G.R. No.

102223, August 22, 1996 By virtue of said contracts, ASPAC sold electronic products, exported by ITEC, to
their sole customer, the Philippine Long Distance Telephone Company, (PLDT, for
COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-TRADE, brevity).
INC., (FORMERLY ASPAC-ITEC PHILIPPINES, INC.) AND FRANCISCO
S. AGUIRRE, PETITIONERS, VS. THE COURT OF APPEALS, ITEC To facilitate their transactions, ASPAC, dealing under its new appellation, and PLDT
INTERNATIONAL, INC., AND ITEC, INC., RESPONDENTS. executed a document entitled "PLDT-ASPAC/ITEC PROTOCOL"[4] which defined
the project details for the supply of ITEC’s Interface Equipment in connection with
DECISION the Fifth Expansion Program of PLDT.

TORRES, JR., J.: One year into the second term of the parties’ Representative Agreement, ITEC
decided to terminate the same, because petitioner ASPAC allegedly violated its
contractual commitment as stipulated in their agreements.[5]
Business Corporations, according to Lord Coke, "have no souls." They do business
peddling goods, wares or even services across national boundaries in "soulless forms"
ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE
in quest for profits albeit at times, unwelcomed in these strange lands venturing into
COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of which is
uncertain markets and, the risk of dealing with wily competitors.
likewise petitioner Aguirre, of using knowledge and information of ITEC’s products
specifications to develop their own line of equipment and product support, which are
This is one of the issues in the case at bar.
similar, if not identical to ITEC’s own, and offering them to ITEC’s former customer.
Contested in this petition for review on Certiorari is the Decision of the Court of
On January 31, 1991, the complaint[6] in Civil Case No. 91-294, was filed with the
Appeals on June 7, 1991, sustaining the RTC Order dated February 22, 1991, denying
Regional Trial Court of Makati, Branch 134 by ITEC, INC. Plaintiff sought to enjoin,
the petitioners’ Motion to Dismiss, and directing the issuance of a writ of preliminary
first, preliminarily and then, after trial, permanently; (1) defendants DIGITAL, CMDI,
injunction, and its companion Resolution of October 9, 1991, denying the petitioners’
and Francisco Aguirre and their agents and business associates, to cease and desist
Motion for Reconsideration.
from selling or attempting to sell to PLDT and to any other party, products which
have been copied or manufactured "in like manner, similar or identical to the
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for
products, wares and equipment of plaintiff," and (2) defendant ASPAC, to cease and
brevity) and ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both domestic
desist from using in its corporate name, letter heads, envelopes, sign boards and
corporations, while petitioner Francisco S. Aguirre is their President and majority
business dealings, plaintiff’s trademark, internationally known as ITEC; and the
stockholder. Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC.
recovery from defendants in solidum, damages of at least P500,000.00, attorney’s fees
(ITEC, for brevity) are corporations duly organized and existing under the laws of the
and litigation expenses.
State of Alabama, United States of America. There is no dispute that ITEC is a foreign
corporation not licensed to do business in the Philippines.
In due time, defendants filed a motion to dismiss[7] the complaint on the following
grounds: (1) That plaintiff has no legal capacity to sue as it is a foreign corporation
On August 14, 1987, ITEC entered into a contract with petitioner ASPAC referred to
doing business in the Philippines without the required BOI authority and SEC license,
as "Representative Agreement".[1] Pursuant to the contract, ITEC engaged ASPAC as
and (2) that plaintiff is simply engaged in forum shopping which justifies the
its "exclusive representative" in the Philippines for the sale of ITEC’s products, in
application against it of the principle of "forum non conveniens".
consideration of which, ASPAC was paid a stipulated commission. The agreement
was signed by G.A. Clark and Francisco S. Aguirre, presidents of ITEC and ASPAC
On February 8, 1991, the complaint was amended by virtue of which ITEC
respectively, for and in behalf of their companies.[2] The said agreement was initially
INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC.[8]
for a term of twenty-four months. After the lapse of the agreed period, the agreement
was renewed for another twenty-four months.
In their Supplemental Motion to Dismiss,[9] defendants took note of the amendment
of the complaint and asked the court to consider in toto their motion to dismiss and
Through a "License Agreement"[3] entered into by the same parties on November 10,
their supplemental motion as their answer to the amended complaint.
1988, ASPAC was able to incorporate and use the name "ITEC" in its own name.
Thus, ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC
After conducting hearings on the prayer for preliminary injunction, the court a quo
(Philippines).
on February 22, 1991, issued its Order:[10] (1) denying the motion to dismiss for being
devoid of legal merit with a rejection of both grounds relied upon by the defendants
1
in their motion to dismiss, and (2) directing the issuance of a writ of preliminary Republic Act 5455 if the petitioner is an independent entity which buys and
injunction on the same day. distributes products not only of the petitioner, but also of other manufacturers or
transacts business in its name and for its account and not in the name or for the
From the foregoing order, petitioners elevated the case to the respondent Court of account of the foreign principal. A reading of the agreements between the petitioner
Appeals on a Petition for Certiorari and Prohibition [11]under Rule 65 of the Revised and the respondents shows that they are highly restrictive in nature, thus making the
Rules of Court, assailing and seeking the nullification and the setting aside of the petitioner a mere conduit or extension of the respondents.
Order and the Writ of Preliminary Injunction issued by the Regional Trial Court.
The respondent appellate court stated, thus: It is alleged that certain provisions of the "Representative Agreement" executed by the
parties are similar to those found in the License Agreement of the parties in the Top-
"We find no reason whether in law or from the facts of record, to disagree with the Weld case which were considered as "highly restrictive" by this Court. The provisions
(lower court’s) ruling. We therefore are unable to find in respondent Judge’s issuance in point are:
of said writ the grave abuse of discretion ascribed thereto by the petitioners. "2.0 Terms and Conditions of Sales.

In fine, We find that the petition prima facie does not show that Certiorari lies in the 2.1 Sale of ITEC products shall be at the purchase price set by ITEC from time to time.
present case and therefore, the petition does not deserve to be given due course. Unless otherwise expressly agreed to in writing by ITEC the purchase price is net to
ITEC and does not include any transportation charges, import charges or taxes into or
WHEREFORE, the present petition should be, as it is hereby, denied due course and within the Territory. All orders from customers are subject to formal acceptance by
accordingly, is hereby dismissed. Costs against the petitioners. ITEC at its Huntsville, Alabama U.S.A. facility.

SO ORDERED."[12] xxx xxx xxx

Petitioners filed a motion for reconsideration[13] on June 7, 1991, which was likewise
denied by the respondent court. 3.0 Duties of Representative
"WHEREFORE, the present motion for reconsideration should be, as it is hereby,
denied for lack of merit. For the same reason, the motion to have the motion for 3.1. REPRESENTATIVE SHALL:
reconsideration set for oral argument likewise should be and is hereby denied.
3.1.1. Not represent or offer for sale within the Territory any product which competes
SO ORDERED."[14] with an existing ITEC product or any product which ITEC has under active
Petitioners are now before us via Petition for Review on Certiorari[15] under Rule 45 of development.
the Revised Rules of Court.
3.1.2. Actively solicit all potential customers within the Territory in a systematic and
It is the petitioners’ submission that private respondents are foreign corporations businesslike manner.
actually doing business in the Philippines without the requisite authority and license
from the Board of Investments and the Securities and Exchange Commission, and 3.1.3. Inform ITEC of all request for proposals, requests for bids, invitations to bid and
thus, disqualified from instituting the present action in our courts. It is their the like within the Territory.
contention that the provisions of the Representative Agreement, petitioner ASPAC
executed with private respondent ITEC, are similarly "highly restrictive" in nature as 3.1.4. Attain the Annual Sales Goal for the Territory established by ITEC. The Sales
those found in the agreements which confronted the Court in the case of Top-Weld Goals for the first 24 months is set forth on Attachment two (2) hereto. The Sales Goal
Manufacturing, Inc. vs. ECED S.A. et al.,[16] as to reduce petitioner ASPAC to a mere for additional twelve month periods, if any, shall be sent to the Sales Agent by ITEC
conduit or extension of private respondents in the Philippines. at the beginning of each period. These Sales Goals shall be incorporated into this
Agreement and made a part hereof.
In that case, we ruled that respondent foreign corporations are doing business in the
Philippines because when the respondents entered into the disputed contracts with
the petitioner, they were carrying out the purposes for which they were created, i.e., xxx xxx xxx
to manufacture and market welding products and equipment. The terms and
conditions of the contracts as well as the respondents’ conduct indicate that they 6.0. Representative as Independent Contractor
established within our country a continuous business, and not merely one of a
temporary character. The respondents could be exempted from the requirements of xxx xxx xxx
2

6.2. When acting under this Agreement REPRESENTATIVE is authorized to solicit
sales within the Territory on ITEC’s behalf but is authorized to bind ITEC only in its
capacity as Representative and no other, and then only to specific customers and on
terms and conditions expressly authorized by ITEC in writing." [17]
Aside from the abovestated provisions, petitioners point out the following matters of
record, which allegedly witness to the respondents' activities within the Philippines
in pursuit of their business dealings:
"a. While petitioner ASPAC was the authorized exclusive representative for three (3)
years, it solicited from and closed several sales for and on behalf of private
respondents as to their products only and no other, to PLDT, worth no less than US
$15 Million (p. 20, tsn, Feb. 18, 1991);
b. Contract No. 1 (Exhibit for Petitioners) which covered these sales and identified by
private respondents’ sole witness, Mr. Clarence Long, is not in the name of petitioner
ASPAC as such representative, but in the name of private respondent ITEC, INC. (p.
20, tsn, Feb. 18, 1991);
c. The document denominated as "PLDT-ASPAC/ITEC PROTOCOL" (Annex C of the
original and amended complaints) which defined the responsibilities of the parties
thereto as to the supply, installation and maintenance of the ITEC equipment sold
under said Contract No. 1 is, as its very title indicates, in the names jointly of the
petitioner ASPAC and private respondents;
d. To evidence receipt of the purchase price of US $15 Million, private respondent
ITEC, Inc. issued in its letter head, a Confirmation of payment dated November 13,
1989 and its Invoice dated November 22, 1989 (Annexes 1 and 2 of the Motion to
Dismiss and marked as Exhibits 2 and 3 for the petitioners), both of which were
identified by private respondent’s sole witness, Mr. Clarence Long (pp. 25-27, tsn,
Feb. 18, 1991)."[18]
Petitioners contend that the above acts or activities belie the supposed independence
of petitioner ASPAC from private respondents. "The unrebutted evidence on record
below for the petitioners likewise reveal the continuous character of doing business in
the Philippines by private respondents based on the standards laid down by this
Court in Wang Laboratories, Inc. vs. Hon. Rafael T. Mendoza, et al. [19] and again in
TOP-WELD. (supra)" It thus appears that as the respondent Court of Appeals and the
trial court’s failure to give credence on the grounds relied upon in support of their
Motion to Dismiss that petitioners ascribe grave abuse of discretion amounting to an
excess of jurisdiction of said courts.
Petitioners likewise argue that since private respondents have no capacity to bring
suit here, the Philippines is not the "most convenient forum" because the trial court is
devoid of any power to enforce its orders issued or decisions rendered in a case that
could not have been commenced to begin with, such that in insisting to assume and
exercise jurisdiction over the case below, the trial court had gravely abused its
discretion and even actually exceeded its jurisdiction.
As against petitioner’s insistence that private respondent is "doing business" in the
Philippines, the latter maintains that it is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules and
Regulations Implementing the Omnibus Investments Code of 1987, the following:
"(1) A foreign firm is deemed not engaged in business in the Philippines if it transacts
business through middlemen, acting in their own names, such as indebtors,
commercial bookers or commercial merchants.
(2) A foreign corporation is deemed not "doing business" if its representative
domiciled in the Philippines has an independent status in that it transacts business in
its name and for its account."[20]
Private respondent argues that a scrutiny of its Representative Agreement with the
Petitioners will show that although ASPAC was named as representative of ITEC.,
ASPAC actually acted in its own name and for its own account. The following
provisions are particularly mentioned:
"3.1.7.1. In the event that REPRESENTATIVE imports directly from ITEC,
REPRESENTATIVE will pay for its own account; all customs duties and import fees
imposed on any ITEC products; all import expediting or handling charges and
expenses imposed on ITEC products; and any stamp tax fees imposed on ITEC.
xxx xxx xxx
4.1. As complete consideration and payment for acting as representative under this
Agreement, REPRESENTATIVE shall receive a sales commission equivalent to a
percentum of the FOB value of all ITEC equipment sold to customers within the
territory as a direct result of REPRESENTATIVE’s sales efforts."[21]
More importantly, private respondents charge ASPAC of admitting its independence
from ITEC by entering and ascribing to provision No. 6 of the Representative
Agreement.
"6.0. Representative as Independent Contractor
6.1. When performing any of its duties under this Agreement, REPRESENTATIVE
shall act as an independent contractor and not as an employee, worker, laborer,
partner, joint venturer of ITEC as these terms are defined by the laws, regulations,
decrees or the like of any jurisdiction, including the jurisdiction of the United States,
the state of Alabama and the Territory."[22]
Although it admits that the Representative Agreement contains provisions which
both support and belie the independence of ASPAC, private respondents echoes the
respondent court’s finding that the lower court did not commit grave abuse of
discretion nor acted in excess of jurisdiction when it found that the ground relied
upon by the petitioners in their motion to dismiss does not appear to be
indubitable.[23]
The issues before us now are whether or not private respondent ITEC is an
unlicensed corporation doing business in the Philippines, and if it is, whether or not
3
this fact bars it from invoking the injunctive authority of our courts.
Considering the above, it is necessary to state what is meant by "doing business" in
the Philippines. Section 133 of the Corporation Code, provides that "No foreign
corporation, transacting business in the Philippines without a license, or its successors
or assigns, shall be permitted to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine Courts or
administrative tribunals on any valid cause of action recognized under Philippine
laws."[24]
Generally, a "foreign corporation" has no legal existence within the state in which it is
foreign. This proceeds from the principle that juridical existence of a corporation is
confined within the territory of the state under whose laws it was incorporated and
organized, and it has no legal status beyond such territory. Such foreign corporation
may be excluded by any other state from doing business within its limits, or
conditions may be imposed on the exercise of such privileges. [25] Before a foreign
corporation can transact business in this country, it must first obtain a license to
transact business in the Philippines, and a certificate from the appropriate
government agency. If it transacts business in the Philippines without such a license,
it shall not be permitted to maintain or intervene in any action, suit, or proceeding in
any court or administrative agency of the Philippines, but it may be sued on any valid
cause of action recognized under Philippine laws.[26]
In a long line of decisions, this Court has not altogether prohibited a foreign
corporation not licensed to do business in the Philippines from suing or maintaining
an action in Philippine Courts. What it seeks to prevent is a foreign corporation doing
business in the Philippines without a license from gaining access to Philippine
Courts.[27]
The purpose of the law in requiring that foreign corporations doing business in the
Philippines be licensed to do so and that they appoint an agent for service of process
is to subject the foreign corporation doing business in the Philippines to the
jurisdiction of its courts. The object is not to prevent the foreign corporation from
performing single acts, but to prevent it from acquiring a domicile for the purpose of
business without taking steps necessary to render it amenable to suit in the local
courts.[28] The implication of the law is that it was never the purpose of the legislature
to exclude a foreign corporation which happens to obtain an isolated order for
business from the Philippines, and thus, in effect, to permit persons to avoid their
contracts made with such foreign corporations.[29]
There is no exact rule or governing principle as to what constitutes "doing" or
"engaging" or "transacting" business. Indeed, such case must be judged in the light of
its peculiar circumstances, upon its peculiar facts and upon the language of the
statute applicable. The true test, however, seems to be whether the foreign
corporation is continuing the body or substance of the business or enterprise for
which it was organized.[30]
Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include:
"soliciting orders, purchases, service contracts, opening offices, whether called
"liaison" offices or branches; appointing representatives or distributors who are
domiciled in the Philippines or who in any calendar year stay in the Philippines for a
period or periods totaling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that imply a continuity or
commercial dealings or arrangements and contemplate to that extent the performance
of acts or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of, commercial gain or of the purpose and object of the
business organization."
Thus, a foreign corporation with a settling agent in the Philippines which issued
twelve marine policies covering different shipments to the Philippines[31]and a foreign
corporation which had been collecting premiums on outstanding policies[32] were
regarded as doing business here.
The same rule was observed relating to a foreign corporation with an "exclusive
distributing agent" in the Philippines, and which has been selling its products here
since 1929,[33] and a foreign corporation engaged in the business of manufacturing
and selling computers worldwide, and had installed at least 26 different products in
several corporations in the Philippines, and allowed its registered logo and trademark
to be used and made it known that there exists a designated distributor in the
Philippines.[34]
In Georg Grotjahn GMBH and Co. vs. Isnani,[35] it was held that the uninterrupted
performance by a foreign corporation of acts pursuant to its primary purposes and
functions as a regional area headquarters for its home office, qualifies such
corporation as one doing business in the country.
These foregoing instances should be distinguished from a single or isolated
transaction or occasional, incidental, or casual transactions, which do not come within
the meaning of the law,[36] for in such case, the foreign corporation is deemed not
engaged in business in the Philippines.
Where a single act or transaction, however, is not merely incidental or casual but
indicates the foreign corporation’s intention to do other business in the Philippines,
said single act or transaction constitutes "doing" or "engaging in" or "transacting"
business in the Philippines.[37]
In determining whether a corporation does business in the Philippines or not, aside
from their activities within the forum, reference may be made to the contractual
agreements entered into by it with other entities in the country. Thus, in the Top-
Weld case (supra), the foreign corporation’s LICENSE AND TECHNICAL
AGREEMENT and DISTRIBUTOR AGREEMENT with their local contacts were made
the basis of their being regarded by this Tribunal as corporations doing business in
the country. Likewise, in Merill Lynch Futures, Inc. vs. Court of Appeals, etc. [38] the
4
FUTURES CONTRACT entered into by the petitioner foreign corporation weighed
heavily in the court’s ruling.
With the abovestated precedents in mind, we are persuaded to conclude that private
respondent had been "engaged in" or "doing business" in the Philippines for some
time now. This is the inevitable result after a scrutiny of the different contracts and
agreements entered into by ITEC with its various business contacts in the country,
particularly ASPAC and Telephone Equipment Sales and Services, Inc. (TESSI, for
brevity). The latter is a local electronics firm engaged by ITEC to be its local technical
representative, and to create a service center for ITEC products sold locally. Its
arrangements, with these entities indicate convincingly ITEC’s purpose to bring about
the situation among its customers and the general public that they are dealing
directly with ITEC, and that ITEC is actively engaging in business in the country.
In its Master Service Agreement[39] with TESSI, private respondents required its local
technical representative to provide the employees of the technical and service center
with ITEC identification cards and business cards, and to correspond only on ITEC,
Inc., letterhead. TESSI personnel are instructed to answer the telephone with "ITEC
Technical Assistance Center.", such telephone being listed in the telephone book
under the heading of ITEC Technical Assistance Center, and all calls being recorded
and forwarded to ITEC on a weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly report detailing the
failure and repair of ITEC products, and to requisition monthly the materials and
components needed to replace stock consumed in the warranty repairs of the prior
month.
A perusal of the agreements between petitioner ASPAC and the respondents shows
that there are provisions which are highly restrictive in nature, such as to reduce
petitioner ASPAC to a mere extension or instrument of the private respondent.
The "No Competing Product" provision of the Representative Agreement between
ITEC and ASPAC provides: "The Representative shall not represent or offer for sale
within the Territory any product which competes with an existing ITEC product or
any product which ITEC has under active development." Likewise pertinent is the
following provision: "When acting under this Agreement, REPRESENTATIVE is
authorized to solicit sales within the Territory on ITEC’s behalf but is authorized to
bind ITEC only in its capacity as Representative and no other, and then only to
specific customers and on terms and conditions expressly authorized by ITEC in
writing."
When ITEC entered into the disputed contracts with ASPAC and TESSI, they were
carrying out the purposes for which it was created, i.e., to market electronics and
communications products. The terms and conditions of the contracts as well as ITEC’s
conduct indicate that they established within our country a continuous business, and
not merely one of a temporary character.[40]
Notwithstanding such finding that ITEC is doing business in the country, petitioner is
nonetheless estopped from raising this fact to bar ITEC from instituting this
injunction case against it.
A foreign corporation doing business in the Philippines may sue in Philippine Courts
although not authorized to do business here against a Philippine citizen or entity who
had contracted with and benefited by said corporation.[41] To put it in another way, a
party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. And the doctrine of
estoppel to deny corporate existence applies to a foreign as well as to domestic
corporations.[42] One who has dealt with a corporation of foreign origin as a corporate
entity is estopped to deny its corporate existence and capacity. The principle will be
applied to prevent a person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes chiefly in cases where such person
has received the benefits of the contract.[43]
The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua
non habere debet - no person ought to derive any advantage of his own wrong. This
is as it should be for as mandated by law, "every person must in the exercise of his
rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith."[44]
Concededly, corporations act through agents like directors and officers. Corporate
dealings must be characterized by utmost good faith and fairness. Corporations
cannot just feign ignorance of the legal rules as in most cases, they are manned by
sophisticated officers with tried management skills and legal experts with practiced
eye on legal problems. Each party to a corporate transaction is expected to act with
utmost candor and fairness and, thereby allow a reasonable proportion between
benefits and expected burdens. This is a norm which should be observed where one
or the other is a foreign entity venturing in a global market.
As observed by this Court in TOP-WELD (supra), viz:
The parties are charged with knowledge of the existing law at the time they enter into
a contract and at the time it is to become operative. (Twiehaus v. Rosner, 245 SW 2d
107; Hall v. Bucher, 227 SW 2d 98). Moreover, a person is presumed to be more
knowledgeable about his own state law than his alien or foreign contemporary. In
this case, the record shows that, at least, petitioner had actual knowledge of the
applicability of R.A. No. 5455 at the time the contract was executed and at all times
thereafter. This conclusion is compelled by the fact that the same statute is now being
propounded by the petitioner to bolster its claim. We, therefore sustain the appellate
court’s view that "it was incumbent upon TOP-WELD to know whether or not IRTI
and ECED were properly authorized to engage in business in the Philippines when
they entered into the licensing and distributorship agreements." The very purpose of
the law was circumvented and evaded when the petitioner entered into said
agreements despite the prohibition of R.A. No. 5455. The parties in this case being
equally guilty of violating R.A. No. 5455, they are in pari delicto, in which case it
5
follows as a consequence that petitioner is not entitled to the relief prayed for in this requisites are met: 1) That the Philippine Court is one to which the parties may
case. conveniently resort to; 2) That the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and, 3) That the Philippine Court has
The doctrine of lack of capacity to sue based on the failure to acquire a local license is or is likely to have power to enforce its decision.[48]
based on considerations of sound public policy. The license requirement was imposed
to subject the foreign corporation doing business in the Philippines to the jurisdiction The aforesaid requirements having been met, and in view of the court’s disposition to
of its courts. It was never intended to favor domestic corporations who enter into give due course to the questioned action, the matter of the present forum not being
solitary transactions with unwary foreign firms and then repudiate their obligations the "most convenient" as a ground for the suit’s dismissal, deserves scant
simply because the latter are not licensed to do business in this country. [45] consideration.

In Antam Consolidated Inc. vs. Court of Appeals, et al.[46] we expressed our chagrin IN VIEW OF THE FOREGOING PREMISES, the instant Petition is
over this commonly used scheme of defaulting local companies which are being sued hereby DISMISSED. The decision of the Court of Appeals dated June 7, 1991,
by unlicensed foreign companies not engaged in business in the Philippines to invoke upholding the RTC Order dated February 22, 1991, denying the petitioners’ Motion to
the lack of capacity to sue of such foreign companies. Obviously, the same ploy is Dismiss, and ordering the issuance of the Writ of Preliminary Injunction is hereby
resorted to by ASPAC to prevent the injunctive action filed by ITEC to enjoin affirmed in toto.
petitioner from using knowledge possibly acquired in violation of fiduciary
arrangements between the parties. SO ORDERED.

By entering into the "Representative Agreement" with ITEC, Petitioner is charged

with knowledge that ITEC was not licensed to engage in business activities in the
country, and is thus estopped from raising in defense such incapacity of ITEC, having
chosen to ignore or even presumptively take advantage of the same.

In Top-Weld, we ruled that a foreign corporation may be exempted from the license
requirement in order to institute an action in our courts if its representative in the
country maintained an independent status during the existence of the disputed
contract. Petitioner is deemed to have acceded to such independent character when it
entered into the Representative Agreement with ITEC, particularly, provision 6.2
(supra).

Petitioner’s insistence on the dismissal of this action due to the application, or non
application, of the private international law rule of forum non conveniens defies well-
settled rules of fair play. According to petitioner, the Philippine Court has no venue
to apply its discretion whether to give cognizance or not to the present action,
because it has not acquired jurisdiction over the person of the plaintiff in the case, the
latter allegedly having no personality to sue before Philippine Courts. This argument
is misplaced because the court has already acquired jurisdiction over the plaintiff in
the suit, by virtue of his filing the original complaint. And as we have already
observed, petitioner are not at liberty to question plaintiff’s standing to sue, having
already acceded to the same by virtue of its entry into the Representative Agreement
referred to earlier.

Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the
facts of the case, whether to give due course to the suit or dismiss it, on the principle
of forum non conveniens.[47] Hence, the Philippine Court may refuse to assume
jurisdiction in spite of its having acquired jurisdiction. Conversely, the court may
assume jurisdiction over the case if it chooses to do so; provided, that the following
6
G.R. No. 103493, June 19, 1997
PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE
LIMITED, AND ATHONA HOLDINGS, N.V., PETITIONERS, VS. THE
HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O.
DUCAT, PRECIOSO R. PERLAS, AND WILLIAM H. CRAIG, RESPONDENTS.
DECISION
MENDOZA, J.:
This case presents for determination the conclusiveness of a foreign judgment upon
the rights of the parties under the same cause of action asserted in a case in our local
court. Petitioners brought this case in the Regional Trial Court of Makati, Branch 56,
which, in view of the pendency at the time of the foreign action, dismissed Civil Case
No. 16563 on the ground of litis pendentia, in addition to forum non conveniens. On
appeal, the Court of Appeals affirmed. Hence this petition for review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans
from petitioners Ayala International Finance Limited (hereafter called AYALA)[1] and
Philsec Investment Corporation (hereafter called PHILSEC) in the sum of
US$2,500,000.00, secured by shares of stock owned by Ducat with a market value of
P14,088,995.00. In order to facilitate the payment of the loans, private respondent
1488, Inc., through its president, private respondent Drago Daic, assumed Ducat’s
obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed
a Warranty Deed with Vendor’s Lien by which it sold to petitioner Athona Holdings,
N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for
US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in the
amount of US$2,500,000.00 as initial payment of the purchase price. The balance of
US$307,209.02 was to be paid by means of a promissory note executed by ATHONA
in favor of 1488, Inc. Subsequently, upon their receipt of the US$2,500,000.00 from
1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and delivered
to 1488, Inc. all the shares of stock in their possession belonging to Ducat.
As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire
amount covered by the note became due and demandable. Accordingly, on October
17, 1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and
ATHONA in the United States for payment of the balance of US$307,209.02 and for
damages for breach of contract and for fraud allegedly perpetrated by petitioners in
misrepresenting the marketability of the shares of stock delivered to 1488, Inc. under
the Agreement. Originally instituted in the United States District Court of Texas,
165th Judicial District, where it was docketed as Case No. 85-57746, the venue of the
action was later transferred to the United States District Court for the Southern
District of Texas, where 1488, Inc. filed an amended complaint, reiterating its
allegations in the original complaint. ATHONA filed an answer with counterclaim,
impleading private respondents herein as counterdefendants, for allegedly conspiring
in selling the property at a price over its market value. Private respondent Perlas,
who had allegedly appraised the property, was later dropped as counterdefendant.
ATHONA sought the recovery of damages and excess payment allegedly made to
1488, Inc. and, in the alternative, the rescission of sale of the property. For their part,
PHILSEC and AYALA filed a motion to dismiss on the ground of lack of jurisdiction
over their person, but, as their motion was denied, they later filed a joint answer with
counterclaim against private respondents and Edgardo V. Guevarra, PHILSEC’s own
former president, for the rescission of the sale on the ground that the property had
been overvalued. On March 13, 1990, the United States District Court for the Southern
District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the
ground that it was “frivolous and [was] brought against him simply to humiliate and
embarrass him.” For this reason, the U.S. court imposed so-called Rule 11 sanctions
on PHILSEC and AYALA and ordered them to pay damages to Guevarra.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States,
petitioners filed a complaint “For Sum of Money with Damages and Writ of
Preliminary Attachment” against private respondents in the Regional Trial Court of
Makati, where it was docketed as Civil Case No. 16563. The complaint reiterated the
allegation of petitioners in their respective counterclaims in Civil Action No. H-86-440
of the United States District Court of Southern Texas that private respondents
committed fraud by selling the property at a price 400 percent more than its true
value of US$800,000.00. Petitioners claimed that, as a result of private respondents’
fraudulent misrepresentations, ATHONA, PHILSEC, and AYALA were induced to
enter into the Agreement and to purchase the Houston property. Petitioners prayed
that private respondents be ordered to return to ATHONA the excess payment of
US$1,700,000.00 and to pay damages. On April 20, 1987, the trial court issued a writ of
preliminary attachment against the real and personal properties of private
respondents.[2]
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of
(1) litis pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in
the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-
IFL to state a cause of action. Ducat contended that the alleged overpricing of the
property prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-
IFL which were not parties to the sale and whose only participation was to extend
financial accommodation to ATHONA under a separate loan agreement. On the other
hand, private respondents 1488, Inc. and its president Daic filed a joint “Special
Appearance and Qualified Motion to Dismiss,” contending that the action being in
personam, extraterritorial service of summons by publication was ineffectual and did
not vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign
corporation, and Daic, who is a non-resident alien.
On January 26, 1988, the trial court granted Ducat’s motion to dismiss, stating that
“the evidentiary requirements of the controversy may be more suitably tried before
the forum of the litis pendentia in the U.S., under the principle in private
international law of forum non conveniens,” even as it noted that Ducat was not a
party in the U.S. case.
7
A separate hearing was held with regard to 1488, Inc. and Daic’s motion to dismiss.
On March 9, 1988, the trial court[3] granted the motion to dismiss filed by 1488, Inc.
and Daic on the ground of litis pendentia considering that
the “main factual element” of the cause of action in this case which is the validity of
the sale of real property in the United States between defendant 1488 and plaintiff
ATHONA is the subject matter of the pending case in the United States District Court
which, under the doctrine of forum non conveniens, is the better (if not exclusive)
forum to litigate matters needed to determine the assessment and/or fluctuations of
the fair market value of real estate situated in Houston, Texas, U.S.A. from the date of
the transaction in 1983 up to the present and verily, . . . (emphasis by trial court)
Warranty Deed was executed in Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE
SAME PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON
BY THE COURT OF APPEALS IN AFFIRMING THE TRIAL COURT’S
DISMISSAL OF THE CIVIL ACTION IS NOT APPLICABLE.
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY
THE COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL
COURT OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.

