1.

NATIONAL UNION FIRE INSURANCE COMPANY PITTSBURGH V. STOLT-NIELSEN PHILIPPINES

OF

being performed. Nor has any conflict been pointed out between the Charter Party and the Bill of Lading. Arbitration, as an alternative mode of settling disputes, has long been recognized and accepted in our jurisdiction (Chapter 2, Title XIV, Book IV, Civil Code). Republic Act No. 876 (The Arbitration Law) also expressly authorizes arbitration of domestic disputes. Foreign arbitration as a system of settling commercial disputes of an international character was likewise recognized when the Philippines adhered to the United Nations "Convention on the Recognition and the Enforcement of Foreign Arbitral Awards of 1958," under the 10 May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition and allowing enforcement of international arbitration agreements between parties of different nationalities within a contracting state. Thus, it pertinently provides: 1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration. 2. The term "agreement in writing" shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams. 3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. It has not been shown that the arbitral clause in question is null and void, inoperative, or incapable of being performed. Nor has any conflict been pointed out between the Charter Party and the Bill of Lading. In fine, referral to arbitration in New York pursuant to the arbitration clause, and suspension of the proceedings in Civil Case No. 13498 below, pending the return of the arbitral award, is, indeed called for. 2. QUERUBIN V. QUERUBIN Note: This case is entirely in Spanish with random insertions of American doctrines. Therefore, the facts are shit. I guess the importance of the case is to take note of the doctrines (since we wont discussing this in class anyways.) Facts: It is therefore ordered, adjudged and decreed that the interlocutory judgment of divorce hereinbefore entered on February 27, 1948, in Book 1891, page 319, be and the same is hereby modified in the following particulars in connection with the custody of the minor child of the parties only: (1) The care, custody and control of the minor child of the parties, Querubina Querubin, is hereby awarded to defendant and crosscomplainants; (2) Said child is to be maintained in a neutral home, subject to the right of reasonable visitation on the part of both parties to this action; (3) Each party shall have the right to take said child away from said neutral home but plaintiff and cross-defendant is restrained from taking said child to her place of residence; (4) Each party is restrained from molesting the other, or in any way interfering with the other's right of reasonable visitation of said child; (5) Each party is restrained from removing the child from the State of California without first securing the permission of the court; said parties are further restrained from keeping the child out of the County of Los Angeles for more than one day without first securing the consent of the court. Under interlocutory decree of March 7, 1949, the child, a girl now 3 1/2 years old, was granted to defendant husband, but the child was to be
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FACTS: On 9 January 1985, United Coconut Chemicals, Inc. shipped 404.774 metric tons of distilled C6-C18 fatty acid on board MT "Stolt Sceptre," a tanker owned by Stolt-Nielsen Philippines Inc., from Bauan, Batangas, Philippines, consigned to "Nieuwe Matex" at Rotterdam, Netherlands, covered by Tanker Bill of Lading BL No. BAT-1. The shipment was insured under a marine cargo policy with Petitioner National Union Fire Insurance Company of Pittsburg (hereinafter referred to as INSURER), a non-life American insurance corporation, through its settling agent in the Philippines, the American International Underwriters (Philippines), Inc., the other petitioner herein. Upon receipt of the cargo by the consignee in the Netherlands, it was found to be discoloured and totally contaminated. Hence, a claim was made on the Insurer of the cargo. The insurer as subrogee filed a claim for damages against the carrier with the RTC of Manila. The carrier filed a motion to dismiss on the ground that the case was arbritrable and pursuant to the charter party as embodied in the bill of lading, arbitration must be done. The insurer opposed the motion by arguing that the provision on arbitration was not included in the bill of lading and even if it was included, it was nevertheless unjust and unreasonable. The RTC denied the motion but upon reconsideration, the resolution on the motion to dismiss was suspended or deferred. The carrier then filed a petition for review on certiorari with preliminary injunction/TRO which was granted by the CA. ISSUE: Are the terms of the Charter Party, particularly the provision on arbitration, binding on the INSURER? HELD: The pertinent portion of the Bill of Lading in issue provides in part: xxx [A]ll the terms whatsoever of the said Charter except the rate and payment of freight specified therein apply to and govern the rights of the parties concerned in this shipment.xxx The provision on arbitration in the Charter Party reads: 4. Arbitration. Any dispute arising from the making, performance or termination of this Charter Party shall be settled in New York, Owner and Charterer each appointing an arbitrator, who shall be a merchant, broker or individual experienced in the shipping business; the two thus chosen, if they cannot agree, shall nominate a third arbitrator who shall be an admiralty lawyer. Such arbitration shall be conducted in conformity with the provisions and procedure of the United States arbitration act, and a judgment of the court shall be entered upon any award made by said arbitrator. Nothing in this clause shall be deemed to waive Owner's right to lien on the cargo for freight, deed of freight, or demurrage. Clearly, the Bill of Lading incorporates by reference the terms of the Charter Party. It is settled law that the charter may be made part of the contract under which the goods are carried by an appropriate reference in the Bill of Lading. As the respondent Appellate Court found, the INSURER "cannot feign ignorance of the arbitration clause since it was already charged with notice of the existence of the charter party due to an appropriate reference thereof in the bill of lading and, by the exercise of ordinary diligence, it could have easily obtained a copy thereof either from the shipper or the charterer. We hold, therefore, that the INSURER cannot avoid the binding effect of the arbitration clause. By subrogation, it became privy to the Charter Party as fully as the SHIPPER before the latter was indemnified, because as subrogee it stepped into the shoes of the SHIPPER-ASSURED and is subrogated merely to the latter's rights. It can recover only the amount that is recoverable by the assured. And since the right of action of the SHIPPER-ASSURED is governed by the provisions of the Bill of Lading, which includes by reference the terms of the Charter Party, necessarily, a suit by the INSURER is subject to the same agreements. It has not been shown that the arbitral clause in question is null and void, inoperative, or incapable of
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kept in a neutral home; both parties were given reasonable visitation and both were restrained from removing the child out of the state. Defendant has taken the child with him to the Philippine Islands. At time of trial custody was apparently denied plaintiff because she was then living with another man. She is now married to this man and they have a well equipped home. Plaintiff appears to be a devoted mother. She has one child, the issue of her present marriage, and is also caring for a child that was abandoned by certain friends of hers. Plaintiffs husband is regularly and permanently employed. Witnesses testified in behalf of the plaintiff in reference to her motherly qualities and the condition of her home. She visited the child in question sufficiently when the child was in the neutral home and brought her toys and other articles. Service of the order to show cause was made on deft's attorneys of record. The interlocutory decree was modified so as to provide that custody of the child shall be awarded to the plaintiff and the defendant shall have the right of reasonable visitation. Defendant shall pay plaintiff for the support of the child $30 each month on the 1st day thereof, commencing Jan. 1950. [my interpretation of what happened next: Plaintiff wife sought to enforce the interlocutory decree of the California courts awarding her custody by filing a case in the Philippines against the husband] Issue: Whether or not an interlocutory decree of one state can be enforced in another (NO) Held: The rule is of common knowledge that the definitive judgment of a court of another state between the same parties on the same cause of action, on the merits of the case is conclusive, but it must be a definitive judgment on the merits only. Where the judgment is merely interlocutory, the determination of the question by the court which rendered it did not settle and adjudge finally the rights of the parties." (National Park Bank vs. Old Colony Trust Co., 186 N.Y.S., 717.) As already stated the Minnesota decree, to the extent that it is final and not subject to modification, is entitled to the protection of the full faith and credit clause of the federal Constitution and must be enforced in this state. If, however, a part of the Minnesota decree in not final, but is subject to modification by the court which rendered it, then neither the United States Constitution nor the principle of comity compels the courts of this state to enforce that part of the decree; for no court other than the one granting the original decree could undertake to administer relief without bringing about a conflict of authority. (Levine vs. Levine, 187 Pac., 609.) A judgment rendered by a competent court, having jurisdiction in one state, is conclusive on the merits in the courts of every other state, when made the basis of an action and the merits cannot be reinvestigated. Our own Supreme Court so holds. Cook vs. Thornhill, 13 Tex. 293, 65 Am. Dec. 63. But before such a judgment rendered in one state is entitled to acceptance, in the courts of another state, as conclusive on the merits, it must be a final judgment and not merely an interlocutory decree. Freeman on Judgment, Sec. 575; Baugh vs. Baugh, 4 Bibb (7 Ky.) 556; Brinkley vs. Brinkley, 50 N.Y. 184, 10 Am. Rep. 460; Griggs, vs. Becker, 87 Wis. 313, 58 N.W. 396. (Walker vs. Garland et al., 235 S.W., 1078.) A consideration of all the facts and circumstances leads to the conclusion that comity does not require the courts of this state, regardless of the well-being of the child, to lend their aid to the enforcement of the Iowa decree by returning Winifred to the custody of her grandmother. A child is not a chattel to which title and the right of possession may be secured by the decree of any court. If the decree had been rendered by a domestic court of competent jurisdiction, it would not have conclusively established the right to the custody of the child. In a contest between rival claimants, this court would have been free, notwithstanding the decree, to award the custody solely with an eye to the child's welfare. (State ex rel. Aldridge vs. Aldridge, 204 N.W. 324.) On habeas corpus by the mother to obtain possession from the father of two children aged four and six years, whose custody she alleged had been awarded her in divorce proceedings in another state, it appeared that the mother was without property, and had no means of support save her personal earnings of $15 per month, was in poor
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health, and lived with her mother, in immoral surroundings, and that the father was an industrious and sober man, earnings $100 per month. Held, that the welfare of the children was the only thing to be considered, and a judgment awarding their custody to the mother should be reversed. (Kentzler vs. Kentzler, 28 Pac., 370.) On the question of comity, this court said in the habeas corpus case of In re Stockman, 71 Mich. 180, 38 N.W. 876: "Comity cannot be considered in a case like this, when the future welfare of the child is the vital question in the case. The good of the child is superior to all other considerations. It is the polar star to guide to the conclusion in all cases of infants, whether the question is raised upon a writ of habeas corpus or in a court of chancery." (Ex parte Leu, 215 N.W., 384.) 3. BORTHWICK V. CASTRO BARTOLOME

