FOREIGN ELEMENT
They then requested her to go back to Jakarta to help arrange the release of Thamer
Jurisprudrence
FIRST DIVISION
G.R. No. 122191, October 08, 1998
SAUDI ARABIAN AIRLINES, PETITIONER, VS. COURT OF APPEALS, MILAGROS P. MORADA
AND HON. RODOLFO A. ORTIZ, IN HIS CAPACITY AS PRESIDING JUDGE OF BRANCH 89,
REGIONAL TRIAL COURT OF QUEZON CITY, RESPONDENTS.
DECISION
QUISUMBING, J.:
This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside the
Resolution[1] dated September 27, 1995 and the Decision[2] dated April 10, 1996 of the Court of
Appeals[3] in CA-G.R. SP No. 36533,[4] and the Orders[5] dated August 29, 1994[6] and February 2,
1995[7] that were issued by the trial court in Civil Case No. Q-93-18394.[8]
The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned
Decision[9], are as follows:
"On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines based in
Jeddah, Saudi Arabia. x x x
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance with fellow
crew members Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it was almost
morning when they returned to their hotels, they agreed to have breakfast together at the room of
Thamer. When they were in te (sic) room, Allah left on some pretext. Shortly after he did, Thamer
attempted to rape plaintiff. Fortunately, a roomboy and several security personnel heard her cries for
help and rescued her. Later, the Indonesian police came and arrested Thamer and Allah Al-Gazzawi,
the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her about the
Jakarta incident.
and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and base manager Baharini negotiated with
the police for the immediate release of the detained crew members but did not succeed because plaintiff
refused to cooperate. She was afraid that she might be tricked into something she did not want because
of her inability to understand the local dialect. She also declined to sign a blank paper and a document
written in the local dialect. Eventually, SAUDIA allowed plaintiff to return to Jeddah but barred her from
the Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian
authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they were again
put in service by defendant SAUDI (sic). In September 1990, defendant SAUDIA transferred plaintiff to
Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her
superiors requested her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi
Arabia. When she saw him, he brought her to the police station where the police took her passport and
questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her to
make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the
police return her passport and allowed her to catch the afternoon flight out of Jeddah.
One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the
departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered to take
a later flight to Jeddah to see Mr. Miniewy, the Chief Legal Officer of SAUDIA. When she did, a certain
Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sign a document
written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As
it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then
returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see
Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance from
SAUDIA’s Manila manager, Aslam Saleemi, that the investigation was routinary and that it posed no
danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing
happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about
the Jakarta incident. After one hour of interrogation, they let her go. At the airport, however, just as her
plane was about to take off, a SAUDIA officer told her that the airline had forbidden her to take flight. At
the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick took away her
passport and told her to remain in Jeddah, at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her
astonishment and shock, rendered a decision, translated to her in English, sentencing her to five
months imprisonment and to 286 lashes. Only then did she realize that the Saudi court had tried her,
together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff guilty of (1)
adultery; (2) going to a disco, dancing and listening to the music in violation of Islamic laws; and (3)
socializing with the male crew, in contravention of Islamic tradition." [10]
Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA.
Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in Jeddah to
help her while her case is on appeal. Meanwhile, to pay for her upkeep, she worked on the domestic
flight of SAUDIA, while Thamer and Allah continued to serve in the international flights.[11]
Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and
allowed her to leave Saudi Arabia. Shortly before her return to Manila, [12] she was terminated from the
service by SAUDIA, without her being informed of the cause.
On November 23, 1993, Morada filed a Complaint[13] for damages against SAUDIA, and Khaled Al-
Balawi ("Al- Balawi"), its country manager.
On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss[14] which raised the following
grounds, to wit: (1) that the Complaint states no cause of action against Saudia; (2) that defendant Al-
Balawi is not a real party in interest; (3) that the claim or demand set forth in the Complaint has been
waived, abandoned or otherwise extinguished; and (4) that the trial court has no jurisdiction to try the
case.
On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) [15] Saudia filed a reply[16]
thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint[17] wherein Al-Balawi was dropped as party
defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to Dismiss Amended
Complaint[18].
The trial court issued an Order[19] dated August 29, 1994 denying the Motion to Dismiss Amended
Complaint filed by Saudia.
From the Order of respondent Judge[20] denying the Motion to Dismiss, SAUDIA filed on September 20,
1994, its Motion for Reconsideration[21] of the Order dated August 29, 1994. It alleged that the trial court
has no jurisdiction to hear and try the case on the basis of Article 21 of the Civil Code, since the proper
law applicable is the law of the Kingdom of Saudi Arabia. On October 14, 1994, Morada filed her
Opposition[22] (To Defendant’s Motion for Reconsideration).
In the Reply[23] filed with the trial court on October 24, 1994, SAUDIA alleged that since its Motion for
Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus Motion Rule does not
apply, even if that ground is raised for the first time on appeal. Additionally, SAUDIA alleged that the
Philippines does not have any substantial interest in the prosecution of the instant case, and hence,
without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order[24] dated February 2, 1995, denying SAUDIA’s
Motion for Reconsideration. The pertinent portion of the assailed Order reads as follows:
"Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru counsel, on
September 20, 1994, and the Opposition thereto of the plaintiff filed, thru counsel, on October 14, 1994,
as well as the Reply therewith of defendant Saudi Arabian Airlines filed, thru counsel, on October 24,
1994, considering that a perusal of the plaintiff’s Amended Complaint, which is one for the recovery of
actual, moral and exemplary damages plus attorney’s fees, upon the basis of the applicable Philippine
law, Article 21 of the New Civil Code of the Philippines, is, clearly, within the jurisdiction of this Court as
regards the subject matter, and there being nothing new of substance which might cause the reversal or
modification of the order sought to be reconsidered, the motion for reconsideration of the defendant, is
DENIED.
SO ORDERED."[25]
Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition with Prayer
for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining Order [26] with the Court of
Appeals.
Respondent Court of Appeals promulgated a Resolution with Temporary Restraining Order[27] dated
February 23, 1995, prohibiting the respondent Judge from further conducting any proceeding, unless
otherwise directed, in the interim.
In another Resolution[28] promulgated on September 27, 1995, now assailed, the appellate court denied
SAUDIA’s Petition for the Issuance of a Writ of Preliminary Injunction dated February 18, 1995, to wit:
"The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after considering
the Answer, with Prayer to Deny Writ of Preliminary Injunction (Rollo, p. 135) the Reply and Rejoinder, it
appearing that herein petitioner is not clearly entitled thereto (Unciano Paramedical College, et. Al., v.
Court of Appeals, et. Al., 100335, April 7, 1993, Second Division).
SO ORDERED."
On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition [29] for Review with
Prayer for Temporary Restraining Order dated October 13, 1995.
However, during the pendency of the instant Petition, respondent Court of Appeals rendered the
Decision[30] dated April 10, 1996, now also assailed. It ruled that the Philippines is an appropriate forum
considering that the Amended Complaint’s basis for recovery of damages is Article 21 of the Civil Code,
and thus, clearly within the jurisdiction of respondent Court. It further held that certiorari is not the proper
remedy in a denial of a Motion to Dismiss, inasmuch as the petitioner should have proceeded to trial,
and in case of an adverse ruling, find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary
Restraining Order[31] dated April 30, 1996, given due course by this Court. After both parties submitted
their Memoranda,[32] the instant case is now deemed submitted for decision.
Petitioner SAUDIA raised the following issues:
"I
The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based on Article 21 of the
New Civil Code since the proper law applicable is the law of the Kingdom of Saudi Arabia inasmuch as
this case involves what is known in private international law as a ‘conflicts problem’. Otherwise, the
Republic of the Philippines will sit in judgment of the acts done by another sovereign state which is
abhorred.
II.
Leave of court before filing a supplemental pleading is not a jurisdictional requirement. Besides, the
matter as to absence of leave of court is now moot and academic when this Honorable Court required
the respondents to comment on petitioner’s April 30, 1996 Supplemental Petition For Review With
Prayer For A Temporary Restraining Order Within Ten (10) Days From Notice Thereof. Further, the
Revised Rules of Court should be construed with liberality pursuant to Section 2, Rule 1 thereof.
III.
Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533 entitled
‘Saudi Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al.’ and filed its April 30, 1996 Supplemental Petition
For Review With Prayer For A Temporary Restraining Order on May 7, 1996 at 10:29 a.m. or within the
15-day reglementary period as provided for under Section 1, Rule 45 of the Revised Rules of Court.
Therefore, the decision in CA-G.R. SP NO. 36533 has not yet become final and executory and this
Honorable Court can take cognizance of this case."[33]
From the foregoing factual and procedural antecedents, the following issues emerge for our resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE REGIONAL TRIAL
COURT OF QUEZON CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394
ENTITLED "MILAGROS P. MORADA V. SAUDI ARABIAN AIRLINES."
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THE CASE
PHILIPPINE LAW SHOULD GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It
maintains that private respondent’s claim for alleged abuse of rights occurred in the Kingdom of Saudi
Arabia. It alleges that the existence of a foreign element qualifies the instant case for the application of
the law of the Kingdom of Saudi Arabia, by virtue of the lex loci delicti commissi rule.[34]
On the other hand, private respondent contends that since her Amended Complaint is based on Articles
19[35] and 21[36] of the Civil Code, then the instant case is properly a matter of domestic law. [37]
Under the factual antecedents obtaining in this case, there is no dispute that the interplay of events
occurred in two states, the Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint [38] dated June 23, 1994:
"2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing business in
the Philippines. It may be served with summons and other court processes at Travel Wide Associated
Sales (Phils.), Inc., 3rd Floor, Cougar Building, 114 Valero St., Salcedo Village, Makati, Metro Manila.
xxx xxx xxx
6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian
authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they were again
put in service by defendant SAUDIA. In September 1990, defendant SAUDIA transferred plaintiff to
Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her
superiors requested her to see MR. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi
Arabia. When she saw him, he brought her to the police station where the police took her passport and
questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her to
make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the
police return her passport and allowed her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the
departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered to take
a later flight to Jeddah to see Mr. Meniewy, the Chief Legal Officer of SAUDIA. When she did, a certain
Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sign a document
written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As
it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then
returned to Manila.
9.Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see
Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance from
SAUDIA’s Manila manager, Aslam Saleemi, that the investigation was routinary and that it posed no
danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993.
Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter
about the Jakarta incident. After one hour of interrogation, they let her go. At the airport, however, just
as her plane was about to take off, a SAUDIA officer told her that the airline had forbidden her to take
that flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick
took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to
her astonishment and shock, rendered a decision, translated to her in English, sentencing her to five
months imprisonment and to 286 lashes. Only then did she realize that the Saudi court had tried her,
together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff guilty of (1)
adultery; (2) going to a disco, dancing, and listening to the music in violation of Islamic laws; (3)
socializing with the male crew, in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the Philippine
Embassy in Jeddah. The latter helped her pursue an appeal from the decision of the court. To pay for
her upkeep, she worked on the domestic flights of defendant SAUDIA while, ironically, Thamer and
Allah freely served the international flights." [39]
Where the factual antecedents satisfactorily establish the existence of a foreign element, we agree with
petitioner that the problem herein could present a "conflicts" case.
A factual situation that cuts across territorial lines and is affected by the diverse laws of two or more
states is said to contain a "foreign element". The presence of a foreign element is inevitable since social
and economic affairs of individuals and associations are rarely confined to the geographic limits of their
birth or conception.[40]
The forms in which this foreign element may appear are many. [41] The foreign element may simply
consist in the fact that one of the parties to a contract is an alien or has a foreign domicile, or that a
contract between nationals of one State involves properties situated in another State. In other cases,
the foreign element may assume a complex form.[42]
In the instant case, the foreign element consisted in the fact that private respondent Morada is a
resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation. Also, by virtue
of the employment of Morada with the petitioner Saudia as a flight stewardess, events did transpire
during her many occasions of travel across national borders, particularly from Manila, Philippines to
Jeddah, Saudi Arabia, and vice versa, that caused a "conflicts" situation to arise.
We thus find private respondent’s assertion that the case is purely domestic, imprecise. A conflicts
problem presents itself here, and the question of jurisdiction[43] confronts the court a quo.
After a careful study of the private respondent’s Amended Complaint, [44] and the Comment thereon, we
note that she aptly predicated her cause of action on Articles 19 and 21 of the New Civil Code.
On one hand, Article 19 of the New Civil Code provides;
"Art. 19. 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."
On the other hand, Article 21 of the New Civil Code provides:
"Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for damages."
Thus, in Philippine National Bank (PNB) vs. Court of Appeals,[45] this Court held that:
"The aforecited provisions on human relations were intended to expand the concept of torts in this
jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is
impossible for human foresight to specifically provide in the statutes."
Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions. Thus, we
agree with private respondent’s assertion that violations of Articles 19 and 21 are actionable, with
judicially enforceable remedies in the municipal forum.
Based on the allegations[46] in the Amended Complaint, read in the light of the Rules of Court on
jurisdiction[47] we find that the Regional Trial Court (RTC) of Quezon City possesses jurisdiction over the
subject matter of the suit.[48] Its authority to try and hear the case is provided for under Section 1 of
Republic Act No. 7691, to wit:
"Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization
Act of 1980", is hereby amended to read as follows:
SEC. 19. Jurisdiction in Civil Cases. - Regional Trial Courts shall exercise exclusive jurisdiction:
xxx xxx xxx
(8) In all other cases in which demand, exclusive of interest, damages of whatever kind, attorney’s fees,
litigation expenses, and costs or the value of the property in controversy exceeds One hundred
thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of
the above-mentioned items exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis ours)
xxx xxx xxx
And following Section 2 (b), Rule 4 of the Revised Rules of Court—the venue, Quezon City, is
appropriate:
"SEC. 2 Venue in Courts of First Instance. -[Now Regional Trial Court]
(a) x x x xxx xxx
(b) Personal actions. - All other actions may be commenced and tried where the defendant or any of the
defendants resides or may be found, or where the plaintiff or any of the plaintiff resides, at the election
of the plaintiff."
Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of the
RTC Quezon City assuming jurisdiction. Paramount is the private interest of the litigant. Enforceability of
a judgment if one is obtained is quite obvious. Relative advantages and obstacles to a fair trial are
equally important. Plaintiff may not, by choice of an inconvenient forum, ‘vex’, ‘harass’, or ‘oppress’ the
defendant, e.g. by inflicting upon him needless expense or disturbance. But unless the balance is
strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed. [49]
Weighing the relative claims of the parties, the court a quo found it best to hear the case in the
Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff (private
respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of Saudi Arabia where she no
longer maintains substantial connections. That would have caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience have
been shown by either of the parties. The choice of forum of the plaintiff (now private respondent) should
be upheld.
Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By filing her
Complaint and Amended Complaint with the trial court, private respondent has voluntary submitted
herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several motions [50] praying for the dismissal of
Morada’s Amended Complaint. SAUDIA also filed an Answer In Ex Abundante Cautelam dated
February 20, 1995. What is very patent and explicit from the motions filed, is that SAUDIA prayed for
other reliefs under the premises. Undeniably, petitioner SAUDIA has effectively submitted to the trial
court’s jurisdiction by praying for the dismissal of the Amended Complaint on grounds other than lack of
jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.:[51]
"We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower court’s
jurisdiction over defendant’s person, prayed for dismissal of the complaint on the ground that plaintiff’s
cause of action has prescribed. By interposing such second ground in its motion to dismiss, Ker and
Co., Ltd. availed of an affirmative defense on the basis of which it prayed the court to resolve
controversy in its favor. For the court to validly decide the said plea of defendant Ker & Co., Ltd., it
necessarily had to acquire jurisdiction upon the latter’s person, who, being the proponent of the
affirmative defense, should be deemed to have abandoned its special appearance and voluntarily
submitted itself to the jurisdiction of the court."
Similarly, the case of De Midgely vs. Ferandos, held that:
"When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the
person, it must be for the sole and separate purpose of objecting to the jurisdiction of the court. If his
motion is for any other purpose than to object to the jurisdiction of the court over his person, he thereby
submits himself to the jurisdiction of the court. A special appearance by motion made for the purpose of
objecting to the jurisdiction of the court over the person will be held to be a general appearance, if the
party in said motion should, for example, ask for a dismissal of the action upon the further ground that
the court had no jurisdiction over the subject matter." [52]
Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City. Thus, we
find that the trial court has jurisdiction over the case and that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law problems seek to answer two important
questions: (1) What legal system should control a given situation where some of the significant facts
occurred in two or more states; and (2) to what extent should the chosen legal system regulate the
situation.[53]
Several theories have been propounded in order to identify the legal system that should ultimately
control. Although ideally, all choice-of-law theories should intrinsically advance both notions of justice
and predictability, they do not always do so. The forum is then faced with the problem of deciding which
of these two important values should be stressed.[54]
Before a choice can be made, it is necessary for us to determine under what category a certain set of
facts or rules fall. This process is known as "characterization", or the "doctrine of qualification". It is the
"process of deciding whether or not the facts relate to the kind of question specified in a conflicts
rule."[55] The purpose of "characterization" is to enable the forum to select the proper law. [56]
Our starting point of analysis here is not a legal relation, but a factual situation, event, or operative
fact.[57] An essential element of conflict rules is the indication of a "test" or "connecting factor" or "point
of contact". Choice-of-law rules invariably consist of a factual relationship (such as property right,
contract claim) and a connecting factor or point of contact, such as the situs of the res, the place of
celebration, the place of performance, or the place of wrongdoing. [58]
Note that one or more circumstances may be present to serve as the possible test for the determination
of the applicable law.[59] These "test factors" or "points of contact" or "connecting factors" could be any
of the following:
"(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In particular, the
lex situs is decisive when real rights are involved;
(4) the place where an act has been done, the locus actus, such as the place where a contract
has been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is
particularly important in contracts and torts;
(5) the place where an act is intended to come into effect, e.g., the place of performance of contractual
duties, or the place where a power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci
intentionis;
(7) the place where judicial or administrative proceedings are instituted or done. The lex fori"the law of
the forum"is particularly important because, as we have seen earlier, matters of ‘procedure’ not going to
the substance of the claim involved are governed by it; and because the lex fori applies whenever the
content of the otherwise applicable foreign law is excluded from application in a given case for the
reason that it falls under one of the exceptions to the applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and
of its master or owner as such. It also covers contractual relationships particularly contracts of
affreightment."[60] (Underscoring ours.)
After a careful study of the pleadings on record, including allegations in the Amended Complaint
deemed submitted for purposes of the motion to dismiss, we are convinced that there is reasonable
basis for private respondent’s assertion that although she was already working in Manila, petitioner
brought her to Jeddah on the pretense that she would merely testify in an investigation of the charges
she made against the two SAUDIA crew members for the attack on her person while they were in
Jakarta. As it turned out, she was the one made to face trial for very serious charges, including adultery
and violation of Islamic laws and tradition.
There is likewise logical basis on record for the claim that the "handing over" or "turning over" of the
person of private respondent to Jeddah officials, petitioner may have acted beyond its duties as
employer. Petitioner’s purported act contributed to and amplified or even proximately caused additional
humiliation, misery and suffering of private respondent. Petitioner thereby allegedly facilitated the arrest,
detention and prosecution of private respondent under the guise of petitioner’s authority as employer,
taking advantage of the trust, confidence and faith she reposed upon it. As purportedly found by the
Prince of Makkah, the alleged conviction and imprisonment of private respondent was wrongful. But
these capped the injury or harm allegedly inflicted upon her person and reputation, for which petitioner
could be liable as claimed, to provide compensation or redress for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving torts, the "connecting factor" or "point
of contact" could be the place or places where the tortious conduct or lex loci actus occurred. And
applying the torts principle in a conflicts case, we find that the Philippines could be said as a situs of the
tort (the place where the alleged tortious conduct took place). This is because it is in the Philippines
where petitioner allegedly deceived private respondent, a Filipina residing and working here. According
to her, she had honestly believed that petitioner would, in the exercise of its rights and in the
performance of its duties, "act with justice, give her her due and observe honesty and good faith."
Instead, petitioner failed to protect her, she claimed. That certain acts or parts of the injury allegedly
occurred in another country is of no moment. For in our view what is important here is the place where
the over-all harm or the fatality of the alleged injury to the person, reputation, social standing and human
rights of complainant, had lodged, according to the plaintiff below (herein private respondent). All told, it
is not without basis to identify the Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi, modern
theories and rules on tort liability[61] have been advanced to offer fresh judicial approaches to arrive at
just results. In keeping abreast with the modern theories on tort liability, we find here an occasion to
apply the "State of the most significant relationship" rule, which in our view should be appropriate to
apply now, given the factual context of this case.
In applying said principle to determine the State which has the most significant relationship, the
following contacts are to be taken into account and evaluated according to their relative importance with
respect to the particular issue: (a) the place where the injury occurred; (b) the place where the conduct
causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of
business of the parties, and (d) the place where the relationship, if any, between the parties is
centered.[62]
As already discussed, there is basis for the claim that over-all injury occurred and lodged in the
Philippines. There is likewise no question that private respondent is a resident Filipina national, working
with petitioner, a resident foreign corporation engaged here in the business of international air carriage.
Thus, the "relationship" between the parties was centered here, although it should be stressed that this
suit is not based on mere labor law violations. From the record, the claim that the Philippines has the
most significant contact with the matter in this dispute,[63] raised by private respondent as plaintiff below
against defendant (herein petitioner), in our view, has been properly established.
Prescinding from this premise that the Philippines is the situs of the tort complaint of and the place
"having the most interest in the problem", we find, by way of recapitulation, that the Philippine law on EN BANC
tort liability should have paramount application to and control in the resolution of the legal issues arising
out of this case. Further, we hold that the respondent Regional Trial Court has jurisdiction over the G.R. No. 92013, July 25, 1990
parties and the subject matter of the complaint; the appropriate venue is in Quezon City, which could
properly apply Philippine law. Moreover, we find untenable petitioner’s insistence that "[s]ince private SALVADOR H. LAUREL, PETITIONER, VS. RAMON GARCIA, AS HEAD OF THE ASSET
respondent instituted this suit, she has the burden of pleading and proving the applicable Saudi law on PRIVATIZATION TRUST, RAUL MANGLAPUS, AS SECRETARY OF FOREIGN AFFAIRS, AND
the matter."[64] As aptly said by private respondent, she has "no obligation to plead and prove the law of CATALINO MACARAIG, AS EXECUTIVE SECRETARY, RESPONDENTS.
the Kingdom of Saudi Arabia since her cause of action is based on Articles 19 and 21" of the Civil Code
of the Philippines. In her Amended Complaint and subsequent pleadings she never alleged that Saudi [G. R. NO. 92047. JULY 25, 1990]
law should govern this case.[65] And as correctly held by the respondent appellate court, "considering
that it was the petitioner who was invoking the applicability of the law of Saudi Arabia, thus the burden DIONISIO S. OJEDA, PETITIONER, VS. EXECUTIVE SECRETARY MACARAIG, JR., ASSETS
was on it [petitioner] to plead and to establish what the law of Saudi Arabia is". [66] PRIVATIZATION TRUST CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO,
ET AL., AS MEMBERS OF THE PRINCIPAL AND BIDDING COMMITTEES ON THE
Lastly, no error could be imputed to the respondent appellate court in upholding the trial court’s denial of UTILIZATION/DISPOSITION OF PHILIPPINE GOVERNMENT PROPERTIES IN JAPAN,
defendant’s (herein petitioner’s) motion to dismiss the case. Not only was jurisdiction in order and venue RESPONDENTS.
properly laid, but appeal after trial was obviously available, and the expeditious trial itself indicated by
the nature of the case at hand. Indubitably, the Philippines is the state intimately concerned with the DECISION
ultimate outcome of the case below not just for the benefit of all the litigants, but also for the vindication
of the country’s system of law and justice in a transnational setting. With these guidelines in mind, the GUTIERREZ, JR., J.:

trial court must proceed to try and adjudge the case in the light of relevant Philippine law, with due
consideration of the foreign element or elements involved. Nothing said herein, of course, should be These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents

construed as prejudging the results of the case in any manner whatsoever. from proceeding with the bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-
Chome Minato-ku, Tokyo, Japan scheduled on February 21, 1990. We granted the prayer for a

WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-18394 temporary restraining order effective February 20, 1990. One of the petitioners (in G. R. No. 92047)

entitled "Milagros P. Morada vs. Saudi Arabia Airlines" is hereby REMANDED to Regional Trial Court of likewise prays for a writ of mandamus to compel the respondents to fully disclose to the public the basis

Quezon City, Branch 89 for further proceedings. of their decision to push through with the sale of the Roppongi property inspite of strong public
opposition and to explain the proceedings which effectively prevent the participation of Filipino citizens

SO ORDERED. and entities in the bidding process.

