complaints-in-
intervention.

On May 19,1987, petitioner Fu Hing Oil Co., Ltd. (hereinafter referred to as Fu Hing"), a
Republic of the Philippines corporation organized in Hong Kong and not doing business in the Philippines, filed a
SUPREME COURT motion for leave to intervene with an attached complaint-in-intervention, alleging that Fu
Manila Hing supplied marine diesel oil/fuel to the MV Estella and incurred barge expenses for the

CONFLICTS
total sum of One Hundred Fifty-two Thousand Four Hundred Twelve Dollars and Fifty-Six
Cents (US$152,412.56) but such has remained unpaid despite demand and that the claim
constitutes a maritime lien. The issuance of a writ of attachment was also prayed for.
On July 16, 1987, petitioner K.K. Shell Sekiyu Osaka Hatsubaisho (hereinafter referred to
as K.K. Shell"), a corporation organized in Japan and not doing business in the Philippines,
likewise filed a motion to intervene with an attached complaint-in-intervention, alleging that
upon request of NSS, Crestamonte's general agent in Japan, K.K. Shell provided and
supplied marine diesel oil/fuel to the W Estella at the ports of Tokyo and Mutsure in Japan
and that despite previous demands Crestamonte has failed to pay the amounts of Sixteen
Thousand Nine Hundred Ninety-Six Dollars and Ninety- Six Cents (US$16,996.96) and One
Million Yen (Y1,000,000.00) and that K.K. Shell's claim constitutes a maritime lien on the
MV Estella. The complaint-in-intervention sought the issuance of a writ of preliminary
attachment.
The trial court allowed the intervention of Fu Hing and K.K. Shell on June 19,1987 and
August 11, 1987, respectively. Writs of preliminary attachment were issued on August 25,
1987 upon posting of the appropriate bonds. Upon the posting of counterbonds, the writs of
attachment were discharged on September 3, 1987.
Atlantic and the MV Estella moved to dismiss the complaints-in- intervention filed by Fu
Hing and K.K. Shell.
In the meantime, Atlantic and the AWU Estella filed a petition in the Court of Appeals against
the trial court judge, Kumagai, NSS and Keihin, docketed as CA-G.R. SP No. 12999, which
sought the annulment of the orders of the trial court dated April 30, 1987 and August 11,
1987. Among others, the omnibus order dated August 11, 1987 denied the motion to
reconsider the order allowing Fu Hing's intervention and granted K.K. Shell's motion to
intervene. Again Fu Hing and K.K. Shell intervened, CA-G.R. SP No. 12999 was
consolidated with another case (CA-G.R. SP No. 12341). Fu Hing and K.K. Shell intervened
in CA-G.R. SP No. 12999.
In a decision dated June 14, 1989, the Court of Appeals annulled the orders of the trial court
and directed it to cease and desist from proceeding with the case.
31
According to the Court of Appeals, Fu Hing and K.K. Shell were not suppliers but sub-
agents of NSS, hence they were bound by the Agency Agreement between Crestamonte
and NSS, particularly, the choice of forum clause, which provides:
12.0-That this Agreement shall be governed by the Laws of Japan. Any
matters, disputes, and/or differences arising between the parties hereto
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concerned regarding this Agreement shall be subject exclusively to the
jurisdiction of the District Courts of Japan.
Thus, concluded the Court of Appeals, the trial court should have disallowed their motions to
intervene.
A motion for reconsideration was filed by Fu Hing and K.K. Shell but this was denied by the
Court of Appeals. Hence this petition;
In this case, we shall review the decision of the Court of Appeals only insofar as it relate to
the intervention of K.K. Shell. Fu Hing Oil Co., Ltd. filed a motion to withdraw as co-
petitioner on March 7, 1990, alleging that an amicable settlement had been reached with
private respondents. The Court granted the motion on March 19, 1990.
After considering the pleadings filed by the parties and the arguments raised therein, the
Court finds reversible error on the part of the Court of Appeals in so far; as it disallowed
petitioners' intervention in the case before the trial court and ordered the latter to cease and
desist from proceeding with the case.
1. A reading of the Agency Agreement fails to support the conclusion that K.K. Shell is a
sub-agent of NSS and is, therefore, bound by the agreement.
The body of the Agency Agreement entered into by and between Crestamonte (referred to
in the agreement as "Owner") and NSS ("Agent") provides:
WITNESSETH
That the OWNER has appointed and by these presents hereby appoints the AGENT as its
General Agents for all Japan in connection with the Owner's vessels and/or providing
suitable vessels for Japan Ports under the following terms and conditions:
1.0 - In general, the Agent will abide by the Owner's decisions regarding the
mode of operations of the vessels in Japan and that all cargo bookings,
vessel's fixtures/charters, etc. by the Agent, shall always be subject to the
prior approval and consent of the Owners.
2.0 - That the Agent shall provide for the necessary services required for
the husbanding of the Owner's vessels in all Japan Ports and issue Bill(s) of
Lading to Shippers in the form prescribed by the Owners.
 3.0 - That the Agent shall be responsible for fixing south-bound cargoes
with revenues sufficient to cover ordinary liner operation expenses such as
bunkers, additives, lubricating oil, water, running repairs, drydocking
expenses, usual port disbursement accounts, cargo handling charges
including stevedorage, provisions and ship's stores and cash advance to
crew (excluding crew provisions).
The Agent expressly agrees that the Owner's cash flow in Japan shall be
essentially the Agent's responsibility, and should the revenue for south-
bound cargoes as above-mentioned be insufficient to cover the aforesaid
expenses, the Agent shall provide credit to the extent of the vessels'
requirements, provided however that said obligation shall be secured by the
Owner committing at least forty-eight (48) mailings of Japan/Philippines
liner service per year.
The Agent shall settle, in behalf of the Owner, all outstanding payments for
the operation costs on Owner's liner service carried forward from the
present Owner's agent, subject to approval of Owner's Representative in
Japan in regard to amount and nature thereof.
4.0- That the agent shall furnish office space of approximately thirty (30)
square meters for the exclusive use of the Owner and its representatives,
within the premises of the Agent's office, free of charge.
5.0 That the responsibilities of the Agent in regard to the cargo shall
begin, in the case of imports into the territory of Japan, from the time such
cargo has left the ship's tackles, and shall cease, in case of export, upon
completion of loading.
6.0 That the remuneration of the Agent from the Owner shall be as
follows:
xxx xxx xxx
7.0 That the Agent shall exert best efforts to recommend32to Owners
stevedoring and other expenses incurred in connection with work on board
the Owner's vessels, as well as customs house charges, pilotage, harbour
dues, cables, etc. which are for Owner's account, on the cheapest possible
terms. Owners shall decide and may appoint through the Agent the services
described herein.
CONFLICTS
8.0 That the Agent shall be responsible for the due collection of and due
payment to the Owner of all outward freight prepaid for cargo without delay
upon the sailing of each vessel from the port. The Agent shall be also
responsible for the due collection of all inward freight payable at the port
against delivery unless otherwise instructed by the Owner to the contrary.
9.0 The account statements supported by vouchers in two copies
itemized for each service and/or supply for each vessel, shall be forwarded
by the Agent to the Owner promptly after the departure of each vessel but
in no case later than 60 days thereafter.
10.0 That the freightage to be collected by the Agent in Japan shall be
paid to the Owner after deducting the total amount of disbursements
incurred in Japan.
11.0 That this Agreement takes effect as of April 15, 1983 and shall
remain in force unless terminated by either party upon 60 days notice.
12.0 That this Agreement shall be governed by the Laws of Japan. Any
matters, disputes, and/or differences arising between the parties hereto
concerned regarding this reement shall be subject exclusively to the
jurisdiction of the District Courts of Japan. [Annex "G" of the Petition, Rollo,
pp. 100-104.]
No express reference to the contracting of sub-agents or the applicability of the terms of the
agreement, particularly the choice-of-forum clause, to sub-agents is made in the text of the
agreement. What the contract clearly states are NSS' principal duties, i.e., that it shall
provide for the necessary services required for the husbanding of Crestamonte's vessels in
Japanese ports (section 2.0) and shall be responsible for fixing southbound cargoes with
revenues sufficient to cover ordinary expenses (section 3.0).itc-asl
Moreover, the complaint-in-intervention filed by K.K. Shell merely alleges that it provided
and supplied the MV Estella with marine diesel oil/fuel, upon request of NSS who was
acting for and as duly appointed agent of Crestamonte [Rollo, pp. 116117.] There is thus no
basis for the Court of Appeal's finding, as regards K.K Shell in relation to its intervention in
Civil Case No. 87-38930, that "the sub-agents admitted in their pleadings that they were
appointed as local agent/sub-agent or representatives by NSS by virtue of said Agency
Agreement" [Decision, p. 7; Rollo, p. 33.] What the Court of Appeals could have been
referring to was K.K. Shell's Urgent Motion for Leave to Intervene dated February 24, 1987
in another case (Civil Case No. 86-38704) in another court and involving other vessels (NW
Ofelia and MV Christina C), where it was alleged that K.K. Shell is "one of the
representatives of NS Shipping Corporation for the supply of bunker oil, fuel oil, provisions
and other necessaries to vessels of which NS Shipping Corporation was the general agent."
[Comment, p. 17; Rollo, p. 274.] However, this allegation does not conclusively establish a
sub-agency between NSS and K.K. Shell. It is therefore surprising how the Court of Appeals
could have come to the conclusion, just on the basis of the Agency Agreement and the
pleadings filed in the trial court, that "Crestamonte is the principal, NSS is the agent and ...
Fu Hing and K.K Shell are the sub-agents." [Decision, p. 6; Rollo, p. 32.]
In view of the inconclusiveness of the Agency Agreement and the pleadings filed in the trial
court, additional evidence, if there be any, would still have to be presented to establish the
allegation that K.K. Shell is a sub-agent of NSS.
In the same vein, as the choice-of-forum clause in the agreement (paragraph 12.0) has not
been conclusively shown to be binding upon K.K. Shell, additional evidence would also still
have to be presented to establish this defense, K.K. Shell cannot therefore, as of yet, be
barred from instituting an action in the Philippines.
2. Private respondents have anticipated the possibility that the courts will not find that K.K.
Shell is expressly bound by the Agency Agreement, and thus they fall back on the argument
that even if this were so, the doctrine of forum non conveniens would be a valid ground to
cause the dismissal of K.K. Shell's complaint-in-intervention.
still to be conducted, whether or not petitioners are indeed maritime lienholders and as such
may enforce the lien against the MV Estella are matters that still have to be established.
Neither are we ready to rule on the private respondents' invocation of the doctrine of forum
non conveniens, as the exact nature of the relationship of the parties is still to be
established. We leave this matter to the sound discretion of the trial court judge who is in
the best position, after some vital facts are established, to determine whether special
circumstances require that his court desist from assuming jurisdiction over the suit.
It was clearly reversible error on the. part of the Court of Appeals to annul the trial court's
orders, insofar as K.K. Shell is concerned, and order the trial court to cease and desist from
proceeding with Civil Case No. 87-38930. There are still numerous material facts to be
established in order to arrive at a conclusion as to the true nature of the relationship
between Crestamonte and K.K. Shell and between NSS and K.K. Shell. The best recourse
would have been to allow the trial court to proceed with Civil Case No. 87-38930 and
consider whatever defenses may be raised by private respondents after they have filed their
answer and evidence to support their conflicting claims has been presented. The Court of
Appeals, however, substituted its judgment for that of the trial court and decided the merits
of the case, even in the absence of evidence, on the pretext of reviewing an interlocutory
order.

K.K. Shell counters this argument by invoking its right as maritime lienholder. It cites WHEREFORE, the petition is GRANTED and the decision of the Court of Appeals is
Presidential Decree No. 1521, the Ship Mortgage Decree of 1978, which provides: REVERSED in CA-G.R. SP No. 12999, insofar as it annulled the order of the August 11,
1987 and directed the trial court to cease and desist from proceeding with Civil Case No.
87-38930.
SEC. 21. Maritime Lien for Necessaries; person entitled to such lien-Any
person furnishing repairs, supplies, to wage, use of dry dock or marine
railway, or other necessaries, to any vessel, whether foreign or domestic, SO ORDERED.
upon the order of the owner of such vessel, or of a person authorized by
the owner, shall have a maritime lien on the vessel, which may be enforced
by suit in rem, and it shall be necessary to allege or prove that credit was
given to the vessel.

Private respondents on the other hand argue that even if P.D. No. 1521 is applicable, K.K.
Shell cannot rely on the maritime lien because the fuel was provided not exclusively for the
benefit of the MV Estella, but for the benefit of Crestamonte in general. Under the law it
33
must be established that the credit was extended to the vessel itself. Now, this is a defense
that calls precisely for a factual determination by the trial court of who benefitted from the
delivery of the fuel. Hence, again, the necessity for the reception of evidence before the trial
court.

In other words, considering the dearth of evidence due to the fact that the private
respondents have yet to file their answer in the proceedings below and trial on the merits is

CONFLICTS
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

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
34 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
CONFLICTS
"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 complaint 6 in Civil Case No. 91-294, was filed with the Regional
Trial Court of Makati, Branch 134 by ITEC, INC. Plaintiff sought to enjoin, first, preliminarily
and then, after trial, permanently; (1) defendants DIGITAL, CMDI, and Francisco Aguirre
and their agents and business associates, to cease and desist from selling or attempting to
sell to PLDT and to any other party, products which have been copied or manufactured "in
like manner, similar or identical to the products, wares and equipment of plaintiff," and (2)
35
defendant ASPAC, to cease and desist from using in its corporate name, letter heads,
envelopes, sign boards and business dealings, plaintiff's trademark, internationally known
as ITEC; and the recovery from defendants in solidum, damages of at least P500,000.00,
attorney's fees and litigation expenses.
In due time, defendants filed a motion to dismiss 7 the complaint on the following grounds:
CONFLICTS
(1) That plaintiff has no legal capacity to sue as it is a foreign corporation doing business in
the Philippines without the required BOI authority and SEC license, and (2) that plaintiff is
simply engaged in forum shopping which justifies the application against it of the principle of
"forum non conveniens".
On February 8, 1991, the complaint was amended by virtue of which ITEC
INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC. 8
In their Supplemental Motion to Dismiss, 9 defendants took note of the amendment of the
complaint and asked the court to consider in toto their motion to dismiss and their
supplemental motion as their answer to the amended complaint.
After conducting hearings on the prayer for preliminary injunction, the court a quo on
February 22, 1991, issued its Order: 10 (1) denying the motion to dismiss for being devoid of
legal merit with a rejection of both grounds relied upon by the defendants in their motion to
dismiss, and (2) directing the issuance of a writ of preliminary injunction on the same day.
From the foregoing order, petitioners elevated the case to the respondent Court of Appeals
on a Petition for Certiorari and Prohibition 11 under Rule 65 of the Revised Rules of Court,
assailing and seeking the nullification and the setting aside of the Order and the Writ of
Preliminary Injunction issued by the Regional Trial Court.
The respondent appellate court stated, thus:
We find no reason whether in law or from the facts of record, to disagree with the (lower
court's) ruling. We therefore are unable to find in respondent Judge's issuance of said writ
the grave abuse of discretion ascribed thereto by the petitioners.
In fine, We find that the petition prima facie does not show that Certiorari lies in the present
case and therefore, the petition does not deserve to be given due course.
WHEREFORE, the present petition should be, as it is hereby, denied due course and
accordingly, is hereby dismissed. Costs against the petitioners.
SO ORDERED. 12
Petitioners filed a motion for reconsideration 13 on June 7, 1991, which was likewise denied
by the respondent court.
WHEREFORE, the present motion for reconsideration should be, as it is hereby, denied for
lack of merit. For the same reason, the motion to have the motion for reconsideration set for
oral argument likewise should be and is hereby denied. xxx xxx xxx

SO ORDERED. 14
3.0 Duties of Representative
Petitioners are now before us via Petition for Review on Certiorari 15 under Rule 45 of the
3.1. REPRESENTATIVE SHALL:
Revised Rules of Court.
3.1.1. Not represent or offer for sale within the Territory any product which competes with an
It is the petitioners' submission that private respondents are foreign corporations actually
existing ITEC product or any product which ITEC has under active development.
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 3.1.2. Actively solicit all potential customers within the Territory in a systematic and business
Representative Agreement, petitioner ASPAC executed with private respondent ITEC, are like manner.
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 3.1.3. Inform ITEC of all request for proposals, requests for bids, invitations to bid and the
petitioner ASPAC to a mere conduit or extension of private respondents in the Philippines. like within the Territory.

