KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD.

,
vs
MINORU KITAMURA

G.R. No. 149177

November 23, 2007

FACTS:

Nippon Engineering Consultants (Nippon), a Japanese consultancy firm providing technical and
management support in the infrastructure projects national permanently residing in the Philippines.
The agreement provides that Kitamaru was to extend professional services to Nippon for a year.
Nippon assigned Kitamaru to work as the project manager of the Southern Tagalog
Access Road (STAR) project. When the STAR project was near completion, DPWH engaged
the consultancy services of Nippon, this time for the detailed engineering & construction
supervision of the Bongabon-Baler Road Improvement (BBRI) Project. Kitamaru was named as
the project manger in the contract.

Hasegawa, Nippon’s general manager for its International Division, informed Kitamaru that the
company had no more intention of automatically renewing his ICA. His services would be engaged
by the company only up to the substantial completion of the STAR Project.

Kitamaru demanded that he be assigned to the BBRI project. Nippon insisted that Kitamaru’s
contract was for a fixed term that had expired. Kitamaru then filed for specific performance &
damages w/ the RTC of Lipa City. Nippon filed a MTD.

Nippon’s contention: The ICA had been perfected in Japan & executed by & between Japanese
nationals. Thus, the RTC of Lipa City has no jurisdiction. The claim for improper pre-termination
of Kitamaru’s ICA could only be heard & ventilated in the proper courts of Japan following the
principles of lex loci celebrationis & lex contractus.

The RTC denied the motion to dismiss. The CA ruled hat the principle of lex loci celebrationis
was not applicable to the case, because nowhere in the pleadings was the validity of the written
agreement put in issue. It held that the RTC was correct in applying the principle of lex loci
solutionis.

ISSUE:

Whether or not the subject matter jurisdiction of Philippine courts in civil cases for specific
performance & damages involving contracts executed outside the country by foreign nationals
may be assailed on the principles of lex loci celebrationis, lex contractus, “the state of the most
significant relationship rule,” or forum non conveniens.

HELD:

NO. In the judicial resolution of conflicts problems, 3 consecutive phases are involved:
jurisdiction, choice of law, and recognition and enforcement of judgments. Jurisdiction & choice
of law are 2 distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel
to this state; choice of law asks the further question whether the application of a substantive law
w/c will determine the merits of the case is fair to both parties. The power to exercise jurisdiction
does not automatically give a state constitutional authority to apply forum law. While jurisdiction
and the choice of the lex fori will often coincide, the “minimum contacts” for one do not always
provide the necessary “significant contacts” for the other. The question of whether the law of a
state can be applied to a transaction is different from the question of whether the courts of that
state have jurisdiction to enter a judgment.
In this case, only the 1st phase is at 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/petitioner, over the defendant/respondent, over the subject matter, over the issues of
the case and, in cases involving property, over the res or the thing w/c is the subject of the
litigation. In assailing the trial court's jurisdiction herein, Nippon is actually referring to subject
matter jurisdiction.

Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority
w/c establishes and organizes the court. It is given only by law and in the manner prescribed by
law. It is further determined by the allegations of the complaint irrespective of whether the plaintiff
is entitled to all or some of the claims asserted therein. To succeed in its motion for the dismissal
of an action for lack of jurisdiction over the subject matter of the claim, the movant must show
that the court or tribunal cannot act on the matter submitted to it because no law grants it the power
to adjudicate the claims.

In the instant case, Nippon, in its MTD, does not claim that the RTC is not properly vested by law
w/ jurisdiction to hear the subject controversy for a civil case for specific performance & damages
is one not capable of pecuniary estimation & is properly cognizable by the RTC of Lipa City. What
they rather raise as grounds to question subject matter jurisdiction are the principles of lex loci
celebrationis and lex contractus, and the “state of the most significant relationship rule.” The
Court finds the invocation of these grounds unsound.

Lex loci celebrationis relates to the “law of the place of the ceremony” or the law of the place
where a contract is made. The doctrine of lex contractus or lex loci contractus means the “law of
the place where a contract is executed or to be performed.” It controls the nature, construction, and
validity of the contract and it may pertain to the law voluntarily agreed upon by the parties or the
law intended by them either expressly or implicitly. Under the “state of the most significant
relationship rule,” to ascertain what state law to apply to a dispute, the court should determine
which state has the most substantial connection to the occurrence and the parties. In a case
involving a contract, the court should consider where the contract was made, was negotiated, was
to be performed, and the domicile, place of business, or place of incorporation of the parties. This
rule takes into account several contacts and evaluates them according to their relative importance
with respect to the particular issue to be resolved.

Since these 3 principles in conflict of laws make reference to the law applicable to a dispute, they
are rules proper for the 2nd phase, the choice of law. They determine which state's law is to be
applied in resolving the substantive issues of a conflicts problem. Necessarily, as the only issue in
this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called
for.