The trial court also held itself without jurisdiction over 1488, Inc. and Daic because 3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF
they were non-residents and the action was not an action in rem or quasi in rem, so APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY
that extraterritorial service of summons was ineffective. The trial court subsequently REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL
lifted the writ of attachment it had earlier issued against the shares of stocks of 1488, COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR
THERE IS EVERY REASON TO PROTECT AND VINDICATE PETITIONERS’
Inc. and Daic.
RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE
RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED
Petitioners appealed to the Court of Appeals, arguing that the trial court erred in
UPON THEM HERE IN THE PHILIPPINES.
applying the principle of litis pendentia and forum non conveniens and in ruling that
it had no jurisdiction over the defendants, despite the previous attachment of shares
We will deal with these contentions in the order in which they are made.
of stocks belonging to 1488, Inc. and Daic.
First. It is important to note in connection with the first point that while the present
On January 6, 1992, the Court of Appeals[4] affirmed the dismissal of Civil Case No.
case was pending in the Court of Appeals, the United States District Court for the
16563 against Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus:
Southern District of Texas rendered judgment[5] in the case before it. The judgment,
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants
which was in favor of private respondents, was affirmed on appeal by the Circuit
are Philsec, the Ayala International Finance Ltd. (BPI-IFL’s former name) and the
Court of Appeals.[6] Thus, the principal issue to be resolved in this case is whether
Athona Holdings, NV. The case at bar involves the same parties. The transaction sued
Civil Case No. 16536 is barred by the judgment of the U.S. court.
upon by the parties, in both cases is the Warranty Deed executed by and between
Athona Holdings and 1488 Inc. In the U.S. case, breach of contract and the promissory
Private respondents contend that for a foreign judgment to be pleaded as res judicata,
note are sued upon by 1488 Inc., which likewise alleges fraud employed by herein
a judgment admitting the foreign decision is not necessary. On the other hand,
appellants, on the marketability of Ducat’s securities given in exchange for the Texas
petitioners argue that the foreign judgment cannot be given the effect of res judicata
property. The recovery of a sum of money and damages, for fraud purportedly
without giving them an opportunity to impeach it on grounds stated in Rule 39, §50
committed by appellees, in overpricing the Texas land, constitute the action before
of the Rules of Court, to wit: “want of jurisdiction, want of notice to the party,
the Philippine court, which likewise stems from the same Warranty Deed.
collusion, fraud, or clear mistake of law or fact.”
The Court of Appeals also held that Civil Case No. 16563 was an action in personam
for the recovery of a sum of money for alleged tortious acts, so that service of
Petitioners’ contention is meritorious. While this Court has given the effect of res
summons by publication did not vest the trial court with jurisdiction over 1488, Inc.
judicata to foreign judgments in several cases,[7] it was after the parties opposed to the
and Drago Daic. The dismissal of Civil Case No. 16563 on the ground of forum non
judgment had been given ample opportunity to repel them on grounds allowed
conveniens was likewise affirmed by the Court of Appeals on the ground that the
under the law.[8] It is not necessary for this purpose to initiate a separate action or
case can be better tried and decided by the U.S. court:
proceeding for enforcement of the foreign judgment. What is essential is that there is
The U.S. case and the case at bar arose from only one main transaction, and involve
opportunity to challenge the foreign judgment, in order for the court to properly
foreign elements, to wit: 1) the property subject matter of the sale is situated in Texas,
determine its efficacy. This is because in this jurisdiction, with respect to actions in
U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3) although the
personam, as distinguished from actions in rem, a foreign judgment merely
buyer, Athona Holdings, a foreign corporation which does not claim to be doing
constitutes prima facie evidence of the justness of the claim of a party and, as such, is
business in the Philippines, is wholly owned by Philsec, a domestic corporation,
subject to proof to the contrary.[9] Rule 39, §50 provides:
Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4) the
8
SEC. 50. Effect of foreign judgments. - The effect of a judgment of a tribunal of a foreign
country, having jurisdiction to pronounce the judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the
title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a
right as between the parties and their successors in interest by a subsequent title; but
the judgment may be repelled by evidence of a want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v. Union Insurance
Society of Canton, Ltd.,[10] which private respondents invoke for claiming conclusive
effect for the foreign judgment in their favor, the foreign judgment was considered
res judicata because this Court found “from the evidence as well as from appellant’s
own pleadings”[11] that the foreign court did not make a “clear mistake of law or fact”
or that its judgment was void for want of jurisdiction or because of fraud or collusion
by the defendants. Trial had been previously held in the lower court and only
afterward was a decision rendered, declaring the judgment of the Supreme Court of
the State of Washington to have the effect of res judicata in the case before the lower
court. In the same vein, in Philippine International Shipping Corp. v. Court of
Appeals,[12] this Court held that the foreign judgment was valid and enforceable in
the Philippines there being no showing that it was vitiated by want of notice to the
party, collusion, fraud or clear mistake of law or fact. The prima facie presumption
under the Rule had not been rebutted.
In the case at bar, it cannot be said that petitioners were given the opportunity to
challenge the judgment of the U.S. court as basis for declaring it res judicata or
conclusive of the rights of private respondents. The proceedings in the trial court
were summary. Neither the trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence presented thereat,
to assure a proper determination of whether the issues then being litigated in the U.S.
court were exactly the issues raised in this case such that the judgment that might be
rendered would constitute res judicata. As the trial court stated in its disputed order
dated March 9, 1988:
On the plaintiff’s claim in its Opposition that the causes of action of this case and the
pending case in the United States are not identical, precisely the Order of January 26,
1988 never found that the causes of action of this case and the case pending before the
USA Court, were identical. (emphasis added)
It was error therefore for the Court of Appeals to summarily rule that petitioners’
action is barred by the principle of res judicata. Petitioners in fact questioned the
jurisdiction of the U.S. court over their persons, but their claim was brushed aside by
both the trial court and the Court of Appeals.[13]
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition
for the enforcement of judgment in the Regional Trial Court of Makati, where it was
docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the
proceedings were suspended because of the pendency of this case. To sustain the
appellate court’s ruling that the foreign judgment constitutes res judicata and is a bar
to the claim of petitioners would effectively preclude petitioners from repelling the
judgment in the case for enforcement. An absurdity could then arise: a foreign
judgment is not subject to challenge by the plaintiff against whom it is invoked, if it is
pleaded to resist a claim as in this case, but it may be opposed by the defendant if the
foreign judgment is sought to be enforced against him in a separate proceeding. This
is plainly untenable. It has been held therefore that:
[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction
where affirmative relief is being sought. Hence, in the interest of justice, the
complaint should be considered as a petition for the recognition of the Hongkong
judgment under Section 50 (b), Rule 39 of the Rules of Court in order that the
defendant, private respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if applicable. [14]
Accordingly, to insure the orderly administration of justice, this case and Civil Case
No. 92-1070 should be consolidated.[15] After all, the two have been filed in the
Regional Trial Court of Makati, albeit in different salas, this case being assigned to
Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in
Branch 134 of Judge Ignacio Capulong. In such proceedings, petitioners should have
the burden of impeaching the foreign judgment and only in the event they succeed in
doing so may they proceed with their action against private respondents.
Second. Nor is the trial court’s refusal to take cognizance of the case justifiable under
the principle of forum non conveniens. First, a motion to dismiss is limited to the
grounds under Rule 16, §1, which does not include forum non conveniens.[16] The
propriety of dismissing a case based on this principle requires a factual
determination, hence, it is more properly considered a matter of defense. Second,
while it is within the discretion of the trial court to abstain from assuming jurisdiction
on this ground, it should do so only after “vital facts are established, to determine
whether special circumstances” require the court’s desistance.[17]
In this case, the trial court abstained from taking jurisdiction solely on the basis of the
pleadings filed by private respondents in connection with the motion to dismiss. It
failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and
one of the defendants (Ventura Ducat) is a Filipino, and that it was the
extinguishment of the latter’s debt which was the object of the transaction under
litigation. The trial court arbitrarily dismissed the case even after finding that Ducat
was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial court to hold that
jurisdiction over 1488, Inc. and Daic could not be obtained because this is an action in
personam and summons were served by extraterritorial service. Rule 14, §17 on
extraterritorial service provides that service of summons on a non-resident defendant
may be effected out of the Philippines by leave of Court where, among others, “the
property of the defendant has been attached within the Philippines.” [18] It is not
disputed that the properties, real and personal, of the private respondents had been
attached prior to service of summons under the Order of the trial court dated April
9
20, 1987.[19]

Fourth. As for the temporary restraining order issued by the Court on June 29, 1994,
to suspend the proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to
enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S. court, the
Court finds that the judgment sought to be enforced is severable from the main
judgment under consideration in Civil Case No. 16563. The separability of Guevarra’s
claim is not only admitted by petitioners,[20] it appears from the pleadings that
petitioners only belatedly impleaded Guevarra as defendant in Civil Case No.
16563.[21] Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to
proceed.

WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case
No. 16563 is REMANDED to the Regional Trial Court of Makati for consolidation
with Civil Case No. 92-1070 and for further proceedings in accordance with this
decision. The temporary restraining order issued on June 29, 1994 is hereby LIFTED.

SO ORDERED.

10
G. R. No. 120077, October 13, 2000
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD.
PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION, ARBITER
CEFERINA J. DIOSANA AND MARCELO G. SANTOS, RESPONDENTS.
DECISION
PARDO, J.:
The case before the Court is a petition for certiorari[1] to annul the following orders of
the National Labor Relations Commission (hereinafter referred to as "NLRC") for
having been issued without or with excess jurisdiction and with grave abuse of
discretion:[2]
(1) Order of May 31, 1993.[3] Reversing and setting aside its earlier resolution of
August 28, 1992.[4] The questioned order declared that the NLRC, not the Philippine
Overseas Employment Administration (hereinafter referred to as "POEA"), had
jurisdiction over private respondent's complaint;
(2) Decision of December 15, 1994.[5] Directing petitioners to jointly and severally pay
private respondent twelve thousand and six hundred dollars (US$12,600.00)
representing salaries for the unexpired portion of his contract; three thousand six
hundred dollars (US$3,600.00) as extra four months salary for the two (2) year period
of his contract, three thousand six hundred dollars (US$3,600.00) as "14th month pay"
or a total of nineteen thousand and eight hundred dollars (US$19,800.00) or its peso
equivalent and attorney's fees amounting to ten percent (10%) of the total award; and
(3) Order of March 30, 1995.[6] Denying the motion for reconsideration of the
petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos")
was an overseas worker employed as a printer at the Mazoon Printing Press,
Sultanate of Oman. Subsequently, in June 1988, he was directly hired by the Palace
Hotel, Beijing, People's Republic of China and later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and
the Manila Hotel International Company, Limited (hereinafter referred to as
"MHICL").
When the case was filed in 1990, MHC was still a government-owned and controlled
corporation duly organized and existing under the laws of the Philippines.
MHICL is a corporation duly organized and existing under the laws of Hong Kong. [7]
MHC is an "incorporator" of MHICL, owning 50% of its capital stock. [8]
By virtue of a "management agreement"[9] with the Palace Hotel (Wang Fu Company
Limited), MHICL[10] trained the personnel and staff of the Palace Hotel at Beijing,
China.
Now the facts.
During his employment with the Mazoon Printing Press in the Sultanate of Oman,
respondent Santos received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt,
General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed respondent
Santos that he was recommended by one Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer, but with a higher
monthly salary and increased benefits. The position was slated to open on October 1,
1988.[11]
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance
of the offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign
employment contract to respondent Santos. Mr. Henk advised respondent Santos that
if the contract was acceptable, to return the same to Mr. Henk in Manila, together
with his passport and two additional pictures for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press,
effective June 30, 1988, under the pretext that he was needed at home to help with the
family's piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr.
Henk's letter. Respondent Santos enclosed four (4) signed copies of the employment
contract (dated June 4, 1988) and notified them that he was going to arrive in Manila
during the first week of July 1988.
The employment contract of June 4, 1988 stated that his employment would
commence September 1, 1988 for a period of two years.[12] It provided for a monthly
salary of nine hundred dollars (US$900.00) net of taxes, payable fourteen (14) times a
year.[13]
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing
Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He started to work at
the Palace Hotel.[14]
Subsequently, respondent Santos signed an amended "employment agreement" with
the Palace Hotel, effective November 5, 1988. In the contract, Mr. Shmidt represented
the Palace Hotel. The Vice President (Operations and Development) of petitioner
MHICL Miguel D. Cergueda signed the employment agreement under the word
"noted".
11

From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave.
He returned to China and reassumed his post on July 17, 1989.
On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a
handwritten note that respondent Santos be given one (1) month notice of his release
from employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by
Mr. Shmidt that his employment at the Palace Hotel print shop would be terminated
due to business reverses brought about by the political upheaval in China. [15] We
quote the letter:[16]
"After the unfortunate happenings in China and especially Beijing (referring to
Tiannamen Square incidents), our business has been severely affected. To reduce
expenses, we will not open/operate printshop for the time being.
"We sincerely regret that a decision like this has to be made, but rest assured this does
in no way reflect your past performance which we found up to our expectations."
"Should a turnaround in the business happen, we will contact you directly and give
you priority on future assignment."
On September 5, 1989, the Palace Hotel terminated the employment of respondent
Santos and paid all benefits due him, including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the Philippines.
On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr.
Shmidt, demanding full compensation pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit:[17]
"His service with the Palace Hotel, Beijing was not abruptly terminated but we
followed the one-month notice clause and Mr. Santos received all benefits due him.
"For your information, the Print Shop at the Palace Hotel is still not operational and
with a low business outlook, retrenchment in various departments of the hotel is
going on which is a normal management practice to control costs.
"When going through the latest performance ratings, please also be advised that his
performance was below average and a Chinese National who is doing his job now
shows a better approach.
"In closing, when Mr. Santos received the letter of notice, he hardly showed up for
work but still enjoyed free accommodation/laundry/meals up to the day of his
departure."
On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with
the Arbitration Branch, National Capital Region, National Labor Relations
Commission (NLRC). He prayed for an award of nineteen thousand nine hundred
and twenty three dollars (US$19,923.00) as actual damages, forty thousand pesos
(P40,000.00) as exemplary damages and attorney's fees equivalent to 20% of the
damages prayed for. The complaint named MHC, MHICL, the Palace Hotel and Mr.
Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with summons and neither
participated in the proceedings before the Labor Arbiter.[18]
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against
petitioners, thus:[19]
"WHEREFORE, judgment is hereby rendered:
"1. directing all the respondents to pay complainant jointly and severally;
"a) $20,820 US dollars or its equivalent in Philippine currency as unearned salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
"d) Ten (10) percent of the total award as attorney's fees.
"SO ORDERED."
On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the
NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating: [20]
"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void
for want of jurisdiction. Complainant is hereby enjoined to file his complaint with the
POEA.
"SO ORDERED."
On September 18, 1992, respondent Santos moved for reconsideration of the afore-
quoted resolution. He argued that the case was not cognizable by the POEA as he was
not an "overseas contract worker."[21]
On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC
directed Labor Arbiter Emerson Tumanon to hear the case on the question of whether
private respondent was retrenched or dismissed.[22]
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the
testimonial and documentary evidence presented to and heard by him.[23]
Subsequently, Labor Arbiter Tumanon was re-assigned as trial arbiter of the National
Capital Region, Arbitration Branch, and the case was transferred to Labor Arbiter Jose
G. de Vera.[24]
12
On November 25, 1994, Labor Arbiter de Vera submitted his report. [25] He found that
respondent Santos was illegally dismissed from employment and recommended that
he be paid actual damages equivalent to his salaries for the unexpired portion of his
contract.[26]
On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:[27]
"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are
supported by substantial evidence, judgment is hereby rendered, directing the
respondents to jointly and severally pay complainant the following computed
contractual benefits: (1) US$12,600.00 as salaries for the un-expired portion of the
parties' contract; (2) US$3,600.00 as extra four (4) months salary for the two (2) years
period (sic) of the parties' contract; (3) US$3,600.00 as "14th month pay" for the
aforesaid two (2) years contract stipulated by the parties or a total of US$19,800.00 or
its peso equivalent, plus (4) attorney's fees of 10% of complainant's total award.
"SO ORDERED."
On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor
Arbiter de Vera's recommendation had no basis in law and in fact. [28]
On March 30, 1995, the NLRC denied the motion for reconsideration.[29]
Hence, this petition.[30]
On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance
of a temporary restraining order and/or writ of preliminary injunction and a motion
for the annulment of the entry of judgment of the NLRC dated July 31, 1995. [31]
On November 20, 1995, the Court denied petitioner's urgent motion. The Court
required respondents to file their respective comments, without giving due course to
the petition.[32]
On March 8, 1996, the Solicitor General filed a manifestation stating that after going
over the petition and its annexes, they can not defend and sustain the position taken
by the NLRC in its assailed decision and orders. The Solicitor General prayed that he
be excused from filing a comment on behalf of the NLRC[33]
On April 30,1996, private respondent Santos filed his comment. [34]
On June 26, 1996, the Court granted the manifestation of the Solicitor General and
required the NLRC to file its own comment to the petition.[35]
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign jurisdictions and
the case involves purely foreign elements. The only link that the Philippines has with
the case is that respondent Santos is a Filipino citizen. The Palace Hotel and MHICL
are foreign corporations. Not all cases involving our citizens can be tried here.
The employment contract.-- Respondent Santos was hired directly by the Palace
Hotel, a foreign employer, through correspondence sent to the Sultanate of Oman,
where respondent Santos was then employed. He was hired without the intervention
of the POEA or any authorized recruitment agency of the government.[36]
Under the rule of forum non conveniens, a Philippine court or agency may assume
jurisdiction over the case if it chooses to do so provided: (1) that the Philippine court is
one to which the parties may conveniently resort to; (2) that the Philippine court is in
a position to make an intelligent decision as to the law and the facts; and (3) that the
Philippine court has or is likely to have power to enforce its decision. [37] The
conditions are unavailing in the case at bar.
Not Convenient.-- We fail to see how the NLRC is a convenient forum given that all
the incidents of the case - from the time of recruitment, to employment to dismissal
occurred outside the Philippines. The inconvenience is compounded by the fact that
the proper defendants, the Palace Hotel and MHICL are not nationals of the
Philippines. Neither are they "doing business in the Philippines." Likewise, the main
witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines.
No power to determine applicable law.-- Neither can an intelligent decision be made
as to the law governing the employment contract as such was perfected in foreign
soil. This calls to fore the application of the principle of lex loci contractus (the law of
the place where the contract was made).[38]
The employment contract was not perfected in the Philippines. Respondent Santos
signified his acceptance by writing a letter while he was in the Republic of Oman.
This letter was sent to the Palace Hotel in the People's Republic of China.
No power to determine the facts.-- Neither can the NLRC determine the facts
surrounding the alleged illegal dismissal as all acts complained of took place in
Beijing, People's Republic of China. The NLRC was not in a position to determine
whether the Tiannamen Square incident truly adversely affected operations of the
Palace Hotel as to justify respondent Santos' retrenchment.
Principle of effectiveness, no power to execute decision.-- Even assuming that a
proper decision could be reached by the NLRC, such would not have any binding
effect against the employer, the Palace Hotel. The Palace Hotel is a corporation
incorporated under the laws of China and was not even served with summons.
Jurisdiction over its person was not acquired.
13
This is not to say that Philippine courts and agencies have no power to solve
controversies involving foreign employers. Neither are we saying that we do not have
power over an employment contract executed in a foreign country. If Santos were an
"overseas contract worker", a Philippine forum, specifically the POEA, not the
NLRC, would protect him.[39] He is not an "overseas contract worker" a fact which he
admits with conviction.[40]
Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's
decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and
(2) that MHICL was liable for Santos' retrenchment, still MHC, as a separate and
distinct juridical entity cannot be held liable.
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital
stock. However, this is not enough to pierce the veil of corporate fiction between
MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the
corporate fiction is used to defeat public convenience, justify wrong, protect fraud or
defend a crime.[41] It is done only when a corporation is a mere alter ego or business
conduit of a person or another corporation.
In Traders Royal Bank v. Court of Appeals,[42] we held that "the mere ownership by a
single stockholder or by another corporation of all or nearly all of the capital stock of
a corporation is not of itself a sufficient reason for disregarding the fiction of separate
corporate personalities."
The tests in determining whether the corporate veil may be pierced are: First, the
defendant must have control or complete domination of the other corporation's
finances, policy and business practices with regard to the transaction attacked. There
must be proof that the other corporation had no separate mind, will or existence with
respect the act complained of. Second, control must be used by the defendant to
commit fraud or wrong. Third, the aforesaid control or breach of duty must be the
proximate cause of the injury or loss complained of. The absence of any of the
elements prevents the piercing of the corporate veil.[43]
It is basic that a corporation has a personality separate and distinct from those
composing it as well as from that of any other legal entity to which it may be
related.[44] Clear and convincing evidence is needed to pierce the veil of corporate
fiction.[45] In this case, we find no evidence to show that MHICL and MHC are one
and the same entity.
III. MHICL not Liable
Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his
employment contract with the Palace Hotel. This fact fails to persuade us.
First, we note that the Vice President (Operations and Development) of MHICL,
Miguel D. Cergueda signed the employment contract as a mere witness. He merely
signed under the word "noted".
When one "notes" a contract, one is not expressing his agreement or approval, as a
party would.[46] In Sichangco v. Board of Commissioners of Immigration,[47] the Court
recognized that the term "noted" means that the person so noting has merely taken
cognizance of the existence of an act or declaration, without exercising a judicious
deliberation or rendering a decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing
part" of the document is that which, "in a deed or other formal instrument is that part
which comes after the recitals, or where there are no recitals, after the parties
(emphasis ours)."[48] As opposed to a party to a contract, a witness is simply one who,
"being present, personally sees or perceives a thing; a beholder, a spectator, or
eyewitness."[49] One who "notes" something just makes a "brief written statement" [50] a
memorandum or observation.
Second, and more importantly, there was no existing employer-employee
relationship between Santos and MHICL. In determining the existence of an
employer-employee relationship, the following elements are considered:[51]
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and
"(4) the power to control employee's conduct."
MHICL did not have and did not exercise any of the aforementioned powers. It did
not select respondent Santos as an employee for the Palace Hotel. He was referred to
the Palace Hotel by his friend, Nestor Buenio. MHICL did not engage respondent
Santos to work. The terms of employment were negotiated and finalized through
correspondence between respondent Santos, Mr. Schmidt and Mr. Henk, who were
officers and representatives of the Palace Hotel and not MHICL. Neither did
respondent Santos adduce any proof that MHICL had the power to control his
conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL that
terminated respondent Santos' services.
Neither is there evidence to suggest that MHICL was a "labor-only contractor."[52]
There is no proof that MHICL "supplied" respondent Santos or even referred him for
employment to the Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and
the same entity. The fact that the Palace Hotel is a member of the "Manila Hotel
Group" is not enough to pierce the corporate veil between MHICL and the Palace
Hotel.
14
IV. Grave Abuse of Discretion 31, 1993, December 15, 1994 and March 30, 1995 in NLRC NCR CA No. 002101-91
(NLRC NCR Case No. 00-02-01058-90).
Considering that the NLRC was forum non-conveniens and considering further that no
employer-employee relationship existed between MHICL, MHC and respondent No costs.
Santos, Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction over
respondent's claim in NLRC NCR Case No. 00-02-01058-90. SO ORDERED.

Labor Arbiters have exclusive and original jurisdiction only over the following: [53]
"1. Unfair labor practice cases;

"2. Termination disputes;

"3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;

"4. Claims for actual, moral, exemplary and other forms of damages arising from
employer-employee relations;

"5. Cases arising from any violation of Article 264 of this Code, including questions
involving legality of strikes and lockouts; and

"6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a
claim for reinstatement."
In all these cases, an employer-employee relationship is an indispensable
jurisdictional requirement.