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.
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

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:
36
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.
CONFLICTS
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.
37
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:
CONFLICTS
(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
38
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
CONFLICTS
true test, however, seems to be whether the foreign corporation is continuing the body or
substance of the business or enterprise for which it was organized. 30
Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include:
soliciting orders, purchases, service contracts, opening offices, whether called "liaison"
offices or branches; appointing representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for a period or periods
totalling one hundred eighty (180) days or more; participating in the management,
supervision or control of any domestic business firm, entity or corporation in the Philippines,
and any other act or acts that imply a continuity or commercial dealings or arrangements
and contemplate to that extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution of, commercial gain or of
the purpose and object of the business organization.
Thus, a foreign corporation with a settling agent in the Philippines which issued twelve
marine policies covering different shipments to the Philippines 31 and a foreign corporation
which had been collecting premiums on outstanding policies 32 were regarded as doing
business here.
The same rule was observed relating to a foreign corporation with an "exclusive distributing
agent" in the Philippines, and which has been selling its products here since 1929, 33 and a
foreign corporation engaged in the business of manufacturing and selling computers
worldwide, and had installed at least 26 different products in several corporations in the
Philippines, and allowed its registered logo and trademark to be used and made it known
that there exists a designated distributor in the Philippines. 34
In Georg Grotjahn GMBH and Co. vs. Isnani, 35 it was held that the uninterrupted
performance by a foreign corporation of acts pursuant to its primary purposes and functions
as a regional area headquarters for its home office, qualifies such corporation as one doing
business in the country.
These foregoing instances should be distinguished from a single or isolated transaction or
occasional, incidental, or casual transactions, which do not come within the meaning of the
law, 36 for in such case, the foreign corporation is deemed not engaged in business in the
Philippines.
Where a single act or transaction, however, is not merely incidental or casual but indicates
the foreign corporation's intention to do other business in the Philippines, said single act or
transaction constitutes "doing" or "engaging in" or "transacting" business in the
Philippines. 37
In determining whether a corporation does business in the Philippines or not, aside from
their activities within the forum, reference may be made to the contractual agreements
entered into by it with other entities in the country. Thus, in the Top-Weld case ( supra), the
foreign corporation's LICENSE AND TECHNICAL AGREEMENT and DISTRIBUTOR
AGREEMENT with their local contacts were made the basis of their being regarded by this
Tribunal as corporations doing business in the country. Likewise, in Merill Lynch
Futures, Inc. vs. Court of Appeals, etc. 38 the FUTURES CONTRACT entered into by the
petitioner foreign corporation weighed heavily in the court's ruling.
With the abovestated precedents in mind, we are persuaded to conclude that private
respondent had been "engaged in" or "doing business" in the Philippines for some time now.
This is the inevitable result after a scrutiny of the different contracts and agreements
entered into by ITEC with its various business contacts in the country, particularly ASPAC
and Telephone Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a local
electronics firm engaged by ITEC to be its local technical representative, and to create a
service center for ITEC products sold locally. Its arrangements, with these entities indicate
convincingly ITEC's purpose to bring about the situation among its customers and the
general public that they are dealing directly with ITEC, and that ITEC is actively engaging in
business in the country.
In its Master Service Agreement 39 with TESSI, private respondent required its local
technical representative to provide the employees of the technical and service center with
ITEC identification cards and business cards, and to correspond only on ITEC, Inc.,
letterhead. TESSI personnel are instructed to answer the telephone with "ITEC Technical
Assistance Center.", such telephone being listed in the telephone book under the heading of
ITEC Technical Assistance Center, and all calls being recorded and forwarded to ITEC on a
weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly report detailing the failure
and repair of ITEC products, and to requisition monthly the materials and components
needed to replace stock consumed in the warranty repairs of the prior month.
A perusal of the agreements between petitioner ASPAC and the respondents shows that
there are provisions which are highly restrictive in nature, such as to reduce petitioner
ASPAC to a mere extension or instrument of the private respondent.
39
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
CONFLICTS
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 from40the license
requirement in order to institute an action in our courts if its representative in the country
maintained an independent status during the existence of the disputed contract. Petitioner is
deemed to have acceded to such independent character when it entered into the
Representative Agreement with ITEC, particularly, provision 6.2 (supra).
CONFLICTS
Petitioner's insistence on the dismissal of this action due to the application, or non
application, of the private international law rule of forum non conveniens defies well-settled
rules of fair play. According to petitioner, the Philippine Court has no venue to apply its
discretion whether to give cognizance or not to the present action, because it has not
acquired jurisdiction over the person of the plaintiff in the case, the latter allegedly having no
personality to sue before Philippine Courts. This argument is misplaced because the court
has already acquired jurisdiction over the plaintiff in the suit, by virtue of his filing the original
complaint. And as we have already observed, petitioner is not at liberty to question plaintiff's
standing to sue, having already acceded to the same by virtue of its entry into the
Representative Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts of
the case, whether to give due course to the suit or dismiss it, on the principle of forum non
convenience. 47 Hence, the Philippine Court may refuse to assume jurisdiction in spite of its
having acquired jurisdiction. Conversely, the court may assume jurisdiction over the case if
it chooses to do so; provided, that the following requisites are met: 1) That the Philippine
Court is one to which the parties may conveniently resort to; 2) That the Philippine Court is
in a position to make an intelligent decision as to the law and the facts; and, 3) That the
Philippine Court has or is likely to have power to enforce its decision. 48
The aforesaid requirements having been met, and in view of the court's disposition to give
due course to the questioned action, the matter of the present forum not being the "most
convenient" as a ground for the suit's dismissal, deserves scant consideration.
IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby DISMISSED. The
decision of the Court of Appeals dated June 7, 1991, upholding the RTC Order dated
February 22, 1991, denying the petitioners' Motion to Dismiss, and ordering the issuance of
the Writ of Preliminary Injunction, is hereby affirmed in toto.
SO ORDERED.
 ISSUE:
1. Did the Philippine court acquire jurisdiction over the person of the petitioner corp, despite
allegations of lack of capacity to sue because of non-registration?
2. Can the Philippine court give due course to the suit or dismiss it, on the principle of forum
non convenience?

HELD: petition dismissed.

1. YES; We are persuaded to conclude that ITEC had been engaged in or doing
COMMUNICATION MATERIALS AND DESIGN, INC et al vs.CA et al.
business in the Philippines for some time now. This is the inevitable result after a scrutiny
G.R. No. 102223
of the different contracts and agreements entered into by ITEC with its various business
August 22, 1996
contacts in the country. Its arrangements, with these entities indicate convincingly that ITEC
is actively engaging in business in the country.
FACTS: Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI) and
ASPAC MULTI-TRADE INC., (ASPAC) are both domestic corporations.. Private
A foreign corporation doing business in the Philippines may sue in Philippine Courts
Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC) are corporations duly
although not authorized to do business here against a Philippine citizen or entity who had
organized and existing under the laws of the State of Alabama, USA. There is no dispute
contracted with and benefited by said corporation. To put it in another way, a party is
that ITEC is a foreign corporation not licensed to do business in the Philippines.
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
ITEC entered into a contract with ASPAC referred to as Representative Agreement. applies to a foreign as well as to domestic corporations. One who has dealt with a
Pursuant to the contract, ITEC engaged ASPAC as its exclusive representative in the corporation of foreign origin as a corporate entity is estopped to deny its corporate existence
Philippines for the sale of ITECs products, in consideration of which, ASPAC was paid a and capacity.
stipulated commission. Through a License Agreement entered into by the same parties
later on, ASPAC was able to incorporate and use the name ITEC in its own name. Thus ,
In Antam Consolidated Inc. vs. CA et al. we expressed our chagrin over this commonly used
ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC (Philippines).
scheme of defaulting local companies which are being sued by unlicensed foreign
One year into the second term of the parties Representative Agreement, ITEC decided to
companies not engaged in business in the Philippines to invoke the lack of capacity to sue
terminate the same, because petitioner ASPAC allegedly violated its contractual
of such foreign companies. Obviously, the same ploy is resorted to by ASPAC to prevent the
commitment as stipulated in their agreements. ITEC charges the petitioners and another
injunctive action filed by ITEC to enjoin petitioner from using knowledge possibly acquired in
Philippine Corporation, DIGITAL BASE COMMUNICATIONS, INC. (DIGITAL), the President
violation of fiduciary arrangements between the parties.
of which is likewise petitioner Aguirre, of using knowledge and information of ITECs
products specifications to develop their own line of equipment and product support, which
are similar, if not identical to ITECs own, and offering them to ITECs former customer. 2. YES; Petitioners 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
The complaint was filed with the RTC-Makati by ITEC, INC. Defendants filed a MTD the
discretion whether to give cognizance or not to the present action, because it has not
complaint on the following grounds: (1) That plaintiff has no legal capacity to sue as it is a
acquired jurisdiction over the person of the plaintiff in the case, the latter allegedly having no
foreign corporation doing business in the Philippines without the required BOI authority
41 and
personality to sue before Philippine Courts. This argument is misplaced because the court
SEC license, and (2) that plaintiff is simply engaged in forum shopping which justifies the
has already acquired jurisdiction over the plaintiff in the suit, by virtue of his filing the original
application against it of the principle of forum non conveniens. The MTD was denied.
complaint. And as we have already observed, petitioner is not at liberty to question plaintiffs
standing to sue, having already acceded to the same by virtue of its entry into the
Petitioners elevated the case to the respondent CA on a Petition for Certiorari and Representative Agreement referred to earlier.
Prohibition under Rule 65 of the Revised ROC. It was dismissed as well. MR denied, hence
this Petition for Review on Certiorari under Rule 45.

CONFLICTS
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. 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: Republic of the Philippines
SUPREME COURT
1) That the Philippine Court is one to which the parties may conveniently resort to; Manila
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. SECOND DIVISION
The aforesaid requirements having been met, and in view of the courts disposition to give
due course to the questioned action, the matter of the present forum not being the most G.R. No. 162894 February 26, 2008
convenient as a ground for the suits dismissal, deserves scant consideration.
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 Decision 1 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
42 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
CONFLICTS
Pablo C. Espiritu, Jr. rendered judgment ordering BMSI and RUST to pay respondents
money claims.5 Upon appeal by BMSI, the NLRC reversed the decision of the Labor Arbiter
and dismissed respondents complaint on the ground of lack of jurisdiction. 6 Respondent
elevated the case to this Court but was dismissed in a Resolution dated 26 November 1997.
The Resolution became final and executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for
damages before the Regional Trial Court (RTC) of Bauang, La Union. The
Complaint,7 docketed as Civil Case No. 1192-BG, named as defendants herein petitioner
Raytheon International, Inc. as well as BMSI and RUST, the two corporations impleaded in
the earlier labor case. The complaint essentially reiterated the allegations in the labor case
that BMSI verbally employed respondent to negotiate the sale of services in government
projects and that respondent was not paid the commissions due him from the Pinatubo
dredging project which he secured on behalf of BMSI. The complaint also averred that BMSI
and RUST as well as petitioner itself had combined and functioned as one company.
In its Answer,8 petitioner alleged that contrary to respondents claim, it was a foreign
corporation duly licensed to do business in the Philippines and denied entering into any
arrangement with respondent or paying the latter any sum of money. Petitioner also denied
combining with BMSI and RUST for the purpose of assuming the alleged obligation of the
said companies.9 Petitioner also referred to the NLRC decision which disclosed that per the
written agreement between respondent and BMSI and RUST, denominated as "Special
Sales Representative Agreement," the rights and obligations of the parties shall be
governed by the laws of the State of Connecticut. 10 Petitioner sought the dismissal of the
complaint on grounds of failure to state a cause of action and forum non conveniens and
prayed for damages by way of compulsory counterclaim. 11
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on
Affirmative Defenses and for Summary Judgment12 seeking the dismissal of the complaint
on grounds of forum non conveniens and failure to state a cause of action. Respondent
opposed the same. Pending the resolution of the omnibus motion, the deposition of Walter
Browning was taken before the Philippine Consulate General in Chicago. 13
In an Order14 dated 13 September 2000, the RTC denied petitioners omnibus motion. The
trial court held that the factual allegations in the complaint, assuming the same to be
admitted, were sufficient for the trial court to render a valid judgment thereon.43
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
16
Petitioner filed a Motion for Reconsideration of the order, which motion was opposed by
respondent.17 In an Order dated 31 July 2001,18 the trial court denied petitioners motion.
CONFLICTS
Thus, it filed a Rule 65 Petition 19 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 Decision 21 denying the
petition for certiorari for lack of merit. It also denied petitioners motion for reconsideration in
the assailed Resolution issued on 10 March 2004.22
The appellate court held that although the trial court should not have confined itself to the
allegations in the complaint and should have also considered evidence aliunde in resolving
petitioners omnibus motion, it found the evidence presented by petitioner, that is, the
deposition of Walter Browning, insufficient for purposes of determining whether the
complaint failed to state a cause of action. The appellate court also stated that it could not
rule one way or the other on the issue of whether the corporations, including petitioner,
named as defendants in the case had indeed merged together based solely on the evidence
presented by respondent. Thus, it held that the issue should be threshed out during
trial.23 Moreover, the appellate court deferred to the discretion of the trial court when the
latter decided not to desist from assuming jurisdiction on the ground of the inapplicability of
the principle of forum non conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO
DISMISS THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION
AGAINST RAYTHEON INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO
DISMISS THE COMPLAINT ON THE GROUND OF FORUM NON
CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino
Padua Law Office, counsel on record for respondent, manifested that the lawyer handling
the case, Atty. Rogelio Karagdag, had severed relations with the law firm even before the
filing of the instant petition and that it could no longer find the whereabouts of Atty.
Karagdag or of respondent despite diligent efforts. In a Resolution 25 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 instances 27 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
44 only when
the substantive issues of the instant case develop, that is, after hearing on the merits proceeds before
the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse
impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties
are not precluded from seeking remedies elsewhere.34 Petitioners averments of the foreign elements
CONFLICTS
in the instant case are not sufficient to oust the trial court of its jurisdiction over Civil Case No. No.
1192-BG and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires
a factual determination; hence, it is more properly considered as a matter of defense. While it is within
the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so
only after vital facts are established, to determine whether special circumstances require the courts
desistance.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.
 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
RAYTHEON V. ROUZIE (2008) to a foreign forum. This is an exercise of sovereign prerogative of the country where the case is filed.