Further, Nippon’s premature invocation of choice-of-law rules is exposed by the fact that they
have not yet pointed out any conflict between the laws of Japan and ours. Before determining
which law should apply, 1st there should exist a conflict of laws situation requiring the application
of the conflict of laws rules. Also, when the law of a foreign country is invoked to provide the
proper rules for the solution of a case, the existence of such law must be pleaded and proved.

It should be noted that when a conflicts case, one involving a foreign element, is brought before a
court or administrative agency, there are 3 alternatives open to the latter in disposing of it: (1)
dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the
case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume
jurisdiction over the case and take into account or apply the law of some other State or States. The
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.
Neither can the other ground raised, forum non conveniens, be used to deprive the RTC of its
jurisdiction. 1st, it is not a proper basis for a motion to dismiss because Sec. 1, Rule 16 of the Rules
of Court does not include it as a ground. 2nd, whether a suit should be entertained or dismissed on
the basis of the said doctrine depends largely upon the facts of the particular case and is addressed
to the sound discretion of the RTC. In this case, the RTC decided to assume jurisdiction. 3rd, the
propriety of dismissing a case based on this principle requires a factual determination; hence, this
conflicts principle is more properly considered a matter of defense.

Raytheon Int’l, Inc., vs. Stockton W. Rouzie, Jr.

FACTS

Brand Marine Services, Inc. (BMSI), a corporation duly organized & existing under the laws of
Connecticut, &Stockton Rouzie, Jr., an American citizen, entered into a contract

BMSI hired Rouzie as its representative to negotiate the sale of services in several government
projects in thePhilippines for an agreed remuneration of 10% of the gross receipts.

Rouzie secured a service contract w/ the Rep. of Phil. on behalf of BMSI for the dredging of
rivers affected by the Mt.Pinatubo eruption & mudflows.

Rouzie filed before the NLRC a suit against BMSI and Rust International (Rust) for alleged
nonpayment of commissions, illegal termination, & breach of employment contract.

The Labor Arbiter order

ed BMSI & Rust to pay Rouzie’s money claims.

Upon appeal, the NLRC reversed & dismissed Rouzie’s complaint on the ground of lack of
jurisdiction.

Rouzie filed an action for damages before the RTC of La Union (where he was a resident)
against Raytheon International. He reiterated that he was not paid the commissions due him from
the Pinatubo dredging project w/c hesecured on behalf of BMSI. The complaint also averred that
BMSI, RUST and Raytheon had combined & functioned as 1 company.

RAYTHEON SOUGHT THE DISMISSAL OF THE COMPLAINT ON THE GROUNDS OF

FAILURE TO STATE ACAUSE OF ACTION & FORUM NON CONVENIENS & PRAYED
FOR DAMAGES BY WAY OF COMPULSORY
COUNTERCLAIM. THE RTC DENIED RAYTHEON’S MOTION. THE CA AFFIRMED.

Raytheon’s contention: The written contract between Rouzie & BMSI included a valid choice of
law clause, that is, that the contract shall be governed by the laws of the State of Connecticut. It
also mentions the presence of foreign elements in the dispute, namely that the parties &
witnesses involved are American corporations & citizens & the evidence to be presented is
located outside the Philippines, that renders our local courts inconvenient forums. The foreign
elements of the dispute necessitate the immediate application of the doctrine of forum non
conveniens.

ISSUES(a) W/N the RTC had jurisdiction.(b) W/N the complaint should be dismissed on the
ground of forum non conveniens.

RULING

(a) YES.
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a
Philippine court and where the court has jurisdiction over the subject matter, the parties and the
res, it may or can proceed to try the case even if the rules of conflict-of-laws or the convenience
of the parties point to a foreign forum. This is an exercise of sovereign prerogative of the country
where the case is filed.

Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and
the law & by the material allegations in the complaint, irrespective of w/n the plaintiff is entitled
to recover all or some of the claims or reliefs sought therein. The case file was an action for
damages arising from an alleged breach of contract. Undoubtedly, the nature of the action and
the amount of damages prayed are w/in the jurisdiction of the RTC.

As regards jurisdiction over the parties, the RTC acquired jurisdiction over Rouzi upon the filing
of the complaint. On the other hand, jurisdiction over the person of Raytheon was acquired by its
voluntary appearance in court.

That THE SUBJECT CONTRACT INCLUDED A STIPULATION THAT THE SAME SHALL
BE GOVERNED BYTHE LAWS OF THE STATE OF CONNECTICUT DOES NOT
SUGGEST THAT THE PHILIPPINE COURTS,
OR ANY OTHER FOREIGN TRIBUNAL FOR THAT MATTER, ARE PRECLUDED FROM
HEARING THE CIVIL ACTION.

JURISDICTION & CHOICE OF LAW ARE 2 DISTINCT CONCEPTS. Jurisdiction considers

whether it is fair to cause a defendant to travel to this state; choice of law asks the further
question whether the application of a substantive law which will determine the merits of the case
is fair to both parties. The choice of law stipulation will be come relevant only when the
substantive issues of the instant case develop, that is, after hearing on the merits proceeds before
the trial court.

(b) NO.