FACTS: Based on an action commenced in the Circuit Court of the First Circuit, State of Hawaii, U.S.A., Joseph E. Scallon sought to compel payment by William B. Borthwick on four (4) promissory notes in the amounts of $32,408.95, $29,584.94, $2,832.59 and $40,000.00, plus stipulated interest. Scallon's complaint alleged that Borthwick, an American citizen living in the Philippines, owned real property interests in Hawaii where he last resided and transacted business therein; that business dealings which transpired in Honolulu, Hawaii had given rise to the promissory notes sued upon, and Borthwick had failed to pay the debts despite demand. The promissory notes, which although uniformly specifying the city of Palos Verdes, Los Angeles, California as the place of payment, also provided that "in the event that payment *** shall not have been made in full on or before the maturity date *** at *** (such) place ***, payee may select, at his option, Manila, Philippines, or Honolulu, Hawaii as additional places for payment *** and *** any court in any of said places having jurisdiction over the subject matter shall be a proper Court for the trial of any action brought to enforce payment of this note and the law of the place in which said action is brought shall apply." Borthwick being then in Monterey, California, summons was served upon him personally in that place, pursuant to Hawaiian law allowing service of process on a person outside the territorial confines of the State, if he had otherwise submitted himself to the jurisdiction of its courts as to causes of action arising from the act of transacting any business within Hawaii Borthwick ignored the summons. Default was entered against him, and in due course a default judgment was rendered against him. However, Scallon's attempts to have the judgment executed in Hawaii and California failed, because no assets of Borthwick could be found in those states. Scallon and his wife, Jewell, then came to the Philippines and on March 15, 1980 brought suit against Borthwick in the Court of First Instance of Makati, seeking enforcement of the default judgment of the Hawaii Court. The sheriff's initial efforts to serve summons on Borthwick personally at his address at 861 Richmond St., Greenhills, Mandaluyong having been unsuccessful because Borthwick was "always out on official business", the sheriff effected substituted service by leaving a copy of the summons and the complaint with Borthwick's "house caretaker/gardener" named Fred Daniel. Borthwick filed no answer to the Scallons' complaint. He was declared in default. After due proceedings judgment by default was rendered against him. There was no response from Borthwick until after the Court subsequently amended its judgment so as to make the sums due under the Hawaii Court decision payable in their equivalent in Philippine currency. Notice of this amendatory order was personally accepted by Borthwick at this time. Borthwick then moved for a new trial but was denied by the trial court. As to Borthwick's attack on the validity of the foreign judgment, the Trial Court ruled that "under the ** Hawaii Revised Statute cited by the defendant the Hawaii Court has jurisdiction" because the factual premises upon which the exercise of such jurisdiction was based "had
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not been refuted by the defendant" although he "appears to be a lawyer, and the summons in the Hawaii case was served personally on him." Finally, the Trial Court disposed of Borthwick's other defenses saying that the present action "is for the enforcement of a foreign judgment" where the validity of his defenses to the original action is immaterial. Borthwick proceeded directly to this Court and filed a petition for review. ISSUE: Is the judgment renderred by the Hawaii Court against Borthwick enforceable in the Philippines? HELD: YES. It is true that a foreign judgment against a person is merely "presumptive evidence of a right as between the parties," and rejection thereof may be justified, among others, by "evidence of a want of jurisdiction" of the issuing authority, under Rule 39 of the Rules of Court. In the case at bar, the jurisdiction of the Circuit Court of Hawaii hinged entirely on the existence of either of two facts in accordance with its State laws, i.e., either Borthwick owned real property in Hawaii, or the promissory notes sued upon resulted from his business transactions therein. Scallon's complaint clearly alleged both facts. Borthwick was accorded opportunity to answer the complaint and impugn those facts, but he failed to appear and was in consequence declared in default. There thus exists no evidence in the record of the Hawaii case upon which to lay a conclusion of lack of jurisdiction, as Borthwick now urges. The opportunity to negate the foreign court's competence by proving the non-existence of said jurisdictional facts established in the original action, was again afforded to Borthwick in the Court of First Instance of Makati, where enforcement of the Hawaii judgment was sought. This time it was the summons of the domestic court which Borthwick chose to ignore, but with the same result: he was declared in default. And in the default judgment subsequently promulgated, the Court a quo decreed enforcement of the judgment affirming among others the jurisdictional facts, that Borthwick owned real property in Hawaii and transacted business therein. In the light of these antecedents, it is plain that what Borthwick seeks in essence is one more opportunity, a third, to challenge the jurisdiction of the Hawaii Court and the merits of the cause of action which that Court had adjudged to have been established against him. This he may obtain only if he succeed in showing that the declaration of his default was incorrect. He has unfortunately not been able to do that; hence, the verdict must go against him. 4. PHILIPPINE INTERNATIONAL SHIPPING V. CA

Because of the unjustifiable failure and refusal of PISC and its guarantors to jointly and severally pay their obligations to Interpool, the latter filed a complaint with the QC RTC to enforce the default judgment of the U.S. District Court against PISC and also to enforce the individually executed Continuing Guaranties of the other petitioners. Petitioners failed to answer the complaint so they were declared in default. The RTC ruled in favor of Interpool ordering all petitioners to jointly and severally pay Interpool pursuant to the U.S. District Court judgment. Petitioners' appeal to the CA was denied. Petitioners' side: They allege that both the Default Judgment rendered by the U.S. District Court and the RTC decision are null and void on jurisdictional grounds because the U.S. District Court never acquired jurisdiction over their persons as they had not been served with summons and a copy of the Complaint in the case there. And in the RTC case, they contend that such jurisdictional error effectively prevented the RTC from taking cognizance of the Complaint and from enforcing the U.S. District Court's Default Judgment against them. And that assuming the validity of the disputed Default Judgment, the same may be enforced only against PISC since the other petitioners were not impleaded originally in the case filed in New York. Issues: 1. W/N the U.S. District Court validly acquired jurisdiction over PISC - YES 2. W/N the Default Judgment is valid and enforceable here YES 3. W/N the other petitioners can be held liable for the default judgment - YES Held: The evidence of record clearly shows that the U.S. District Court had validly acquired jurisdiction over PISC under the procedural law applicable in that forum (the U.S. Federal Rules on Civil Procedure). Copies of the Summons and Complaint, which were attached to the Petition for Review filed with this Court, were stamped "Received, 18 Jan 1983, PISC Manila." indicating that service had been made upon and acknowledged by PISC office in Manila on, 18 Jan. 1983, and that PISC had actual notice of such Complaint and Summons. Moreover, copies of said Summons and Complaint had likewise been served upon Prentice-Hall Corporation New York, PISC's agent, expressly designated by it in the Leasing Agreement with Interpool. The record also shows that PISC, without, however, assailing the jurisdiction of the U.S. District Court over the person of petitioner, had filed a Motion to Dismiss the Complaint which Motion was denied. All of the foregoing matters, which were stated specifically in the U.S. District Court's disputed Default Judgement, have not been disproven or otherwise overcome by petitioners.

1.

Facts: Interpool, Ltd. is a foreign corporation, duly organized and existing under the laws of Bahamas Islands with office and business address in New York and not licensed to do, and not doing business, in the Philippines. Principal petitioner is PISC. The other petitioners are Phil. Construction Consortium Corporation, Pacific Mills Inc., and Universal Steel Smelting Company, Inc. They are all corporations duly organized and existing under the laws of the Philippines. The other petitioners Lim, Bautista, Laude, Sing Lim, Lao and Teh are Philippine residents. In 1979 - 1981, PISC leased from Interpool and its wholly owned subsidiary, Container Trading Corporation, several containers pursuant to the Membership Agreement and Hiring Conditions (Exhibit B) and the Master Equipment Leasing Agreement (Exhibit C), both dated June 1979. Phil. Construction Consortium, Pacific Mills and Universal Steel guaranteed to pay all money due, or to become due, to Interpool from PISC and any liability of the latter arising out of the leasing or purchasing of equipment. Lim, et. al. also unconditionally and irrevocably guaranteed to pay Interpool all payments due to it and any liability that may arise under the 2 agreements. PISC incurred outstanding and unpaid obligations with Interpool amounting to of $94,456.28, representing unpaid per diems, drop-off charges, interest and other agreed charges. Interpool sent letters to the other petitioners demanding payment of their outstanding and unpaid obligations, but to no avail. So Interpool filed a case against the PISC before the U.S. District Court, Southern District of New York. Interpool obtained a Default Judgment against PISC ordering it to pay Interpool liquidated damages, together with interest and costs.
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That foreign judgment-which had become final and executory, no appeal having been taken therefrom and perfected by petitioner PISC-is thus "presumptive evidence of a right as between the parties [i.e., PISC and Interpool] and their successors in interest by a subsequent title." Further there has been no showing by petitioners that the Default Judgment rendered by the U.S. District Court was vitiated by "want of notice to the party, collusion, fraud, or clear mistake of law or fact." The Default Judgment imposing upon PISC a liability of $94,456.28 in favor of Interpool, is valid and may be enforced in this jurisdiction.

2.