[ G.R. No. 162894, February 26, 2008 ] 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.

FACTS:
Sometime in 1990, Brand Marine Services, Inc., a corporation duly organized and existing under
the laws of the State of Connecticut, United States of America, and respondent Stockton W. Rouzie,
Jr., an American citizen, entered into a contract whereby BMSI hired respondent as its representative
to negotiate the sale of services in several government projects in the Philippines for an agreed
remuneration of 10% of the gross receipts. On 11 March 1992, respondent secured a service contract
with the Republic of the Philippines on behalf of BMSI for the dredging of rivers affected by the Mt.
Pinatubo eruption and mudflows.
On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations
Commission, a suit against BMSI and Rust International, Inc., Rodney C. Gilbert and Walter G.
Browning for alleged nonpayment of commissions, illegal termination and breach of employment
contract.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before
the Regional Trial Court of Bauang, La Union. The Complaint named as defendants herein petitioner
Raytheon International, Inc. as well as BMSI and RUST, the two corporations impleaded in the earlier
labor case.
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.The choice of law stipulation will become relevant only when
the substantive issues of the instant case develop, that is, after hearing on the merits proceeds before
the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse
impositions on its jurisdiction where it is not the most convenient or available forum and the parties
are not precluded from seeking remedies elsewhere. Petitioners averments of the foreign elements in
the instant case are not sufficient to oust the trial court of its jurisdiction over Civil Case No. No. 1192-
BG and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires
a factual determination; hence, it is more properly considered as a matter of defense. While it is within
the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so
only after vital facts are established, to determine whether special circumstances require the courts
desistance.

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 lawsof the State of Connecticut.
Petitioner sought the dismissal of the complaint on grounds of failure to state a cause of action
and forum non conveniens and prayed for damages by way of compulsory counterclaim.

Petitioner asserts that the written contract between respondent and BMSI included a valid choice of
law clause, that is, that the contract shall be governed by the laws of the State of Connecticut. It also
mentions the presence of foreign elements in the dispute namely, the parties and witnesses involved
are American corporations and citizens and the evidence to be presented is located outside the
Philippines that renders our local courts inconvenient forums. 45

ISSUE:

WHETHER OR NOT THE COMPLAINT BE DISMISSED ON THE GROUND OF FORUM NON

CONVENIENS?

RULING:

CONFLICTS
 G.R. No. 125078 May 30, 2011

BERNABE L. NAVIDA, ET AL Petitioners,

vs.
HON. TEODORO A. DIZON, JR., Presiding Judge, Regional Trial Court, Branch 37,
General Santos City, SHELL OIL CO., DOW CHEMICAL CO., OCCIDENTAL CHEMICAL
CORP., STANDARD FRUIT CO., STANDARD FRUIT & STEAMSHIP CO., DOLE FOOD
CO., INC., DOLE FRESH FRUIT CO., DEL MONTE FRESH PRODUCE N.A., DEL MONTE
TROPICAL FRUIT CO., CHIQUITA BRANDS INTERNATIONAL, INC. and CHIQUITA
BRANDS, INC., Respondents.
DECISION

LEONARDO-DE CASTRO, J.:

Before the Court are consolidated Petitions for Review on Certiorari under Rule 45 of the
Rules of Court, which arose out of two civil cases that were filed in different courts but
whose factual background and issues are closely intertwined.

The petitions in G.R. Nos. 1250781 and 1255982 both assail the Order3 dated May 20, 1996
of the Regional Trial Court (RTC) of General Santos City, Branch 37, in Civil Case No. 5617.
The said Order decreed the dismissal of the case in view of the perceived lack of jurisdiction
of the RTC over the subject matter of the complaint. The petition in G.R. No. 125598 also
challenges the Orders dated June 4, 19964 and July 9, 1996,5 which held that the RTC of
General Santos City no longer had jurisdiction to proceed with Civil Case No. 5617.

On the other hand, the petitions in G.R. Nos. 126654, 6 127856,7 and 1283988 seek the
reversal of the Order9dated October 1, 1996 of the RTC of Davao City, Branch 16, in Civil
Case No. 24,251-96, which also dismissed the case on the ground of lack of jurisdiction.

G.R. Nos. 125078, 125598, 126654, 127856, and 128398 were consolidated in the
Resolutions dated February 10, 1997,10 April 28, 199711 and March 10, 1999.12

The factual antecedents of the petitions are as follows:

46
Proceedings before the Texas Courts
Republic of the Philippines
SUPREME COURT Beginning 1993, a number of personal injury suits were filed in different Texas state courts
Manila by citizens of twelve foreign countries, including the Philippines. The thousands of plaintiffs
sought damages for injuries they allegedly sustained from their exposure to
dibromochloropropane (DBCP), a chemical used to kill nematodes (worms), while working
FIRST DIVISION on farms in 23 foreign countries. The cases were eventually transferred to, and consolidated