The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is
limited to disputes arising from an employer-employee relationship which can be
resolved by reference to the Labor Code, or other labor statutes, or their collective
bargaining agreements.[54]

"To determine which body has jurisdiction over the present controversy, we rely on
the sound judicial principle that jurisdiction over the subject matter is conferred by
law and is determined by the allegations of the complaint irrespective of whether the
plaintiff is entitled to all or some of the claims asserted therein." [55]

The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the
complaint. His failure to dismiss the case amounts to grave abuse of discretion.[56]

V. The Fallo

WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS
the orders and resolutions of the National Labor Relations Commission dated May
15
G.R. No. 141536, February 26, 2001
GIL MIGUEL T. PUYAT, PETITIONER, VS. RON ZABARTE, RESPONDENT.
DECISION
PANGANIBAN, J.:
Summary judgment in a litigation is resorted to if there is no genuine issue as to any
material fact, other than the amount of damages. If this verity is evident from the
pleadings and the supporting affidavits, depositions and admissions on file with the
court, the moving party is entitled to such remedy as a matter of course.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
challenging the August 31, 1999 Decision[1] of the Court of Appeals (CA), which
affirmed the Regional Trial Court (RTC) of Pasig City, Branch 67 in Civil Case No.
64107; and the January 20, 2000 CA Resolution [2] which denied reconsideration.
The assailed CA Decision disposed as follows:
"WHEREFORE, finding no error in the judgment appealed from, the same is
AFFIRMED."[3]
The Facts
The facts of this case, as narrated by the Court of Appeals, are as follows: [4]
"It appears that on 24 January 1994, [Respondent] Ron Zabarte commenced [an
action] to enforce the money judgment rendered by the Superior Court for the State of
California, County of Contra Costa, U.S.A. On 18 March 1994, [petitioner] filed his
Answer with the following special and affirmative defenses:
xxxxxxxxx
`8) The Superior Court for the State of California, County of Contra Costa[,] did not
properly acquire jurisdiction over the subject matter of and over the persons involved
in [C]ase #C21-00265.
`9) The Judgment on Stipulations for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 was obtained without the assistance of counsel for [petitioner] and
without sufficient notice to him and therefore, was rendered in clear violation of
[petitioner's] constitutional rights to substantial and procedural due process.
`10) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 was procured by means of fraud or collusion or undue influence
and/or based on a clear mistake of fact and law.
`11) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 is contrary to the laws, public policy and canons of morality
obtaining in the Philippines and the enforcement of such judgment in the Philippines
would result in the unjust enrichment of [respondent] at the expense of [petitioner] in
this case.
`12) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated
December 12, 1991 is null and void and unenforceable in the Philippines.
`13) In the transaction, which is the subject matter in Case #C21-00265, [petitioner] is
not in any way liable, in fact and in law, to [respondent] in this case, as contained in
[petitioner's] `Answer to Complaint' in Case #C21-00265 dated April 1, 1991, Annex
`B' of [respondent's] `Complaint' dated December 6, 1993.
'14) [Respondent] is guilty of misrepresentation or falsification in the filing of his
`Complaint' in this case dated December 6, 1993. Worse, [respondent] has no capacity
to sue in the Philippines.
'15) Venue has been improperly laid in this case.'
(Record, pp. 42-44)
"On 1 August 1994, [respondent] filed a [M]otion for [S]ummary [J]udgment under
Rule 34 of the Rules of Court alleging that the [A]nswer filed by [petitioner] failed to
tender any genuine issue as to the material facts. In his [O]pposition to [respondent's]
motion, [petitioner] demurred as follows:
`2) [Petitioner] begs to disagree[;] in support hereof, [he] wishes to mention that in his
`Answer with Special and Affirmative Defenses' dated March 16, 1994 [petitioner] has
interposed that the `Judgment on Stipulations for Entry in Judgment' is null and void,
fraudulent, illegal and unenforceable, the same having been obtained by means of
fraud, collusion, undue influence and/or clear mistake of fact and law. In addition,
[he] has maintained that said `Judgment on Stipulations for Entry in Judgment' was
obtained without the assistance of counsel for [petitioner] and without sufficient
notice to him and therefore, was rendered in violation of his constitutional rights to
substantial and procedural due process.'
"The [M]otion for [S]ummary [J]udgment was set for hearing on 12 August 1994
during which [respondent] marked and submitted in evidence the following:
Exhibit - x x x Judgment on Stipulation For Entry In
`A' Judgment of the Supreme Court of the
State of California[,] County of Contra
Costa[,] signed by Hon. Ellen James, Judge
of the Superior Court.
Exhibit - x x x Certificate of Authentication of the
`B' [O]rder signed by the Hon. Ellen James,
issued by the Consulate General of the
Republic of the Philippines.
Exhibit - [R]eturn of the [W]rit of [E]xecution (writ
16
`C' unsatisfied) issued by the sheriff/marshall,
County of Santa Clara, State of California. "2. The amount of P30,000.00 as attorney's fees;

Exhibit - "3. To pay the costs of suit.

[W]rit of [E]xecution
`D'
"The claim for moral damages, not having been substantiated, it is hereby denied."[7]
Ruling of the Court of Appeals
Exhibit - [P]roof of [S]ervice of copies of [W]rit of
'E' [E]xecution, [N]otice of [L]evy, Affirming the trial court, the Court of Appeals held that petitioner was estopped from
[M]emorandum of [G]arnishee, assailing the judgment that had become final and had, in fact, been partially executed.
[E]xemptions from [E]nforcement of The CA also ruled that summary judgment was proper, because petitioner had failed
[J]udgment. to tender any genuine issue of fact and was merely maneuvering to delay the full
effects of the judgment.

Exhibit - Certification issued by the Secretary of
`F' State, State of California that Stephen Weir
is the duly elected, qualified and acting
[c]ounty [c]lerk of the County of Contra
Costa of the State of California.
Citing Ingenohl v. Olsen,[8] the CA also rejected petitioner's argument that the RTC
should have dismissed the action for the enforcement of a foreign judgment, on the
ground of forum non conveniens. It reasoned out that the recognition of the foreign
judgment was based on comity, reciprocity and res judicata.
Hence, this Petition.[9]

Exhibit - Certificate of [A]uthentication of the [W]rit Issue

`G' of [E]xecution.
"On 6 April 1995, the court a quo issued an [O]rder granting [respondent's] [M]otion
for [S]ummary [J]udgment [and] likewise granting [petitioner] ten (10) days to submit
opposing affidavits, after which the case would be deemed submitted for resolution
(Record, pp. 152-153). [Petitioner] filed a [M]otion for [R]econsideration of the
aforesaid [O]rder and [respondent] filed [C]omment. On 30 June 1995, [petitioner]
filed a [M]otion to [D]ismiss on the ground of lack of jurisdiction over the subject
matter of the case and forum-non-conveniens (Record, pp. 166-170). In his [O]pposition
to the [M]otion (Record, pp. 181-182) [respondent] contended that [petitioner could]
no longer question the jurisdiction of the lower court on the ground that [the latter's]
Answer had failed to raise the issue of jurisdiction. [Petitioner] countered by asserting
in his Reply that jurisdiction [could] not be fixed by agreement of the parties. The
lower court dismissed [his] [M]otion for [R]econsideration and [M]otion [to]
[D]ismiss (Record, pp. 196-198), x x x."
The RTC[5] eventually rendered its February 21, 1997 Decision,[6] which disposed as
follows:
"WHEREFORE, judgment is hereby rendered, ordering [petitioner] to pay
[respondent] the following amounts:
"1. The amount of U.S. dollars $241,991.33, with the interest of legal rate
from October 18, 1991, or its peso equivalent, pursuant to the
[J]udgment of [S]tipulation for [E]ntry in [J]udgment dated December
19, 1991;
In his Memorandum, petitioner submits this lone but all-embracing issue:
"Whether or not the Court of Appeals acted in a manner x x x contrary to law when it
affirmed the Order of the trial court granting respondent's Motion for Summary
Judgment and rendering judgment against the petitioner."[10]
In his discussion, petitioner contends that the CA erred in ruling in this wise:
1 That his Answer failed to tender a genuine issue of fact regarding the following:
2 (a) the jurisdiction of a foreign court over the subject matter

(b) the validity of
the foreign judgment

(c) the judgment's conformity to Philippine laws,
public policy, canons of morality, and norms against unjust enrichment
3 That the principle of forum non conveniens was inapplicable to the instant case.
This Court's Ruling
The Petition has no merit.
First Question:
Summary Judgment
Petitioner vehemently insists that summary judgment is inappropriate to resolve the
case at bar, arguing that his Answer allegedly raised genuine and material factual
matters which he should have been allowed to prove during trial.
On the other hand, respondent argues that the alleged "genuine issues of fact" raised
by petitioner are mere conclusions of law, or "propositions arrived at not by any
17
process of natural reasoning from a fact or a combination of facts stated but by the
application of the artificial rules of law to the facts pleaded." [11]
The RTC granted respondent's Motion for Summary Judgment because petitioner, in
his Answer, admitted the existence of the Judgment on Stipulation for Entry in
Judgment. Besides, he had already paid $5,000 to respondent, as provided in the
foreign judgment sought to be enforced.[12] Hence, the trial court ruled that, there
being no genuine issue as to any material fact, the case should properly be resolved
through summary judgment. The CA affirmed this ruling.
We concur with the lower courts. Summary judgment is a procedural device for the
prompt disposition of actions in which the pleadings raise only a legal issue, and not
a genuine issue as to any material fact. By genuine issue is meant a question of fact that
calls for the presentation of evidence. It should be distinguished from an issue that is
sham, contrived, set in bad faith and patently unsubstantial.[13]
Summary judgment is resorted to in order to avoid long drawn out litigations and
useless delays. When affidavits, depositions and admissions on file show that there
are no genuine issues of fact to be tried, the Rules allow a party to pierce the
allegations in the pleadings and to obtain immediate relief by way of summary
judgment. In short, since the facts are not in dispute, the court is allowed to decide the
case summarily by applying the law to the material facts.
Petitioner contends that by allowing summary judgment, the two courts a quo
prevented him from presenting evidence to substantiate his claims. We do not agree.
Summary judgment is based on facts directly proven by affidavits, depositions or
admissions.[14] In this case, the CA and the RTC both merely ruled that trial was not
necessary to resolve the case. Additionally and correctly, the RTC specifically ordered
petitioner to submit opposing affidavits to support his contentions that (1) the
Judgment on Stipulation for Entry in Judgment was procured on the basis of fraud,
collusion, undue influence, or a clear mistake of law or fact; and (2) that it was
contrary to public policy or the canons of morality.[15]
Again, in its Order[16] dated November 29, 1995, the trial court clarified that the
opposing affidavits were "for [petitioner] to spell out the facts or circumstances [that]
would constitute lack of jurisdiction over the subject matter of and over the persons
involved in Case No. C21-00265," and that would render the judgment therein null
and void. In this light, petitioner's contention that he was not allowed to present
evidence to substantiate his claims is clearly untenable.
For summary judgment to be valid, Rule 34, Section 3 of the Rules of Court, requires
(a) that there must be no genuine issue as to any material fact, except for the amount
of damages; and (b) that the party presenting the motion for summary judgment
must be entitled to a judgment as a matter of law.[17] As mentioned earlier, petitioner
admitted that a foreign judgment had been rendered against him and in favor of
respondent, and that he had paid $5,000 to the latter in partial compliance therewith.
Hence, respondent, as the party presenting the Motion for Summary Judgment, was
shown to be entitled to the judgment.
The CA made short shrift of the first requirement. To show that petitioner had raised
no genuine issue, it relied instead on the finality of the foreign judgment which was,
in fact, partially executed. Hence, we shall show in the following discussion how the
defenses presented by petitioner failed to tender any genuine issue of fact, and why a
full-blown trial was not necessary for the resolution of the issues.
Jurisdiction
Petitioner alleges that jurisdiction over Case No. C21-00265, which involved
partnership interest, was vested in the Securities and Exchange Commission, not in
the Superior Court of California, County of Contra Costa.
We disagree. In the absence of proof of California law on the jurisdiction of courts, we
presume that such law, if any, is similar to Philippine law. We base this conclusion on
the presumption of identity or similarity, also known as processual presumption. [18]
The Complaint,[19] which respondent filed with the trial court, was for the
enforcement of a foreign judgment. He alleged therein that the action of the foreign
court was for the collection of a sum of money, breach of promissory notes, and
damages.[20]
In our jurisdiction, such a case falls under the jurisdiction of civil courts, not of the
Securities and Exchange Commission (SEC). The jurisdiction of the latter is
exclusively over matters enumerated in Section 5, PD 902-A,[21] prior to its latest
amendment. If the foreign court did not really have jurisdiction over the case, as
petitioner claims, it would have been very easy for him to show this. Since
jurisdiction is determined by the allegations in a complaint, he only had to submit a
copy of the complaint filed with the foreign court. Clearly, this issue did not warrant
trial.
Rights to Counsel and to Due Process
Petitioner contends that the foreign judgment, which was in the form of a
Compromise Agreement, cannot be executed without the parties being assisted by
their chosen lawyers. The reason for this, he points out, is to eliminate collusion,
undue influence and/or improper exertion of ascendancy by one party over the
other. He alleges that he discharged his counsel during the proceedings, because he
felt that the latter was not properly attending to the case. The judge, however, did not
allow him to secure the services of another counsel. Insisting that petitioner settle the
case with respondent, the judge practically imposed the settlement agreement on
him. In his Opposing Affidavit, petitioner states:
"It is true that I was initially represented by a counsel in the proceedings in #C21-
00625. I discharged him because I then felt that he was not properly attending to my
case or was not competent enough to represent my interest. I asked the Judge for time
to secure another counsel but I was practically discouraged from engaging one as the
Judge was insistent that I settle the case at once with the [respondent]. Being a
18
foreigner and not a lawyer at that I did not know what to do. I felt helpless and the
Judge and [respondent's] lawyer were the ones telling me what to do. Under ordinary
circumstances, their directives should have been taken with a grain of salt especially
so [since respondent's] counsel, who was telling me what to do, had an interest
adverse to mine. But [because] time constraints and undue influence exerted by the
Judge and [respondent's] counsel on me disturbed and seriously affected my freedom
to act according to my best judgment and belief. In point of fact, the terms of the
settlement were practically imposed on me by the Judge seconded all the time by
[respondent's] counsel. I was then helpless as I had no counsel to assist me and the
collusion between the Judge and [respondent's] counsel was becoming more evident
by the way I was treated in the Superior Court of [t]he State of California. I signed the
`Judgment on Stipulation for Entry in Judgment' without any lawyer assisting me at
the time and without being fully aware of its terms and stipulations."[22]
The manifestation of petitioner that the judge and the counsel for the opposing party
had pressured him would gain credibility only if he had not been given sufficient
time to engage the services of a new lawyer. Respondent's Affidavit[23] dated May 23,
1994, clarified, however, that petitioner had sufficient time, but he failed to retain a
counsel. Having dismissed his lawyer as early as June 19, 1991, petitioner directly
handled his own defense and negotiated a settlement with respondent and his
counsel in December 1991. Respondent also stated that petitioner, ignoring the
judge's reminder of the importance of having a lawyer, argued that "he would be the
one to settle the case and pay" anyway. Eventually, the Compromise Agreement was
presented in court and signed before Judge Ellen James on January 3, 1992. Hence,
petitioner's rights to counsel and to due process were not violated.
Unjust Enrichment
Petitioner avers that the Compromise Agreement violated the norm against unjust
enrichment because the judge made him shoulder all the liabilities in the case, even if
there were two other defendants, G.S.P & Sons, Inc. and the Genesis Group.
We cannot exonerate petitioner from his obligation under the foreign judgment, even
if there are other defendants who are not being held liable together with him. First,
the foreign judgment itself does not mention these other defendants, their
participation or their liability to respondent. Second, petitioner's undated Opposing
Affidavit states: "[A]lthough myself and these entities were initially represented by
Atty. Lawrence L. Severson of the Law Firm Kouns, Quinlivan & Severson, x x x I
discharged x x x said lawyer. Subsequently, I assumed the representation for myself
and these firms and this was allowed by the Superior Court of the State of California
without any authorization from G.G.P. & Sons, Inc. and the Genesis Group." [24]
Clearly, it was petitioner who chose to represent the other defendants; hence, he
cannot now be allowed to impugn a decision based on this ground.
In any event, contrary to petitioner's contention, unjust enrichment or solutio indebiti
does not apply to this case. This doctrine contemplates payment when there is no
duty to pay, and the person who receives the payment has no right to receive it. [25] In
this case, petitioner merely argues that the other two defendants whom he
represented were liable together with him. This is not a case of unjust enrichment.
We do not see, either, how the foreign judgment could be contrary to law, morals,
public policy or the canons of morality obtaining in the country. Petitioner owed
money, and the judgment required him to pay it. That is the long and the short of this
case.
In addition, the maneuverings of petitioner before the trial court reinforce our belief
that his claims are unfounded. Instead of filing opposing affidavits to support his
affirmative defenses, he filed a Motion for Reconsideration of the Order allowing
summary judgment, as well as a Motion to Dismiss the action on the ground of forum
non conveniens. His opposing affidavits were filed only after the Order of November
29, 1995 had denied both Motions.[26] Such actuation was considered by the trial court
as a dilatory ploy which justified the resolution of the action by summary judgment.
According to the CA, petitioner's allegations sought to delay the full effects of the
judgment; hence, summary judgment was proper. On this point, we concur with both
courts.
Second Question:
Forum Non Conveniens
Petitioner argues that the RTC should have refused to entertain the Complaint for
enforcement of the foreign judgment on the principle of forum non conveniens. He
claims that the trial court had no jurisdiction, because the case involved partnership
interest, and there was difficulty in ascertaining the applicable law in California. All
the aspects of the transaction took place in a foreign country, and respondent is not
even Filipino.
We disagree. Under the principle of forum non conveniens, even if the exercise of
jurisdiction is authorized by law, courts may nonetheless refuse to entertain a case for
any of the following practical reasons:
"1) The belief that the matter can be better tried and decided elsewhere, either because
the main aspects of the case transpired in a foreign jurisdiction or the material
witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known as
forum shopping[,] merely to secure procedural advantages or to convey or harass the
defendant;
3) The unwillingness to extend local judicial facilities to non-residents or aliens when
the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right sought to
be maintained; and
5) The difficulty of ascertaining foreign law."[27]
None of the aforementioned reasons barred the RTC from exercising its jurisdiction.
19
In the present action, there was no more need for material witnesses, no forum
shopping or harassment of petitioner, no inadequacy in the local machinery to
enforce the foreign judgment, and no question raised as to the application of any
foreign law.

Authorities agree that the issue of whether a suit should be entertained or dismissed
on the basis of the above-mentioned principle depends largely upon the facts of each
case and on the sound discretion of the trial court.[28] Since the present action lodged
in the RTC was for the enforcement of a foreign judgment, there was no need to
ascertain the rights and the obligations of the parties based on foreign laws or
contracts. The parties needed only to perform their obligations under the
Compromise Agreement they had entered into.

Under Section 48, Rule 39 of the 1997 Rules of Civil Procedure, a judgment in an
action in personam rendered by a foreign tribunal clothed with jurisdiction is
presumptive evidence of a right as between the parties and their successors-in-
interest by a subsequent title.[29]

Also, under Section 5(n) of Rule 131, a court -- whether in the Philippines or
elsewhere -- enjoys the presumption that it is acting in the lawful exercise of its
jurisdiction, and that it is regularly performing its official duty. [30] Its judgment may,
however, be assailed if there is evidence of want of jurisdiction, want of notice to the
party, collusion, fraud or clear mistake of law or fact. But precisely, this possibility
signals the need for a local trial court to exercise jurisdiction. Clearly, the application
of forum non coveniens is not called for.

The grounds relied upon by petitioner are contradictory. On the one hand, he insists
that the RTC take jurisdiction over the enforcement case in order to invalidate the
foreign judgment; yet, he avers that the trial court should not exercise jurisdiction
over the same case on the basis of forum non conveniens. Not only do these defenses
weaken each other, but they bolster the finding of the lower courts that he was merely
maneuvering to avoid or delay payment of his obligation.

WHEREFORE, the Petition is hereby DENIED and the assailed Decision and
Resolution AFFIRMED. Double costs against petitioner.

20
G.R. No. 120135, March 31, 2003
BANK OF AMERICA NT&SA, BANK OF AMERICA INTERNATIONAL, LTD.,
PETITIONERS, VS. COURT OF APPEALS, HON. MANUEL PADOLINA,
EDUARDO LITONJUA, SR., AND AURELIO K. LITONJUA, JR.,
RESPONDENTS.
DECISION
AUSTRIA-MARTINEZ, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the November 29, 1994 decision of the Court of Appeals[1] and the April 28, 1995
resolution denying petitioners’ motion for reconsideration.
The factual background of the case is as follows:
On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas, for
brevity) filed a Complaint[2] before the Regional Trial Court of Pasig against the Bank
of America NT&SA and Bank of America International, Ltd. (defendant banks for
brevity) alleging that: they were engaged in the shipping business; they owned two
vessels: Don Aurelio and El Champion, through their wholly-owned corporations;
they deposited their revenues from said business together with other funds with the
branches of said banks in the United Kingdom and Hongkong up to 1979; with their
business doing well, the defendant banks induced them to increase the number of
their ships in operation, offering them easy loans to acquire said vessels; [3] thereafter,
the defendant banks acquired, through their (Litonjuas’) corporations as the
borrowers: (a) El Carrier[4]; (b) El General[5]; (c) El Challenger[6]; and (d) El
Conqueror[7]; the vessels were registered in the names of their corporations; the
operation and the funds derived therefrom were placed under the complete and
exclusive control and disposition of the petitioners;[8] and the possession the vessels
was also placed by defendant banks in the hands of persons selected and designated
by them (defendant banks).[9]
The Litonjuas claimed that defendant banks as trustees did not fully render an
account of all the income derived from the operation of the vessels as well as of the
proceeds of the subsequent foreclosure sale;[10] because of the breach of their fiduciary
duties and/or negligence of the petitioners and/or the persons designated by them in
the operation of private respondents’ six vessels, the revenues derived from the
operation of all the vessels declined drastically; the loans acquired for the purchase of
the four additional vessels then matured and remained unpaid, prompting defendant
banks to have all the six vessels, including the two vessels originally owned by the
private respondents, foreclosed and sold at public auction to answer for the
obligations incurred for and in behalf of the operation of the vessels; they (Litonjuas)
lost sizeable amounts of their own personal funds equivalent to ten percent (10%) of
the acquisition cost of the four vessels and were left with the unpaid balance of their
loans with defendant banks.[11] The Litonjuas prayed for the accounting of the
revenues derived in the operation of the six vessels and of the proceeds of the sale
thereof at the foreclosure proceedings instituted by petitioners; damages for breach of
trust; exemplary damages and attorney’s fees.[12]
Defendant banks filed a Motion to Dismiss on grounds of forum non conveniens and
lack of cause of action against them.[13]
On December 3, 1993, the trial court issued an Order denying the Motion to Dismiss,
thus:
“WHEREFORE, and in view of the foregoing consideration, the Motion to Dismiss is
hereby DENIED. The defendant is therefore, given a period of ten (10) days to file its
Answer to the complaint.
“SO ORDERED.”[14]
Instead of filing an answer the defendant banks went to the Court of Appeals on a
“Petition for Review on Certiorari”[15] which was aptly treated by the appellate court
as a petition for certiorari. They assailed the above-quoted order as well as the
subsequent denial of their Motion for Reconsideration.[16] The appellate court
dismissed the petition and denied petitioners’ Motion for Reconsideration.[17]
Hence, herein petition anchored on the following grounds:
“1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT
THE SEPARATE PERSONALITIES OF THE PRIVATE RESPONDENTS (MERE
STOCKHOLDERS) AND THE FOREIGN CORPORATIONS (THE REAL
BORROWERS) CLEARLY SUPPORT, BEYOND ANY DOUBT, THE PROPOSITION
THAT THE PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO SUE.
“2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT WHILE
THE PRINCIPLE OF FORUM NON CONVENIENS IS NOT MANDATORY, THERE
ARE, HOWEVER, SOME GUIDELINES TO FOLLOW IN DETERMINING
WHETHER THE CHOICE OF FORUM SHOULD BE DISTURBED. UNDER THE
CIRCUMSTANCES SURROUNDING THE INSTANT CASE, DISMISSAL OF THE
COMPLAINT ON THE GROUND OF FORUM NON-CONVENIENS IS MORE
APPROPRIATE AND PROPER.
“3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL JUDGMENT
IN THE PHILIPPINES. IN FACT, THE PENDENCY OF FOREIGN ACTION MAY BE
THE LEGAL BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY THE
PRIVATE RESPONDENT. COROLLARY TO THIS, THE RESPONDENT COURT OF
APPEALS FAILED TO CONSIDER THE FACT THAT PRIVATE RESPONDENTS
ARE GUILTY OF FORUM SHOPPING.” [18]
As to the first assigned error: Petitioners argue that the borrowers and the registered
owners of the vessels are the foreign corporations and not private respondents
Litonjuas who are mere stockholders; and that the revenues derived from the
operations of all the vessels are deposited in the accounts of the corporations. Hence,
petitioners maintain that these foreign corporations are the legal entities that have the
personalities to sue and not herein private respondents; that private respondents,
being mere shareholders, have no claim on the vessels as owners since they merely
have an inchoate right to whatever may remain upon the dissolution of the said
21
foreign corporations and after all creditors have been fully paid and satisfied;[19] and
that while private respondents may have allegedly spent amounts equal to 10% of the
acquisition costs of the vessels in question, their 10% however represents their
investments as stockholders in the foreign corporations.[20]
Anent the second assigned error, petitioners posit that while the application of the
principle of forum non conveniens is discretionary on the part of the Court, said
discretion is limited by the guidelines pertaining to the private as well as public
interest factors in determining whether plaintiffs’ choice of forum should be
disturbed, as elucidated in Gulf Oil Corp. vs. Gilbert[21] and Piper Aircraft Co. vs.
Reyno,[22] to wit:
“Private interest factors include: (a) the relative ease of access to sources of proof; (b)
the availability of compulsory process for the attendance of unwilling witnesses; (c)
the cost of obtaining attendance of willing witnesses; or (d) all other practical
problems that make trial of a case easy, expeditious and inexpensive. Public interest
factors include: (a) the administrative difficulties flowing from court congestion; (b)
the local interest in having localized controversies decided at home; (c) the avoidance
of unnecessary problems in conflict of laws or in the application of foreign law; or (d)
the unfairness of burdening citizens in an unrelated forum with jury duty.”[23]
In support of their claim that the local court is not the proper forum, petitioners allege
the following:
“i) The Bank of America Branches involved, as clearly mentioned in the Complaint,
are based in Hongkong and England. As such, the evidence and the witnesses are not
readily available in the Philippines;
“ii) The loan transactions were obtained, perfected, performed, consummated and
partially paid outside the Philippines;
“iii) The monies were advanced outside the Philippines. Furthermore, the mortgaged
vessels were part of an offshore fleet, not based in the Philippines;
“iv) All the loans involved were granted to the Private Respondents’ foreign
CORPORATIONS;
“v) The Restructuring Agreements were ALL governed by the laws of England;
“vi) The subsequent sales of the mortgaged vessels and the application of the sales
proceeds occurred and transpired outside the Philippines, and the deliveries of the
sold mortgaged vessels were likewise made outside the Philippines;
“vii) The revenues of the vessels and the proceeds of the sales of these vessels were
ALL deposited to the Accounts of the foreign CORPORATIONS abroad; and
“viii) Bank of America International Ltd. is not licensed nor engaged in trade or
business in the Philippines.”[24]
Petitioners argue further that the loan agreements, security documentation and all
subsequent restructuring agreements uniformly, unconditionally and expressly
provided that they will be governed by the laws of England;[25] that Philippine Courts
would then have to apply English law in resolving whatever issues may be presented
to it in the event it recognizes and accepts herein case; that it would then be imposing
a significant and unnecessary expense and burden not only upon the parties to the
transaction but also to the local court. Petitioners insist that the inconvenience and
difficulty of applying English law with respect to a wholly foreign transaction in a
case pending in the Philippines may be avoided by its dismissal on the ground of
forum non conveniens. [26]
Finally, petitioners claim that private respondents have already waived their alleged
causes of action in the case at bar for their refusal to contest the foreign civil cases
earlier filed by the petitioners against them in Hongkong and England, to wit:
“1.) Civil action in England in its High Court of Justice, Queen’s Bench Division
Commercial Court (1992-Folio No. 2098) against (a) LIBERIAN TRANSPORT
NAVIGATION. SA.; (b) ESHLEY COMPANIA NAVIERA SA., (c) EL CHALLENGER
SA; (d) ESPRIONA SHIPPING CO. SA; (e) PACIFIC NAVIGATOS CORP. SA; (f)
EDDIE NAVIGATION CORP. SA; (g) EDUARDO K. LITONJUA & (h) AURELIO K.
LITONJUA.
“2.) Civil action in England in its High Court of Justice, Queen’s Bench Division,
Commercial Court (1992-Folio No. 2245) against (a) EL CHALLENGER S.A., (b)
ESPRIONA SHIPPING COMPANY S.A., (c) EDUARDO KATIPUNAN LITONJUA
and (d) AURELIO KATIPUNAN LITONJUA.
“3.) Civil action in the Supreme Court of Hongkong High Court (Action No. 4039 of
1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A.,
(c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS
CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA
CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA, JR.,
and (h) EDUARDO KATIPUNAN LITONJUA.
“4.) A civil action in the Supreme Court of Hong Kong High Court (Action No. 4040
of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL CHALLENGER
S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS
CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA
CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA, RJ.,
and (h) EDUARDO KATIPUNAN LITONJUA.”
and that private respondents’ alleged cause of action is already barred by the
pendency of another action or by litis pendentia as shown above.[27]
On the other hand, private respondents contend that certain material facts and
pleadings are omitted and/or misrepresented in the present petition for certiorari;
that the prefatory statement failed to state that part of the security of the foreign loans
were mortgages on a 39-hectare piece of real estate located in the Philippines;[28] that
while the complaint was filed only by the stockholders of the corporate borrowers,
the latter are wholly-owned by the private respondents who are Filipinos and
therefore under Philippine laws, aside from the said corporate borrowers being but
22
their alter-egos, they have interests of their own in the vessels. [29] Private respondents
also argue that the dismissal by the Court of Appeals of the petition for certiorari was
justified because there was neither allegation nor any showing whatsoever by the
petitioners that they had no appeal, nor any plain, speedy, and adequate remedy in
the ordinary course of law from the Order of the trial judge denying their Motion to
Dismiss; that the remedy available to the petitioners after their Motion to Dismiss was
denied was to file an Answer to the complaint;[30] that as upheld by the Court of
Appeals, the decision of the trial court in not applying the principle of forum non
conveniens is in the lawful exercise of its discretion.[31] Finally, private respondents
aver that the statement of petitioners that the doctrine of res judicata also applies to
foreign judgment is merely an opinion advanced by them and not based on a
categorical ruling of this Court;[32] and that herein private respondents did not
actually participate in the proceedings in the foreign courts. [33]
We deny the petition for lack of merit.
It is a well-settled rule that the order denying the motion to dismiss cannot be the
subject of petition for certiorari. Petitioners should have filed an answer to the
complaint, proceed to trial and await judgment before making an appeal. As
repeatedly held by this Court:
“An order denying a motion to dismiss is interlocutory and cannot be the subject of
the extraordinary petition for certiorari or mandamus. The remedy of the aggrieved
party is to file an answer and to interpose as defenses the objections raised in his
motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate the
entire case by appeal in due course. xxx Under certain situations, recourse to certiorari
or mandamus is considered appropriate, i.e., (a) when the trial court issued the order
without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion
by the trial court; or (c) appeal would not prove to be a speedy and adequate remedy
as when an appeal would not promptly relieve a defendant from the injurious effects
of the patently mistaken order maintaining the plaintiff’s baseless action and
compelling the defendant needlessly to go through a protracted trial and clogging the
court dockets by another futile case.”[34]
Records show that the trial court acted within its jurisdiction when it issued the
assailed Order denying petitioners’ motion to dismiss. Does the denial of the motion
to dismiss constitute a patent grave abuse of discretion? Would appeal, under the
circumstances, not prove to be a speedy and adequate remedy? We will resolve said
questions in conjunction with the issues raised by the parties.
First issue. Did the trial court commit grave abuse of discretion in refusing to dismiss
the complaint on the ground that plaintiffs have no cause of action against defendants
since plaintiffs are merely stockholders of the corporations which are the registered
owners of the vessels and the borrowers of petitioners?
No. Petitioners’ argument that private respondents, being mere stockholders of the
foreign corporations, have no personalities to sue, and therefore, the complaint
should be dismissed, is untenable. A case is dismissible for lack of personality to sue
upon proof that the plaintiff is not the real party-in-interest. Lack of personality to sue
can be used as a ground for a Motion to Dismiss based on the fact that the complaint,
on the face thereof, evidently states no cause of action.[35] In San Lorenzo Village
Association, Inc. vs. Court of Appeals,[36] this Court clarified that a complaint states a
cause of action where it contains three essential elements of a cause of action, namely:
(1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and
(3) the act or omission of the defendant in violation of said legal right. If these
elements are absent, the complaint becomes vulnerable to a motion to dismiss on the
ground of failure to state a cause of action.[37] To emphasize, it is not the lack or
absence of cause of action that is a ground for dismissal of the complaint but rather
the fact that the complaint states no cause of action.[38] “Failure to state a cause of action”
refers to the insufficiency of allegation in the pleading, unlike “lack of cause of action”
which refers to the insufficiency of factual basis for the action. “Failure to state a
cause of action” may be raised at the earliest stages of an action through a motion to
dismiss the complaint, while “lack of cause of action” may be raised any time after
the questions of fact have been resolved on the basis of stipulations, admissions or
evidence presented.[39]
In the case at bar, the complaint contains the three elements of a cause of action. It
alleges that: (1) plaintiffs, herein private respondents, have the right to demand for an
accounting from defendants (herein petitioners), as trustees by reason of the fiduciary
relationship that was created between the parties involving the vessels in question; (2)
petitioners have the obligation, as trustees, to render such an accounting; and (3)
petitioners failed to do the same.
Petitioners insist that they do not have any obligation to the private respondents as
they are mere stockholders of the corporation; that the corporate entities have
juridical personalities separate and distinct from those of the private respondents.
Private respondents maintain that the corporations are wholly owned by them and
prior to the incorporation of such entities, they were clients of petitioners which
induced them to acquire loans from said petitioners to invest on the additional ships.
We agree with private respondents. As held in the San Lorenzo case, [40]
“xxx assuming that the allegation of facts constituting plaintiffs’ cause of action is not
as clear and categorical as would otherwise be desired, any uncertainty thereby
arising should be so resolved as to enable a full inquiry into the merits of the action.”
As this Court has explained in the San Lorenzo case, such a course, would preclude
multiplicity of suits which the law abhors, and conduce to the definitive
determination and termination of the dispute. To do otherwise, that is, to abort the
action on account of the alleged fatal flaws of the complaint would obviously be
indecisive and would not end the controversy, since the institution of another action
upon a revised complaint would not be foreclosed.[41]
Second Issue. Should the complaint be dismissed on the ground of forum non-
conveniens?
No. The doctrine of forum non-conveniens, literally meaning ‘the forum is
inconvenient’, emerged in private international law to deter the practice of global
23
forum shopping,[42] that is to prevent non-resident litigants from choosing the forum
or place wherein to bring their suit for malicious reasons, such as to secure
procedural advantages, to annoy and harass the defendant, to avoid overcrowded
dockets, or to select a more friendly venue. Under this doctrine, a court, in conflicts of
law cases, may refuse impositions on its jurisdiction where it is not the most
“convenient” or available forum and the parties are not precluded from seeking
remedies elsewhere.[43]
Whether a suit should be entertained or dismissed on the basis of said doctrine
depends largely upon the facts of the particular case and is addressed to the sound
discretion of the trial court.[44] In the case of Communication Materials and Design, Inc.
vs. Court of Appeals,[45] this Court held that “xxx [a] Philippine Court may assume
jurisdiction over the case if it chooses to do so; provided, that the following requisites
are met: (1) that the Philippine Court is one to which the parties may conveniently
resort to; (2) that the Philippine Court is in a position to make an intelligent decision
as to the law and the facts; and, (3) that the Philippine Court has or is likely to have
power to enforce its decision.”[46] Evidently, all these requisites are present in the
instant case.
Moreover, this Court enunciated in Philsec. Investment Corporation vs. Court of
Appeals,[47] that the doctrine of forum non conveniens should not be used as a ground
for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include
said doctrine as a ground. This Court further ruled that while it is within the
discretion of the trial court to abstain from assuming jurisdiction on this ground, it
should do so only after vital facts are established, to determine whether special
circumstances require the court’s desistance; and that the propriety of dismissing a
case based on this principle of forum non conveniens requires a factual determination,
hence it is more properly considered a matter of defense.[48]
elements of res judicata should one of the cases be adjudged.
As the Court of Appeals aptly observed:
“xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad
involving the parties herein xxx, failed to provide this Court with relevant and clear
specifications that would show the presence of the above-quoted elements or
requisites for res judicata. While it is true that the petitioners in their motion for
reconsideration (CA Rollo, p. 72), after enumerating the various civil actions
instituted abroad, did aver that “Copies of the foreign judgments are hereto attached
and made integral parts hereof as Annexes ‘B’, ‘C’, ’D’ and ‘E’”, they failed, wittingly
or inadvertently, to include a single foreign judgment in their pleadings submitted to
this Court as annexes to their petition. How then could We have been expected to rule
on this issue even if We were to hold that foreign judgments could be the basis for the
application of the aforementioned principle of res judicata?”[53]
Consequently, both courts correctly denied the dismissal of herein subject complaint.
WHEREFORE, the petition is DENIED for lack of merit.
Costs against petitioners.
SO ORDERED.

