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G.R. No.


June 19, 1997

CRAIG, respondents.

Private respondent Ventura O. Ducat obtained separate loans from
petitioners Ayala International Finance Limited and Philsec Investment
Corporation 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 whereby 1488, Inc. executed a
Warranty Deed with Vendor's Lien by which it sold to petitioner Athona
Holdings, N.V. 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.

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. 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, 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.
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.
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.
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
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.
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.
RTC of Makati: issued a writ of preliminary attachment against the real
and personal properties of private respondents.

Private respondent Ducat moved to dismiss the Civil Case on the grounds
of (1) litis pendentia, (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.
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 nonresident alien.
RTC of Makati:
granted Ducat's motion to dismiss, stating that "the evidentiary
requirements of the controversy may be more suitably tried before the
forum of the litis pendentia in the U.S., under the principle in private
international law of forum non conveniens," even as it noted that Ducat
was not a party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and Daic's motion to
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.
The trial court also held itself without jurisdiction over 1488, Inc. and Daic
because they were non-residents and the action was not an action in rem
or quasi in rem, so that extraterritorial service of summons was
ineffective. The trial court subsequently lifted the writ of attachment it had
earlier issued against the shares of stocks of 1488, Inc. and Daic.
Affirmed the dismissal of Civil Case No. 16563 against Ducat, 1488, Inc.,
and Daic on the ground of litis pendentia.
While the present case was pending in the Court of Appeals, the United
States District Court for the Southern District of Texas rendered judgment
5 in the case before it. The judgment, which was in favor of private
respondents, was affirmed on appeal by the Circuit Court of Appeals.
The U.S. case and the case at bar arose from only one main transaction,
and involve foreign elements, to wit: 1) the property subject matter of the
sale is situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident
foreign corporation; 3) although the buyer, Athona Holdings, a foreign
corporation which does not claim to be doing business in the Philippines, is
wholly owned by Philsec, a domestic corporation, Athona Holdings is also
owned by BPI-IFL, also a foreign corporation; 4) the Warranty Deed was
executed in Texas, U.S.A.

Hence the current petition.

WON Civil Case No. 16536 is barred by the judgment of the U.S. court.
WON forum non convenience is applicable
While this Court has given the effect of res judicata to foreign judgments
in several cases, 7 it was after the parties opposed to the judgment had
been given ample opportunity to repel them on grounds allowed under the
law. 8 It is not necessary for this purpose to initiate a separate action or
proceeding for enforcement of the foreign judgment. What is essential is
that there is opportunity to challenge the foreign judgment, in order for
the court to properly determine its efficacy. This is because in this
jurisdiction, with respect to actions in personam, as distinguished from
actions in rem, a foreign judgment merely constitutes prima facie evidence
the justness of the claim of a party and, as such, is subject to proof to the
contrary. 9 Rule 39, 50 provides:
Sec. 50.
Effect of foreign judgments. The effect of a judgment of
a tribunal of a foreign country, having jurisdiction to pronounce the
judgment is as follows:
In case of a judgment upon a specific thing, the judgment is
conclusive upon the title to the thing;
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.
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.
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.
[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.
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.
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.
the trial court abstained from taking jurisdiction solely on the basis of the
pleadings filed by private respondents in connection with the motion to
dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a
domestic corporation and one of the defendants (Ventura Ducat) is a
Filipino, and that it was the extinguishment of the latter's debt which was
the object of the transaction under litigation. The trial court arbitrarily
dismissed the case even after finding that Ducat was not a party in the
U.S. case.
Third. It was error we think for the Court of Appeals and the trial court to
hold that jurisdiction over 1488, Inc. and Daic could not be obtained
because this is an action in personam and summons were served by
extraterritorial service. Rule 14, 17 on extraterritorial service provides
that service of summons on a non-resident defendant may be effected out
of the Philippines by leave of Court where, among others, "the property of
the defendant has been attached within the Philippines." 18 It is not
disputed that the properties, real and personal, of the private respondents
had been attached prior to service of summons under the Order of the trial
court dated April 20, 1987.
Fourth. As for the temporary restraining order issued by the Court on June
29, 1994, to suspend the proceedings in Civil Case No. 92-1445 filed by
Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the
petitioners by the U.S. court, the Court finds that the judgment sought to
be enforced is severable from the main judgment under consideration in
Civil Case No. 16563. The separability of Guevara's claim is not only

admitted by petitioners, 20 it appears from the pleadings that petitioners

only belatedly impleaded Guevarra as defendant in Civil Case No. 16563.
21 Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to
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

G.R. No. L-24170

December 16, 1968


That on September 10, 1950, at about noon time, a customs patrol team
on board Patrol Boat ST-23 intercepted the five (5) sailing vessels in
question on the high seas, between British North Borneo and Sulu while
they were heading towards Tawi-tawi, Sulu.
Customs officers boarded and found on board, 181 cases of 'Herald'
cigarettes, 9 cases of 'Camel' cigarettes, and some pieces of rattan chairs.
The sailing vessels are all of Philippine registry, owned and manned by
Filipino residents of Sulu, and of less than thirty (30) tons burden. They
came from Sandakan, British North Borneo, but did not possess any permit
from the Commissioner of Customs to engage in the importation of
merchandise into any port of the Sulu sea, as required by Section 1363(a)
of the Revised Administrative Code. Their cargoes were not covered by the
required import license under Republic Act No. 426, otherwise known as
the Import Control Law."
Respondent Commissioner of Customs, as noted at the outset, affirmed
the decision rendered by the Collector of Customs of Jolo, who found cause
for forfeiture under the law of the vessels and the cargo contained therein.
He was, as also already made known, sustained by the Court of Tax
CTA: Affirmed
Hence this petition for review.
WON the interception and seizure by customs officials on the high seas is
It has been established that the five vessels came from Sandakan, British
North Borneo, a foreign port, and when intercepted, all of them were
heading towards Tawi-tawi, a domestic port within the Sulu sea. Laden
with foreign manufactured cigarettes, they did not possess the import

license required by Republic Act No. 426, nor did they carry a permit from
the Commissioner of Customs to engage in importation into any port in the
Sulu sea. Their course announced loudly their intention not merely to skirt
along the territorial boundary of the Philippines but to come within our
limits and land somewhere in Tawi-tawi towards which their prows were
pointed. As a matter of fact, they were about to cross our aquatic
boundary but for the intervention of a customs patrol which, from all
appearances, was more than eager to accomplish its mission."
It is quite irrational for Filipino sailors manning five Philippine vessels to
sneak out of the Philippines and go to British North Borneo, and come a
long way back laden with highly taxable goods only to turn about upon
reaching the brink of our territorial waters and head for another foreign
From the apprehension and seizure of the vessels in question on the high
seas beyond the territorial waters of the Philippines, the absence of
jurisdiction of Commissioner of Customs is predicated. Such contention of
petitioners-appellants is without merit.
It is unquestioned that all vessels seized are of Philippine registry. The
Revised Penal Code leaves no doubt as to its applicability and
enforceability not only within the Philippines, its interior waters and
maritime zone, but also outside of its jurisdiction against those committing
offense while on a Philippine ship ...8 The principle of law that sustains the
validity of such a provision equally supplies a firm foundation for the
seizure of the five sailing vessels found thereafter to have violated the
applicable provisions of the Revised Administrative Code.
It is a well settled doctrine of International Law that a state has the right
to protect itself and its revenues, a right not limited to its own territory but
extending to the high seas.
"The authority of a nation within its own territory is absolute and
exclusive. The seizure of a vessel within the range of its cannon by a
foreign force is an invasion of that territory, and is a hostile act which it is
its duty to repel. But its power to secure itself from injury may certainly be
exercised beyond the limits of its territory."
The fact that the alleged offense imputed to petitioners-appellants is a
violation of Section 1363(a) and not Section 1363(f). The title of Section
1363 is clear, "Property subject to forfeiture under customs laws." The first
subsection thereof, (a) cover any vessel including cargo unlawfully
engaged in the importation of merchandise except a port of entry.
Subsection (f) speaks of any merchandise of any prohibited importation,
the importation of which is effected or attempted contrary to law and all
other merchandise which in the opinion of the Collector of Customs have
been used are or were intended to be used as instrument in the
importation or exportation of the former.