The oral arguments in G. R. No. 92013, Laurel v. Garcia, et al. were heard by the Court on March 13,
1990. After G. R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed, the respondents were
required to file a comment by the Court’s resolution dated February 22, 1990. The two petitions were
consolidated on March 27, 1990 when the memoranda of the parties in the Laurel case were
deliberated upon.
The Court could not act on these cases immediately because the respondents filed a motion for an
extension of thirty (30) days to file comment in G. R. No. 92047, followed by a second motion for an
extension of another thirty (30) days which we granted on May 8, 1990, a third motion for extension of
time granted on May 24, 1990 and a fourth motion for extension of time which we granted on June 5,
1990 but calling the attention of the respondents to the length of time the petitions have been pending.
After the comment was filed, the petitioner in G. R. No. 92047 asked for thirty (30) days to file a reply.
We noted his motion and resolved to decide the two (2) cases.
I building needed major repairs. Due to the failure of our government to provide necessary funds, the
The subject property in this case is one of the four (4) properties in Japan acquired by the Philippine
government under the Reparations Agreement entered into with Japan on May 9, 1956, the other lots
being:
(1) The Nampeidai Property at 11-24 Nampeidai?machi, Shibuya-ku, Tokyo which has an area of
approximately 2,489.96 square meters, and is at present the site of the Philippine Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an an area of around 764.72 square
meters and categorized as a commercial lot now being used as a warehouse and parking lot for the
consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku, Kobe, a
residential lot which is now vacant.
The properties and the capital goods and services procured from the Japanese government for national
development projects are part of the indemnification to the Filipino people for their losses in life and
property and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be payable in
twenty (20) years in accordance with annual schedules of procurements to be fixed by the Philippine
and Japanese governments (Article 2, Reparations Agreement). Rep. Act No. 1789, the Reparations
Law, prescribes the national policy on procurement and utilization of reparations and development
loans. The procurements are divided into those for use by the government sector and those for private
parties in projects as the then National Economic Council shall determine. Those intended for the
private sector shall be made available by sale to Filipino citizens or to one hundred (100%) percent
Filipino-owned entities in national development projects.
The Roppongi property was acquired from the Japanese government under the Second Year Schedule
and listed under the heading “Government Sector”, through Reparations Contract No. 300 dated June
27, 1958. The Roppongi property consists of the land and building “for the Chancery of the Philippine
Embassy” (Annex M-D to Memorandum for Petitioner, p. 503). As intended, it became the site of the
Philippine Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the Roppongi
Roppongi property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former Philippine Ambassador to Japan,
Carlos J. Valdez, to make the property the subject of a lease agreement with a Japanese firm - Kajima
Corporation - which shall construct two (2) buildings in Roppongi and one (1) building in Nampeidai and
renovate the present Philippine Chancery in Nampeidai. The consideration of the construction would be
the lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi and the two
(2) buildings in Nampeidai. The other building in Roppongi shall then be used as the Philippine
Embassy Chancery. At the end of the lease period, all the three leased buildings shall be occupied and
used by the Philippine government. No change of ownership or title shall occur. (See Annex “B” to
Reply to Comment) The Philippine government retains the title all throughout the lease period and
thereafter. However, the government has not acted favorably on this proposal which is pending
approval and ratification between the parties. Instead, on August 11, 1986, President Aquino created a
committee to study the disposition/utilization of Philippine government properties in Tokyo and Kobe,
Japan through Administrative Order No. 3, followed by Administrative Orders Numbered 3-A, B, C and
D.
On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino citizens or entities
to avail of reparations’ capital goods and services in the event of sale, lease or disposition. The four
properties in Japan including the Roppongi were specifically mentioned in the first “Whereas” clause.
Amidst opposition by various sectors, the Executive branch of the government has been pushing, with
great vigor, its decision to sell the reparations properties starting with the Roppongi lot. The property
has twice been set for bidding at a minimum floor price of $225 million. The first bidding was a failure
since only one bidder qualified. The second one, after postponements, has not yet materialized. The
last scheduled bidding on February 21, 1990 was restrained by this Court. Later, the rules on bidding
were changed such that the $225 million floor price became merely a suggested floor price.
The Court finds that each of the herein petitions raises distinct issues. The petitioner in G. R. No. 92013
objects to the alienation of the Roppongi property to anyone while the petitioner in G. R. No. 92047
adds as a principal objection the alleged unjustified bias of the Philippine government in favor of selling
the property to non-Filipino citizens and entities. These petitions have been consolidated and are
resolved at the same time for the objective is the same -- to stop the sale of the Roppongi property.
The petitioner in G. R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by the Philippine Government?; and
(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction, to sell the
Roppongi property?
Petitioner Dionisio Ojeda in G. R. No. 92047, apart from questioning the authority of the government to
alienate the Roppongi property assails the constitutionality of Executive Order No. 296 in making the
property available for sale to non-Filipino citizens and entities. He also questions the bidding
procedures of the Committee on the Utilization or Disposition of Philippine Government Properties in
Japan for being discriminatory against Filipino citizens and Filipino-owned entities by denying them the
right to be informed about the bidding requirements.
II
In G. R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related lots were
acquired as part of the reparations from the Japanese government for diplomatic and consular use by
the Philippine government. Vice-President Laurel states that the Roppongi property is classified as one
of public dominion, and not of private ownership under Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes under “property intended for public service” in
paragraph 2 of the above provision. He states that being one of public dominion, no ownership by any
one can attach to it, not even by the State. The Roppongi and related properties were acquired for
“sites for chancery, diplomatic, and consular quarters, buildings and other improvements” (Second Year
Reparations Schedule). The petitioner states that they continue to be intended for a necessary service.
They are held by the State in anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it
cannot be appropriated, is outside the commerce of man, or to put it in more simple terms, it cannot be
alienated nor be the subject matter of contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20
[1915]). Noting the non-use of the Roppongi property at the moment, the petitioner avers that the same
remains property of public dominion so long as the government has not used it for other purposes nor
adopted any measure constituting a removal of its original purpose or use.
The respondents, for their part, refute the petitioner’s contention by saying that the subject property is
not governed by our Civil Code but by the laws of Japan where the property is located. They rely upon
the rule of lex situs which is used in determining the applicable law regarding the acquisition, transfer
and devolution of the title to a property. They also invoke Opinion No. 21, Series of 1988, dated
January 27, 1988 of the Secretary of Justice which used the lex situs in explaining the inapplicability of
Philippine law regarding a property situated in Japan.
The respondents add that even assuming for the sake of argument that the Civil Code is applicable, the
Roppongi property has ceased to become property of public dominion. It has become patrimonial
property because it has not been used for public service or for diplomatic purposes for over thirteen (13)
years now (Citing Article 422, Civil Code) and because the intention by the Executive Department and
the Congress to convert it to private use has been manifested by overt acts, such as, among others: (1)
the transfer of the Philippine Embassy to Nampeidai; (2) the issuance of administrative orders for the
possibility of alienating the four government properties in Japan; (3) the issuance of Executive Order
No. 296; (4) the enactment by the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform
Law] on June 10, 1988 which contains a provision stating that funds may be taken from the sale of
Philippine properties in foreign countries; (5) the holding of the public bidding of the Roppongi property
but which failed; (6) the deferment by the Senate in Resolution No. 55 of the bidding to a future date;
thus an acknowledgment by the Senate of the government’s intention to remove the Roppongi property
from the public service purpose; and (7) the resolution of this Court dismissing the petition in Ojeda v.
Bidding Committee, et al., G. R. No. 87478 which sought to enjoin the second bidding of the Roppongi
property scheduled on March 30, 1989.
III
In G. R. No. 92047, petitioner Ojeda once more asks this Court to rule on the constitutionality of
Executive Order No. 296. He had earlier filed a petition in G. R. No. 87478 which the Court dismissed
on August 1, 1989. He now avers that the executive order contravenes the constitutional mandate to
conserve and develop the national patrimony stated in the Preamble of the 1987 Constitution. It also
allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands of the public domain to Filipino
citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and 23 of Commonwealth Act 141).
(2) The preference for Filipino citizens in the grant of rights, privileges and concessions covering the
national economy and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition and trade practices;
(4) The guarantee of the right of the people to information on all matters of public concern (Section 7,
Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned by Filipino
citizens of capital goods received by the Philippines under the Reparations Act (Sections 2 and 12 of
Rep. Act No. 1789); and
(6) The declaration of the state policy of full public disclosure of all transactions involving public interest
(Section 28, Article II, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional executive
order is a misapplication of public funds. He states that since the details of the bidding for the Roppongi
property were never publicly disclosed until February 15, 1990 (or a few days before the scheduled
bidding), the bidding guidelines are available only in Tokyo, and the accomplishment of requirements
and the selection of qualified bidders should be done in Tokyo, interested Filipino citizens or entities
owned by them did not have the chance to comply with Purchase Offer Requirements on the Roppongi.
Worse, the Roppongi shall be sold for a minimum price of $225 million from which price capital gains tax
under Japanese law of about 50 to 70% of the floor price would still be deducted.
IV
The petitioners and respondents in both cases do not dispute the fact that the Roppongi site and the
three related properties were acquired through reparations agreements, that these were assigned to the
government sector and that the Roppongi property itself was specifically designated under the
Reparations Agreement to house the Philippine Embassy.
The nature of the Roppongi lot as property for public service is expressly spelled out. It is dictated by
the terms of the Reparations Agreement and the corresponding contract of procurement which bind
both the Philippine government and the Japanese government.
There can be no doubt that it is of public dominion unless it is convincingly shown that the property has
become patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce of man. It cannot be
alienated. Its ownership is a special collective ownership for general use and enjoyment, an application
to the satisfaction of collective needs, and resides in the social group. The purpose is not to serve the
State as a juridical person, but the citizens; it is intended for the common and public welfare and cannot
be the object of appropriation. (Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the
Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
“ART. 419. Property is either of public dominion or of private ownership.
“ART. 420. The following things are property of public dominion:
“(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, banks, shores, roadsteads, and others of similar character;
“(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth.
“ART. 421. All other property of the State, which is not of the character stated in the preceding
article, is patrimonial property.”
The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil Code as
property belonging to the State and intended for some public service.
Has the intention of the government regarding the use of the property been changed because the lot
has been idle for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a long time for actual Embassy service does not
automatically convert it to patrimonial property. Any such conversion happens only if the property is
withdrawn from public use (Cebu Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A
property continues to be part of the public domain, not available for private appropriation or ownership
“until there is a formal declaration on the part of the government to withdraw it from being such (Ignacio
v. Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned public officials insinuating a change
of intention. We emphasize, however, that an abandonment of the intention to use the Roppongi
property for public service and to make it patrimonial property under Article 422 of the Civil Code must
be definite. Abandonment cannot be inferred from the non-use alone specially if the non-use was
attributable not to the government’s own deliberate and indubitable will but to a lack of financial support
to repair and improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368 [1988]).
Abandonment must be a certain and positive act based on correct legal premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of the Roppongi
property’s original purpose. Even the failure by the government to repair the building in Roppongi is not
abandonment since as earlier stated, there simply was a shortage of government funds. The recent
Administrative Orders authorizing a study of the status and conditions of government properties in
Japan were merely directives for investigation but did not in any way signify a clear intention to dispose
of the properties.
Executive Order No. 296, though its title declares an “authority to sell”, does not have a provision in its
text expressly authorizing the sale of the four properties procured from Japan for the government sector.
The executive order does not declare that the properties lost their public character. It merely intends to
make the properties available to foreigners and not to Filipinos alone in case of a sale, lease or other
disposition. It merely eliminates the restriction under Rep. Act No. 1789 that reparations goods may be
sold only to Filipino citizens and one hundred (100%) percent Filipino-owned entities. The text of
Executive Order No. 296 provides:
“Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to the contrary
notwithstanding, the abovementioned properties can be made available for sale, lease or any other
manner of disposition to non-Filipino citizens or to entities owned by non-Filipino citizens.”
Executive Order No. 296 is based on the wrong premise or assumption that the Roppongi and the three
other properties were earlier converted into alienable real properties. As earlier stated, Rep. Act No.
1789 differentiates the procurements for the government sector and the private sector (Sections 2 and
12, Rep. Act No. 1789). Only the private sector properties can be sold to end-users who must be
Filipinos or entities owned by Filipinos. It is this nationality provision which was amended by Executive
Order No. 296.
Section 63 (c) of Rep. Act. No. 6657 (the CARP Law) which provides as one of the sources of funds for
its implementation, the proceeds of the disposition of the properties of the Government in foreign
countries, did not withdraw the Roppongi property from being classified as one of public dominion when
it mentions Philippine properties abroad. Section 63 (c) refers to properties which are alienable and not
to those reserved for public use or service. Rep. Act No. 6657, therefore, does not authorize the
Executive Department to sell the Roppongi property. It merely enumerates possible sources of future
funding to augment (as and when needed) the Agrarian Reform Fund created under Executive Order
No. 299. Obviously any property outside of the commerce of man cannot be tapped as a source of
funds.
The respondents try to get around the public dominion character of the Roppongi property by insisting
that Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials, of all people, should be the ones to insist that
in the sale of extremely valuable government property, Japanese law and not Philippine law should
prevail. The Japanese law -- its coverage and effects, when enacted, and exceptions to its provisions --
is not presented to the Court. It is simply asserted that the lex loci rei sitae or Japanese law should
apply without stating what that law provides. It is assumed on faith that Japanese law would allow the
sale.
We see no reason why a conflict of law rule should apply when no conflict of law situation exists. A
conflict of law situation arises only when: (1) There is a dispute over the title or ownership of an
immovable, such that the capacity to take and transfer immovables, the formalities of conveyance, the
essential validity and effect of the transfer, or the interpretation and effect of a conveyance, are to be
determined (See Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law on
land ownership and its conveyance is asserted to conflict with a domestic law on the same matters.
Hence, the need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is no question that the property
belongs to the Philippines. The issue is the authority of the respondent officials to validly dispose of
property belonging to the State. And the validity of the procedures adopted to effect its sale. This is
governed by Philippine law. The rule of lex situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the relevance of the lex situs
rule is misplaced. The opinion does not tackle the alienability of the real properties procured through
reparations nor the existence in what body of the authority to sell them. In discussing who are capable
of acquiring the lots, the Secretary merely explains that it is the foreign law which should determine who
can acquire the properties so that the constitutional limitation on acquisition of lands of the public
domain to Filipino citizens and entities wholly owned by Filipinos is inapplicable. We see no point in
belaboring whether or not this opinion is correct. Why should we discuss who can acquire the Roppongi
lot when there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the recommendation by the
investigating committee to sell the Roppongi property was premature or, at the very least, conditioned
on a valid change in the public character of the Roppongi property. Moreover, the approval does not
have the force and effect of law since the President already lost her legislative powers. The Congress
had already convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi property is no longer of public
dominion, there is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides:
“Section 79 (f). Conveyances and contracts to which the Government is a party. In cases in which the
Government of the Republic of the Philippines is a party to any deed or other instrument conveying the
title to real estate or to any other property the value of which in excess of one hundred thousand pesos,
the respective Department Secretary shall prepare the necessary papers which, together with the
proper recommendations, shall be submitted to the Congress of the Philippines for approval by the
same. Such deed, instrument, or contract shall be executed and signed by the President of the
Philippines on behalf of the Government of the Philippines unless the authority therefor be expressly
vested by law in another officer.” (Underlining supplied)
The requirement has been retained in Section 48, Book I of the Administrative Code of 1987 (Executive
Order No. 292).
“SEC. 48. Official Authorized to Convey Real Property. - Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
“(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President,
unless the authority therefor is expressly vested by law in another officer.
“(2) For property belonging to the Republic of the Philippines but titled in the name of any political
subdivision or of any corporate agency or instrumentality, by the executive head of the agency or
instrumentality.” (Underlining supplied)
It is not for the President to convey valuable real property of the government on his or her own sole will.
Any such conveyance must be authorized and approved by a law enacted by the Congress. It requires
executive and legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale of the
Roppongi property does not withdraw the property from public domain much less authorize its sale. It is
a mere resolution; it is not a formal declaration abandoning the public character of the Roppongi
property. In fact, the Senate Committee on Foreign Relations is conducting hearings on Senate
Resolution No. 734 which raises serious policy considerations and calls for a fact-finding investigation of
the circumstances behind the decision to sell the Philippine government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass upon the
constitutionality of Executive Order No. 296. Contrary to respondents’ assertion, we did not uphold the
authority of the President to sell the Roppongi property. The Court stated that the constitutionality of the
executive order was not the real issue and that resolving the constitutional question was “neither
necessary nor finally determinative of the case.” The Court noted that “[W]hat petitioner ultimately
questions is the use of the proceeds of the disposition of the Roppongi property.” In emphasizing that
“the decision of the Executive to dispose of the Roppongi property to finance the CARP x x x cannot be
questioned” in view of Section 63 (c) of Rep. Act No. 6657, the Court did not acknowledge the fact that
the property became alienable nor did it indicate that the President was authorized to dispose of the
Roppongi property. The resolution should be read to mean that in case the Roppongi property is re-
classified to be patrimonial and alienable by authority of law, the proceeds of a sale may be used for
national economic development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us question the proposed 1990 sale
of the Roppongi property. We are resolving the issues raised in these petitions, not the issues raised in
1989.
Having declared a need for a law or formal declaration to withdraw the Roppongi property from public
domain to make it alienable and a need for legislative authority to allow the sale of the property, we see
no compelling reason to tackle the constitutional issues raised by petitioner Ojeda.
The Court does not ordinarily pass upon constitutional questions unless these questions are
properly raised in appropriate cases and their resolution is necessary for the determination of the case
(People v. Vera, 65 Phil. 56 [1937]). The Court will not pass upon a constitutional question although
properly presented by the record if the case can be disposed of on some other ground such as the
application of a statute or general law (Siler v. Louisville and Nashville R. Co., 213 U. S. 175, [1909],
Railroad Commission v. Pullman Co., 312 U. S. 496 [1941]).
The petitioner in G. R. No. 92013 states why the Roppongi property should not be sold:
The Roppongi property is not just like any piece of property. It was given to the Filipino people in
reparation for the lives and blood of Filipinos who died and suffered during the Japanese military
occupation, for the suffering of widows and orphans who lost their loved ones and kindred, for the
homes and other properties lost by countless Filipinos during the war. The Tokyo properties are a
monument to the bravery and sacrifice of the Filipino people in the face of an invader; like the
monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic or financial benefits
from them. But who would think of selling these monuments? Filipino honor and national dignity dictate
that we keep our properties in Japan as memorials to the countless Filipinos who died and suffered.
Even if we should become paupers we should not think of selling them. For it would be as if we sold the
lives and blood and tears of our countrymen. (Rollo G. R. No. 92013, p. 147)
The petitioner in G. R. No. 92047 also states:
“Roppongi is no ordinary property. It is one ceded by the Japanese government in atonement for its
past belligerence, for the valiant sacrifice of life and limb and for deaths, physical dislocation and
economic devastation the whole Filipino people endured in World War II.
“It is for what it stands for, and for what it could never bring back to life, that its significance today
remains undimmed, inspite of the lapse of 45 years since the war ended, inspite of the passage of 32
years since the property passed on to the Philippine government.
“Roppongi is a reminder that cannot -- should not -- be dissipated. x x x.” (Rollo - 92047, p. 9)
It is indeed true that the Roppongi property is valuable not so much because of the inflated prices
fetched by real property in Tokyo but more so because of its symbolic value to all Filipinos - veterans
and civilians alike. Whether or not the Roppongi and related properties will eventually be sold is a
policy determination where both the President and Congress must concur. Considering the properties’
importance and value, the laws on conversion and disposition of property of public dominion must be
faithfully followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of prohibition is
issued enjoining the respondents from proceeding with the sale of the Roppongi property in Tokyo,
Japan. The February 20, 1990 Temporary Restraining Order is made PERMANENT.
SO ORDERED.
CONCURRING OPINION
CRUZ, J.:
I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the following
observations only for emphasis.
It is clear that the respondents have failed to show the President's legal authority to sell the
Roppongi property. When asked to do so at the hearing on these petitions, the Solicitor General was at
best ambiguous, although I must add in fairness that this was not his fault. The fact is that there is no
such authority. Legal expertise alone cannot conjure that statutory permission out of thin air.
Exec. Order No. 296, which reads like so much legislative double talk, does not contain such
authority. Neither does Rep. Act No. 6657, which simply allows the proceeds of the sale of our
properties abroad to be used for the comprehensive agrarian reform program. Senate Res. No. 55 was
a mere request for the deferment of the scheduled sale of the Roppongi property, possibly to stop the
transaction altogether; and in any case it is not a law. The sale of the said property may be authorized
only by Congress through a duly enacted statute, and there is no such law.
Once again, we have affirmed the principle that ours is a government of laws and not of men,
where every public official, from the lowest to the highest, can act only by virtue of a valid authorization.
I am happy to note that in the several cases where this Court has ruled against her, the President of the
Philippines has submitted to this principle with becoming grace.
DISSENTING OPINION
FELICIANO, J.:
With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E.
Gutierrez, Jr.
For purposes of this separate opinion, I assume that the piece of land located in 306 Ropponggi,
5-Chome, Minato-ku, Tokyo, Japan (hereinafter referred to as the "Ropponggi property") may be
characterized as property of public dominion, within the meaning of Article 420 (2) of the Civil Code:
"[Property] which belong[s] to the State, without being for public use, and are intended for some public
service ---."
It might not be amiss, however, to note that the appropriateness of trying to bring within the confines of
the simple three-fold classification found in Article 420 of the Civil Code ("property for public use",
property "intended for some public service" and property intended "for the development of the national
wealth") all property owned by the Republic of the Philippines whether found within the territorial