Third issue. Are private respondents guilty of forum shopping because of the
pendency of foreign action?

No. Forum shopping exists where the elements of litis pendentia are present and
where a final judgment in one case will amount to res judicata in the other.[49]
Parenthetically, for litis pendentia to be a ground for the dismissal of an action there
must be: (a) identity of the parties or at least such as to represent the same interest in
both actions; (b) identity of rights asserted and relief prayed for, the relief being
founded on the same acts; and (c) the identity in the two cases should be such that the
judgment which may be rendered in one would, regardless of which party is
successful, amount to res judicata in the other.[50]

In case at bar, not all the requirements for litis pendentia are present. While there may
be identity of parties, notwithstanding the presence of other respondents,[51] as well as
the reversal in positions of plaintiffs and defendants[52], still the other requirements
necessary for litis pendentia were not shown by petitioner. It merely mentioned that
civil cases were filed in Hongkong and England without however showing the
identity of rights asserted and the reliefs sought for as well as the presence of the
24
G.R. No. 149177, November 23, 2007
KAZUHIRO HASEGAWA AND NIPPON ENGINEERING CONSULTANTS CO.,
LTD., PETITIONERS, VS. MINORU KITAMURA, RESPONDENT.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the April 18, 2001 Decision[1] of the Court of Appeals (CA) in CA-G.R.
SP No. 60827, and the July 25, 2001 Resolution[2] denying the motion for
reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a
Japanese consultancy firm providing technical and management support in the
infrastructure projects of foreign governments,[3] entered into an Independent
Contractor Agreement (ICA) with respondent Minoru Kitamura, a Japanese national
permanently residing in the Philippines.[4] The agreement provides that respondent
was to extend professional services to Nippon for a year starting on April 1, 1999. [5]
Nippon then assigned respondent to work as the project manager of the Southern
Tagalog Access Road (STAR) Project in the Philippines, following the company's
consultancy contract with the Philippine Government.[6]
When the STAR Project was near completion, the Department of Public Works and
Highways (DPWH) engaged the consultancy services of Nippon, on January 28, 2000,
this time for the detailed engineering and construction supervision of the Bongabon-
Baler Road Improvement (BBRI) Project.[7] Respondent was named as the project
manager in the contract's Appendix 3.1.[8]
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for
its International Division, informed respondent that the company had no more
intention of automatically renewing his ICA. His services would be engaged by the
company only up to the substantial completion of the STAR Project on March 31,
2000, just in time for the ICA's expiry.[9]
Threatened with impending unemployment, respondent, through his lawyer,
requested a negotiation conference and demanded that he be assigned to the BBRI
project. Nippon insisted that respondent’s contract was for a fixed term that had
already expired, and refused to negotiate for the renewal of the ICA. [10]
As he was not able to generate a positive response from the petitioners, respondent
consequently initiated on June 1, 2000 Civil Case No. 00-0264 for specific performance
and damages with the Regional Trial Court of Lipa City. [11]
For their part, petitioners, contending that the ICA had been perfected in Japan and
executed by and between Japanese nationals, moved to dismiss the complaint for lack
of jurisdiction. They asserted that the claim for improper pre-termination of
respondent's ICA could only be heard and ventilated in the proper courts of Japan
following the principles of lex loci celebrationis and lex contractus.[12]
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the
replacement of Kitamura by a certain Y. Kotake as project manager of the BBRI
Project.[13]
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank[14] that
matters connected with the performance of contracts are regulated by the law
prevailing at the place of performance,[15] denied the motion to dismiss.[16] The trial
court subsequently denied petitioners' motion for reconsideration,[17] prompting them
to file with the appellate court, on August 14, 2000, their first Petition for Certiorari
under Rule 65 [docketed as CA-G.R. SP No. 60205].[18] On August 23, 2000, the CA
resolved to dismiss the petition on procedural grounds—for lack of statement of
material dates and for insufficient verification and certification against forum
shopping.[19] An Entry of Judgment was later issued by the appellate court on
September 20, 2000.[20]
Aggrieved by this development, petitioners filed with the CA, on September 19, 2000,
still within the reglementary period, a second Petition for Certiorari under Rule 65
already stating therein the material dates and attaching thereto the proper verification
and certification. This second petition, which substantially raised the same issues as
those in the first, was docketed as CA-G.R. SP No. 60827.[21]
Ruling on the merits of the second petition, the appellate court rendered the assailed
April 18, 2001 Decision[22] finding no grave abuse of discretion in the trial court's
denial of the motion to dismiss. The CA ruled, among others, that the principle of lex
loci celebrationis was not applicable to the case, because nowhere in the pleadings was
the validity of the written agreement put in issue. The CA thus declared that the trial
court was correct in applying instead the principle of lex loci solutionis.[23]
Petitioners' motion for reconsideration was subsequently denied by the CA in the
assailed July 25, 2001 Resolution.[24]
Remaining steadfast in their stance despite the series of denials, petitioners instituted
the instant Petition for Review on Certiorari[25] imputing the following errors to the
appellate court:
4 THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT
THE TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE
INSTANT CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT
SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS ENTERED INTO
BY AND BETWEEN TWO JAPANESE NATIONALS, WRITTEN WHOLLY
IN THE JAPANESE LANGUAGE AND EXECUTED IN TOKYO, JAPAN.
5
6 THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN
OVERLOOKING THE NEED TO REVIEW OUR ADHERENCE TO THE
PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF RECENT
DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.[26]
25
The pivotal question that this Court is called upon to resolve is whether the subject
matter jurisdiction of Philippine courts in civil cases for specific performance and
damages involving contracts executed outside the country by foreign nationals may
be assailed on the principles of lex loci celebrationis, lex contractus, the “state of the
most significant relationship rule,” or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters
raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP
No. 60205 has already barred the filing of the second petition docketed as CA-G.R. SP
No. 60827 (fundamentally raising the same issues as those in the first one) and the
instant petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the
petition's defective certification of non-forum shopping, it was a dismissal without
prejudice.[27] The same holds true in the CA's dismissal of the said case due to defects
in the formal requirement of verification[28] and in the other requirement in Rule 46 of
the Rules of Court on the statement of the material dates.[29] The dismissal being
without prejudice, petitioners can re-file the petition, or file a second petition
attaching thereto the appropriate verification and certification—as they, in fact did—
and stating therein the material dates, within the prescribed period[30] in Section 4,
Rule 65 of the said Rules.[31]
The dismissal of a case without prejudice signifies the absence of a decision on the
merits and leaves the parties free to litigate the matter in a subsequent action as
though the dismissed action had not been commenced. In other words, the
termination of a case not on the merits does not bar another action involving the same
parties, on the same subject matter and theory.[32]
Necessarily, because the said dismissal is without prejudice and has no res judicata
effect, and even if petitioners still indicated in the verification and certification of the
second certiorari petition that the first had already been dismissed on procedural
grounds,[33] petitioners are no longer required by the Rules to indicate in their
certification of non-forum shopping in the instant petition for review of the second
certiorari petition, the status of the aforesaid first petition before the CA. In any case,
an omission in the certificate of non-forum shopping about any event that will not
constitute res judicata and litis pendentia, as in the present case, is not a fatal defect. It
will not warrant the dismissal and nullification of the entire proceedings, considering
that the evils sought to be prevented by the said certificate are no longer present. [34]
The Court also finds no merit in respondent's contention that petitioner Hasegawa is
only authorized to verify and certify, on behalf of Nippon, the certiorari petition filed
with the CA and not the instant petition. True, the Authorization [35] dated September
4, 2000, which is attached to the second certiorari petition and which is also attached
to the instant petition for review, is limited in scope—its wordings indicate that
Hasegawa is given the authority to sign for and act on behalf of the company only in
the petition filed with the appellate court, and that authority cannot extend to the
instant petition for review.[36] In a plethora of cases, however, this Court has liberally
applied the Rules or even suspended its application whenever a satisfactory
explanation and a subsequent fulfillment of the requirements have been made.[37]
Given that petitioners herein sufficiently explained their misgivings on this point and
appended to their Reply[38] an updated Authorization[39] for Hasegawa to act on
behalf of the company in the instant petition, the Court finds the same as sufficient
compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the defect in the
verification and certification. As respondent pointed out, and to which we agree,
Hasegawa is truly not authorized to act on behalf of Nippon in this case. The
aforesaid September 4, 2000 Authorization and even the subsequent August 17, 2001
Authorization were issued only by Nippon's president and chief executive officer, not
by the company's board of directors. In not a few cases, we have ruled that corporate
powers are exercised by the board of directors; thus, no person, not even its officers,
can bind the corporation, in the absence of authority from the board. [40] Considering
that Hasegawa verified and certified the petition only on his behalf and not on behalf
of the other petitioner, the petition has to be denied pursuant to Loquias v. Office of the
Ombudsman.[41] Substantial compliance will not suffice in a matter that demands strict
observance of the Rules.[42] While technical rules of procedure are designed not to
frustrate the ends of justice, nonetheless, they are intended to effect the proper and
orderly disposition of cases and effectively prevent the clogging of court dockets.[43]
Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to
question the trial court's denial of their motion to dismiss. It is a well-established rule
that an order denying a motion to dismiss is interlocutory, and cannot be the subject
of the extraordinary petition for certiorari or mandamus. The appropriate recourse is to
file an answer and to interpose as defenses the objections raised in the motion, to
proceed to trial, and, in case of an adverse decision, to elevate the entire case by
appeal in due course.[44] While there are recognized exceptions to this rule,[45]
petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its
jurisdiction to hear and resolve the civil case for specific performance and damages
filed by the respondent. The ICA subject of the litigation was entered into and
perfected in Tokyo, Japan, by Japanese nationals, and written wholly in the Japanese
language. Thus, petitioners posit that local courts have no substantial relationship to
the parties[46] following the [state of the] most significant relationship rule in Private
International Law.[47]
The Court notes that petitioners adopted an additional but different theory when they
elevated the case to the appellate court. In the Motion to Dismiss[48] filed with the trial
court, petitioners never contended that the RTC is an inconvenient forum. They
merely argued that the applicable law which will determine the validity or invalidity
26
of respondent's claim is that of Japan, following the principles of lex loci celebrationis
and lex contractus.[49] While not abandoning this stance in their petition before the
appellate court, petitioners on certiorari significantly invoked the defense of forum
non conveniens.[50] On petition for review before this Court, petitioners dropped their
other arguments, maintained the forum non conveniens defense, and introduced their
new argument that the applicable principle is the [state of the] most significant
relationship rule.[51]
Be that as it may, this Court is not inclined to deny this petition merely on the basis of
the change in theory, as explained in Philippine Ports Authority v. City of Iloilo.[52] We
only pointed out petitioners' inconstancy in their arguments to emphasize their
incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three consecutive phases
are involved: jurisdiction, choice of law, and recognition and enforcement of
judgments. Corresponding to these phases are the following questions: (1) Where can
or should litigation be initiated? (2) Which law will the court apply? and (3) Where
can the resulting judgment be enforced?[53]
Analytically, jurisdiction and choice of law are two distinct concepts.[54] Jurisdiction
considers whether it is fair to cause a defendant to travel to this state; choice of law
asks the further question whether the application of a substantive law which will
determine the merits of the case is fair to both parties. The power to exercise
jurisdiction does not automatically give a state constitutional authority to apply
forum law. While jurisdiction and the choice of the lex fori will often coincide, the
“minimum contacts” for one do not always provide the necessary “significant
contacts” for the other.[55] The question of whether the law of a state can be applied to
a transaction is different from the question of whether the courts of that state have
jurisdiction to enter a judgment.[56]
In this case, only the first phase is at issue—jurisdiction. Jurisdiction, however, has
various aspects. For a court to validly exercise its power to adjudicate a controversy,
it must have jurisdiction over the plaintiff or the petitioner, over the defendant or the
respondent, over the subject matter, over the issues of the case and, in cases involving
property, over the res or the thing which is the subject of the litigation. [57] In assailing
the trial court's jurisdiction herein, petitioners are actually referring to subject matter
jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the
sovereign authority which establishes and organizes the court. It is given only by law
and in the manner prescribed by law.[58] It is further determined by the allegations of
the complaint irrespective of whether the plaintiff is entitled to all or some of the
claims asserted therein.[59] To succeed in its motion for the dismissal of an action for
lack of jurisdiction over the subject matter of the claim,[60] the movant must show that
the court or tribunal cannot act on the matter submitted to it because no law grants it
the power to adjudicate the claims.[61]
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial
court is not properly vested by law with jurisdiction to hear the subject controversy
for, indeed, Civil Case No. 00-0264 for specific performance and damages is one not
capable of pecuniary estimation and is properly cognizable by the RTC of Lipa
City.[62] What they rather raise as grounds to question subject matter jurisdiction are
the principles of lex loci celebrationis and lex contractus, and the “state of the most
significant relationship rule.”
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the “law of the place of the ceremony”[63] or the law of
the place where a contract is made.[64] The doctrine of lex contractus or lex loci
contractus means the “law of the place where a contract is executed or to be
performed.”[65] It controls the nature, construction, and validity of the contract[66] and
it may pertain to the law voluntarily agreed upon by the parties or the law intended
by them either expressly or implicitly.[67] Under the “state of the most significant
relationship rule,” to ascertain what state law to apply to a dispute, the court should
determine which state has the most substantial connection to the occurrence and the
parties. In a case involving a contract, the court should consider where the contract
was made, was negotiated, was to be performed, and the domicile, place of business,
or place of incorporation of the parties.[68] This rule takes into account several contacts
and evaluates them according to their relative importance with respect to the
particular issue to be resolved.[69]
Since these three principles in conflict of laws make reference to the law applicable to
a dispute, they are rules proper for the second phase, the choice of law. [70] They
determine which state's law is to be applied in resolving the substantive issues of a
conflicts problem.[71] Necessarily, as the only issue in this case is that of jurisdiction,
choice-of-law rules are not only inapplicable but also not yet called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed by the
fact that they have not yet pointed out any conflict between the laws of Japan and
ours. Before determining which law should apply, first there should exist a conflict of
laws situation requiring the application of the conflict of laws rules.[72] Also, when the
law of a foreign country is invoked to provide the proper rules for the solution of a
case, the existence of such law must be pleaded and proved.[73]
It should be noted that when a conflicts case, one involving a foreign element, is
brought before a court or administrative agency, there are three alternatives open to
the latter in disposing of it: (1) dismiss the case, either because of lack of jurisdiction
or refusal to assume jurisdiction over the case; (2) assume jurisdiction over the case
and apply the internal law of the forum; or (3) assume jurisdiction over the case and
take into account or apply the law of some other State or States. [74] The court’s power
to hear cases and controversies is derived from the Constitution and the laws. While
it may choose to recognize laws of foreign nations, the court is not limited by foreign
sovereign law short of treaties or other formal agreements, even in matters regarding
rights provided by foreign sovereigns.[75]
27
Neither can the other ground raised, forum non conveniens,[76] be used to deprive the
trial court of its jurisdiction herein. First, it is not a proper basis for a motion to
dismiss because Section 1, Rule 16 of the Rules of Court does not include it as a
ground.[77] Second, whether a suit should be entertained or dismissed on the basis of
the said doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court.[78] In this case, the RTC decided to
assume jurisdiction. Third, the propriety of dismissing a case based on this principle
requires a factual determination; hence, this conflicts principle is more properly
considered a matter of defense.[79]

Accordingly, since the RTC is vested by law with the power to entertain and hear the
civil case filed by respondent and the grounds raised by petitioners to assail that
jurisdiction are inappropriate, the trial and appellate courts correctly denied the
petitioners’ motion to dismiss.

WHEREFORE, premises considered, the petition for review on certiorari is DENIED.

SO ORDERED.

28
G.R. No. 162894, February 26, 2008
RAYTHEON INTERNATIONAL, INC., Petitioner, vs. STOCKTON W. ROUZIE,
JR., Respondent.
DECISION
TINGA, J,:
Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules
of Civil Procedure which seeks the reversal of the Decision[1] and Resolution[2] of the
Court of Appeals in CA-G.R. SP No. 67001 and the dismissal of the civil case filed by
respondent against petitioner with the trial court.
As culled from the records of the case, the following antecedents appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized
and existing under the laws of the State of Connecticut, United States of America, and
respondent Stockton W. Rouzie, Jr., an American citizen, entered into a contract
whereby BMSI hired respondent as its representative to negotiate the sale of services
in several government projects in the Philippines for an agreed remuneration of 10%
of the gross receipts. On 11 March 1992, respondent secured a service contract with
the Republic of the Philippines on behalf of BMSI for the dredging of rivers affected
by the Mt. Pinatubo eruption and mudflows.[3]
On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor
Relations Commission (NLRC) a suit against BMSI and Rust International, Inc.
(RUST), Rodney C. Gilbert and Walter G. Browning for alleged nonpayment of
commissions, illegal termination and breach of employment contract.[4] On 28
September 1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered judgment ordering
BMSI and RUST to pay respondent’s money claims.[5] Upon appeal by BMSI, the
NLRC reversed the decision of the Labor Arbiter and dismissed respondent’s
complaint on the ground of lack of jurisdiction.[6] Respondent elevated the case to this
Court but was dismissed in a Resolution dated 26 November 1997. The Resolution
became final and executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for
damages before the Regional Trial Court (RTC) of Bauang, La Union. The
Complaint,[7] docketed as Civil Case No. 1192-BG, named as defendants herein
petitioner Raytheon International, Inc. as well as BMSI and RUST, the two
corporations impleaded in the earlier labor case. The complaint essentially reiterated
the allegations in the labor case that BMSI verbally employed respondent to negotiate
the sale of services in government projects and that respondent was not paid the
commissions due him from the Pinatubo dredging project which he secured on behalf
of BMSI. The complaint also averred that BMSI and RUST as well as petitioner itself
had combined and functioned as one company.
In its Answer,[8] petitioner alleged that contrary to respondent’s claim, it was a
foreign corporation duly licensed to do business in the Philippines and denied
entering into any arrangement with respondent or paying the latter any sum of
money. Petitioner also denied combining with BMSI and RUST for the purpose of
assuming the alleged obligation of the said companies.[9] Petitioner also referred to
the NLRC decision which disclosed that per the written agreement between
respondent and BMSI and RUST, denominated as “Special Sales Representative
Agreement,” the rights and obligations of the parties shall be governed by the laws of
the State of Connecticut.[10] Petitioner sought the dismissal of the complaint on
grounds of failure to state a cause of action and forum non conveniens and prayed for
damages by way of compulsory counterclaim.[11]
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based
on Affirmative Defenses and for Summary Judgment[12] seeking the dismissal of the
complaint on grounds of forum non conveniens and failure to state a cause of action.
Respondent opposed the same. Pending the resolution of the omnibus motion, the
deposition of Walter Browning was taken before the Philippine Consulate General in
Chicago.[13]
In an Order[14] dated 13 September 2000, the RTC denied petitioner’s omnibus motion.
The trial court held that the factual allegations in the complaint, assuming the same to
be admitted, were sufficient for the trial court to render a valid judgment thereon. It
also ruled that the principle of forum non conveniens was inapplicable because the trial
court could enforce judgment on petitioner, it being a foreign corporation licensed to
do business in the Philippines.[15]
Petitioner filed a Motion for Reconsideration[16] of the order, which motion was
opposed by respondent.[17] In an Order dated 31 July 2001,[18] the trial court denied
petitioner’s motion. Thus, it filed a Rule 65 Petition [19] with the Court of Appeals
praying for the issuance of a writ of certiorari and a writ of injunction to set aside the
twin orders of the trial court dated 13 September 2000 and 31 July 2001 and to enjoin
the trial court from conducting further proceedings.[20]
On 28 August 2003, the Court of Appeals rendered the assailed Decision [21] denying
the petition for certiorari for lack of merit. It also denied petitioner’s motion for
reconsideration in the assailed Resolution issued on 10 March 2004. [22]
The appellate court held that although the trial court should not have confined itself
to the allegations in the complaint and should have also considered evidence aliunde
in resolving petitioner’s omnibus motion, it found the evidence presented by
petitioner, that is, the deposition of Walter Browning, insufficient for purposes of
determining whether the complaint failed to state a cause of action. The appellate
court also stated that it could not rule one way or the other on the issue of whether
the corporations, including petitioner, named as defendants in the case had indeed
merged together based solely on the evidence presented by respondent. Thus, it held
that the issue should be threshed out during trial.[23] Moreover, the appellate court
deferred to the discretion of the trial court when the latter decided not to desist from
assuming jurisdiction on the ground of the inapplicability of the principle of forum
non conveniens.
29

Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS
THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST
RAYTHEON INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS
THE COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.[24]
Incidentally, respondent failed to file a comment despite repeated notices. The
Ceferino Padua Law Office, counsel on record for respondent, manifested that the
lawyer handling the case, Atty. Rogelio Karagdag, had severed relations with the law
firm even before the filing of the instant petition and that it could no longer find the
whereabouts of Atty. Karagdag or of respondent despite diligent efforts. In a
Resolution[25] dated 20 November 2006, the Court resolved to dispense with the filing
of a comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract between respondent and BMSI
included a valid choice of law clause, that is, that the contract shall be governed by
the laws of the State of Connecticut. It also mentions the presence of foreign elements
in the dispute – namely, the parties and witnesses involved are American
corporations and citizens and the evidence to be presented is located outside the
Philippines – that renders our local courts inconvenient forums. Petitioner theorizes
that the foreign elements of the dispute necessitate the immediate application of the
doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,[26] the Court outlined three consecutive phases
involved in judicial resolution of conflicts-of-laws problems, namely: jurisdiction,
choice of law, and recognition and enforcement of judgments. Thus, in the
instances[27] where the Court held that the local judicial machinery was adequate to
resolve controversies with a foreign element, the following requisites had to be
proved: (1) that the Philippine Court is one to which the parties may conveniently
resort; (2) that the Philippine Court is in a position to make an intelligent decision as
to the law and the facts; and (3) that the Philippine Court has or is likely to have the
power to enforce its decision.[28]
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed
in a Philippine court and where the court has jurisdiction over the subject matter, the
parties and the res, it may or can proceed to try the case even if the rules of conflict-of-
laws or the convenience of the parties point to a foreign forum. This is an exercise of
sovereign prerogative of the country where the case is filed. [29]
Jurisdiction over the nature and subject matter of an action is conferred by the
Constitution and the law[30] and by the material allegations in the complaint,
irrespective of whether or not the plaintiff is entitled to recover all or some of the
claims or reliefs sought therein.[31] Civil Case No. 1192-BG is an action for damages
arising from an alleged breach of contract. Undoubtedly, the nature of the action and
the amount of damages prayed are within the jurisdiction of the RTC.
As regards jurisdiction over the parties, the trial court acquired jurisdiction over
herein respondent (as party plaintiff) upon the filing of the complaint. On the other
hand, jurisdiction over the person of petitioner (as party defendant) was acquired by
its voluntary appearance in court.[32]
That the subject contract included a stipulation that the same shall be governed by the
laws of the State of Connecticut does not suggest that the Philippine courts, or any
other foreign tribunal for that matter, are precluded from hearing the civil action.
Jurisdiction and choice of law are two distinct concepts. Jurisdiction considers
whether it is fair to cause a defendant to travel to this state; choice of law asks the
further question whether the application of a substantive law which will determine
the merits of the case is fair to both parties.[33] The choice of law stipulation will
become relevant only when the substantive issues of the instant case develop, that is,
after hearing on the merits proceeds before the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may
refuse impositions on its jurisdiction where it is not the most “convenient” or
available forum and the parties are not precluded from seeking remedies
elsewhere.[34] Petitioner’s averments of the foreign elements in the instant case are not
sufficient to oust the trial court of its jurisdiction over Civil Case No. No. 1192-BG and
the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non
conveniens requires a factual determination; hence, it is more properly considered as a
matter of defense. While it is within the discretion of the trial court to abstain from
assuming jurisdiction on this ground, it should do so only after vital facts are
established, to determine whether special circumstances require the court’s
desistance.[35]
Finding no grave abuse of discretion on the trial court, the Court of Appeals
respected its conclusion that it can assume jurisdiction over the dispute
notwithstanding its foreign elements. In the same manner, the Court defers to the
sound discretion of the lower courts because their findings are binding on this Court.
Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a
cause of action against petitioner. Failure to state a cause of action refers to the
insufficiency of allegation in the pleading.[36] As a general rule, the elementary test for
failure to state a cause of action is whether the complaint alleges facts which if true
would justify the relief demanded.[37]
The complaint alleged that petitioner had combined with BMSI and RUST to function
as one company. Petitioner contends that the deposition of Walter Browning rebutted
this allegation. On this score, the resolution of the Court of Appeals is instructive,
thus:
30
x x x Our examination of the deposition of Mr. Walter Browning as well as other
documents produced in the hearing shows that these evidence aliunde are not quite
sufficient for us to mete a ruling that the complaint fails to state a cause of action.