The liability of the vessels and merchandise under the above terms of the
statute would appear to be undeniable. The action taken then by the
Commissioner of Customs was in accordance with law.
There was nothing arbitrary about the manner in which such seizure and
forfeiture were effected. The right to a hearing of petitioners-appellants
was respected. They could not have been unaware of what they were
doing. It would be an affront to reason if under the above circumstances
they could be allowed to raise in all seriousness a due process question.
Such a constitutional guaranty, basic and fundamental, certainly should
not be allowed to lend itself as an instrument for escaping a liability arising
from one's own nefarious acts.
Petitioners-appellants would further assail the validity of the action taken
by the respondent Commissioner of Customs by the plea that the repeal of
Republic Act No. 426 abated whatever liability could have been incurred
The expiration of the Import Control Law "did not produce the effect of
declaring legal the importation of goods which were illegally imported and
the seizure and forfeiture thereof as ordered by the Collector of Customs
illegal or null and void."
The expiration of Republic Act No. 650 could not have produced the effect
(1) of declaring legal the importation of the cotton counterpanes which
were illegally imported, and (2) of declaring the seizure and forfeiture
ordered by the Collector of Customs illegal or null and void; in other words
it could not have the effect of annulling or setting aside the decision of the
Collector of Customs which was rendered while the law was in force and
which should stand until it is revoked by the appellate tribunal."
Such expiration of the period of effectivity of Republic Act No. 650 "did not
have the effect of depriving the Commissioner of Customs of the
jurisdiction, acquired by him prior thereto, to act on cases of forfeiture
pending before him, which are in the nature of proceeding in rem.
It is thus most evident that the Court of Tax Appeals had not in any wise
refused to adhere faithfully to controlling legal principles when it sustained
the action taken by respondent Commissioner of Customs. It would be a
reproach and a reflection on the law if on the facts as they had been
shown to exist, the seizure and forfeiture of the vessels and cargo in
question were to be characterized as outside the legal competence of our
government and violative of the constitutional rights of petitionersappellants. Fortunately, as had been made clear above, that would be an
undeserved reflection and an unwarranted reproach. The vigor of the war
against smuggling must not be hampered by a misreading of international
law concepts and a misplaced reliance on a constitutional guaranty that
has not in any wise been infringed.

WHEREFORE, the decision of respondent Court of Tax Appeals of November

19, 1964, is affirmed.

G.R. No. L-5887

December 16, 1910

THE UNITED STATES, plaintiff-appellee,vs.

LOOK CHAW (alias LUK CHIU), defendant-appellant.
That between 11 and 12 o'clock a. m. on the present month (stated as
August 19, 1909), several persons, among them Messrs. Jacks and
Milliron, chief of the department of the port of Cebu and internal-revenue
agent of Cebu, respectively, went abroad the steamship Erroll to inspect
and search its cargo, and found, first in a cabin near the saloon, one sack.
The sack referred to as Exhibit A contained 49 cans of opium, and the
other, Exhibit B, the larger sack, also contained several cans of the same
substance. The hold, in which the sack mentioned in Exhibit B was found,
was under the defendant's control, who moreover, freely and of his own
will and accord admitted that this sack, as well as the other referred to in
Exhibit B and found in the cabin, belonged to him. The said defendant also
stated, freely and voluntarily, that he had bought these sacks of opium, in
Hongkong with the intention of selling them as contraband in Mexico or
Vera Cruz, and that, as his hold had already been searched several times
for opium, he ordered two other Chinamen to keep the sack. Exhibit A.
It is to be taken into account that the two sacks of opium, designated as
Exhibits A and B, properly constitute the corpus delicti. Moreover, another
lot of four cans of opium, marked, as Exhibit C, was the subject matter of
investigation at the trial, and with respect to which the chief of the
department of the port of Cebu testified that they were found in the part of
the ship where the firemen habitually sleep, and that they were delivered
to the first officer of the ship to be returned to the said firemen after the
vessel should have left the Philippines, because the firemen and crew of
foreign vessels, pursuant to the instructions he had from the Manila
custom-house, were permitted to retain certain amounts of opium, always
provided it should not be taken shore.
And, finally, another can of opium, marked "Exhibit D," is also corpus
delicti and important as evidence in this cause.
FISCAL. What is it?
WITNESS. It is a can opium which was bought from the defendant by a
secret-service agent and taken to the office of the governor to prove that
the accused had opium in his possession to sell.

On motion by the defense, the court ruled that this answer might be
stricken out "because it refers to a sale." But, with respect to this answer,
the chief of the department of customs had already given this testimony,
to wit:
FISCAL. Who asked you to search the vessel?
WITNESS. The internal-revenue agent came to my office and said that a
party brought him a sample of opium and that the same party knew that
there was more opium on board the steamer, and the agent asked that the
vessel be searched.
According to the testimony of the internal-revenue agent, the defendant
stated to him, in the presence of the provincial fiscal, of a Chinese
interpreter the warden of the jail, and four guards, that the opium seized
in the vessel had been bought by him in Hongkong, at three pesos for
each round can and five pesos for each one of the others, for the purpose
of selling it, as contraband, in Mexico and Puerto de Vera Cruz; that on the
15th the vessel arrived at Cebu, and on the same day he sold opium; that
he had tried to sell opium for P16 a can; that he had a contract to sell an
amount of the value of about P500; that the opium found in the room of
the other two Chinamen prosecuted in another cause, was his, and that he
had left it in their stateroom to avoid its being found in his room, which
had already been searched many times; and that, according to the
defendant, the contents of the large sack was 80 cans of opium, and of the
small one, 49, and the total number, 129.
It was established that the steamship Erroll was of English nationality, that
it came from Hongkong, and that it was bound for Mexico, via the call
ports of Manila and Cebu.
CFI of Cebu:
Sentenced the defendant to five years' imprisonment, to pay a fine of
P10,000, with additional subsidiary imprisonment in case of insolvency,
though not to exceed one third of the principal penalty, and to the
payment of the costs. It further ordered the confiscation, in favor of the
Insular Government, of the exhibits presented in the case.
Hence the current petition
WON the court acquired jurisdiction

That, although the mere possession of a thing of prohibited use in these

Islands, aboard a foreign vessel in transit, in any of their ports, does not,
as a general rule, constitute a crime triable by the courts of this country,
on account of such vessel being considered as an extension of its own
nationality, the same rule does not apply when the article, whose use is
prohibited within the Philippine Islands, in the present case a can of
opium, is landed from the vessel upon Philippine soil, thus committing an
open violation of the laws of the land, with respect to which, as it is a
violation of the penal law in force at the place of the commission of the
crime, only the court established in that said place itself had competent
jurisdiction, in the absence of an agreement under an international treaty.
It is also found: That, even admitting that the quantity of the drug seized,
the subject matter of the present case, was considerable, it does not
appear that, on such account, the two penalties fixed by the law on the
subject, should be imposed in the maximum degree.

When merchant vessels enter for the purposes of trade, it would be

obviously inconvenient and dangerous to society, and would subject the
laws to continual infraction, and the government to degradation, if such
individuals or merchants did not owe temporary and local allegiance, and
were not amenable to the jurisdiction of the country.
G.R. No. L-18924

October 19, 1922

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant, vs.

