CONFLICTS OF LAW CASE DIGESTS ASSIGNMENT

Submitted by: TARIGA, CARLYN Y.

LLB
Wednesday Class 7C30 - 9C30

HSBSC vs. Sherman,

G.R. No. 72494, Aug. 11, 1989

FACTS:
A Singaporean company applied with and was granted by the Singapore branch of
HSBC an overdraft facility, secured by a Joint and Several Guarantee executed by
the formerʼs directors (Filipino residents). In the Guarantee, there is a clause
stipulating that jurisdiction over any dispute arising from the transaction is vested
with the Singaporean courts. When the Singaporean company defaulted, HSBC
filed suit against the directors in the Philippines.

ISSUE: Whether or not the choice of law clause should be upheld

HELD:
Jurisdiction, which finds its source in sovereignty, cannot be bargained away by
the parties.
The State can assume jurisdiction when there is a reasonable basis of exercising
it.
To be reasonable, the jurisdiction must be based on some minimum contacts that
will not offend traditional notions on fair play and substantial justice.
In the present case, the minimum contact considered is the Philippine residence of
the private respondents.
In assuming jurisdiction, SC held that the parties did not stipulate that only the
courts of Singapore, to the exclusion of all the rest, has jurisdiction.

(Because jurisdiction cannot be stipulated upon, the choice of jurisdiction was

treated as a choice of
venue. And applying thus, the choice of venue is only permissive, in the absence
of restrictive words to lend exclusivity to the chosen forum.)
 In re UNION CARBIDE CORPORATION GAS PLANT DISASTER AT BHOPAL,
INDIA IN DECEMBER, 1984

United States District Court, S.D. New York.

FACTS

On the night of December 2-3, 1984 the most tragic industrial disaster in history
occurred in the city of Bhopal, state of Madhya Pradesh, Union of India.
The prevailing winds on the early morning of December 3, 1984 were from
Northwest to Southeast.
They blew the deadly gas into the overpopulated hutments adjacent to the plant
and into the most densely occupied parts of the city.
Methyl isocyanate (MIC), a highly toxic gas, is an ingredient in the production of
both Sevin and Temik.
On the night of the tragedy MIC leaked from the plant in substantial quantities for
reasons not yet determined.The results were horrendous.
Estimates of deaths directly attributable to the leak range as high as 2,100.
Over 200,000 people suffered injuries some serious and permanent some mild and
temporary.
Livestock were killed and crops damaged. Businesses were interrupted.

On December 7, 1984 the first lawsuit was filed by American lawyers in the United
States on behalf of thousands of Indians.
Since then 144 additional actions have been commenced in federal courts in the
United States.
The actions have all been joined and assigned by the Judicial Panel on Multidistrict
Litigation to the Southern District of New York by order of February 6, 1985,

The individual federal court complaints have been superseded by a consolidated

complaint filed on June 28, 1985.

The Indian Government on March 29, 1985 enacted legislation, the Bhopal Gas
Leak Disaster (Processing of Claims) Act (21 of 1985) ("Bhopal Act"), providing
that the Government of India has the exclusive right to represent Indian plaintiffs in
India and elsewhere in connection with the tragedy.
Pursuant to the Bhopal Act, the Union of India, on April 8, 1985, filed a complaint
with this Court setting forth claims for relief similar to those in the consolidated
complaint of June 28, 1985.

By order of April 25, 1985 this Court established a Plaintiffs' Executive Committee,
comprised of F. Lee Bailey and Stanley M. Chesley, Esqs., who represented
individual plaintiffs and Michael V. Ciresi, Esq., whose firm represents the Union of
India. Jack S. Hoffinger, Esq., who represents individual plaintiffs, was appointed
liaison counsel for the Plaintiffs' Executive Committee.
Union Carbide argues that virtually all of the evidence which will be relevant at a
trial in this case is located in India. Union Carbide's position is that almost all
records relating to liability, and without exception, all records relevant to damages,
are to be found in and around Bhopal. On the liability question Union Carbide
asserts that the Bhopal plant was managed and operated entirely by Indian
nationals, who were employed by UCIL. (Affidavit of Warren J. Woomer, formerly
Works Manager of the Bhopal plant ("Woomer Aff.") at 2

ISSUE: Whether or not the case will be dismissed on the ground on Forum non
convenience

CONCLUSION

This Court is firmly convinced that the Indian legal system is in a far better
position than the American courts to determine the cause of the tragic event and
thereby fix liability.
Further, the Indian courts have greater access to all the information needed to
arrive at the amount of the compensation to be awarded the victims.

The presence in India of the overwhelming majority of the witnesses and evidence,
both documentary and real, would by itself suggest that India is the most
convenient forum for this consolidated case. The additional presence in India of all
but the less than handful of claimants underscores the convenience of holding trial
in India. All of the private interest factors described in Piper and Gilbert weigh
heavily toward *867 dismissal of this case on the grounds of forum non
conveniens.
The public interest factors set forth in Piper and Gilbert also favor dismissal. The
administrative burden of this immense litigation would unfairly tax this or any
American tribunal. The cost to American taxpayers of supporting the litigation in
the United States would be excessive. When another, adequate and more
convenient forum so clearly exists, there is no reason to press the United States
judiciary to the limits of its capacity. No American interest in the outcome of this
litigation outweighs the interest of India in applying Indian law and Indian values to
the task of resolving this case.
The Bhopal plant was regulated by Indian agencies. The Union of India has a very
strong interest in the aftermath of the accident which affected its citizens on its
own soil. Perhaps Indian regulations were ignored or contravened. India may wish
to determine whether the regulations imposed on the chemical industry within its
boundaries were sufficiently stringent. The Indian interests far outweigh the
interests of citizens of the United States in the litigation.