Annexes “A” to “E” by themselves are not substantial, convincing and conclusive
proofs that Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty
obligations of defendant Rust International in the Makar Port Project in General
Santos City, after Rust International ceased to exist after being absorbed by REC.
Other documents already submitted in evidence are likewise meager to
preponderantly conclude that Raytheon International, Inc., Rust International[,] Inc.
and Brand Marine Service, Inc. have combined into one company, so much so that
Raytheon International, Inc., the surviving company (if at all) may be held liable for
the obligation of BMSI to respondent Rouzie for unpaid commissions. Neither these
documents clearly speak otherwise.[38]
As correctly pointed out by the Court of Appeals, the question of whether petitioner,
BMSI and RUST merged together requires the presentation of further evidence, which
only a full-blown trial on the merits can afford.

WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision
and Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are hereby
AFFIRMED. Costs against petitioner.

SO ORDERED.

31
G.R. No. 198587, January 14, 2015
SAUDI ARABIAN AIRLINES (SAUDIA) AND BRENDA J. BETIA,
PETITIONERS, VS. MA. JOPETTE M. REBESENCIO, MONTASSAH B. SACAR-
ADIONG, ROUEN RUTH A. CRISTOBAL AND LORAINE S. SCHNEIDER-
CRUZ, RESPONDENTS.
DECISION
LEONEN, J.:
All Filipinos are entitled to the protection of the rights guaranteed in the Constitution.
This is a Petition for Review on Certiorari with application for the issuance of a
temporary restraining order and/or writ of preliminary injunction under Rule 45 of
the 1997 Rules of Civil Procedure praying that judgment be rendered reversing and
setting aside the June 16, 2011 Decision[1] and September 13, 2011 Resolution[2] of the
Court of Appeals in CA-G.R. SP. No. 113006.
Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established and
existing under the laws of Jeddah, Kingdom of Saudi Arabia. It has a Philippine office
located at 4/F, Metro House Building, Sen. Gil J. Puyat Avenue, Makati City. [3] In its
Petition filed with this court, Saudia identified itself as follows:
1. Petitioner SAUDIA is a foreign corporation established and existing under the
Royal Decree No. M/24 of 18.07.1385H (10.02.1962G) in Jeddah, Kingdom of Saudi
Arabia ("KSA"). Its Philippine Office is located at 4/F Metro House Building, Sen, Gil J.
Puyat Avenue, Makati City (Philippine Office). It may be served with orders of this
Honorable Court through undersigned counsel at 4 th and 6th Floors, Citibank Center
Bldg., 8741 Paseo de Roxas, Makati City.[4] (Emphasis supplied)
Respondents (complainants before the Labor Arbiter) were recruited and hired by
Saudia as Temporary Flight Attendants with the accreditation and approval of the
Philippine Overseas Employment Administration.[5] After undergoing seminars
required by the Philippine Overseas Employment Administration for deployment
overseas, as well as training modules offered by Saudia (e.g., initial flight
attendant/training course and transition training), and after working as Temporary
Flight Attendants, respondents became Permanent Flight Attendants. They then
entered into Cabin Attendant contracts with Saudia: Ma. Jopette M. Rebesencio (Ma.
Jopette) on May 16, 1990;[6] Montassah B. Sacar-Adiong (Montassah) and Rouen Ruth
A. Cristobal (Rouen Ruth) on May 22, 1993;[7] and Loraine Schneider-Cruz (Loraine)
on August 27, 1995.[8]
Respondents continued their employment with Saudia until they were separated
from service on various dates in 2006.[9]
Respondents contended that the termination of their employment was illegal. They
alleged that the termination was made solely because they were pregnant.[10]
As respondents alleged, they had informed Saudia of their respective pregnancies
and had gone through the necessary procedures to process their maternity leaves.
Initially, Saudia had given its approval but later on informed respondents that its
management in Jeddah, Saudi Arabia had disapproved their maternity leaves. In
addition, it required respondents to file their resignation letters. [11]
Respondents were told that if they did not resign, Saudia would terminate them all
the same. The threat of termination entailed the loss of benefits, such as separation
pay and ticket discount entitlements.[12]
Specifically, Ma. Jopette received a call on October 16, 2006 from Saudia's Base
Manager, Abdulmalik Saddik (Abdulmalik).[13] Montassah was informed personally
by Abdulmalik and a certain Faisal Hussein on October 20, 2006 after being required
to report to the office one (1) month into her maternity leave. [14] Rouen Ruth was also
personally informed by Abdulmalik on October 17, 2006 after being required to
report to the office by her Group Supervisor.[15] Loraine received a call on October 12,
2006 from her Group Supervisor, Dakila Salvador.[16]
Saudia anchored its disapproval of respondents' maternity leaves and demand for
their resignation on its "Unified Employment Contract for Female Cabin Attendants"
(Unified Contract).[17] Under the Unified Contract, the employment of a Flight
Attendant who becomes pregnant is rendered void. It provides:
(H) Due to the essential nature of the Air Hostess functions to be physically fit on
board to provide various services required in normal or emergency cases on both
domestic/international flights beside her role in maintaining continuous safety and
security of passengers, and since she will not be able to maintain the required medical
fitness while at work in case of pregnancy, accordingly, if the Air Hostess becomes pregnant at
any time during the term of this contract, this shall render her employment contract as void
and she will be terminated due to lack of medical fitness.[18] (Emphasis supplied)
In their Comment on the present Petition,[19] respondents emphasized that the
Unified Contract took effect on September 23, 2006 (the first day of Ramadan),[20] well
after they had filed and had their maternity leaves approved. Ma. Jopette filed her
maternity leave application on September 5, 2006.[21] Montassah filed her maternity
leave application on August 29, 2006, and its approval was already indicated in
Saudia's computer system by August 30, 2006.[22] Rouen Ruth filed her maternity
leave application on September 13, 2006,[23] and Loraine filed her maternity leave
application on August 22, 2006.[24]
Rather than comply and tender resignation letters, respondents filed separate appeal
letters that were all rejected.[25]
Despite these initial rejections, respondents each received calls on the morning of
November 6, 2006 from Saudia's office secretary informing them that their maternity
leaves had been approved. Saudia, however, was quick to renege on its approval. On
the evening of November 6, 2006, respondents again received calls informing them
that it had received notification from Jeddah, Saudi Arabia that their maternity leaves
had been disapproved.[26]
Faced with the dilemma of resigning or totally losing their benefits, respondents
32
executed handwritten resignation letters. In Montassah's and Rouen Ruth's cases,
their resignations were executed on Saudia's blank letterheads that Saudia had
provided. These letterheads already had the word "RESIGNATION" typed on the
subject portions of their headings when these were handed to respondents. [27]
On November 8, 2007, respondents filed a Complaint against Saudia and its officers
for illegal dismissal and for underpayment of salary, overtime pay, premium pay for
holiday, rest day, premium, service incentive leave pay, 13 th month pay, separation
pay, night shift differentials, medical expense reimbursements, retirement benefits,
illegal deduction, lay-over expense and allowances, moral and exemplary damages,
and attorney's fees.[28] The case was initially assigned to Labor Arbiter Hermino V.
Suelo and docketed as NLRC NCR Case No. 00-11-12342-07.
Saudia assailed the jurisdiction of the Labor Arbiter.[29] It claimed that all the
determining points of contact referred to foreign law and insisted that the Complaint
ought to be dismissed on the ground of forum non conveniens.[30] It added that
respondents had no cause of action as they resigned voluntarily.[31]
On December 12, 2008, Executive Labor Arbiter Fatima Jambaro-Franco rendered the
Decision[32] dismissing respondents' Complaint. The dispositive portion of this
Decision reads:
WHEREFORE, premises' considered, judgment is hereby rendered DISMISSING the
instant complaint for lack of jurisdiction/merit.[33]
On respondents' appeal, the National Labor Relations Commission's Sixth Division
reversed the ruling of Executive Labor Arbiter Jambaro-Franco. It explained that
"[considering that complainants-appellants are OFWs, the Labor Arbiters and the
NLRC has [sic] jurisdiction to hear and decide their complaint for illegal
termination."[34] On the matter of forum non conveniens, it noted that there were no
special circumstances that warranted its abstention from exercising jurisdiction.[35] On
the issue of whether respondents were validly dismissed, it held that there was
nothing on record to support Saudia's claim that respondents resigned voluntarily.
The dispositive portion of the November 19, 2009 National Labor Relations
Commission Decision[36] reads:
WHEREFORE, premises considered, judgment is hereby rendered finding the appeal
impressed with merit. The respondents-appellees are hereby directed to pay
complainants-appellants the aggregate amount of SR614,001.24 corresponding to
their backwages and separation pay plus ten (10%) percent thereof as attorney's fees.
The decision of the Labor Arbiter dated December 12, 2008 is hereby VACATED and
SET ASIDE. Attached is the computation prepared by this Commission and made an
integral part of this Decision.[37]
In the Resolution dated February 11, 2010,[38] the National Labor Relations
Commission denied petitioners' Motion for Reconsideration.
In the June 16, 2011 Decision,[39] the Court of Appeals denied petitioners' Rule 65
Petition and modified the Decision of the National Labor Relations Commission with
respect to the award of separation pay and backwages.
The dispositive portion of the Court of Appeals Decision reads:
WHEREFORE, the instant petition is hereby DENIED. The Decision dated November
19, 2009 issued by public respondent, Sixth Division of the National Labor Relations
Commission - National Capital Region is MODIFIED only insofar as the computation
of the award of separation pay and backwages. For greater clarity, petitioners are
ordered to pay private respondents separation pay which shall be computed from
private respondents' first day of employment up to the finality of this decision, at the
rate of one month per year of service and backwages which shall be computed from
the date the private respondents were illegally terminated until finality of this
decision. Consequently, the ten percent (10%) attorney's fees shall be based on the
total amount of the award. The assailed Decision is affirmed in all other respects.
The labor arbiter is hereby DIRECTED to make a recomputation based on the
foregoing.[40]
In the Resolution dated September 13, 2011,[41] the Court of Appeals denied
petitioners' Motion for Reconsideration.
Hence, this Appeal was filed.
The issues for resolution are the following:
First, whether the Labor Arbiter and the National Labor Relations Commission may
exercise jurisdiction over Saudi Arabian Airlines and apply Philippine law in
adjudicating the present dispute;
Second, whether respondents' voluntarily resigned or were illegally terminated; and
Lastly, whether Brenda J. Betia may be held personally liable along with Saudi
Arabian Airlines.
I
Summons were validly served on Saudia and jurisdiction over it validly acquired.
There is no doubt that the pleadings and summons were served on Saudia through its
counsel.[42] Saudia, however, claims that the Labor Arbiter and the National Labor
Relations Commission had no jurisdiction over it because summons were never
served on it but on "Saudia Manila."[43] Referring to itself as "Saudia Jeddah," it claims
that "Saudia Jeddah" and not "Saudia Manila" was the employer of respondents
because:
First, "Saudia Manila" was never a party to the Cabin Attendant contracts entered into
by respondents;
Second, it was "Saudia Jeddah" that provided the funds to pay for respondents'
salaries and benefits; and
33