WONG CHENG (alias WONG CHUN), defendant-appellee.
Appellee is accused of having illegally smoked opium, aboard the merchant
vessel Changsa of English nationality while said vessel was anchored in
Manila Bay two and a half miles from the shores of the city.
Appellee filed a demurrer case
CFI of Manila:
Sustained the demurrer presented by the defendant
Hence the current petition
Whether the courts of the Philippines have jurisdiction over crime, like the
one herein involved, committed aboard merchant vessels anchored in our
jurisdiction waters.
Two fundamental rules on this particular matter in connection with
International Law; to wit, the French rule, according to which crimes
committed aboard a foreign merchant vessels should not be prosecuted in
the courts of the country within whose territorial jurisdiction they were
committed, unless their commission affects the peace and security of the
territory; and the English rule, based on the territorial principle and
followed in the United States, according to which, crimes perpetrated
under such circumstances are in general triable in the courts of the
country within territory they were committed. Of this two rules, it is the
last one that obtains in this jurisdiction, because at present the theories
and jurisprudence prevailing in the United States on this matter are
authority in the Philippines which is now a territory of the United States.
In the cases of The Schooner Exchange vs. M'Faddon and Others Chief
Justice Marshall said:

United States vs. Bull

No court of the Philippine Islands had jurisdiction over an offense or crime
committed on the high seas or within the territorial waters of any other
country, but when she came within three miles of a line drawn from the
headlands, which embrace the entrance to Manila Bay, she was within
territorial waters, and a new set of principles became applicable.
The ship and her crew were then subject to the jurisdiction of the
territorial sovereign subject to such limitations as have been conceded by
that sovereignty through the proper political agency.
Mali and Wildenhus vs. Keeper of the Common Jail:
The principle which governs the whole matter is this: Disorder which
disturb only the peace of the ship or those on board are to be dealt with
exclusively by the sovereignty of the home of the ship, but those which
disturb the public peace may be suppressed, and, if need be, the offenders
punished by the proper authorities of the local jurisdiction. It may not be
easy at all times to determine which of the two jurisdictions a particular
act of disorder belongs. Much will undoubtedly depend on the attending
circumstances of the particular case, but all must concede that felonious
homicide is a subject for the local jurisdiction, and that if the proper
authorities are proceeding with the case in the regular way the consul has
no right to interfere to prevent it.
United States vs. Look Chaw:
Although the mere possession of an article of prohibited use in the
Philippine Islands, aboard a foreign vessel in transit in any local port, does
not, as a general rule, constitute a crime triable by the courts of the
Islands, such vessels being considered as an extension of its own
nationality, the same rule does not apply when the article, the use of
which is prohibited in the Islands, is landed from the vessels upon
Philippine soil; in such a case an open violation of the laws of the land is
committed with respect to which, as it is a violation of the penal law in
force at the place of the commission of the crime, no court other than that
established in the said place has jurisdiction of the offense, in the absence
of an agreement under an international treaty.
As to whether the United States has ever consented by treaty or otherwise
to renouncing such jurisdiction or a part thereof, we find nothing to this
effect so far as England is concerned, to which nation the ship where the

crime in question was committed belongs. Besides, in his work "Treaties,

Conventions, etc.," volume 1, page 625, Malloy says the following:
There shall be between the territories of the United States of America, and
all the territories of His Britanic Majesty in Europe, a reciprocal liberty of
commerce. The inhabitants of the two countries, respectively, shall have
liberty freely and securely to come with their ships and cargoes to all such
places, ports and rivers, in the territories aforesaid, to which other
foreigners are permitted to come, to enter into the same, and to remain
and reside in any parts of the said territories, respectively; also to hire and
occupy houses and warehouses for the purposes of their commerce; and,
generally, the merchants and traders of each nation respectively shall
enjoy the most complete protection and security for their commerce, but
subject always to the laws and statutes of the two countries, respectively.
We have seen that the mere possession of opium aboard a foreign vessel
in transit was held by this court not triable by or courts, because it being
the primary object of our Opium Law to protect the inhabitants of the
Philippines against the disastrous effects entailed by the use of this drug,
its mere possession in such a ship, without being used in our territory,
does not being about in the said territory those effects that our statute
contemplates avoiding. Hence such a mere possession is not considered a
disturbance of the public order.
But to smoke opium within our territorial limits, even though aboard a
foreign merchant ship, is certainly a breach of the public order here
established, because it causes such drug to produce its pernicious effects
within our territory. It seriously contravenes the purpose that our
Legislature has in mind in enacting the aforesaid repressive statute.
Moreover, as the Attorney-General aptly observes:
. . . The idea of a person smoking opium securely on board a foreign
vessel at anchor in the port of Manila in open defiance of the local
authorities, who are impotent to lay hands on him, is simply subversive of
public order. It requires no unusual stretch of the imagination to conceive
that a foreign ship may come into the port of Manila and allow or solicit
Chinese residents to smoke opium on board.
The order appealed from is revoked and the cause ordered remanded to
the court of origin for further proceedings in accordance with law, without
special findings as to costs. So ordered.

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.
G.R. No. 120135

March 31, 2003


LTD., petitioners,
LITONJUA, SR., and AURELIO K. LITONJUA, JR., respondents.
Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua ) filed a Complaint2 before
the RTC of Pasig against the Bank of America NT&SA and Bank of America
International, Ltd. 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 corporations as the
borrowers: (a) El Carrier4; (b) El General5; (c) El Challenger6; and (d) El
Conqueror7; the vessels were registered in the names of their
corporations; the operation and the funds derived therefrom were placed
under the complete and exclusive control and disposition of the
petitioners;8 and the possession the vessels was also placed by defendant
banks in the hands of persons selected and designated by them.
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.

Defendant banks filed a Motion to Dismiss on grounds of forum non

conveniens and lack of cause of action against them.
RTC of Pasig:
Denied the Motion to Dismiss
Instead of filing an answer the defendant banks went to the Court of
Appeals on a "Petition for Review on Certiorari"
CA: Dismissed the petition


Hence the current petition

WON Should the complaint be dismissed on the ground of forum nonconveniens
WON private respondents guilty of forum shopping because of the
pendency of foreign action
The doctrine of forum non-conveniens, literally meaning 'the forum is
inconvenient', emerged in private international law to deter the practice of
global forum shopping,42 that is to prevent non-resident litigants from
choosing the forum or place wherein to bring their suit for malicious
reasons, such as to secure procedural advantages, to annoy and harass
the defendant, to avoid overcrowded dockets, or to select a more friendly
venue. Under this doctrine, a court, in conflicts of law cases, may refuse
impositions on its jurisdiction where it is not the most "convenient" or
available forum and the parties are not precluded from seeking remedies
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
Evidently, all these requisites are present in the instant case.

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.
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.
In case at bar, not all the requirements for litis pendentia are present.
While there may be identity of parties, notwithstanding the presence of
other respondents,51 as well as the reversal in positions of plaintiffs and
defendants52, still the other requirements necessary for litis pendentia
were not shown by petitioner. It merely mentioned that civil cases were
filed in Hongkong and England without however showing the identity of
rights asserted and the reliefs sought for as well as the presence of the
elements of res judicata should one of the cases be adjudged.
Consequently, both courts correctly denied the dismissal of herein subject
WHEREFORE, the petition is DENIED for lack of merit.

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.

G.R. No. 120077

October 13, 2000


Private respondent Marcelo 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 and the Manila Hotel
International Company, Limited.
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
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.
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 June 4, 1988, respondent Santos wrote the Palace Hotel and

acknowledged Mr. Henk's letter. Respondent Santos enclosed four (4)
signed copies of the employment contract (dated June 4, 1988) and
notified them that he was going to arrive in Manila during the first week of
July 1988.
The employment contract of June 4, 1988 stated that his employment
would commence September 1, 1988 for a period of two years.12 It
provided for a monthly salary of nine hundred dollars (US$900.00) net of
taxes, payable fourteen (14) times a year.13
On June 30, 1988, respondent Santos was deemed resigned from the
Mazoon Printing Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He
started to work at the Palace Hotel.14
Subsequently, respondent Santos signed an amended "employment
agreement" with the Palace Hotel, effective November 5, 1988. In the
contract, Mr. Shmidt represented the Palace Hotel. The Vice President
(Operations and Development) of petitioner MHICL Miguel D. Cergueda
signed the employment agreement under the word "noted".
From June 8 to 29, 1989, respondent Santos was in the Philippines on
vacation leave. He returned to China and reassumed his post on July 17,
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.
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.

NLRC: ruled in favor of private respondent.

On November 11, 1989, Mr. Shmidt replied, to wit:

Hence the current petition

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.