3. The existence of liability on the part of PISC having been duly established in the U.S. case, it was not improper for Interpool in seeking enforcement in this jurisdiction of the foreign judgment imposing such liability, to have included the other petitioners as defendants in the civil case filed with the RTC. Sec. 6, Rule 3 of the Revised Rules of Court provides: Sec. 6. Permissive joinder of parties. All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise provided
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in these rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest. The other petitioners had executed continuing guarantees to secure performance by PISC of its contractual obligations under the 2 agreements with Interpool. As guarantors they held themselves out as liable "whether jointly, severally, or in the alternative," to Interpool under their separate "continuing guarantees" executed in the Philippines, for any breach of those Agreements on the part of PISC. The liability of the other petitioners was, in other words, not based upon the 2 agreements to which they were not parties. While, the New York award is precisely premised upon a breach by PISC of its own obligations under those agreements. 5. NORTHWEST ORIENT AIRLINES, INC V. CA *Claim for unremitted sales proceeds; Japanese court served summons in Sharps Manila office. FACTS: Northwest- Minnesota, US company; Sharp- Philippine company with a branch in Yokohama, Japan. Northwest and Sharps Japan branch entered into an International Passenger Sales Agency Agreement, whereby Northwest authorized Sharp to sell its tickets. However, Sharp failed to remit the proceeds of the ticket sales prompting Northwest to file a case for the collection of the unremitted proceeds with a claim for damages. The Japanese court issued a writ of summons against Sharp, but despite 2 attempts, its service in Japan proved unsuccessful. At the first try, the person in Sharps Japan office advised the bailiff that the person believed to be authorized to receive court processes was in Manila and would be back in a few days. On the day of the return of the authorized person, the bailiff went back but the former refused to accept the summons claiming that he was no longer Sharps employee. Due to the failed attempts, the Japanese court decided to serve the summons and the complaint at Sharps head office in Manila though diplomatic channels. Eventually, Sharp received the writ of summons from a Deputy Sheriff in Manila.1 Despite receipt, however, Sharp failed to appear at the scheduled hearing. The Japanese court decided in favor of Northwest and Sharp later received a copy of the judgment from the same Deputy Sheriff. Since Sharp did not appeal, the judgment became final and executory. Since plaintiff was unable to execute the decision in Japan, it filed a suit for enforcement of the judgment before the RTC of Manila. Sharps defense: 1. The judgment is null and void for want of jurisdiction; and 2. The judgment is contrary to Philippine law and public policy and rendered without due process of law (rendered without due and proper notice to the defendant) RTC and CA: Dismissed the complaint. The process of the court has no extraterritorial effect and no jurisdiction is acquired over the person of the defendant by serving him beyond the boundaries of that State. Since it is an action in personam, personal or substituted service of summons within the forum is required for the court to acquire jurisdiction over the defendant. The summons effected in Manila was null and void and did not confer jurisdiction upon the Japanese court over the person of Sharp. Therefore, the foreign judgment is null and void.
1 The Japan court requested the Japan SC to cause the delivery of the summons and other legal documents to the Philippines. acting on that request, the Japan SC sent the summons and other legal documents to the Ministry of Foreign Affairs of Japan, which, in turn, forwarded the same to the Japanese Embassy in Manila. Thereafter, the court processes were delivered to the DFA, then to the Executive Judge of the Manila RTC, who forthwith ordered the Deputy Sheriff to serve the same on Sharp at its principal office in Manila. 3C | CONFLCIT OF LAWS | ATTY. ARIS GULAPA

ISSUE: W/N the Japanese court acquired jurisdiction over Sharp by serving summons through diplomatic channels at its principal office in Manila. (YES) HELD: Yes, it acquired jurisdiction because the service of summons was valid. Sec. 3, Rule 141 of the ROC provides that a court, whether of the Philippines or elsewhere, enjoys the presumption that it as acting in the lawful exercise of jurisdiction and has regularly performed its official duty. Consequently, the party attacking a foreign judgment has the burden of overcoming this presumption. Matters of remedy and procedure, such as those relating to the service of process upon a defendant, are governed by the lex fori (in this case, Japan procedural law). Since Sharp failed to plead and prove the applicable Japanese law, the processual presumption may be invoked. Sec. 14, Rule 14 of the ROC provides that if the defendant is a foreign corporation doing business in the Philippines, service may be made (1) on its RESIDENT AGENT designated in accordance with law for that purpose, or (2) if there is no such agent, on the GOVERNMENT OFFICIAL designated by law to that effect, or (3) on ANY OF ITS OFFICERS/AGENTS WITHIN THE PHILIPPINES. (Remember that Sharp has 4 branches in Japan so it is considered a foreign corporation doing business in Japan.) Since Sharp did not plead having a resident agent in Japan, the impression is that it had none. Therefore, service on the designated government official or on any of its officers or agents in Japan could be availed of. Either of the 2 options is allowed. Therefore, the service done in this case (see Footnote for the detailed process) is equivalent to service on the proper government official under Sec. 14, Rule 14 of the ROC, in relation to Sec. 128 of the Corporation Code. Inasmuch as Sharp was admittedly doing business in Japan through its 4 duly registered branches at the time of the filing of the case, in light of the processual presumption, it may be deemed a resident of Japan and as such, was amenable to the jurisdiction of the courts therein and may be deemed to have assented to the said courts lawful methods of serving process. In sum, the extraterritorial of summons by the Japanese court was valid not only under the processual presumption but also because of the presumption of regularity of performance of official duty. 6. PHILSEC V. CA

US Case PLAINTIFF: 1488 DEFENDANTS: Philsec Investment Corporation (PHILSEC); Ayala International Finance Limited (AYALA); Athona Holdings (ATHONA); BPI COUNTER-CLAIMANT: ATHONA COUNTER-CLAIMANT #2: AYALA and PHILSEC COUNTER-DEFENDANTS (for both counter-claims): 1488, Inc.; Drago Daic; Ventura Ducat; Precioso Perlas; William Craig Philippine Case PLAINTIFFS: PHILSEC; BPI; ATHONA DEFENDANTS: 1488; Daic; Ducat; Perlas; Craig Facts: Ventura Ducat obtained separate loans from AYALA and PHILSEC, secured by shares of stock owned by her. 1488, through its president Drago Daic, assumed Ducat's obligation through a Warranty Deed, by which it sold to ATHONA a parcel of land in Texas, while PHILSEC and AYALA extended a loan to ANTHONA as the purchase price. PHILSEC and AYALA released Ducat from his indebtedness and delivered to 1488 Ducat's shares of stock. ATHONA failed to pay the interest on the balance of the loan so the entire amount became due and demandable. 1488 then sued PHILSEC, AYALA and ATHONA in Texas, USA for the payment of the balance and for breach of contract.
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ATHONA filed a counterclaim against 1488, Daic, Ducat, Perlas, and Craig (counter-defendants), for allegedly conspiring in selling the property at a price over its market value. PHILSEC and AYALA also filed a counterclaim against the same counter-defendants. While this case was pending in the US, PHILSEC, BPI and ATHONA (PETITIONERS) filed a complaint for sum of money with damages against 1488, Daic, Ducat, Perlas, and Craig (PRIVATE RESPONDENTS) in RTC Makati. They allege that because of the private respondents fraudulent misrepresentations, they were induced to purchase the Texas property, and at an overpriced rate. The trial court dismissed the case on the ground that "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." It also held itself without jurisdiction over 1488, Inc. and Daic because they were nonresidents and the action was not an action in rem or quasi in rem, so that extraterritorial service of summons was ineffective. The CA affirmed this decision. (Maenwhile, the US District Court rendered judgment while the case was pending in the CA.) Issue: W/N the Philippine case is barred by the judgment of the US Court. (NO)

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. 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. On jurisdiction It was error 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. It is not disputed that the properties, real and personal, of the private respondents had been attached prior to service of summons under a trial court order. 7. PHILIPPINE ALUMINUM ENTERPRISES WHEELS INC. V. FAGSI

Petitioners argument: 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.

Held: Petitioners' contention is meritorious. 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. 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.2 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 foreign judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the defendant may present evidence of lack of jurisdiction, notice, collusion, fraud or clear mistake of fact and law, if applicable. 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. Other COL issues: On forum non conveniens The trial courts refusal to take cognizance of the case is not 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
2 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. 3C | CONFLCIT OF LAWS | ATTY. ARIS GULAPA

FACTS: In 1978, FASGI Enterprises Inc. (FASGI), a foreign corporation organized under the laws of California, USA, entered into a contract with Philippine Aluminum Wheels, Inc. (PAWI), a Philippine corporation, whereby the latter agrees to deliver 8,594 wheels to FASGI. FASGI received the wheels and so it paid PAWI $216,444.30. Later however, FASGI found out that the wheels are defective and did not comply with certain US standards. So in 1979, FASGI sued PAWI in a California court. In 1980, a settlement was reached but PAWI failed to comply with the terms of the agreement. A second agreement was made but PAWI was again remiss in its obligation. The agreement basically provides that PAWI shall return the purchase price in installment and conversely, FASGI shall return the wheel in installment. PAWI was only able to make two installments (which were actually made beyond the scheduled date). FASGI also returned the corresponding number of wheels. Eventually in 1982, FASGI sought the enforcement of the agreement and it received a favorable judgment from the California court. PAWI is then ordered to pay an equivalent of P252k plus damages but FASGI was not ordered to return the remaining wheels. PAWI was not able to comply with the court order in the US. So in 1983, FASGI filed a complaint for the enforcement of a foreign judgment with RTC-Makati. Hearings were made and in 1990, the trial judge ruled against FASGI on the ground that the foreign judgment is tainted with fraud because FASGI was not ordered to return the remaining wheels (unjust enrichment) and that PAWIs American lawyer entered into the agreements without the consent of PAWI. On appeal, the Court of Appeals reversed the trial court. ISSUE: Whether or not the foreign judgment may be enforced here in the Philippines. HELD: Yes. The judgment is valid. A valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate parties and the underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction; that trial upon regular proceedings has been conducted, following due citation or voluntary appearance of the defendant and under a system of jurisprudence likely to secure an impartial administration of justice; and that there is nothing to indicate either a prejudice in court and in the system of laws under which it is sitting or fraud in procuring the judgment. A foreign judgment is presumed to be valid and binding in the country from which it comes, until a contrary showing, on the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum. In this case, PAWI was very well represented in the California court. PAWIs insistence that its American lawyer colluded with FASGI; that
5

he entered into the compromise agreement without PAWIs authority is belied by the fact that PAWI initially complied with the agreement. It did not disclaim the agreement. It sent two installments (though belatedly) but failed to comply on the rest. It cannot now aver that the agreement is without its authority. Further, it is just but fair for the California court not to order FASGI to return the remaining wheels because of PAWIs arrears. 8. PRISCILLA MIJARES V. HON. SANTIAGO JAVIER RANADA