boundaries of the Republic or located within the territory of another sovereign State, is not self-evident.
The first item of the classification -- property intended for public use -- can scarcely be properly applied
to property belonging to the Republic but found within the territory of another State. The third item of
the classification -- property intended for the development of the national wealth -- is illustrated, in
Article 339 of the Spanish Civil Code of 1889, by mines or mineral properties. Again, mineral lands
owned by a sovereign State are rarely, if ever, found within the territorial base of another sovereign
State. The task of examining in detail the applicability of the classification set out in Article 420 of our
Civil Code to property that the Philippines happens to own outside its own boundaries must, however,
be left to academicians.
For present purposes, too, I agree that there is no question of conflict of laws that is, at the present
time, before this Court. The issues before us relate essentially to authority to sell the Ropponggi
property so far as Philippine law is concerned.
The majority opinion raises two (2) issues: (a) whether or not the Ropponggi property has been
converted into patrimonial property or property of the private domain of the State; and (b) assuming an
affirmative answer to (a), whether or not there is legal authority to dispose of the Ropponggi property.
I
Addressing the first issue of conversion of property of public dominion intended for some public
service, into property of the private domain of the Republic, it should be noted that the Civil Code does
not address the question of who has authority to effect such conversion. Neither does the Civil Code
set out or refer to any procedure for such conversion.
Our case law, however, contains some fairly explicit pronouncements on this point, as Justice
Sarmiento has pointed out in his concurring opinion. In Ignacio v. Director of Lands (108 Phils. 335
[1960]), petitioner Ignacio argued that if the land in question formed part of the public domain, the trial
court should have declared the same no longer necessary for public use or public purposes and which
would, therefore, have become disposable and available for private ownership. Mr. Justice
Montemayor, speaking for the Court, said:
"Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer washed by
the waters of the sea and is not necessary for purposes of public utility, or for the establishment of
special industries, or for coast-guard service, the government shall declare it to be the property of the
owners of the estates adjacent thereto and as an increment thereof. We believe that only the executive
and possibly the legislative departments have the authority and the power to make the declaration that
any land so gained by the sea, is not necessary for purposes of public utility, or for the establishment of
special industries, or for coast-guard service. If no such declaration has been made by said
departments, the lot in question forms part of the public domain." (Natividad v. Director of Lands, supra.)
The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y
Monteverde v. Director of Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p. 52).
‘x x x is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to
determine whether any public land are to be used for the purposes specified in Article 4 of the Law of
Waters.’
Consequently, until a formal declaration on the part of the Government, through the executive
department or the Legislature, to the effect that the land in question is no longer needed for coast-guard
service, for public use or for special industries, they continue to be part of the public domain, not
available for private appropriation or ownership." (108 Phil. at 338-339; underscoring supplied)
Thus, under Ignacio, either the Executive Department or the Legislative Department may convert
property of the State of public dominion into patrimonial property of the State. No particular formula or
procedure of conversion is specified either in statute law or in case law. Article 422 of the Civil Code
simply states that: "Property of public dominion, when no longer intended for public use or for public
service, shall form part of the patrimonial property of the State". I respectfully submit, therefore, that the
only requirement which is legitimately imposable is that the intent to convert must be reasonably clear
from a consideration of the act or acts of the Executive Department or of the Legislative Department
which are said to have effected such conversion.
The same legal situation exists in respect of conversion of property of public dominion belonging to
municipal corporations, i.e., local governmental units, into patrimonial property of such entities. In Cebu
Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City Council of Cebu by resolution declared a
certain portion of an existing street as an abandoned road, "the same not being included in the city
development plan". Subsequently, by another resolution, the City Council of Cebu authorized the acting
City Mayor to sell the land through public bidding. Although there was no formal and explicit declaration
of conversion of property for public use into patrimonial property, the Supreme Court said:
"x x x xxx xxx
(2) Since that portion of the city street subject of petitioner's application for registration of title was
withdrawn from public use, it follows that such withdrawn portion becomes patrimonial property which
can be the object of an ordinary contract.
Article 422 of the Civil Code expressly provides that 'Property of public dominion, when no longer
intended for public use of for public service, shall form part of the patrimonial property of the State.'
Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal
terms, states that ‘Property thus withdrawn from public servitude may be used or conveyed for any
purpose for which other real property belonging to the City may be lawfully used or conveyed.’
Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the
petitioner is valid. Hence, the petitioner has a registrable title over the lot in question." (66 SCRA at
484; underscoring supplied)
Thus, again as pointed out by Sarmiento, J. in his separate opinion, in the case of property owned by
municipal corporations simple non-use or the actual dedication of public property to some use other
than "public use" or some "public service", was sufficient legally to convert such property into
patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20 [1906]; Municipality of Hinunganan v.
Director of Lands, 24 Phil. 124 [1913]; Province of Zamboanga del Norte v. City of Zamboanga, 22
SCRA 1334 (1968).
I would also add that such was the case not only in respect of property of municipal corporations
but also in respect of property of the State itself. Manresa in commenting on Article 341 of the 1889
Spanish Civil Code which has been carried over verbatim into our Civil Code by Article 422 thereof,
wrote:
"La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que los bienes de
dominio publico dejan de serlo. Si la Administracion o la autoridad competente legislativa realizan un
acto en virtud del cual cesa el destino o uso publico de los bienes de que se trata, naturalmente la
dificultad queda desde el primer momento resuelta. Hay un punto de partida cierto para iniciar las
relaciones juridicas a que pudiera haber lugar. Pero puede ocurrir que no haya tal declaracion expresa,
legislativa or administrativa, y, sin embargo, cesar de hecho el destino publico de los bienes; ahora
bien, en este caso, y para los efectos juridicos que resultan de entrar la cosa en el comercio de los
hombres, ¿se entendera que se ha verificado la conversion de los bienes de dominio publico en bienes
patrimoniales?
El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la afirmativa, y por nuestra
parte creemos que tal debe ser la solucion. El destino de las cosas no depende tanto de una
declaracion expresa como del uso publico de las mismas, y cuando el uso publico cese con respecto
de determinados bienes, cesa tambien su situacion en el dominio publico. Si una fortaleza en ruina se
abandona y no se repara, si un trozo de la via publica se abandona tambien por constituir otro nuevo en
mejores condiciones .... ambos bienes cesan de estar adscritos al uso comun o a la defensa nacional, y
ambos bienes pasan el patrimonio del Estado, y su regimen juridico es el del presente Codigo, y las
leyes especiales mas o memos administrativas." (3 Manresa, Comentarios al Codigo Civil Español, p.
128 (7a ed.; 1952) (Underscoring supplied)
The majority opinion says that none of the executive acts pointed to by the Government purported,
expressly or definitely, to convert the Ropponggi property into patrimonial property of the Republic.
Assuming that to be the case, it is respectfully submitted that the cumulative effect of the executive acts
here involved was to convert property originally intended for and devoted to public service into
patrimonial property of the State, that is, property susceptible of disposition to and appropriation by
private persons. These executive acts, in their totality if not each individual act, make crystal clear the
intent of the Executive Department to effect such conversion. These executive acts include:
(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study the
disposition/utilization of the Government's property in Japan. The Committee was composed of officials
of the Executive Department: the Executive Secretary; the Philippine Ambassador to Japan; and
representatives of the Department of Foreign Affairs and the Asset Privatization Trust. On 19
September 1988, the Committee recommended to the President the sale of one of the lots (the lot
specifically in Ropponggi) through public bidding. On 4 October 1988, the President approved the
recommendation of the Committee.
On 14 December 1988, the Philippine Government by diplomatic note informed the Japanese Ministry
of Foreign Affairs of the Republic's intention to dispose of the property in Ropponggi. The Japanese
Government through its Ministry of Foreign Affairs replied that it interposed no objection to such
disposition by the Republic. Subsequently, the President and the Committee informed the leaders of
the House of Representatives and of the Senate of the Philippines of the proposed disposition of the
Ropponggi property.
(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming that the
majority opinion is right in saying that Executive Order No. 296 is insufficient to authorize the sale of the
Ropponggi property, it is here submitted with respect that Executive Order No. 296 is more than
sufficient to indicate an intention to convert the property previously devoted to public service into
patrimonial property that is capable of being sold or otherwise disposed of.
(c) Non-use of the Ropponggi lot for fourteen (14) years for diplomatic or for any other public purposes.
Assuming (but only arguendo) that non-use does not, by itself, automatically convert the property into
patrimonial property, I respectfully urge that prolonged non-use, conjoined with the other factors here
listed, was legally effective to convert the lot in Ropponggi into patrimonial property of the State.
Actually, as already pointed out, case law involving property of municipal corporations is to the effect
that simple non-use or the actual dedication of public property to some use other than public use or
public service, was sufficient to convert such property into patrimonial property of the local
governmental entity concerned. Also as pointed out above, Manresa reached the same conclusion in
respect of conversion of property of the public domain of the State into property of the private domain of
the State.
The majority opinion states that "abandonment cannot be inferred from the non-use alone especially if
the non-use was attributable not to the Government's own deliberate and indubitable will but to lack of
financial support to repair and improve the property" (Majority Opinion, p. 13). With respect, it may be
stressed that there is no abandonment involved here, certainly no abandonment of property or of
property rights. What is involved is the change of the classification of the property from property of the
public domain into property of the private domain of the State. Moreover, if for fourteen (14) years, the
Government did not see fit to appropriate whatever funds were necessary to maintain the property in
Ropponggi in a condition suitable for diplomatic representation purposes, such circumstance may, with
equal logic, be construed as a manifestation of the crystalizing intent to change the character of the
property.
(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the sale of the
lot in Ropponggi. The circumstance that this bidding was not successful certainly does not argue
against an intent to convert the property involved into property that is disposable by bidding.
The above set of events and circumstances makes no sense at all if it does not, as a whole, show at
least the intent on the part of the Executive Department (with the knowledge of the Legislative
Department) to convert the property involved into patrimonial property that is susceptible of being sold.
II
Having reached an affirmative answer in respect of the first issue, it is necessary to address the
second issue of whether or not there exists legal authority for the sale or disposition of the Ropponggi
property.
The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917 which
reads as follows:
"SEC. 79 (f). Conveyances and contracts to which the Government is a party. -- In cases in which the
Government of the Republic of the Philippines is a party to any deed or other instrument conveying the
title to real estate or to any other property the value of which is in excess of one hundred thousand
pesos, the respective Department Secretary shall prepare the necessary papers which, together with
the proper recommendations, shall be submitted to the Congress of the Philippines for approval by the
same. Such deed, instrument, or contract shall be executed and signed by the President of the
Philippines on behalf of the Government of the Philippines unless the authority therefor be expressly
vested by law in another officer." (Underscoring supplied)
The majority opinion then goes on to state that: "[T]he requirement has been retained in Section 4,
Book I of the Administrative Code of 1987 (Executive Order No. 292)" which reads:
"SEC. 48. Official Authorized to Convey Real Property. -- Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President,
unless the authority therefor is expressly vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in the name of any political
subdivision or of any corporate agency or instrumentality, by the executive head of the agency or
instrumentality." (Underscoring supplied)
Two points need to be made in this connection. Firstly, the requirement of obtaining specific
approval of Congress when the price of the real property being disposed of is in excess of One Hundred
Thousand Pesos (P100,000.00) under the Revised Administrative Code of 1917, has been deleted from
Section 48 of the 1987 Administrative Code. What Section 48 of the present Administrative Code refers
to is authorization by law for the conveyance. Section 48 does not purport to be itself a source of legal
authority for conveyance of real property of the Government. For Section 48 merely specifies the official
authorized to execute and sign on behalf of the Government the deed of conveyance in case of such a
conveyance.
Secondly, examination of our statute books shows that authorization by law for disposition of real
property of the private domain of the Government, has been granted by Congress both in the form of (a)
a general, standing authorization for disposition of patrimonial property of the Government; and (b)
specific legislation authorizing the disposition of particular pieces of the Government's patrimonial
property.
Standing legislative authority for the disposition of land of the private domain of the Philippines is
provided by Act No. 3038, entitled "An Act Authorizing the Secretary of Agriculture and Natural
Resources to Sell or Lease Land of the Private Domain of the Government of the Philippine Islands
(now Republic of the Philippines)", enacted on 9 March 1922. The full text of this statute is as follows:
"Be it enacted by the Senate and House of Representatives of the Philippines in Legislature assembled
and by the authority of the same:
SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary of the Environment
and Natural Resources) is hereby authorized to sell or lease land of the private domain of the
Government of the Philippine Islands, or any part thereof, to such persons, corporations or associations
as are, under the provisions of Act Numbered Twenty-eight hundred and seventy-four, (now
Commonwealth Act No. 141, as amended) known as the Public Land Act, entitled to apply for the
purchase or lease of agricultural public land.
SECTION 2. The sale of the land referred to in the preceding section shall, if such land is agricultural,
be made in the manner and subject to the limitations prescribed in chapters five and six, respectively, of
said Public Land Act, and if it be classified differently, in conformity with the provisions of chapter nine of
said Act: Provided, however, That the land necessary for the public service shall be exempt from the
provisions of this Act.
SECTION 3. This Act shall take effect on its approval.
Approved, March 9, 1922." (Underscoring supplied)
Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain of the State,
it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now Chapter 9 of the
present Public Land Act (Commonwealth Act No. 141, as amended) and that both statutes refer to:
"any tract of land of the public domain which being neither timber nor mineral land, is intended to be
used for residential purposes or for commercial or industrial purposes other than agricultural"
(Underscoring supplied). In other words, the statute covers the sale or lease of residential, commercial
or industrial land of the private domain of the State.
Implementing regulations have been issued for the carrying out of the provisions of Act No. 3038.
On 21 December 1954, the then Secretary of Agriculture and Natural Resources promulgated Lands
Administrative Orders Nos. 7-6 and 7-7 which were entitled, respectively: "Supplementary Regulations
Governing the Sale of the Lands of the Private Domain of the Republic of the Philippines"; and
"Supplementary Regulations Governing the Lease of Lands of Private Domain of the Republic of the
Philippines" (text in 51 O.G. 28-29 [1955]).
It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in effect
and has not been repealed.[1]
Specific legislative authorization for disposition of particular patrimonial properties of the State is
illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted on 26 April 1904,
which provided for the disposition of the friar lands, purchased by the Government from the Roman
Catholic Church, to bona fide settlers and occupants thereof or to other persons. In Jacinto v. Director
of Lands (49 Phil. 853 [1926]), these friar lands were held to be private and patrimonial properties of the
State. Act No. 2360, enacted on 28 February 1914, authorized the sale of the San Lazaro Estate
located in the City of Manila, which had also been purchased by the Government from the Roman
Catholic Church. In January 1916, Act No. 2555 amended Act No. 2360 by including therein all lands
and buildings owned by the Hospital and the Foundation of San Lazaro theretofor leased by private
persons, and which were also acquired by the Philippine Government.
After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only one
statute authorizing the President to dispose of a specific piece of property. This statute is Republic Act
No. 905, enacted on 20 June 1953, which authorized the President to sell an identified parcel of land of
the private domain of the National Government to the National Press Club of the Philippines, and to
other recognized national associations of professionals with academic standing, for the nominal price of
P1.00. It appears relevant to note that Republic Act No. 905 was not an outright disposition in
perpetuity of the property involved; it provided for reversion of the property to the National Government
in case the National Press Club stopped using it for its headquarters. What Republic Act No. 905
authorized was really a donation, and not a sale.
The basic submission here made is that Act No. 3038 provides standing legislative authorization
for disposition of the Ropponggi property which, in my view, has been converted into patrimonial
property of the Republic.[2]
To some, the submission that Act No. 3038 applies not only to lands of the private domain of the
State located in the Philippines but also to patrimonial property found outside the Philippines, may
appear strange or unusual. I respectfully submit that such position is not any more unusual or strange
than the assumption that Article 420 of the Civil Code applies not only to property of the Republic
located within Philippine territory but also to property found outside the boundaries of the Republic.
It remains to note that under the well-settled doctrine that heads of Executive Departments are
alter egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and in view of the
constitutional power of control exercised by the President over department heads (Article VII, Section
17, 1987 Constitution), the President herself may carry out the function or duty that is specifically lodged
in the Secretary of the Department of Environment and Natural Resources (Araneta v. Gatmaitan, 101
Phil. 328 [1957]). At the very least, the President retains the power to approve or disapprove the
exercise of that function or duty when done by the Secretary of Environment and Natural Resources.
It is hardly necessary to add that the foregoing analyses and submissions relate only to the
austere question of existence of legal power or authority. They have nothing to do with much-debated
questions of wisdom or propriety or relative desirability either of the proposed disposition itself or of the
proposed utilization of the anticipated proceeds of the property involved. These latter types of
considerations lie within the sphere of responsibility of the political departments of government -- the
Executive and the Legislative authorities.
For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013 and
92047.
[1] We are orally advised by the Office of the Director of Lands that Act No. 3038 is very much in effect
and that the Bureau of Lands continues to date to act under it. See also, in this connection,
Sections 2 and 4 of Republic Act No. 477, enacted 9 June 1950 and as last amended by B.P.
Blg. 233. This statute governs the disposition of lands of the public domain and of the private
domain of the State, including lands previously vested in the United States Alien Property
Custodian and transferred to the Republic of the Philippines.
[2] Since Act No. 3038 established certain qualifications for applicants for purchase or lease of land of
private domain of the government, it is relevant to note that Executive Order No. 296,
promulgated at a time when the President was still exercising legislative authority, provides as
follows:
"Sec. 1. The provisions of Republic Act No. 1789, as amended, and of other laws, to the
contrary notwithstanding, the above mentioned properties can be made available for sale,
lease or any other manner of disposition to non-Filipino citizens." (Underscoring supplied)
CONCURRING STATEMENT
PADILLA, J.:
I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few
observations which could help in further clarifying the issues.
Under our tri-partite system of government ordained by the Constitution, it is Congress that lays
down or determines policies. The President executes such policies. The policies determined by
Congress are embodied in legislative enactments that have to be approved by the President to become
law. The President, of course, recommends to Congress the approval of policies but, in the final
analysis, it is Congress that is the policy-determining branch of government.
The judiciary interprets the laws and, in appropriate cases, determines whether the laws enacted
by Congress and approved by the President, and presidential acts implementing such laws, are in
accordance with the Constitution.
The Roppongi property was acquired by the Philippine government pursuant to the reparations
agreement between the Philippine and Japanese governments. Under such agreement, this property
was acquired by the Philippine government for a specific purpose, namely, to serve as the site of the
Philippine Embassy in Tokyo, Japan. Consequently, Roppongi is a property of public dominion and
intended for public service, squarely falling within that class of property under Art. 420 of the Civil Code,
which provides:
"Art. 420. The following things are property of public dominion:
(1) x x x
(2) "Those which belong to the State, without being for public use, and are intended for some public
service or for the development of the national wealth. (339a)"
Public dominion property intended for public service cannot be alienated unless the property is first
transformed into private property of the state otherwise known as patrimonial property of the state. [1]
The transformation of public dominion property to state patrimonial property involves, to my mind, a
policy decision. It is a policy decision because the treatment of the property varies according to its
classification. Consequently, it is Congress which can decide and declare the conversion of Roppongi
from a public dominion property to a state patrimonial property. Congress has made no such decision
or declaration.
Moreover, the sale of public property (once converted from public dominion to state patrimonial
property) must be approved by Congress, for this again is a matter of policy (i.e. to keep or dispose of
the property). Sec. 48, Book 1 of the Administrative Code of 1987 provides:
"SEC. 48. Official Authorized to Convey Real Property. - Whenever real property of the Government is
authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the
government by the following:
‘(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly vested by
law in another officer.
‘(2) For property belonging to the Republic of the Philippines but titled in the
name of any political subdivision or of any corporate agency or instrumentality, by
the executive head of the agency or instrumentality.'" (Underlinings supplied)
But the record is bare of any congressional decision or approval to sell Roppongi. The record is
likewise bare of any congressional authority extended to the President to sell Roppongi thru public
bidding or otherwise.
It is, therefore, clear that the President cannot sell or order the sale of Roppongi thru public bidding
or otherwise without a prior congressional approval, first, converting Roppongi from a public dominion
property to a state patrimonial property, and, second, authorizing the President to sell the same.
ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the temporary
restraining order earlier issued by this Court.
[1] Art. 422 of the Civil Code provides:
"Property of public dominion, when no longer intended for public use or public service, shall form part
of the patrimonial property of the State. (341a)
CONCURRING OPINION
SARMIENTO, J.:
The central question, as I see it, is whether or not the so-called "Roppongi property" has lost its
nature as property of public dominion, and hence, has become patrimonial property of the State. I
understand that the parties are agreed that it was property intended for "public service" within the
contemplation of paragraph (2), of Article 430, of the Civil Code, and accordingly, land of State
dominion, and beyond human commerce. The lone issue is in the light or supervening developments,
that is, -- non-user thereof by the National Government (for diplomatic purposes) for the last thirteen
years; the issuance of Executive Order No. 296 making it available for sale to any interested buyer; the
promulgation of Republic Act No. 6657, the Comprehensive Agrarian Reform Law, making available for
the program's financing, State assets sold; the approval by the President of the recommendation of the
investigating committee formed to study the property's utilization; and the issuance of Resolution No. 55
of the Philippine Senate requesting for the deferment of its disposition -- it, "Roppongi", is still property
of the public dominion, and if it is not, how it lost that character.
When land of the public dominion ceases to be one, or when the change takes place, is a question
our courts have debated early. In a 1906 decision,[1] it was held that property of the public dominion, a
public plaza in this instance, becomes patrimonial upon use thereof for purposes other than a plaza. In
a later case,[2] this ruling was reiterated. Likewise, it has been held that land, originally private property,
has become of public dominion upon its donation to the town and its conversion and use as a public
plaza.[3] It is notable that under these three cases, the character of the property, and any change
occurring therein, depends on the actual use to which it is dedicated.[4]
Much later, however, the Court held that "until a formal declaration on the part of the Government,
through the executive department or the Legislative, to the effect that the land ... is no longer needed for
[public] service, for public use or special industries, [it] continue[s] to be part of the public [dominion], not
available for private expropriation or ownership." [5] So also, it was ruled that a political subdivision (the
City of Cebu in this case) alone may declare (under its charter) a city road abandoned and thereafter, to
dispose of it.[6]