WON forum non-conveniens is applicable

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
The Palace Hotel and Mr. Shmidt were not served with summons and
neither participated in the proceedings before the Labor Arbiter.18
Labor Arbiter Ceferina J. Diosana:
Decided the case against petitioners
Petitioners appealed to the NLRC, arguing that the POEA, not the NLRC
had jurisdiction over the case.
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.
MR as he was not an "overseas contract worker:
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.
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
Labor Arbiter de Veras report: 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

MR: Denied

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

The employment contract was not perfected in the Philippines. Respondent

Santos signified his acceptance by writing a letter while he was in the
Republic of Oman. This letter was sent to the Palace Hotel in the People's
Republic of China.
No power to determine the facts. Neither can the NLRC determine the
facts surrounding the alleged illegal dismissal as all acts complained of
took place in Beijing, People's Republic of China. The NLRC was not in a
position to determine whether the Tiannamen Square incident truly
adversely affected operations of the Palace Hotel as to justify respondent
Santos' retrenchment.
Principle of effectiveness, no power to execute decision. Even assuming
that a proper decision could be reached by the NLRC, such would not have
any binding effect against the employer, the Palace Hotel. The Palace Hotel
is a corporation incorporated under the laws of China and was not even
served with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to
solve controversies involving foreign employers. Neither are we saying that
we do not have power over an employment contract executed in a foreign
country. If Santos were an "overseas contract worker", a Philippine forum,
specifically the POEA, not the NLRC, would protect him.39 He is not an
"overseas contract worker" a fact which he admits with conviction.40

"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

Even assuming that the NLRC was the proper forum, even on the merits,
the NLRC's decision cannot be sustained.

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

IV. Grave Abuse of Discretion

V. The Fallo

Considering that the NLRC was forum non-conveniens and considering

further that no employer-employee relationship existed between MHICL,
MHC and respondent Santos, Labor Arbiter Ceferina J. Diosana clearly had
no jurisdiction over respondent's claim in NLRC NCR Case No. 00-0201058-90.

WHEREFORE, the Court hereby GRANTS the petition for certiorari and
ANNULS the orders and resolutions of the National Labor Relations

Labor Arbiters have exclusive and original jurisdiction only over the
"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;

intervene with an attached complaint-in-intervention, alleging that upon

request of NSS, Crestamonte's general agent in Japan, K.K. Shell provided
and supplied marine diesel oil/fuel to the W Estella at the ports of Tokyo
and Mutsure in Japan and that despite previous demands Crestamonte has
failed to pay the amounts of Sixteen Thousand Nine Hundred Ninety-Six
Dollars and Ninety- Six Cents (US$16,996.96) and One Million Yen
(Y1,000,000.00) and that K.K. Shell's claim constitutes a maritime lien on
the MV Estella. The complaint-in-intervention sought the issuance of a writ
of preliminary attachment.
The trial court allowed the intervention of Fu Hing and K.K. Shell.
G.R. Nos. 90306-07

July 30, 1990

Atlantic and the MV Estella moved to

intervention filed by Fu Hing and K.K. Shell.





LTD., petitioners,
and THE VESSEL M/V "ESTELLA", respondents.

In the meantime, Atlantic and the AWU Estella filed a petition in the Court
of Appeals against the trial court judge, Kumagai, NSS and Keihin. Denied
the motion to reconsider the order allowing Fu Hing's intervention and
granted K.K. Shell's motion to intervene.


CA: annulled the orders of the trial court and directed it to cease and
desist from proceeding with the case.

Kumagai Kaiun Kaisha, Ltd. a corporation formed and existing under the
laws of Japan, filed a complaint for the collection of a sum of money with
preliminary attachment against Atlantic Venus Co., S.A a corporation
registered in Panama, the vessel MV Estella and Crestamonte Shipping
Corporation a Philippine corporation. Atlantic is the owner of the MV
Estella. The complaint, docketed as a Civil Case on RTC of Manila alleged
that Crestamonte, as bareboat charterer and operator of the MV Estella,
appointed N.S. Shipping Corporation a Japanese corporation, as its general
agent in Japan. The appointment was formalized in an Agency Agreement.
NSS in turn appointed Kumagai as its local agent in Osaka, Japan.
Kumagai supplied the MV Estella with supplies and services but despite
repeated demands Crestamonte failed to pay the amounts due.
NSS and Keihin Narasaki Corporation filed complaints-in-intervention.
Petitioner Fu Hing Oil Co., Ltd. a corporation organized in Hong Kong and
not doing business in the Philippines, filed a motion for leave to intervene
with an attached complaint-in-intervention, alleging that Fu Hing supplied
marine diesel oil/fuel to the MV Estella and incurred barge expenses for
the total sum of One Hundred Fifty-two Thousand Four Hundred Twelve
Dollars and Fifty-Six Cents (US$152,412.56) but such has remained
unpaid despite demand and that the claim constitutes a maritime lien. The
issuance of a writ of attachment was also prayed for.
Petitioner K.K. Shell Sekiyu Osaka Hatsubaisho a corporation organized in
Japan and not doing business in the Philippines, likewise filed a motion to

Fu Hing and K.K. Shell were not suppliers but sub-agents of NSS, hence
they were bound by the Agency Agreement between Crestamonte and
NSS, particularly, the choice of forum clause, which provides:
12.0-That this Agreement shall be governed by the Laws of Japan. Any
matters, disputes, and/or differences arising between the parties hereto
concerned regarding this Agreement shall be subject exclusively to the
jurisdiction of the District Courts of Japan.
Thus, concluded the Court of Appeals, the trial court should have
disallowed their motions to intervene.


Hence the current petition

Whether the court has acquired jurisdiction?
A reading of the Agency Agreement fails to support the conclusion
that K.K. Shell is a sub-agent of NSS and is, therefore, bound by the

The body of the Agency Agreement entered into by and between

Crestamonte (referred to in the agreement as "Owner") and NSS ("Agent")
That the OWNER has appointed and by these presents hereby appoints the
AGENT as its General Agents for all Japan in connection with the Owner's
vessels and/or providing suitable vessels for Japan Ports under the
following terms and conditions:
12.0 That this Agreement shall be governed by the Laws of Japan. Any
matters, disputes, and/or differences arising between the parties hereto
concerned regarding this reement shall be subject exclusively to the
jurisdiction of the District Courts of Japan. [Annex "G" of the Petition,
Rollo, pp. 100-104.]
No express reference to the contracting of sub-agents or the applicability
of the terms of the agreement, particularly the choice-of-forum clause, to
sub-agents is made in the text of the agreement. What the contract clearly
states are NSS' principal duties.
In the same vein, as the choice-of-forum clause in the agreement
(paragraph 12.0) has not been conclusively shown to be binding upon K.K.
Shell, additional evidence would also still have to be presented to establish
this defense, K.K. Shell cannot therefore, as of yet, be barred from
instituting an action in the Philippines.
Private respondents have anticipated the possibility that the courts will not
find that K.K. Shell is expressly bound by the Agency Agreement, and thus
they fall back on the argument that even if this were so, the doctrine of
forum non conveniens would be a valid ground to cause the dismissal of
K.K. Shell's complaint-in-intervention.
K.K. Shell counters this argument by invoking its right as maritime
lienholder. It cites Presidential Decree No. 1521, the Ship Mortgage Decree
of 1978, which provides:
SEC. 21. Maritime Lien for Necessaries; person entitled to such lien-Any
person furnishing repairs, supplies, to wage, use of dry dock or marine
railway, or other necessaries, to any vessel, whether foreign or domestic,
upon the order of the owner of such vessel, or of a person authorized by
the owner, shall have a maritime lien on the vessel, which may be
enforced by suit in rem, and it shall be necessary to allege or prove that
credit was given to the vessel.
Private respondents on the other hand argue that even if P.D. No. 1521 is
applicable, K.K. Shell cannot rely on the maritime lien because the fuel
was provided not exclusively for the benefit of the MV Estella, but for the
benefit of Crestamonte in general. Under the law it must be established