CONFLICTS
in, the Federal District Court for the Southern District of Texas, Houston Division. The cases
therein that involved plaintiffs from the Philippines were "Jorge Colindres Carcamo, et al. v.
Shell Oil Co., et al.," which was docketed as Civil Action No. H-94-1359, and "Juan Ramon
Valdez, et al. v. Shell Oil Co., et al.," which was docketed as Civil Action No. H-95-1356. The
defendants in the consolidated cases prayed for the dismissal of all the actions under the
doctrine of forum non conveniens.
In a Memorandum and Order dated July 11, 1995, the Federal District Court conditionally
granted the defendants motion to dismiss. Pertinently, the court ordered that:
Delgado, Jorge Carcamo, Valdez and Isae Carcamo will be dismissed 90 days after the
entry of this Memorandum and Order provided that defendants and third- and fourth-party
defendants have:
(1) participated in expedited discovery in the United States xxx;
(2) either waived or accepted service of process and waived any other jurisdictional defense
within 40 days after the entry of this Memorandum and Order in any action commenced by a
plaintiff in these actions in his home country or the country in which his injury occurred. Any
plaintiff desiring to bring such an action will do so within 30 days after the entry of this
Memorandum and Order;
(3) waived within 40 days after the entry of this Memorandum and Order any limitations-
based defense that has matured since the commencement of these actions in the courts of
Texas;
(4) stipulated within 40 days after the entry of this Memorandum and Order that any
discovery conducted during the pendency of these actions may be used in any foreign
proceeding to the same extent as if it had been conducted in proceedings initiated there;
and
(5) submitted within 40 days after the entry of this Memorandum and Order an agreement
binding them to satisfy any final judgment rendered in favor of plaintiffs by a foreign court.
xxxx 47
Notwithstanding the dismissals that may result from this Memorandum and Order, in the
event that the highest court of any foreign country finally affirms the dismissal for lack of
jurisdiction of an action commenced by a plaintiff in these actions in his home country or the
country in which he was injured, that plaintiff may return to this court and, upon proper
motion, the court will resume jurisdiction over the action as if the case had never been
dismissed for [forum non conveniens].13
CONFLICTS
Civil Case No. 5617 before the RTC of General Santos City and G.R. Nos. 125078 and
125598
In accordance with the above Memorandum and Order, a total of 336 plaintiffs from General
Santos City (the petitioners in G.R. No. 125078, hereinafter referred to as NAVIDA, et al.)
filed a Joint Complaint14 in the RTC of General Santos City on August 10, 1995. The case
was docketed as Civil Case No. 5617. Named as defendants therein were: Shell Oil Co.
(SHELL); Dow Chemical Co. (DOW); Occidental Chemical Corp. (OCCIDENTAL); Dole
Food Co., Inc., Dole Fresh Fruit Co., Standard Fruit Co., Standard Fruit and Steamship Co.
(hereinafter collectively referred to as DOLE); Chiquita Brands, Inc. and Chiquita Brands
International, Inc. (CHIQUITA); Del Monte Fresh Produce N.A. and Del Monte Tropical Fruit
Co. (hereinafter collectively referred to as DEL MONTE); Dead Sea Bromine Co., Ltd.;
Ameribrom, Inc.; Bromine Compounds, Ltd.; and Amvac Chemical Corp. (The
aforementioned defendants are hereinafter collectively referred to as defendant companies.)
Navida, et al., prayed for the payment of damages in view of the illnesses and injuries to the
reproductive systems which they allegedly suffered because of their exposure to DBCP.
They claimed, among others, that they were exposed to this chemical during the early
1970s up to the early 1980s when they used the same in the banana plantations where
they worked at; and/or when they resided within the agricultural area where such chemical
was used. Navida, et al., claimed that their illnesses and injuries were due to the fault or
negligence of each of the defendant companies in that they produced, sold and/or otherwise
put into the stream of commerce DBCP-containing products. According to NAVIDA, et al.,
they were allowed to be exposed to the said products, which the defendant companies
knew, or ought to have known, were highly injurious to the formers health and well-being.
Instead of answering the complaint, most of the defendant companies respectively filed their
Motions for Bill of Particulars. 15 During the pendency of the motions, on March 13, 1996,
NAVIDA, et al., filed an Amended Joint Complaint, 16 excluding Dead Sea Bromine Co., Ltd.,
Ameribrom, Inc., Bromine Compounds, Ltd. and Amvac Chemical Corp. as party
defendants.
Again, the remaining defendant companies filed their various Motions for Bill of
Particulars.17 On May 15, 1996, DOW filed an Answer with Counterclaim. 18
On May 20, 1996, without resolving the motions filed by the parties, the RTC of General
Santos City issued an Order dismissing the complaint. First, the trial court determined that it
did not have jurisdiction to hear the case, to wit:
THE COMPLAINT FOR DAMAGES FILED WITH THE REGIONAL TRIAL COURT SHOULD
BE DISMISSED FOR LACK OF JURISDICTION
xxxx
The substance of the cause of action as stated in the complaint against the defendant
foreign companies cites activity on their part which took place abroad and had occurred
outside and beyond the territorial domain of the Philippines. These acts of defendants cited
in the complaint included the manufacture of pesticides, their packaging in containers, their
distribution through sale or other disposition, resulting in their becoming part of the stream
of commerce.
Accordingly, the subject matter stated in the complaint and which is uniquely particular to
the present case, consisted of activity or course of conduct engaged in by foreign
defendants outside Philippine territory, hence, outside and beyond the jurisdiction of
Philippine Courts, including the present Regional Trial Court. 19
Second, the RTC of General Santos City declared that the tort alleged by Navida, et al., in
their complaint is a tort category that is not recognized in Philippine laws. Said the trial
court:
THE TORT ASSERTED IN THE PRESENT COMPLAINT AGAINST DEFENDANT
FOREIGN COMPANIES IS NOT WITHIN THE SUBJECT MATTER JURISDICTION OF
THE REGIONAL TRIAL COURT, BECAUSE IT IS NOT A TORT CATEGORY WITHIN THE
PURVIEW OF THE PHILIPPINE LAW
The specific tort asserted against defendant foreign companies in the present complaint is
product liability tort. When the averments in the present complaint are examined in terms of
the particular categories of tort recognized in the Philippine Civil Code, it becomes stark
clear that such averments describe and identify the category of specific tort known
as product liability tort. This is necessarily so, because it is the productmanufactured by
defendant foreign companies, which is asserted to be the proximate cause of the damages
sustained by the plaintiff workers, and the liability of the defendant foreign companies, is
premised on being the manufacturer of the pesticides.
It is clear, therefore, that the Regional Trial Court has jurisdiction over the present case, if
and only if the Civil Code of the Philippines, or a suppletory special law prescribes a product
liability tort, inclusive of and comprehending the specific tort described in the complaint of
48
the plaintiff workers.20
Third, the RTC of General Santos City adjudged that Navida, et al., were coerced into
submitting their case to the Philippine courts, viz:
FILING OF CASES IN THE PHILIPPINES - COERCED AND ANOMALOUS
CONFLICTS
The Court views that the plaintiffs did not freely choose to file the instant action, but rather
were coerced to do so, merely to comply with the U.S. District Courts Order dated July 11,
1995, and in order to keep open to the plaintiffs the opportunity to return to the U.S. District
Court.21
Fourth, the trial court ascribed little significance to the voluntary appearance of the
defendant companies therein, thus:
THE DEFENDANTS SUBMISSION TO JURISDICTION IS CONDITIONAL AS IT IS
ILLUSORY
Defendants have appointed their agents authorized to accept service of
summons/processes in the Philippines pursuant to the agreement in the U.S. court that
defendants will voluntarily submit to the jurisdiction of this court. While it is true that this
court acquires jurisdiction over persons of the defendants through their voluntary
appearance, it appears that such voluntary appearance of the defendants in this case is
conditional. Thus in the "Defendants Amended Agreement Regarding Conditions of
Dismissal for Forum Non Conveniens" (Annex to the Complaint) filed with the U.S. District
Court, defendants declared that "(t)he authority of each designated representative to accept
service of process will become effective upon final dismissal of these actions by the Court".
The decision of the U.S. District Court dismissing the case is not yet final and executory
since both the plaintiffs and defendants appealed therefrom (par. 3(h), 3(i), Amended
Complaint). Consequently, since the authority of the agent of the defendants in the
Philippines is conditioned on the final adjudication of the case pending with the U.S. courts,
the acquisition of jurisdiction by this court over the persons of the defendants is also
conditional. x x x.
The appointment of agents by the defendants, being subject to a suspensive condition, thus
produces no legal effect and is ineffective at the moment. 22
Fifth, the RTC of General Santos City ruled that the act of NAVIDA, et al., of filing the case
in the Philippine courts violated the rules on forum shopping and litis pendencia. The trial
court expounded:
THE JURISDICTION FROWNS UPON AND PROHIBITS FORUM SHOPPING
This court frowns upon the fact that the parties herein are both vigorously pursuing their
appeal of the decision of the U.S. District court dismissing the case filed thereat. To allow
the parties to litigate in this court when they are actively pursuing the same cases in another
forum, violates the rule on forum shopping so abhorred in this jurisdiction. x x x.
xxxx
THE FILING OF THE CASE IN U.S. DIVESTED THIS COURT OF ITS OWN
JURISDICTION
Moreover, the filing of the case in the U.S. courts divested this court of its own jurisdiction.
This court takes note that the U.S. District Court did not decline jurisdiction over the cause
of action. The case was dismissed on the ground of forum non conveniens, which is really a
matter of venue. By taking cognizance of the case, the U.S. District Court has, in essence,
concurrent jurisdiction with this court over the subject matter of this case. It is settled that
initial acquisition of jurisdiction divests another of its own jurisdiction. x x x.
xxxx
THIS CASE IS BARRED BY THE RULE OF "LITIS PENDENCIA"
Furthermore, the case filed in the U.S. court involves the same parties, same rights and
interests, as in this case. There exists litis pendencia since there are two cases involving the
same parties and interests. The court would like to emphasize that in accordance with the
rule on litis pendencia x x x; the subsequent case must be dismissed. Applying the
foregoing [precept] to the case-at-bar, this court concludes that since the case between the
parties in the U.S. is still pending, then this case is barred by the rule on "litis pendencia." 23
In fine, the trial court held that:
It behooves this Court, then to dismiss this case. For to continue with these proceedings,
would be violative of the constitutional provision on the Bill of Rights guaranteeing speedy
disposition of cases (Ref. Sec. 16, Article III, Constitution). The court has no other choice. To
insist on further proceedings with this case, as it is now presented, might accord this court a
charming appearance. But the same insistence would actually thwart the very ends of
justice which it seeks to achieve.
This evaluation and action is made not on account of but rather with due consideration to
the fact that the dismissal of this case does not necessarily deprive the parties especially
the plaintiffs of their possible remedies. The court is cognizant that the Federal Court may
resume proceedings of that earlier case between the herein parties involving the same acts
or omissions as in this case. 49
WHEREFORE, in view of the foregoing considerations, this case is now considered
DISMISSED.24
On June 4, 1996, the RTC of General Santos City likewise issued an Order, 25 dismissing
DOWs Answer with Counterclaim.
CONFLICTS
CHIQUITA, DEL MONTE and SHELL each filed a motion for reconsideration 26 of the RTC
Order dated May 20, 1996, while DOW filed a motion for reconsideration 27 of the RTC Order
dated June 4, 1996. Subsequently, DOW and OCCIDENTAL also filed a Joint Motion for
Reconsideration28 of the RTC Order dated May 20, 1996.
In an Order29 dated July 9, 1996, the RTC of General Santos City declared that it had
already lost its jurisdiction over the case as it took into consideration the Manifestation of the
counsel of NAVIDA, et al., which stated that the latter had already filed a petition for review
on certiorari before this Court.
CHIQUITA and SHELL filed their motions for reconsideration 30 of the above order.
On July 11, 1996, NAVIDA, et al., filed a Petition for Review on Certiorari in order to assail
the RTC Order dated May 20, 1996, which was docketed as G.R. No. 125078.
The RTC of General Santos City then issued an Order 31 dated August 14, 1996, which
merely noted the incidents still pending in Civil Case No. 5617 and reiterated that it no
longer had any jurisdiction over the case.
On August 30, 1996, DOW and OCCIDENTAL filed their Petition for Review on
Certiorari,32 challenging the orders of the RTC of General Santos City dated May 20, 1996,
June 4, 1996 and July 9, 1996. Their petition was docketed as G.R. No. 125598.
In their petition, DOW and OCCIDENTAL aver that the RTC of General Santos City erred in
ruling that it has no jurisdiction over the subject matter of the case as well as the persons of
the defendant companies.
In a Resolution33 dated October 7, 1996, this Court resolved to consolidate G.R. No. 125598
with G.R. No. 125078.
CHIQUITA filed a Petition for Review on Certiorari, 34 which sought the reversal of the RTC
Orders dated May 20, 1996, July 9, 1996 and August 14, 1996. The petition was docketed
as G.R. No. 126018. In a Resolution 35 dated November 13, 1996, the Court dismissed the
aforesaid petition for failure of CHIQUITA to show that the RTC committed grave abuse of
discretion. CHIQUITA filed a Motion for Reconsideration, 36 but the same was denied through
a Resolution37 dated January 27, 1997.
Civil Case No. 24,251-96 before the RTC of Davao City and G.R. Nos. 126654, 127856,
and 128398
Another joint complaint for damages against SHELL, DOW, OCCIDENTAL, DOLE, DEL
MONTE, and CHIQUITA was filed before Branch 16 of the RTC of Davao City by 155
plaintiffs from Davao City. This case was docketed as Civil Case No. 24,251-96. These
plaintiffs (the petitioners in G.R. No. 126654, hereinafter referred to as ABELLA, et al.)
amended their Joint-Complaint on May 21, 1996.38
Similar to the complaint of NAVIDA, et al., ABELLA, et al., alleged that, as workers in the
banana plantation and/or as residents near the said plantation, they were made to use
and/or were exposed to nematocides, which contained the chemical DBCP. According to
ABELLA, et al., such exposure resulted in "serious and permanent injuries to their health,
including, but not limited to, sterility and severe injuries to their reproductive
capacities."39ABELLA, et al., claimed that the defendant companies manufactured,
produced, sold, distributed, used, and/or made available in commerce, DBCP without
warning the users of its hazardous effects on health, and without providing instructions on
its proper use and application, which the defendant companies knew or ought to have
known, had they exercised ordinary care and prudence.
Except for DOW, the other defendant companies filed their respective motions for bill of
particulars to which ABELLA, et al., filed their opposition. DOW and DEL MONTE filed their
respective Answers dated May 17, 1996 and June 24, 1996.
The RTC of Davao City, however, junked Civil Case No. 24,251-96 in its Order dated
October 1, 1996, which, in its entirety, reads:
Upon a thorough review of the Complaint and Amended Complaint For: Damages filed by
the plaintiffs against the defendants Shell Oil Company, DOW Chemicals Company,
Occidental Chemical Corporation, Standard Fruit Company, Standard Fruit and Steamship,
DOLE Food Company, DOLE Fresh Fruit Company, Chiquita Brands, Inc., Chiquita Brands
International, Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruits Co., all foreign
corporations with Philippine Representatives, the Court, as correctly pointed out by one of
the defendants, is convinced that plaintiffs "would have this Honorable Court dismiss the
case to pave the way for their getting an affirmance by the Supreme Court" (#10 of
Defendants Del Monte Fresh Produce, N.A. and Del Monte Tropical Fruit Co., Reply to
Opposition dated July 22, 1996). Consider these:
50
1) In the original Joint Complaint, plaintiffs state that: defendants have no properties in the
Philippines; they have no agents as well (par. 18); plaintiffs are suing the defendants for
tortuous acts committed by these foreign corporations on their respective countries, as
plaintiffs, after having elected to sue in the place of defendants residence, are now
compelled by a decision of a Texas District Court to file cases under torts in this jurisdiction
for causes of actions which occurred abroad (par. 19); a petition was filed by same plaintiffs
against same defendants in the Courts of Texas, USA, plaintiffs seeking for payment of
CONFLICTS
damages based on negligence, strict liability, conspiracy and international tort theories (par.
27); upon defendants Motion to Dismiss on Forum non [conveniens], said petition was
provisionally dismissed on condition that these cases be filed in the Philippines or before 11
August 1995 (Philippine date; Should the Philippine Courts refuse or deny jurisdiction, the
U. S. Courts will reassume jurisdiction.)
11. In the Amended Joint Complaint, plaintiffs aver that: on 11 July 1995, the Federal District
Court issued a Memorandum and Order conditionally dismissing several of the consolidated
actions including those filed by the Filipino complainants. One of the conditions imposed
was for the plaintiffs to file actions in their home countries or the countries in which they
were injured x x x. Notwithstanding, the Memorandum and [O]rder further provided that
should the highest court of any foreign country affirm the dismissal for lack of jurisdictions
over these actions filed by the plaintiffs in their home countries [or] the countries where they
were injured, the said plaintiffs may return to that court and, upon proper motion, the Court
will resume jurisdiction as if the case had never been dismissed for forum non conveniens.
The Court however is constrained to dismiss the case at bar not solely on the basis of the
above but because it shares the opinion of legal experts given in the interview made by the
Inquirer in its Special report "Pesticide Cause Mass Sterility," to wit:
1. Former Justice Secretary Demetrio Demetria in a May 1995 opinion said: The Philippines
should be an inconvenient forum to file this kind of damage suit against foreign companies
since the causes of action alleged in the petition do not exist under Philippine laws. There
has been no decided case in Philippine Jurisprudence awarding to those adversely affected
by DBCP. This means there is no available evidence which will prove and disprove the
relation between sterility and DBCP.
2. Retired Supreme Court Justice Abraham Sarmiento opined that while a class suit is
allowed in the Philippines the device has been employed strictly. Mass sterility will not
qualify as a class suit injury within the contemplation of Philippine statute.
3. Retired High Court Justice Rodolfo Nocom stated that there is simply an absence of
doctrine here that permits these causes to be heard. No product liability ever filed or tried
here.
Case ordered dismissed.40
Docketed as G.R. No. 126654, the petition for review, filed on November 12, 1996 by
ABELLA, et al., assails before this Court the above-quoted order of the RTC of Davao City.
ABELLA, et al., claim that the RTC of Davao City erred in dismissing Civil Case No. 24,251-
96 on the ground of lack of jurisdiction.
According to ABELLA, et al., the RTC of Davao City has jurisdiction over the subject matter
of the case since Articles 2176 and 2187 of the Civil Code are broad enough to cover the
acts complained of and to support their claims for damages.
ABELLA, et al., further aver that the dismissal of the case, based on the opinions of legal
luminaries reported in a newspaper, by the RTC of Davao City is bereft of basis. According
to them, their cause of action is based on quasi-delict under Article 2176 of the Civil Code.
They also maintain that the absence of jurisprudence regarding the award of damages in
favor of those adversely affected by the DBCP does not preclude them from presenting
evidence to prove their allegations that their exposure to DBCP caused their sterility and/or
infertility.
SHELL, DOW, and CHIQUITA each filed their respective motions for reconsideration of the
Order dated October 1, 1996 of the RTC of Davao City. DEL MONTE also filed its motion for
reconsideration, which contained an additional motion for the inhibition of the presiding
judge.
The presiding judge of Branch 16 then issued an Order41 dated December 2, 1996,
voluntarily inhibiting himself from trying the case. Thus, the case was re-raffled to Branch 13
of the RTC of Davao City.
In an Order42 dated December 16, 1996, the RTC of Davao City affirmed the Order dated
October 1, 1996, and denied the respective motions for reconsideration filed by defendant
companies.
Thereafter, CHIQUITA filed a Petition for Review dated March 5, 1997, questioning the
Orders dated October 1, 1996 and December 16, 1996 of the RTC of Davao City. This case
was docketed as G.R. No. 128398.
In its petition, CHIQUITA argues that the RTC of Davao City erred in dismissing the case
motu proprio as it acquired jurisdiction over the subject matter of the case as well as over
the persons of the defendant companies which voluntarily appeared before it. CHIQUITA
also claims that the RTC of Davao City cannot dismiss the case simply on the basis of
opinions of alleged legal experts appearing in a newspaper article.
51
Initially, this Court in its Resolution 43 dated July 28, 1997, dismissed the petition filed by
CHIQUITA for submitting a defective certificate against forum shopping. CHIQUITA,
however, filed a motion for reconsideration, which was granted by this Court in the
Resolution44 dated October 8, 1997.
CONFLICTS
On March 7, 1997, DEL MONTE also filed its petition for review on certiorari before this
Court assailing the above-mentioned orders of the RTC of Davao City. Its petition was
docketed as G.R. No. 127856.
DEL MONTE claims that the RTC of Davao City has jurisdiction over Civil Case No. 24,251-
96, as defined under the law and that the said court already obtained jurisdiction over its
person by its voluntary appearance and the filing of a motion for bill of particulars and, later,
an answer to the complaint. According to DEL MONTE, the RTC of Davao City, therefore,
acted beyond its authority when it dismissed the case motu proprio or without any motion to
dismiss from any of the parties to the case.
In the Resolutions dated February 10, 1997, April 28, 1997, and March 10, 1999, this Court
consolidated G.R. Nos. 125078, 125598, 126654, 127856, and 128398.
The Consolidated Motion to Drop DOW, OCCIDENTAL, and SHELL as Party-Respondents
filed by NAVIDA, et al. and ABELLA, et al.
On September 26, 1997, NAVIDA, et al., and ABELLA, et al., filed before this Court a
Consolidated Motion (to Drop Party-Respondents).45 The plaintiff claimants alleged that they
had amicably settled their cases with DOW, OCCIDENTAL, and SHELL sometime in July
1997. This settlement agreement was evidenced by facsimiles of the "Compromise
Settlement, Indemnity, and Hold Harmless Agreement," which were attached to the said
motion. Pursuant to said agreement, the plaintiff claimants sought to withdraw their petitions
as against DOW, OCCIDENTAL, and SHELL.
DOLE, DEL MONTE and CHIQUITA, however, opposed the motion, as well as the
settlement entered into between the plaintiff claimants and DOW, OCCIDENTAL, and
SHELL.
The Memoranda of the Parties
Considering the allegations, issues, and arguments adduced by the parties, this Court, in a
Resolution dated June 22, 1998, 46 required all the parties to submit their respective
memoranda.
CHIQUITA filed its Memorandum on August 28, 1998; 47 SHELL asked to be excused from
the filing of a memorandum alleging that it had already executed a compromise agreement
with the plaintiff claimants.48 DOLE filed its Memorandum on October 12, 1998 49 while DEL
MONTE filed on October 13, 1998. 50 NAVIDA, et al., and ABELLA, et al., filed their
Consolidated Memorandum on February 3, 1999; 51 and DOW and OCCIDENTAL jointly filed
a Memorandum on December 23, 1999.52
The Motion to Withdraw Petition for Review in G.R. No. 125598
On July 13, 2004, DOW and OCCIDENTAL filed a Motion to Withdraw Petition for Review in
G.R. No. 125598, 53explaining that the said petition "is already moot and academic and no
longer presents a justiciable controversy" since they have already entered into an amicable
settlement with NAVIDA, et al. DOW and OCCIDENTAL added that they have fully complied
with their obligations set forth in the 1997 Compromise Agreements.
DOLE filed its Manifestation dated September 6, 2004, 54 interposing no objection to the
withdrawal of the petition, and further stating that they maintain their position that DOW and
OCCIDENTAL, as well as other settling defendant companies, should be retained as
defendants for purposes of prosecuting the cross-claims of DOLE, in the event that the