Lastly, it was with "Saudia Jeddah" that respondents filed their resignations. [44]
Saudia posits that respondents' Complaint was brought against the wrong party
because "Saudia Manila," upon which summons was served, was never the employer
of respondents.[45]
Saudia is vainly splitting hairs in its effort to absolve itself of liability. Other than its
bare allegation, there is no basis for concluding that "Saudia Jeddah" is distinct from
"Saudia Manila."
What is clear is Saudia's statement in its own Petition that what it has is a "Philippine
Office . . . located at 4/F Metro House Building, Sen. Gil J. Puyat Avenue, Makati
City."[46] Even in the position paper that Saudia submitted to the Labor Arbiter,[47]
what Saudia now refers to as "Saudia Jeddah" was then only referred to as "Saudia
Head Office at Jeddah, KSA,"[48] while what Saudia now refers to as "Saudia Manila"
was then only referred to as "Saudia's office in Manila."[49]
By its own admission, Saudia, while a foreign corporation, has a Philippine office.
Section 3(d) of Republic Act No.. 7042, otherwise known as the Foreign Investments
Act of 1991, provides the following:
The phrase "doing business" shall include . . . opening offices, whether called
"liaison" offices or branches; . . . and any other act or acts that imply a continuity of
commercial dealings or arrangements and contemplate to that extent the performance
of acts or works, or the exercise of some of the functions normally incident to, and in
progressive prosecution of commercial gain or of the purpose and object of the
business organization. (Emphasis supplied)
A plain application of Section 3(d) of the Foreign Investments Act leads to no other
conclusion than that Saudia is a foreign corporation doing business in the Philippines.
As such, Saudia may be sued in the Philippines and is subject to the jurisdiction of
Philippine tribunals.
Moreover, since there is no real distinction between "Saudia Jeddah" and "Saudia
Manila" — the latter being nothing more than Saudia's local office — service of
summons to Saudia's office in Manila sufficed to vest jurisdiction over Saudia's
person in Philippine tribunals.
II
Saudia asserts that Philippine courts and/or tribunals are not in a position to make an
intelligent decision as to the law and the facts. This is because respondents' Cabin
Attendant contracts require the application of the laws of Saudi Arabia, rather than
those of the Philippines.[50] It claims that the difficulty of ascertaining foreign law calls
into operation the principle of forum non conveniens, thereby rendering improper the
exercise of jurisdiction by Philippine tribunals.[51]
A choice of law governing the validity of contracts or the interpretation of its
provisions dees not necessarily imply forum non conveniens. Choice of law and forum
non conveniens are entirely different matters.
Choice of law provisions are an offshoot of the fundamental principle of autonomy of
contracts. Article 1306 of the Civil Code firmly ensconces this:
Article 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
In contrast, forum non conveniens is a device akin to the rule against forum shopping. It
is designed to frustrate illicit means for securing advantages and vexing litigants that
would otherwise be possible if the venue of litigation (or dispute resolution) were left
entirely to the whim of either party.
Contractual choice of law provisions factor into transnational litigation and dispute
resolution in one of or in a combination of four ways: (1) procedures for settling
disputes, e.g., arbitration; (2) forum, i.e., venue; (3) governing law; and (4) basis for
interpretation. Forum non conveniens relates to, but is not subsumed by, the second of
these.
Likewise, contractual choice of law is not determinative of jurisdiction. Stipulating on
the laws of a given jurisdiction as the governing law of a contract does not preclude
the exercise of jurisdiction by tribunals elsewhere. The reverse is equally true: The
assumption of jurisdiction by tribunals does not ipso facto mean that it cannot apply
and rule on the basis of the parties' stipulation. In Hasegawa v. Kitamura:[52]
Analytically, jurisdiction and choice of law are two distinct concepts. Jurisdiction
considers whether it is fair to cause a defendant to travel to this state; choice of law
asks the further question whether the application of a substantive law V'hich will
determine the merits of the case is fair to both parties. The power to exercise
jurisdiction does not automatically give a state constitutional authority to apply
forum law. While jurisdiction and the choice of the lex fori will often, coincide, the
"minimum contacts" for one do not always provide the necessary "significant
contacts" for the other. The question of whether the law of a state can be applied to a
transaction is different from the question of whether the courts of that state have
jurisdiction to enter a judgment.[53]
As various dealings, commercial or otherwise, are facilitated by the progressive ease
of communication and travel, persons from various jurisdictions find themselves
transacting with each other. Contracts involving foreign elements are, however,
nothing new. Conflict of laws situations precipitated by disputes and litigation
anchored on these contracts are not totally novel.
Transnational transactions entail differing laws on the requirements Q for the validity
of the formalities and substantive provisions of contracts and their interpretation.
These transactions inevitably lend themselves to the possibility of various fora for
litigation and dispute resolution. As observed by an eminent expert on transnational
law:
The more jurisdictions having an interest in, or merely even a point of contact with, a
34
transaction or relationship, the greater the number of potential fora for the resolution
of disputes arising out of or related to that transaction or relationship. In a world of
increased mobility, where business and personal transactions transcend national
boundaries, the jurisdiction of a number of different fora may easily be invoked in a
single or a set of related disputes.[54]
Philippine law is definite as to what governs the formal or extrinsic validity of
contracts. The first paragraph of Article 17 of the Civil Code provides that "[t]he
forms and solemnities of contracts . . . shall be governed by the laws of the country in
which they are executed"[55] (i.e., lex loci celebrationis).
In contrast, there is no statutorily established mode of settling conflict of laws
situations on matters pertaining to substantive content of contracts. It has been noted
that three (3) modes have emerged: (1) lex loci contractus or the law of the place of the
making; (2) lex loci solutionis or the law of the place of performance; and (3) lex loci
intentionis or the law intended by the parties.[56]
Given Saudia's assertions, of particular relevance to resolving the present dispute is
lex loci intentionis.
An author observed that Spanish jurists and commentators "favor lex loci
intentionis."[57] These jurists and commentators proceed from the Civil Code of Spain,
which, like our Civil Code, is silent on what governs the intrinsic validity of contracts,
and the same civil law traditions from which we draw ours.
In this jurisdiction, this court, in Philippine Export and Foreign Loan Guarantee v. V.P.
Eusebio Construction, Inc.,[58] manifested preference for allowing the parties to select
the law applicable to their contract":
No conflicts rule on essential validity of contracts is expressly provided for in our
laws. The rule followed by most legal systems, however, is that the intrinsic validity
of a contract must be governed by the lex contractus or "proper law of the contract."
This is the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the
law intended by them either expressly or implicitly (the lex loci intentionis). The law
selected may be implied from such factors as substantial connection with the
transaction, or the nationality or domicile of the parties. Philippine courts would do
well to adopt the first and most basic rule in most legal systems, namely, to allow the
parties to select the law applicable to their contract, subject to the limitation that it is not
against the law, morals, or public policy of the forum and that the chosen law must bear a
substantive relationship to the transaction.[59] (Emphasis in the original)
Saudia asserts that stipulations set in the Cabin Attendant contracts require the
application of the laws of Saudi Arabia. It insists that the need to comply with these
stipulations calls into operation the doctrine of forum non conveniens and, in turn,
makes it necessary for Philippine tribunals to refrain from exercising jurisdiction.
As mentioned, contractual choice of laws factors into transnational litigation in any or
a combination of four (4) ways. Moreover, forum non conveniens relates to one of these:
choosing between multiple possible fora.
Nevertheless, the possibility of parallel litigation in multiple fora — along with the
host of difficulties it poses — is not unique to transnational litigation. It is a difficulty
that similarly arises in disputes well within the bounds of a singe jurisdiction.
When parallel litigation arises strictly within the context of a single jurisdiction, such
rules as those on forum shopping, litis pendentia, and res judicata come into operation.
Thus, in the Philippines, the 1997 Rules on Civil Procedure provide for willful and
deliberate forum shopping as a ground not only for summary dismissal with
prejudice but also for citing parties and counsels in direct contempt, as well as for the
imposition of administrative sanctions.[60] Likewise, the same rules expressly provide
that a party may seek the dismissal of a Complaint or another pleading asserting a
claim on the ground "[t]hat there is another action pending between the same parties
for the same cause," i.e., litis pendentia, or "[t]hat the cause of action is barred by a
prior judgment,"[61] i.e., res judicata.
Forum non conveniens, like the rules of forum shopping, litis pendentia, and res judicata,
is a means of addressing the problem of parallel litigation. While the rules of forum
shopping, litis pendentia, and res judicata are designed to address the problem of
parallel litigation within a single jurisdiction, forum non conveniens is a means devised
to address parallel litigation arising in multiple jurisdictions.
Forum non conveniens literally translates to "the forum is inconvenient."[62] It is a
concept in private international law and was devised to combat the "less than
honorable" reasons and excuses that litigants use to secure procedural advantages,
annoy and harass defendants, avoid overcrowded dockets, and select a "friendlier"
venue.[63] Thus, the doctrine of forum non conveniens addresses the same rationale that
the rule against forum shopping does, albeit on a multijurisdictional scale.
Forum non conveniens, like res judicata,[64] is a concept originating in common law.[65]
However, unlike the rule on res judicata, as well as those on litis pendentia and forum
shopping, forum non conveniens finds no textual anchor, whether in statute or in
procedural rules, in our civil law system. Nevertheless, jurisprudence has applied
forum non conveniens as basis for a court to decline its exercise of jurisdiction.[66]
Forum non conveniens is soundly applied not only to address parallel litigation and
undermine a litigant's capacity to vex and secure undue advantages by engaging in
forum shopping on an international scale. It is also grounded on principles of comity
and judicial efficiency.
Consistent with the principle of comity, a tribunal's desistance in exercising
jurisdiction on account of forum non conveniens is a deferential gesture to the tribunals
of another sovereign. It is a measure that prevents the former's having to interfere in
affairs which are better and more competently addressed by the latter. Further, forum
non conveniens entails a recognition not only that tribunals elsewhere are better suited
to rule on and resolve a controversy, but also, that these tribunals are better positioned to
enforce judgments and, ultimately, to dispense justice. Forum non conveniens prevents
the embarrassment of an awkward situation where a tribunal is rendered
35
incompetent in the face of the greater capability — both analytical and practical — of
a tribunal in another jurisdiction.
The wisdom of avoiding conflicting and unenforceable judgments is as much a matter
of efficiency and economy as it is a matter of international courtesy. A court would
effectively be neutering itself if it insists on adjudicating a controversy when it knows
full well that it is in no position to enforce its judgment. Doing so is not only an
exercise in futility; it is an act of frivolity. It clogs the dockets of a.tribunal and leaves
it to waste its efforts on affairs, which, given transnational exigencies, will be reduced
to mere academic, if not trivial, exercises.
Accordingly, under the doctrine of forum non conveniens, "a court, in conflicts of law
cases, may refuse impositions on its jurisdiction where it is not the most 'convenient'
or available forum and the parties are not precluded from seeking remedies
elsewhere."[67] In Puyat v. Zabarte,[68] this court recognized the following situations as
among those that may warrant a court's desistance from exercising jurisdiction:
1 The belief that the matter can be better tried and decided elsewhere, either
) because the main aspects of the case transpired in a foreign jurisdiction or
the material witnesses have their residence there;
2 The belief that the non-resident plaintiff sought the forum[,] a practice
) known as forum shopping[,] merely to secure procedural advantages or to
convey or harass the defendant;
3 The unwillingness to extend local judicial facilities to non- residents or
) aliens when the docket may already be overcrowded;
4 The inadequacy of the local judicial machinery for effectuating the right
) sought to be maintained; and
5 The difficulty of ascertaining foreign law.[69]
)
In Bank of America, NT&SA, Bank of America International, Ltd. v. Court of Appeals,[70] this
court underscored that a Philippine court may properly assume jurisdiction over a
case if it chooses to do so to the extent: "(1) that the Philippine Court is one to which
the parties may conveniently resort to; (2) that the Philippine Court is in a position to
make an intelligent decision as to the law and the facts; and (3) that the Philippine
Court has or is likely to have power to enforce its decision."[71]
The use of the word "may" (i.e., "may refuse impositions on its jurisdiction"[72]) in the
decisions shows that the matter of jurisdiction rests on the sound discretion of a court.
Neither the mere invocation of forum non conveniens nor the averment of foreign
elements operates to automatically divest a court of jurisdiction. Rather, a court
should renounce jurisdiction only "after 'vital facts are established, to determine
whether special circumstances' require the court's desistance."[73] As the propriety of
applying forum non conveniens is contingent on a factual determination, it is, therefore,
a matter of defense.[74]
The second sentence of Rule 9, Section 1 of the 1997 Rules of Civil Procedure is
exclusive in its recital of the grounds for dismissal that are exempt from the omnibus
motion rule: (1) lack of jurisdiction over the subject matter; (2) litis pendentia; (3) res
judicata; and (4) prescription. Moreover, dismissal on account of forum non conveniens
is a fundamentally discretionary matter. It is, therefore, not a matter for a defendant
to foist upon the court at his or her own convenience; rather, it must be pleaded at the
earliest possible opportunity.
On the matter of pleading forum non conveniens, we state the rule, thus: Forum non
conveniens must not only be clearly pleaded as a ground for dismissal; it must be pleaded as
such at the earliest possible opportunity. Otherwise, it shall be deemed waived.
This court notes that in Hasegawa,[75] this court stated that forum non conveniens is not a
ground for a motion to dismiss.[76] The factual ambience of this case however does not
squarely raise the viability of this doctrine. Until the opportunity comes to review the
use of motions to dismiss for parallel litigation, Hasegawa remains existing doctrine.
Consistent with forum non conveniens as fundamentally a factual matter, it is
imperative that it proceed from & factually established basis. It would be improper to
dismiss an action pursuant to forum non conveniens based merely on a perceived,
likely, or hypothetical multiplicity of fora. Thus, a defendant must also plead and show
that a prior suit has, in fact, been brought in another jurisdiction.
The existence of a prior suit makes real the vexation engendered by duplicitous
litigation, the embarrassment of intruding into the affairs of another sovereign, and
the squandering of judicial efforts in resolving a dispute already lodged and better
resolved elsewhere. As has been noted:
A case will not be stayed o dismissed on [forum] non conveniens grounds unless the
plaintiff is shown to have an available alternative forum elsewhere. On this, the
moving party bears the burden of proof.
A number of factors affect the assessment of an alternative forum's adequacy. The
statute of limitations abroad may have run, of the foreign court may lack either
subject matter or personal jurisdiction over the defendant. . . . Occasionally, doubts
will be raised as to the integrity or impartiality of the foreign court (based, for
example, on suspicions of corruption or bias in favor of local nationals), as to the
fairness of its judicial procedures, or as to is operational efficiency (due, for example,
to lack of resources, congestion and delay, or interfering circumstances such as a civil
unrest). In one noted case, [it was found] that delays of 'up to a quarter of a century'
rendered the foreign forum... inadequate for these purposes.[77]
We deem it more appropriate and in the greater interest of prudence that a defendant not only
allege supposed dangerous tendencies in litigating in this jurisdiction; the defendant must also
show that such danger is real and present in that litigation or dispute resolution has
commenced in another jurisdiction and that a foreign tribunal has chosen to exercise
jurisdiction.
36
III
Forum non conveniens finds no application and does not operate to divest Philippine
tribunals of jurisdiction and to require the application of foreign law.
Saudia invokes forum non conveniens to supposedly effectuate the stipulations of the
Cabin Attendant contracts that require the application of the laws of Saudi Arabia.
Forum non conveniens relates to forum, not to the choice of governing law. Thai forum
non conveniens may ultimately result in the application of foreign law is merely an
incident of its application. In this strict sense, forum non conveniens is not applicable. It
is not the primarily pivotal consideration in this case.
In any case, even a further consideration of the applicability of forum non conveniens
on the incidental matter of the law governing respondents' relation with Saudia leads
to the conclusion that it is improper for Philippine tribunals to divest themselves of
jurisdiction.
Any evaluation of the propriety of contracting parties' choice of a forum and'its incidents
must grapple with two (2) considerations: first, the availability and adequacy of recourse to a
foreign tribunal; and second, the question of where, as between the forum court and a foreign
court, the balance of interests inhering in a dispute weighs more heavily.
The first is a pragmatic matter. It relates to the viability of ceding jurisdiction to a
foreign tribunal and can be resolved by juxtaposing the competencies and practical
circumstances of the tribunals in alternative fora. Exigencies, like the statute of
limitations, capacity to enforce orders and judgments, access to records, requirements
for the acquisition of jurisdiction, and even questions relating to the integrity of
foreign courts, may render undesirable or even totally unfeasible recourse to a foreign
court. As mentioned, we consider it in the greater interest of prudence that a
defendant show, in pleading forum non conveniens, that litigation has commenced in
another jurisdiction and that a foieign tribunal has, in fact, chosen to exercise
jurisdiction.
Two (2) factors weigh into a court's appraisal of the balance of interests inhering in a
dispute: first, the vinculum which the parties and their relation have to a given
jurisdiction; and second, the public interest that must animate a tribunal, in its
capacity as an agent of the sovereign, in choosing to assume or decline jurisdiction.
The first is more concerned with the parties, their personal circumstances, and private
interests; the second concerns itself with the state and the greater social order.
In considering the vinculum, a court must look into the preponderance of linkages
which the parties and their transaction may have to either jurisdiction. In this respect,
factors, such as the parties' respective nationalities and places of negotiation,
execution, performance, engagement or deployment, come into play.
In considering public interest, a court proceeds with a consciousness that it is an
organ of the state. It must, thus, determine if the interests of the sovereign (which acts
through it) are outweighed by those of the alternative jurisdiction. In this respect, the
court delves into a consideration of public policy. Should it find that public interest
weighs more heavily in favor of its assumption of jurisdiction, it should proceed in
adjudicating the dispute, any doubt or .contrary view arising from the preponderance
of linkages notwithstanding.
Our law on contracts recognizes the validity of contractual choice of law provisions.
Where such provisions exist, Philippine tribunals, acting as the forum court, generally
defer to the parties' articulated choice.
This is consistent with the fundamental principle of autonomy of contracts. Article
1306 of the Civ:l Code expressly provides that "[t]he contracting parties may establish
'such stipulations, clauses, terms and conditions as they may deem convenient."[78]
Nevertheless, while a Philippine tribunal (acting as the forum court) is called upon to
respect the parties' choice of governing law, such respect must not be so permissive as
to lose sight of considerations of law, morals, good customs, public order, or public
policy that underlie the contract central to the controversy.
Specifically with respect to public policy, in Pakistan International Airlines Corporation
v. Ople,[79] this court explained that:
counter-balancing the principle of autonomy of contracting parties is the equally
general rule that provisions of applicable law, especially provisions relating to matters
affected with public policy, are deemed written inta the contract. Put a little differently, the
governing principle is that parties may not contract away applicable provisions of
law especially peremptory provisions dealing with matters heavily impressed with
public interest.[80] (Emphasis supplied)
Article II, Section 14 of the 1987 Constitution provides that "[t]he State ... shall ensure
the fundamental equality before the law of women and men." Contrasted with Article
II, Section 1 of the 1987 Constitution's statement that "[n]o person shall ... be denied
the equal protection of the laws," Article II, Section 14 exhorts the State to "ensure."
This does not only mean that the Philippines shall not countenance nor lend legal
recognition and approbation to measures that discriminate on the basis of one's being
male or female. It imposes an obligation to actively engage in securing the fundamental
equality of men and women.
The Convention on the Elimination of all Forms of Discrimination against Women
(CEDAW), signed and ratified by the Philippines on July 15, 1980, and on August 5,
1981, respectively,[81] is part of the law of the land. In view of the widespread signing
and ratification of, as well as adherence (in practice) to it by states, it may even be
said that many provisions of the CEDAW may have become customary international
law. The CEDAW gives effect to the Constitution's policy statement in Article II,
Section 14. Article I of the CEDAW defines "discrimination against women" as:
any distinction, exclusion or restriction made on the basis of sex which has the effect
or purpose of impairing or nullifying the recognition, enjoyment or exercise by
women, irrespective of their marital status, on a basis of equality of men and women,
of human rights and fundamental freedoms in the political, economic, social, cultural,
37
civil or any other field.[82]
The constitutional exhortation to ensure fundamental equality, as illumined by its
enabling law, the CEDAW, must inform and animate all the actions of all
personalities acting on behalf of the State. It is, therefore, the bounden duty of this
court, in rendering judgment on the disputes brought before it, to ensure that no
discrimination is heaped upon women on the mere basis of their being women. This
is a point so basic and central that all our discussions and pronouncements —
regardless of whatever averments there may be of foreign law — must proceed from
this premise.
So informed and animated, we emphasize the glaringly discriminatory nature of
Saudia's policy. As argued by respondents, Saudia's policy entails the termination of
employment of flight attendants who become pregnant. At the risk of stating the
obvious, pregnancy is an occurrence that pertains specifically to women. Saudia's policy
excludes from and restricts employment on the basis of no other consideration but
sex.
We do not lose sight of the reality that pregnancy does present physical limitations
that may render difficult the performance of functions associated with being a flight
attendant. Nevertheless, it would be the height of iniquity to view pregnancy as a
disability so permanent and immutable that, it must entail the termination of one's
employment. It is clear to us that any individual, regardless of gender, may be subject
to exigencies that limit the performance of functions. However, we fail to appreciate
how pregnancy could be such an impairing occurrence that it leaves no other
recourse but the complete termination of the means through which a woman earns a
living.
Apart from the constitutional policy on the fundamental equality before the law of
men and women, it is settled that contracts relating to labor and employment are
impressed with public interest. Article 1700 of the Civil Code provides that "[t]he
relation between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good."
Consistent with this, this court's pronouncements in Pakistan International Airlines
Corporation[83] are clear and unmistakable:
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement
which specifies, firstly, the law of Pakistan as the applicable law of the agreement,
and, secondly, lays the venue for settlement of any dispute arising out of or in
connection with the agreement "only [in] courts of Karachi, Pakistan". The first clause
of paragraph 10 cannot be invoked to prevent the application of Philippine labor laws
and'regulations to the subject matter of this case, i.e., the employer-employee
relationship between petitioner PIA and private respondents. We have already pointed
out that the relationship is much affected with public interest and that the otherwise applicable
Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon some
other law to govern their relationship. . . . Under these circumstances, paragraph 10 of the
employment agreement cannot be given effect so as to oust Philippine agencies and
courts of the jurisdiction vested upon them by Philippine law. [84] (Emphasis supplied)
As the present dispute relates to (what the respondents allege to be) the illegal
termination of respondents' employment, this case is immutably a matter of public
interest and public policy. Consistent with clear pronouncements in law and
jurisprudence, Philippine laws properly find application in and govern this case.
'Moreover, as this premise for Saudia's insistence on the application forum non
conveniens has been shattered, it follows that Philippine tribunals may properly
assume jurisdiction over the present controversy. Philippine jurisprudence provides
ample illustrations of when a court's renunciation of jurisdiction on account of forum
non conveniens is proper or improper.'
In Philsec Investment Corporation v. Court of Appeals,[85] this court noted that the trial
court failed to consider that one of the plaintiffs was a domestic corporation, that one
of the defendants was a Filipino, and that it was the extinguishment of the latter's
debt that was the object of the transaction subject of the litigation. Thus, this court
held, among others, that the trial court's refusal to assume jurisdiction was not
justified by forum non conveniens and remanded the case to the trial court.
In Raytheon International, Inc. v. Rouzie, Jr.,[86] this court sustained the trial court's
assumption of jurisdiction considering that the trial court could properly enforce
judgment on the petitioner which was a foreign corporation licensed to do business in
the Philippines.
In Pioneer International, Ltd. v. Guadiz, Jr.,[87] this court found no reason to disturb the
trial court's assumption of jurisdiction over a case in which, as noted by the trial
court, "it is more convenient to hear and decide the case in the Philippines because
Todaro [the plaintiff] resides in the Philippines and the contract allegedly breached
involve[d] employment in the Philippines."[88]
In Pacific Consultants International Asia, Inc. v. Schonfeld,[89] this court held that the fact
that the complainant in an illegal dismissal case was a Canadian citizen and a
repatriate did not warrant the application of forum non conveniens considering that: (1)
the Labor Code does not include forum non conveniens as a ground for the dismissal of
a complaint for illegal dismissal; (2) the propriety of dismissing a case based on forum
non conveniens requires a factual determination; and (3) the requisites for assumption
of jurisdiction as laid out in Bank of America, NT&SA[90] were all satisfied.
In contrast, this court ruled in The Manila Hotel Corp. v. National Labor Relations
Commission[91] that the National Labor Relations Q Commission was a seriously
inconvenient forum. In that case, private respondent Marcelo G. Santos was working
in the Sultanate of Oman when he received a letter from Palace Hotel recruiting him
for employment in Beijing, China. Santos accepted the offer. Subsequently, however,
he was released from employment supposedly due to business reverses arising from
political upheavals in China (i.e., the Tiananmen Square incidents of 1989). Santos
later filed a Complaint for illegal dismissal impleading Palace Hotel's General
Manager, Mr. Gerhard Schmidt, the Manila Hotel International Company Ltd. (which
was, responsible for training Palace Hotel's personnel and staff), and the Manila Hotel
Corporation (which owned 50% of Manila Hotel International Company Ltd.'s capital
38
stock).
In ruling against the National Labor Relations Commission's exercise of jurisdiction,
this court noted that the main aspects of the case transpired in two (2) foreign
jurisdictions, Oman and China, and that the case involved purely foreign elements.
Specifically, Santos was directly hired by a foreign employer through correspondence
sent to Oman. Also, the proper defendants were neither Philippine nationals nor
engaged in business in the Philippines, while the main witnesses were not residents
of the Philippines. Likewise, this court noted that the National Labor Relations
Commission was in no position to conduct the following: first, determine the law
governing the employment contract, as it was entered into in foreign soil; second,
determine the facts, as Santos' employment was terminated in Beijing; and third,
enforce its judgment, since Santos' employer, Palace Hotel, was incorporated under
the laws of China and was not even served with summons.
Contrary to Manila Hotel, the case now before us does not entail a preponderance of
linkages that favor a foreign jurisdiction.
Here, the circumstances of the parties and their relation do not approximate the
circumstances enumerated in Puyat,[92] which this court recognized as possibly
justifying the desistance of Philippine tribunals from exercising jurisdiction.
First, there is no basis for concluding that the case can be more conveniently tried
elsewhere. As established earlier, Saudia is doing business in the Philippines. For
their part, all four (4) respondents are Filipino citizens maintaining residence in the
Philippines and, apart from their previous employment with Saudia, have no other
connection to the Kingdom of Saudi Arabia. It would even be to respondents'
inconvenience if this case were to be tried elsewhere.
Second, the records are bereft of any indication that respondents filed their Complaint
in an effort to engage in forum shopping or to vex and inconvenience Saudia.
Third, there is no indication of "unwillingness to extend local judicial facilities to non-
residents or aliens."[93] That Saudia has managed to bring the present controversy all
the way to this court proves this.
Fourth, it cannot be said that the local judicial machinery is inadequate for
effectuating the right sought to be maintained. Summons was properly served on
Saudia and jurisdiction over its person was validly acquired.
Lastly, there is not even room for considering foreign law. Philippine law properly
governs the present dispute.
As the question of applicable law has been settled, the supposed difficulty of
ascertaining foreign law (which requires the application of forum non conveniens)
provides no insurmountable inconvenience or special circumstance that will justify
depriving Philippine tribunals of jurisdiction.
Even if we were to assume, for the sake of discussion, that it is the laws of Saudi
Arabia which should apply, it does not follow that Philippine tribunals should refrain
from exercising jurisdiction. To. recall our pronouncements in Puyat, [94] as well as in
Bank of America, NT&SA,[95] it is not so much the mere applicability of foreign law
which calls into operation forum non conveniens. Rather, what justifies a court's
desistance from exercising jurisdiction is "[t]he difficulty of ascertaining foreign
law"[96] or the inability of a "Philippine Court to make an intelligent decision as to the
law[.]"[97]
Consistent with lex loci intentionis, to the extent that it is proper and practicable (i.e.,
"to make an intelligent decision"[98]), Philippine tribunals may apply the foreign law
selected by the parties. In fact, (albeit without meaning to make a pronouncement on
the accuracy and reliability of respondents' citation) in this case, respondents
themselves have made averments as to the laws of Saudi Arabia. In their Comment,
respondents write:
Under the Labor Laws of Saudi Arabia and the Philippines[,] it is illegal and unlawful
to terminate the employment of any woman by virtue of pregnancy. The law in Saudi
Arabia is even more harsh and strict [sic] in that no employer can terminate the
employment of a female worker or give her a warning of the same while on Maternity
Leave, the specific provision of Saudi Labor Laws on the matter is hereto quoted as
follows:
"An employer may not terminate the employment of a female worker or give her a
warning of the same while on maternity leave." (Article 155, Labor Law of the
Kingdom of Saudi Arabia, Royal Decree No. M/51.)[99]
All told, the considerations for assumption of jurisdiction by Philippine tribunals as
outlined in Bank of America, NT&SA[100] have been satisfied. First, all the parties are
based in the Philippines and all the material incidents transpired in this jurisdiction.
Thus, the parties may conveniently seek relief from Philippine tribunals. Second,
Philippine tribunals are in a position to make an intelligent decision as to the law and
the facts. Third, Philippine tribunals are in a position to enforce their decisions. There
is no compelling basis for ceding jurisdiction to a foreign tribunal. Quite the contrary,
the immense public policy considerations attendant to this case behoove Philippine
tribunals to not shy away from their duty to rule on the case.
IV
Respondents were illegally terminated.
In Bilbao v. Saudi Arabian Airlines,[101] this court defined voluntary resignation as "the
voluntary act of an employee who is in a situation where one believes that personal
reasons cannot be sacrificed in favor of the exigency of the service, and one has no
other choice but to dissociate oneself from employment. It is a formal pronouncement
or relinquishment of an office, with the intention of relinquishing the office
accompanied by the act of relinquishment."[102] Thus, essential to the act of resignation
is voluntariness. It must be the result of an employee's exercise of his or her own will.
39
In the same case of Bilbao, this court advanced a means for determining whether an
employee resigned voluntarily:
As the intent to relinquish must concur with the overt act of relinquishment, the acts of
the employee before and after the alleged resignation must be considered in determining
whether he or she, in fact, intended, to sever his or her employment.[103] (Emphasis supplied)
On the other hand, constructive dismissal has been defined as "cessation of work
because 'continued employment is rendered impossible, unreasonable or unlikely, as
an offer involving a demotion in rank or a diminution in pay' and other benefits."[104]
In Penaflor v. Outdoor Clothing Manufacturing Corporation,[105] constructive dismissal
has been described as tantamount to "involuntarily [sic] resignation due to the harsh,
hostile, and unfavorable conditions set by the employer."[106] In the same case, it was
noted that "[t]he gauge for constructive dismissal is whether a reasonable person in
the employee's position would feel compelled to give up his employment under the
prevailing circumstances."[107]
Applying the cited standards on resignation and constructive dismissal, it is clear that
respondents were constructively dismissed. Hence, their termination was illegal.
The termination of respondents' employment happened when they were pregnant
and expecting to incur costs on account of child delivery and infant rearing. As noted
by the Court of Appeals, pregnancy is a time when they need employment to sustain
their families.[108] Indeed, it goes against normal and reasonable human behavior to
abandon one's livelihood in a time of great financial need.
It is clear that respondents intended to remain employed with Saudia. All they did
was avail of their maternity leaves. Evidently, the very nature of a maternity leave
means that a pregnant employee will not report for work only temporarily and that she
will resume the performance of her duties as soon as the leave allowance expires.
It is also clear that respondents exerted all efforts to' remain employed with Saudia.
Each of them repeatedly filed appeal letters (as much as five [5] letters in the case of
Rebesencio[109]) asking Saudia to reconsider the ultimatum that they resign or be
terminated along with the forfeiture of their benefits. Some of them even went to
Saudia's office to personally seek reconsideration.[110]
Respondents also adduced a copy of the "Unified Employment Contract for Female
Cabin Attendants."[111] This contract deemed void the employment of a flight
attendant who becomes pregnant and threatened termination due to lack of medical
fitness.[112] The threat of termination (and the forfeiture of benefits that it entailed) is
enough to compel a reasonable person in respondents' position to give up his or her
employment.
Saudia draws attention to how respondents' resignation letters were supposedly
made in their own handwriting. This minutia fails to surmount all the other
indications negating any voluntariness on respondents' part. If at all, these same
resignation letters are proof of how any supposed resignation did not arise from
respondents' own initiative. As earlier pointed out, respondents' resignations were
executed on Saudia's blank letterheads that Saudia had provided. These letterheads
already had the word "RESIGNATION" typed on the subject portion of their
respective headings when these were handed to respondents.[113]
"In termination cases, the burden of proving just or valid cause for dismissing an
employee rests on the employer."[114] In this case, Saudia makes much of how
respondents supposedly completed their exit interviews, executed quitclaims,
received their separation pay, and took more than a year to file their Complaint.[115] If
at all, however, these circumstances prove only the fact of their occurrence, nothing
more. The voluntariness of respondents' departure from Saudia is non sequitur.
Mere compliance with standard procedures or processes, such as the completion of
their exit interviews, neither negates compulsion nor indicates voluntariness.
As with respondent's resignation letters, their exit interview forms even support their
claim of illegal dismissal and militates against Saudia's arguments. These exit
interview forms, as reproduced by Saudia in its own Petition, confirms the
unfavorable conditions as regards respondents' maternity leaves. Ma. Jopette's and
Loraine's exit interview forms are particularly telling:
a. From Ma. Jopette's exit interview form:
3. In what respects has the job met or failed to meet your expectations?
THE SUDDEN TWIST OF DECISION REGARDING THE MATERNITY LEAVE.[116]
b. From Loraine's exit interview form:
1. What are your main reasons for leaving Saudia? What company are you joining?
xxx xxx xxx
Others
CHANGING POLICIES REGARDING MATERNITY LEAVE (PREGNANCY)[117]
As to respondents' quitclaims, in Phil. Employ Services and Resources, Inc. v. Paramio,[118]
this court noted that "[i]f (a) there is clear proof that the waiver was wangled from an
unsuspecting or gullible person; or (b) the terms of the settlement are unconscionable,
and on their face invalid, such quitclaims must be struck down as invalid or
illegal."[119] Respondents executed their quitclaims after having been unfairly given an
ultimatum to resign or be terminated (and forfeit their benefits).
V
Having been illegally and unjustly dismissed, respondents are entitled to full
backwages and benefits from the time of their termination until the finality of this
Decision. They are likewise entitled to separation pay in the amount of one (1)
40
month's salary for every year of service until the fmality of this Decision, with a
fraction of a year of at least six (6) months being counted as one (1) whole year.
Moreover, "[m]oral damages are awarded in termination cases where the employee's
dismissal was attended by bad faith, malice or fraud, or where it constitutes an act
oppressive to labor, or where it was done in a manner contrary to morals, good
customs or public policy."[120] In this case, Saudia terminated respondents'
employment in a manner that is patently discriminatory and running afoul of the
public interest that underlies employer-employee relationships. As such, respondents
are entitled to moral damages.
To provide an "example or correction for the public good"[121] as against such
discriminatory and callous schemes, respondents are likewise entitled to exemplary
damages.
In a long line of cases, this court awarded exemplary damages to illegally dismissed
employees whose "dismissal[s were] effected in a wanton, oppressive or malevolent
manner."[122] This court has awarded exemplary damages to employees who were
terminated on such frivolous, arbitrary, and unjust grounds as membership in or
involvement with labor unions,[123] injuries sustained in the course of employment,[124]
development of a medical condition due to the employer's own violation of the
employment contract,[125] and lodging of a Complaint against the employer.[126]
Exemplary damages were also awarded to employees who were deemed illegally
dismissed by an employer in an attempt to evade compliance with statutorily
established employee benefits.[127] Likewise, employees dismissed for supposedly just
causes, but in violation of due process requirements, were awarded exemplary
damages.[128]
These examples pale in comparison to the present controversy. Stripped of all
unnecessary complexities, respondents were dismissed for no other reason than
simply that they were pregnant. This is as wanton, oppressive, and tainted with bad
faith as any reason for termination of employment can be. This is no ordinary case of
illegal dismissal. This is a case of manifest gender discrimination. It is an affront not
only to our statutes and policies on employees' security of tenure, but more so, to the
Constitution's dictum of fundamental equality between men and women.[129]
The award of exemplary damages is, therefore, warranted, not only to remind
employers of the need to adhere to the requirements of procedural and substantive
due process in termination of employment, but more importantly, to demonstrate
that gender discrimination should in no case be countenanced.
Having been compelled to litigate to seek reliefs for their illegal and unjust dismissal,
respondents are likewise entitled to attorney's fees in the amount of 10% of the total
monetary award.[130]
VI
Petitioner Brenda J. Betia may not be held liable.
A corporation has a personality separate and distinct from those of the persons
composing it. Thus, as a rule, corporate directors and officers are not liable for the
illegal termination of a corporation's employees. It is only when they acted in bad
faith or with malice that they become solidarity liable with the corporation. [131]
In Ever Electrical Manufacturing, Inc. (EEMI) v. Samahang Manggagawa ng Ever
Electrical,[132] this court clarified that "[b]ad faith does not connote bad judgment or
negligence; it imports a dishonest purpose or some moral obliquity and conscious
doing of wrong; it means breach of a known duty through some motive or interest or
ill will; it partakes of the nature of fraud."[133]
Respondents have not produced proof to show that Brenda J. Betia acted in bad faith
or with malice as regards their termination. Thus, she may not be held solidarity
liable with Saudia.
WHEREFORE, with the MODIFICATIONS that first, petitioner Brenda J. Betia is not
solidarity liable with petitioner Saudi Arabian Airlines, and second, that petitioner
Saudi Arabian Airlines is liable for moral and exemplary damages. The June 16, 2011
Decision and the September 13, 2011 Resolution of the Court of Appeals in CA-G.R.
SP. No. 113006 are hereby AFFIRMED in all other respects. Accordingly, petitioner
Saudi Arabian Airlines is ordered to pay respondents:
(1 Full backwages and all other benefits computed from the respective dates in which each
) respondents were illegally terminated until the finality of this Decision;
(2 Separation pay computed from the respective dates in which each of the respon
) commenced employment until the finality of this Decision at the rate of one (1) month's s
for every year of service, with a fraction of a year of at least six (6) months being counted a
(1) whole year;
(3 Moral damages in the amount of P100,000.00 per respondent;
)
(4 Exemplary damages in the amount of P200,000.00 per respondent; and
)
(5 Attorney's fees equivalent to 10% of the total award.
)
Interest of 6% per annum shall likewise be imposed on the total judgment award
from the finality of this Decision until full satisfaction thereof.
This case is REMANDED to the Labor Arbiter to make a detailed computation of the
amounts due to respondents which petitioner Saudi Arabian Airlines should pay
without delay.
41
SO ORDERED.