that the credit was extended to the vessel itself. Now, this is a defense
that calls precisely for a factual determination by the trial court of who
benefitted from the delivery of the fuel. Hence, again, the necessity for the
reception of evidence before the trial court.
In other words, considering the dearth of evidence due to the fact that the
private respondents have yet to file their answer in the proceedings below
and trial on the merits is still to be conducted, whether or not petitioners
are indeed maritime lienholders and as such may enforce the lien against
the MV Estella are matters that still have to be established.
Neither are we ready to rule on the private respondents' invocation of the
doctrine of forum non conveniens, as the exact nature of the relationship
of the parties is still to be established. We leave this matter to the sound
discretion of the trial court judge who is in the best position, after some
vital facts are established, to determine whether special circumstances
require that his court desist from assuming jurisdiction over the suit.
It was clearly reversible error on the. part of the Court of Appeals to annul
the trial court's orders, insofar as K.K. Shell is concerned, and order the
trial court to cease and desist from proceeding with Civil Case No. 8738930. There are still numerous material facts to be established in order to
arrive at a conclusion as to the true nature of the relationship between
Crestamonte and K.K. Shell and between NSS and K.K. Shell. The best
recourse would have been to allow the trial court to proceed with Civil
Caseand consider whatever defenses may be raised by private respondents
after they have filed their answer and evidence to support their conflicting
claims has been presented. The Court of Appeals, however, substituted its
judgment for that of the trial court and decided the merits of the case,
even in the absence of evidence, on the pretext of reviewing an
interlocutory order.
WHEREFORE, the petition is GRANTED and the decision of the Court of
Appeals is REVERSED

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.
ITEC charges the petitioners and another Philippine Corporation, DIGITAL
BASE COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of
which is likewise petitioner Aguirre, of using knowledge and information of
ITEC's products specifications to develop their own line of equipment and
product support, which are similar, if not identical to ITEC's own, and
offering them to ITEC's former customer.
G.R. No. 102223

August 22, 1996

FRANCISCO S. AGUIRRE, petitioners,
INC., respondents.
MULTI-TRADE INC., are both domestic corporations, while petitioner
Francisco S. Aguirre is their President and majority stockholder. Private
Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for
brevity) are corporations duly organized and existing under the laws of the
State of Alabama, United States of America. ITEC is a foreign corporation
not licensed to do business in the Philippines.
ITEC entered into a contract with petitioner ASPAC referred to as
"Representative Agreement". 1 Pursuant to the contract, ITEC engaged
ASPAC as its "exclusive representative" in the Philippines for the sale of
ITEC's products, in consideration of which, ASPAC was paid a stipulated
commission. The agreement was signed by G.A. Clark and Francisco S.
Aguirre, presidents of ITEC and ASPAC respectively, for and in behalf of
their companies. 2 The said agreement was initially for a term of twentyfour months. After the lapse of the agreed period, the agreement was
renewed for another twenty-four months.
Through a "License Agreement" 3 entered into by the same parties on
November 10, 1988, ASPAC was able to incorporate and use the name
"ITEC" in its own name. Thus , ASPAC Multi-Trade, Inc. became legally and
publicly known as ASPAC-ITEC (Philippines).
By virtue of said contracts, ASPAC sold electronic products, exported by
ITEC, to their sole customer, the Philippine Long Distance Telephone
Company, (PLDT, for brevity).

Defendants filed a motion to dismiss the complaint

RTC of Makati:
(1) denying the motion to dismiss for being devoid of legal merit with
a rejection of both grounds relied upon by the defendants in their
motion to dismiss, and (2) directing the issuance of a writ of
preliminary injunction on the same day.
CA: Dismissed


Hence the current petition

WON Philippine court acquire jurisdiction over the person of the petitioner
corp, despite allegations of lack of capacity to sue because of nonregistration?
WON the Philippine court give due course to the suit or dismiss it, on the
principle of forum non convenience
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."
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
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

premiums on outstanding policies 32 were regarded as doing business

With the abovestated precedents in mind, we are persuaded to conclude
that private respondent had been "engaged in" or "doing business" in the
Philippines for some time now. This is the inevitable result after a scrutiny
of the different contracts and agreements entered into by ITEC with its
various business contacts in the country, particularly ASPAC and Telephone
Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a
local electronics firm engaged by ITEC to be its local technical
representative, and to create a service center for ITEC products sold
locally. Its arrangements, with these entities indicate convincingly ITEC's
purpose to bring about the situation among its customers and the general
public that they are dealing directly with ITEC, and that ITEC is actively
engaging in business in the country.
In its Master Service Agreement 39 with TESSI, private respondent
required its local technical representative to provide the employees of the
technical and service center with ITEC identification cards and business
cards, and to correspond only on ITEC, Inc., letterhead. TESSI personnel
are instructed to answer the telephone with "ITEC Technical Assistance
Center.", such telephone being listed in the telephone book under the
heading of ITEC Technical Assistance Center, and all calls being recorded
and forwarded to ITEC on a weekly basis.

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.

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.

Article 44 of the Omnibus Investments Code of 1987 defines the phrase to


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.

soliciting orders, purchases, service contracts, opening offices, whether

called "liaison" offices or branches; appointing representatives or
distributors who are domiciled in the Philippines or who in any calendar
year stay in the Philippines for a period or periods totalling one hundred
eighty (180) days or more; participating in the management, supervision
or control of any domestic business firm, entity or corporation in the
Philippines, and any other act or acts that imply a continuity or commercial
dealings or arrangements and contemplate to that extent the performance
of acts or works, or the exercise of some of the functions normally incident
to, and in progressive prosecution of, commercial gain or of the purpose
and object of the business organization.

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

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

When ITEC entered into the disputed contracts with ASPAC and TESSI,
they were carrying out the purposes for which it was created. 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.

an intelligent decision as to the law and the facts; and, 3) That the
Philippine Court has or is likely to have power to enforce its decision. 48

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. 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. One who has dealt with a corporation of foreign origin as a
corporate entity is estopped to deny its corporate existence and capacity.

The aforesaid requirements having been met, and in view of the court's
disposition to give due course to the questioned action, the matter of the
present forum not being the "most convenient" as a ground for the suit's
dismissal, deserves scant consideration.

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."
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.
Petitioner's insistence on the dismissal of this action due to the application,
or non application, of the private international law rule of forum non
conveniens defies well-settled rules of fair play. According to petitioner, the
Philippine Court has no venue to apply its discretion whether to give
cognizance or not to the present action, because it has not acquired
jurisdiction over the person of the plaintiff in the case, the latter allegedly
having no personality to sue before Philippine Courts. This argument is
misplaced because the court has already acquired jurisdiction over the
plaintiff in the suit, by virtue of his filing the original complaint. And as we
have already observed, petitioner is not at liberty to question plaintiff's
standing to sue, having already acceded to the same by virtue of its entry
into the Representative Agreement referred to earlier.
the Philippine Court may refuse to assume jurisdiction in spite of its having
acquired jurisdiction. Conversely, the court may assume jurisdiction over
the case if it chooses to do so; provided, that the following requisites are
met: 1) That the Philippine Court is one to which the parties may
conveniently resort to; 2) That the Philippine Court is in a position to make

IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby


Dismissed, The Resolution became final and executory
Respondent, then a resident of La Union, instituted an action for damages
before the Regional Trial Court (RTC) of Bauang, La Union.
In its Answer,8 petitioner alleged that contrary to respondents claim, it
was a foreign corporation duly licensed to do business in the Philippines
and denied entering into any arrangement with respondent or paying the
latter any sum of money. Petitioner also denied combining with BMSI and
RUST for the purpose of assuming the alleged obligation of the said
G.R. No. 162894

February 26, 2008


STOCKTON W. ROUZIE, JR., respondent.
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
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.
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.
Labor Arbiter Pablo C. Espiritu, Jr.
Rendered judgment ordering BMSI and RUST to pay respondents money
Reversed the decision of the Labor Arbiter and dismissed respondents
complaint on the ground of lack of jurisdiction.