complaint below is reinstated.
NAVIDA, et al., also filed their Comment dated September 14, 2004, 55 stating that they
agree with the view of DOW and OCCIDENTAL that the petition in G.R. No. 125598 has
become moot and academic because Civil Case No. 5617 had already been amicably
settled by the parties in 1997.
On September 27, 2004, DEL MONTE filed its Comment on Motion to Withdraw Petition for
Review Filed by Petitioners in G.R. No. 125598, 56 stating that it has no objections to the
withdrawal of the petition filed by DOW and OCCIDENTAL in G.R. No. 125598.
In a Resolution57 dated October 11, 2004, this Court granted, among others, the motion to
withdraw petition for review filed by DOW and OCCIDENTAL.
THE ISSUES
In their Consolidated Memorandum, NAVIDA, et al., and ABELLA, et al., presented the
following issues for our consideration:
IN REFUTATION
I. THE COURT DISMISSED THE CASE DUE TO LACK OF
52
JURISDICTION.
a) The court did not simply dismiss the case because it was filed in bad
faith with petitioners intending to have the same dismissed and returned to
the Texas court.
CONFLICTS
b) The court dismissed the case because it was convinced that it did not
have jurisdiction.
IN SUPPORT OF THE PETITION
II. THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT
MATTER OF THE CASE.
a. The acts complained of occurred within Philippine territory.
b. Art. 2176 of the Civil Code of the Philippines is broad enough to cover
the acts complained of.
c. Assumption of jurisdiction by the U.S. District Court over petitioner[s]
claims did not divest Philippine [c]ourts of jurisdiction over the same.
d. The Compromise Agreement and the subsequent Consolidated Motion to
Drop Party Respondents Dow, Occidental and Shell does not unjustifiably
prejudice remaining respondents Dole, Del Monte and Chiquita. 58
DISCUSSION
On the issue of jurisdiction
Essentially, the crux of the controversy in the petitions at bar is whether the RTC of General
Santos City and the RTC of Davao City erred in dismissing Civil Case Nos. 5617 and
24,251-96, respectively, for lack of jurisdiction.
Remarkably, none of the parties to this case claims that the courts a quo are bereft of
jurisdiction to determine and resolve the above-stated cases. All parties contend that the
RTC of General Santos City and the RTC of Davao City have jurisdiction over the action for
damages, specifically for approximately P2.7 million for each of the plaintiff claimants.
NAVIDA, et al., and ABELLA, et al., argue that the allegedly tortious acts and/or omissions
of defendant companies occurred within Philippine territory. Specifically, the use of and
exposure to DBCP that was manufactured, distributed or otherwise put into the stream of
commerce by defendant companies happened in the Philippines. Said fact allegedly
constitutes reasonable basis for our courts to assume jurisdiction over the case.
Furthermore, NAVIDA, et al., and ABELLA, et al., assert that the provisions of Chapter 2 of
the Preliminary Title of the Civil Code, as well as Article 2176 thereof, are broad enough to
cover their claim for damages. Thus, NAVIDA, et al., and ABELLA, et al., pray that the
respective rulings of the RTC of General Santos City and the RTC of Davao City in Civil
Case Nos. 5617 and 24,251-96 be reversed and that the said cases be remanded to the
courts a quo for further proceedings.
DOLE similarly maintains that the acts attributed to defendant companies constitute a quasi-
delict, which falls under Article 2176 of the Civil Code. In addition, DOLE states that if there
were no actionable wrongs committed under Philippine law, the courts a quo should have
dismissed the civil cases on the ground that the Amended Joint-Complaints of NAVIDA, et
al., and ABELLA, et al., stated no cause of action against the defendant companies. DOLE
also argues that if indeed there is no positive law defining the alleged acts of defendant
companies as actionable wrong, Article 9 of the Civil Code dictates that a judge may not
refuse to render a decision on the ground of insufficiency of the law. The court may still
resolve the case, applying the customs of the place and, in the absence thereof, the general
principles of law. DOLE posits that the Philippines is the situs of the tortious acts allegedly
committed by defendant companies as NAVIDA, et al., and ABELLA, et al., point to their
alleged exposure to DBCP which occurred in the Philippines, as the cause of the sterility
and other reproductive system problems that they allegedly suffered. Finally, DOLE adds
that the RTC of Davao City gravely erred in relying upon newspaper reports in dismissing
Civil Case No. 24,251-96 given that newspaper articles are hearsay and without any
evidentiary value. Likewise, the alleged legal opinions cited in the newspaper reports were
taken judicial notice of, without any notice to the parties. DOLE, however, opines that the
dismissal of Civil Case Nos. 5617 and 24,251-96 was proper, given that plaintiff claimants
merely prosecuted the cases with the sole intent of securing a dismissal of the actions for
the purpose of convincing the U.S. Federal District Court to re-assume jurisdiction over the
cases.
In a similar vein, CHIQUITA argues that the courts a quo had jurisdiction over the subject
matter of the cases filed before them. The Amended Joint-Complaints sought
approximately P2.7 million in damages for each plaintiff claimant, which amount falls within
the jurisdiction of the RTC. CHIQUITA avers that the pertinent matter is the place of the
alleged exposure to DBCP, not the place of manufacture, packaging, distribution, sale, etc.,
of the said chemical. This is in consonance with the lex loci delicti commisi theory in
determining the situs of a tort, which states that the law of the place where the alleged
wrong was committed will govern the action. CHIQUITA and the other defendant companies
also submitted themselves to the jurisdiction of the RTC by making voluntary appearances
and seeking for affirmative reliefs during the course of the proceedings. None53 of the
defendant companies ever objected to the exercise of jurisdiction by the courts a quo over
their persons. CHIQUITA, thus, prays for the remand of Civil Case Nos. 5617 and 24,251-96
to the RTC of General Santos City and the RTC of Davao City, respectively.
The RTC of General Santos City and the RTC of Davao City have jurisdiction over Civil
Case Nos. 5617 and 24,251-96, respectively
CONFLICTS
The rule is settled that jurisdiction over the subject matter of a case is conferred by law and
is determined by the allegations in the complaint and the character of the relief sought,
irrespective of whether the plaintiffs are entitled to all or some of the claims asserted
therein.59 Once vested by law, on a particular court or body, the jurisdiction over the subject
matter or nature of the action cannot be dislodged by anybody other than by the legislature
through the enactment of a law.
At the time of the filing of the complaints, the jurisdiction of the RTC in civil cases under
Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, was:
SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original
jurisdiction:
xxxx
(8) In all other cases in which the demand, exclusive of interest, damages of whatever kind,
attorneys fees, litigation expenses, and costs or the value of the property in controversy
exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro
Manila, where the demand, exclusive of the abovementioned items exceeds Two hundred
thousand pesos (P200,000.00).60
Corollary thereto, Supreme Court Administrative Circular No. 09-94, states:
2. The exclusion of the term "damages of whatever kind" in determining the jurisdictional
amount under Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as amended by R.A. No.
7691, applies to cases where the damages are merely incidental to or a consequence of the
main cause of action. However, in cases where the claim for damages is the main cause of
action, or one of the causes of action, the amount of such claim shall be considered in
determining the jurisdiction of the court.
Here, NAVIDA, et al., and ABELLA, et al., sought in their similarly-worded Amended Joint-
Complaints filed before the courts a quo, the following prayer:
PRAYER
WHEREFORE, premises considered, it is most respectfully prayed that after hearing,
judgment be rendered in favor of the plaintiffs ordering the defendants:
a) TO PAY EACH PLAINTIFF moral damages in the amount of One Million Five Hundred
Thousand Pesos (P1,500,00.00);
b) TO PAY EACH PLAINTIFF nominal damages in the amount of Four Hundred Thousand
Pesos (P400,000.00) each;
c) TO PAY EACH PLAINTIFF exemplary damages in the amount of Six Hundred Thousand
Pesos (P600,000.00);
d) TO PAY EACH PLAINTIFF attorneys fees of Two Hundred Thousand Pesos
(P200,000.00); and
e) TO PAY THE COSTS of the suit.61
From the foregoing, it is clear that the claim for damages is the main cause of action and
that the total amount sought in the complaints is approximately P2.7 million for each of the
plaintiff claimants. The RTCs unmistakably have jurisdiction over the cases filed in General
Santos City and Davao City, as both claims by NAVIDA, et al., and ABELLA, et al., fall within
the purview of the definition of the jurisdiction of the RTC under Batas Pambansa Blg. 129.
Moreover, the allegations in both Amended Joint-Complaints narrate that:
THE CAUSES OF ACTION
4. The Defendants manufactured, sold, distributed, used, AND/OR MADE
AVAILABLE IN COMMERCE nematocides containing the chemical
dibromochloropropane, commonly known as DBCP. THE CHEMICAL WAS
USED AGAINST the parasite known as the nematode, which plagued
banana plantations, INCLUDING THOSE in the Philippines. AS IT TURNED
OUT, DBCP not only destroyed nematodes. IT ALSO CAUSED ILL-
EFFECTS ON THE HEALTH OF PERSONS EXPOSED TO IT AFFECTING
the human reproductive system as well.
5. The plaintiffs were exposed to DBCP in the 1970s up to the early 1980s
WHILE (a) they used this product in the banana plantations WHERE they
were employed, and/or (b) they resided within the agricultural area WHERE
IT WAS USED. As a result of such exposure, the plaintiffs suffered serious
and permanent injuries TO THEIR HEALTH, including, but not limited 54to,
STERILITY and severe injuries to their reproductive capacities.
6. THE DEFENDANTS WERE AT FAULT OR WERE NEGLIGENT IN THAT
THEY MANUFACTURED, produced, sold, and/or USED DBCP and/or
otherwise, PUT THE SAME into the stream of commerce, WITHOUT
INFORMING THE USERS OF ITS HAZARDOUS EFFECTS ON HEALTH
AND/OR WITHOUT INSTRUCTIONS ON ITS PROPER USE AND
CONFLICTS
APPLICATION. THEY allowed Plaintiffs to be exposed to, DBCP-containing
materials which THEY knew, or in the exercise of ordinary care and
prudence ought to have known, were highly harmful and injurious to the
Plaintiffs health and well-being.
7. The Defendants WHO MANUFACTURED, PRODUCED, SOLD,
DISTRIBUTED, MADE AVAILABLE OR PUT DBCP INTO THE STREAM
OF COMMERCE were negligent OR AT FAULT in that they, AMONG
OTHERS:
a. Failed to adequately warn Plaintiffs of the dangerous characteristics of
DBCP, or to cause their subsidiaries or affiliates to so warn plaintiffs;
b. Failed to provide plaintiffs with information as to what should be
reasonably safe and sufficient clothing and proper protective equipment and
appliances, if any, to protect plaintiffs from the harmful effects of exposure
to DBCP, or to cause their subsidiaries or affiliates to do so;
c. Failed to place adequate warnings, in a language understandable to the
worker, on containers of DBCP-containing materials to warn of the dangers
to health of coming into contact with DBCP, or to cause their subsidiaries or
affiliates to do so;
d. Failed to take reasonable precaution or to exercise reasonable care to
publish, adopt and enforce a safety plan and a safe method of handling and
applying DBCP, or to cause their subsidiaries or affiliates to do so;
e. Failed to test DBCP prior to releasing these products for sale, or to cause
their subsidiaries or affiliates to do so; and
f. Failed to reveal the results of tests conducted on DBCP to each plaintiff,
governmental agencies and the public, or to cause their subsidiaries or
affiliate to do so.
8. The illnesses and injuries of each plaintiff are also due to the FAULT or
negligence of defendants Standard Fruit Company, Dole Fresh Fruit
Company, Dole Food Company, Inc., Chiquita Brands, Inc. and Chiquita
Brands International, Inc. in that they failed to exercise reasonable care to
prevent each plaintiffs harmful exposure to DBCP-containing products
which defendants knew or should have known were hazardous to each
plaintiff in that they, AMONG OTHERS:
 a. Failed to adequately supervise and instruct Plaintiffs in the safe and
proper application of DBCP-containing products;
b. Failed to implement proper methods and techniques of application of
said products, or to cause such to be implemented;
c. Failed to warn Plaintiffs of the hazards of exposure to said products or to
cause them to be so warned;
d. Failed to test said products for adverse health effects, or to cause said
products to be tested;
e. Concealed from Plaintiffs information concerning the observed effects of
said products on Plaintiffs;
f. Failed to monitor the health of plaintiffs exposed to said products;
g. Failed to place adequate labels on containers of said products to warn
them of the damages of said products; and
h. Failed to use substitute nematocides for said products or to cause such
substitutes to [be] used.62 (Emphasis supplied and words in brackets ours.)
Quite evidently, the allegations in the Amended Joint-Complaints of NAVIDA, et al., and
ABELLA, et al., attribute to defendant companies certain acts and/or omissions which led to
their exposure to nematocides containing the chemical DBCP. According to NAVIDA, et al.,
and ABELLA, et al., such exposure to the said chemical caused ill effects, injuries and
illnesses, specifically to their reproductive system.
Thus, these allegations in the complaints constitute the cause of action of plaintiff claimants
a quasi-delict, which under the Civil Code is defined as an act, or omission which causes
damage to another, there being fault or negligence. To be precise, Article 2176 of the Civil
Code provides:
Article 2176. Whoever by act or omission causes damage to another, there being 55 fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is governed
by the provisions of this Chapter.
As specifically enumerated in the amended complaints, NAVIDA, et al., and ABELLA, et al.,
point to the acts and/or omissions of the defendant companies in manufacturing, producing,
CONFLICTS
selling, using, and/or otherwise putting into the stream of commerce, nematocides which
contain DBCP, "without informing the users of its hazardous effects on health and/or without
instructions on its proper use and application." 63
Verily, in Citibank, N.A. v. Court of Appeals, 64 this Court has always reminded that
jurisdiction of the court over the subject matter of the action is determined by the allegations
of the complaint, irrespective of whether or not the plaintiffs are entitled to recover upon all
or some of the claims asserted therein. The jurisdiction of the court cannot be made to
depend upon the defenses set up in the answer or upon the motion to dismiss, for
otherwise, the question of jurisdiction would almost entirely depend upon the defendants.
What determines the jurisdiction of the court is the nature of the action pleaded as
appearing from the allegations in the complaint. The averments therein and the character of
the relief sought are the ones to be consulted.
Clearly then, the acts and/or omissions attributed to the defendant companies constitute a
quasi-delict which is the basis for the claim for damages filed by NAVIDA, et al., and
ABELLA, et al., with individual claims of approximately P2.7 million for each plaintiff
claimant, which obviously falls within the purview of the civil action jurisdiction of the RTCs.
Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et al., allegedly
suffered resulted from their exposure to DBCP while they were employed in the banana
plantations located in the Philippines or while they were residing within the agricultural areas
also located in the Philippines. The factual allegations in the Amended Joint-Complaints all
point to their cause of action, which undeniably occurred in the Philippines. The RTC of
General Santos City and the RTC of Davao City obviously have reasonable basis to
assume jurisdiction over the cases.
It is, therefore, error on the part of the courts a quo when they dismissed the cases on the
ground of lack of jurisdiction on the mistaken assumption that the cause of action narrated
by NAVIDA, et al., and ABELLA, et al., took place abroad and had occurred outside and
beyond the territorial boundaries of the Philippines, i.e., "the manufacture of the pesticides,
their packaging in containers, their distribution through sale or other disposition, resulting in
their becoming part of the stream of commerce," 65 and, hence, outside the jurisdiction of the
RTCs.
Certainly, the cases below are not criminal cases where territoriality, or the situs of the act
complained of, would be determinative of jurisdiction and venue for trial of cases. In
personal civil actions, such as claims for payment of damages, the Rules of Court allow the
action to be commenced and tried in the appropriate court, where any of the plaintiffs or
defendants resides, or in the case of a non-resident defendant, where he may be found, at
the election of the plaintiff.66
In a very real sense, most of the evidence required to prove the claims of NAVIDA, et al.,
and ABELLA, et al., are available only in the Philippines. First, plaintiff claimants are all
residents of the Philippines, either in General Santos City or in Davao City. Second, the
specific areas where they were allegedly exposed to the chemical DBCP are within the
territorial jurisdiction of the courts a quo wherein NAVIDA, et al., and ABELLA, et al., initially
filed their claims for damages. Third, the testimonial and documentary evidence from
important witnesses, such as doctors, co-workers, family members and other members of
the community, would be easier to gather in the Philippines. Considering the great number
of plaintiff claimants involved in this case, it is not far-fetched to assume that voluminous
records are involved in the presentation of evidence to support the claim of plaintiff
claimants. Thus, these additional factors, coupled with the fact that the alleged cause of
action of NAVIDA, et al., and ABELLA, et al., against the defendant companies for damages
occurred in the Philippines, demonstrate that, apart from the RTC of General Santos City
and the RTC of Davao City having jurisdiction over the subject matter in the instant civil
cases, they are, indeed, the convenient fora for trying these cases. 67
The RTC of General Santos City and the RTC of Davao City validly acquired jurisdiction
over the persons of all the defendant companies
It is well to stress again that none of the parties claims that the courts a quo lack jurisdiction
over the cases filed before them. All parties are one in asserting that the RTC of General
Santos City and the RTC of Davao City have validly acquired jurisdiction over the persons
of the defendant companies in the action below. All parties voluntarily, unconditionally and
knowingly appeared and submitted themselves to the jurisdiction of the courts a quo.
Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides that "[t]he defendants
voluntary appearance in the action shall be equivalent to service of summons." In this
connection, all the defendant companies designated and authorized representatives to
receive summons and to represent them in the proceedings before the courts a quo. All the
defendant companies submitted themselves to the jurisdiction of the courts a quo by making
several voluntary appearances, by praying for various affirmative reliefs, and by actively
participating during the course of the proceedings below.
In line herewith, this Court, in Meat Packing Corporation of the Philippines v.
Sandiganbayan,68 held that jurisdiction over the person of the defendant in civil cases is
56
acquired either by his voluntary appearance in court and his submission to its authority or by
service of summons. Furthermore, the active participation of a party in the proceedings is
tantamount to an invocation of the courts jurisdiction and a willingness to abide by the
resolution of the case, and will bar said party from later on impugning the court or bodys
jurisdiction.69
CONFLICTS
Thus, the RTC of General Santos City and the RTC of Davao City have validly acquired
jurisdiction over the persons of the defendant companies, as well as over the subject matter
of the instant case. What is more, this jurisdiction, which has been acquired and has been
vested on the courts a quo, continues until the termination of the proceedings.
It may also be pertinently stressed that "jurisdiction" is different from the "exercise of
jurisdiction." Jurisdiction refers to the authority to decide a case, not the orders or the
decision rendered therein. Accordingly, where a court has jurisdiction over the persons of
the defendants and the subject matter, as in the case of the courts a quo, the decision on all
questions arising therefrom is but an exercise of such jurisdiction. Any error that the court
may commit in the exercise of its jurisdiction is merely an error of judgment, which does not
affect its authority to decide the case, much less divest the court of the jurisdiction over the
case.70
Plaintiffs purported bad faith in filing the subject civil cases in Philippine courts
Anent the insinuation by DOLE that the plaintiff claimants filed their cases in bad faith
merely to procure a dismissal of the same and to allow them to return to the forum of their
choice, this Court finds such argument much too speculative to deserve any merit.
It must be remembered that this Court does not rule on allegations that are unsupported by
evidence on record. This Court does not rule on allegations which are manifestly
conjectural, as these may not exist at all. This Court deals with facts, not fancies; on
realities, not appearances. When this Court acts on appearances instead of realities, justice
and law will be short-lived.71 This is especially true with respect to allegations of bad faith, in
line with the basic rule that good faith is always presumed and bad faith must be proved. 72
In sum, considering the fact that the RTC of General Santos City and the RTC of Davao City
have jurisdiction over the subject matter of the amended complaints filed by NAVIDA, et al.,
and ABELLA, et al., and that the courts a quo have also acquired jurisdiction over the
persons of all the defendant companies, it therefore, behooves this Court to order the
remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of General Santos City and the
RTC of Davao City, respectively.
On the issue of the dropping of DOW, OCCIDENTAL and SHELL as respondents in view of
their amicable settlement with NAVIDA, et al., and ABELLA, et al.
NAVIDA, et al., and ABELLA, et al., are further praying that DOW, OCCIDENTAL and
SHELL be dropped as respondents in G.R. Nos. 125078 and 126654, as well as in Civil
Case Nos. 5617 and 24,251-96. The non-settling defendants allegedly manifested that they
intended to file their cross-claims against their co-defendants who entered into compromise
agreements. NAVIDA, et al., and ABELLA, et al., argue that the non-settling defendants did
not aver any cross-claim in their answers to the complaint and that they subsequently
sought to amend their answers to plead their cross-claims only after the settlement between
the plaintiff claimants and DOW, OCCIDENTAL, and SHELL were executed. NAVIDA, et al.,
and ABELLA, et al., therefore, assert that the cross-claims are already barred.
In their Memoranda, CHIQUITA and DOLE are opposing the above motion of NAVIDA, et
al., and ABELLA, et al., since the latters Amended Complaints cited several instances of
tortious conduct that were allegedly committed jointly and severally by the defendant
companies. This solidary obligation on the part of all the defendants allegedly gives any co-
defendant the statutory right to proceed against the other co-defendants for the payment of
their respective shares. Should the subject motion of NAVIDA, et al., and ABELLA, et al., be
granted, and the Court subsequently orders the remand of the action to the trial court for
continuance, CHIQUITA and DOLE would allegedly be deprived of their right to prosecute
their cross-claims against their other co-defendants. Moreover, a third party complaint or a
separate trial, according to CHIQUITA, would only unduly delay and complicate the
proceedings. CHIQUITA and DOLE similarly insist that the motion of NAVIDA, et al., and
ABELLA, et al., to drop DOW, SHELL and OCCIDENTAL as respondents in G.R. Nos.
125078 and 126654, as well as in Civil Case Nos. 5617 and 24,251-96, be denied.
Incidentally, on April 2, 2007, after the parties have submitted their respective memoranda,
DEL MONTE filed a Manifestation and Motion73 before the Court, stating that similar
settlement agreements were allegedly executed by the plaintiff claimants with DEL MONTE
and CHIQUITA sometime in 1999. Purportedly included in the agreements were Civil Case
Nos. 5617 and 24,251-96. Attached to the said manifestation were copies of the
Compromise Settlement, Indemnity, and Hold Harmless Agreement between DEL MONTE
and the settling plaintiffs, as well as the Release in Full executed by the latter. 74 DEL
MONTE specified therein that there were "only four (4) plaintiffs in Civil Case No. 5617 who
are claiming against the Del Monte parties" 75 and that the latter have executed amicable
settlements which completely satisfied any claims against DEL MONTE. In accordance with
the alleged compromise agreements with the four plaintiffs in Civil Case No. 5617, DEL
MONTE sought the dismissal of the Amended Joint-Complaint in the said civil case.