has conclusive effect as in the case of in rem actions, if only for the purpose of allowing the losing party an opportunity to challenge the foreign judgment, and in order for the court to properly determine its efficacy. Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity. The rules are silent as to what initiatory procedure must be undertaken in order to enforce a foreign judgment in the Philippines. But there is no question that the filing of a civil complaint is an appropriate measure for such purpose. Complaint is capable of pecuniary estimation. More importantly, the matters for proof are different. Using the above example, the complainant will have to establish before the court the tortious act or omission committed by the tortfeasor, who in turn is allowed to rebut these factual allegations or prove extenuating circumstances. Extensive litigation is thus conducted on the facts, and from there the right to and amount of damages are assessed. On the other hand, in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself, and not the facts from which it prescinds. More importantly, the matters for proof are different. Using the above example, the complainant will have to establish before the court the tortious act or omission committed by the tortfeasor, who in turn is allowed to rebut these factual allegations or prove extenuating circumstances. Extensive litigation is thus conducted on the facts, and from there the right to and amount of damages are assessed. On the other hand, in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself, and not the facts from which it prescinds. the actionable issues are generally restricted to a review of jurisdiction of the foreign court, the service of personal notice, collusion, fraud, or mistake of fact or law. The limitations on review is in consonance with a strong and pervasive policy in all legal systems to limit repetitive litigation on claims and issues. Otherwise known as the policy of preclusion, it seeks to protect party expectations resulting from previous litigation, to safeguard against the harassment of defendants, to insure that the task of courts not be increased by never-ending litigation of the same disputes. The petitioners thus paid the correct amount of filing fees, and it was a grave abuse of discretion for respondent judge to have applied instead a clearly inapplicable rule and dismissed the complaint. However, generally accepted principles of international law, by virtue of the incorporation clause of the Constitution, form part of the laws of the land even if they do not derive from treaty obligations. This along with the principles of comity and others calls for the recognition and enforcement of foreign judgments. Thus, relative to the enforcement of foreign judgments in the Philippines, it emerges that there is a general right recognized within our body of laws, and affirmed by the Constitution, to seek recognition and enforcement of foreign judgments, as well as a right to defend against such enforcement on the grounds of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. The preclusion of an action for enforcement of a foreign judgment in this country merely due to an exhorbitant assessment of docket fees is alien to generally accepted practices and principles in international law. Indeed, there are grave concerns in conditioning the amount of the filing fee on the pecuniary award or the value of the property subject of the foreign decision. Such pecuniary award will almost certainly be in foreign denomination, computed in accordance with the applicable laws and standards of the forum.[72] The vagaries of inflation, as well as the relative low-income capacity of the Filipino, to date may very well translate into an award virtually unenforceable in this country, despite its integral validity, if the docket fees for the enforcement thereof were predicated on the amount of the award sought to be enforced. One more word. It bears noting that Section 48, Rule 39 acknowledges that the Final Judgment is not conclusive yet, but presumptive evidence of a right of the petitioners against the Marcos Estate. Moreover, the Marcos Estate is not precluded to present evidence, if any, of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. This
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Facts: Complaint in US district court of Hawaii against estate of Marcos brought by ten Filipino citizens for a class of people, around 10,000, alleging human rights abuses against them during the Marcos regime. Alien Tort Act was invoked to give jurisdiction. Award in their favor was One Billion Nine Hundred Sixty Four Million Five Thousand Eight Hundred Fifty Nine Dollars and Ninety Cents ($1,964,005,859.90). Petitioners tried to have a foreign courts award enforced against the estate of Marcos but the trial court asked for a filing fee of over Four Hundred Seventy-Two Million Pesos (P472,000,000.00). motion to dismiss alleged by estate, one ground was the non-payment of filing fees the petitioners only having paid P410.00. Complaint dismissed by trial court without prejudice. Subject matter deemed capable of pecuniary estimation even if it involved a foreign judgment. Petitioners submit that their action is incapable of pecuniary estimation as the subject matter of the suit is the enforcement of a foreign judgment, and not an action for the collection of a sum of money or recovery of damages. Petitioners invoke Section 11, Article III of the Bill of Rights of the Constitution, which provides that Free access to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty, a mandate which is essentially defeated by the required exorbitant filing fee. The adjudicated amount of the filing fee, as arrived at by the RTC, was characterized as indisputably unfair, inequitable, and unjust. The Commission on Human Rights (CHR) was permitted to intervene in this case. It urged that the petition be granted and a judgment rendered, ordering the enforcement and execution of the District Court judgment. For the CHR, the Makati RTC erred in interpreting the action for the execution of a foreign judgment as a new case, in violation of the principle that once a case has been decided between the same parties in one country on the same issue with finality, it can no longer be relitigated again in another country. The CHR likewise invokes the principle of comity, and of vested rights. Hence this appeal. Issue: Whether the action filed with the lower court in dismissing the case? Held: Petitioners complaint may have been lodged against an estate, but it is clearly based on a judgment, the Final Judgment of the US District Court. The provision does not make any distinction between a local judgment and a foreign judgment, and where the law does not distinguish, we shall not distinguish. This is not a real action, as it involves no real property or title or possession nor does the foreign award pertain to any real property. The rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in different countries. The court then cites the relevant provision in our rules of court concerning the effect of foreign judgments. There is an evident distinction between a foreign judgment in an action in rem and one in personam. For an action in rem, the foreign judgment is deemed conclusive upon the title to the thing, while in an action in personam, the foreign judgment is presumptive, and not conclusive, of a right as between the parties and their successors in interest by a subsequent title. However, in both cases, the foreign judgment is susceptible to impeachment in our local courts on the grounds of want of jurisdiction or notice to the party, collusion, fraud, or clear mistake of law or fact. Thus, the party aggrieved by the foreign judgment is entitled to defend against the enforcement of such decision in the local forum. It is essential that there should be an opportunity to challenge the foreign judgment, in order for the court in this jurisdiction to properly determine its efficacy. It is clear then that it is usually necessary for an action to be filed in order to enforce a foreign judgment, even if such judgment
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ruling, decisive as it is on the question of filing fees and no other, does not render verdict on the enforceability of the Final Judgment before the courts under the jurisdiction of the Philippines, or for that matter any other issue which may legitimately be presented before the trial court. Such issues are to be litigated before the trial court, but within the confines of the matters for proof as laid down in Section 48, Rule 39. On the other hand, the speedy resolution of this claim by the trial court is encouraged, and contumacious delay of the decision on the merits will not be brooked by this Court. 9. ASIAVEST MERCHANT BANKERS V. COURT OF APPEALS

irregularities therefore the PRESUMPTION of validity and regularity of service of summons and the decision rendered by the High Court of Malaya should stand. 2. On the matter of alleged lack of authority of the law firm of Allen and Gledhill to represent private respondent, not only did the private respondent's witnesses admit that the said law firm of Allen and Gledhill were its counsels in its transactions in Malaysia.

FACTS: The petitioner Asiavest Merchant Bankers (M) Berhad : Malaysian corporation Private respondent Philippine National Construction Corporation : Philippine corporation 1983 : petitioner initiated a suit for collection against private respondent before the High Court of Malaya in Kuala Lumpur. Petitioner sought to recover the indemnity of the performance bond it had put up in favor of private respondent to guarantee the completion of the Felda Project and the nonpayment of the loan it extended to Asiavest-CDCP Sdn. Bhd. for the completion of Paloh Hanai and Kuantan By Pass; Project. September 13, 1985: the High Court of Malaya (Commercial Division) rendered judgment in favor of the petitioner and against the private respondent The private respondent was asked to pay 5,108,290.23 Ringgits

a.

Following UNSUCCESSFUL ATTEMPTS to secure payment from private respondent under the judgment, petitioner initiated on September 5, 1988 the complaint before Regional Trial Court of Pasig, Metro Manila, to ENFORCE THE JUDGMENT of the High Court of Malaya The RTC of Manila and the CA denied the motion for lack of want of jurisdiction

but of greater significance is the fact that petitioner offered in evidence relevant Malaysian jurisprudence to the effect that i. it is not necessary under Malaysian law for counsel appearing before the Malaysian High Court to submit a special power of attorney authorizing him to represent a client before said court, ii. that counsel appearing before the Malaysian High Court has full authority to compromise the suit iii. That counsel appearing before the Malaysian High Court need not comply with certain pre-requisites as required under Philippine law to appear and compromise judgments on behalf of their clients before said court.

3.

On the ground that collusion, fraud and, clear mistake of fact and law tainted the judgment of the High Court of Malaya, no clear evidence of the same was adduced or shown. Since the burden of proof again should be shouldered by the private respondent

a.

ISSUE: Whether or not the Malaysian High Court acquired jurisdiction over the PNCC or the private respondent Contentions of Private Respondent: (more of the rules of procedure) 1. The Malaysian High Court did not serve the summons to the right persons a. The summons was sent to the accountant of the PNCC, Cora Deala; she is not authorized to receive the summons for and in behalf of the private respondent. 2. Private respondent was not represented by counsel in the proceedings a. According to Abelardo, the private respondents executive secretary said that there is no resolution granting or authorizing Allen and Glendhill (the said to be lawyers of the company) to admit all the claims of the petitioner.

As aforestated, the lex fori or the internal law of the forum governs matters of remedy and procedure.

i.

Considering that under the procedural rules of the High Court of Malaya, a valid judgment may be rendered even without stating in the judgment every fact and law upon which the judgment is based, then the same must be accorded respect and the courts in the jurisdiction cannot invalidate the judgment of the foreign court simply because our rules provide otherwise.

10. REPUBLIC V. GINGOYON FACTS: This is an MR of the 2005 Resolution of the Case, where in it was held that the Government first pay PIATCO (the builder) the amount of 3.02 Billion Pesos before it may acquire physical possession over the facilities of NAIA 3. The Government propounds several reasons for the reconsideration of the Courts Decision dated 19 December 2005. Some of the arguments merely rehash points raised in the petition and already dispensed with exhaustively in the Decision. This applies in particular to the argument that Republic Act No. 8974 does not apply to the expropriation of the Ninoy Aquino International Airport Passenger Terminal 3 (NAIA 3), which is not a right-of-way, site or location. This Resolution will instead focus as it should on the new arguments. On the newly raised arguments, there are considerable factual elements brought up by the Government. In the main, the Government devotes significant effort in diminishing PIATCOs right to just compensation as builder or owner of the NAIA 3. Particularly brought to fore are the claims relating to two entities, Takenaka Corporation (Takenaka) and Asahikosan (Asahikosan) Corporation, who allegedly claim significant liens on the terminal, arising from their alleged unpaid bills by virtue of an Engineering, Procurement and Construction Contract they had with PIATCO. On account of these adverse claims,
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3.

That the decision of the Malaysian High Court is tainted with fraud and clear mistake of fact/law; a. Since there is no statement of facts and law given which the award is given in favor of the petitioner.