42
G.R. Nos. 178382-83, September 23, 2015
CONTINENTAL MICRONESIA, INC., PETITIONER, VS. JOSEPH BASSO,
RESPONDENT.
DECISION
JARDELEZA, J.:
This is a Petition for Review on Certiorari[1] under Rule 45 of the levised Rules of
Court assailing the Decision[2] dated May 23, 2006 and Resolution[3] dated June 19,
2007 of the Court of Appeals in the consolidated cases CA-G.R. SP No. 83938 and CA-
G.R. SP No. 84281. These assailed Decision and Resolution set aside the Decision[4]
dated November 28, 2003 of the National Labor Relations Commission (NLRC)
declaring Joseph Basso's (Basso) dismissal illegal, and ordering the payment of
separation pay as alternative to reinstatement and full backwages until the date of the
Decision.
The Facts
Petitioner Continental Micronesia, Inc. (CMI) is a foreign corporation organized and
existing under the laws of and domiciled in the United States of America (US). It is
licensed to do business in the Philippines.[5] Basso, a US citizen, resided in the
Philippines prior to his death.[6]
During his visit to Manila in 1990, Mr. Keith R. Braden (Mr. Braden), Managing
Director-Asia of Continental Airlines, Inc. (Continental), offered Basso the position of
General Manager of the Philippine Branch of Continental. Basso accepted the offer. [7]
It was not until much later that Mr. Braden, who had since returned to the US, sent
Basso the employment contract[8] dated February 1, 1991, which Mr. Braden had
already signed. Basso then signed the employment contract and returned it to Mr.
Braden as instructed.
On November 7, 1992, CMI took over the Philippine operations of Continental, with
Basso retaining his position as General Manager.[9]
On December 20, 1995, Basso received a letter from Mr. Ralph Schulz (Mr. Schulz),
who was then CMI's Vice President of Marketing and Sales, informing Basso that he
has agreed to work in CMI as a consultant on an "as needed basis" effective February
1, 1996 to July 31, 1996. The letter also informed Basso that: (1) he will not receive any
monetary compensation but will continue being covered by the insurance provided
by CMI; (2) he will enjoy travel privileges; and (3) CMI will advance Php1,140,000.00
for the payment of housing lease for 12 months.[10]
On January 11, 1996, Basso wrote a counter-proposal[11] to Mr. Schulz regarding his
employment status in CMI. On March 14, 1996, Basso wrote another letter addressed
to Ms. Marty Woodward (Ms. Woodward) of CMI's Human Resources Department
inquiring about the status of his employment.[12] On the same day, Ms. Woodward
responded that pursuant to the employment contract dated February 1, 1991, Basso
could be terminated at will upon a thirty-day notice. This notice was allegedly the
letter Basso received from Mr. Schulz on December 20, 1995. Ms. Woodward also
reminded Basso of the telephone conversation between him, Mr. Schulz and Ms.
Woodward on December 19, 1995, where they informed him of the company's
decision to relieve him as General Manager. Basso, instead, was offered the position
of consultant to CMI. Ms. Woodward also informed Basso that CMI rejected his
counter-proposal and, thus, terminated his employment effective January 31, 1996.
CMI offered Basso a severance pay, in consideration of the Php1,140,000.00 housing
advance that CMI promised him.[13]
Basso filed a Complaint for Illegal Dismissal with Moral and Exemplary Damages
against CMI on December 19, 1996.[14] Alleging the presence of foreign elements, CMI
filed a Motion to Dismiss[15] dated February 10, 1997 on the ground of lack of
jurisdiction over the person of CMI and the subject matter of the controversy. In an
Order[16] dated August 27, 1997, the Labor Arbiter granted the Motion to Dismiss.
Applying the doctrine of lex loci contractus, the Labor Arbiter held that the terms and
provisions of the employment contract show that the parties did not intend to apply
our Labor Code (Presidential Decree No. 442). The Labor Arbiter also held that no
employer-employee relationship existed between Basso and the branch office of CMI
in the Philippines, but between Basso and the foreign corporation itself.
On appeal, the NLRC remanded the case to the Labor Arbiter for the determination of
certain facts to settle the issue on jurisdiction. NLRC ruled that the issue on whether
the principle of lex loci contractus or lex loci celebrationis should apply has to be further
threshed out.[17]
Labor Arbiter's Ruling
Labor Arbiter Madjayran H. Ajan in his Decision[18] dated September 24, 1999
dismissed the case for lack of merit and jurisdiction.
The Labor Arbiter agreed with CMI that the employment contract was xecuted in the
US "since the letter-offer was under the Texas letterhead and the acceptance of
Complainant was returned there."[19] Thus, applying the doctrine of lex loci
celebrationis, US laws apply. Also, applying lex loci contractus, the Labor Arbiter ruled
that the parties did not intend to apply Philippine laws, thus:
Although the contract does not state what law shall apply, it is obvious that
Philippine laws were not written into it. More specifically, the Philippine law on taxes
and the Labor Code were not intended by the parties to apply, otherwise Par. 7 on the
payment by Complainant U.S. Federal and Home State income taxes, and Pars. 22/23
on termination by 30-day prior notice, will not be there. The contract was prepared in
contemplation of Texas or U.S. laws where Par. 7 is required and Pars. 22/23 is
allowed.[20]
The Labor Arbiter also ruled that Basso was terminated for a valid cause based on the
allegations of CMI that Basso committed a series of acts that constitute breach of trust
and loss of confidence.[21]
43
The Labor Arbiter, however, found CMI to have voluntarily submitted to his office's
jurisdiction. CMI participated in the proceedings, submitted evidence on the merits of
the case, and sought affirmative relief through a motion to dismiss.[22]
NLRC's Ruling
On appeal, the NLRC Third Division promulgated its Decision[23] dated November
28, 2003, the decretal portion of which reads:
WHEREFORE, the decision dated 24 September 1999 is VACATED and SET ASIDE.
Respondent CMI is ordered to pay complainant the amount of US$5,416.00 for failure
to comply with the due notice requirement. The other claims are dismissed.
SO ORDERED.[24]
The NLRC did not agree with the pronouncement of the Labor Arbiter that his office
has no jurisdiction over the controversy. It ruled that the Labor Arbiter acquired
jurisdiction over the case when CMI voluntarily submitted to his office's jurisdiction
by presenting evidence, advancing arguments in support of the legality of its acts,
and praying for reliefs on the merits of the case.[25]
On the merits, the NLRC agreed with the Labor Arbiter that Basso was dismissed for
just and valid causes on the ground of breach of trust and loss of confidence. The
NLRC ruled that under the applicable rules on loss of trust and confidence of a
managerial employee, such as Basso, mere existence of a basis for believing that such
employee has breached the trust of his employer suffices. However, the NLRC found
that CMI denied Basso the required due process notice in his dismissal.[26]
Both CMI and Basso filed their respective Motions for Reconsideration dated January
15, 2004[27] and January 8, 2004.[28] Both motions were dismissed in separate
Resolutions dated March 15, 2004[29] and February 27, 2004,[30] respectively.
Basso filed a Petition for Certiorari dated April 16, 2004 with the Court of Appeals
docketed as CA-G.R. SP No. 83938.[31] Basso imputed grave abuse of discretion on the
part of the NLRC in ruling that he was validiy dismissed. CMI filed its own Petition
for Certiorari dated May 13, 2004 docketed as CA-G.R. SP No. 84281,[32] alleging that
the NLRC gravely abused its discretion when it assumed jurisdiction over the person
of CMI and the subject matter of the case.
In its Resolution dated October 7, 2004, the Court of Appeals consolidated the two
cases[33] and ordered the parties to file their respective Memoranda.
The Court of Appeal's Decision
The Court of Appeals promulgated the now assailed Decision[34] dated May 23, 2006,
the relevant dispositive portion of which reads:
WHEREFORE, the petition of Continental docketed as CA-G.R. SP No. 84281 is
DENIED DUE COURSE and DISMISSED.
On the other hand the petition of Basso docketed as CA-G.R. SP No. 83938 is GIVEN
DUE COURSE and GRANTED, and accordingly, the assailed Decision dated
November 28, 2003 and Resolution dated February 27, 2004 of the NLRC are SET
ASIDE and VACATED. Instead judgment is rendered hereby declaring the dismissal
of Basso illegal and ordering Continental to pay him separation pay equivalent to one
(1) month pay for every year of service as an alternative to reinstatement. Further,
ordering Continental to pay Basso his full backwages from the date of his said illegal
dismissal until date of this decision. The claim for moral and exemplary damages as
well as attorney's fees are dismissed.[35]
The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction
over the subject matter of the case and over the parties. The Court of Appeals
explained that jurisdiction over the subject matter of the action is determined by the
allegations of the complaint and the law. Since the case filed by Basso is a termination
dispute that is "undoubtedly cognizable by the labor tribunals", the Labor Arbiter and
the NLRC had jurisdiction to rule on the merits of the case. On the issue of
jurisdiction over he person of the parties, who are foreigners, the Court of Appeals
ruled that jurisdiction over the person of Basso was acquired when he filed the
complaint for illegal dismissal, while jurisdiction over the person of CMI was
acquired through coercive process of service of summons to its agent in the
Philippines. The Court of Appeals also agreed that the active participation of CMI in
the case rendered moot the issue on jurisdiction.
On the merits of the case, the Court of Appeals declared that CMI illegally dismissed
Basso. The Court of Appeals found that CMI's allegations of loss of trust and
confidence were not established. CMI "failed to prove its claim of the incidents which
were its alleged bases for loss of trust or confidence." [36] While managerial employees
can be dismissed for loss of trust and confidence, there must be a basis for such loss,
beyond mere whim or caprice.
After the parties filed their Motions for Reconsideration,[37] the Court of Appeals
promulgated Resolution[38] dated June 19, 2007 denying CMI's motion, while partially
granting Basso's as to the computation of backwages.
Hence, this petition, which raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REVIEWING THE
FACTUAL FINDINGS OF THE NLRC INSTEAD OF LIMITING ITS INQUIRY INTO
WHETHER OR NOT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION.
II.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE
LABOR ARBITER AND THE NLRC HAD JURISDICTION TO HEAR AND TRY THE
ILLEGAL DISMISSAL CASE.
44
III.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT
BASSO WAS NOT VALIDLY DISMISSED ON THE GROUND OF LOSS OF TRUST
OR CONFIDENCE.
We begin with the second issue on the jurisdiction of the Labor Arbiter and the NLRC
in the illegal dismissal case. The first and third issues will be discussed jointly.
The labor tribunals had jurisdiction over the parties and the subject matter of the case.
CMI maintains that there is a conflict-of-laws issue that must be settled to determine
proper jurisdiction over the parties and the subject matter of the case. It also alleges
that the existence of foreign elements calls or the application of US laws and the
doctrines of lex loci celebrationis (the law of the place of the ceremony), lex loci
contractus (law of the place where a contract is executed), and lex loci intentionis (the
intention of the parties as to the law that should govern their agreement). CMI also
invokes the application of the rule of forum non conveniens to determine the propriety
of the assumption of jurisdiction by the labor tribunals.
We agree with CMI that there is a conflict-of-laws issue that needs to be resolved first.
Where the facts establish the existence of foreign elements, he case presents a conflict-
of-laws issue.[39] The foreign element in a case nay appear in different forms, such as
in this case, where one of the parties s an alien and the other is domiciled in another
state.
In Hasegawa v. Kitamura,[40] we stated that in the judicial resolution of conflict-of-laws
problems, three consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. In resolving the conflicts problem, courts
should ask the following questions:
1. "Under the law, do I have jurisdiction over the subject matter and the parties to this
case?
2. "If the answer is yes, is this a convenient forum to the parties, in light of the facts?
3. "If the answer is yes, what is the conflicts rule for this particular problem?
4. "If the conflicts rule points to a foreign law, has said law been properly pleaded and
proved by the one invoking it?
5. "If so, is the application or enforcement of the foreign law in the forum one of the
basic exceptions to the application of foreign law? In short, is there any strong policy
or vital interest of the forum that is at stake in this case and which should preclude
the application of foreign law?[41]
Jurisdiction is defined as the power and authority of the courts to hear, try and decide
cases. Jurisdiction over the subject matter is conferred by the Constitution or by law
and by the material allegations in the complaint, regardless of whether or not the
plaintiff is entitled to recover all or some of the claims or reliefs sought therein. [42] It
cannot be acquired through a waiver or enlarged by the omission of the parties or
conferred by the acquiescence of the court.[43] That the employment contract of Basso
was replete with references to US laws, and that it originated from and was returned
to the US, do not automatically preclude our labor tribunals from exercising
jurisdiction to hear and try this case.
This case stemmed from an illegal dismissal complaint. The Labor Code, under
Article 217, clearly vests original and exclusive jurisdiction to hear and decide cases
involving termination disputes to the Labor Arbiter. Hence, the Labor Arbiter and the
NLRC have jurisdiction over the subject matter of the case.
As regards jurisdiction over the parties, we agree with the Court of Appeals that the
Labor Arbiter acquired jurisdiction over the person of Basso, notwithstanding his
citizenship, when he filed his complaint against CMI. On the other hand, jurisdiction
over the person of CMI was acquired through the coercive process of service of
summons. We note that CMI never denied that it was served with summons. CMI
has, in fact, voluntarily appeared and participated in the proceedings before the
courts. Though a foreign corporation, CMI is licensed to do business in the
Philippines and has a local business address here. The purpose of the law in requiring
that foreign corporations doing business in the country be licensed to do so, is to
subject the foreign corporations to the jurisdiction of our courts.[44]
Considering that the Labor Arbiter and the NLRC have jurisdiction over the parties
and the subject matter of this case, these tribunals may proceed to try the case even if
the rules of conflict-of-laws or the convenience of the parties point to a foreign forum,
this being an exercise of sovereign prerogative of the country where the case is
filed.[45]
The next question is whether the local forum is the convenient forum in light of the
facts of the case. CMI contends that a Philippine court is an inconvenient forum.
We disagree.
Under the doctrine of forum non conveniens, a Philippine court in a conflict-of-laws
case may assume jurisdiction if it chooses to do so, provided, that the following
requisites are met: (1) that the Philippine Court is one to which the parties may
conveniently resort to; (2) that the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and (3) that the Philippine Court has or
is likely to have power to enforce its decision.[46] All these requisites are present here.
Basso may conveniently resort to our labor tribunals as he and CMI lad physical
presence in the Philippines during the duration of the trial. CMI has a Philippine
branch, while Basso, before his death, was residing here. Thus, it could be reasonably
expected that no extraordinary measures were needed for the parties to make
arrangements in advocating their respective cases.
The labor tribunals can make an intelligent decision as to the law and facts. The
45
incident subject of this case (i.e. dismissal of Basso) happened in the Philippines, the
surrounding circumstances of which can be ascertained without having to leave the
Philippines. The acts that allegedly led to loss of trust and confidence and Basso's
eventual dismissal were committed in the Philippines. As to the law, we hold that
Philippine law is the proper law of he forum, as we shall discuss shortly. Also, the
labor tribunals have the power to enforce their judgments because they acquired
jurisdiction over the persons of both parties.
Our labor tribunals being the convenient fora, the next question is what law should
apply in resolving this case.
The choice-of-law issue in a conflict-of-laws case seeks to answer the following
important questions: (1) What legal system should control a given situation where
some of the significant facts occurred in two or more states; and (2) to what extent
should the chosen legal system regulate the situation.[47] These questions are entirely
different from the question of jurisdiction that only seeks to answer whether the
courts of a state where the case is initiated have jurisdiction to enter a judgment. [48] As
such, the power to exercise jurisdiction does not automatically give a state
constitutional authority to apply forum law.[49]
CMI insists that US law is the applicable choice-of-law under the principles of lex loci
celebrationis and lex loci contractus. It argues that the contract of employment
originated from and was returned to the US after Basso signed it, and hence, was
perfected there. CMI further claims that the references to US law in the employment
contract show the parties' intention to apply US law and not ours. These references
are:
7 Foreign station allowance of forty percent (40%) using the "U.S. State Department
Index, the base being Washington, D.C."
8 Philippines. The alleged prohibited acts of Basso that warranted his dismissal were
9 Tax equalization that made Basso responsible for "federal and any home state
income taxes."
10
11 Hardship allowance of fifteen percent (15%) of base pay based upon the "U.S.
Department of State Indexes of living costs abroad."
12
13 The employment arrangement is "one at will, terminable by either party without
any further liability on thirty days prior written notice."[50]
CMI asserts that the US law on labor relations particularly, the US Railway Labor Act
sanctions termination-at-will provisions in an employment contract. Thus, CMI
concludes that if such laws were applied, there would have been no illegal dismissal
to speak of because the termination-at-will provision in Basso's employment contract
would have been perfectly valid.
We disagree.
In Saudi Arabian Airlines v. Court of Appeals,[51] we emphasized that an essential
element of conflict rules is the indication of a "test" or "connecting factor" or "point of
contact". Choice-of-law rules invariably consist of a factual relationship (such as
property right, contract claim) and a connecting fact or point of contact, such as the
situs of the res, the place of celebration, the place of performance, or the place of
wrongdoing. Pursuant to Saudi Arabian Airlines, we hold that the "test factors," "points
of contact" or "connecting factors" in this case are the following:
(1) The nationality, domicile or residence of Basso;
(2) The seat of CMI;
(3) The place where the employment contract has been made, the locus actus;
(4) The place where the act is intended to come into effect, e.g., the place of
performance of contractual duties;
(5) The intention of the contracting parties as to the law that should govern their
agreement, the lex loci intentionis; and
(6) The place where judicial or administrative proceedings are instituted or done. [52]
Applying the foregoing in this case, we conclude that Philippine law the applicable
law. Basso, though a US citizen, was a resident here from he time he was hired by
CMI until his death during the pendency of the case. CMI, while a foreign
corporation, has a license to do business in the Philippines and maintains a branch
here, where Basso was hired to work. The contract of employment was negotiated in
the Philippines. A purely consensual contract, it was also perfected in the Philippines
when Basso accepted the terms and conditions of his employment as offered by CMI.
The place of performance relative to Biasso's contractual duties was in the
committed in the Philippines.
Clearly, the Philippines is the state with the most significant relationship to the
problem. Thus, we hold that CMI and Basso intended Philippine law to govern,
notwithstanding some references made to US laws and the fact that this intention was
not expressly stated in the contract. We explained in Philippine Export and Foreign Loan
Guarantee Corporation v. V. P. Eusebio Construction, Inc.[53] that the law selected may be
implied from such factors as substantial connection with the transaction, or the
nationality or domicile of the parties.[54] We cautioned, however, that while Philippine
courts would do well to adopt the first and most basic rule in most legal systems,
namely, to allow the parties to select the law applicable to their contract, the selection
is subject to the limitation that it is not against the law, morals, or public policy of the
forum.[55]
Similarly, in Bank of America, NT&SA v. American Realty Corporation,[56] we ruled that a
foreign law, judgment or contract contrary to a sound and established public policy of
the forum shall not be applied. Thus:
Moreover, foreign law should not be applied when its application would work
46
undeniable injustice to the citizens or residents of the forum. To give justice is the
most important function of law; hence, a law, or judgment or contract that is
obviously unjust negates the fundamental principles of Conflict of Laws. [57]
Termination-at-will is anathema to the public policies on labor protection espoused
by our laws and Constitution, which dictates that no worker shall be dismissed
except for just and authorized causes provided by law and after due process having
been complied with.[58] Hence, the US Railway Labor Act, which sanctions
termination-at-will, should not be applied in this case.
Additionally, the rule is that there is no judicial notice of any foreign law. As any
other fact, it must be alleged and proved.[59] If the foreign law is not properly pleaded
or proved, the presumption of identity or similarity of the foreign law to our own
laws, otherwise known as processual presumption, applies. Here, US law may have
been properly pleaded but it was not proved in the labor tribunals.
Having disposed of the issue on jurisdiction, we now rule on the first and third
issues.
The Court of Appeals may review the factual findings of the NLRC in a Rule 65 petition.
CMI submits that the Court of Appeals overstepped the boundaries of the limited
scope of its certiorari jurisdiction when instead of ruling on the existence of grave
abuse of discretion, it proceeded to pass upon the legality and propriety of Basso's
dismissal. Moreover, CMI asserts that it was error on the part of the Court of Appeals
to re-evaluate the evidence and circumstances surrounding the dismissal of Basso.
We disagree.
The power of the Court of Appeals to review NLRC decisions via a Petition for
Certiorari under Rule 65 of the Revised Rules of Court was settled in our decision in
St. Martin Funeral Home v. NLRC.[60] The general rule is that certiorari does not lie to
review errors of judgment of the trial court, as well as that of a quasi-judicial tribunal.
In certiorari proceedings, judicial review does not go as far as to examine and assess
the evidence of the parties and to weigh their probative value.[61] However, this rule
admits of exceptions. In Globe Telecom, Inc. v. Florendo-Flores,[62] we stated:
In the review of an NLRC decision through a special civil action for certiorari,
resolution is confined only to issues of jurisdiction and grave abuse of discretion on
the part of the labor tribunal. Hence, the Court refrains from reviewing factual
assessments of lower courts and agencies exercising adjudicative functions, such as
the NLRC. Occasionally, however, the Court is constrained to delve into factual
matters where, as in the instant case, the findings of the NLRC contradict those of the
Labor Arbiter.
In this instance, the Court in the exercise of its equity jurisdiction may look into the
records of the case and re-examine the questioned findings. As a corollary, this Court
is clothed with ample authority to review matters, even if they are not assigned as
errors in their appeal, if it finds that their consideration is necessary to arrive at a just
decision of the case. The same principles are now necessarily adhered to and are
applied by the Court of Appeals in its expanded jurisdiction over labor cases elevated
through a petition for certiorari; thus, we see no error on its part when it made anew a
factual determination of the matters and on that basis reversed the ruling of the
NLRC.[63] (Citations omitted.)
Thus, the Court of Appeals may grant the petition when the factual hidings
complained of are not supported by the evidence on record; when its necessary to
prevent a substantial wrong or to do substantial justice; when the findings of the
NLRC contradict those of the Labor Arbiter; and when necessary to arrive at a just
decision of the case.[64] To make these findings, the Court of Appeals necessarily has
to look at the evidence and make its own factual determination. [65]
Since the findings of the Labor Arbiter differ with that of the NLRC, we find that the
Court of Appeals correctly exercised its power to review the evidence and the records
of the illegal dismissal case.
Basso was illegally dismissed.
It is of no moment that Basso was a managerial employee of CMI Managerial
employees enjoy security of tenure and the right of the management to dismiss must
be balanced against the managerial employee's right to security of tenure, which is
not one of the guaranties he gives up.[66]
In Apo Cement Corporation v. Baptisma,[67] we ruled that for an employer to validly
dismiss an employee on the ground of loss of trust and confidence under Article 282
(c) of the Labor Code, the employer must observe the following guidelines: 1) loss of
confidence should not be simulated; 2) it should not be used as subterfuge for causes
which are improper, illegal or unjustified; 3) it may not be arbitrarily asserted in the
face of overwhelming evidence to the contrary; and 4) it must be genuine, not a mere
afterthought to justify earlier action taken in bad faith. More importantly, it must be
based on a willful breach of trust and founded on clearly established facts.
We agree with the Court of Appeals that the dismissal of Basso was not founded on
clearly established facts and evidence sufficient to warrant dismissal from
employment. While proof beyond reasonable doubt is not required to establish loss of
trust and confidence, substantial evidence is required and on the employer rests the
burden to establish it.[68] There must be some basis for the loss of trust, or that the
employer has reasonable ground to believe that the employee is responsible for
misconduct, which renders him unworthy of the trust and confidence demanded by
his position.[69]
CMI alleges that Basso committed the following:
(1 Basso delegated too much responsibility to the General Sales Agent and relied heavily o
) judgments.[70]
(2 Basso excessively issued promotional tickets to his friends who had no direct business
47
) CMI.[71]
(3 The advertising agency that CMI contracted had to deal directly with Guam because Basso hiswas
) hardly available.[72] Mr. Schulz discovered that Basso exceeded the advertising budget of Continental,
$76,000.00 in 1994 and by $20,000.00 in 1995.[73]
(4 Basso spent more time and attention to his personal businesses and was reputed toname.
) nightclubs in the Philippines.[74]
(5 Basso used free tickets and advertising money to promote his personal business, [75] such
) brochure that jointly advertised one of Basso's nightclubs with CMI.
We find that CMI failed to discharge its burden to prove the above acts. CMI merely
submitted affidavits of its officers, without any other corroborating evidence. Basso,
on the other hand, had adequately explained his side. On the advertising agency and
budget issues raised by CMI, he explained that these were blatant lies as the
advertising needs of CMI were centralized in its Guam office and the Philippine office
was not authorized to deal with CMI's advertising agency, except on minor issues. [76]
Basso further stated that under CMI's existing policy, ninety percent (90%) of the
advertising decisions were delegated to the advertising firm of McCann-Ericsson in
Japan and only ten percent (10%) were left to the Philippine office. [77] Basso also
denied the allegations of owning nightclubs and promoting his personal businesses
and explained that it was illegal for foreigners in the Philippines to engage in retail
trade in the first place.
Apart from these accusations, CMI likewise presented the findings of the audit team
headed by Mr. Stephen D. Goepfert, showing that "for the period of 1995 and 1996,
personal passes for Continental and other airline employees were noted (sic) to be
issued for which no service charge was collected."[78] The audit cited the trip pass log
of a total of 10 months. The trip log does not show, however, that Basso caused all the
ticket issuances. More, half of the trips in the log occurred from March to July of
1996,[79] a period beyond the tenure of Basso. Basso was terminated effectively on
January 31, 1996 as indicated in the letter of Ms. Woodward. [80]
CMI also accused Basso of making "questionable overseas phone calls". Basso,
however, adequately explained in his Reply[81] that the phone calls to Italy and
Portland, USA were made for the purpose of looking for a technical maintenance
personnel with US Federal Aviation Authority qualifications, which CMI needed at
that time. The calls to the US were also made in connection with his functions as
General Manager, such as inquiries on his tax returns filed in Nevada. Biasso also
explained that the phone lines[82] were open direct lines that all personnel were free to
use to make direct long distance calls.[83]
Finally, CMI alleged that Basso approved the disbursement of Php80,000.00 to cover
the transfer fee of the Manila Polo Club share from Mr. Kenneth Glover, the previous
General Manager, to him. CMI claimed that "nowhere in the said contract was it
likewise indicated that the Manila Polo Club share was part of the compensation
package given by CMI to Basso."[84] CMI's claims are not credible. Basso explained
that the Manila Polo Club share was offered to him as a bonus to entice him to leave
then employer, United Airlines. A letter from Mr. Paul J. Casey, former president
by supports Basso.[85] In the letter, Mr. Casey explained:
As a signing bonus, and a perk to attract Mr. Basso to join Continental Airlines, he
was given the Manila Polo Club share and authorized to have the share re-issued in his
own In addition to giving Mr. Basso the Manila Polo Club share, Continental agreed
to pay the dues for a period of three years and this was embodied in his contract with
Continental. This was all clone with my knowledge and approval. [86]
Clause
as a 14 of the employment contract also states:
Club Memberships: The Company will locally pay annual dues for membership in a
club in Manila that your immediate supervisor and I agree is of at least that value to
Continental through you in your role as our General Manager for the Philippines.[87]
Taken together, the above pieces of evidence suggest that the Manila Polo Club share
was part of Basso's compensation package and thus he validly used company funds
to pay for the transfer fees. If doubts exist between the evidence presented by the
employer and the employee, the scales of justice must be tilted in favor of the latter. [88]
Finally, CMI violated procedural due process in terminating Basso. In King of Kings
Transport, Inc. v. Mamac[89] we detailed the procedural due process steps in
termination of employment:
To clarify, the following should be considered in terminating the services of
employees:
(1) The first written notice to be served on the employees should contain the specific
causes or grounds for termination against them, and a directive that the employees
are given the opportunity to submit their written explanation within a reasonable
period. "Reasonable opportunity" under the Omnibus Rules means every kind of
assistance that management must accord to the employees to enable them to prepare
adequately for their defense. This should be construed as a period of at least five (5)
calendar days from receipt of the notice to give the employees an opportunity to
study the accusation against them, consult a union official or lawyer, gather data and
evidence, and decide on the defenses they will raise against the complaint. Moreover,
in order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and circumstances
that will serve as basis for the charge against the employees. A general description of
the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282
is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a
hearing or conference wherein the employees will be given the opportunity to: (1)
explain and clarify their defenses to the charge against them; (2) present evidence in
support of their defenses; and (3) rebut the evidence presented against them by the
management. During the hearing or conference, the employees are given the chance
to defend themselves personally, with the assistance of a representative or counsel of
their choice. Moreover, this conference or hearing could be used by the parties as an
48
opportunity to come to an amicable settlement. illegal dismissal, to October 2, 2002, the date of his compulsory retirement age.

(3) After determining that termination of employment is justified, the employers shall SO ORDERED.
serve the employees a written notice of termination indicating that: (1) all
circumstances involving the charge against the employees have been considered; and
(2) grounds have been established to justify the severance of their employment.
(Emphasis in original.)
Here, Mr. Schulz's and Ms. Woodward's letters dated December 19, 1995 and March
14, 1996, respectively, are not one of the valid twin notices. Neither identified the
alleged acts that CMI now claims as bases for Basso's termination. Ms. Woodward's
letter even stressed that the original plan was to remove Basso as General Manager
but with an offer to make him consultant. It was inconsistent of CMI to declare Basso
as unworthy of its trust and confidence and, in the same breath, offer him the position
of consultant. As the Court of Appeals pointed out:
But mark well that Basso was clearly notified that the sole ground for his dismissal
was the exercise of the termination at will clause in the employment contract. The
alleged loss of trust and confidence claimed by Continental appears to be a mere
afterthought belatedly trotted out to save the day.[90]
Basso is entitled to separation pay and full backwages.

Under Article 279 of the Labor Code, an employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of eniority rights and other
privileges, and to his full backwages, inclusive of allowances and to his other
benefits or their monetary equivalent omputed from the time his compensation was
withheld up to the time of actual reinstatement.

Where reinstatement is no longer viable as an option, separation pay equivalent to

one (1) month salary for every year of service should be awarded as an alternative.
The payment of separation pay is in addition to payment of backwages. [91] In the case
of Basso, reinstatement is no longer possible since he has already passed away. Thus,
Basso's separation pay with full backwages shall be paid to his heirs.