Furthermore, in view of the above settlement agreements with ABELLA, et al., in Civil Case
No. 24,251-96, DEL MONTE stated that it no longer wished to pursue its petition in G.R. No.
127856 and accordingly prayed that it be allowed to withdraw the same.
Having adjudged that Civil Case Nos. 5617 and 24,251-96 should be remanded 57to the RTC
of General Santos City and the RTC of Davao City, respectively, the Court deems that the
Consolidated Motions (to Drop Party-Respondents) filed by NAVIDA, et al., and ABELLA, et
al., should likewise be referred to the said trial courts for appropriate disposition.
Under Article 2028 of the Civil Code, "[a] compromise is a contract whereby the parties, by
making reciprocal concessions, avoid a litigation or put an end to one already commenced."
Like any other contract, an extrajudicial compromise agreement is not excepted from rules
CONFLICTS
and principles of a contract. It is a consensual contract, perfected by mere consent, the
latter being manifested by the meeting of the offer and the acceptance upon the thing and
the cause which are to constitute the contract. 76 Judicial approval is not required for its
perfection.77 A compromise has upon the parties the effect and authority of res
judicata78 and this holds true even if the agreement has not been judicially approved. 79 In
addition, as a binding contract, a compromise agreement determines the rights and
obligations of only the parties to it.80
In light of the foregoing legal precepts, the RTC of General Santos City and the RTC of
Davao City should first receive in evidence and examine all of the alleged compromise
settlements involved in the cases at bar to determine the propriety of dropping any party as
a defendant therefrom.
The Court notes that the Consolidated Motions (to Drop Party-Respondents) that was filed
by NAVIDA, et al., and ABELLA, et al., only pertained to DOW, OCCIDENTAL and SHELL in
view of the latter companies alleged compromise agreements with the plaintiff claimants.
However, in subsequent developments, DEL MONTE and CHIQUITA supposedly reached
their own amicable settlements with the plaintiff claimants, but DEL MONTE qualified that it
entered into a settlement agreement with only four of the plaintiff claimants in Civil Case No.
5617. These four plaintiff claimants were allegedly the only ones who were asserting claims
against DEL MONTE. However, the said allegation of DEL MONTE was simply stipulated in
their Compromise Settlement, Indemnity, and Hold Harmless Agreement and its truth could
not be verified with certainty based on the records elevated to this Court. Significantly, the
336 plaintiff claimants in Civil Case No. 5617 jointly filed a complaint without individually
specifying their claims against DEL MONTE or any of the other defendant companies.
Furthermore, not one plaintiff claimant filed a motion for the removal of either DEL MONTE
or CHIQUITA as defendants in Civil Case Nos. 5617 and 24,251-96.
There is, thus, a primary need to establish who the specific parties to the alleged
compromise agreements are, as well as their corresponding rights and obligations therein.
For this purpose, the courts a quo may require the presentation of additional evidence from
the parties. Thereafter, on the basis of the records of the cases at bar and the additional
evidence submitted by the parties, if any, the trial courts can then determine who among the
defendants may be dropped from the said cases.
It is true that, under Article 2194 of the Civil Code, the responsibility of two or more persons
who are liable for the same quasi-delict is solidary. A solidary obligation is one in which each
of the debtors is liable for the entire obligation, and each of the creditors is entitled to
demand the satisfaction of the whole obligation from any or all of the debtors. 81
In solidary obligations, the paying debtors right of reimbursement is provided for under
Article 1217 of the Civil Code, to wit:
Art. 1217. Payment made by one of the solidary debtors extinguishes the obligation. If two
or more solidary debtors offer to pay, the creditor may choose which offer to accept.
He who made the payment may claim from his co-debtors only the share which corresponds
to each, with the interest for the payment already made. If the payment is made before the
debt is due, no interest for the intervening period may be demanded.
When one of the solidary debtors cannot, because of his insolvency, reimburse his share to
the debtor paying the obligation, such share shall be borne by all his co-debtors, in
proportion to the debt of each.1avvphil
The above right of reimbursement of a paying debtor, and the corresponding liability of the
co-debtors to reimburse, will only arise, however, if a solidary debtor who is made to answer
for an obligation actually delivers payment to the creditor. As succinctly held in Lapanday
Agricultural Development Corporation v. Court of Appeals, 82 "[p]ayment, which means not
only the delivery of money but also the performance, in any other manner, of the obligation,
is the operative fact which will entitle either of the solidary debtors to seek reimbursement
for the share which corresponds to each of the [other] debtors." 83
In the cases at bar, there is no right of reimbursement to speak of as yet. A trial on the
merits must necessarily be conducted first in order to establish whether or not defendant
companies are liable for the claims for damages filed by the plaintiff claimants, which would
necessarily give rise to an obligation to pay on the part of the defendants.
At the point in time where the proceedings below were prematurely halted, no cross-claims
have been interposed by any defendant against another defendant. If and when such a
cross-claim is made by a non-settling defendant against a settling defendant, it is within the
discretion of the trial court to determine the propriety of allowing such a cross-claim and if
the settling defendant must remain a party to the case purely in relation to the cross claim.
In Armed Forces of the Philippines Mutual Benefit Association, Inc. v. Court of Appeals, 84 the
Court had the occasion to state that "where there are, along with the parties to the
compromise, other persons involved in the litigation who have not taken part in concluding
the compromise agreement but are adversely affected or feel prejudiced thereby, should not
be precluded from invoking in the same proceedings an adequate relief therefor." 85
58
Relevantly, in Philippine International Surety Co., Inc. v. Gonzales, 86 the Court upheld the
ruling of the trial court that, in a joint and solidary obligation, the paying debtor may file a
third-party complaint and/or a cross-claim to enforce his right to seek contribution from his
co-debtors.
CONFLICTS
Hence, the right of the remaining defendant(s) to seek reimbursement in the above
situation, if proper, is not affected by the compromise agreements allegedly entered into by
NAVIDA, et al., and ABELLA, et al., with some of the defendant companies.
WHEREFORE, the Court hereby GRANTS the petitions for review on certiorari in G.R. Nos.
125078, 126654, and 128398. We REVERSE and SET ASIDE the Order dated May 20,
1996 of the Regional Trial Court of General Santos City, Branch 37, in Civil Case No. 5617,
and the Order dated October 1, 1996 of the Regional Trial Court of Davao City, Branch 16,
and its subsequent Order dated December 16, 1996 denying reconsideration in Civil Case
No. 24,251-96, and REMAND the records of this case to the respective Regional Trial
Courts of origin for further and appropriate proceedings in line with the ruling herein that
said courts have jurisdiction over the subject matter of the amended complaints in Civil
Case Nos. 5617 and 24,251-96.
The Court likewise GRANTS the motion filed by Del Monte to withdraw its petition in G.R.
No. 127856. In view of the previous grant of the motion to withdraw the petition in G.R. No.
125598, both G.R. Nos. 127856 and 125598 are considered CLOSED AND TERMINATED.
No pronouncement as to costs.
SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
Navida v Dizon
Facts:
Beginning 1993, a number of personal injury suits were filed in different Texas state courts
by citizens of twelve foreign countries, including the Philippines. The thousands of plaintiffs
sought damages for injuries they allegedly sustained from their exposure to
dibromochloropropane (DBCP), a chemical used to kill nematodes (worms), while working
on farms in 23 foreign countries. The cases were eventually transferred to, and consolidated
in, the Federal District Court for the Southern District of Texas, Houston Division. The
defendants in the consolidated cases prayed for the dismissal of all the actions under the
doctrine of forum non conveniens.
In a Memorandum Order, the Federal District Court conditionally granted the defendants
motion to dismiss provided the defendants:
(1) participated in expedited discovery in the United States
(2) either waived or accepted service of process and waived any other jurisdictional defense
in any action commenced by a plaintiff in these actions in his home country or the country in
which his injury occurred.
(3) waived any limitations-based defense that has matured since the commencement of
these actions in the courts of Texas;
(4) stipulated that any discovery conducted during the pendency of these actions may be
used in any foreign proceeding to the same extent as if it had been conducted in
proceedings initiated there; and
(5) submitted an agreement binding them to satisfy any final judgment rendered in favor of
plaintiffs by a foreign court.
In the event that the highest court of any foreign country finally affirms the dismissal for lack
of jurisdiction of an action commenced by a plaintiff in these actions in his home country or
the country in which he was injured, that plaintiff may return to this court and, upon proper
motion, the court will resume jurisdiction over the action as if the case had never been
dismissed for.
Case 1 (125078) and 2 (125598):
336 plaintiffs from General Santos City filed a Joint Complaint in the RTC of General Santos
City. Named as defendants therein were: Shell Oil Co. (SHELL); Dow Chemical Co. (DOW);
Occidental Chemical Corp. (OCCIDENTAL); Dole Food Co., Inc., Dole Fresh Fruit Co.,
Standard Fruit Co., Standard Fruit and Steamship Co. (hereinafter collectively referred to as
DOLE); Chiquita Brands, Inc. and Chiquita Brands International, Inc. (CHIQUITA); Del
Monte Fresh Produce N.A. and Del Monte Tropical Fruit Co. (hereinafter collectively
referred to as DEL MONTE); Dead Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine
Compounds, Ltd.; and Amvac Chemical Corp. (The aforementioned defendants are
hereinafter collectively referred to as defendant companies.)
NAVIDA, et al., prayed for the payment of damages in view of the illnesses and injuries to
the reproductive systems which they allegedly suffered because of their exposure to DBCP.
They claimed, among others, that they were exposed to this chemical during the early
1970s up to the early 1980s when they used the same in the banana plantations59 where
they worked at; and/or when they resided within the agricultural area where such chemical
was used. NAVIDA, et al., claimed that their illnesses and injuries were due to the fault or
negligence of each of the defendant companies in that they produced, sold and/or otherwise
put into the stream of commerce DBCP-containing products. According to NAVIDA, et al.,
they were allowed to be exposed to the said products, which the defendant companies
knew, or ought to have known, were highly injurious to the formers health and well-being.
CONFLICTS
Without resolving the motions filed by the parties, the RTC of General Santos City issued an
Order dismissing the complaint. First, the trial court determined that it did not have
jurisdiction to hear the case because the substance of the cause of action as stated in the
complaint against the defendant foreign companies cites activity on their part which took
place abroad and had occurred outside and beyond the territorial domain of the Philippines.
These acts of defendants cited in the complaint included the manufacture of pesticides, their
packaging in containers, their distribution through sale or other disposition, resulting in their
becoming part of the stream of commerce. The subject matter stated in the complaint and
which is uniquely particular to the present case, consisted of activity or course of conduct
engaged in by foreign defendants outside Philippine territory, hence, outside and beyond
the jurisdiction of Philippine Courts, including the present Regional Trial Court.
Second, the RTC of General Santos City adjudged that NAVIDA, et al., were coerced into
submitting their case to the Philippine courts, merely to comply with the U.S. District Courts
Order and in order to keep open to the plaintiffs the opportunity to return to the U.S. District
Court.
Third, the trial court ascribed little significance to the voluntary appearance of the defendant
companies. Defendants have appointed their agents authorized to accept service of
summons/processes in the Philippines pursuant to the agreement in the U.S. court that
defendants will voluntarily submit to the jurisdiction of this court. While it is true that this
court acquires jurisdiction over persons of the defendants through their voluntary
appearance, it appears that such voluntary appearance of the defendants in this case is
conditional. Thus in the Defendants Amended Agreement Regarding Conditions of
Dismissal for Forum Non Conveniens filed with the U.S. District Court, defendants declared
that (t)he authority of each designated representative to accept service of process will
become effective upon final dismissal of these actions by the Court. The decision of the
U.S. District Court dismissing the case is not yet final and executory since both the plaintiffs
and defendants appealed therefrom. Consequently, since the authority of the agent of the
defendants in the Philippines is conditioned on the final adjudication of the case pending
with the U.S. courts, the acquisition of jurisdiction by this court over the persons of the
defendants is also conditional.
Fourth, the RTC of General Santos City ruled that the act of NAVIDA, et al., of filing the case
in the Philippine courts violated the rules on forum shopping and litis pendencia. This court
frowns upon the fact that the parties herein are both vigorously pursuing their appeal of the
decision of the U.S. District court dismissing the case filed thereat. To allow the parties to
litigate in this court when they are actively pursuing the same cases in another forum,
violates the rule on forum shopping so abhorred in this jurisdiction. Moreover, the filing of
the case in the U.S. courts divested this court of its own jurisdiction. This court takes note
that the U.S. District Court did not decline jurisdiction over the cause of action. The case
was dismissed on the ground of forum non conveniens, which is really a matter of venue. By
taking cognizance of the case, the U.S. District Court has, in essence, concurrent
jurisdiction with this court over the subject matter of this case. It is settled that initial
acquisition of jurisdiction divests another of its own jurisdiction.
Case 3 (126654), 4 (127856), 5(128398)
Another joint complaint for damages against SHELL, DOW, OCCIDENTAL, DOLE, DEL
MONTE, and CHIQUITA was filed before Branch 16 of the RTC of Davao City by 155
plaintiffs from Davao City. They alleged that as workers in the banana plantation and/or as
residents near the said plantation, they were made to use and/or were exposed to
nematocides, which contained the chemical DBCP. According to ABELLA, et al., such
exposure resulted in serious and permanent injuries to their health, including, but not
limited to, sterility and severe injuries to their reproductive capacities.
The RTC of Davao City, however, junked Civil Cases. The Court however is constrained to
dismiss the case at bar not solely on the basis of the above but because it shares the
opinion of legal experts given in the interview made by the Inquirer in its Special report
Pesticide Cause Mass Sterility, Former Justice Secretary Demetrio Demetria in a May
1995 opinion said: The Philippines should be an inconvenient forum to file this kind of
damage suit against foreign companies since the causes of action alleged in the petition do
not exist under Philippine laws. There has been no decided case in Philippine
Jurisprudence awarding to those adversely affected by DBCP. This means there is no
available evidence which will prove and disprove the relation between sterility and DBCP.
Eventually, the cases reached the SC!
Present case:
The main contention of the petitioners states that the allegedly tortious acts and/or
omissions of defendant companies occurred within Philippine territory. Said fact allegedly
constitutes reasonable basis for our courts to assume jurisdiction over the case.
DOLE similarly maintains that the acts attributed to defendant companies constitute a quasi-
delict, which falls under Article 2176 of the Civil Code. DOLE also argues that if indeed there
is no positive law defining the alleged acts of defendant companies as actionable wrong,
Article 9 of the Civil Code dictates that a judge may not refuse to render a decision on the
ground of insufficiency of the law. The court may still resolve the case, applying the customs
of the place and, in the absence thereof, the general principles of law.
60
CHIQUITA (another petitioner) argues that the courts a quo had jurisdiction over the subject
matter of the cases filed before them. CHIQUITA avers that the pertinent matter is the place
of the alleged exposure to DBCP, not the place of manufacture, packaging, distribution,
sale, etc., of the said chemical. This is in consonance with the lex loci delicti commisi theory
in determining the situs of a tort, which states that the law of the place where the alleged
wrong was committed will govern the action. CHIQUITA and the other defendant companies
CONFLICTS
also submitted themselves to the jurisdiction of the RTC by making voluntary appearances
and seeking for affirmative reliefs during the course of the proceedings.
Issue:
Whether or not the RTCs have jurisdiction over the subject matter in these cases.
Held: Yes.
1. The rule is settled that jurisdiction over the subject matter of a case is conferred by law
and is determined by the allegations in the complaint and the character of the relief sought,
irrespective of whether the plaintiffs are entitled to all or some of the claims asserted
therein. Once vested by law, on a particular court or body, the jurisdiction over the subject
matter or nature of the action cannot be dislodged by anybody other than by the legislature
through the enactment of a law.
At the time of the filing of the complaints, the jurisdiction of the RTC in civil cases under
Batas Pambansa Blg. 129, as amended by Republic Act No. 7691, was:
In all other cases in which the demand, exclusive of interest, damages of whatever kind,
attorneys fees, litigation expenses, and costs or the value of the property in controversy
exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro
Manila, where the demand, exclusive of the abovementioned items exceeds Two hundred
thousand pesos (P200,000.00).
Supreme Court Administrative Circular No. 09-94, states:
The exclusion of the term damages of whatever kind in determining the jurisdictional
amount under Section 19 (8) and Section 33 (1) of B.P. Blg. 129, as amended by R.A. No.
7691, applies to cases where the damages are merely incidental to or a consequence of the
main cause of action. However, in cases where the claim for damages is the main cause of
action, or one of the causes of action, the amount of such claim shall be considered in
determining the jurisdiction of the court.
It is clear that the claim for damages is the main cause of action and that the total amount
sought in the complaints is approximately P2.7 million for each of the plaintiff claimants. The
RTCs unmistakably have jurisdiction over the cases filed in General Santos City and Davao
City.
2. The jurisdiction of the court cannot be made to depend upon the defenses set up in the
answer or upon the motion to dismiss, for otherwise, the question of jurisdiction would
almost entirely depend upon the defendants. What determines the jurisdiction of the court is
the nature of the action pleaded as appearing from the allegations in the complaint. The
averments therein and the character of the relief sought are the ones to be consulted.
Clearly then, the acts and/or omissions attributed to the defendant companies constitute a
quasi-delict which is the basis for the claim for damages filed by NAVIDA, et al., and
ABELLA, et al., with individual claims of approximately P2.7 million for each plaintiff
claimant, which obviously falls within the purview of the civil action jurisdiction of the RTCs.
3. It is, therefore, error on the part of the courts a quo when they dismissed the cases on the
ground of lack of jurisdiction on the mistaken assumption that the cause of action narrated
by NAVIDA, et al., and ABELLA, et al., took place abroad and had occurred outside and
beyond the territorial boundaries of the Philippines, i.e., the manufacture of the pesticides,
their packaging in containers, their distribution through sale or other disposition, resulting in
their becoming part of the stream of commerce, and, hence, outside the jurisdiction of the
RTCs.
Certainly, the cases below are not criminal cases where territoriality, or the situs of the act
complained of, would be determinative of jurisdiction and venue for trial of cases. In
personal civil actions, such as claims for payment of damages, the Rules of Court allow the
action to be commenced and tried in the appropriate court, where any of the plaintiffs or
defendants resides, or in the case of a non-resident defendant, where he may be found, at
the election of the plaintiff.
In a very real sense, most of the evidence required to prove the claims of NAVIDA, et al.,
and ABELLA, et al., are available only in the Philippines. First, plaintiff claimants are all
residents of the Philippines, either in General Santos City or in Davao City. Second, the
specific areas where they were allegedly exposed to the chemical DBCP are within the
territorial jurisdiction of the courts a quo wherein NAVIDA, et al., and ABELLA, et al., initially
filed their claims for damages. Third, the testimonial and documentary evidence from
important witnesses, such as doctors, co-workers, family members and other members of
the community, would be easier to gather in the Philippines.
----
Re: Jurisdiction over the person
The RTC of General Santos City and the RTC of Davao City validly acquired jurisdiction
61
over the persons of all the defendant companies. All parties voluntarily, unconditionally and
knowingly appeared and submitted themselves to the jurisdiction of the courts a quo. All the
defendant companies submitted themselves to the jurisdiction of the courts a quo by making
several voluntary appearances, by praying for various affirmative reliefs, and by actively
participating during the course of the proceedings below.
In line herewith, this Court, in Meat Packing Corporation of the Philippines v.
Sandiganbayan, held that jurisdiction over the person of the defendant in civil cases is
CONFLICTS
acquired either by his voluntary appearance in court and his submission to its authority or by
service of summons. Furthermore, the active participation of a party in the proceedings is
tantamount to an invocation of the courts jurisdiction and a willingness to abide by the
resolution of the case, and will bar said party from later on impugning the court or bodys
jurisdiction.
---Jurisdiction v Exercise of Jurisdiction
It may also be pertinently stressed that jurisdiction is different from the exercise of
jurisdiction. Jurisdiction refers to the authority to decide a case, not the orders or the
decision rendered therein. Accordingly, where a court has jurisdiction over the persons of
the defendants and the subject matter, as in the case of the courts a quo, the decision on all
questions arising therefrom is but an exercise of such jurisdiction. Any error that the court
may commit in the exercise of its jurisdiction is merely an error of judgment, which does not
affect its authority to decide the case, much less divest the court of the jurisdiction over the
case.
----Re: Bad faith in filing cases to procure a dismissal and to allow petitioners to return to the
forum of their choice.
This Court finds such argument much too speculative to deserve any merit.
It must be remembered that this Court does not rule on allegations that are unsupported by
evidence on record. This Court does not rule on allegations which are manifestly
conjectural, as these may not exist at all. This Court deals with facts, not fancies; on
realities, not appearances.
* We REMAND the records of this case to the respective Regional Trial Courts of origin for
further and appropriate proceedings in line with the ruling herein that said courts have
jurisdiction over the subject matter of the amended complaints.
NAVIDA VS. DIZON
FACTS:
2 petitions, G.R. 125078 & 125598, assailed the perceived lack of jurisdiction of RTC over the
matter
Proceedings before the texas courts:
Beginning 1993, a number of personal injury suits were filed in different texas state courts by
citizens of 12 foreign countries, including the Philippines;
Thousands of plaintiffs sought damages for injuries they allegedly sustained from their exposure
to a chemical used to kill nematodes while working on farms in 23 foreign countries;
 Respondents want the case be dismissed under the doctrine of forum non conveniens While a class suit is allowed in the Philippines, the device has been employed strictly. Mass
sterility will not qualify as a class suit injury within the contemplation of Philippine statute (Retired
The federal district court granted the motion to dismiss subject to certain conditions; Supreme Court Justice Sarmiento);