UNDER THE DOCTRINE OF FORUM NON CONVENIENS, A COURT, IN CONFLICTS-

OF-LAWS CASES, MAY
REFUSE IMPOSITIONS ON ITS JURISDICTION WHERE IT IS NOT THE MOST
“CONVENIENT” OR
AVAILABLE FORUM AND THE PARTIES ARE NOT PRECLUDED FROM
SEEKING REMEDIES ELSEWHERE.
Raytheon’s averments of the foreign elements are not sufficient to oust the RTC of its
jurisdiction over the case and the parties involved.

Moreover, the propriety of dismissing a case based on the principle of forum non conveniens
requires a factual determination; hence, it is more properly considered as a matter of defense.
While it is w/c the discretion of the trial court to abstain from assuming jurisdiction on this
ground, it should do so only after vital facts are established, to determine whether special
circumstances require the court’s desistance.

HONGKONG AND SHANGHAI BANKING CORPORATION (HSBC)

vs. SHERMAN et al G.R. No. 72494 August 11, 1989

FACTS: It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd.
(COMPANY), a company incorporated in Singapore applied with and was granted by HSBC
Singapore branch an overdraft facility in the maximum amount of Singapore dollars 200,000
with interest at 3% over HSBC prime rate, payable monthly, on amounts due under said
overdraft facility.
As a security for the repayment by the COMPANY of sums advanced by HSBC to it through the
aforesaid overdraft facility, in 1982, both private respondents and a certain Lowe, all of whom
were directors of the COMPANY at such time, executed a Joint and Several Guarantee in favor
of HSBC whereby private respondents and Lowe agreed to pay, jointly and severally, on demand
all sums owed by the COMPANY to petitioner BANK under the aforestated overdraft facility.

The Joint and Several Guarantee provides, inter alia, that:

This guarantee and all rights, obligations and liabilities arising hereunder shall be construed and
determined under and may be enforced in accordance with the laws of the Republic of
Singapore. We hereby agree that the Courts of Singapore shall have jurisdiction over all disputes
arising under this guarantee. …

The COMPANY failed to pay its obligation. Thus, HSBC demanded payment and inasmuch as
the private respondents still failed to pay, HSBC filed A complaint for collection of a sum of
money against private respondents Sherman and Reloj before RTC of Quezon City.
Private respondents filed an MTD on the ground of lack of jurisdiction over the subject matter.
The trial court denied the motion. They then filed before the respondent IAC a petition for
prohibition with preliminary injunction and/or prayer for a restraining order. The IAC rendered a
decision enjoining the RTC Quezon City from taking further cognizance of the case and to
dismiss the same for filing with the proper court of Singapore which is the proper forum. MR
denied, hence this petition.

ISSUE: Do Philippine courts have jurisdiction over the suit, vis-a-vis the Guarantee stipulation
regarding jurisdiction?
HELD: YES
One basic principle underlies all rules of jurisdiction in International Law: a State does not have
jurisdiction in the absence of some reasonable basis for exercising it, whether the proceedings
are in rem quasi in rem or in personam. To be reasonable, the jurisdiction must be based on some
minimum contacts that will not offend traditional notions of fair play and substantial justice
The defense of private respondents that the complaint should have been filed in Singapore is
based merely on technicality. They did not even claim, much less prove, that the filing of the
action here will cause them any unnecessary trouble, damage, or expense. On the other hand,
there is no showing that petitioner BANK filed the action here just to harass private respondents.

**

In the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., where the stipulation was “[i]n case
of litigation, jurisdiction shall be vested in the Court of Davao City.” We held:

Anent the claim that Davao City had been stipulated as the venue, suffice it to say that a
stipulation as to venue does not preclude the filing of suits in the residence of plaintiff or
defendant under Section 2 (b), Rule 4, ROC, in the absence of qualifying or restrictive words in
the agreement which would indicate that the place named is the only venue agreed upon by the
parties.
Applying the foregoing to the case at bar, the parties did not thereby stipulate that only the courts
of Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause in question
operate to divest Philippine courts of jurisdiction. In International Law, jurisdiction is often
defined as the light of a State to exercise authority over persons and things within its boundaries
subject to certain exceptions. Thus, a State does not assume jurisdiction over travelling
sovereigns, ambassadors and diplomatic representatives of other States, and foreign military
units stationed in or marching through State territory with the permission of the latter’s
authorities. This authority, which finds its source in the concept of sovereignty, is exclusive
within and throughout the domain of the State. A State is competent to take hold of any judicial
matter it sees fit by making its courts and agencies assume jurisdiction over all kinds of cases
brought before them
NOTES:
The respondent IAC likewise ruled that:
… In a conflict problem, a court will simply refuse to entertain the case if it is not authorized by
law to exercise jurisdiction. And even if it is so authorized, it may still refuse to entertain the
case by applying the principle of forum non conveniens. …
However, whether a suit should be entertained or dismissed on the basis of the principle of forum
non conveniens depends largely upon the facts of the particular case and is addressed to the
sound discretion of the trial court. Thus, the IAC should not have relied on such principle.