In holding that there is "a need for a law or formal declaration to withdraw the Roppongi property
from public domain to make it alienable and a land for legislative authority to allow the sale of the
property,"[7] the majority lays stress to the fact that: (1) An affirmative act--executive or legislative--is
necessary to reclassify property of the public dominion, and (2) a legislative decree is required to make
it alienable. It also clears the uncertainties brought about by earlier interpretations that the nature of
property--whether public or patrimonial--is predicated on the manner it is actually used, or not used, and
in the same breath, repudiates the Government's position that the continuous non-use of "Roponggi",
among other arguments, for "diplomatic purposes", has turned it into State patrimonial property.

I feel that this view corresponds to existing pronouncements of this Court, among other things,
that: (1) Property is presumed to be State property in the absence of any showing to the contrary; [8] (2)
With respect to forest lands, the same continue to be lands of the public dominion unless and until
reclassified by the Executive Branch of the Government;[9] and (3) All natural resources, under the
Constitution, and subject to exceptional cases, belong to the State. [10]

I am elated that the Court has banished previous uncertainties.

RESOLUTION OF CONFLICTS PROBLEMS

Phases Involved
THIRD DIVISION
G.R. No. 149177, November 23, 2007
KAZUHIRO HASEGAWA AND NIPPON ENGINEERING CONSULTANTS CO., LTD., PETITIONERS,
VS. MINORU KITAMURA, RESPONDENT.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
April 18, 2001 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25, 2001
Resolution[2] denying the motion for reconsideration thereof.
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese
consultancy firm providing technical and management support in the infrastructure projects of foreign
governments,[3] entered into an Independent Contractor Agreement (ICA) with respondent Minoru
Kitamura, a Japanese national permanently residing in the Philippines.[4] The agreement provides that
respondent was to extend professional services to Nippon for a year starting on April 1, 1999. [5] Nippon
then assigned respondent to work as the project manager of the Southern Tagalog Access Road
(STAR) Project in the Philippines, following the company's consultancy contract with the Philippine
Government.[6]
When the STAR Project was near completion, the Department of Public Works and Highways (DPWH)
engaged the consultancy services of Nippon, on January 28, 2000, this time for the detailed engineering
and construction supervision of the Bongabon-Baler Road Improvement (BBRI) Project.[7] Respondent
was named as the project manager in the contract's Appendix 3.1. [8]
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its International
Division, informed respondent that the company had no more intention of automatically renewing his
ICA. His services would be engaged by the company only up to the substantial completion of the STAR
Project on March 31, 2000, just in time for the ICA's expiry. [9]
Threatened with impending unemployment, respondent, through his lawyer, requested a negotiation
conference and demanded that he be assigned to the BBRI project. Nippon insisted that respondent’s
contract was for a fixed term that had already expired, and refused to negotiate for the renewal of the
ICA.[10]
As he was not able to generate a positive response from the petitioners, respondent consequently
initiated on June 1, 2000 Civil Case No. 00-0264 for specific performance and damages with the
Regional Trial Court of Lipa City.[11]
For their part, petitioners, contending that the ICA had been perfected in Japan and executed by and
between Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted that
the claim for improper pre-termination of respondent's ICA could only be heard and ventilated in the
proper courts of Japan following the principles of lex loci celebrationis and lex contractus.[12]
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of
Kitamura by a certain Y. Kotake as project manager of the BBRI Project. [13]
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank[14] that matters
connected with the performance of contracts are regulated by the law prevailing at the place of
performance,[15] denied the motion to dismiss.[16] The trial court subsequently denied petitioners' motion
for reconsideration,[17] prompting them to file with the appellate court, on August 14, 2000, their first
Petition for Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205].[18] On August 23, 2000, the
CA resolved to dismiss the petition on procedural grounds—for lack of statement of material dates and
for insufficient verification and certification against forum shopping. [19] An Entry of Judgment was later
issued by the appellate court on September 20, 2000.[20]
Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within the
reglementary period, a second Petition for Certiorari under Rule 65 already stating therein the material
dates and attaching thereto the proper verification and certification. This second petition, which
substantially raised the same issues as those in the first, was docketed as CA-G.R. SP No. 60827.[21]
Ruling on the merits of the second petition, the appellate court rendered the assailed April 18, 2001
Decision[22] finding no grave abuse of discretion in the trial court's denial of the motion to dismiss. The
CA ruled, among others, that the principle of lex loci celebrationis was not applicable to the case,
because nowhere in the pleadings was the validity of the written agreement put in issue. The CA thus
declared that the trial court was correct in applying instead the principle of lex loci solutionis.[23]
Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25, 2001
Resolution.[24]
Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant
Petition for Review on Certiorari[25] imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE TRIAL
COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT CONTROVERSY,
DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF THE PROCEEDINGS
A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE NATIONALS, WRITTEN
WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE NEED
TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE
LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.[26]
The pivotal question that this Court is called upon to resolve is whether the subject matter jurisdiction of
Philippine courts in civil cases for specific performance and damages involving contracts executed
outside the country by foreign nationals may be assailed on the principles of lex loci celebrationis, lex
contractus, the “state of the most significant relationship rule,” or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters raised by the
respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has
already barred the filing of the second petition docketed as CA-G.R. SP No. 60827 (fundamentally
raising the same issues as those in the first one) and the instant petition for review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's defective
certification of non-forum shopping, it was a dismissal without prejudice. [27] The same holds true in the
CA's dismissal of the said case due to defects in the formal requirement of verification [28] and in the
other requirement in Rule 46 of the Rules of Court on the statement of the material dates. [29] The
dismissal being without prejudice, petitioners can re-file the petition, or file a second petition attaching
thereto the appropriate verification and certification—as they, in fact did—and stating therein the
material dates, within the prescribed period[30] in Section 4, Rule 65 of the said Rules.[31]
The dismissal of a case without prejudice signifies the absence of a decision on the merits and leaves
the parties free to litigate the matter in a subsequent action as though the dismissed action had not
been commenced. In other words, the termination of a case not on the merits does not bar another
action involving the same parties, on the same subject matter and theory. [32]
Necessarily, because the said dismissal is without prejudice and has no res judicata effect, and even if
petitioners still indicated in the verification and certification of the second certiorari petition that the first
had already been dismissed on procedural grounds, [33] petitioners are no longer required by the Rules
to indicate in their certification of non-forum shopping in the instant petition for review of the second
certiorari petition, the status of the aforesaid first petition before the CA. In any case, an omission in the
certificate of non-forum shopping about any event that will not constitute res judicata and litis pendentia,
as in the present case, is not a fatal defect. It will not warrant the dismissal and nullification of the entire
proceedings, considering that the evils sought to be prevented by the said certificate are no longer
present.[34]
The Court also finds no merit in respondent's contention that petitioner Hasegawa is only authorized to
verify and certify, on behalf of Nippon, the certiorari petition filed with the CA and not the instant petition.
True, the Authorization[35] dated September 4, 2000, which is attached to the second certiorari petition
and which is also attached to the instant petition for review, is limited in scope—its wordings indicate
that Hasegawa is given the authority to sign for and act on behalf of the company only in the petition
filed with the appellate court, and that authority cannot extend to the instant petition for review. [36] In a
plethora of cases, however, this Court has liberally applied the Rules or even suspended its application
whenever a satisfactory explanation and a subsequent fulfillment of the requirements have been
made.[37] Given that petitioners herein sufficiently explained their misgivings on this point and appended
to their Reply[38] an updated Authorization[39] for Hasegawa to act on behalf of the company in the
instant petition, the Court finds the same as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the defect in the verification and
certification. As respondent pointed out, and to which we agree, Hasegawa is truly not authorized to act
on behalf of Nippon in this case. The aforesaid September 4, 2000 Authorization and even the
subsequent August 17, 2001 Authorization were issued only by Nippon's president and chief executive
officer, not by the company's board of directors. In not a few cases, we have ruled that corporate
powers are exercised by the board of directors; thus, no person, not even its officers, can bind the
corporation, in the absence of authority from the board. [40] Considering that Hasegawa verified and
certified the petition only on his behalf and not on behalf of the other petitioner, the petition has to be
denied pursuant to Loquias v. Office of the Ombudsman.[41] Substantial compliance will not suffice in a
matter that demands strict observance of the Rules.[42] While technical rules of procedure are designed
not to frustrate the ends of justice, nonetheless, they are intended to effect the proper and orderly
disposition of cases and effectively prevent the clogging of court dockets. [43]
Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to question the trial
court's denial of their motion to dismiss. It is a well-established rule that an order denying a motion to
dismiss is interlocutory, and cannot be the subject of the extraordinary petition for certiorari or
mandamus. The appropriate recourse is to file an answer and to interpose as defenses the objections
raised in the motion, to proceed to trial, and, in case of an adverse decision, to elevate the entire case
by appeal in due course.[44] While there are recognized exceptions to this rule,[45] petitioners' case does
not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its jurisdiction to hear
and resolve the civil case for specific performance and damages filed by the respondent. The ICA
subject of the litigation was entered into and perfected in Tokyo, Japan, by Japanese nationals, and
written wholly in the Japanese language. Thus, petitioners posit that local courts have no substantial
relationship to the parties[46] following the [state of the] most significant relationship rule in Private
International Law.[47]
The Court notes that petitioners adopted an additional but different theory when they elevated the case
to the appellate court. In the Motion to Dismiss [48] filed with the trial court, petitioners never contended
that the RTC is an inconvenient forum. They merely argued that the applicable law which will determine
the validity or invalidity of respondent's claim is that of Japan, following the principles of lex loci
celebrationis and lex contractus.[49] While not abandoning this stance in their petition before the
appellate court, petitioners on certiorari significantly invoked the defense of forum non conveniens.[50]
On petition for review before this Court, petitioners dropped their other arguments, maintained the forum
non conveniens defense, and introduced their new argument that the applicable principle is the [state of
the] most significant relationship rule.[51]
Be that as it may, this Court is not inclined to deny this petition merely on the basis of the change in
theory, as explained in Philippine Ports Authority v. City of Iloilo.[52] We only pointed out petitioners'
inconstancy in their arguments to emphasize their incorrect assertion of conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved:
jurisdiction, choice of law, and recognition and enforcement of judgments. Corresponding to these
phases are the following questions: (1) Where can or should litigation be initiated? (2) Which law will the
court apply? and (3) Where can the resulting judgment be enforced?[53]
Analytically, jurisdiction and choice of law are two distinct concepts. [54] Jurisdiction considers whether it
is fair to cause a defendant to travel to this state; choice of law asks the further question whether the
application of a substantive law which will determine the merits of the case is fair to both parties. The
power to exercise jurisdiction does not automatically give a state constitutional authority to apply forum
law. While jurisdiction and the choice of the lex fori will often coincide, the “minimum contacts” for one
do not always provide the necessary “significant contacts” for the other. [55] The question of whether the
law of a state can be applied to a transaction is different from the question of whether the courts of that
state have jurisdiction to enter a judgment.[56]
In this case, only the first phase is at issue—jurisdiction. Jurisdiction, however, has various aspects. For
a court to validly exercise its power to adjudicate a controversy, it must have jurisdiction over the plaintiff
or the petitioner, over the defendant or the respondent, over the subject matter, over the issues of the
case and, in cases involving property, over the res or the thing which is the subject of the litigation. [57] In
assailing the trial court's jurisdiction herein, petitioners are actually referring to subject matter
jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority which
establishes and organizes the court. It is given only by law and in the manner prescribed by law.[58] It is
further determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all
or some of the claims asserted therein.[59] To succeed in its motion for the dismissal of an action for lack
of jurisdiction over the subject matter of the claim,[60] the movant must show that the court or tribunal
cannot act on the matter submitted to it because no law grants it the power to adjudicate the claims. [61]
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not properly
vested by law with jurisdiction to hear the subject controversy for, indeed, Civil Case No. 00-0264 for
specific performance and damages is one not capable of pecuniary estimation and is properly
cognizable by the RTC of Lipa City.[62] What they rather raise as grounds to question subject matter
jurisdiction are the principles of lex loci celebrationis and lex contractus, and the “state of the most
significant relationship rule.”
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the “law of the place of the ceremony”[63] or the law of the place where a
contract is made.[64] The doctrine of lex contractus or lex loci contractus means the “law of the place
where a contract is executed or to be performed.”[65] It controls the nature, construction, and validity of
the contract[66] and it may pertain to the law voluntarily agreed upon by the parties or the law intended
by them either expressly or implicitly.[67] Under the “state of the most significant relationship rule,” to
ascertain what state law to apply to a dispute, the court should determine which state has the most
substantial connection to the occurrence and the parties. In a case involving a contract, the court should
consider where the contract was made, was negotiated, was to be performed, and the domicile, place of
business, or place of incorporation of the parties.[68] This rule takes into account several contacts and
evaluates them according to their relative importance with respect to the particular issue to be
resolved.[69]
Since these three principles in conflict of laws make reference to the law applicable to a dispute, they
are rules proper for the second phase, the choice of law.[70] They determine which state's law is to be
applied in resolving the substantive issues of a conflicts problem. [71] Necessarily, as the only issue in
this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have
not yet pointed out any conflict between the laws of Japan and ours. Before determining which law
should apply, first there should exist a conflict of laws situation requiring the application of the conflict of
laws rules.[72] Also, when the law of a foreign country is invoked to provide the proper rules for the
solution of a case, the existence of such law must be pleaded and proved.[73]
It should be noted that when a conflicts case, one involving a foreign element, is brought before a court
or administrative agency, there are three alternatives open to the latter in disposing of it: (1) dismiss the
case, either because of lack of jurisdiction or refusal to assume jurisdiction over the case; (2) assume
jurisdiction over the case and apply the internal law of the forum; or (3) assume jurisdiction over the
case and take into account or apply the law of some other State or States.[74] The court’s power to hear
cases and controversies is derived from the Constitution and the laws. While it may choose to recognize
laws of foreign nations, the court is not limited by foreign sovereign law short of treaties or other formal
agreements, even in matters regarding rights provided by foreign sovereigns. [75]
Neither can the other ground raised, forum non conveniens, [76] be used to deprive the trial court of its
jurisdiction herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of
the Rules of Court does not include it as a ground.[77] Second, whether a suit should be entertained or
dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court.[78] In this case, the RTC decided to assume
jurisdiction. Third, the propriety of dismissing a case based on this principle requires a factual
determination; hence, this conflicts principle is more properly considered a matter of defense.[79]
Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed by
respondent and the grounds raised by petitioners to assail that jurisdiction are inappropriate, the trial
and appellate courts correctly denied the petitioners’ motion to dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED.
SO ORDERED.
Venue vs. Jurisdiction
SECOND DIVISION
G.R. No. 111685, August 20, 2001
DAVAO LIGHT & POWER CO., INC., PETITIONER, VS. THE HON. COURT OF APPEALS, HON.
RODOLFO M. BELLAFLOR, PRESIDING JUDGE OF BRANCH 11, RTC-CEBU AND FRANCISCO
TESORERO, RESPONDENTS.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari assailing the Decision dated August 31, 1993 rendered by
the Sixteenth Division[1] of the Court of Appeals in CA-G.R. SP No. 29996, the dispositive portion of
which states:
WHEREFORE, the petition for review filed by Davao Light & Power Co., Inc. is hereby DENIED DUE
COURSE and the same is DISMISSED.
IT IS SO ORDERED.
The antecedent facts are:
On April 10, 1992, petitioner Davao Light & Power Co., Inc. filed a complaint for damages [2] against
private respondent Francisco Tesorero before the Regional Trial Court of Cebu City, Branch
11. Docketed as CEB-11578, the complaint prayed for damages in the amount of P11,000,000.00.
In lieu of an answer, private respondent filed a motion to dismiss [3] claiming that: (a) the complaint did
not state a cause of action; (b) the plaintiff's claim has been extinguished or otherwise rendered moot
and academic; (c) there was non-joinder of indispensable parties; and (d) venue was improperly
laid. Of these four (4) grounds, the last mentioned is most material in this case at bar.
On August 3, 1992, the trial court issued a Resolution[4] dismissing petitioner's complaint on the ground
of improper venue. The trial court stated that:
The plaintiff being a private corporation undoubtedly Banilad, Cebu City is the plaintiff's principal place
of business as alleged in the complaint and which for purposes of venue is considered as its residence.
xxx.
However, in defendant's motion to dismiss, it is alleged and submitted that the principal office of plaintiff
is at "163-165 P. Reyes Street, Davao City as borne out by the Contract of Lease (Annex 2 of the
motion) and another Contract of Lease of Generating Equipment (Annex 3 of the motion) executed by
the plaintiff with the NAPOCOR.
The representation made by the plaintiff in the 2 aforementioned Lease Contracts stating that its
principal office is at "163-165 P. Reyes Street, Davao City" bars the plaintiff from denying the same.
The choice of venue should not be left to plaintiff's whim or caprises [sic]. He may be impelled by some
ulterior motivation in choosing to file a case in a court even if not allowed by the rules of venue.
Another factor considered by the Courts in deciding controversies regarding venue are considerations of
judicial economy and administration, as well as the convenience of the parties for which the rules of
procedure and venue were formulated xxx.
Considering the foregoing, the Court is of the opinion that the principal office of plaintiff is at Davao City
which for purposes of venue is the residence of plaintiff.
Hence, the case should be filed in Davao City.
The motion on the ground of improper venue is granted and the complaint DISMISSED on that ground.
SO ORDERED.
Petitioner's motion for reconsideration[5] was denied in an Order[6] dated October 1, 1992.
From the aforesaid resolution and order, petitioner originally filed before this Court on November 20,
1992 a petition for review on certiorari docketed as G.R. No. 107381.[7] We declined to take immediate
cognizance of the case, and in a Resolution dated January 11, 1993, [8] referred the same to the Court of
Appeals for resolution. The petition was docketed in the appellate court as CA-G.R. SP No. 29996.
On August 31, 1993, the Court of Appeals rendered the assailed judgment[9] denying due course and
dismissing the petition. Counsel for petitioner received a copy of the decision on September 6, 1993. [10]
Without filing a motion for reconsideration, petitioner filed the instant petition, assailing the judgment of
the Court of Appeals on the following grounds:
5.01. Respondent Court of Appeals denied petitioner procedural due process by failing to resolve the
third of the above-stated issues.
5.02. Petitioner's right to file its action for damages against private respondent in Cebu City where its
principal office is located, and for which it paid P55,398.50 in docket fees, may not be negated by a
supposed estoppel absent the essential elements of the false statement having been made to private
respondent and his reliance on good faith on the truth thereof, and private respondent's action or
inaction based thereon of such character as to change his position or status to his injury, detriment or
prejudice.
The principal issue in the case at bar involves a question of venue. It is to be distinguished from
jurisdiction, as follows:
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or
waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action; but
the venue of an action as fixed by statute may be changed by the consent of the parties and an
objection that the plaintiff brought his suit in the wrong county may be waived by the failure of the
defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to
jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition
exists against their alteration.[11]
It is private respondent's contention that the proper venue is Davao City, and not Cebu City where
petitioner filed Civil Case No. CEB-11578. Private respondent argues that petitioner is estopped from
claiming that its residence is in Cebu City, in view of contradictory statements made by petitioner prior to
the filing of the action for damages. First, private respondent adverts to several contracts [12] entered
into by petitioner with the National Power Corporation (NAPOCOR) where in the description of personal
circumstances, the former states that its principal office is at "163-165 P. Reyes St., Davao City."
According to private respondent the petitioner's address in Davao City, as given in the contracts, is an
admission which should bind petitioner.
In addition, private respondent points out that petitioner made several judicial admissions as to its
principal office in Davao City consisting principally of allegations in pleadings filed by petitioner in a
number of civil cases pending before the Regional Trial Court of Davao in which it was either a plaintiff
or a defendant.[13]
Practically the same issue was addressed in Young Auto Supply Co. v. Court of Appeals.[14] In the
aforesaid case, the defendant therein sought the dismissal of an action filed by the plaintiff, a
corporation, before the Regional Trial Court of Cebu City, on the ground of improper venue. The trial
court denied the motion to dismiss; on certiorari before the Court of Appeals, the denial was reversed
and the case was dismissed. According to the appellate tribunal, venue was improperly laid since the
address of the plaintiff was supposedly in Pasay City, as evidenced by a contract of sale, letters and
several commercial documents sent by the plaintiff to the defendant, even though the plaintiff's articles
of incorporation stated that its principal office was in Cebu City. On appeal, we reversed the Court of
Appeals. We reasoned out thus:
In the Regional Trial Courts, all personal actions are commenced and tried in the province or city where
the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff xxx.
There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Both
plaintiffs aver in their complaint that they are residents of Cebu City, thus:
xxx xxx xxx
The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:
"THIRD. That the place where the principal office of the corporation is to be established or located is at
Cebu City, Philippines (as amended on December 20, 1980 and further amended on December 20,
1984)" xxx.
A corporation has no residence in the same sense in which this term is applied to a natural person. But
for practical purposes, a corporation is in a metaphysical sense a resident of the place where its
principal office is located as stated in the articles of incorporation (Cohen v. Benguet Commercial Co.,
Ltd., 34 Phil. 526 [1916] Clavecilla Radio System v. Antillo, 19 SCRA 379 [1967]). The Corporation
Code precisely requires each corporation to specify in its articles of incorporation the "place where the
principal office of the corporation is to be located which must be within the Philippines" (Sec. 14[3]. The
purpose of this requirement is to fix the residence of a corporation in a definite place, instead of allowing
it to be ambulatory.
In Clavecilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why actions cannot
be filed against a corporation in any place where the corporation maintains its branch offices. The Court
ruled that to allow an action to be instituted in any place where the corporation has branch offices,
would create confusion and work untold inconvenience to said entity. By the same token, a corporation
cannot be allowed to file personal actions in a place other than its principal place of business unless
such a place is also the residence of a co-plaintiff or a defendant.
WHEREFORE, the instant petition is hereby GRANTED. The appealed decision is hereby REVERSED
and SET ASIDE. The Regional Trial Court of Cebu City, Branch 11 is hereby directed to proceed with
Civil Case No. CEB-11578 with all deliberate dispatch. No pronouncement as to costs.
SO ORDERED.

If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground that
its principal place of business was in Cebu City, Roxas could argue that YASCO was in estoppel CHOICE OF LAW
because it misled Roxas to believe that Pasay City was its principal place of business. But this is not
Doctrine of Qualification
the case before us.
-Saudi Arabian Airlines vs. Court of Appeals
With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its principal
place of business is located, it becomes unnecessary to decide whether Garcia is also a resident of
Cebu City and whether Roxas was in estoppel from questioning the choice of Cebu City as the
venue. [italics supplied]

The same considerations apply to the instant case. It cannot be disputed that petitioner's principal
office is in Cebu City, per its amended articles of incorporation[15] and by-laws.[16] An action for damages
being a personal action,[17] venue is determined pursuant to Rule 4, section 2 of the Rules of Court, to
wit:

Venue of personal actions.--All other actions may be commenced and tried where the plaintiff or any of
the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in
the case of a non-resident defendant where he may be found, at the election of the plaintiff. [18]

Private respondent is not a party to any of the contracts presented before us. He is a complete stranger
to the covenants executed between petitioner and NAPOCOR, despite his protestations that he is privy
thereto, on the rather flimsy ground that he is a member of the public for whose benefit the electric
generating equipment subject of the contracts were leased or acquired. We are likewise not persuaded
Consideration of Public Policy
by his argument that the allegation or representation made by petitioner in either the complaints or
answers it filed in several civil cases that its residence is in Davao City should estop it from filing the
G.R. No. 104776, December 05, 1994
damage suit before the Cebu courts. Besides there is no showing that private respondent is a party in
those civil cases or that he relied on such representation by petitioner.
CADALIN, ET, AL., VS. POEA

DECISION
QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et al., v. Philippine Overseas
Employment Administration's Administrator, et al.," was filed under Rule 65 of the Revised Rules of
Court:
(1) to modify the Resolution dated September 2, 1991 of the National Labor Relations
Commission (NLRC) in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-779 and L-86-
05-460;
(2) to render a new decision: (i) declaring private respondents as in default; (ii) declaring the said
labor cases as a class suit; (iii) ordering Asia International Builders Corporation (AIBC) and
Brown & Root International Inc. (BRII) to pay the claims of the 1,767 claimants in said labor
cases; (iv) declaring Atty. Florante M. de Castro guilty of forum-shopping; and (v) dismissing
POEA Case No. L-86-05-460; and
(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for
reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et al., v. Hon. National Labor
Relations Commission, et al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-
555, L-85-10-777, L-85-10-799 and L-86-05-460 insofar as it: (i) applied the three-year
prescriptive period under the Labor Code of the Philippines instead of the ten-year
prescriptive period under the Civil Code of the Philippines; and (ii) denied the "three-hour daily
average" formula in the computation of petitioners' overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for
reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos.105029-32, entitled "Asia International Builders Corporation, et al., v. National
Labor Relations Commission, et al." was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-
555, L-85-10-777, L-85-10-779 and L-86-05-460, insofar as it granted the claims of 149
claimants; and
(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied the motions for
reconsideration of AIBC and BRII (Rollo, pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of NLRC, which modified the decision of the POEA in the four
labor cases: (1) awarded monetary benefits only to 149 claimants and (2) directed Labor Arbiter Fatima
J. Franco to conduct hearings and to receive evidence on the claims dismissed by the POEA for lack of
substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R. Nos. 104911-
14 were raffled to the Second Division. In the Resolution dated July 26, 1993, the Second Division
referred G.R. Nos. 104911-14 to the Third Division (G.R. No. 104911-14, Rollo, p. 895).
In the Resolution dated September 29, 1993, the Third Division granted the motion filed in G.R. Nos.
104911-14 for the consolidation of said cases with G.R. Nos. 104776 and 105029-32, which were
assigned to the First Division (G.R. Nos. 104911-14, Rollo, pp. 986, 1,107; G.R. Nos. 105029-30, Rollo,
pp. 369-377, 426-432). In the Resolution dated October 27, 1993, the First Division granted the motion
to consolidate G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo, p. 1109; G.R.
No. 105029-32, Rollo, p. 1562).
I
On June 6, 1984, Bienvenido M. Cadalin, Rolando M. Amul and Donato B. Evangelista, in their own
behalf and on behalf of 728 other overseas contract workers (OCWs) instituted a class suit by filing an
"Amended Complaint" with the Philippine Overseas Employment Administration (POEA) for money
claims arising from their recruitment by AIBC and employment by BRII (POEA Case No. L-84-06-555).
The claimants were represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in construction; while
AIBC is a domestic corporation licensed as a service contractor to recruit, mobilize and deploy Filipino
workers for overseas employment on behalf of its foreign principals.
The amended complaint principally sought the payment of the unexpired portion of the employment
contracts, which was terminated prematurely, and secondarily, the payment of the interest of the
earnings of the Travel and Reserved Fund; interest on all the unpaid benefits; area wage and salary
differential pay; fringe benefits; refund of SSS and premium not remitted to the SSS; refund of
withholding tax not remitted to the BIR; penalties for committing prohibited practices; as well as the
suspension of the license of AIBC and the accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was given, together
with BRII, up to July 5, 1984 to file its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants to file a bill
of particulars within ten days from receipt of the order and the movants to file their answers within ten
days from receipt of the bill of particulars. The POEA Administrator also scheduled a pre-trial
conference on July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23, 1984,
AIBC filed a "Motion to Strike Out of the Records" the "Complaint" and the "Compliance and
Manifestation." On July 25, 1984, the claimants filed their "Rejoinder and Comments," averring, among
other matters, the failure of AIBC and BRII to file their answers and to attend the pre-trial conference on
July 25, 1984. The claimants alleged that AIBC and BRII had waived their right to present evidence and
had defaulted by failing to file their answers and to attend the pre trial conference.
On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the Records" filed by
AIBC but required the claimants to correct the deficiencies in the complaint pointed out in the order.
On October 10, 1984, claimants asked for time within which to comply with the Order of October 2, 1984
and filed an "Urgent Manifestation," praying that the POEA Administrator direct the parties to submit
simultaneously their position papers, after which the case should be deemed submitted for decision. On
the same day, Atty. Florante de Castro filed another complaint for the same money claims and benefits
in behalf of several claimants, some of whom were also claimants in POEA Case No. L-84-06-555
(POEA Case No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2, 1984 and an
"Urgent Manifestation,” praying that the POEA direct the parties to submit simultaneously their position
papers after which the case would be deemed submitted for decision. On the same day, AIBC asked for
time to file its comment on the "Compliance" and "Urgent Manifestation" of claimants. On November 6,
1984, it filed a second motion for extension of time to file the comment.
On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension of time was
granted.
On November 14, 1984, claimants filed an opposition to the motions for extension of time and asked
that AIBC and BRII be declared in default for failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, that claimants
should be ordered to amend their complaint.
On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file their
answers within ten days from receipt of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said order of the
POEA Administrator. Claimants opposed the appeal, claiming that it was dilatory and praying that AIBC
and BRII be declared in default.
On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper" dated
March 24, 1985, adding new demands: namely, the payment of overtime pay, extra night work pay,
annual leave differential pay, leave indemnity pay, retirement and savings benefits and their share of
forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15, 1985, the POEA Administrator directed
AIBC to file its answer to the amended complaint (G.R. No. 104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion For Summary Judgment." On the same day, the
POEA issued an order directing AIBC and BRII to file their answers to the "Amended Complaint,"
otherwise, they would be deemed to have waived their right to present evidence and the case would be
resolved on the basis of complainants' evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and Motion for Bill
of Particulars Re: Amended Complaint dated March 24, 1985." Claimants opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to file their
answers in POEA Case No. L-84-06-555.
On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition for the
issuance of a writ of injunction. On September 19, 1985, NLRC enjoined the POEA Administrator from
hearing the labor cases and suspended the period for the filing of the answers of AIBC and BRII.
On September 19, 1985, claimants asked the POEA Administrator to include additional claimants in the
case and to investigate alleged wrongdoings of BRII, AIBC and their respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case No. L-85-10-
777) against AIBC and BRII with the POEA, demanding monetary claims similar to those subject of
POEA Case No. L-84-06-555. In the same month, Solomon Reyes also filed his own complaint (POEA
Case No. L-85-10-779) against AIBC and BRII.
On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the substitution of
the original counsel of record and the cancellation of the special powers of attorney given the original
counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No. 86-05-460) in
behalf of 11 claimants including Bienvenido Cadalin, a claimant in POEA Case No. 84-06-555.
On December 12, 1986, NLRC dismissed the two appeals filed on February 27, 1985 and September
18, 1985 by AIBC and BRII.
In narrating the proceedings of the labor cases before the POEA Administrator, it is not amiss to
mention that two cases were filed in the Supreme Court by the claimants, namely - G.R. No. 72132 on
September 26, 1985 and Administrative Case No. 2858 on March 18, 1986. On May 13, 1987, the
Supreme Court issued a resolution in Administrative Case No. 2858 directing the POEA Administrator to
resolve the issues raised in the motions and oppositions filed in POEA Cases Nos. L-84-06-555 and L-
86-05-460 and to decide the labor cases with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order dated
September 4, 1985 of the POEA Administrator. Said order required BRII and AIBC to answer the
amended complaint in POEA Case No. L-84-06-555. In a resolution dated November 9, 1987, we
dismissed the petition by informing AIBC that all its technical objections may properly be resolved in the
hearings before the POEA.
Complaints were also filed before the Ombudsman. The first was filed on September 22, 1988 by
claimant Hermie Arguellas and 18 co-claimants against the POEA Administrator and several NLRC
Commissioners. The Ombudsman merely referred the complaint to the Secretary of Labor and
Employment with a request for the early disposition of POEA Case No. L-84-06-555. The second was
filed on April 28, 1989 by claimants Emigdio P. Bautista and Rolando R. Lobeta charging AIBC and BRII
for violation of labor and social legislations. The third was filed by Jose R. Santos, Maximino N. Talibsao
and Amado B. Bruce denouncing AIBC and BRII of violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated December
12, 1986.
On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for suspension of the
period for filing an answer or motion for extension of time to file the same until the resolution of its
motion for reconsideration of the order of the NLRC dismissing the two appeals. On April 28, 1987,
NLRC en banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the same hearing, the
parties were given a period of 15 days from said date within which to submit their respective position
papers. On June 24, 1987, claimants filed their "Urgent Motion to Strike Out Answer," alleging that the
answer was filed out of time. On June 29, 1987, claimants filed their "Supplement to Urgent
Manifestational Motion" to comply with the POEA Order of June 19, 1987. On February 24, 1988, AIBC
and BRII submitted their position paper. On March 4, 1988, claimants filed their "Ex-Parte Motion to
Expunge from the Records" the position paper of AIBC and BRII, claiming that it was filed out of time.
On September 1, 1988, the claimants represented by Atty. De Castro filed their memorandum in POEA
Case No. L-86-05-460. On September 6, 1988, AIBC and BRII submitted their Supplemental
Memorandum. On September 12, 1988, BRII filed its "Reply to Complainant's Memorandum." On
October 26, 1988, claimants submitted their "Ex-Parte Manifestational Motion and Counter-
Supplemental Motion," together with 446 individual contracts of employments and service records. On
October 27, 1988, AIBC and BRII filed a "Consolidated Reply."
On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No. L-84-06-555
and the other consolidated cases, which awarded the amount of $824,652.44 in favor of only 324
complainants.
On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial Appeal" from the
decision of the POEA. On the same day, AIBC also filed its motion for reconsideration and/or appeal in
addition to the "Notice of Appeal" filed earlier on February 6, 1989 by another counsel for AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of the appeal
of AIBC and BRII.
On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal Memorandum," together
with their "newly discovered evidence" consisting of payroll records.
On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among other matters
that there were only 728 named claimants. On April 20, 1989, the claimants filed their "Counter-
Manifestation," alleging that there were 1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion For Execution" of the Decision dated January 30,
1989 on the grounds that BRII had failed to appeal on time and AIBC had not posted the supersedeas
bond in the amount of $824,652.44.
On December 23, 1989, claimants filed another motion to resolve the labor cases.
On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767 claimants
be awarded their monetary claims for failure of private respondents to file their answers within the
reglementary period required by law.
On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:
"WHEREFORE, premises considered, the Decision of the POEA in these consolidated cases is
modified to the extent and in accordance with the following dispositions:
1. The claims of the 94 complainants identified and listed in Annex "A" hereof are
dismissed for having prescribed;
2. Respondents AIBC and Brown & Root are hereby ordered, jointly and severally, to pay
the 149 complainants, identified and listed in Annex "B" hereof, the peso equivalent,
at the time of payment, of the total amount in US dollars indicated opposite their
respective names;
3. The awards given by the POEA to the 19 complainants classified and listed in Annex
"C" hereof, who appear to have worked elsewhere than in Bahrain are hereby set
aside.
4. All claims other than those indicated in Annex "B", including those for overtime work
and favorably granted by the POEA, are hereby dismissed for lack of substantial
evidence in support thereof or are beyond the competence of this Commission to
pass upon.
In addition, this Commission, in the exercise of its powers and authority under Article 218 (c) of the
Labor Code, as amended by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this
Commission to summon parties, conduct hearings and receive evidence, as expeditiously as possible,
and thereafter submit a written report to this Commission (First Division) of the proceedings taken,
regarding the claims of the following:
(a) complainants identified and listed in Annex "D" attached and made an integral part
of this Resolution, whose claims were dismissed by the POEA for lack of proof of
employment in Bahrain (these complainants numbering 683, are listed in pages 13
to 23 of the decision of POEA, subject of the appeals) and,
(b) complainants identified and listed in Annex "E" attached and made an integral part
of this Resolution, whose awards decreed by the POEA, to Our mind, are not
 supported by substantial evidence" (G.R. No. 104776; Rollo, pp. 113-115; G.R.
Nos. 104911-14, pp. 85-87; G.R. Nos. 105029-31, pp. 120-122).
On November 27, 1991, claimant Amado S. Tolentino and 12 co-claimants, who were former clients of
Atty. Del Mundo, filed a petition for certiorari with the Supreme Court (G.R. Nos. 120741-44). The
petition was dismissed in a resolution dated January 27, 1992.
Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC were filed. The
first, by the claimants represented by Atty. Del Mundo; the second, by the claimants represented by
Atty. De Castro; and the third, by AIBC and BRII.
In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration.
Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No. 104776), the
claimants represented by Atty. De Castro (G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos.
105029-32).
II
Compromise Agreements
Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII have submitted,
from time to time, compromise agreements for our approval and jointly moved for the dismissal of their
respective petitions insofar as the claimants-parties to the compromise agreements were concerned
(See Annex A for list of claimants who signed quitclaims).
Thus the following manifestations that the parties had arrived at a compromise agreement and the
corresponding motions for the approval of the agreements were filed by the parties and approved by the
Court:
1.) Joint Manifestation and Motion involving claimant Emigdio Abarquez and 47 co-claimants
dated September 2, 1992 (G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32,
Rollo, pp. 470-615);
2.) Joint Manifestation and Motion involving petitioner Bienvenido Cadalin and 82 co-
petitioners dated September 3, 1992 (G.R. No. 104776, Rollo, pp. 364-507);
3.) Joint Manifestation and Motion involving claimant Jose M. Aban and 36 co-claimants
dated September 17, 1992 (G.R. Nos. 105029-32, Rollo, pp. 613-722; G.R. No. 104776,
Rollo, pp. 518-626; G.R. Nos. 104911-14, Rollo, pp. 407-516);
4.) Joint Manifestation and Motion involving claimant Antonio T. Anglo and 17 co-claimants
dated October 14, 1992 (G.R. Nos. 105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo,
pp. 650-713; G.R. Nos. 104911-14, Rollo, pp. 530-590);
5.) Joint Manifestation and Motion involving claimant Dionisio Bobongo and 6 co-claimants
dated January 15, 1993 (G.R. No. 104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo,
pp. 629-652);
6.) Joint Manifestation and Motion involving claimant Valerio A. Evangelista and 4 co-
claimants dated March 10, 1993 (G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No.
104776, Rollo, pp. 1815-1829);
7.) Joint Manifestation and Motion involving claimants Palconeri Banaag and 5 co-claimants
dated March 17, 1993 (G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14,
Rollo, pp. 655-675);
8.) Joint Manifestation and Motion involving claimant Benjamin Ambrosio and 15 other co-
claimants dated May 4, 1993 (G.R. Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-
14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-1814);
9.) Joint Manifestation and Motion involving Valerio Evangelista and 3 co-claimants dated
May 10, 1993 (G.R. No. 104776, Rollo, pp. 1815-1829);
10.) Joint Manifestation and Motion involving petitioner Quiterio R. Agudo and 36 co-claimants
dated June 14, 1993 (G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14,
Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp. 1066-1183);
 11.) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19 co-claimants PART B -
dated July 22, 1993 (G.R. No. 104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo,
pp. 1193-1256; G.R. Nos. 104911-14; pp. 896-959); (1) Employment Position
Classification :
12.) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 co-claimants
(Code) :
dated September 7, 1993 (G.R. Nos. 105029-32, Rollo, pp. 1266-1278; G.R. No. 104776,
Rollo, pp. 1243-1254; G.R. Nos. 104911-14, Rollo, pp. 972-984); (2) Company Employment
Status :
13.) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37 co-claimants
(3) Date of Employment
dated September 8, 1993 (G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14,
to Commence on :
Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397);
(4) Basic Working
14.) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-claimants dated Hours Per Week :
January 10, 1994 (G.R. Nos. 105029-32, Rollo, Vol. II);
(5) Basic Working
Hours per Month :
15.) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimants dated
August 25, 1994 (G.R. Nos. 105029-32; G.R. No. 104776; G.R. No. 104911-14).
(6) Basic Hourly Rate :