As to the computation of backwages, we agree with CMI that Basso was entitled to
backwages only up to the time he reached 65 years old, the compulsory retirement
age under the law.[92] This is our consistent ruling.[93] When Basso was illegally
dismissed on January 31, 1996, he was already 58 years old.[94] He turned 65 years old
on October 2, 2002. Since backwages are granted on grounds of equity for earnings
lost by an employee due to his illegal dismissal,[95] Basso was entitled to backwages
only for the period he could have worked had he not been illegally dismissed, i.e.
from January 31, 1996 to October 2, 2002.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated May
23, 2006 and Resolution dated June 19, 2007 in the consolidated cases CA-G.R. SP No.
83938 and CA-G.R. SP No. 84281 are AFFIRMED, with MODIFICATION as to the
award of backwages. Petitioner Continental Micronesia, Inc. is hereby ordered to pay
Respondent Joseph Basso's heirs: 1) separation pay equivalent to one (1) month pay
for every year of service, and 2) full backwages from January 31, 1996, the date of his
49
G.R. No. 172301, August 19, 2015
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, PETITIONER, VS.
ASIAVEST MERCHANT BANKERS (M) BERHAD, RESPONDENT.
DECISION
LEONEN, J.:
This case stemmed from an action for recovery of sum of money filed before the
Regional Trial Court of Pasig by respondent Malaysian corporation against petitioner
Philippine National Construction Corporation (PNCC), formerly Construction &
Development Corporation of the Philippines. PNCC is a government-acquired asset
corporation.
We resolve whether our courts have subject matter jurisdiction over an action for
recovery of sum of money filed by a Malaysian corporation against a Philippine
corporation involving a contract executed and performed in Malaysia, and the
applicability of the forum non conveniens principle.
PNCC filed this Petition[1] assailing the Court of Appeals Decision[2] dated June 10,
2005 dismissing its appeal, and Resolution[3] dated April 7, 2006 denying
reconsideration.[4] The trial court ruled in favor of Asiavest Merchant Bankers (M)
Berhad and ordered PNCC to reimburse it the sum of Malaysian Ringgit (MYR)
3,915,053.54 or its equivalent in Philippine peso.[5]
PNCC prays that this court reverse and set aside the Court of Appeals Decision and
Resolution, as well as the trial court's Decision[6] declaring it in default.[7] It prays the
trial court's order of default be reversed and it be allowed to file its Answer, or, the
cause of action having already prescribed under Malaysian laws, the case be
dismissed outright.[8]
PNCC and Asiavest Holdings (M) Sdn. Bhd. (Asiavest Holdings) caused the
incorporation of an associate company known as Asiavest-CDCP Sdn. Bhd. (Asiavest-
CDCP), through which they entered into contracts to construct rural roads and
bridges for the State of Pahang, Malaysia.[9]
In connection with this construction contract, PNCC obtained various guarantees and
bonds from Asiavest Merchant Bankers (M) Berhad to guarantee the due performance
of its obligations.[10] The four contracts of guaranty stipulate that Asiavest Merchant
Bankers (M) Berhad shall guarantee to the State of Pahang "the due performance by
PNCC of its construction contracts . . . and the repayment of the temporary advances
given to PNCC[.]"[11] These contracts were understood to be governed by the laws of
Malaysia.[12]
There was failure to perform the obligations under the construction contract,
prompting the State of Pahang to demand payment against Asiavest Merchant
Bankers (M) Berhad's performance bonds.[13] It "entered into a compromise agreement
with the State of Pahang by paying . . . the reduced amount of [Malaysian Ringgit
(MYR)] 3,915,053.54[.]"[14] Consequently, the corporation demanded indemnity from
PNCC by demanding the amount it paid to the State of Pahang. [15]
On April 12, 1994, Asiavest Merchant Bankers (M) Berhad filed a Complaint[16] for
recovery of sum of money against PNCC before the Regional Trial Court of Pasig. [17]
It based its action on Malaysian laws. Specifically, it invoked Section 98[18] of the
Malaysian Contracts Act of 1950 and Section 11[19] of the Malaysian Civil Law Act of
1956.[20]
PNCC filed Motions for extension of time to file its Answer on May 18, 1994, June 2,
1994, and June 17, 1994. The trial court granted these motions, with the last one set to
expire on July 3, 1994. On July 4, 1994, PNCC filed a Motion for another five-day
extension. The trial court denied this Motion on July 13, 1994. [21]
On July 27, 1994, the trial court declared PNCC in default for failure to file any
responsive pleading, and allowed Asiavest Merchant Bankers (M) Berhad to present
its evidence ex parte.[22]
The Regional Trial Court, in its Decision dated November 29, 1994, rendered
judgment in favor of Asiavest Merchant Bankers (M) Berhad:
WHEREFORE, premises considered and it appearing that plaintiff hads [sic] proved
its claim by preponderance of evidence, judgment is hereby rendered in favor of
plaintiff and against defendant Philippine National Construction Corporation
ordering the latter to pay the plaintiff:
14 The sum of Malaysian Ringgit M $3,915,053.54 or its equivalent in [Philippine peso
at the bank rate of exchange (on the date of payment) plus legal interest from
the date of demand until fully paid.
15
16 The sum of P300,000.00 as and by way of attorney's fees; and
17
18 Cost of suit.
SO ORDERED.[23]
The trial court found that Asiavest Merchant Bankers (M) Berhad complied with the
requisites for proof of written foreign laws.[24] The Malaysian laws invoked were
found to be similar with Articles 2066 and 2067 of the Civil Code:[25]
ART. 2066. The guarantor who pays for a debtor must be indemnified by the latter.
The indemnity comprises:
( The total amount of the debt;
1
)
( The legal interests thereon from the time the payment was made known to
2 the debtor, even though it did not earn interest for the creditor;
)
50
( The expenses incurred by the guarantor after having notified the debtor that
3 payment had been demanded of him;
) 1953 (Act 254) in that "actions founded on contract or to recover any sum ... by virtue
( Damages, if they are due.
4 Bankers (M) Berhad paid the State of Pahang "in or about 1988[.]"[44] On April 14,
) 1982, April 2, 1983, and August 2, 1983, Asiavest Merchant Bankers (M) Berhad made
ART. 2067. The guarantor who pays is subrogated by virtue thereof to all the rights
which the creditor had against the debtor.
If the guarantor has compromised with the creditor, he cannot demand of the debtor
more than what he has really paid.
On January 30, 1995, the trial court denied PNCC's Motion to Lift Order of Default[26]
filed on December 12, 1994.[27] On August 11, 1995, it also denied PNCC's Motion for
Reconsideration Ad Cautelam[28] dated December 21, 1994.[29] PNCC brought its case
before the Court of Appeals.[30]
The Court of Appeals, in its Decision dated June 10, 2005, dismissed PNCC's appeal
for raising pure questions of law exclusively cognizable by this court. [31] It likewise
denied reconsideration.[32]
Hence, PNCC filed this Petition.
PNCC contends it had consistently raised the propriety of impleading the two
Malaysian corporations, Asiavest-CDCP and Asiavest Holdings, and their participant
liability, which are questions of fact.[33] According to PNCC, Asiavest-CDCP
undertook to hold PNCC "free and harmless from all its obligations under the
construction agreement[,]"[34] while Asiavest Holdings agreed in the guaranty
agreement to share with PNCC the guarantee liability on a 51% (Asiavest Holdings) -
49% (PNCC) arrangement.[35] Since the repayment of financing facilities received by
Asiavest-CDCP was jointly guaranteed by PNCC and Asiavest Holdings as admitted
in the Complaint,[36] the lower courts "erred in ordering [PNCC] to reimburse the
entire amount claimed by the respondent."[37] While the issue on its exact liability was
not assigned as an error, PNCC argues it has amply discussed this issue in its
pleadings.[38]
PNCC submits that the trial court could have invoked the principle of forum non
conveniens and refused to take cognizance of the case considering the difficulty in
acquiring jurisdiction over the two Malaysian corporations and in determining
PNCC's exact liability.[39]
PNCC adds that it was deprived of its day in court when its Motion for another five-
day extension to file an Answer was denied, and it was subsequently declared in
default.[40] "[T]he transactions involved originated from and occurred in a foreign
country[.]"[41] This constrained PNCC to request several extensions in order to collate
the records in preparation for its defense.[42]
PNCC also raises prescription pursuant to Item 6 of the Malaysian Limitation Act of
of any written law . . . shall not be brought after the expiration of six years from
[accrual of cause of action]."[43] The Complaint alleged that Asiavest Merchant
demands against PNCC for payment on the guarantees in favor of the State of
Pahang.[45] Since the Complaint was filed on April 13, 1994, six years had already
elapsed from 1988.[46]
Lastly, PNCC submits that Asiavest Merchant Bankers (M) Berhad already winded
up voluntarily based on the Certification[47] issued by the Director of the Insolvency
and Liquidation Department for Official Receiver, Malaysia.[48] PNCC alleges that the
liquidators declared in their Account of Receipts and Payments and Statement of the
Position in the Winding Up dated August 3, 1995 and submitted on April 4, 2006 that
"there [were] no more debts or claims existing for or against the respondent." [49] Thus,
the case is now moot and academic with the termination of Asiavest Merchant
Bankers (M) Berhad's corporate existence coupled with the declaration of no
claims.[50]
Asiavest Merchant Bankers (M) Berhad counters that the Court of Appeals did not err
in dismissing the appeal as PNCC's Brief[51] only raised two issues that are both
questions of law: lack of jurisdiction over the subject matter, and deprivation of day
in court with the denial of its Motion for Reconsideration Ad Cautelam.[52]
Asiavest Merchant Bankers (M) Berhad argues that the principle of forum non
conveniens was addressed to the discretion of the trial court.[53] Moreover, this issue
was not raised before the Court of Appeals. The issue on prescription based on
Malaysian laws was also not raised. In any case, PNCC failed to plead and prove this
foreign law provision.[54]
On its civil personality, Asiavest Merchant Bankers (M) Berhad denies it has ceased to
exist, and this issue was also not raised before the lower court. In any case, this is of
no moment as Asiavest Merchant Bankers (M) Berhad had already acquired a
decision in its favor.[55]
According to Asiavest Merchant Bankers (M) Berhad, PNCC was not denied due
process as it was granted a total of 60 days to file a responsive pleading before the
trial court.[56] It submits that PNCC wasted almost six months before moving to lift
the default order.[57] Moreover, "the filing and consideration of a party's motion for
reconsideration accords [it] due process."[58]
The Petition raises the following issues:
First, whether the Court of Appeals erred in dismissing the appeal on the ground that
it raised pure questions of law;
51

Second, whether the Court of Appeals erred in not finding that the two Malaysian
corporations, Asiavest Holdings (M) Sdn. Bhd. and Asiavest-CDCP Sdn. Bhd., should
have been impleaded as parties;
Third, whether the trial court "erred in not refusing to assume jurisdiction on the
ground of forum non-conveniens[;]"[59]
Fourth, whether petitioner Philippine National Construction Corporation was
deprived of due process when the trial court declared it in default;
Fifth, whether respondent Asiavest Merchant Bankers (M) Berhad's claim already
prescribed under Malaysian laws; and
Lastly, whether this case "should be dismissed considering that respondent [Asiavest
Merchant Bankers (M) Berhad] is no longer an existing corporation."[60]
I.
On the procedural issue, petitioner submits that the Court of Appeals erred in finding
that only questions of law were raised.[61]
Section 9(3) of Batas Pambansa Blg. 129 enumerates the appellate jurisdiction of the
Court of Appeals. This section includes the proviso: "except those falling within the
appellate jurisdiction of the Supreme Court[.]" This court's appellate jurisdiction is
found in Article VIII, Section 5(2)(e) of the Constitution:
SECTION 5. The Supreme Court shall have the following powers:
....
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the
Rules of Court may provide, final judgments and orders of lower courts in:
....
(e) All cases in which only an error or question of law is involved.
A question of law exists "when the doubt or difference arises as to what the law is on
a certain state of facts[,]"[62] while a question of fact exists "when the doubt or
difference arises as to the truth or the falsehood of alleged facts[.]" [63] Questions of fact
require the examination of the probative value of the parties' evidence. [64]
This Petition originated from a default judgment against petitioner. Petitioner was not
able to present evidence before the trial court. Necessarily, the errors raised from the
trial court involved only questions of law.
II.
Petitioner insists that the issue on "the propriety of impleading the two Malaysian
corporations as well as their participant liability . . . involves a question of fact." [65]
According to petitioner, Asiavest-CDCP undertook to hold petitioner free and
harmless from all its obligations under the construction agreement, while Asiavest
Holdings agreed in the guaranty agreement to share with PNCC the guarantee
liability on a 51% (Asiavest Holdings) - 49% (PNCC) arrangement.[66] Petitioner
submits that "the propriety of impleading the two Malaysian corporations[,] [and]
their participant liability[,] [are] question[s] of fact."[67]
Petitioner adds that it has consistently mentioned its argument on the two Malaysian
companies in its pleadings before the lower courts.[68] Specifically, these pleadings
were the Motion to Lift Order of Default[69] with Affidavit of Merit[70] dated December
9, 1994, Motion for Reconsideration Ad Cautelam,[71] Brief for PNCC,[72] and
Comment[73] on Asiavest Merchant Bankers (M) Berhad's Motion to Dismiss Appeal.
Respondent counters that this was not assigned as an error before the Court of
Appeals.[74]
Rule 44, Section 13 of the Rules of Court enumerates the required contents of an
appellant's brief. In paragraph (e), the appellant's brief must include "[a] clear and
concise statement of the issues of fact or law to be submitted to the court for its
judgment[.]"
In its appellant's Brief before the Court of Appeals, petitioner only assigned the
following two errors:
I. THE TRIAL COURT GRAVELY ERRED IN RENDERING THE QUESTIONED
DECISION AS IT HAD NO JURISDICTION OVER THE SUBJECT MATTER OF THE
CASE.
II. THE TRIAL COURT GRAVELY ERRED IN DENYING THE MOTION FOR
RECONSIDERATION AD CAUTELAM FILED BY DEFENDANT-APPELLANT AS IT
DEPRIVED THE LATTER OF HIS DAY IN COURT.[75]
The argument on the two Malaysian corporations was raised by petitioner for the first
time in its Motion to Lift Order of Default with Affidavit of Merit dated December 9,
1994:
7. If the Defendant be given the chance to present its evidence, it will prove the
following:
....
b. Per subcontract agreement entered into by and between defendant and a third
party, Asiavest CDCP Sdn. Bhd., the liability of defendant (CDCP) in the event of
default regarding the performance bonds and guarantees alleged in the complaint
which were posted in the name of the defendant shall be borne by Asiavest CDCP
Sdn. Bhd.
Hence, the need for impleading Asiavest CDCP Sdn. Bhd.
52

c. Assuming that Defendant is liable to the plaintiff, its liability is joint with Asiavest
Holdings Company and only to the extent of 49% of the total amount due which is its
proportionate share in the joint venture project entered into by them. [76]
On January 30, 1995, the trial court denied petitioner's Motion to Lift Order of
Default.[77] There is no showing whether petitioner questioned this trial court Order
as petitioner opted to file the Motion for Reconsideration Ad Cautelam dated
December 21, 1994, praying, among others, that it "be considered as Motion for
Reconsideration of the Decision dated November 29, 1994 in the event that the
Motion to Lift Order of Default is denied[.]"[78] On August 11, 1995, the trial court also
denied this later Motion,[79] and there is no showing whether petitioner questioned
this trial court Order.
In any event, this court has held that "[i]t is essential, to boot, that that party
demonstrate that he has a meritorious cause of action or defense; otherwise, nothing
would be gained by setting the default order aside."[80]
Petitioner's bare allegations fail to convince. The bases of its argument to implead and
hold the two Malaysian corporations liable are the subcontract agreement and
guaranty agreement. Copies of these agreements were not submitted with any of its
pleadings. Thus, the lower courts could not have determined for certain whether the
two Malaysian corporations did enter into the alleged agreements, the subject of the
agreements, or the extent of their liabilities, if any.
Petitioner claims that respondent made admissions in its Complaint in relation to the
two Malaysian companies.[81] Specifically, paragraphs 3 and 4 of the Complaint read:
3. While in Malaysia, defendant [PNCC] jointly with Asiavest Holdings (M) Sdn[.]
Bhd[.], caused the incorporation of an associate company known as Asiavest-CDCP
Sdn. Bhd., with which it undertook to construct rural roads and bridges under
contracts with the State of Pahang, Malaysia.
4. In connection with defendant's construction contracts with the State of Pahang, it
obtained various guarantees and bonds from plaintiff to guarantee to the State of
Pahang and other parties the due performance of defendant's obligations. Defendant
bound itself to indemnify plaintiff for liability or payment on these bonds and guarantees.
Defendant also directly guaranteed to plaintiff, jointly with Asiavest Holdings (M)
Sdn. Bhd., the repayment of certain financing facilities received from plaintiff by
Asiavest-CDCP Sdn. Bhd.[82] (Emphasis supplied)
However, there was no factual finding on the connection between the "financing
facilities" received by Asiavest-CDCP from respondent, and the performance bond
transactions respondent now claims from. This was argued by respondent in its Brief
before the Court of Appeals as follows:
The suit below was not filed to collect repayment of those financing facilities, whether
against the entity that received the facilities or its guarantors. It was filed to enforce
PNCC's obligation to indemnify plaintiff Asiavest on its performance bond payments
to project owners that PNCC had abandoned. The Asiavest performance bonds were
transactions different from the "financing facilities" PNCC refers to. The Asiavest
indemnification claims, and the bonds and other contracts on which they were based,
were clearly identified in the complaint as follows:.... [83]
Also, since petitioner mentioned its argument on the two Malaysian corporations in
its Motion to Lift Order of Default[84] and Motion for Reconsideration Ad Cautelam[85]
filed before the trial court, these were already considered by the lower court when it
ruled on both Motions.
Assuming that the subcontract agreement indeed provides that Asiavest-CDCP
would answer any liability upon default on the performance bond, petitioner may
later claim reimbursement from this Malaysian corporation the amount it was made
to pay by judgment in this suit.
III.
Petitioner raised only two errors before the Court of Appeals. [86] First, the trial court
had no jurisdiction over the subject matter of the case, and it would be more
convenient for both parties if the case was heard in the forum where the contracts
were executed and performed.[87] Second, petitioner was deprived of its day in
court.[88]
Petitioner raised these contentions before the trial court in its Motion to Lift Order of
Default with Affidavit of Merit dated December 9, 1994[89] and Motion for
Reconsideration Ad Cautelam dated December 21, 1994.[90] These were the same two
errors it elevated to the Court of Appeals in its Brief. [91]
On the jurisdiction issue, jurisdiction over the subject matter is conferred by law. [92]
Batas Pambansa Blg. 129, otherwise known as The Judiciary Reorganization Act of
1980, is one such law that provides for the jurisdiction of our courts. A plain reading
of Section 19[93] shows that civil actions for payment of sum of money are within the
exclusive original jurisdiction of trial courts:
SEC. 19. Jurisdiction in civil cases.-Regional Trial Courts shall exercise exclusive
original jurisdiction:
....
(8) In all other cases in which the demand, exclusive of interest, damages of whatever
kind, attorney's fees, litigation expenses, and costs or the value of the property in
controversy exceeds One hundred thousand pesos (P100,000) or, in such other cases
in Metro Manila, where the demand, exclusive of the abovementioned items exceeds
Two hundred thousand pesos (P200,000).
These jurisdictional amounts were adjusted to P300,000.00, and P400,000.00 in the
case of Metro Manila.[94] Thus, the Regional Trial Court of Pasig has jurisdiction over
respondent's complaint for recovery of the sum of Malaysian Ringgit (MYR)
3,915,053.54.
Petitioner argues that "[i]n view of the compelling necessity to implead the two
53
foreign corporations, the Trial Court should have refused to assume jurisdiction over
the case on the ground of forum non-conveniens, even if the Court might have
acquired jurisdiction over the subject matter and over the person of the petitioner."[95]
We find that the trial court correctly assumed jurisdiction over the Complaint.
"Forum non conveniens literally translates to 'the forum is inconvenient.'"[96] This
doctrine applies in conflicts of law cases. It gives courts the choice of not assuming
jurisdiction when it appears that it is not the most convenient forum and the parties
may seek redress in another one.[97] It is a device "designed to frustrate illicit means
for securing advantages and vexing litigants that would otherwise be possible if the
venue of litigation (or dispute resolution) were left entirely to the whim of either
party."[98]
Puyat v. Zabarte[99] enumerated practical reasons when courts may refuse to entertain
a case even though the exercise of jurisdiction is authorized by law:
1) The belief that the matter can be better tried and decided elsewhere, either because
the main aspects of the case transpired in a foreign jurisdiction or the material
witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known as
forum shopping[,] merely to secure procedural advantages or to convey or harass the
defendant;
3) The unwillingness to extend local judicial facilities to non- residents or aliens when
the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right sought to
be maintained; and
5) The difficulty of ascertaining foreign law.[100] (Emphasis in the original)
On the other hand, courts may choose to assume jurisdiction subject to the following
requisites: "(1) that the Philippine Court is one to which the parties may conveniently
resort to; (2) that the Philippine Court is in a position to make an intelligent decision
as to the law and the facts; and (3) that the Philippine Court has or is likely to have
power to enforce its decision."[101]
The determination of whether to entertain a case is addressed to the sound discretion
of the court, which must carefully consider the facts of the particular case.[102] A mere
invocation of the doctrine of forum non conveniens or an easy averment that foreign
elements exist cannot operate to automatically divest a court of its jurisdiction. It is
crucial for courts to determine first if facts were established such that special
circumstances exist to warrant its desistance from assuming jurisdiction. [103]
We discussed in Saudi Arabian Airlines v. Rebesencio[104] how the doctrine grounds on
"comity and judicial efficiency"[105] and how it involves a recognition that other
tribunals may be "better positioned to enforce judgments[:]" [106]
Forum non conveniens is soundly applied not only to address parallel litigation and
undermine a litigant's capacity to vex and secure undue advantages by engaging in
forum shopping on an international scale. It is also grounded on principles of comity
and judicial efficiency.
Consistent with the principle of comity, a tribunal's desistance in exercising
jurisdiction on account of forum non conveniens is a deferential gesture to the tribunals
of another sovereign. It is a measure that prevents the former's having to interfere in
affairs which are better and more competently addressed by the latter. Further, forum
non conveniens entails a recognition not only that tribunals elsewhere are better suited to
rule on and resolve a controversy, but also, that these tribunals are better positioned to
enforce judgments and, ultimately, to dispense justice. Forum non conveniens prevents the
embarrassment of an awkward situation where a tribunal is rendered incompetent in
the face of the greater capability — both analytical and practical — of a tribunal in
another jurisdiction.[107] (Emphasis supplied)
Saudi Arabian Airlines also discussed the need to raise forum non conveniens at the
earliest possible time, and to show that a prior suit has been brought in another
jurisdiction:
On the matter of pleading forum non conveniens, we state the rule, thus: Forum non
conveniens must not only be clearly pleaded as a ground for dismissal; it must be pleaded as
such at the earliest possible opportunity. Otherwise, it shall be deemed waived.
....
Consistent with forum non conveniens as fundamentally a factual matter, it is
imperative that it proceed from a factually established basis. It would be improper to
dismiss an action pursuant to forum non conveniens based merely on a perceived,
likely, or hypothetical multiplicity of fora. Thus, a defendant must also plead and show
that a prior suit has, in fact, been brought in another jurisdiction.
....
We deem it more appropriate and in the greater interest of prudence that a defendant not only
allege supposed dangerous tendencies in litigating in this jurisdiction; the defendant must also
show that such danger is real and present in that litigation or dispute resolution has
commenced in another jurisdiction and that a foreign tribunal has chosen to exercise
jurisdiction.[108] (Emphasis in the original)
The trial court assumed jurisdiction and explained in its Order dated August 11, 1995
that "[o]n the contrary[,] to try the case in the Philippines, it is believed, would be
more convenient to defendant corporation as its principal office is located in the
Philippines, its records will be more accessible, witnesses would be readily available
and entail less expenses in terms of legal services."[109] We agree.
Petitioner is a domestic corporation with its main office in the Philippines. It is safe to
assume that all of its pertinent documents in relation to its business would be
available in its main office. Most of petitioner's officers and employees who were
involved in the construction contract in Malaysia could most likely also be found in
the Philippines. Thus, it is unexpected that a Philippine corporation would rather
54
engage this civil suit before Malaysian courts. Our courts would be "better positioned
to enforce [the] judgment and, ultimately, to dispense" [110] in this case against
petitioner.
Also, petitioner failed to plead and show real and present danger that another
jurisdiction commenced litigation and the foreign tribunal chose to exercise
jurisdiction.[111]
IV.
The other error petitioner raised before the Court of Appeals involved due process.
Petitioner argues it was denied its day in court. We find no denial of petitioner's right
to due process by the lower court.
This court has consistently held that the essence of due process is the opportunity to
be heard. In other words, there is no denial of the right to due process if there was an
opportunity for the parties to defend their interests in due course. [112]
Petitioner had been able to file a Motion for Reconsideration Ad Cautelam before the
trial court, and later elevated its case before the Court of Appeals. There is no denial
of due process if a party was given an opportunity to be heard in a Motion for
Reconsideration.[113]
Petitioner also did not take advantage of the opportunities it was given to file a
responsive pleading. It allowed the periods it was given for the filing of pleadings to
lapse.
The trial court granted petitioner's three Motions for extension of time to file its
Answer,[114] yet petitioner still failed to file its Answer on the day it was due. In its
Motion to Lift Order of Default, petitioner alleged that "[t]he Lawyer previously
handling this case, Atty. Noel de Leon, had already transferred to another
government office and that he failed to file an Answer in this case due to excusable
negligence brought about by the failure of the Defendant to furnish and provide him
with all the pertinent documents necessary in the preparation of its defense." [115]
Excusable negligence means negligence that "ordinary diligence and prudence could
not have guarded against."[116] The Motion did not state the pertinent documents it
needed from respondent that prevented petitioner from filing a timely Answer.
Petitioner never attempted to file its Answer, even belatedly. In its Petition before this
court, petitioner prays that it still be allowed to file an Answer. [117] Petitioner argued
below that the trial court had no jurisdiction over the subject matter, yet it did not file
a Motion to Dismiss on this ground pursuant to Rule 16, Section 1(b)[118] of the Rules
of Court.
Also, the trial court ordered petitioner in default on July 27, 1994 and rendered
judgment on November 29, 1994. It was only after five months or on December 12,
1994 that petitioner filed a Motion to Lift Order of Default.
This Motion included a two-page Affidavit of Merit alleging that the trial court has no
jurisdiction over the subject matter; its subcontract agreement with Asiavest-CDCP
provides that the latter will be the one liable in case of default in the performance
bond; and it is jointly liable with Asiavest Holdings so its liability, if any, is only to
the extent of 49%.[119] The Affidavit did not state the evidence it plans to present in the
event its Motion is granted, or attach documents in support of its claims.
V.
Petitioner contends that under Item 6 of the Malaysian Limitation Act of 1953 (Act
254), "actions founded on contract or to recover any sum . . . by virtue of any written
law . . . shall not be brought after the expiration of six years from [accrual of] cause of
action[.]"[120] It contends that the Complaint was filed on April 13, 1994. Thus, six
years already elapsed from 1988.[121]
Prescription is one of the grounds for a motion to dismiss,[122] but petitioner did not
avail itself of this remedy. Prescription was also not raised as an error before the
Court of Appeals. Nevertheless, we have ruled that prescription may be raised for the
first time before this court.[123]
Petitioner invokes Malaysian laws on prescription, but it was not able to prove these
foreign law provisions. Our courts follow the doctrine of processual presumption:
It is hornbook principle, however, that the party invoking the application of a foreign
law has the burden of proving the law, under the doctrine of processual presumption
which, in this case, petitioners failed to discharge. The Court's ruling in EDI-
Staffbuilders Int'l, v. NLRC illuminates:
In the present case, the employment contract signed by Gran specifically states that
Saudi Labor Laws will govern matters not provided for in the contract (e.g. specific
causes for termination, termination procedures, etc.). Being the law intended by the
parties (lex loci intentiones) to apply to the contract, Saudi Labor Laws should govern
all matters relating to the termination of the employment of Gran.
In international law, the party who wants to have a foreign law applied to a dispute
or case has the burden of proving the foreign law. The foreign law is treated as a
question of fact to be properly pleaded and proved as the judge or labor arbiter
cannot take judicial notice of a foreign law. He is presumed to know only domestic or
forum law.
Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter;
thus, the International Law doctrine of presumed-identity approach or processual
presumption comes into play. Where a foreign law is not pleaded or, even if pleaded, is not
proved, the presumption is that foreign law is the same as ours. Thus, we apply Philippine
labor laws in determining the issues presented before us.
The Philippines does not take judicial notice of foreign laws, hence, they must not only be
alleged; they must be proven. To prove a foreign law, the party invoking it must present
a copy thereof and comply with Sections 24 and 25 of Rule 132 of the Revised Rules of
55
Court[.][124] (Emphasis supplied)
Our provisions on prescription are found in the Civil Code. Specifically, Article
1144(1) of the Civil Code states that actions upon a written contract must be brought
within 10 years from the accrual of the right, and not six years.

Even assuming that the six-year prescription applies, petitioner cannot conclude
prescription from the allegations in the Complaint. The Complaint filed on April 12,
1994 states that Asiavest Merchant Bankers (M) Berhad reached settlement with the
State of Pahang "[i]n or about 1988[.]"[125] If Asiavest Merchant Bankers (M) Berhad
paid on April 13, 1988 onward, six years would not yet elapse since the Complaint
was filed on April 12, 1994.

VI.

Lastly, petitioner submits that respondent voluntarily winded up and is no longer an

existing corporation based on a Certification issued by the Director of Insolvency and
Liquidation Department for Official Receiver, Malaysia.[126] Petitioner adds that the
appointed liquidators declared that there were no more debts or claims existing for or
against respondent in their Account of Receipts and Payments and Statement of the
Position in the Winding Up dated August 3, 1995 and submitted on April 4, 2006.

Respondent denies this allegation. It argues that this was not raised before the lower
courts and, in any case, respondent already acquired a decision in its favor.[127]

The Petition did not attach a copy of the alleged liquidators' declaration that
respondent had no more existing claims. Based on petitioner's allegation, this
declaration was dated August 3, 1995, an earlier date than petitioner's Notice of
Appeal[128] to the Court of Appeals dated August 31, 1995. However, petitioner only
mentioned this declaration in its Petition before this court.

It is consistent with fair play that new issues cannot be raised for the first time before
this court if these could have been raised earlier before the lower courts. [129] Justice
and due process demand that this rule be followed.

In any event, respondent is a Malaysian corporation. Petitioner has not proven the
relevant foreign law provisions to support its allegations that respondent has ceased
to exist and that all its claims are consequently extinguished.

WHEREFORE, the Petition is DENIED for lack of merit.

SO ORDERED.

56