Proceedings in the RTC of General Santos City Absence of doctrine in the Philippines regarding product liability

336 plaintiffs from GenSan filed a Joint Complaint in the RTC of GenSan. Petitioners (Davao) contends that the RTC has jurisdiction over the case since Articles 2176 and
2187 of the Civil Code are broad enough to cover the acts complained of; and that the opinions
They prayed for the payment of damages in view of the illnesses and injuries suffered from of the legal experts are bereft of basis;
DBCP, claiming that they were exposed to the said chemical even though the defendants knew it
was harmful; Motion to withdraw was filed by Respondents asserting that the Petition for review is moot and
academic since they already entered into an amicable settlement with petitioners
Defendant filed their motion for bill of particulars
ISSUE/S:
The RTC dismissed the complaints on the following grounds:

The activity took outside the Philippines territory, hence, outside Philippine jurisdiction; 1. Whether or not the Court is correct in dismissing the petition due to lack of jurisdiction?

2. Whether or not the trial court has jurisdiction over the matter?
The tort in the complaint, which is product liability tort is not the tor category within the purview
of Philippine Law
a. That the acts complained of occurred within the Philippines;
That Petitioners coerced into submitting their case in the Philippines b. That Article 2176 of the Civil Code is broad enough to cover the act;
The voluntary appearance of defendants has little significance; c. That assumption by the US District Court did not divest jurisdiction of the Philippine courts;
and,
Petioners violated the rules on forum shopping and litis pendencia
d. That the compromise agreement does not justifiably prejudice remaining respondents.
The case is barred by litis pendencia SINCE THE CASE IS PENDING IN THE US COURTS,
THE PRESENT COMPLAINT MUST BE DISMISSED
RULING/S:
The petitioners filed a Petition for Review
ISSUE ON JURISDICTION
Proceedings in the RTC of Davao City
1. The court erred in dismissing the case on the ground of jurisdiction.
155 plaintiffs from Davao filed a complaint in the RTC of Davao, similar to the complaint of
Navida etal (GenSan) The jurisdiction of court cannot be made to depend upon the defenses set by defendants.
What determines jurisdiction of the court is the nature of action pleaded as appearing from the
However, the RTC likewise junked the case for the following reasons: allegations in the complaint.

That Petitioners would have this court dismiss the case to pave the way for their
62 getting an 2. None of the parties actually move for the case based on the RTC jurisdiction but more on the
affirmance by the supreme court prayer for damages.

It shares the opinion of legal experts, to wit: 3. The trial court has clearly jurisdiction over the matter.

The Philippines should be an inconvenient forum to file this kind of damage suit against foreign THE RULE IS SETTLED THAT JURISDICTION OVER THE SUBJECT MATTER OF A CASE
companies since the causes of action alleged in the petition do not exist under Philippine laws IS CONFERRED BY LAW AND IS DETERMINED BY THE ALLEGATIONS IN THE
(Former Justice Secretary Demetria); COMPLAINT AND THE CHARACTER OF THE RELIEF SOUGHT. Once vested by law, on a

CONFLICTS
 particular court or body, the jurisdiction over the subject matter of the action cannot be DECISION
dislodged by anybody other that the legislature thru enactment of a law.