III
(7) Overtime Rate
Per Hour :
The facts as found by the NLRC are as follows:
(8) Projected Period
"We have taken painstaking efforts to sift over the more than fifty volumes now comprising the records of Service (Subject toC (1)
of these cases. From the records, it appears that the complainants-appellants allege that they were of this [sic]) :
recruited by respondent-appellant AIBC for its accredited foreign principal, Brown & Root, on various Months and/or
dates from 1975 to 1983. They were all deployed at various projects undertaken by Brown & Root in Job Completion
several countries in the Middle East, such as Saudi Arabia, Libya, United Arab Emirates and Bahrain, xxx
as well as in Southeast Asia, in Indonesia and Malaysia.
3. HOURS OF WORK AND COMPENSATION
Having been officially processed as overseas contract workers by the Philippine Government, all the
a) The Employee is employed at the hourly rate and overtime rate as set out in Part B of this
individual complainants signed standard overseas employment contracts (Records, Vols. 25-32.
Document.
Hereafter, reference to the records would be sparingly made, considering their chaotic arrangement)
with AIBC before their departure from the Philippines. These overseas employment contracts invariably b) The hours of work shall be those set forth by the Employer, and Employer may, at his sole option,
contained the following relevant terms and conditions. change or adjust such hours as maybe deemed necessary from time to time.
4. TERMINATION
a) Notwithstanding any other terms and conditions of this agreement, the Employer may, at his sole
discretion, terminate employee's service with cause, under this agreement at any time. If the Employer
terminates the services of the Employee under this Agreement because of the completion or
termination, or suspension of the work on which the Employee's services were being utilized, or
because of a reduction in force due to a decrease in scope of such work, or by change in the type of
construction of such work. The Employer will be responsible for his return transportation to his country
of origin. Normally on the most expeditious air route, economy class accommodation.
xxx
10. VACATION/SICK LEAVE BENEFITS
a) After one (1) year of continuous service and/or satisfactory completion of contract, employee shall
be entitled to 12-days vacation leave with pay. This shall be computed at the basic wage rate. Fractions
of a year's service will be computed on a pro-rata basis.
b) Sick leave of 15-days shall be granted to the employee for every year of service for non-work
connected injuries or illness. If the employee failed to avail of such leave benefits, the same shall be
forfeited at the end of the year in which said sick leave is granted.
11. BONUS
A bonus of 20% (for offshore work) of gross income will be accrued and payable only upon satisfactory
completion of this contract.
12. OFFDAY PAY
The seventh day of the week shall be observed as a day of rest with 8 hours regular pay. If work is
performed on this day, all hours work shall be paid at the premium rate. However, this offday pay
provision is applicable only when the laws of the Host Country require payments for rest day.
In the State of Bahrain, where some of the individual complainants were deployed, His Majesty Isa Bin
Salman Al Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1976, otherwise known
as the Labour Law for the Private Sector (Records, Vol. 18). This decree took effect on August 16,
1976. Some of the provisions of Amiri Decree No. 23 that are relevant to the claims of the complainants-
appellants are as follows (underscoring supplied only for emphasis):
Art. 79: x x x A worker shall receive payment for each extra hour equivalent to his wage entitlement
increased by a minimum of twenty-five per centum thereof for hours worked during the day; and by a
minimum of fifty per centum thereof for hours worked during the night which shall be deemed to being
from seven o'clock in the evening until seven o'clock in the morning x x x."
Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.
x x x an employer may require a worker, with his consent, to work on his weekly day of rest if
circumstances so require and in respect of which an additional sum equivalent to 150% of his normal
wage shall be paid to him x x x."
Art. 81: x x x When conditions of work require the worker to work on any official holiday, he shall be paid
an additional sum equivalent to 150% of his normal wage."
Art. 84: Every worker who has completed one year's continuous service with his employer shall be
entitled to leave on full pay for a period of not less than 21 days for each year increased to a period not
less than 28 days after five continuous years of service."
A worker shall be entitled to such leave upon a quantum meruit in respect of the proportion of his
service in that year."
Art. 107: A contract of employment made for a period of indefinite duration may be terminated by either
party thereto after giving the other party thirty days' prior notice before such termination, in writing, in
respect of monthly paid workers and fifteen days' notice in respect of other workers. The party
terminating a contract without giving the required notice shall pay to the other party compensation
equivalent to the amount of wages payable to the worker for the period of such notice or the unexpired
portion thereof."
Art. 111: x x x the employer concerned shall pay to such worker, upon termination of employment, a
leaving indemnity for the period of his employment calculated on the basis of fifteen days' wages for
each year of the first three years of service and of one month's wages for each year of service
thereafter. Such worker shall be entitled to payment of leaving indemnity upon a quantum meruit in
proportion to the period of his service completed within a year."
All the individual complainants-appellants have already been repatriated to the Philippines at the time of (f) Whether or not the POEA awarded sums beyond what the complainants-appellants
the filing of these cases (R.R. No. 104776, Rollo, pp. 59-65). prayed for; and, if so, whether or not these awards are valid.

IV Fifth: - Whether or not the POEA erred in holding respondents AIBC and Brown & Root jointly and
severally liable for the judgment awards despite the alleged finding that the former was the employer of
The issues raised before and resolved by the NLRC were: the complainants;

First: - Whether or not complainants are entitled to the benefits provided by Amiri Decree No. 23 of
Bahrain;
(a) Whether or not the complainants who have worked in Bahrain are entitled to the above-
mentioned benefits.
(b) Whether or not Art. 44 of the same Decree (allegedly prescribing a more favorable
treatment of alien employees) bars complainants from enjoying its benefits.
(a) Whether or not the POEA has acquired jurisdiction over Brown & Root;
(b) Whether or not the undisputed fact that AIBC was a licensed construction contractor
precludes a finding that Brown & Root is liable for complainants claims.
Sixth: - Whether or not the POEA Administrator's failure to hold respondents in default constitutes a
reversible error.
Seventh: - Whether or not the POEA Administrator erred in dismissing the following claims:

Second: - Assuming that Amiri Decree No. 23 of Bahrain is applicable in these cases, whether or not
a. Unexpired portion of contract;
complainants' claim for the benefits provided therein have prescribed.

Third: - Whether or not the instant cases qualify as a class suit. b. Interest earnings of Travel and Reserve Fund;

Fourth: - Whether or not the proceedings conducted by the POEA, as well as the decision that is the c. Retirement and Savings Plan benefits;
subject of these appeals, conformed with the requirements of due process;

d. War Zone bonus or premium pay of at least 100% of basic pay;

(a) Whether or not the respondent-appellant was denied its right to due process;

e. Area Differential Pay;

(b) Whether or not the admission of evidence by the POEA after these cases were submitted
for decision was valid; f. Accrued interests on all the unpaid benefits;

(c) Whether or not the POEA acquired jurisdiction over Brown Root International, Inc.; g. Salary differential pay;

(d) Whether or not the judgment awards are supported by substantial evidence; h. Wage differential pay;

(e) Whether or not the awards based on the averages and formula presented by the i. Refund of SSS premiums not remitted to SSS;
complainants-appellants are supported by substantial evidence;
j. Refund of withholding tax not remitted to BIR;
 k. Fringe benefits under B & R's "A Summary of Employee Benefits" (Annex "Q" of
Amended Complaint);
l. Moral and exemplary damages;
m. Attorney's fees of at least ten percent of the judgment award;
n. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and the
accreditation of B & R issued by POEA;
o. Penalty for violations of Article 34 (prohibited practices), not excluding reportorial
requirements thereof.
Eighth: - Whether or not the POEA Administrator erred in not dismissing POEA Case No. (L) 86-65-460
on the ground of multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55).
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence
governing the pleading and proof of a foreign law and admitted in evidence a simple copy of the
Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector). NLRC invoked Article 221 of
the Labor Code of the Philippines, vesting on the Commission ample discretion to use every and all
reasonable means to ascertain the facts in each case without regard to the technicalities of law or
procedure. NLRC agreed with the POEA Administrator that the Amiri Decree No. 23, being more
favorable and beneficial to the workers, should form part of the overseas employment contract of the
complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked in
Bahrain, and set aside awards of the POEA Administrator in favor of the claimants, who worked
elsewhere.
On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of the
complainants was three years, as provided in Article 291 of the Labor Code of the Philippines, and not
ten years as provided in Article 1144 of the Civil Code of the Philippines nor one year as provided in the
Amiri Decree No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot be treated as
a class suit for the simple reason that not all the complainants worked in Bahrain and therefore, the
subject matter of the action, the claims arising from the Bahrain law, is not of common or general
interest to all the complainants.
On the fourth issue, NLRC found at least three infractions of the cardinal rules of administrative due
process: namely, (1) the failure of the POEA Administrator to consider the evidence presented by AIBC
and BRII; (2) some findings of fact were not supported by substantial evidence; and (3) some of the
evidence upon which the decision was based were not disclosed to AIBC and BRII during the hearing.
On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC are
solidarily liable for the claims of the complainants and held that BRII was the actual employer of the
complainants, or at the very least, the indirect employer, with AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through the
summons served on AIBC, its local agent.
On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motion to
Declare AIBC in default.
On the seventh issue, which involved other money claims not based on the Amiri Decree No. 23, NLRC
ruled:
(1) that the POEA Administrator has no jurisdiction over the claims for refund of the SSS
premiums and refund of withholding taxes and the claimants should file their claims for said
refund with the appropriate government agencies;
(2) that claimants failed to establish that they are entitled to the claims which are not based on
the overseas employment contracts nor the Amiri Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over claims for moral and exemplary
damages and nonetheless, the basis for granting said damages was not established;
(4) that the claims for salaries corresponding to the unexpired portion of their contract may be
allowed if filed within the three-year prescriptive period;
 (5) that the allegation that complainants were prematurely repatriated prior to the expiration of
their overseas contract was not established; and
(6) that the POEA Administrator has no jurisdiction over the complaint for the suspension or
cancellation of the AIBC's recruitment license and the cancellation of the accreditation of BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 should have
been dismissed on the ground that the claimants in said case were also claimants in POEA Case No.
(L) 84-06-555. Instead of dismissing POEA Case No. (L) 86-65- 460, the POEA just resolved the
corresponding claims in POEA Case No. (L) 84-06-555. In other words, the POEA did not pass upon
the same claims twice.
V that considering the staggering amount of the claims (more than US$50,000,000.00) and the
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds:
(1) that they were deprived by NLRC and the POEA of their right to a speedy disposition of their
cases as guaranteed by Section 16, Article III of the 1987 Constitution. The POEA
Administrator allowed private respondents to file their answers in two years (on June 19,
1987) after the filing of the original complaint (on April 2, 1985) and NLRC, in total disregard of
its own rules, affirmed the action of the POEA Administrator;
(2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default and
should have rendered summary judgment on the basis of the pleadings and evidence
submitted by claimants;
(3) that NLRC and POEA Administrator erred in not holding that the labor cases filed by AIBC
and BRII cannot be considered a class suit;
(4) that the prescriptive period for the filing of the claims is ten years; and
(5) that NLRC and the POEA Administrator should have dismissed POEA Case No. L-86-05-
460, the case filed by Atty. Florante de Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:
(1) that they were not responsible for the delay in the disposition of the labor cases, considering
the great difficulty of getting all the records of the more than 1,500 claimants, the piece-meal
filing of the complaints and the addition of hundreds of new claimants by petitioners;
(2) that considering the number of complaints and claimants, it was impossible to prepare the
answers within the ten-day period provided in the NLRC Rules, that when the motion to
declare AIBC in default was filed on July 19, 1987, said party had already filed its answer, and
complicated issues raised by the parties, the ten-day rule to answer was not fair and
reasonable;
(3) that the claimants failed to refute NLRC's finding that there was no common or general
interest in the subject matter of the controversy - which was the applicability of the Amiri
Decree No. 23. Likewise, the nature of the claims varied, some being based on salaries
pertaining to the unexpired portion of the contracts while others being for pure money claims.
Each claimant demanded separate claims peculiar only to himself and depending upon the
particular circumstances obtaining in his case;
(4) that the prescriptive period for filing the claims is that prescribed by Article 291 of the Labor
Code of the Philippines (three years) and not the one prescribed by Article 1144 of the Civil
Code of the Philippines (ten years); and
(5) that they are not concerned with the issue of whether POEA Case No. L-86-05-460 should be
dismissed, this being a private quarrel between the two labor lawyers (Rollo, pp. 292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint manifestations and
motions of AIBC and BRII dated September 2 and 11, 1992, claiming that all the claimants who entered
into the compromise agreements subject of said manifestations and motions were his clients and that
Atty. Florante M. de Castro had no right to represent them in said agreements. He also claimed that the
claimants were paid less than the award given them by NLRC; that Atty. De Castro collected additional
attorney's fees on top of the 25% which he was entitled to receive; and that the consent of the claimants
to the compromise agreements and quitclaims were procured by fraud (G.R. No. 104776, Rollo, pp.
838-810). In the Resolution dated November 23, 1992, the Court denied the motion to strike out the
Joint Manifestations and Motions dated September 2 and 11, 1992 (G.R. No. 104911-14, Rollo, pp.
608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's Lien," alleging
that the claimants who entered into compromise agreements with AIBI and BRII with the assistance of
Atty. De Castro, had all signed a retainer agreement with his law firm (G.R. No. 104776, Rollo, pp. 623-
624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castro and Atty.
Katz Tierra for contempt of court and for violation of Canons 1, 15 and 16 of the Code of Professional
Responsibility. The said lawyers allegedly misled this Court, by making it appear that the claimants who
entered into the compromise agreements were represented by Atty. De Castro, when in fact they were
represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 1560-1614).
On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro for unethical
practices and moved for the voiding of the quitclaims submitted by some of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that NLRC
gravely abused its discretion when it: (1) applied the three-year prescriptive period under the Labor
Code of the Philippines; and (2) it denied the claimant's formula based on an average overtime pay of
three hours a day (Rollo, pp. 18-22).
The claimants argue that said method was proposed by BRII itself during the negotiation for an
amicable settlement of their money claims in Bahrain as shown in the Memorandum dated April 16,
1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22).
BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the prescriptive
period in the Labor Code of the Philippines, a special law, prevails over that provided in the civil Code of
the Philippines, a general law.
As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the overtime
pay, BRII and AIBC claimed that they were not bound by what appeared therein, because such
memorandum was proposed by a subordinate Bahrain official and there was no showing that it was
approved by the Bahrain Minister of Labor. Likewise, they claimed that the averaging method was
discussed in the course of the negotiation for the amicable settlement of the dispute and any offer made
by a party therein could not be used as an admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it: (1)
enforced the provisions of the Amiri Decree No. 23 of 1976 and not the terms of the employment
contracts; (2) granted claims for holiday, overtime and leave indemnity pay and other benefits, on
evidence admitted in contravention of petitioners' constitutional right to due process; and (3) ordered the
POEA Administrator to hold new hearings for the 683 claimants whose claims had been dismissed for
lack of proof by the POEA Administrator or NLRC itself. Lastly, they allege that assuming that the Amiri
Decree No. 23 of 1976 was applicable, NLRC erred when it did not apply the one-year prescription
provided in said law (Rollo, pp. 29- 30).
VI
G.R. No. 104776
G.R. Nos. 104911-14
G.R. Nos. 105029-32
All the petitions raise the common issue of prescription although they disagreed as to the time that
should be embraced within the prescriptive period.
To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of the Civil
Code of the Philippines. NLRC believed otherwise, fixing the prescriptive period at three years as
provided in Article 291 of the Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds, insisted that
NLRC erred in ruling that the prescriptive period applicable to the claims was three years, instead of ten
years, as found by the POEA Administrator.
The Solicitor General expressed his personal view that the prescriptive period was one year as
prescribed by the Amiri Decree No. 23 of 1976 but he deferred to the ruling of NLRC that Article 291 of
the Labor Code of the Philippines was the operative law.
The POEA Administrator held the view that:
"These money claims (under Article 291 of the Labor Code) refer to those arising from the employer's
violation of the employee's right as provided by the Labor Code.
In the instant case, what the respondents violated are not the rights of the workers as provided by the
Labor Code, but the provisions of the Amiri Decree No. 23 issued in Bahrain, which ipso facto amended
the workers' contracts of employment. Respondents consciously failed to conform to these provisions
which specifically provide for the increase of the workers' rate. It was only after June 30, 1983, four
months after the brown builders brought a suit against B & R in Bahrain for this same claim, when
respondent AIBC's contracts have undergone amendments in Bahrain for the new hires/renewals
(Respondent's Exhibit 7).
Hence, premises considered, the applicable law of prescription to this instant case is Article 1144 of the
Civil Code of the Philippines, which provides:
‘Article 1144. The following actions may be brought within ten years from the time the cause of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;'
Thus, herein money claims of the complainants against the respondents shall prescribe in ten years
from August 16, 1976. Inasmuch as all claims were filed within the ten-year prescriptive period, no claim
suffered the infirmity of being prescribed" (G. R. No. 104776, Rollo, pp. 89-90).
In overruling the POEA Administrator, and holding that the prescriptive period is three years as provided
in Article 291 of the Labor Code of the Philippines, the NLRC argued as follows:
"The Labor Code provides that 'all money claims arising from employer-employee relations xxx shall be
filed within three years from the time the cause of action accrued; otherwise they shall be forever
barred' (Art. 291, Labor Code, as amended). This three-year prescriptive period shall be the one applied
here and which should be reckoned from the date of repatriation of each individual complainant,
considering the fact that the case is having (sic) filed in this country. We do not agree with the POEA
Administrator that this three-year prescriptive period applies only to money claims specifically
recoverable under the Philippine Labor Code. Article 291 gives no such indication. Likewise, We can not
consider complainants' cause/s of action to have accrued from a violation of their employment
contracts. There was no violation; the claims arise from the benefits of the law of the country where they
worked" (G. R. No. 104776, Rollo, pp. 90-91).
Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree No. 23 of
1976, NLRC opined that the applicability of said law was one of characterization, i.e., whether to
characterize the foreign law on prescription or statute of limitation as "substantive" or "procedural."
NLRC cited the decision in Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955]),
where the issue was the applicability of the Panama Labor Code in a case filed in the State of New York
for claims arising from said Code. In said case, the claims would have prescribed under the
Panamanian Law but not under the Statute of Limitations of New York. The U.S. Circuit Court of
Appeals held that the Panamanian Law was procedural as it was not "specifically intended to be
substantive," hence, the prescriptive period provided in the law of the forum should apply. The Court
observed:
“... And where, as here, we are dealing with a statute of limitations of a foreign country, and it is not
clear on the face of the statute that its purpose was to limit the enforceability, outside as well as within
the foreign country concerned, of the substantive rights to which the statute pertains, we think that as a
yardstick for determining whether that was the purpose this test is the most satisfactory one. It does not
lead American courts into the necessity of examining into the unfamiliar peculiarities and refinements of
different foreign legal systems..."
The Court further noted:
xxx xxx xxx
"Applying that test here it appears to us that the libelant is entitled to succeed, for the respondents have
failed to satisfy us that the Panamanian period of limitation in question was specifically aimed against
the particular rights which the libelant seeks to enforce. The Panama Labor Code is a statute having
broad objectives, viz: 'The present Code regulates the relations between capital and labor, placing them
on a basis of social justice, so that, without injuring any of the parties, there may be guaranteed for labor
the necessary conditions for a normal life and to capital an equitable return to its investment.' In
pursuance of these objectives the Code gives laborers various rights against their employers. Article
623 establishes the period of limitation for all such rights, except certain ones which are enumerated in
Article 621. And there is nothing in the record to indicate that the Panamanian legislature gave special
consideration to the impact of Article 623 upon the particular rights sought to be enforced here, as
distinguished from the other rights to which that Article is also applicable. Were we confronted with the
question of whether the limitation period of Article 621 (which carves out particular rights to be governed
by a shorter limitation period) is to be regarded as 'substantive' or 'procedural' under the rule of
‘specifity’ we might have a different case; but here on the surface of things we appear to be dealing with
a 'broad,' and not a 'specific,' statute of limitations" (G.R. No. 104776, Rollo, pp. 92-94).
Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of the Philippines,
which was applied by NLRC, refers only to claims "arising from the employer's violation of the
employee's right as provided by the Labor Code." They assert that their claims are based on the
violation of their employment contracts, as amended by the Amiri Decree No. 23 of 1976 and therefore
the claims may be brought within ten years as provided by Article 1144 of the Civil Code of the
Philippines (Rollo, G.R. Nos. 104911-14, pp. 18-21). To bolster their contention, they cite PALEA v.
Philippine Airlines, Inc., 70 SCRA 244 (1976).
AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri Decree No. 23
of 1976, argue that there is in force in the Philippines a "borrowing law," which is Section 48 of the Code
of Civil Procedure and that where such kind of law exists, it takes precedence over the common-law
conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).
First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri
Decree No. 23 of 1976 or a Philippine law on prescription that shall be the governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
"A claim arising out of a contract of employment shall not be actionable after the lapse of one year from
the date of the expiry of the contract" (G.R. Nos. 105029-31, Rollo, p. 226).
As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as
service of process, joinder of actions, period and requisites for appeal, and so forth, are governed by the
laws of the forum. This is true even if the action is based upon a foreign substantive law (Restatement
of the Conflict of Laws, Sec. 685; Salonga, Private International Law 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed
either as procedural or substantive, depending on the characterization given such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statute of
limitations of New York, instead of the Panamanian law, after finding that there was no showing that the
Panamanian law on prescription was intended to be substantive. Being considered merely a procedural
law even in Panama, it has to give way to the law of the forum on prescription of actions.
However, the characterization of a statute into a procedural or substantive law becomes irrelevant when
the country of the forum has a "borrowing statute." Said statute has the practical effect of treating the
foreign statute of limitation as one of substance (Goodrich, Conflict of Laws 152-153 [1938]). A
"borrowing statute" directs the state of the forum to apply the foreign statute of limitations to the pending
claims based on a foreign law (Siegel, Conflicts 183 [1975]). While there are several kinds of "borrowing
statutes," one form provides that an action barred by the laws of the place where it accrued, will not be
enforced in the forum even though the local statute has not run against it (Goodrich and Scoles, Conflict
of Laws 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this kind. Said Section
provides:
"If by the laws of the state or country where the cause of action arose, the action is barred, it is also
barred in the Philippine Islands."
Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of said
Code repealed only those provisions of the Code of Civil Procedure as to which were inconsistent with
it. There is no provision in the Civil Code of the Philippines, which is inconsistent with or contradictory to
Section 48 of the Code of Civil Procedure (Paras, Philippine Conflict of Laws 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar
as it ordains the application in this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy
(Canadian Northern Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To
enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in
question would contravene the public policy on the protection to labor.
In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:
"The state shall promote social justice in all phases of national development" (Sec. 10).
(2) Upon on obligation created by law;
(3) Upon a judgment."
NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Code of the
Philippines, which in pertinent part provides:
"Money claims-all money claims arising from employer-employee relations accruing during the
effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued,
otherwise they shall be forever barred.
xxx."
The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70 SCRA 244
(1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable to the cases at bench (Rollo, p.
21). The said case involved the correct computation of overtime pay as provided in the collective
bargaining agreements and not the Eight-Hour Labor Law.