HELD: GRANTED. The Malaysian High Court acquired jurisdiction over PNCC due to the following grounds:

1.

The rules of procedure (such as those serving of summons) are governed by the lex fori or the internal law forumwhich is in this case is Malaysia a. It is the procedural law of Malaysia where the judgment was rendered that determines the validity of the service of court process on private respondent as well as other matters raised by it. i. Since the burden of proof of showing that there are irregularities in the serving of summons as to the procedural rules of the Malaysian high court should be shouldered by the private respondents; however, the private respondent failed to show or give proof in the said

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the Government now claims as controvertible the question of who is the builder of the NAIA 3. The Government likewise claims as indispensable the need of Takenaka and Asahikosan to provide the necessary technical services and supplies so that all the various systems and equipment will be ready and operational in a manner that allows the Government to possess a fully-capable international airport terminal. The Governments concerns that impelled the filing of its MR are summed up in the following passage therein: The situation the Republic now faces is that if any part of its Php3.02 billion deposit is released directly to PIATCO, and PIATCO, as in the past, does not wish to settle its obligations directly to Takenaka, Asahikosan and Fraport, the Republic may end up having expropriated a terminal with liens and claims far in excess of its actual value, the liens remain unextinguished, and PIATCO on the other hand, ends up with the P3.02B in its pockets gratuitously. ISSUE: W/N the court can take into consideration the foreign judgment relied upon by the Government? NO HELD: The Court is not to reverse its previous rulings based on factual premises that are not yet conclusive or judicially established. Certainly, whatever claims or purported liens Takenaka and Asahikosan against PIATCO or over the NAIA 3 have not been judicially established. Neither Takenaka nor Asahikosan are parties to the present action, and thus have not presented any claim which could be acted upon by this Court. The earlier adjudications in Agan v. PIATCO made no mention of either Takenaka or Asahikosan, and certainly made no declaration as to their rights to any form of compensation. If there is indeed any right to remuneration due to these two entities arising from NAIA 3, they have not yet been established by the courts of the land. It must be emphasized that the conclusive ruling in Agan v. PIATCO (Agan 2004) is that PIATCO, as builder of the facilities, must first be justly compensated in accordance with law and equity for the Government to take over the facilities. It is on that premise that the Court adjudicated this case in its 2005 Decision. While the Government refers to a judgment rendered by a London court in favor of Takenaka and Asahikosan against PIATCO in the amount of US$82 Million, it should be noted that this foreign judgment is not yet binding on Philippine courts. It is entrenched in Section 48, Rule 39 of the Rules of Civil Procedure that a foreign judgment on the mere strength of its promulgation is not yet conclusive, as it can be annulled on the grounds of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. It is likewise recognized in Philippine jurisprudence and international law that a foreign judgment may be barred from recognition if it runs counter to public policy. Assuming that PIATCO indeed has corresponding obligations to other parties relating to NAIA 3, the Court does not see how such obligations, yet unproven, could serve to overturn the Decision mandating that the Government first pay PIATCO the amount of 3.02 Billion Pesos before it may acquire physical possession over the facilities. This directive enjoining payment is in accordance with Republic Act No. 8974, and under the mechanism established by the law the amount to be initially paid is that which is provisionally determined as just compensation. There are other judicial avenues outside of this Motion for Reconsideration wherein all other claims relating to the airport facilities may be ventilated, proved and determined. Since such claims involve factual issues, they must first be established by the appropriate trier of facts before they can be accorded any respect by or binding force on this Court. 11. JORGE GONZALES, ET AL. V. CLIMAX MINING LTD., ET AL. Facts: Jorge Gonzales is a claimowner of mineral deposits in Quirino and Nueva Vizcaya. He entered into a letter-agreement in May 14, 1987 with Geophilippines [GEO], Inc, and Inmex Ltd. [INMEX] wherein he granted to these 2 companies the exclusive right to explore and survey, operate and exploit the mining claims for 36 mos. In 1989, the agreement was extended for 3 more years. In 1991, Jorge, Arimco
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Mining Corp, GEO, INMEX and Anumex Phils. Inc. signed an Addendum to the agreement providing that Arimco would apply to the Phil. Govt permission to mine the claims as the governments contractor under a Financial Technical Assistance Agreement (FTAA). The following contracts were also entered into by the parties: 1996 Operating and Financial Accommodation Contract 1st Parties: CLIMAX ARIMCO and CLIMAX MINING 2nd Party: Australasian Phil. Mining Inc. [APMI] CLIMAX ARIMCO and APMI CLIMAX MINING and APMI

1996 1991

Assignment, Accession Agreement Memorandum of Agreement Transfer of FTAA to APMI

In 1999, Jorge filed before the Panel of Arbitrators [Panel] of the Mines and Geosciences Bureau of DENR against CLIMAX ARIMCO, CLIMAX and APMI, a complaint to annul or terminate the Addendum Contract, the FTAA, and the 3 other contracts (in the table). His complaint is grounded on FRAUD, OPPRESSION and/or VIOLATION of Section 2, Article XII of the CONSTITUTION perpetrated by these foreign RESPONDENTS, conspiring and confederating with one another and with each other. Jorge alleges that the companies conspiring and misrepresented under the Addendum Contract and FTAA that CLIMAX ARIMCO possessed financial and technical capacity to put the project into commercial production. In turn, the companies have allegedly caused damage not only to him but also to the Republic of the Philippines. The Panel initially dismissed the complaint for lack of jurisdiction. On MR, it favored Jorge with regard to the issues of nullity, termination, withdrawal or damages, but with regard to the constitutionality of the Addendum Agreement and FTAA, it maintained that it had no jurisdiction. However, according to the Panel, a ruling on the validity of the assailed contracts would result to the grant or denial of mining rights over the properties; hence, the question on the validity of the contract amounts to a mining conflict or dispute w/c involve the exploration and exploitation of minerals over the disputed area. CA ruled that the Panel of Arbitrators did not have jurisdiction because the fraud allegations in the complaint called for the interpretation and application of laws, and did not involve any mining dispute. Also, the complaint (1) did not specify the particular acts constituting fraud and oppression, (2) the action has prescribed since the Addendum Contract was executed in 1991, the action to annul it should have been brought not later than 1995 (4yrs from discovery of fraud), (3) fraud and duress only makes a contract voidable, and (4) the Addendum Contract Clause 19.1 provides that the petition should have been settled thru arbitration under RA No. 876 (Arbitration Law). Clause 19.1 states, [a]ll disputes arising out of or in connection with the Contract, which cannot be settled amicably among the Parties, shall finally be settled under R.A. 876. Issues: 1. W/N the complaint filed raises a mining dispute or a judicial question, in order to determine if the Panel has jurisdiction? JUDICIAL QUESTION thus jurisdiction with regular courts. 2. W/N the dispute should be brought for arbitration under RA 876 (Arbitration Law)? NO. Held: 1. The main assertion of Jorge is that the contracts are void. This claim indicates that the complaint was not merely for the determination of rights under the mining contracts since the very validity of those contracts is put in issue. The resolution of the validity of the contracts remains a legal or judicial question as it requires the exercise of judicial function which is with the regular courts. The Panel does not have jurisdiction since it does not involve the application of technical knowledge and expertise relating to mining. Allegations of fraud and duress in the execution of a contract are matters within the jurisdiction of the ordinary courts of law. 2. SC held the case should not be brought under the ambit of the Arbitration Law, but for a different reason. The question of validity of the contract containing the agreement to submit to arbitration
8

will affect the applicability of the arbitration clause itself. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent positions. (SIMPLY PUT: If the contract is void is adjudged by the regular courts to be void, then the clause will also be void. Therefore the issue on validity should first be resolved not by arbitration but by the regular courts.)

12.