4. On whether the act occurred in the Philippines, the Court held YES. Thus, civil code article 2176 NACHURA, J.:
which provides that whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done..xxx is applicable in the case at bar and Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court
therefore, RTC obviously has jurisdiction over the matter. assailing the April 18, 2001 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No.
60827, and the July 25, 2001 Resolution2denying the motion for reconsideration thereof.
Also, the case at bar is a personal case, not a criminal, hence, lex situs theory is not
necessarily applicable.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a
5. The facts clearly shows that the claim for damages is the cause of action and that the RTC Japanese consultancy firm providing technical and management support in the
unmistakably has jurisdiction over the matter. infrastructure projects of foreign governments, 3 entered into an Independent Contractor
Agreement (ICA) with respondent Minoru Kitamura, a Japanese national permanently
6. Moreover, the RTC of GenSan and Davao validly acquired jurisdiction over the persons of all the
residing in the Philippines.4 The agreement provides that respondent was to extend
defendant companies.
professional services to Nippon for a year starting on April 1, 1999. 5 Nippon then assigned
In the case Meat Packing Corp. of the Philippines vs. Sandiganbayan, the court held that respondent to work as the project manager of the Southern Tagalog Access Road (STAR)
jurisdiction over the person of the defendant in civil cases is acquired by his Project in the Philippines, following the company's consultancy contract with the Philippine
voluntary appearance in court and his submission to its authority or by service of Government.6
summons..xxxactive participation of a party in the proceedings is tantamount to an
invocation of courts jurisdiction and willingness to abide in the resolution of the When the STAR Project was near completion, the Department of Public Works and
case.
Highways (DPWH) engaged the consultancy services of Nippon, on January 28, 2000, this
Jurisdiction is different from exercise of jurisdiction. Jurisdiction refers to the authority to time for the detailed engineering and construction supervision of the Bongabon-Baler Road
decide a case, not the orders or the decision rendered therein. Improvement (BBRI) Project.7 Respondent was named as the project manager in the
contract's Appendix 3.1.8
Where a court has jurisdiction over persons of the defendants and the subject matter, the
decision on all questions arising therefrom is the exercise of jurisdiction. 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
Republic of the Philippines the substantial completion of the STAR Project on March 31, 2000, just in time for the ICA's
expiry.9
SUPREME COURT
Manila
Threatened with impending unemployment, respondent, through his lawyer, requested a
negotiation conference and demanded that he be assigned to the BBRI project. Nippon
THIRD DIVISION insisted that respondents contract was for a fixed term that had already expired, and
refused to negotiate for the renewal of the ICA. 10
G.R. No. 149177 November 23, 2007 63
As he was not able to generate a positive response from the petitioners, respondent
KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., consequently initiated on June 1, 2000 Civil Case No. 00-0264 for specific performance and
LTD., Petitioners, damages with the Regional Trial Court of Lipa City.11
vs.
For their part, petitioners, contending that the ICA had been perfected in Japan and
MINORU KITAMURA, Respondent.
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
CONFLICTS
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. Frank that 14
matters connected with the performance of contracts are regulated by the law prevailing at
the place of performance,15 denied the motion to dismiss.16 The trial court subsequently
denied petitioners' motion for reconsideration,17 prompting them to file with the appellate
court, on August 14, 2000, their first Petition for Certiorari under Rule 65 [docketed as CA-
G.R. SP No. 60205].18 On August 23, 2000, the CA resolved to dismiss the petition on
procedural groundsfor lack of statement of material dates and for insufficient verification
and certification against forum shopping. 19 An Entry of Judgment was later issued by the
appellate court on September 20, 2000.20
Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still
within the reglementary period, a second Petition for Certiorari under Rule 65 already
stating therein the material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the same issues as those in the
first, was docketed as CA-G.R. SP No. 60827.21
Ruling on the merits of the second petition, the appellate court rendered the assailed April
18, 2001 Decision22finding 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:
64
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.
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B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE
NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI
SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE
INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is whether the subject matter
jurisdiction of Philippine courts in civil cases for specific performance and damages
involving contracts executed outside the country by foreign nationals may be assailed on
the principles of lex loci celebrationis, lex contractus, the "state of the most significant
relationship rule," or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters raised
by the respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No.
60205 has already barred the filing of the second petition docketed as CA-G.R. SP No.
60827 (fundamentally raising the same issues as those in the first one) and the instant
petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the
petition's defective certification of non-forum shopping, it was a dismissal without
prejudice.27 The same holds true in the CA's dismissal of the said case due to defects in the
formal requirement of verification28 and in the other requirement in Rule 46 of the Rules of
Court on the statement of the material dates. 29 The dismissal being without prejudice,
petitioners can re-file the petition, or file a second petition attaching thereto the appropriate
verification and certificationas they, in fact didand stating therein the material dates,
within the prescribed period30 in Section 4, Rule 65 of the said Rules.31
The dismissal of a case without prejudice signifies the absence of a decision on the merits
and leaves the parties free to litigate the matter in a subsequent action as though the
dismissed action had not been commenced. In other words, the termination of a case not on
the merits does not bar another action involving the same parties, on the same subject
matter and theory.32
Necessarily, because the said dismissal is without prejudice and has no res judicata effect,
and even if petitioners still indicated in the verification and certification of the
second certiorari petition that the first had already been dismissed on procedural
grounds,33 petitioners are no longer required by the Rules to indicate in their certification of
non-forum shopping in the instant petition for review of the second certiorari petition, the
status of the aforesaid first petition before the CA. In any case, an omission in the certificate
of non-forum shopping about any event that will not constitute res judicata and litis
pendentia, as in the present case, is not a fatal defect. It will not warrant the dismissal and
nullification of the entire proceedings, considering that the evils sought to be prevented by
the said certificate are no longer present.34
The Court also finds no merit in respondent's contention that petitioner Hasegawa is only
authorized to verify and certify, on behalf of Nippon, the certiorari petition filed with the CA
and not the instant petition. True, the Authorization 35 dated September 4, 2000, which is
attached to the second certiorari petition and which is also attached to the instant petition for
review, is limited in scopeits wordings indicate that Hasegawa is given the authority to
sign for and act on behalf of the company only in the petition filed with the appellate court,
and that authority cannot extend to the instant petition for review. 36 In a plethora of cases,
however, this Court has liberally applied the Rules or even suspended its application
whenever a satisfactory explanation and a subsequent fulfillment of the requirements have
been made.37 Given that petitioners herein sufficiently explained their misgivings on this
point and appended to their Reply 38 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.40Considering 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 65 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.
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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 parties 46following
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 Dismiss 48 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. 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.62What they rather raise as
grounds to question subject matter jurisdiction are the principles of lex loci
celebrationisand 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 contract 66 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 66 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
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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 courts power to hear cases and
controversies is derived from the Constitution and the laws. While it may choose to
recognize laws of foreign nations, the court is not limited by foreign sovereign law short of
treaties or other formal agreements, even in matters regarding rights provided by foreign
sovereigns.75
Neither can the other ground raised, forum non conveniens,76 be used to deprive the trial
court of its jurisdiction herein. First, it is not a proper basis for a motion to dismiss because
Section 1, Rule 16 of the Rules of Court does not include it as a ground. 77 Second, whether
a suit should be entertained or dismissed on the basis of the said doctrine depends largely
upon the facts of the particular case and is addressed to the sound discretion of the trial
court.78 In this case, the RTC decided to assume jurisdiction. Third, the propriety of
dismissing a case based on this principle requires a factual determination; hence, this
conflicts principle is more properly considered a matter of defense. 79
Accordingly, since the RTC is vested by law with the power to entertain and hear the civil
case filed by respondent and the grounds raised by petitioners to assail that jurisdiction are
inappropriate, the trial and appellate courts correctly denied the petitioners motion to
dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED.
SO ORDERED.
Kazuhiro Hasegawa vs Minoru Kitamura
538 SCRA 261 Conflict of Laws Private International Law Jurisdiction Lex Loci
Celebrationis Lex Loci Solutionis State of the Most Significant Relationship Forum
Non Conveniens
 In March 1999, Nippon Engineering Consultants Co., Ltd, a Japanese firm, was contracted
by the Department of Public Works and Highways (DPWH) to supervise the construction of
the Southern Tagalog Access Road. In April 1999, Nippon entered into an independent
contractor agreement (ICA) with Minoru Kitamura for the latter to head the said project. The
ICA was entered into in Japan and is effective for a period of 1 year (so until April 2000). In
January 2000, DPWH awarded the Bongabon-Baler Road project to Nippon. Nippon
subsequently assigned Kitamura to head the road project. But in February 2000, Kazuhiro
Hasegawa, the general manager of Nippon informed Kitamura that they are pre-terminating
his contract. Kitamura sought Nippon to reconsider but Nippon refused to negotiate.
Kitamura then filed a complaint for specific performance and damages against Nippon in the
RTC of Lipa.
Hasegawa filed a motion to dismiss on the ground that the contract was entered in Japan
hence, applying the principle of lex loci celebracionis, cases arising from the contract should
be cognizable only by Japanese courts. The trial court denied the motion. Eventually,
Nippon filed a petition for certiorari with the Supreme Court.
Hasegawa, on appeal significantly changed its theory, this time invoking forum non
conveniens; that the RTC is an inconvenient forum because the parties are Japanese
nationals who entered into a contract in Japan. Kitamura on the other hand invokes the trial
courts ruling which states that matters connected with the performance of contracts are
regulated by the law prevailing at the place of performance, so since the obligations in the
ICA are executed in the Philippines, courts here have jurisdiction.
ISSUE: Whether or not the complaint against Nippon should be dismissed.
HELD: No. The trial court did the proper thing in taking cognizance of it.
In the first place, the case filed by Kitamura is a complaint for specific performance and
damages. Such case is incapable of pecuniary estimation; such cases are within the
jurisdiction of the regional trial court.
Hasegawa filed his motion to dismiss on the ground of forum non conveniens. However,
such ground is not one of those provided for by the Rules as a ground for dismissing a civil
case.
67
The Supreme Court also emphasized that the contention that Japanese laws should apply
is premature. In conflicts cases, there are three phases and each next phase commences
when one is settled, to wit:
1. Jurisdiction Where should litigation be initiated? Court must have jurisdiction
over the subject matter, the parties, the issues, the property, the res. Also considers,
CONFLICTS
whether it is fair to cause a defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will determine the merits of the
case is fair to both parties.
2. Choice of Law Which law will the court apply? Once a local court takes
cognizance, it does not mean that the local laws must automatically apply. The court must
determine which substantive law when applied to the merits will be fair to both parties.
3. Recognition and Enforcement of Judgment Where can the resulting judgment
be enforced?
This case is not yet in the second phase because upon the RTCs taking cognizance of the
case, Hasegawa immediately filed a motion to dismiss, which was denied. He filed a motion
for reconsideration, which was also denied. Then he bypassed the proper procedure by
immediately filing a petition for certiorari. The question of which law should be applied
should have been settled in the trial court had Hasegawa not improperly appealed the
interlocutory order denying his MFR.
KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD., vs
MINORU KITAMURA
G.R. No. 149177 November 23, 2007
FACTS:
Nippon Engineering Consultants (Nippon), a Japanese consultancy firm providing technical
and management support in the infrastructure projects national permanently residing in the
Philippines. The agreement provides that Kitamaru was to extend professional services to
Nippon for a year. Nippon assigned Kitamaru to work as the project manager of the
Southern Tagalog Access Road (STAR) project. When the STAR project was near
completion, DPWH engaged the consultancy services of Nippon, this time for the detailed
engineering & construction supervision of the Bongabon-Baler Road Improvement (BBRI)
Project. Kitamaru was named as the project manger in the contract.
Hasegawa, Nippons general manager for its International Division, informed Kitamaru 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.
Kitamaru demanded that he be assigned to the BBRI project. Nippon insisted that
Kitamarus contract was for a fixed term that had expired. Kitamaru then filed for specific
performance & damages w/ the RTC of Lipa City. Nippon filed a MTD.
Nippons contention: The ICA had been perfected in Japan & executed by & between
Japanese nationals. Thus, the RTC of Lipa City has no jurisdiction. The claim for improper
pre-termination of Kitamarus ICA could only be heard & ventilated in the proper courts of
Japan following the principles of lex loci celebrationis & lex contractus.
The RTC denied the motion to dismiss. The CA ruled hat 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. It held that the RTC was correct in applying
the principle of lex loci solutionis.
ISSUE:
Whether or not the subject matter jurisdiction of Philippine courts in civil cases for specific
performance & 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.
HELD:
NO. In the judicial resolution of conflicts problems, 3 consecutive phases are involved:
jurisdiction, choice of law, and recognition and enforcement of judgments. Jurisdiction &
choice of law are 2 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 w/c will determine the merits of the case is fair to both
parties. The power to exercise jurisdiction does notautomatically give a
state constitutional authority to apply forum law. While jurisdiction and the choice of the lex
foriwill often coincide, the minimum contacts for one do not always provide the necessary
significant contacts for the other. 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.
In this case, only the 1st phase is at issuejurisdiction. Jurisdiction, however, has various
aspects. For a court to validly exercise its power to adjudicate a controversy, it must have
jurisdiction over the plaintiff/petitioner, over the defendant/respondent, over the subject
matter, over the issues of the case and, in cases involving property, over the res or the thing
w/c is the subject of the litigation.In assailing the trial court's jurisdiction herein, Nippon is
actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign
authority w/c establishes and organizes the court. It is given only by law and in68 the manner
prescribed by law. 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. To succeed in its
motion for the dismissal of an action for lack of jurisdiction over the subject matter of the
claim, the movant must show that the court or tribunal cannot act on the matter submitted to
it because no lawgrants it the power to adjudicate the claims.
CONFLICTS
In the instant case, Nippon, in its MTD, does not claim that the RTC is not properly vested
by law w/ jurisdiction to hear the subject controversy for a civil case for specific performance
& damages is one not capable of pecuniary estimation & is properly cognizable by the RTC
of Lipa City.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 or the law of the place
where a contract is made. The doctrine of lex contractus or lex loci contractusmeans the
law of the place where a contract is executed or to be performed. It controls the nature,
construction, and validity of the contract and it may pertain to the law voluntarily agreed
upon by the parties or the law intended by them either expressly or implicitly. 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.This rule takes into account several
contacts and evaluates them according to their relative importance with respect to the
particular issue to be resolved.
Since these 3 principles in conflict of laws make reference to the law applicable to a dispute,
they are rules proper for the 2 nd phase, the choice of law. They determine which state's law
is to be applied in resolving the substantive issues of a conflicts problem. Necessarily, as
the only issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable
but also not yet called for.
Further, Nippons 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, 1st there should exist a conflict of laws situation
requiring theapplication of the conflict of laws rules. 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.
It should be noted that when a conflicts case, one involving a foreign element, is brought
before a court or administrative agency, there are 3 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. The courts power to hear cases and
controversies is derived from the Constitution and the laws. While it may choose to
recognize laws of foreign nations, the court is not limited by foreign sovereign law short of
treaties or other formal agreements, even in matters regarding rights provided by foreign
sovereigns.
Neither can the other ground raised, forum non conveniens, be used to deprive the RTC of
its jurisdiction. 1st, it is not a proper basis for a motion to dismiss because Sec. 1, Rule 16
of the Rules of Court does not include it as a ground. 2nd, 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 RTC. In this case, the
RTC decided to assume jurisdiction. 3rd, 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.

69

CONFLICTS