"The state affirms labor as a primary social economic force. It shall protect the rights of workers and
As noted by the Court: "That is precisely why petitioners did not make any reference as to the
promote their welfare” (Sec. 18).
computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and
instead insisted that work computation provided in the collective bargaining agreements between the
In Article XIII on Social Justice and Human Rights, the 1987 Constitution provides:
parties be observed. Since the claim for pay differentials is primarily anchored on the written contracts
between the litigants, the ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code
"Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized,
should govern."
and promote full employment and equality of employment opportunities for all."

Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933) provides:
Having determined that the applicable law on prescription is the Philippine law, the next question is
whether the prescriptive period governing the filing of the claims is three years, as provided by the
"Any action to enforce any cause of action under this Act shall be commenced within three years after
Labor Code or ten years, as provided by the Civil Code of the Philippines.
the cause of action accrued otherwise such action shall be forever barred, xxx".

The claimants are of the view that the applicable provision is Article 1144 of the Civil Code of the
The Court further explained:
Philippines, which provides:

"The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
"The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as amended) will
apply, if the claim for differentials for overtime work is solely based on said law, and not on a collective
bargaining agreement or any other contract. In the instant case, the claim for overtime compensation is
not so much because of Commonwealth Act No. 444, as amended but because the claim is a
demandable right of the employees, by reason of the above-mentioned collective bargaining
agreement."
Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to enforce
any cause of action under said law." On the other hand, Article 291 of the Labor Code of the Philippines
provides the prescriptive period for filing "money claims arising from employer-employee relations." The
claims in the cases at bench all arose from the employer-employee relations, which is broader in scope
than claims arising from a specific law or from the collective bargaining agreement.
The contention of the POEA Administrator, that the three-year prescriptive period under Article 291 of
the Labor Code of the Philippines applies only to money claims specifically recoverable under said
Code, does not find support in the plain language of the provision. Neither is the contention of the
claimants in G.R. No. 104911-14 that said Article refers only to claims "arising from the employer's
violation of the employee's right," as provided by the Labor Code supported by the facial reading of the
provision.
VII
G.R. No. 104776
A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) that while their
complaints were filed on June 6, 1984 with POEA, the case was decided only on January 30, 1989, a
clear denial of their right to a speedy disposition of the case; and (2) that NLRC and the POEA
Administrator should have declared AIBC and BRII in default (Rollo, pp. 31-35).
Claimants invoke a new provision incorporated in the 1987 Constitution, which provides:
"Sec. 16. All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-
judicial, or administrative bodies."
It is true that the constitutional right to "a speedy disposition of cases" is not limited to the accused in
criminal proceedings but extends to all parties in all cases, including civil and administrative cases, and
in all proceedings, including judicial and quasi-judicial hearings. Hence, under the Constitution, any
party to a case may demand expeditious action on all officials who are tasked with the administration of
justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition of cases" is a
relative term. Just like the constitutional guarantee of "speedy trial" accorded to the accused in all
criminal proceedings, "speedy disposition of cases" is a flexible concept. It is consistent with delays and
depends upon the circumstances of each case. What the Constitution prohibits are unreasonable,
arbitrary and oppressive delays which render rights nugatory.
Caballero laid down the factors that may be taken into consideration in determining whether or not the
right to a "speedy disposition of cases" has been violated, thus:
"In the determination of whether or not the right to a 'speedy trial' has been violated, certain factors may
be considered and balanced against each other. These are length of delay, reason for the delay,
assertion of the right or failure to assert it, and prejudice caused by the delay. The same factors may
also be considered in answering judicial inquiry whether or not a person officially charged with the
administration of justice has violated the speedy disposition of cases."
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:
"It must be here emphasized that the right to a speedy disposition of a case, like the right to speedy
trial, is deemed violated only when the proceeding is attended by vexatious, capricious, and oppressive
delays; or when unjustified postponements of the trial are asked for and secured, or when without cause
or justified motive a long period of time is allowed to elapse without the party having his case tried."
Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the amended complaint,
claimants had been asking that AIBC and BRII be declared in default for failure to file their answers
within the ten-day period provided in Section 1, Rule III of Book VI of the Rules and Regulations of the
POEA. At that time, there was a pending motion of AIBC and BRII to strike out of the records the
amended complaint and the "Compliance" of claimants to the order of the POEA, requiring them to
submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that their final disposition in the
administrative level after seven years from their inception, cannot be said to be attended by
unreasonable, arbitrary and oppressive delays as to violate the constitutional rights to a speedy
disposition of the cases of complainants.
The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said complaint had
undergone several amendments, the first being on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983. They were deployed in different areas,
one group in and the other groups outside of, Bahrain. The monetary claims totalling more than US$65
million according to Atty. Del Mundo, included:
Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some facts, the
claimants were ordered to comply with the motion of AIBC for a bill of particulars. When claimants filed
their "Compliance and Manifestation," AIBC moved to strike out the complaint from the records for
failure of claimants to submit a proper bill of particulars. While the POEA Administrator denied the
motion to strike out the complaint, he ordered the claimants "to correct the deficiencies" pointed out by
AIBC.

"1. Unexpired portion of contract; Before an intelligent answer could be filed in response to the complaint, the records of employment of
the more than 1,700 claimants had to be retrieved from various countries in the Middle East. Some of
2. Interest earnings of Travel and Fund;
the records dated as far back as 1975.
3. Retirement and Savings Plan benefit;
The hearings on the merits of the claims before the POEA Administrator were interrupted several times
4. War Zone bonus or premium pay of at least 100% of basic pay;
by the various appeals, first to NLRC and then to the Supreme Court.
5. Area Differential pay;
Aside from the inclusion of additional claimants, two new cases were filed against AIBC and BRII on
6. Accrued Interest of all the unpaid benefits; October 10, 1985 (POEA Cases Nos. L-85-10-777 and L-85-10-779). Another complaint was filed on

7. Salary differential pay; May 29, 1986 (POEA Case No. L-86-05-460). NLRC, in exasperation, noted that the exact number of
claimants had never been completely established (Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p.
8. Wage Differential pay; 57). All the three new cases were consolidated with POEA Case No. L-84-06-555.

9. Refund of SSS premiums not remitted to Social Security System;

10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits consisting of 43 pages
(Annex "Q" of Amended Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of amounts;
14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and issued by the
POEA; and
15. Penalty for violation of Article 34 (Prohibited practices) not excluding reportorial requirements
thereof" (NLRC Resolution, September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74).
NLRC blamed the parties and their lawyers for the delay in terminating the proceedings, thus:
"These cases could have been spared the long and arduous route towards resolution had the parties
and their counsel been more interested in pursuing the truth and the merits of the claims rather than
exhibiting a fanatical reliance on technicalities. Parties and counsel have made these cases a litigation
of emotion. The intransigence of parties and counsel is remarkable. As late as last month, this
Commission made a last and final attempt to bring the counsel of all the parties (this Commission
issued a special order directing respondent Brown& Root's resident agent/s to appear) to come to a
more conciliatory stance. Even this failed" (Rollo, p. 58).
The squabble between the lawyers of claimants added to the delay in the disposition of the cases, to the
lament of NLRC, which complained:

"It is very evident from the records that the protagonists in these consolidated cases appear to be not
only the individual complainants, on the one hand, and AIBC and Brown & Root, on the other hand. The
two lawyers for the complainants, Atty. Gerardo Del Mundo and Atty. Florante De Castro, have yet to
settle the right of representation, each one persistently claiming to appear in behalf of most of the
complainants. As a result, there are two appeals by the complainants. Attempts by this Commission to
resolve counsels' conflicting claims of their respective authority to represent the complainants prove
futile. The bickerings by these two counsels are reflected in their pleadings. In the charges and
countercharges of falsification of documents and signatures, and in the disbarment proceedings by one
against the other. All these have, to a large extent, abetted in confounding the issues raised in these
cases, jumble the presentation of evidence, and even derailed the prospects of an amicable settlement.
It would not be far-fetched to imagine that both counsel, unwittingly, perhaps, painted a rainbow for the
complainants, with the proverbial pot of gold at its end containing more than US$100 million, the
aggregate of the claims in these cases. It is, likewise, not improbable that their misplaced zeal and
exuberance caused them to throw all caution to the wind in the matter of elementary rules of procedure
and evidence" (Rollo, pp. 58-59).
Adding to the confusion in the proceedings before NLRC, is the listing of some of the complainants in
both petitions filed by the two lawyers. As noted by NLRC, "the problem created by this situation is that
if one of the two petitions is dismissed, then the parties and the public respondents would not know
which claim of which petitioner was dismissed and which was not."
B. Claimants insist that all their claims could properly be consolidated in a "class suit" because "all the
named complainants have similar money claims and similar rights sought irrespective of whether they
worked in Bahrain, United Arab Emirates or in Abu Dhabi, Libya or in any part of the Middle East"
(Rollo, pp. 35-38).
A class suit is proper where the subject matter of the controversy is one of common or general interest
to many and the parties are so numerous that it is impracticable to bring them all before the court
(Revised Rules of Court, Rule 3, Sec. 12).
While all the claims are for benefits granted under the Bahrain law, many of the claimants worked
outside Bahrain. Some of the claimants were deployed in Indonesia and Malaysia under different terms
and conditions of employment.
NLRC and the POEA Administrator are correct in their stance that inasmuch as the first requirement of
a class suit is not present (common or general interest based on the Amiri Decree of the State of
Bahrain), it is only logical that only those who worked in Bahrain shall be entitled to file their claims in a
class suit.
While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for
employee's benefits), there is no common question of law or fact. While some claims are based on the
Amiri Law of Bahrain, many of the claimants never worked in that country, but were deployed
elsewhere. Thus, each claimant is interested only in his own demand and not in the claims of the other
employees of defendants. The named claimants have a special or particular interest in specific benefits
completely different from the benefits in which the other named claimants and those included as
members of a "class" are claiming (Berses v. Villanueva, 25 Phil. 473 [1913]). It appears that each
claimant is only interested in collecting his own claims. A claimant has no concern in protecting the
interests of the other claimants as shown by the fact, that hundreds of them have abandoned their co-
claimants and have entered into separate compromise settlements of their respective claims. A principle
basic to the concept of "class suit" is that plaintiffs brought on the record must fairly represent and
protect the interests of the others (Dimayuga v. Court of Industrial Relations, 101 Phil. 590 [1957]). For
this matter, the claimants who worked in Bahrain can not be allowed to sue in a class suit in a judicial
proceeding. The most that can be accorded to them under the Rules of Court is to be allowed to join as
plaintiffs in one complaint (Revised Rules of Court, Rule 3, Sec. 6).
The Court is extra-cautious in allowing class suits because they are the exceptions to the condition, sine
qua non, requiring the joinder of all indispensable parties.
In an improperly instituted class suit, there would be no problem if the decision secured is favorable to
the plaintiffs. The problem arises when the decision is adverse to them, in which case the others who
were impleaded by their self-appointed representatives, would surely claim denial of due process.
C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC should have
declared Atty. Florante De Castro guilty of "forum shopping, ambulance chasing activities, falsification,
duplicity and other unprofessional activities" and his appearances as counsel for some of the claimants
as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop to the practice of
some parties of filing multiple petitions and complaints involving the same issues, with the result that the
courts or agencies have to resolve the same issues. Said Rule, however, applies only to petitions filed
with the Supreme Court and the Court of Appeals. It is entitled "Additional Requirements For Petitions
Filed with the Supreme Court and the Court of Appeals To Prevent Forum Shopping or Multiple Filing of
Petitioners and Complainants." The first sentence of the circular expressly states that said circular
applies to and governs the filing of petitions in the Supreme Court and the Court of Appeals.
While Administrative Circular No. 04-94 extended the application of the anti-forum shopping rule to the
lower courts and administrative agencies, said circular took effect only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for unethical conduct against Atty. De
Castro because NLRC and POEA have no jurisdiction to investigate charges of unethical conduct of
lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by Atty. Gerardo
A. Del Mundo to protect his claim for attorney's fees for legal services rendered in favor of the claimants
(G.R. No. 104776, Rollo, pp. 838-810; 1525).
A statement of a claim for a charging lien shall be filed with the court or administrative agency which
renders and executes the money judgment secured by the lawyer for his clients. The lawyer shall cause
written notice thereof to be delivered to his clients and to the adverse party (Revised Rules of Court,
Rule 138, Sec. 37). The statement of the claim for the charging lien of Atty. Del Mundo should have
been filed with the administrative agency that rendered and executed the judgment.
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. Katz Tierra for
violation of the Code of Professional Responsibility should be filed in a separate and appropriate
proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not accepting their formula of "Three Hours
Average Daily Overtime" in computing the overtime payments. They claim that it was BRII itself which
proposed the formula during the negotiations for the settlement of their claims in Bahrain and therefore
it is in estoppel to disclaim said offer (Rollo, pp. 21-22).
Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16, 1983, which in
pertinent part states:
"After the perusal of the memorandum of the Vice President and the Area Manager, Middle East, of
Brown & Root Co. and the Summary of the compensation offered by the Company to the employees in
respect of the difference of pay of the wages of the overtime and the difference of vacation leave and
the perusal of the documents attached thereto e.e.., minutes of the meetings between the
Representative of the employees and the management of the Company, the complaint filed by the
employees on 14/2/83 where they have claimed as hereinabove stated, sample of the Service Contract
executed between one of the employees and the company through its agent in (sic) Philippines, Asia
International Builders Corporation where it has been provided for 48 hours of work per week and an
annual leave of 12 days and an overtime wage of 1 & 1/4 of the normal hourly wage.
xxx
The Company in its computation reached the following averages:
A. 1. The average duration of the actual service of the employee is 35 months for the Philippino (sic)
employees x x x.
2. The average wage per hour for the Philippino (sic) employee is US$2.69 x x x.
3. The average hours for the overtime is 3 hours plus in all public holidays and weekends.
4. Payment of US$8.72 per months (sic) of service as compensation for the difference of the wages of
the overtime done for each Philipino (sic) employee xxx" (Rollo, p. 22).
BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by a subordinate
official in the Bahrain Department of Labor; (2) that there was no showing that the Bahrain Minister of
Labor had approved said memorandum; and (3) that the offer was made in the course of the negotiation
for an amicable settlement of the claims and therefore it was not admissible in evidence to prove that
anything is due to the claimants.
While said document was presented to the POEA without observing the rule on presenting official
documents of a foreign government as provided in Section 24, Rule 132 of the 1989 Revised Rules on
Evidence, it can be admitted in evidence in proceedings before an administrative body. The opposing
parties have a copy of the said memorandum, and they could easily verify its authenticity and accuracy.
The admissibility of the offer of compromise made by BRII as contained in the memorandum is another
matter. Under Section 27, Rule 130 of the 1989 Revised Rules on Evidence, an offer to settle a claim is
not an admission that anything is due.
Said Rule provides:
"Offer of compromise not admissible. - In civil cases, an offer of compromise is not an admission of any
liability, and is not admissible in evidence against the offeror."
This Rule is not only a rule of procedure to avoid the cluttering of the record with unwanted evidence but
a statement of public policy. There is great public interest in having the protagonists settle their
differences amicably before these ripen into litigation. Every effort must be taken to encourage them to
arrive at a settlement. The submission of offers and counter-offers in the negotiation table is a step in
the right direction. But to bind a party to his offers, as what claimants would make this Court do, would
def eat the salutary purpose of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits than those
stipulated in the overseas-employment contracts of the claimants. It was of the belief that "where the
laws of the host country are more favorable and beneficial to the workers, then the laws of the host
country shall form part of the overseas employment contract." It quoted with approval the observation of
the POEA Administrator that "xxx in labor proceedings, all doubts in the implementation of the
provisions of the Labor Code and its implementing regulations shall be resolved in favor of labor" (Rollo,
pp. 90-94).
AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to enforce the
overseas-employment contracts, which became the law of the parties. They contend that the principle
that a law is deemed to be a part of a contract applies only to provisions of a Philippine law in relation to
contracts executed in the Philippines.
The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided that
the laws of the host country became applicable to said contracts if they offer terms and conditions more
favorable than those stipulated therein. It was stipulated in said contracts that:
"The Employee agrees that while in the employ of the Employer, he will not engage in any other
business or occupation, nor seek employment with anyone other than the Employer; that he shall
devote his entire time and attention and his best energies, and abilities to the performance of such
duties as may be assigned to him by the Employer; that he shall at all times be subject to the direction
and control of the Employer; and that the benefits provided to Employee hereunder are substituted for
and in lieu of all other benefits provided by any applicable law, provided of course, that total
remuneration and benefits do not fall below that of the host country regulation or custom, it being
understood that should applicable laws establish that fringe benefits, or other such benefits additional to
the compensation herein agreed cannot be waived, Employee agrees that such compensation will be
adjusted downward so that the total compensation hereunder, plus the non-waivable benefits shall be
equivalent to the compensation herein agreed" (Rollo, pp. 352-353).
The overseas-employment contracts could have been drafted more felicitously. While a part thereof
provides that the compensation to the employee may be "adjusted downward so that the total
computation (thereunder) plus the non-waivable benefits shall be equivalent to the compensation"
therein agreed, another part of the same provision categorically states "that total remuneration and
benefits do not fall below that of the host country regulation and custom."
Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII, the
parties that drafted it (Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257 [1979]).
Article 1377 of the Civil Code of the Philippines provides:
"The interpretation of obscure words or stipulations in a contract shall not favor the party who caused
the obscurity."
Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared form
containing the stipulations of the employment contract and the employees merely "take it or leave it."
The presumption is that there was an imposition by one party against the other and that the employees
signed the contracts out of necessity that reduced their bargaining power (Fieldmen's Insurance Co.,
Inc. v. Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the overseas-employment contracts in question as adopting
the provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof.
The parties to a contract may select the law by which it is to be governed (Cheshire, Private
International Law, 187 [7th ed]). In such a case, the foreign law is adopted as a "system" to regulate the
relations of the parties, including questions of their capacity to enter into the contract, the formalities to
be observed by them, matters of performance, and so forth (16 Am Jur 2d, 150-161).
Instead of adopting the entire mass of the foreign law, the parties may just agree that specific provisions
of a foreign statute shall be deemed incorporated into their contract "as a set of terms." By such
reference to the provisions of the foreign law, the contract does not become a foreign contract to be
governed by the foreign law. The said law does not operate as a statute but as a set of contractual
terms deemed written in the contract (Anton, Private International Law 197 [1967]; Dicey and Morris,
The Conflict of Laws 702-703, [8th ed.]).
A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law in Torts and
Contracts, 16 Columbia Journal of Transnational Law 1, 21 [1977]). Such party expectation is protected
by giving effect to the parties' own choice of the applicable law (Fricke v. Isbrandtsen Co. Inc., 151 F.
Supp. 465, 467 [1957]). The choice of law must, however, bear some relationship to the parties or their
transaction (Scoles and Hayes, Conflict of Law 644-647 [1982]). There is no question that the contracts
sought to be enforced by claimants have a direct connection with the Bahrain law because the services
were rendered in that country.
In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the "Employment
Agreement," between Norse Management Co. and the late husband of the private respondent,
expressly provided that in the event of illness or injury to the employee arising out of and in the course
of his employment and not due to his own misconduct, "compensation shall be paid to employee in
accordance with and subject to the limitation of the Workmen's Compensation Act of the Republic of the
Philippines or the Worker's Insurance Act of registry of the vessel, whichever is greater." Since the laws
of Singapore, the place of registry of the vessel in which the late husband of private respondent served
at the time of his death, granted a better compensation package, we applied said foreign law in
preference to the terms of the contract.
The case of Bagong Filipinas Overseas Corporation v. National Labor Relations Commission, 135
SCRA 278 (1985), relied upon by AIBC and BRII is inapposite to the facts of the cases at bench. The
issue in that case was whether the amount of the death compensation of a Filipino seaman should be
determined under the shipboard employment contract executed in the Philippines or the Hongkong law.
Holding that the shipboard employment contract was controlling, the Court differentiated said case from
Norse Management Co. in that in the latter case there was an express stipulation in the employment
contract that the foreign law would be applicable if it afforded greater compensation.
B. AIBC and BRII claim that they were denied by NLRC of their right to due process when said
administrative agency granted Friday-pay differential, holiday-pay differential, annual-leave differential
and leave indemnity pay to the claimants listed in Annex B of the Resolution. At first, NLRC reversed
the resolution of the POEA Administrator granting these benefits on a finding that the POEA
Administrator failed to consider the evidence presented by AIBC and BRII, that some findings of fact of
the POEA Administrator were not supported by the evidence, and that some of the evidence were not
disclosed to AIBC and BRII (Rollo, pp. 35-36; 106-107). But instead of remanding the case to the POEA
Administrator for a new hearing, which means further delay in the termination of the case, NLRC
decided to pass upon the validity of the claims itself. It is this procedure that AIBC and BRII complain of
as being irregular and a "reversible error."
They pointed out that NLRC took into consideration evidence submitted on appeal, the same evidence
which NLRC found to have been "unilaterally submitted by the claimants and not disclosed to the
adverse parties" (Rollo, pp. 37-39).
NLRC noted that so many pieces of evidentiary matters were submitted to the POEA Administrator by
the claimants after the cases were deemed submitted for resolution and which were taken cognizance
of by the POEA Administrator in resolving the cases. While AIBC and BRII had no opportunity to rebut
said evidence of the claimants before the POEA Administrator, they had all the opportunity to rebut said
evidence and to present their counter-evidence before NLRC. As a matter of fact, AIBC and BRII
themselves were able to present before NLRC additional evidence which they failed to present before
the POEA Administrator.
Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and all
reasonable means to ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process."
In deciding to resolve the validity of certain claims on the basis of the evidence of both parties submitted The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds that NLRC
before the POEA Administrator and NLRC, the latter considered that it was not expedient to remand the had committed grave abuse of discretion amounting to lack of jurisdiction in issuing the questioned
cases to the POEA Administrator for that would only prolong the already protracted legal controversies. orders. We find no such abuse of discretion.

Even the Supreme Court has decided appealed cases on the merits instead of remanding them to the WHEREFORE, all the three petitions are DISMISSED.
trial court for the reception of evidence, where the same can be readily determined from the
uncontroverted facts on record (Development Bank of the Philippines v. Intermediate Appellate Court, SO ORDERED.
190 SCRA 653 [1990]; Pagdonsalan v. National Labor Relations Commission, 127 SCRA 463 [1984]).

C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the POEA Administrator
to hold new hearings for 683 claimants listed in Annex D of the Resolution dated September 2, 1991
whose claims had been denied by the POEA Administrator "for lack of proof" and for 69 claimants listed
in Annex E of the same Resolution, whose claims had been found by NLRC itself as not "supported by
evidence" (Rollo, pp. 41-45).

NLRC based its ruling on Article 218 (c) of the Labor Code of the Philippines, which empowers it "[to]
conduct investigation for the determination of a question, matter or controversy, within its jurisdiction,
xxx."

It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to remand a case
involving claims which had already been dismissed because such provision contemplates only
situations where there is still a question or controversy to be resolved (Rollo, pp. 41-42).

A principle well embedded in Administrative Law is that the technical rules of procedure and evidence
do not apply to the proceedings conducted by administrative agencies (First Asian Transport & Shipping
Agency Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219
[1987]). This principle is enshrined in Article 221 of the Labor Code of the Philippines and is now the
bedrock of proceedings before NLRC.
Doctrine of Processual Presumption
Notwithstanding the non-applicability of technical rules of procedure and evidence in administrative
FIRST DIVISION
proceedings, there are cardinal rules which must be observed by the hearing officers in order to comply
with the due process requirements of the Constitution. These cardinal rules are collated in Ang Tibay v.
G.R. No. 112573, February 09, 1995
Court of Industrial Relations, 69 Phil. 635 (1940).