Petitioner filed an Omnibus Motion for Preliminary Hearing Based on

Affirmative Defenses and for Summary Judgment12 seeking the dismissal
of the complaint on grounds of forum non conveniens and failure to state a
cause of action.
RTC of La Union:
Denied petitioners omnibus motion. The trial court held that the factual
allegations in the complaint, assuming the same to be admitted, were
sufficient for the trial court to render a valid judgment thereon. 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.
Denied the petition for certiorari for lack of merit.
MR: Denied
Hence the current petition
WON RTC acquired jurisdiction
WON the complaint should be dismissed on the ground of forum non
Thus, in the instances27 where the Court held that the local judicial
machinery was adequate to resolve controversies with a foreign element,
the following requisites had to be proved: (1) that the Philippine Court is

one to which the parties may conveniently resort; (2) that the Philippine
Court is in a position to make an intelligent decision as to the law and the
facts; and (3) that the Philippine Court has or is likely to have the power to
enforce its decision.
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.
Jurisdiction over the nature and subject matter of an action is conferred by
the Constitution and the law30 and by the material allegations in the
complaint, irrespective of whether or not the plaintiff is entitled to recover
all or some of the claims or reliefs sought therein.
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.
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
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws
cases, may refuse impositions on its jurisdiction where it is not the most
"convenient" or available forum and the parties are not precluded from
seeking remedies elsewhere.34 Petitioners averments of the foreign
elements in the instant case are not sufficient to oust the trial court of its
jurisdiction over Civil Case and the parties involved.
Moreover, the propriety of dismissing a case based on the principle of
forum non conveniens requires a factual determination; hence, it is more
properly considered as a matter of defense. While it is within the discretion
of the trial court to abstain from assuming jurisdiction on this ground, it
should do so only after vital facts are established, to determine whether
special circumstances require the courts desistance.35

Finding no grave abuse of discretion on the trial court, the Court of

Appeals respected its conclusion that it can assume jurisdiction over the
dispute notwithstanding its foreign elements. In the same manner, the
Court defers to the sound discretion of the lower courts because their
findings are binding on this Court.
WHEREFORE, the instant petition for review on certiorari is DENIED.

affirms the dismissal for lack of jurisdiction of an action commenced by a

plaintiff in these actions in his home country or the country in which he
was injured, that plaintiff may return to this court and, upon proper
motion, the court will resume jurisdiction over the action as if the case had
never been dismissed for [forum non conveniens].
A total of 336 plaintiffs from General Santos City filed a Joint Complaint14
in the RTC of General Santos City. Named as defendants therein were
Sea Bromine Co., Ltd.; Ameribrom, Inc.; Bromine Compounds, Ltd.; and
Amvac Chemical Corp. (The aforementioned defendants are hereinafter
collectively referred to as defendant companies.)

G.R. No. 125078

May 30, 2011


Presiding Judge, Regional Trial Court, Branch 37, General Santos
Proceedings before the Texas Courts
Beginning 1993, a number of personal injury suits were filed in different
Texas state courts by citizens of twelve foreign countries, including the
Philippines. The thousands of plaintiffs sought damages for injuries they
allegedly sustained from their exposure to dibromochloropropane (DBCP),
a chemical used to kill nematodes (worms), while working on farms in 23
foreign countries. The cases were eventually transferred to, and
consolidated in, the Federal District Court for the Southern District of
Texas, Houston Division.
The defendants in the consolidated cases prayed for the dismissal of all the
actions under the doctrine of forum non conveniens.
Federal District Court:
Granted the defendants motion to dismiss
Notwithstanding the dismissals that may result from this Memorandum
and Order, in the event that the highest court of any foreign country finally

Most of the defendant companies respectively filed their Motions for Bill of
Particulars.15 During the pendency of the motions NAVIDA, et al., filed an
Amended Joint Complaint,16 excluding Dead Sea Bromine Co., Ltd.,
Ameribrom, Inc., Bromine Compounds, Ltd. and Amvac Chemical Corp. as
party defendants.
DOW filed an Answer with Counterclaim.18
RTC of General Santos City:
Dismissed the complaint stating that they did not acquire jurisdiction to
hear the case, the tort alleged by Navida, et al., in their complaint is a tort
category that is not recognized in Philippine laws, that Navida, et al., were
coerced into submitting their case to the Philippine courts, that the act of
NAVIDA, et al., of filing the case in the Philippine courts violated the rules
on forum shopping and litis pendencia.
Likewise issued an Order,25 dismissing DOWs Answer with Counterclaim
RTC of General Santos City declared that it had already lost its jurisdiction
over the case as it took into consideration the Manifestation of the counsel
NAVIDA, et al., filed a Petition for Review on Certiorari in order to assail
the RTC Order which was docketed as G.R. No. 125078.
DOW and OCCIDENTAL filed their Petition for Review on Certiorari,32
challenging the orders of the RTC of General Santos City Their petition was
docketed as G.R. No. 125598.
This Court resolved to consolidate G.R. No. 125598 with G.R. No. 125078.
CHIQUITA filed a Petition for Review on Certiorari the petition was
docketed as G.R. No. 126018, the Court dismissed the aforesaid petition
for failure of CHIQUITA to show that the RTC committed grave abuse of

discretion. CHIQUITA filed a Motion for Reconsideration,36 but the same

was denied.

Granted, among others, the motion to withdraw petition for review filed by

Another joint complaint for damages against SHELL, DOW, OCCIDENTAL,
DOLE, DEL MONTE, and CHIQUITA was filed before Branch 16 of the RTC
of Davao City by 155 plaintiffs from Davao City


ABELLA, et al., alleged that, as workers in the banana plantation and/or as

residents near the said plantation, they were made to use and/or were
exposed to nematocides, which contained the chemical DBCP.
RTC of Davao City
Junked Civil Case No. 24,251-96 in its Order
Docketed as G.R. No. 126654, the petition for review, filed on November
12, 1996 by ABELLA, et al., assails before this Court the above-quoted
order of the RTC of Davao City.
SHELL, DOW, and CHIQUITA each filed their respective motions for
reconsideration, DEL MONTE also filed its motion for reconsideration, which
contained an additional motion for the inhibition of the presiding judge.
The presiding judge voluntarily inhibited inhibiting himself from trying the
case. Thus, the case was re-raffled to Branch 13 of the RTC of Davao City.
RTC of Davao: denied the respective motions for reconsideration filed by
defendant companies.
NAVIDA, et al., and ABELLA, et al., filed before this Court a Consolidated
Motion. The plaintiff claimants alleged that they had amicably settled their
cases with DOW, OCCIDENTAL, and SHELL. This settlement agreement was
evidenced by facsimiles of the "Compromise Settlement, Indemnity, and
Hold Harmless Agreement," which were attached to the said motion.
Pursuant to said agreement, the plaintiff claimants sought to withdraw
their petitions as against DOW, OCCIDENTAL, and SHELL.
DOLE, DEL MONTE and CHIQUITA, however, opposed the motion, as well
as the settlement entered into between the plaintiff claimants and DOW,
DOW and OCCIDENTAL filed a Motion to Withdraw Petition for Review in
G.R. No. 125598, 53 explaining that the said petition "is already moot and
academic and no longer presents a justiciable controversy" since they have
already entered into an amicable settlement with NAVIDA, et al. DOW and
OCCIDENTAL added that they have fully complied with their obligations set
forth in the 1997 Compromise Agreements.


The rule is settled that jurisdiction over the subject matter of a case is
conferred by law and is determined by the allegations in the complaint and
the character of the relief sought, irrespective of whether the plaintiffs are
entitled to all or some of the claims asserted therein.59 Once vested by
law, on a particular court or body, the jurisdiction over the subject matter
or nature of the action cannot be dislodged by anybody other than by the
legislature through the enactment of a law.
At the time of the filing of the complaints, the jurisdiction of the RTC in
civil cases under Batas Pambansa Blg. 129, as amended by Republic Act
No. 7691, was:
SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise
exclusive original jurisdiction:
(8) In all other cases in which the demand, exclusive of interest, damages
of whatever kind, attorneys fees, litigation expenses, and costs or the
value of the property in controversy exceeds One hundred thousand pesos
(P100,000.00) or, in such other cases in Metro Manila, where the demand,
exclusive of the abovementioned items exceeds Two hundred thousand
pesos (P200,000.00).60
Corollary thereto, Supreme Court Administrative Circular No. 09-94,
2. The exclusion of the term "damages of whatever kind" in determining
the jurisdictional amount under Section 19 (8) and Section 33 (1) of B.P.
Blg. 129, as amended by R.A. No. 7691, applies to cases where the
damages are merely incidental to or a consequence of the main cause of
action. However, in cases where the claim for damages is the main cause
of action, or one of the causes of action, the amount of such claim shall be
considered in determining the jurisdiction of the court.