KOREA TECHNOLOGIES CO, LTD V. LERMA

FACTS: Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the supply and installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent Pacific General Steel Manufacturing Corp. (PGSMC) is a domestic corporation. On March 5, 1997, PGSMC and KOGIES executed a contract in the Philippines whereby KOGIES would set up an LPG Cylinder Manufacturing Plant in Carmona, Cavite. On April 7, 1997, in Korea, the parties executed Contract No. KLP-970301 dated March 5, 1997 amending the terms of payment. On October 14, 1997, PGSMC entered into a Contract of Lease with Worth Properties, Inc. (Worth) for use of Worths 5,079-square meter property with a 4,032-square meter warehouse building to house the LPG manufacturing plant. On January 22, 1998, it was shown in the Certificate that, after the installation of the plant, the initial operation could not be conducted as PGSMC encountered financial difficulties affecting the supply of materials, thus forcing the parties to agree that KOGIES would be deemed to have completely complied with the terms and conditions of the March 5, 1997 contract. For the remaining balance of USD306,000 for the installation and initial operation of the plant, PGSMC issued two postdated checks. When KOGIES deposited the checks, these were dishonored for the reason "PAYMENT STOPPED." Thus, on May 8, 1998, KOGIES sent a demand letter to PGSMC threatening criminal action for violation of Batas Pambansa Blg. 22 in case of nonpayment. On the same date, the wife of PGSMCs President faxed a letter dated May 7, 1998 to KOGIES President who was then staying at a Makati City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not delivered several equipment parts already paid for. On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the payments were stopped for reasons previously made known to KOGIES. On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on the ground that KOGIES had altered the quantity and lowered the quality of the machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and transfer the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC filed before the Office of the Public Prosecutor an Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang, President of KOGIES. On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their contract nor dismantle and transfer the machineries and equipment on mere imagined violations by KOGIES. It also insisted that their disputes should be settled by arbitration as agreed upon in Article 15, the arbitration clause of their contract. On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter threatening that the machineries, equipment, and facilities installed in the plant would be dismantled and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES instituted an Application for Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as amended. On July 3, 1998, KOGIES filed a Complaint for Specific Performance, against PGSMC before the Muntinlupa City Regional Trial Court
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(RTC). The RTC granted a temporary restraining order. In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that were stopped were not funded but later on claimed that it stopped payment of the checks for the reason that "their value was not received" as the former allegedly breached their contract by "altering the quantity and lowering the quality of the machinery and equipment" installed in the plant and failed to make the plant operational although it earlier certified to the contrary as shown in a January 22, 1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their Contract, as amended, by unilaterally rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC be restrained from dismantling and transferring the machinery and equipment installed in the plant which the latter threatened to do on July 4, 1998. On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since Art. 15, the arbitration clause, was null and void for being against public policy as it ousts the local courts of jurisdiction over the instant controversy. On July 23, 1998, the RTC issued an Order denying the application for a writ of preliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the machineries and equipment as shown in the contract such that KOGIES no longer had proprietary rights over them. And finally, the RTC held that Art. 15 of the Contract as amended was invalid as it tended to oust the trial court or any other court jurisdiction over any dispute that may arise between the parties. KOGIES prayer for an injunctive writ was denied. PGSMC filed a Motion for Inspection of Things to determine whether there was indeed alteration of the quantity and lowering of quality of the machineries and equipment, and whether these were properly installed. KOGIES opposed the motion positing that the queries and issues raised in the motion for inspection fell under the coverage of the arbitration clause in their contract. KOGIES asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not the machineries and equipment conformed to the specifications in the contract and were properly installed. The trial court granted the motion. On November 11, 1998, the Branch Sheriff filed his Sheriffs Report finding that the enumerated machineries and equipment were not fully and properly installed. Court of Appeals affirmed the trial court and declared the arbitration clause against public policy. ISSUE: W/N the arbitration clause is against public policy. (NO) HELD: Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci contractus. The contract in this case was perfected here in the Philippines. Therefore, our laws ought to govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause or the finality and binding effect of an arbitral award. Art. 2044 provides, "Any stipulation that the arbitrators award or decision shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040." Arbitration clause not contrary to public policy: The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to public policy. Having said that the instant arbitration clause is not against public policy, we come to the question on what governs an arbitration clause specifying that in case of any dispute arising from the contract, an arbitral panel will be constituted in a foreign country and the arbitration rules of the foreign country would govern and its award shall be final and binding. RA 9285 incorporated the UNCITRAL Model law to which we are a signatory: For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from contractual relations. In case a foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration bodies would not be applied. As signatory to the Arbitration Rules of the UNCITRAL Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law (UNCITRAL) in the New York Convention
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on June 21, 1985, the Philippines committed itself to be bound by the Model Law. We have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the Alternative Dispute Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other Purposes, promulgated on April 2, 2004. And while RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a procedural law which has a retroactive effect. Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the following: (1) The RTC must refer to arbitration in proper cases (2) Foreign arbitral awards must be confirmed by the RTC (3) The RTC has jurisdiction to review foreign arbitral awards (4) Grounds for judicial review different in domestic and foreign arbitral awards (5) RTC decision of assailed foreign arbitral award appealable PGSMC has remedies to protect its interests: Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration as it bound itself through the subject contract. While it may have misgivings on the foreign arbitration done in Korea by the KCAB, it has available remedies under RA 9285. Its interests are duly protected by the law which requires that the arbitral award that may be rendered by KCAB must be confirmed here by the RTC before it can be enforced. With our disquisition above, petitioner is correct in its contention that an arbitration clause, stipulating that the arbitral award is final and binding, does not oust our courts of jurisdiction as the international arbitral award, the award of which is not absolute and without exceptions, is still judicially reviewable under certain conditions provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285. Finally, it must be noted that there is nothing in the subject Contract which provides that the parties may dispense with the arbitration clause. Unilateral rescission improper and illegal: Having ruled that the arbitration clause of the subject contract is valid and binding on the parties, and not contrary to public policy; consequently, being bound to the contract of arbitration, a party may not unilaterally rescind or terminate the contract for whatever cause without first resorting to arbitration. In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on October 28, 1998, as ordered by the trial court on October 19, 1998, is of no worth as said Sheriff is not technically competent to ascertain the actual status of the equipment and machineries as installed in the plant. RTC has interim jurisdiction to protect the rights of the parties: While the issue of the proper installation of the equipment and machineries might well be under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear and grant interim measures to protect vested rights of the parties While the KCAB can rule on motions or petitions relating to the preservation or transfer of the equipment and machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC allowing the transfer of the equipment and machineries given the nonrecognition by the lower courts of the arbitral clause, has accorded an interim measure of protection to PGSMC which would otherwise been irreparably damaged. KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted before the KCAB, the award of which can be enforced in our jurisdiction through the RTC. Besides, by our decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its contract with KOGIES. PGSMC to preserve the subject equipment and machineries: While PGSMC may have been granted the right to dismantle and
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transfer the subject equipment and machineries, it does not have the right to convey or dispose of the same considering the pending arbitral proceedings to settle the differences of the parties. PGSMC therefore must preserve and maintain the subject equipment and machineries with the diligence of a good father of a family until final resolution of the arbitral proceedings and enforcement of the award, if any. 13. PANAVISION INTERNATIONAL V. DENNIS TOEPPEN FACTS: Illinois resident Dennis Toeppen registered the domain name, or Internet address, "panavision.com". He used the address to establish a web site displaying aerial views of Pana, Illinois. Panavision, a California photographic equipment company owning the trademarks and trade names of "Panavision" and "Panaflex," decided to establish a world wide web site, and in so doing, discovered that Toeppen had registered their preferred domain name. When Panavision notified Toeppen of its intent to use "panavision.com" for its Internet address, Toeppen demanded $13,000 to discontinue his use of the name. Toeppen then registered "panaflex.com" as well. The California federal district court noted that Toeppen is the owner of numerous other trademark-based domain names, including "aircanada.com", "deltaairlines.com", "eddiebauer.com", and "neimanmarcus.com". Toeppen was also the owner of "arriflex.com", a domain name remarkably similar to the name of Panavision's main competitor. Toeppen has over 200 trademark-based domain names. This activity is referred to in industry parlance as "domain name hoarding" or "cybersquatting". Panavision filed claims in the Central District court of California, for violation of California and federal statutes governing trademark dilution and infringement, unfair competition, and a number of other business torts. Toeppen filed a motion to dismiss under FRCP 12(b)(6), arguing that the Court lacked personal jurisdiction over him because he resided in Illinois and the allegations concerned his actions taken in Illinois. ISSUE: whether the requirements of due process are satisfied by the district court's exercise of personal jurisdiction over Toeppen. HELD: The district court's exercise of jurisdiction was proper and comported with the requirements of due process. Toeppen did considerably more than simply register Panavision's trademarks as his domain names on the Internet. He registered those names as part of a scheme to obtain money from Panavision. A district court's determination that personal jurisdiction can properly be exercised is a question of law reviewable de novo when the underlying facts are undisputed. There is no applicable federal statute governing personal jurisdiction in this case. Accordingly, we apply the law of California, the state in which the district court sits. California's long-arm statute permits a court to exercise personal jurisdiction over a defendant to the extent permitted by the Due Process Clause of the Constitution. Personal jurisdiction may be founded on either general jurisdiction or specific jurisdiction.General jurisdiction exists when a defendant is domiciled in the forum state or his activities there are "substantial" or "continuous and systematic."The district court correctly concluded that it did not have general jurisdiction over Toeppen. Toeppen is domiciled in Illinois and his activities in California are not substantial or continuous and systematic. We apply a three-part test to determine if a district court may exercise specific jurisdiction: (1) The nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or results from the defendant's forum-related activities; and (3) exercise of jurisdiction must be reasonable.