VIII
NORTHWEST ORIENT AIRLINES, INC., PETITIONER, VS. COURT OF APPEALS AND C.F. SHARP
& COMPANY, INC., RESPONDENTS.
DECISION
DAVIDE, JR., J.:
This petition for review on certiorari seeks to set aside the decision of the Court of Appeals affirming the
dismissal of the petitioner's complaint to enforce the judgment of a Japanese court. The principal issue
here is whether a Japanese court can acquire jurisdiction over a Philippine corporation doing business
in Japan by serving summons through diplomatic channels on the Philippine corporation at its principal
office in Manila after prior attempts to serve summons in Japan had failed.
Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a corporation organized under the
laws of the State of Minnesota, U.S.A., sought to enforce in Civil Case No. 83-17637 of the Regional
Trial Court (RTC), Branch 54, Manila, a judgment rendered in its favor by a Japanese court against
private respondent C.F. Sharp & Company, Inc., (hereinafter SHARP), a corporation incorporated under
Philippine laws.
[1]
As found by the Court of Appeals in the challenged decision of 10 November 1993, the following are
the factual and procedural antecedents of this controversy:
On May 9, 1974, plaintiff Northwest Airlines and defendant C.F. Sharp & Company, through its Japan
branch, entered into an International Passenger Sales Agency Agreement, whereby the former
authorized the latter to sell its air transportation tickets. Unable to remit the proceeds of the ticket sales
made by defendant on behalf of the plaintiff under the said agreement, plaintiff on March 25, 1980 sued
defendant in Tokyo, Japan, for collection of the unremitted proceeds of the ticket sales, with claim for
damages.
On April 11, 1980, a writ of summons was issued by the 36th Civil Department, Tokyo District Court of
Japan against defendant at its office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho, Naka-ku,
Yokohoma, Kanagawa Prefecture. The attempt to serve the summons was unsuccessful because the
bailiff was advised by a person in the office that Mr. Dinozo, the person believed to be authorized to
receive court processes was in Manila and would be back on April 24, 1980.
On April 24, 1980, bailiff returned to the defendant's office to serve the summons. Mr. Dinozo refused to
accept the same claiming that he was no longer an employee of the defendant.
After the two attempts of service were unsuccessful, the judge of the Tokyo District Court decided to
have the complaint and the writs of summons served at the head office of the defendant in Manila. On
July 11, 1980, the Director of the Tokyo District Court requested the Supreme Court of Japan to serve
the summons through diplomatic channels upon the defendant’s head office in Manila.
On August 28, 1980, defendant received from Deputy Sheriff Rolando Balingit the writ of summons (p.
276, Records). Despite receipt of the same, defendant failed to appear at the scheduled hearing. Thus,
the Tokyo Court proceeded to hear the plaintiff’s complaint and on [January 29, 1981], rendered
judgment ordering the defendant to pay the plaintiff the sum of 83,158,195 Yen and damages for delay
at the rate of 6% per annum from August 28, 1980 up to and until payment is completed (pp. 12-14,
Records).
On March 24, 1981, defendant received from Deputy Sheriff Balingit copy of the judgment. Defendant
not having appealed the judgment, the same became final and executory.
Plaintiff was unable to execute the decision in Japan, hence, on May 20, 1983, a suit for enforcement of
the judgment was filed by plaintiff before the Regional Trial Court of Manila, Branch 54. [2]
On July 16, 1983, defendant filed its answer averring that the judgment of the Japanese Court sought to
be enforced is null and void and unenforceable in this jurisdiction having been rendered without due and
proper notice to the defendant and/or with collusion or fraud and/or upon a clear mistake of law and fact
(pp. 41-45, Rec.).
Unable to settle the case amicably, the case was tried on the merits. After the plaintiff rested its case,
defendant on April 21, 1989, filed a Motion for Judgment on a Demurrer to Evidence based on two
grounds: (1) the foreign judgment sought to be enforced is null and void for want of jurisdiction and (2)
the said judgment is contrary to Philippine law and public policy and rendered without due process of
law. Plaintiff filed its opposition after which the court a quo rendered the now assailed decision dated
June 21, 1989 granting the demurrer motion and dismissing the complaint (Decision, pp. 376-378,
Records). In granting the demurrer motion, the trial court held that:
"The foreign judgment in the Japanese Court sought in this action is null and void for want of jurisdiction
over the person of the defendant considering that this is an action in personam; the Japanese Court did
not acquire jurisdiction over the person of the defendant because jurisprudence requires that the
defendant be served with summons in Japan in order for the Japanese Court to acquire jurisdiction over
it, the process of the Court in Japan sent to the Philippines which is outside Japanese jurisdiction
cannot confer jurisdiction over the defendant in the case before the Japanese Court of the case at bar.
Boudard versus Tait 67 Phil. 170. The plaintiff contends that the Japanese Court acquired jurisdiction
because the defendant is a resident of Japan, having four (4) branches doing business therein and in
fact had a permit from the Japanese government to conduct business in Japan (citing the exhibits
presented by the plaintiff); if this is so then service of summons should have been made upon the
defendant in Japan in any of these alleged four branches; as admitted by the plaintiff the service of the
summons issued by the Japanese Court was made in the Philippines thru a Philippine Sheriff. This
Court agrees that if the defendant in a foreign court is a resident in the court of that foreign court such
court could acquire jurisdiction over the person of the defendant but it must be served upon the
defendant in the territorial jurisdiction of the foreign court. Such is not the case here because the
defendant was served with summons in the Philippines and not in Japan."
Unable to accept the said decision, plaintiff on July 11, 1989 moved for reconsideration of the decision,
filing at the same time a conditional Notice of Appeal, asking the court to treat the said notice of appeal
"as in effect after and upon issuance of the court's denial of the motion for reconsideration."
Defendant opposed the motion for reconsideration to which a Reply dated August 28, 1989 was filed by
the plaintiff.
On October 16, 1989, the lower court disregarded the Motion for Reconsideration and gave due course
[3]
to the plaintiff's Notice of Appeal.
In its decision, the Court of Appeals sustained the trial court. It agreed with the latter in its reliance upon
[4]
Boudard vs. Tait wherein it was held that "the process of the court has no extraterritorial effect and no
jurisdiction is acquired over the person of the defendant by serving him beyond the boundaries of the
state." To support its position, the Court of Appeals further stated:
In an action strictly in personam, such as the instant case, personal service of summons within the
forum is required for the court to acquire jurisdiction over the defendant (Magdalena Estate Inc. vs.
Nieto, 125 SCRA 230). To confer jurisdiction on the court, personal or substituted service of summons
on the defendant not extraterritorial service is necessary (Dial Corp. vs. Soriano, 161 SCRA 739).
But while plaintiff-appellant concedes that the collection suit filed is an action in personam, it is its theory
that a distinction must be made between an action in personam against a resident defendant and an
action in personam against a non-resident defendant. Jurisdiction is acquired over a non-resident
defendant only if he is served personally within the jurisdiction of the court, and over a resident
defendant if by personal, substituted or constructive service conformably to statutory authorization.
Plaintiff-appellant argues that since the defendant-appellee maintains branches in Japan, it is
considered a resident defendant. Corollarily, personal, substituted or constructive service of summons
when made in compliance with the procedural rules is sufficient to give the court jurisdiction to render
judgment in personam.
Such an argument does not persuade.
It is a general rule that processes of the court cannot lawfully be served outside the territorial limits of
the jurisdiction of the court from which it issues (Carter vs. Carter, 41 S.E. 2d 532, 201) and this is
regardless of the residence or citizenship of the party thus served (Iowa-Rahr vs. Rahr, 129 NW 494,
150 Iowa 511, 35 LRC, NS, 292, Am. Case 1912 D680). There must be actual service within the proper
territorial limits on defendant or someone authorized to accept service for him. Thus, a defendant,
whether a resident or not in the forum where the action is filed, must be served with summons within
that forum.
But even assuming a distinction between a resident defendant and non-resident defendant were to be
adopted, such distinction applies only to natural persons and not to corporations. This finds support in
the concept that "a corporation has no home or residence in the sense in which those terms are applied
to natural persons" (Claude Neon Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as cited by the
defendant-appellee in its brief:
"Residence is said to be an attribute of a natural person, and can be predicated on an artificial being
only by more or less imperfect analogy. Strictly speaking, therefore, a corporation can have no local
residence or habitation. It has been said that a corporation is a mere ideal existence, subsisting only in
contemplation of law -- an invisible being which can have, in fact, no locality and can occupy no space,
and therefore cannot have a dwelling place. (18 Am. Jur. 2d, p. 693 citing Kimmerle vs. Topeka, 88 370,
128 p. 367; Wood v. Hartfold F. Ins. Co., 13 Conn 202)"
Jurisprudence so holds that the foreign or domestic character of a corporation is to be determined by
the place of its origin, where its charter was granted and not by the location of its business activities
(Jennings v. Idaho Rail Light & P. Co., 26 Idaho 703, 146 p. 101). A corporation is a "resident" and an
inhabitant of the state in which it is incorporated and no other (36 Am. Jur. 2d, p. 49).
Defendant-appellee is a Philippine Corporation duly organized under the Philippine laws. Clearly, its
residence is the Philippines, the place of its incorporation, and not Japan. While defendant-appellee
maintains branches in Japan, this will not make it a resident of Japan. A corporation does not become a
resident of another by engaging in business there even though licensed by that state and in terms given
all the rights and privileges of a domestic corporation (Galveston H. & S.A.R. Co. vs. Gonzales, 151 US
496, 38 L ed. 248, 4 S Ct. 401).
On this premise, defendant appellee is a non-resident corporation. As such, court processes must be
served upon it at a place within the state which the action is brought and not elsewhere (St. Clair vs.
[5]
Cox, 106 US 350, 27 L ed. 222, 1 S. Ct. 354).
It then concluded that the service of summons effected in Manila or beyond the territorial boundaries of
Japan was null and did not confer jurisdiction upon the Tokyo District Court over the person of SHARP;
hence, its decision was void.
Unable to obtain a reconsideration of the decision, NORTHWEST elevated the case to this Court
contending that the respondent court erred in holding that SHARP was not a resident of Japan and that
summons on SHARP could only be validly served within that country.
A foreign judgment is presumed to be valid and binding in the country from which it comes, until the
contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due
[6]
notice therein.
Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of a
foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between
the parties and their successors-in?interest by a subsequent title. The judgment may, however, be
assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake
of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere,
enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has regularly
performed its official duty.
Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of
its validity. [7] Being the party challenging the judgment rendered by the Japanese court, SHARP had
the duty to demonstrate the invalidity of such judgment. In an attempt to discharge that burden, it
contends that the extraterritorial service of summons effected at its home office in the Philippines was
not only ineffectual but also void, and the Japanese Court did not, therefore, acquire jurisdiction over it.
It is settled that matters of remedy and procedure such as those relating to the service of process upon
a defendant are governed by the lex fori or the internal law of the forum. [8] In this case, it is the
procedural law of Japan where the judgment was rendered that determines the validity of the
extraterritorial service of process on SHARP. As to what this law is a question of fact, not of law. It may
[9]
not be taken judicial notice of and must be pleaded and proved like any other fact. Sections 24 and
25, Rule 132 of the Rules of Court provide that it may be evidenced by an official publication or by a
duly attested or authenticated copy thereof. It was then incumbent upon SHARP to present evidence as
to what that Japanese procedural law is and to show that under it, the assailed extraterritorial service is
invalid. It did not. Accordingly, the presumption of validity and regularity of the service of summons and
the decision thereafter rendered by the Japanese court must stand.
Alternatively, in the light of the absence of proof regarding Japanese law, the presumption of identity or
similarity or the so-called processual presumption [10] may be invoked. Applying it, the Japanese law on
the matter is presumed to be similar with the Philippine law on service of summons on a private foreign
corporation doing business in the Philippines. Section 14, Rule 14 of the Rules of Court provides that if
the defendant is a foreign corporation doing business in the Philippines, service may be made: (1) on its
resident agent designated in accordance with law for that purpose, or, (2) if there is no such resident
agent, on the government official designated by law to that effect, or (3) on any of its officers or agents
within the Philippines.
If the foreign corporation has designated an agent to receive summons, the designation is exclusive,
and service of summons is without force and gives the court no jurisdiction unless made upon him. [11]
Where the corporation has no such agent, service shall be made on the government official designated
by law, to wit: (a) the Insurance Commissioner, in the case of a foreign insurance company; (b) the
Superintendent of Banks, in the case of a foreign banking corporation; and (c) the Securities and
Exchange Commission, in the case of other foreign corporations duly licensed to do business in the
Philippines. Whenever service of process is so made, the government office or official served shall
transmit by mail a copy of the summons or other legal process to the corporation at its home or principal
[12]
office. The sending of such copy is a necessary part of the service.
SHARP contends that the laws authorizing service of process upon the Securities and Exchange
Commission, the Superintendent of Banks, and the Insurance Commissioner, as the case may be,
presuppose a situation wherein the foreign corporation doing business in the country no longer has any
branches or offices within the Philippines. Such contention is belied by the pertinent provisions of the
[13] [14]
said laws. Thus, Section 128 of the Corporation Code and Section 190 of the Insurance Code
clearly contemplate two situations: (1) if the corporation had left the Philippines or had ceased to
transact business therein, and (2) if the corporation has no designated agent. Section 17 of the General
Banking Act [15] does not even speak of a corporation which had ceased to transact business in the
Philippines.
Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive court
processes in Japan. This silence could only mean, or at least create an impression, that it had none.
Hence, service on the designated government official or on any of SHARP's officers or agents in Japan
could be availed of. The respondent, however, insists that only service on any of its officers or
employees in its branches in Japan could be resorted to. We do not agree. As found by the respondent
court, two attempts at service were made at SHARP's Yokohama branch. Both were unsuccessful. On
the first attempt, Mr. Dinozo, who was believed to be the person authorized to accept court process,
was in Manila. On the second, Mr. Dinozo was present, but he refused to accept the summons
because, according to him, he was no longer an employee of SHARP. While it may be true that service
could have been made upon any of the officers or agents of SHARP at its three other branches in
Japan, the availability of such a recourse would not preclude service upon the proper government
official, as stated above.
As found by the Court of Appeals, it was the Tokyo District Court which ordered that summons for
[16]
SHARP be served at its head office in the Philippines after the two attempts of service had failed.
The Tokyo District Court requested the Supreme Court of Japan to cause the delivery of the summons
and other legal documents to the Philippines. Acting on that request, the Supreme Court of Japan sent
the summons together with the other legal documents to the Ministry of Foreign Affairs of Japan which,
in turn, forwarded the same to the Japanese Embassy in Manila. Thereafter, the court processes were
delivered to the Ministry (now Department) of Foreign Affairs of the Philippines, then to the Executive
Judge of the Court of First Instance (now Regional Trial Court) of Manila, who forthwith ordered Deputy
Sheriff Rolando Balingit to serve the same on SHARP at its principal office in Manila. This service is
equivalent to service on the proper government official under Section 14, Rule 14 of the Rules of Court,
in relation to Section 128 of the Corporation Code. Hence, SHARP's contention that such manner of
[17]
service is not valid under Philippine laws holds no water.
In deciding against the petitioner, the respondent court sustained the trial court's reliance on Boudard
vs. Tait [18] where this Court held:
"The fundamental rule is that jurisdiction in personam over nonresidents, so as to sustain a money
judgment, must be based upon personal service within the state which renders the judgment."
"The process of a court has no extraterritorial effect, and no jurisdiction is acquired over the person of
the defendant by serving him beyond the boundaries of the state. Nor has a judgment of a court of a
foreign country against a resident of this country having no property in such foreign country based on
process served here, any effect here against either the defendant personally or his property situated
here."
"Process issuing from the courts of one state or country cannot run into another, and although a
nonresident defendant may have been personally served with such process in the state or country of his
domicile, it will not give such jurisdiction as to authorize a personal judgment against him."
[19]
It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto and Dial Corp. vs. Soriano, [20] as
well as the principle laid down by the Iowa Supreme Court in the 1911 case of Raher vs. Raher. [21]
The first three cases are, however, inapplicable. Boudard involved the enforcement of a judgment of the
civil division of the Court of First Instance of Hanoi, French Indo-China. The trial court dismissed the
case because the Hanoi court never acquired jurisdiction over the person of the defendant considering
that "[t]he evidence adduced at the trial conclusively proves that neither the appellee [the defendant] nor

his agent or employees were ever in Hanoi, French Indo-China; and that the deceased Marie Theodore
Jerome Boudard had never, at any time, been his employee." In Magdalena Estate, what was declared
invalid resulting in the failure of the court to acquire jurisdiction over the person of the defendants in an
action in personam was the service of summons through publication against non-appearing resident
defendants. It was claimed that the latter concealed themselves to avoid personal service of summons
upon them. In Dial, the defendants were foreign corporations which were not domiciled and licensed to
engage in business in the Philippines and which did not have officers or agents, places of business, or
properties here. On the other hand, in the instant case, SHARP was doing business in Japan and was
maintaining four branches therein.
Insofar as the Philippines is concerned, Raher is a thing of the past. In that case, a divided Supreme
Court of Iowa declared that the principle that there can be no jurisdiction in a court of a territory to
render a personal judgment against anyone upon service made outside its limits was applicable alike to
cases of residents and non-residents. The principle was put at rest by the United States Supreme Court
when it ruled in the 1940 case of Milliken vs. Meyer [22] that domicile in the state is alone sufficient to
bring an absent defendant within the reach of the state's jurisdiction for purposes of a personal
judgment by means of appropriate substituted service or personal service without the state. This
principle is embodied in Section 18, Rule 14 of the Rules of Court which allows service of summons on
residents temporarily out of the Philippines to be made out of the country. The rationale for this rule was
explained in Milliken as follows:
[T]he authority of a state over one of its citizens is not terminated by the mere fact of his absence from
the state. The state which accords him privileges and affords protection to him and his property by virtue
of his domicile may also exact reciprocal duties. "Enjoyment of the privileges of residence within the
state, and the attendant right to invoke the protection of its laws, are inseparable" from the various
incidences of state citizenship. The responsibilities of that citizenship arise out of the relationship to the
state which domicile creates. That relationship is not dissolved by mere absence from the state. The
attendant duties, like the rights and privileges incident to domicile, are not dependent on continuous
presence in the state. One such incident of domicile is amenability to suit within the state even during
sojourns without the state, where the state has provided and employed a reasonable method for
[23]
apprising such an absent party of the proceedings against him.
[24]
The domicile of a corporation belongs to the state where it was incorporated. In a strict technical
sense, such domicile as a corporation may have is single in its essence and a corporation can have
[25]
only one domicile which is the state of its creation.
Nonetheless, a corporation formed in one state may, for certain purposes, be regarded a resident in
another state in which it has offices and transacts business. This is the rule in our jurisdiction and
apropos thereto, it may be necessary to quote what we stated in State Investment House, Inc. vs.
Citibank, N.A., [26] to wit:
The issue is whether these Philippine branches or units may be considered "residents of the Philippine
Islands" as that term is used in Section 20 of the Insolvency Law ... or residents of the state under the
laws of which they were respectively incorporated. The answer cannot be found in the Insolvency Law
itself, which contains no definition of the term, resident, or any clear indication of its meaning. There are
however other statutes, albeit of subsequent enactment and effectivity, from which enlightening notions
of the term may be derived.
The National Internal Revenue Code declares that the term " ‘resident foreign corporation’ applies to a
foreign corporation engaged in trade or business within the Philippines," as distinguished from a " ‘non-
resident foreign corporation’ x x x (which is one) not engaged in trade or business within the
Philippines." [Sec. 20, pars. (h) and (i)].
The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation,
extension offices or any other units of corporation or juridical person organized under the laws of any
foreign country operating in the Philippines shall be considered residents of the Philippines." [Sec. 1(e)].
The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of
foreign banks x x x (which are) called Philippine branches," in the same category as "commercial banks,
savings associations, mortgage banks, development banks, rural banks, stock savings and loan
associations" (which have been formed and organized under Philippine laws), making no distinction
between the former and the latter in so far as the terms "banking institutions" and "bank" are used in the
Act [Sec. 2], declaring on the contrary that in "all matters not specifically covered by special provisions
applicable only to foreign banks, or their branches and agencies in the Philippines, said foreign banks or
their branches and agencies lawfully doing business in the Philippines "shall be bound by all laws, rules,
and regulations applicable to domestic banking corporations of the same class, except such laws, rules
and regulations as provided for the creation, formation, organization, or dissolution of corporations or as
fix the relation, liabilities, responsibilities, or duties of members, stockholders or officers of corporation."
[Sec. 18].
This Court itself has already had occasion to hold [Claude Neon Lights, Fed. Inc. vs. Philippine
Advertising Corp., 57 Phil. 607] that a foreign corporation licitly doing business in the Philippines, which
is a defendant in a civil suit, may not be considered a non-resident within the scope of the legal
provision authorizing attachment against a defendant not residing in the Philippine Islands; [Sec. 424, in
relation to Sec. 412 of Act No. 190, the Code of Civil Procedure; Sec. 1(f), Rule 59 of the Rules of 1940;
Sec. 1(f), Rule 57, Rules of 1964] in other words, a preliminary attachment may not be applied for and
granted solely on the asserted fact that the defendant is a foreign corporation authorized to do business
in the Philippines -- and is consequently and necessarily, "a party who resides out of the Philippines."
Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who
resides out of the country, then, logically, it must be considered a party who does reside in the
Philippines, who is a resident of the country. Be this as it may, this Court pointed out that:
"xx Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to
do business here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall
Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu Cong Eng vs. Trinidad, 47 Phil. 385, 411) We
think it would be entirely out of line with this policy should we make a discrimination against a foreign
corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it
has complied not only with every requirement of law made specially of foreign corporations, but in
addition with every requirement of law made of domestic corporations. xx."
Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the
status of domestic corporations," subsumes their being found and operating as corporations, hence,
residing, in the country.
The same principle is recognized in American law: that the "residence of a corporation, if it can be said
to have a residence, is necessarily where it exercises corporate functions x x;" that it is considered as
dwelling "in the place where its business is done x x," as being "located where its franchises are
exercised x x," and as being "present where it is engaged in the prosecution of the corporate
enterprise;" that a "foreign corporation licensed to do business in a state is a resident of any country
where it maintains an office or agent for transaction of its usual and customary business for venue
purposes;" and that the "necessary element in its signification is locality of existence." [Words and
Phrases, Permanent Ed., vol. 37, pp. 394, 412, 403].
Inasmuch as SHARP was admittedly doing business in Japan through its four duly registered branches
at the time the collection suit against it was filed, then in the light of the processual presumption,
SHARP may be deemed a resident of Japan, and, as such, was amenable to the jurisdiction of the
courts therein and may be deemed to have assented to the said courts' lawful methods of serving
process. [27]
Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only
under the processual presumption but also because of the presumption of regularity of performance of
official duty.
We find NORTHWEST's claim for attorney's fees, litigation expenses, and exemplary damages to be
without merit. We find no evidence that would justify an award for attorney's fees and litigation expenses
under Article 2208 of the Civil Code of the Philippines. Nor is an award for exemplary damages
warranted. Under Article 2234 of the Civil Code, before the court may consider the question of whether
or not exemplary damages should be awarded, the plaintiff must show that he is entitled to moral,
temperate, or compensatory damages. There being no such proof presented by NORTHWEST, no
exemplary damages may be adjudged in its favor.
WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED
insofar as it denied NORTHWEST's claims for attorney's fees, litigation expenses, and exemplary
damages but REVERSED insofar as it sustained the trial court's dismissal of NORTHWEST's complaint
in Civil Case No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and another in its stead
is hereby rendered ORDERING private respondent C.F. SHARP & COMPANY, INC. to pay to
NORTHWEST the amounts adjudged in the foreign judgment subject of said case, with interest
thereon at the legal rate from the filing of the complaint therein until the said foreign judgment is fully
satisfied.
Costs against the private respondent.
SO ORDERED.
Enforcement of Judgment
SECOND DIVISION
G.R. No. 114323, July 23, 1998
OIL AND NATURAL GAS COMMISSION, PETITIONER, VS. COURT OF APPEALS AND PACIFIC
CEMENT COMPANY, INC. RESPONDENTS.
DECISION
MARTINEZ, J.:
This proceeding involves the enforcement of a foreign judgment rendered by the Civil Judge of Dehra
Dun, India in favor of the petitioner, OIL AND NATURAL GAS COMMISSION and against the private
respondent, PACIFIC CEMENT COMPANY, INCORPORATED.
The petitioner is a foreign corporation owned and controlled by the Government of India while the
private respondent is a private corporation duly organized and existing under the laws of the Philippines.
The present conflict between the petitioner and the private respondent has its roots in a contract
entered into by and between both parties on February 26, 1983 whereby the private respondent
undertook to supply the petitioner FOUR THOUSAND THREE HUNDRED (4,300) metric tons of oil well
cement. In consideration therefor, the petitioner bound itself to pay the private respondent the amount of
FOUR HUNDRED SEVENTY-SEVEN THOUSAND THREE HUNDRED U.S. DOLLARS ($477,300.00)
by opening an irrevocable, divisible, and confirmed letter of credit in favor of the latter. The oil well
cement was loaded on board the ship MV SURUTANA NAVA at the port of Surigao City, Philippines for
delivery at Bombay and Calcutta, India. However, due to a dispute between the shipowner and the
private respondent, the cargo was held up in Bangkok and did not reach its point of destination.
Notwithstanding the fact that the private respondent had already received payment and despite several
demands made by the petitioner, the private respondent failed to deliver the oil well cement. Thereafter,
negotiations ensued between the parties and they agreed that the private respondent will replace the
entire 4,300 metric tons of oil well cement with Class “G” cement cost free at the petitioner’s designated
port. However, upon inspection, the Class “G” cement did not conform to the petitioner’s specifications.
The petitioner then informed the private respondent that it was referring its claim to an arbitrator
pursuant to Clause 16 of their contract which stipulates:
“Except where otherwise provided in the supply order/contract all questions and disputes, relating to the
meaning of the specification designs, drawings and instructions herein before mentioned and as to
quality of workmanship of the items ordered or as to any other question, claim, right or thing
whatsoever, in any way arising out of or relating to the supply order/contract design, drawing,
specification, instruction or these conditions or otherwise concerning the materials or the execution or
failure to execute the same during stipulated/extended period or after the completion/abandonment
thereof shall be referred to the sole arbitration of the persons appointed by Member of the Commission
at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter to which the supply or contract relates
and that in the course of his duties as Commission’s employee he had expressed views on all or any of
the matter in dispute or difference.
“The arbitrator to whom the matter is originally referred being transferred or vacating his office or being
unable to act for any reason the Member of the Commission shall appoint another person to act as
arbitrator in acordance with the terms of the contract/supply order. Such person shall be entitled to
proceed with reference from the stage at which it was left by his predecessor. Subject as aforesaid the
provisions of the Arbitration Act, 1940, or any Statutary modification or re-enactment there of and the
rules made there under and for the time being in force shall apply to the arbitration proceedings under
this clause.
“The arbitrator may with the consent of parties enlarge the time, from time to time, to make and publish
the award.
“The venue for arbitration shall be at Dehra dun.”[1]
On July 23, 1988, the chosen arbitrator, one Shri N.N. Malhotra, resolved the dispute in petitioner’s
favor setting forth the arbitral award as follows:
“NOW THEREFORE after considering all facts of the case, the evidence, oral and documentarys
adduced by the claimant and carefully examining the various written statements, submissions, letters,
telexes, etc. sent by the respondent, and the oral arguments addressed by the counsel for the
claimants, I, N.N. Malhotra, Sole Arbitrator, appointed under clause 16 of the supply order dated
26.2.1983, according to which the parties, i.e. M/S Oil and Natural Gas Commission and the Pacific
Cement Co., Inc. can refer the dispute to the sole arbitration under the provision of the Arbitration Act.
1940, do hereby award and direct as follows:-
“The Respondent will pay the following to the claimant :-
1. Amount received by the Respondent Dehra Dun (U.P.) India
against the letter of credit No. 11/19 Re: Misc. Case No. 5 of 1989
dated 28.2.1983 - - - US $ 477,300.00 M/S Pacific Cement Co.,
Inc. vs. ONGC Case
2. Re-imbursement of expenditure incurred Sir:
by the claimant on the inspection team’s 1. We received your letter dated 28 April 1989 only last 18 May 1989.
visit to Philippines in August 1985 - - - US$ 3,881.00 2. Please inform us how much is the court fee to be paid. Your letter did not mention the amount
to be paid.
3. L. C. Establishment charges incurred 3. Kindly give us 15 days from receipt of your letter advising us how much to pay to comply with
by the claimant - - - US $ 1,252.82 the same.
Thank you for your kind consideration.
4. Loss of interest suffered by claimant Pacific Cement Co., Inc.
from 21.6.83 to 23.7.88 - - - US $ 417,169.95 By:
Total amount of award - - - US $ 899,603.77 Jose Cortes, Jr.
President"[3]
“In addition to the above, the respondent would also be liable to pay to the claimant the interest at the
Without responding to the above communication, the foreign court refused to admit the private
rate of 6% on the above amount, with effect from 24.7.1988 upto the actual date of payment by the
respondent’s objections for failure to pay the required filing fees, and thereafter issued an Order on
Respondent in full settlement of the claim as awarded or the date of the decree, whichever is earlier.
February 7, 1990, to wit:

“I determine the cost at Rs. 70,000/- equivalent to US $5,000 towards the expenses on Arbitration, legal “ORDER
expenses, stamps duly incurred by the claimant. The cost will be shared by the parties in equal
proportion.
Since objections filed by defendant have been rejected through Misc. Suit No. 5 on 7.2.90, therefore,
award should be made “Rule of the Court.
“Pronounced at Dehra Dun to-day, the 23rd of July 1988.”[2]
To enable the petitioner to execute the above award in its favor, it filed a Petition before the Court of the
“ORDER
Civil Judge in Dehra Dun, India (hereinafter referred to as the foreign court for brevity), praying that the
decision of the arbitrator be made “the Rule of Court” in India. The foreign court issued notices to the
Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of conditions of award
private respondent for filing objections to the petition. The private respondent complied and sent its
decree is passed. Award Paper No. 3/B-1 shall be a part of the decree. The plaintiff shall also be
objections dated January 16, 1989. Subsequently, the said court directed the private respondent to pay
entitled to get from defendant (US$ 899, 603.77 (US$ Eight Lakhs ninety nine thousand six hundred
the filing fees in order that the latter’s objections could be given consideration. Instead of paying the
and three point seventy seven only) alongwith 9% interest per annum till the last date of realisation.” [4]
required filing fees, the private respondent sent the following communication addressed to the Civil
Judge of Dehra Dun:
Despite notice sent to the private respondent of the foregoing order and several demands by the
petitioner for compliance therewith, the private respondent refused to pay the amount adjudged by the
“The Civil Judge
foreign court as owing to the petitioner. Accordingly, the petitioner filed a complaint with Branch 30 of
the Regional Trial Court (RTC) of Surigao City for the enforcement of the aforementioned judgment of
the foreign court. The private respondent moved to dismiss the complaint on the following grounds: (1)
plaintiff’s lack of legal capacity to sue; (2) lack of cause of action; and (3) plaintiff’s claim or demand has
been waived, abandoned, or otherwise extinguished. The petitioner filed its opposition to the said
motion to dismiss, and the private respondent, its rejoinder thereto. On January 3, 1992, the RTC
issued an order upholding the petitioner’s legal capacity to sue, albeit dismissing the complaint for lack
of a valid cause of action. The RTC held that the rule prohibiting foreign corporations transacting
business in the Philippines without a license from maintaining a suit in Philippine courts admits of an
exception, that is, when the foreign corporation is suing on an isolated transaction as in this case. [5]
Anent the issue of the sufficiency of the petitioner’s cause of action, however, the RTC found the referral
of the dispute between the parties to the arbitrator under Clause 16 of their contract erroneous.
According to the RTC,
“[a] perusal of the above-quoted clause (Clause 16) readily shows that the matter covered by its terms
is limited to “ALL QUESTIONS AND DISPUTES, RELATING TO THE MEANING OF THE
SPECIFICATION, DESIGNS, DRAWINGS AND INSTRUCTIONS HEREIN BEFORE MENTIONED and
as to the QUALITY OF WORKMANSHIP OF THE ITEMS ORDERED or as to any other questions,
claim, right or thing whatsoever, but qualified to ‘IN ANY WAY ARISING OR RELATING TO THE
SUPPLY ORDER/CONTRACT, DESIGN, DRAWING, SPECIFICATION, etc.,’ repeating the
enumeration in the opening sentence of the clause.
“The court is inclined to go along with the observation of the defendant that the breach, consisting of the
non-delivery of the purchased materials, should have been properly litigated before a court of law,
pursuant to Clause No. 15 of the Contract/Supply Order, herein quoted, to wit:
‘JURISDICTION
All questions, disputes and differences, arising under out of or in connection with this supply order, shall
be subject to the EXCLUSIVE JURISDICTION OF THE COURT, within the local limits of whose
jurisdiction and the place from which this supply order is situated.’” [6]
The RTC characterized the erroneous submission of the dispute to the arbitrator as a “mistake of law or
fact amounting to want of jurisdiction”. Consequently, the proceedings had before the arbitrator were
null and void and the foreign court had therefore, adopted no legal award which could be the source of
an enforceable right.[7]
The petitioner then appealed to the respondent Court of Appeals which affirmed the dismissal of the
complaint. In its decision, the appellate court concurred with the RTC’s ruling that the arbitrator did not
have jurisdiction over the dispute between the parties, thus, the foreign court could not validly adopt the
arbitrator’s award. In addition, the appellate court observed that the full text of the judgment of the
foreign court contains the dispositive portion only and indicates no findings of fact and law as basis for
the award. Hence, the said judgment cannot be enforced by any Philippine court as it would violate the
constitutional provision that no decision shall be rendered by any court without expressing therein
clearly and distinctly the facts and the law on which it is based. [8] The appellate court ruled further that
the dismissal of the private respondent’s objections for non-payment of the required legal fees, without
the foreign court first replying to the private respondent’s query as to the amount of legal fees to be
paid, constituted want of notice or violation of due process. Lastly, it pointed out that the arbitration
proceeding was defective because the arbitrator was appointed solely by the petitioner, and the fact that
the arbitrator was a former employee of the latter gives rise to a presumed bias on his part in favor of
the petitioner.[9]
A subsequent motion for reconsideration by the petitioner of the appellate court’s decision was denied,
thus, this petition for review on certiorari citing the following as grounds in support thereof:
“RESPONDENT COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE LOWER COURT’S
ORDER OF DISMISSAL SINCE:
A. THE NON-DELIVERY OF THE CARGO WAS A MATTER PROPERLY COGNIZABLE BY THE
PROVISIONS OF CLAUSE 16 OF THE CONTRACT;
B. THE JUDGMENT OF THE CIVIL COURT OF DEHRADUN, INDIA WAS AN AFFIRMATION OF THE
FACTUAL AND LEGAL FINDINGS OF THE ARBITRATOR AND THEREFORE ENFORCEABLE IN
THIS JURISDICTION;
C. EVIDENCE MUST BE RECEIVED TO REPEL THE EFFECT OF A PRESUMPTIVE RIGHT UNDER
A FOREIGN JUDGMENT.”[10]

The threshold issue is whether or not the arbitrator had jurisdiction over the dispute between the
petitioner and the private respondent under Clause 16 of the contract. To reiterate, Clause 16 provides
as follows:
“Except where otherwise provided in the supply order/contract all questions and disputes, relating to the
meaning of the specification designs, drawings and instructions herein before mentioned and as to
quality of workmanship of the items ordered or as to any other question, claim, right or thing
whatsoever, in any way arising out of or relating to the supply order/contract design, drawing,
specification, instruction or these conditions or otherwise concerning the materials or the execution or
failure to execute the same during stipulated/extended period or after the completion/abandonment
thereof shall be referred to the sole arbitration of the persons appointed by Member of the Commission
at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a
Commission employer (sic) that he had to deal with the matter to which the supply or contract relates
and that in the course of his duties as Commission’s employee he had expressed views on all or any of
the matter in dispute or difference.”[11]
The dispute between the parties had its origin in the non-delivery of the 4,300 metric tons of oil well
cement to the petitioner. The primary question that may be posed, therefore, is whether or not the non-
delivery of the said cargo is a proper subject for arbitration under the above-quoted Clause 16. The
petitioner contends that the same was a matter within the purview of Clause 16, particularly the phrase,
“x x x or as to any other questions, claim, right or thing whatsoever, in any way arising or relating to the
supply order/contract, design, drawing, specification, instruction x x x”.[12] It is argued that the foregoing
phrase allows considerable latitude so as to include non-delivery of the cargo which was a “claim, right
or thing relating to the supply order/contract”. The contention is bereft of merit. First of all, the petitioner
has misquoted the said phrase, shrewdly inserting a comma between the words “supply order/contract”
and “design” where none actually exists. An accurate reproduction of the phrase reads, “x x x or as to
any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply
order/contract design, drawing, specification, instruction or these conditions x x x”. The absence of a
comma between the words “supply order/contract” and “design” indicates that the former cannot be
taken separately but should be viewed in conjunction with the words “design, drawing, specification,
instruction or these conditions”. It is thus clear that to fall within the purview of this phrase, the “claim,
right or thing whatsoever” must arise out of or relate to the design, drawing, specification, or instruction
of the supply order/contract. The petitioner also insists that the non-delivery of the cargo is not only
covered by the foregoing phrase but also by the phrase, “x x x or otherwise concerning the materials or
the execution or failure to execute the same during the stipulated/extended period or after
completion/abandonment thereof x x x”.
The doctrine of noscitur a sociis, although a rule in the construction of statutes, is equally applicable in
the ascertainment of the meaning and scope of vague contractual stipulations, such as the
aforementioned phrase. According to the maxim noscitur a sociis, where a particular word or phrase is
ambiguous in itself or is equally susceptible of various meanings, its correct construction may be made
clear and specific by considering the company of the words in which it is found or with which it is
associated, or stated differently, its obscurity or doubt may be reviewed by reference to associated
words.[13] A close examination of Clause 16 reveals that it covers three matters which may be submitted
to arbitration namely,
(1) all questions and disputes, relating to the meaning of the specification designs, drawings and
instructions herein before mentioned and as to quality of workmanship of the items ordered; or
(2) any other question, claim, right or thing whatsoever, in any way arising out of or relating to the
supply order/contract design, drawing, specification, instruction or these conditions; or
(3) otherwise concerning the materials or the execution or failure to execute the same during
stipulated/extended period or after the completion/abandonment thereof.
The first and second categories unmistakably refer to questions and disputes relating to the design,
drawing, instructions, specifications or quality of the materials of the supply/order contract. In the third
category, the clause, “execution or failure to execute the same”, may be read as “execution or failure to
execute the supply order/contract”. But in accordance with the doctrine of noscitur a sociis, this
reference to the supply order/contract must be construed in the light of the preceding words with which it
is associated, meaning to say, as being limited only to the design, drawing, instructions, specifications
or quality of the materials of the supply order/contract. The non-delivery of the oil well cement is
definitely not in the nature of a dispute arising from the failure to execute the supply order/contract
design, drawing, instructions, specifications or quality of the materials. That Clause 16 should pertain
only to matters involving the technical aspects of the contract is but a logical inference considering that
the underlying purpose of a referral to arbitration is for such technical matters to be deliberated upon by
a person possessed with the required skill and expertise which may be otherwise absent in the regular
courts.
This Court agrees with the appellate court in its ruling that the non-delivery of the oil well cement is a
matter properly cognizable by the regular courts as stipulated by the parties in Clause 15 of their
contract:
“All questions, disputes and differences, arising under out of or in connection with this supply order,
shall be subject to the exclusive jurisdiction of the court, within the local limits of whose jurisdiction and
the place from which this supply order is situated.”[14]
The following fundamental principles in the interpretation of contracts and other instruments served as
our guide in arriving at the foregoing conclusion:
"ART. 1373. If some stipulation of any contract should admit of several meanings, it shall be understood
as bearing that import which is most adequate to render it effectual."[15]
“ART. 1374. The various stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly”. [16]
“Sec. 11. Instrument construed so as to give effect to all provisions. In the construction of an instrument,
where there are several provisions or particulars, such a construction is, if possible, to be adopted as
will give effect to all.”[17]
Thus, this Court has held that as in statutes, the provisions of a contract should not be read in isolation
from the rest of the instrument but, on the contrary, interpreted in the light of the other related
provisions.[18] The whole and every part of a contract must be considered in fixing the meaning of any of
its parts and in order to produce a harmonious whole. Equally applicable is the canon of construction
that in interpreting a statute (or a contract as in this case), care should be taken that every part thereof
be given effect, on the theory that it was enacted as an integrated measure and not as a hodge-podge
of conflicting provisions. The rule is that a construction that would render a provision inoperative should
be avoided; instead, apparently inconsistent provisions should be reconciled whenever possible as
parts of a coordinated and harmonious whole.[19]
The petitioner’s interpretation that Clause 16 is of such latitude as to contemplate even the non-delivery
of the oil well cement would in effect render Clause 15 a mere superfluity. A perusal of Clause 16 shows
that the parties did not intend arbitration to be the sole means of settling disputes. This is manifest from
Clause 16 itself which is prefixed with the proviso, “Except where otherwise provided in the supply
order/contract x x x”, thus indicating that the jurisdiction of the arbitrator is not all encompassing, and
admits of exceptions as may be provided elsewhere in the supply order/contract. We believe that the
correct interpretation to give effect to both stipulations in the contract is for Clause 16 to be confined to
all claims or disputes arising from or relating to the design, drawing, instructions, specifications or
quality of the materials of the supply order/contract, and for Clause 15 to cover all other claims or
disputes.
The petitioner then asseverates that granting, for the sake of argument, that the non-delivery of the oil
well cement is not a proper subject for arbitration, the failure of the replacement cement to conform to
the specifications of the contract is a matter clearly falling within the ambit of Clause 16. In this
contention, we find merit. When the 4,300 metric tons of oil well cement were not delivered to the
petitioner, an agreement was forged between the latter and the private respondent that Class “G”
cement would be delivered to the petitioner as replacement. Upon inspection, however, the replacement
cement was rejected as it did not conform to the specifications of the contract. Only after this latter
circumstance was the matter brought before the arbitrator. Undoubtedly, what was referred to arbitration
was no longer the mere non-delivery of the cargo at the first instance but also the failure of the
replacement cargo to conform to the specifications of the contract, a matter clearly within the coverage
of Clause 16.
The private respondent posits that it was under no legal obligation to make replacement and that it
undertook the latter only “in the spirit of liberality and to foster good business relationship”. [20] Hence, the
undertaking to deliver the replacement cement and its subsequent failure to conform to specifications
are not anymore subject of the supply order/contract or any of the provisions thereof. We disagree.
As per Clause 7 of the supply order/contract, the private respondent undertook to deliver the 4,300
metric tons of oil well cement at “BOMBAY (INDIA) 2181 MT and CALCUTTA 2119 MT”. [21] The failure
of the private respondent to deliver the cargo to the designated places remains undisputed. Likewise,
the fact that the petitioner had already paid for the cost of the cement is not contested by the private
respondent. The private respondent claims, however, that it never benefited from the transaction as it
was not able to recover the cargo that was unloaded at the port of Bangkok. [22] First of all, whether or
not the private respondent was able to recover the cargo is immaterial to its subsisting duty to make
good its promise to deliver the cargo at the stipulated place of delivery. Secondly, we find it difficult to
believe this representation. In its Memorandum filed before this Court, the private respondent asserted
that the Civil Court of Bangkok had already ruled that the non-delivery of the cargo was due solely to the
fault of the carrier.[23] It is, therefore, but logical to assume that the necessary consequence of this
finding is the eventual recovery by the private respondent of the cargo or the value thereof. What
inspires credulity is not that the replacement was done in the spirit of liberality but that it was undertaken
precisely because of the private respondent’s recognition of its duty to do so under the supply
order/contract, Clause 16 of which remains in force and effect until the full execution thereof.
We now go to the issue of whether or not the judgment of the foreign court is enforceable in this
jurisdiction in view of the private respondent’s allegation that it is bereft of any statement of facts and
law upon which the award in favor of the petitioner was based. The pertinent portion of the judgment of
the foreign court reads:
“ORDER
Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of conditions of award
decree is passed. Award Paper No. 3/B-1 shall be a part of the decree. The plaintiff shall also be
entitled to get from defendant ( US$ 899, 603.77 (US$ Eight Lakhs ninety nine thousand six hundred
and three point seventy seven only) alongwith 9% interest per annum till the last date of realisation.” [24]
As specified in the order of the Civil Judge of Dehra Dun, “Award Paper No. 3/B-1 shall be a part of the
decree”. This is a categorical declaration that the foreign court adopted the findings of facts and law of
the arbitrator as contained in the latter’s Award Paper. Award Paper No. 3/B-1, contains an exhaustive
discussion of the respective claims and defenses of the parties, and the arbitrator’s evaluation of the
same. Inasmuch as the foregoing is deemed to have been incorporated into the foreign court’s
judgment the appellate court was in error when it described the latter to be a “simplistic decision
containing literally, only the dispositive portion”.[25]
The constitutional mandate that no decision shall be rendered by any court without expressing therein
clearly and distinctly the facts and the law on which it is based does not preclude the validity of
“memorandum decisions” which adopt by reference the findings of fact and conclusions of law
contained in the decisions of inferior tribunals. In Francisco v. Permskul,[26] this Court held that the
following memorandum decision of the Regional Trial Court of Makati did not transgress the
requirements of Section 14, Article VIII of the Constitution:
“MEMORANDUM DECISION
After a careful perusal, evaluation and study of the records of this case, this Court hereby adopts by
reference the findings of fact and conclusions of law contained in the decision of the Metropolitan Trial
Court of Makati, Metro Manila, Branch 63 and finds that there is no cogent reason to disturb the same.
“WHEREFORE, judgment appealed from is hereby affirmed in toto.”[27] (Underscoring supplied.)
This Court had occasion to make a similar pronouncement in the earlier case of Romero v. Court of
Appeals,[28] where the assailed decision of the Court of Appeals adopted the findings and disposition of
the Court of Agrarian Relations in this wise:
“We have, therefore, carefully reviewed the evidence and made a re-assessment of the same, and We
are persuaded, nay compelled, to affirm the correctness of the trial court’s factual findings and the
soundness of its conclusion. For judicial convenience and expediency, therefore, We hereby adopt by
way of reference, the findings of facts and conclusions of the court a quo spread in its decision, as
integral part of this Our decision.”[29] (Underscoring supplied)
Hence, even in this jurisdiction, incorporation by reference is allowed if only to avoid the cumbersome
reproduction of the decision of the lower courts, or portions thereof, in the decision of the higher
court.[30] This is particularly true when the decision sought to be incorporated is a lengthy and thorough
discussion of the facts and conclusions arrived at, as in this case, where Award Paper No. 3/B-1
consists of eighteen (18) single spaced pages.
Furthermore, the recognition to be accorded a foreign judgment is not necessarily affected by the fact
that the procedure in the courts of the country in which such judgment was rendered differs from that of
the courts of the country in which the judgment is relied on.[31] This Court has held that matters of
remedy and procedure are governed by the lex fori or the internal law of the forum. [32] Thus, if under the
procedural rules of the Civil Court of Dehra Dun, India, a valid judgment may be rendered by adopting
the arbitrator’s findings, then the same must be accorded respect. In the same vein, if the procedure in
the foreign court mandates that an Order of the Court becomes final and executory upon failure to pay
the necessary docket fees, then the courts in this jurisdiction cannot invalidate the order of the foreign
court simply because our rules provide otherwise.
The private respondent claims that its right to due process had been blatantly violated, first by reason of
the fact that the foreign court never answered its queries as to the amount of docket fees to be paid
then refused to admit its objections for failure to pay the same, and second, because of the presumed
bias on the part of the arbitrator who was a former employee of the petitioner.
Time and again this Court has held that the essence of due process is to be found in the reasonable
opportunity to be heard and submit any evidence one may have in support of one’s defense [33] or stated
otherwise, what is repugnant to due process is the denial of opportunity to be heard. [34] Thus, there is no
violation of due process even if no hearing was conducted, where the party was given a chance to
explain his side of the controversy and he waived his right to do so.[35]
In the instant case, the private respondent does not deny the fact that it was notified by the foreign court
to file its objections to the petition, and subsequently, to pay legal fees in order for its objections to be
given consideration. Instead of paying the legal fees, however, the private respondent sent a
communication to the foreign court inquiring about the correct amount of fees to be paid. On the pretext
that it was yet awaiting the foreign court’s reply, almost a year passed without the private respondent
paying the legal fees. Thus, on February 2, 1990, the foreign court rejected the objections of the private
respondent and proceeded to adjudicate upon the petitioner’s claims. We cannot subscribe to the
private respondent’s claim that the foreign court violated its right to due process when it failed to reply to
its queries nor when the latter rejected its objections for a clearly meritorious ground. The private
respondent was afforded sufficient opportunity to be heard. It was not incumbent upon the foreign court
to reply to the private respondent’s written communication. On the contrary, a genuine concern for its
cause should have prompted the private respondent to ascertain with all due diligence the correct
amount of legal fees to be paid. The private respondent did not act with prudence and diligence thus its
plea that they were not accorded the right to procedural due process cannot elicit either approval or
sympathy from this Court.[36]
The private respondent bewails the presumed bias on the part of the arbitrator who was a former
employee of the petitioner. This point deserves scant consideration in view of the following stipulation in
the contract:
“x x x. It will be no objection to any such appointment that the arbitrator so appointed is a Commission
employer (sic) that he had to deal with the matter to which the supply or contract relates and that in the
course of his duties as Commission’s employee he had expressed views on all or any of the matter in
dispute or difference.”[37] (Underscoring supplied.)
Finally, we reiterate hereunder our pronouncement in the case of Northwest Orient Airlines, Inc. v. Court
of Appeals[38] that:
“A foreign judgment is presumed to be valid and binding in the country from which it comes, until the
contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due
notice therein.
“Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of a
foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between
the parties and their successors-in-interest by a subsequent title. The judgment may, however, be
assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake
of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere,
enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has regularly
performed its official duty.”[39]
Consequently, the party attacking a foreign judgment, the private respondent herein, had the burden of
overcoming the presumption of its validity which it failed to do in the instant case.
The foreign judgment being valid, there is nothing else left to be done than to order its enforcement,
despite the fact that the petitioner merely prays for the remand of the case to the RTC for further
proceedings. As this Court has ruled on the validity and enforceability of the said foreign judgment in
this jurisdiction, further proceedings in the RTC for the reception of evidence to prove otherwise are no
longer necessary.
WHEREFORE, the instant petition is GRANTED, and the assailed decision of the Court of Appeals
sustaining the trial court’s dismissal of the OIL AND NATURAL GAS COMMISSION’s complaint in Civil
Case No. 4006 before Branch 30 of the RTC of Surigao City is REVERSED, and another in its stead is
hereby rendered ORDERING private respondent PACIFIC CEMENT COMPANY, INC. to pay to
petitioner the amounts adjudged in the foreign judgment subject of said case.
SO ORDERED.