It is clear that the claim for damages is the main cause of action and that
the total amount sought in the complaints is approximately P2.7 million for
each of the plaintiff claimants. The RTCs unmistakably have jurisdiction
over the cases filed in General Santos City and Davao City, as both claims
by NAVIDA, et al., and ABELLA, et al., fall within the purview of the
definition of the jurisdiction of the RTC under Batas Pambansa Blg. 129.
Article 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such
fault or negligence, if there is no pre-existing contractual relation between
the parties, is called a quasi-delict and is governed by the provisions of
this Chapter.
As specifically enumerated in the amended complaints, NAVIDA, et al., and
ABELLA, et al., point to the acts and/or omissions of the defendant
companies in manufacturing, producing, selling, using, and/or otherwise
putting into the stream of commerce, nematocides which contain DBCP,
"without informing the users of its hazardous effects on health and/or
without instructions on its proper use and application."
Clearly then, the acts and/or omissions attributed to the defendant
companies constitute a quasi-delict which is the basis for the claim for
damages filed by NAVIDA, et al., and ABELLA, et al., with individual claims
of approximately P2.7 million for each plaintiff claimant, which obviously
falls within the purview of the civil action jurisdiction of the RTCs.
Moreover, the injuries and illnesses, which NAVIDA, et al., and ABELLA, et
al., allegedly suffered resulted from their exposure to DBCP while they
were employed in the banana plantations located in the Philippines or
while they were residing within the agricultural areas also located in the
Philippines. The factual allegations in the Amended Joint-Complaints all
point to their cause of action, which undeniably occurred in the Philippines.
The RTC of General Santos City and the RTC of Davao City obviously have
reasonable basis to assume jurisdiction over the cases.
In a very real sense, most of the evidence required to prove the claims of
NAVIDA, et al., and ABELLA, et al., are available only in the Philippines.
First, plaintiff claimants are all residents of the Philippines, either in
General Santos City or in Davao City. Second, the specific areas where
they were allegedly exposed to the chemical DBCP are within the territorial
jurisdiction of the courts a quo wherein NAVIDA, et al., and ABELLA, et al.,
initially filed their claims for damages. Third, the testimonial and
documentary evidence from important witnesses, such as doctors, coworkers, family members and other members of the community, would be
easier to gather in the Philippines. Considering the great number of
plaintiff claimants involved in this case, it is not far-fetched to assume that
voluminous records are involved in the presentation of evidence to support
the claim of plaintiff claimants. Thus, these additional factors, coupled with
the fact that the alleged cause of action of NAVIDA, et al., and ABELLA, et

al., against the defendant companies for damages occurred in the

Philippines, demonstrate that, apart from the RTC of General Santos City
and the RTC of Davao City having jurisdiction over the subject matter in
the instant civil cases, they are, indeed, the convenient fora for trying
these cases.
The RTC of General Santos City and the RTC of Davao City validly acquired
jurisdiction over the persons of all the defendant companies
It is well to stress again that none of the parties claims that the courts a
quo lack jurisdiction over the cases filed before them. All parties are one in
asserting that the RTC of General Santos City and the RTC of Davao City
have validly acquired jurisdiction over the persons of the defendant
companies in the action below. All parties voluntarily, unconditionally and
knowingly appeared and submitted themselves to the jurisdiction of the
courts a quo.
Rule 14, Section 20 of the 1997 Rules of Civil Procedure provides that
"[t]he defendants voluntary appearance in the action shall be equivalent
to service of summons." In this connection, all the defendant companies
designated and authorized representatives to receive summons and to
represent them in the proceedings before the courts a quo. All the
defendant companies submitted themselves to the jurisdiction of the
courts a quo by making several voluntary appearances, by praying for
various affirmative reliefs, and by actively participating during the course
of the proceedings below.
Furthermore, the active participation of a party in the proceedings is
tantamount to an invocation of the courts jurisdiction and a willingness to
abide by the resolution of the case, and will bar said party from later on
impugning the court or bodys jurisdiction.69
Thus, the RTC of General Santos City and the RTC of Davao City have
validly acquired jurisdiction over the persons of the defendant companies,
as well as over the subject matter of the instant case. What is more, this
jurisdiction, which has been acquired and has been vested on the courts a
quo, continues until the termination of the proceedings.
It may also be pertinently stressed that "jurisdiction" is different from the
"exercise of jurisdiction." Jurisdiction refers to the authority to decide a
case, not the orders or the decision rendered therein. Accordingly, where a
court has jurisdiction over the persons of the defendants and the subject
matter, as in the case of the courts a quo, the decision on all questions
arising therefrom is but an exercise of such jurisdiction. Any error that the
court may commit in the exercise of its jurisdiction is merely an error of
judgment, which does not affect its authority to decide the case, much less
divest the court of the jurisdiction over the case.70

Plaintiffs purported bad faith in filing the subject civil cases in Philippine
Anent the insinuation by DOLE that the plaintiff claimants filed their cases
in bad faith merely to procure a dismissal of the same and to allow them
to return to the forum of their choice, this Court finds such argument
much too speculative to deserve any merit.

In solidary obligations, the paying debtors right of reimbursement is

provided for under Article 1217 of the Civil Code, to wit:
Art. 1217. Payment made by one of the solidary debtors extinguishes the
obligation. If two or more solidary debtors offer to pay, the creditor may
choose which offer to accept.

It must be remembered that this Court does not rule on allegations that
are unsupported by evidence on record. This Court does not rule on
allegations which are manifestly conjectural, as these may not exist at all.
This Court deals with facts, not fancies; on realities, not appearances.
When this Court acts on appearances instead of realities, justice and law
will be short-lived.71 This is especially true with respect to allegations of
bad faith, in line with the basic rule that good faith is always presumed
and bad faith must be proved.72

He who made the payment may claim from his co-debtors only the share
which corresponds to each, with the interest for the payment already
made. If the payment is made before the debt is due, no interest for the
intervening period may be demanded.

In sum, considering the fact that the RTC of General Santos City and the
RTC of Davao City have jurisdiction over the subject matter of the
amended complaints filed by NAVIDA, et al., and ABELLA, et al., and that
the courts a quo have also acquired jurisdiction over the persons of all the
defendant companies, it therefore, behooves this Court to order the
remand of Civil Case Nos. 5617 and 24,251-96 to the RTC of General
Santos City and the RTC of Davao City, respectively.

The above right of reimbursement of a paying debtor, and the

corresponding liability of the co-debtors to reimburse, will only arise,
however, if a solidary debtor who is made to answer for an obligation
actually delivers payment to the creditor. As succinctly held in Lapanday
Agricultural Development Corporation v. Court of Appeals,82 "[p]ayment,
which means not only the delivery of money but also the performance, in
any other manner, of the obligation, is the operative fact which will entitle
either of the solidary debtors to seek reimbursement for the share which
corresponds to each of the [other] debtors."83

Under Article 2028 of the Civil Code, "[a] compromise is a contract

whereby the parties, by making reciprocal concessions, avoid a litigation or
put an end to one already commenced." Like any other contract, an
extrajudicial compromise agreement is not excepted from rules and
principles of a contract. It is a consensual contract, perfected by mere
consent, the latter being manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to constitute the
contract.76 Judicial approval is not required for its perfection.77 A
compromise has upon the parties the effect and authority of res judicata78
and this holds true even if the agreement has not been judicially
approved.79 In addition, as a binding contract, a compromise agreement
determines the rights and obligations of only the parties to it.80
In light of the foregoing legal precepts, the RTC of General Santos City and
the RTC of Davao City should first receive in evidence and examine all of
the alleged compromise settlements involved in the cases at bar to
determine the propriety of dropping any party as a defendant therefrom.
It is true that, under Article 2194 of the Civil Code, the responsibility of
two or more persons who are liable for the same quasi-delict is solidary. A
solidary obligation is one in which each of the debtors is liable for the
entire obligation, and each of the creditors is entitled to demand the
satisfaction of the whole obligation from any or all of the debtors.81

When one of the solidary debtors cannot, because of his insolvency,

reimburse his share to the debtor paying the obligation, such share shall
be borne by all his co-debtors, in proportion to the debt of each.1avvphil

In the cases at bar, there is no right of reimbursement to speak of as yet.