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A. PURPOSEFUL AVAILMENT The purposeful availment requirement ensures that a nonresident defendant will not be haled into court based upon "random, fortuitous or attenuated" contacts with the forum state. This requirement is satisfied if the defendant "has taken deliberate action" toward the forum state. It is not required that a defendant be physically present or have physical contacts with the forum, so long as his efforts are "purposefully directed" toward forum residents. In the present case, the district court's decision to exercise personal jurisdiction over Toeppen rested on its determination that the purposeful availment requirement was satisfied by the "effects doctrine." In tort cases, jurisdiction may attach if the defendant's conduct is aimed at or has an effect in the forum state. Under Calder v. Jones, personal jurisdiction can be based upon: "(1) intentional actions (2) expressly aimed at the forum state (3) causing harm, the brunt of which is suffered--and which the defendant knows is likely to be suffered--in the forum state." Toeppen argues he has not directed any activity toward Panavision in California, much less "entered" the state. He contends that all he did was register Panavision's trademarks on the Internet and post web sites using those marks; if this activity injured Panavision, the injury occurred in cyberspace. We agree that simply registering someone else's trademark as a domain name and posting a web site on the Internet is not sufficient to subject a party domiciled in one state to jurisdiction in another. As we said in Cybersell, there must be "something more" to demonstrate that the defendant directed his activity toward the forum state. Id. Here, that has been shown. Toeppen engaged in a scheme to register Panavision's trademarks as his domain names for the purpose of extorting money from Panavision. His conduct, as he knew it likely would, had the effect of injuring Panavision in California where Panavision has its principal place of business and where the movie and television industry is centered. Under the "effects test," the purposeful availment requirement necessary for specific, personal jurisdiction is satisfied. B. Defendant's Forum-Related Activities The second requirement for specific, personal jurisdiction is that the claim asserted in the litigation arises out of the defendant's forum related activities. We must determine if the plaintiff Panavision would not have been injured "but for" the defendant Toeppen's conduct directed toward Panavision in California. This requirement is satisfied. Toeppen's registration of Panavision's trademarks as his own domain names on the Internet had the effect of injuring Panavision in California. C. Reasonableness Even if the first two requirements are met, in order to satisfy the Due Process Clause, the exercise of personal jurisdiction must be reasonable. For jurisdiction to be reasonable, it must comport with "fair play and substantial justice." "[W]here a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." As we have said, Toeppen purposefully directed his activities at Panavision in California. This placed the burden on him to "present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Id. [12] In addressing the question of reasonableness, we consider seven factors: (1) the extent of a defendant's purposeful interjection; (2) the burden on the defendant in defending in the forum; (3) the extent of conflict with the sovereignty of the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum. No one factor is dispositive; a court must balance all seven. The district court found that Toeppen had not presented a compelling case that jurisdiction was unreasonable.
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14. COMPUSERVE V. PATTERSON Facts: CompuServe, a nationwide provider of both electronic network and information services via the internet has its headquarters in Columbus, Ohio. Among the services provided by CompuServe is the opportunity for subscribers to post and sell softwares in the form of shareware. Subscribers are able to download for free (free trial period) and later purchase, sharewares created and posted by other subscribers in the internet. CompuServe accepted payment for the shareware from purchases and remitted that payment, less a commission, to the authors of the shareware. Atty. Patterson, a resident of Houston, Texas, subscribed to CompuServe. Patterson took advantage of CompuServes shareware service by posting Internet navigation software that he developed but marketed via his own corporation, Flashpoint Development. Patterson before use of the shareware service, entered into a shareware Registration Agreement (SRA) that provided that Ohio law governed the parties relationship. After Patterson posted his navigation software via shareware, CompuServe itself began to market its own navigation software. Patterson believed that CompuServes software was confusingly similar to his own trademarked software and notified CompuServe. CompuServe filed a declaratory judgment action in the District Court for the Southern District of Ohio, seeking a declaration that it had not infringed Pattersons trademarks. Patterson filed a motion to dismiss for lack of personal jurisdiction which the court granted. District court dismissed based on lack of personal jurisdiction. CompuServe appealed arguing that Pattersons repeated availment of the shareware sales procedures constituted minimum contacts with the forum state. CompuServe further argued that the existence of the Shareware Registration Agreement clearly stipulating the Ohio law governed disputes regarding the agreement meant that the exercise of personal jurisdiction is inline with the traditional notions of fair play and substantial justice. Issue: w/n CompuServe make a prima facie showing that Patterson's contacts with Ohio, which have been almost entirely electronic in nature, are sufficient, under the Due Process Clause, to support the district court's exercise of personal jurisdiction over Patterson? YES Held: The Internet represents perhaps the latest and greatest manifestation of these historical, globe-shrinking trends. It enables anyone with the right equipment and knowledge - that is, people like Patterson - to operate an international business cheaply, and from a desktop. That business operator, however, remains entitled to the protection of the Due Process Clause, which mandates that potential defendants be able "to structure their primary conduct with some minimum assurance as to where the conduct will and will not render them liable to suit." Patterson consciously reached out from Texas to Ohio to subscribe to CompuServe, and to use its service to market his computer software on the Internet. He entered into a contract which expressly stated that it would be governed by and construed in light of Ohio law. Ohio has written and interpreted its long-arm statute, and particularly its "transacting business" subsection, with the intent of reaching as far as the Due Process Clause will allow, and it certainly has an interest "in providing effective means of redress for its residents. The Ohio long-arm statute allows an Ohio court to exercise personal jurisdiction over nonresidents of Ohio on claims arising from, inter alia, the nonresident's transacting any business in Ohio. It is settled Ohio law, moreover, that the "transacting business" clause of that statute was meant to extend to the federal constitutional limits of due process, and that as a result Ohio personal jurisdiction cases require an examination of those limits. In the instant case, because CompuServe bases its action on Patterson's act of sending his computer software to Ohio for sale on its service, CompuServe seeks to establish such specific personal jurisdiction over Patterson.
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As always in this context, the crucial federal constitutional inquiry is whether, given the facts of the case, the nonresident defendant has sufficient contacts with the forum state that the district court's exercise of jurisdiction would comport with "traditional notions of fair play and substantial justice. This court has repeatedly employed three criteria to make this determination: First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Whether a defendant has purposefully availed itself of the privilege of doing business in the forum state is "the sine qua non for in personam jurisdiction to insure that "random," "fortuitous," or "attenuated" contacts do not cause a defendant to be haled into a jurisdiction. The "purposeful availment" requirement is satisfied when the defendant's contacts with the forum state "proximately result from actions by the defendant himself that create a `substantial connection' with the forum State," and when the defendant's conduct and connection with the forum are such that he "should reasonably anticipate being haled into court there. It does not, however, mean that a defendant must be physically present in the forum state, so long as a commercial actor's efforts are `purposefully directed' toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there. There is no question that Patterson himself took actions that created a connection with Ohio in the instant case. He subscribed to CompuServe, and then he entered into the Shareware Registration Agreement when he loaded his software onto the CompuServe system for others to use and, perhaps, purchase. Once Patterson had done those two things, he was on notice that he had made contracts, to be governed by Ohio law, with an Ohio-based company. Then, he repeatedly sent his computer software, via electronic links, to the CompuServe system in Ohio, and he advertised that software on the CompuServe system. Moreover, he initiated the events that led to the filing of this suit by making demands of CompuServe via electronic and regular mail messages. Second, the cause of action must arise from the defendant's activities there. Patterson chose to transmit his software from Texas to CompuServe's system in Ohio, that myriad others gained access to Patterson's software via that system, and that Patterson advertised and sold his product through that system. Though all this happened with a distinct paucity of tangible, physical evidence, there can be no doubt that Patterson purposefully transacted business in Ohio. Patterson sent software to CompuServe repeatedly for some three years, and the record indicates that he intended to continue marketing his software on CompuServe. Admittedly, merely entering into a contract with CompuServe would not, without more, establish that Patterson had minimum contacts with Ohio. Patterson frequently contacted Ohio to sell his computer software over CompuServe's Ohiobased system. Patterson repeatedly sent his "goods" to CompuServe in Ohio for their ultimate sale. CompuServe, in effect, acted as Patterson's distributor, albeit electronically and not physically. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum to make the exercise of jurisdiction over the defendant reasonable. We conclude that Patterson has knowingly made an effort - and, in fact, purposefully contracted - to market a product in other states, with Ohio-based CompuServe operating, in effect, as his distribution center. Thus, it is reasonable to subject Patterson to suit in Ohio, the state which is home to the computer network service he chose to employ. Someone like Patterson who employs a computer network service like CompuServe to market a product can reasonably expect disputes with that service to yield lawsuits in the service's home state. Here, we have an entrepreneur who purposefully employed CompuServe to market his computer software product. It may be burdensome for Patterson to defend a suit in Ohio, but he knew when he entered into the Shareware Registration Agreement with CompuServe that he was making a connection with Ohio, and presumably he hoped that connection would work to his benefit. Further, Ohio has a strong interest in resolving a dispute involving an Ohio company, which will involve the Ohio law on common law trademarks and trade names.
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15. YAHOO! INC. V LA LIGUE CONTRE LE RECISME ET LANTISEMITISME Facts: La Ligue Conte Le Racisme Et lAntisemitisme (LICRA) and LUnion Des Etudiants Juifs De France are French non-profit organization dedicated to eliminating anti-Semitism. Yahoo!, Inc., on the other hand, is a corporation organized under Delaware laws having its principal place of business in Santa Clara, California. Yahoo! operates an auction site, which allows anyone to post an item for sale and solicit bids from any computer user around the globe. Yahoo! monitors the transactions through limited regulation by prohibiting particular items to be sold. Auction sellers must comply with Yahoo!s policies and may not offer items to buyers in jurisdiction in which the sale of such item violates the jurisdictions applicable laws. However, Yahoo! does not actively regulate the content of each posting and individuals have been able to post offensive items, including Nazi and Third Reich related memorabilia. LICRA sent a cease and desist letter to Yahoo!, which informed it that the sale of Nazi and Third Reich goods through its auction site violates French Law. LICRA threatened legal action if Yahoo! failed to prevent such sales within eight days. LICRA subsequently filed a civil complaint against Yahoo! in the Tribunal de Grande Instance de Paris (French Court). The French Court found approximately 1,000 Nazi and Third Reich related goods being offered for sale on Yahoo!s auction site. Since French citizens could access these materials, the French Court concluded that Yahoo!s auction site violates the French Criminal Code which prohibits the exhibition of Nazi propaganda and artifacts for sale. The French Court ordered Yahoo! to: (1) eliminate French access to the materials on the auction site that offer Nazi artifacts for sale; (2) eliminate French access to web pages displaying text, extracts, or quotations from Mein Kampf and Protocol of the Elders of Zion; (3) post a warning on Yahoo.fr that any search through Yahoo.com may lead to sites containing Nazi propaganda, and that the viewing of the such material may result in legal action against the Internet user; and (4) remove from all browser directories accessible in France the index headings entitled "negationists and from all hypertext links the equation of negationists" under the heading Holocaust. The order also subjects Yahoo! to a penalty of 100,000 Euros for each day of non-compliance. Yahoo! claims that it does not have the technology to block French access to the related auction sites without banning the Nazi-related material altogether. Yahoo! further claims that such a ban would infringe upon its rights under the First Amendment of the U.S. Constitution. Issue: WON it is consistent with the Constitution and laws of the U.S. for another nation to regulate speech by a U.S. resident within the U.S. on the basis that such speech can be accessed by Internet users in that nation. Held: NO. Generally, no legal judgment has any effect, of its own force, beyond the limits of the sovereignty from which its authority is derived. However, the U.S. Constitution requires that full faith and credit be given to judgments of sister states. The extent to which the U.S., or any state, honors the judicial decrees of any other is a matter of choice, governed by the comity of nations. Comity is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. U.S. courts generally recognize foreign judgments and decrees unless enforcement would be prejudicial or contrary to the countrys interests. In this case, the French Courts content and view-point based regulation of the web pages and auction site of Yahoo! are clearly inconsistent with the First Amendment if mandated by a court in the U.S. The protection of free speech and the press embodied in the First amendment would be seriously jeopardized by the entry of foreign judgments granted pursuant to standards deemed appropriate in another country but considered antithetical to the protections afforded the press by the U.S. Constitution. Absent a body of law that establishes international standards with respect to speech on the Internet and an appropriate treaty or legislation addressing the