A trial on the merits must necessarily be conducted first in order to
establish whether or not defendant companies are liable for the claims for
damages filed by the plaintiff claimants, which would necessarily give rise
to an obligation to pay on the part of the defendants.
At the point in time where the proceedings below were prematurely halted,
no cross-claims have been interposed by any defendant against another
defendant. If and when such a cross-claim is made by a non-settling
defendant against a settling defendant, it is within the discretion of the
trial court to determine the propriety of allowing such a cross-claim and if
the settling defendant must remain a party to the case purely in relation to
the cross claim.
WHEREFORE, the Court hereby GRANTS the petitions for review on
certiorari in G.R. Nos. 125078, 126654, and 128398. We REVERSE and
SET ASIDE the Order dated May 20, 1996 of the Regional Trial Court of
General Santos City, Branch 37, in Civil Case No. 5617, and the Order
dated October 1, 1996 of the Regional Trial Court of Davao City, Branch
16, and its subsequent Order dated December 16, 1996 denying
reconsideration in Civil Case No. 24,251-96, and REMAND the records of
this case to the respective Regional Trial Courts of origin for further and

appropriate proceedings in line with the ruling herein that said courts have
jurisdiction over the subject matter of the amended complaints in Civil
Case Nos. 5617 and 24,251-96.

Kitamaru demanded that he be assigned to the BBRI project. Nippon

insisted that Kitamarus contract was for a fixed term that had expired.
Kitamaru then filed for specific performance & damages w/ the RTC of Lipa
City. Nippon filed a MTD.
Nippons contention: The ICA had been perfected in Japan & executed by &
between Japanese nationals. Thus, the RTC of Lipa City has no jurisdiction.
The claim for improper pre-termination of Kitamarus ICA could only be
heard & ventilated in the proper courts of Japan following the principles of
lex loci celebrationis & lex contractus.
The RTC denied the motion to dismiss. The CA ruled hat the principle of lex
loci celebrationis was not applicable to the case, because nowhere in the
pleadings was the validity of the written agreement put in issue. It held
that the RTC was correct in applying the principle of lex loci solutionis.

G.R. No. 149177

November 23, 2007


CO., LTD., Petitioners,
Nippon Engineering Consultants (Nippon), a Japanese consultancy firm
providing technical and management support in the infrastructure projects
national permanently residing in the Philippines. The agreement provides
that Kitamaru was to extend professional services to Nippon for a year.
Nippon assigned Kitamaru to work as the project manager of the Southern
Tagalog Access Road (STAR) project. When the STAR project was near
completion, DPWH engaged the consultancy services of Nippon, this time
for the detailed engineering & construction supervision of the BongabonBaler Road Improvement (BBRI) Project. Kitamaru was named as the
project manger in the contract.
Hasegawa, Nippons general manager for its International Division,
informed Kitamaru that the company had no more intention of
automatically renewing his ICA. His services would be engaged by the
company only up to the substantial completion of the STAR Project.

Whether or not the subject matter jurisdiction of Philippine courts in civil

cases for specific performance & damages involving contracts executed
outside the country by foreign nationals may be assailed on the principles
of lex loci celebrationis, lex contractus, the state of the most significant
relationship rule, or forum non conveniens.
NO. In the judicial resolution of conflicts problems, 3 consecutive phases
are involved: jurisdiction, choice of law, and recognition and enforcement
of judgments. Jurisdiction & choice of law are 2 distinct concepts.
Jurisdiction considers whether it is fair to cause a defendant to travel to
this state; choice of law asks the further question whether the application
of a substantive law w/c will determine the merits of the case is fair to
both parties. The power to exercise jurisdiction does 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.
In this case, only the 1st phase is at issuejurisdiction. Jurisdiction,
however, has various aspects. For a court to validly exercise its power to
adjudicate a controversy, it must have jurisdiction over the
plaintiff/petitioner, over the defendant/respondent, over the subject
matter, over the issues of the case and, in cases involving property, over
the res or the thing w/c is the subject of the litigation. In assailing the trial
court's jurisdiction herein, Nippon is actually referring to subject matter

Jurisdiction over the subject matter in a judicial proceeding is conferred by

the sovereign authority w/c establishes and organizes the court. It is given
only by law and in the manner prescribed by law. It is further determined
by the allegations of the complaint irrespective of whether the plaintiff is
entitled to all or some of the claims asserted therein. To succeed in its
motion for the dismissal of an action for lack of jurisdiction over the
subject matter of the claim, the movant must show that the court or
tribunal cannot act on the matter submitted to it because no law grants it
the power to adjudicate the claims.
In the instant case, Nippon, in its MTD, does not claim that the RTC is not
properly vested by law w/ jurisdiction to hear the subject controversy for a
civil case for specific performance & damages is one not capable of
pecuniary estimation & is properly cognizable by the RTC of Lipa City. What
they rather raise as grounds to question subject matter jurisdiction are the
principles of lex loci celebrationis and lex contractus, and the state of the
most significant relationship rule. The Court finds the invocation of these
grounds unsound.
Lex loci celebrationis relates to the law of the place of the ceremony or
the law of the place where a contract is made. The doctrine of lex
contractus or lex loci contractus means the law of the place where a
contract is executed or to be performed. It controls the nature,
construction, and validity of the contract and it may pertain to the law
voluntarily agreed upon by the parties or the law intended by them either
expressly or implicitly. Under the state of the most significant relationship
rule, to ascertain what state law to apply to a dispute, the court should
determine which state has the most substantial connection to the
occurrence and the parties. In a case involving a contract, the court should
consider where the contract was made, was negotiated, was to be
performed, and the domicile, place of business, or place of incorporation of
the parties. This rule takes into account several contacts and evaluates
them according to their relative importance with respect to the particular
issue to be resolved.
Since these 3 principles in conflict of laws make reference to the law
applicable to a dispute, they are rules proper for the 2nd phase, the choice
of law. They determine which state's law is to be applied in resolving the

substantive issues of a conflicts problem. Necessarily, as the only issue in

this case is that of jurisdiction, choice-of-law rules are not only inapplicable
but also not yet called for.
Further, Nippons premature invocation of choice-of-law rules is exposed by
the fact that they have not yet pointed out any conflict between the laws
of Japan and ours. Before determining which law should apply, 1st there
should exist a conflict of laws situation requiring the application of the
conflict of laws rules. Also, when the law of a foreign country is invoked to
provide the proper rules for the solution of a case, the existence of such
law must be pleaded and proved.
It should be noted that when a conflicts case, one involving a foreign
element, is brought before a court or administrative agency, there are 3
alternatives open to the latter in disposing of it: (1) dismiss the case,
either because of lack of jurisdiction or refusal to assume jurisdiction over
the case; (2) assume jurisdiction over the case and apply the internal law
of the forum; or (3) assume jurisdiction over the case and take into
account or apply the law of some other State or States. The courts power
to hear cases and controversies is derived from the Constitution and the
laws. While it may choose to recognize laws of foreign nations, the court is
not limited by foreign sovereign law short of treaties or other formal
agreements, even in matters regarding rights provided by foreign
Neither can the other ground raised, forum non conveniens, be used to
deprive the RTC of its jurisdiction. 1st, it is not a proper basis for a motion
to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include it
as a ground. 2nd, whether a suit should be entertained or dismissed on
the basis of the said doctrine depends largely upon the facts of the
particular case and is addressed to the sound discretion of the RTC. In this
case, the RTC decided to assume jurisdiction. 3rd, the propriety of
dismissing a case based on this principle requires a factual determination;
hence, this conflicts principle is more properly considered a matter of