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enforcement of such standards to speech originating within the U.S., the principle of comity is outweigh by the courts obligation to uphold the First Amendment. 16. AMERICA ONLINE, INC. V. SUPERIOR COURT FACTS: A class action was filed by Mendoza for himself and others against AOL seeking compensatory and punitive damages, injunctive relief, and restitution. The complaint alleges that real parties are former subscribers to AOL's Internet service who, over the past four years, paid between $5 and $22 each month for the service. Monthly payments were made by allowing AOL to debit automatically the credit cards of class members. The class members terminated their subscriptions to AOL but, without authorization, AOL continued to debit their credit cards for monthly service fees. Mendoza individually alleged that he gave AOL notice of the cancellation of his subscription in October 1999, but AOL continued to charge monthly fees against his credit card at least through February 2000, at which time Mendoza cancelled his credit card in order to stop the debits. The complaint alleged separate causes of action including violations of California's Unfair Business Practices Act (First Cause of Action) (Bus. & Prof.Code, 17200 et seq.), violations of California's CLRA (Second Cause of Action) (Civ. Code, 1770, subd. (a)(14)), common law conversion/trespass (Third Cause of Action), and common law fraud (Fourth Cause of Action). Shortly thereafter, AOL filed a motion to stay or dismiss the action on the ground of inconvenient forum. As noted, the motion was based on the forum selection clause contained in the "Terms of Service" (TOS) agreement entered into between Mendoza and AOL at the time he subscribed to AOL's proprietary Internet service which provides: "You expressly agree that exclusive jurisdiction for any claim or dispute with AOL or relating in any way to your membership or your use of AOL resides in the courts of Virginia and you further agree and expressly consent to the exercise of personal jurisdiction in the courts of Virginia in connection with any such dispute including any claim involving AOL or its affiliates, subsidiaries, employees, contractors, officers, directors, telecommunications providers and content providers...." Additionally, paragraph 8 contained a choice of law provision designating Virginia law as being applicable to any dispute between the parties. Mendoza objected to Exhibit A, claiming that the document did not accurately reflect what was displayed to him when he commenced service with AOL. Instead, he described seeing displayed on his home computer monitor a "densely worded, small-size text that was hard to read on the computer screen." This objection formed the leitmotif for Mendoza's claim that the TOS was an unconscionable adhesion contract, and that under applicable rules of contract construction, the forum selection clause was unenforceable. In addition, Mendoza contended the TOS was unreasonable and unenforceable because it necessarily required him and the putative class members to relinquish legal rights in derogation of California public policy. The court entered its order denying AOL's motion. AOL then petitioned the Supreme Court for review. On February 28, 2001, the high court granted the petition for review, and transferred the matter back to this court with directions to issue an order to show cause why the relief requested in the petition should not be granted. ISSUE: W/N the a forum selection clause in AOLs contracts with Al Mendoza, Jr. and the potential class members, which designated Virginia as the jurisdiction in which all disputes arising out of the relationship would be litigated and which also included a choice of law provision requiring that Virginia law be applied to any such dispute is valid? NO HELD: A. Standard of Review and Burden of Proof In the case of Cal-State the court explained why a different standard of review applied depending on whether the motion to stay or to dismiss was contractually derived: "While none of the contractual forum non conveniens cases have explicitly stated the standard of review, it is apparent from their discussion that they are de facto applying the substantial-evidence test, and there is a meaningful basis for distinction. In ruling on a forum non conveniens motion where no contract is involved, the lower tribunal decides whether or not to exercise jurisdiction based on the evidence before it in light of legally prescribed criteria. Some criteria may be present, some not; ultimately, the review does not depend upon the sufficiency of the evidence
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before the lower tribunal but whether it correctly applied the pertinent criteria. On the other hand, in a contractual forum non conveniens motion, the trial court must determine if there is sufficient evidence to satisfy the requirements for invalidating a binding contract. If the trial court finds there are facts present that satisfy these criteria, it must act in a particular way; there is no discretion involved. The reviewing court is thus involved in determining the quantum of evidence adduced, not the manner in which factors were applied. While we understand the distinction intended by Cal-State, we are not persuaded that appellate review of a contract interpretation issue can be properly analogized to review of an unambiguous forum selection clause. Instead, given existing guidance on this question from our Supreme Court, and the more consistent line of Court of Appeal decisions, which likewise apply the abuse of discretion standard, we disagree with Cal-State 's conclusion that the substantial evidence standard applies instead. Therefore, we review the lower court's decision using the abuse of discretion standard. Turning to the question of which side has the burden of proof when a forum selection clause is challenged, as we have noted, the trial court in the case before us found: "Defendant AOL did not meet its burden of showing that the substantive rights afforded California plaintiffs were not diminished by enforcement of the forum selection clause." Normally, the burden of proof is on the party challenging the enforcement of a contractual forum selection clause. However, the lower court assigned the burden of proof to AOL based on its conclusion that Wimsatt v. Beverly Hills Weight Etc. Internal, Inc. (1995) controls this case. The trial court in the present case concluded that because Mendoza seeks recovery, in part, under the CLRA (Civ.Code, 1750 et seq.), which contains a statutory antiwaiver provision like that involved in Wimsatt, the burden of proof was on AOL to prove that enforcement of the forum selection clause would not result in a significant diminution of rights to California consumers. We agree. In comparing the purpose and remedies afforded to California franchisees under the FIL to those afforded California consumers under the CLRA, we find identical policy considerations which command shifting the burden of proof here to AOL, the party seeking enforcement of the forum selection clause, as was done in Wimsatt. The FIL and the CLRA were each enacted to protect the statute's beneficiaries from deceptive and unfair business practices. Each statutory scheme embodies strong remedial provisions for violations of the statute. Important to the trial court's finding is the fact that the CLRA, like the FIL, embeds in its statutory scheme a provision prohibiting waivers by consumers of any of these remedies. Civil Code section 1751 warns: "Any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void." While the remedial aspects of each statutory scheme are indigenous to the business practices regulated, in both cases the Legislature has ensured that the rights afforded to California citizens against unfair practices cannot be diminished or avoided by contract. Where the effect of transfer to a different forum has the potential of stripping California consumers of their legal rights deemed by the Legislature to be non-waivable, the burden must be placed on the party asserting the contractual forum selection clause to prove that the CLRA's anti-waiver provisions are not violated. For this reason we too embrace the rationale of the Wimsatt decision and conclude that the CLRA claim pleaded by Mendoza, like the FIL claims asserted in Wimsatt, mandates departure from the general rule which normally places the burden of proving unfairness or unreasonableness of the forum selection clause on the party opposed to its enforcement. B. Overview of Forum Selection Clause Enforcement AOL correctly posits that California favors contractual forum selection clauses so long as they are entered into freely and voluntarily, and their enforcement would not be unreasonable. But this encomium is not boundless. Our law favors forum selection agreements only so long as they are procured freely and voluntarily, with the place chosen having some logical nexus to one of the parties or the dispute, and so long as California consumers will not find their substantial legal rights significantly impaired by their enforcement. Therefore, to be enforceable, the selected jurisdiction must be "suitable," "available," and able to "accomplish substantial justice." The trial court determined that the circumstances of contract formation did not reflect Mendoza exercised free will, and that the effect of enforcing the forum selection clause here would violate California public policy by eviscerating important legal rights afforded to this state's consumers.
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C. Enforcement of the Forum Selection Clause Violates Strong California Public Policy California courts will refuse to defer to the selected forum if to do so would substantially diminish the rights of California residents in a way that violates our state's public policy. The CLRA parallels the Corporate Securities Law of 1968, at issue in the case of Hall, insofar as the CRLA is a legislative embodiment of a desire to protect California consumers and furthers a strong public policy of this state. "The CLRA was enacted in an attempt to alleviate social and economic problems stemming from deceptive business practices, which were identified in the 1969 Report of the National Advisory Commission on Civil Disorders. Certainly, the CLRA provides remedial protections at least as important as those under the Corporate Securities Law of 1968. Therefore, by parity of reasoning, enforcement of AOL's forum selection clause, which is also accompanied by a choice of law provision favoring Virginia, would necessitate a waiver of the statutory remedies of the CLRA, in violation of that law's anti-waiver provision (Civ.Code, 1751) and California public policy. For this reason alone, we affirm the trial court's ruling. This conclusion is reinforced by a statutory comparison of California and Virginia consumer protection laws, which reveals Virginia's law provides significantly less consumer protection to its citizens than California law provides for our own. Consumers who prove violations of the CLRA within the three-year limitations period may be entitled to a minimum recovery of $1000, restitution or property, power of injunctive relief, and punitive damages. Attorney fees and costs are also recoverable if the plaintiffs prevail on their claim under the act. In addition to these extraordinary remedies, if the complaining consumer is a senior citizen or disabled person, up to $5000 may be awarded for substantial physical, emotional distress, or economic damage. Of course, the CLRA specifies that actions under that act may be prosecuted as class actions. Virginia also has a statutory scheme denominated the Virginia Consumer Protection Act of 1977 (VCPA). The purpose of the VCPA is to "promote fair and ethical standards of dealings between suppliers and the consuming public." The panoply of prohibited acts appears to be as comprehensive as those under the CRLA, and covers the specific misconduct by AOL alleged in Mendoza's complaint. Under the VCPA, individuals are entitled to sue and recover actual damages, or a minimum of $500, whichever is greater. If willful misconduct is proved, the minimum damages increase to $1000. Attorney fees and costs "may" be awarded. Restitution is also available. However, if the violation is determined to be "unintentional," the only remedies obtainable are restitution and attorney fees and court costs. The Virginia act has a two-year limitations period. Of greater importance is the absence of any provision in the VCPA that allows suits under the Act to proceed as class actions. Unless specifically allowed by statute, class action relief is not generally available in Virginia in actions at law. In contrast to Virginia consumer law's ostensible hostility to class actions, the right to seek class action relief in consumer cases has been extolled by California courts. However, mere inconvenience or additional expense is not the test of unreasonableness since it may be assumed that the plaintiff received under the contract consideration for these things. Although the current dispute between Mendoza and AOL might make it impractical for Mendoza to pursue an individual claim in Virginia, there may be other potential disputes between Mendoza and AOL arising from their relationship which would have significantly greater value. We are also unpersuaded by AOL's contention that the trial court erred in not granting AOL's request for a stay of the California action to allow the Virginia court to determine whether the relief available to Mendoza is consistent with California consumer law. AOL claims that if the Virginia court found inconsistency, the California court could then re-assert jurisdiction, deny enforcement of the forum selection clause, and allow Mendoza to proceed in the California forum. We reject this claim because: 1) it is unnecessary for us to defer our decision until a Virginia course clarifies its consumer law, for we do not find Virginia consumer law to be nearly as opaque as suggested by counsel for AOL; 2) AOL suggests no procedural device which would allow a California court to proceed with the underlying case after a Virginia court has ruled; and 3) a stay would take an already financially impractical legal dispute and compound the expense to resolve it by necessitating perhaps two lawsuits. The order to show cause is discharged and the petition for writ of mandate is denied. Costs are awarded to Mendoza.
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