Plaintiffs, including the Union of India, have argued that the courts of India are not
up to the task of conducting the Bhopal litigation. They assert that the Indian
judiciary has yet to reach full maturity due to the restraints placed upon it by
British colonial rulers who shaped the Indian legal system to meet their own ends.
Plaintiffs allege that the Indian justice system has not yet cast off the burden of
colonialism to meet the emerging needs of a democratic people.

The Court thus finds itself faced with a paradox. In the Court's view, to retain the
litigation in this forum, as plaintiffs request, would be yet another example of
imperialism, another situation in which an established sovereign inflicted its rules,
its standards and values on a developing nation. This Court declines to play such a
role. The Union of India is a world power in 1986, and its courts have the proven
capacity to mete out fair and equal justice. To deprive the Indian judiciary of this
opportunity to stand tall before the world and to pass judgment on behalf of its
own people would be to revive a history of subservience and subjugation from
which India has emerged. India and its people can and must vindicate their claims
before the independent and legitimate judiciary created there since the
Independence of 1947.
This Court defers to the adequacy and ability of the courts of India. Their interest
in the sad events of December 2-3, 1984 at the UCIL plant in the City of Bhopal,
State of Madhya Pradesh, Union of India, is not subject to question or challenge.
The availability of the probative, relevant, material and necessary evidence to
Indian courts is obvious and has been demonstrated in this opinion.

Therefore, the consolidated case is dismissed on the grounds of forum non

conveniens under the following conditions:
 
1. Union Carbide shall consent to submit to the jurisdiction of the courts of India,
and shall continue to waive defenses based upon the statute of limitations;
 
2. Union Carbide shall agree to satisfy any judgment rendered against it by an
Indian court, and if applicable, upheld by an appellate court in that country, where
such judgment and affirmance comport with the minimal requirements of due
process;
 
3. Union Carbide shall be subject to discovery under the model of the United
States Federal Rules of Civil Procedure after appropriate demand by plaintiffs.

THE MANILA HOTEL CORP.

AND MANILA HOTEL INTL. LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS
COMMISSION, ARBITER CEFERINA J. DIOSANA AND MARCELO G. SANTOS,
respondents.

FACTS:

In May, 1988, private respondent Marcelo Santos (hereinafter referred to as

"Santos") was an overseas worker employed as a printer at the Mazoon Printing
Press, Sultanate of Oman. Subsequently, in June 1988, he was directly hired by
the Palace Hotel, Beijing, People's Republic of China and later terminated due to
retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and
the Manila Hotel International Company, Limited (hereinafter referred to as
"MHICL").
On February 20, 1990, respondent Santos filed a complaint for illegal dismissal
with the Arbitration Branch, National Capital Region, National Labor Relations
Commission (NLRC).
He prayed for an award of nineteen thousand nine hundred and twenty three
dollars (US$19,923.00) as actual damages, forty thousand pesos (P40,000.00) as
exemplary damages and attorney's fees equivalent to 20% of the damages prayed
for.
The complaint named MHC, MHICL, the Palace Hotel and Mr. Shmidt as
respondents.
The Palace Hotel and Mr. Shmidt were not served with summons and neither
participated in the proceedings before the Labor Arbiter.¹⁸
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against
petitioners, thus:¹⁹
" directing all the respondents to pay complainant jointly and severally;
On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not
the NLRC had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating:²⁰
"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void
for want of jurisdiction.
Complainant is hereby enjoined to file his complaint with the POEA.
On September 18, 1992, respondent Santos moved for reconsideration of the
afore-quoted resolution.
He argued that the case was not cognizable by the POEA as he was not an
"overseas contract worker."²¹
On May 31, 1993, the NLRC granted the motion and reversed itself.
On December 15, 1994, the NLRC ruled in favor of private respondent, to wit:²⁷
"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are
supported by substantial evidence, judgment is hereby rendered, directing the
respondents to jointly and severally pay complainant
On February 2, 1995, petitioners filed a motion for reconsideration arguing that
Labor Arbiter de Vera's recommendation had no basis in law and in fact.²⁸
On March 30, 1995, the NLRC denied the motion for reconsideration.²⁹

ISSUE: whether or not NLRC has the jurisdiction over the case

RULING:

I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.

We note that the main aspects of the case transpired in two foreign jurisdictions
and the case involves purely foreign elements.
The only link that the Philippines has with the case is that respondent Santos is a
Filipino citizen.
The Palace Hotel and MHICL are foreign corporations. Not all cases involving our
citizens can be tried here.

The employment contract. —

Respondent Santos was hired directly by the Palace Hotel, a foreign employer,
He was hired without the intervention of the POEA or any authorized recruitment
agency of the government.³⁶

Under the rule of forum non conveniens, a Philippine court or agency may assume
jurisdiction over the case if it chooses to do so
provided: (1) that the Philippine court is one to which the parties may conveniently
resort to;
(2) that the Philippine court is in a position to make an intelligent decision as to the
law and the facts; and
(3) that the Philippine court has or is likely to have power to enforce its decision.³⁷
The conditions are unavailing in the case at bar.

Not Convenient. —
We fail to see how the NLRC is a convenient forum given that all the incidents of
the case —
from the time of recruitment, to employment to dismissal occurred outside the
Philippines.
The inconvenience is compounded by the fact that the proper defendants, the
Palace Hotel and MHICL are not nationals of the Philippines.
Neither .are they "doing business in the Philippines."
Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the
Philippines.

No power to determine applicable law. —

Neither can an intelligent decision be made as to the law governing the
employment contract as such was perfected in foreign soil.
This calls to fore the application of the principle of lex loci contractus (the law of
the place where the contract was made).³⁸

The employment contract was not perfected in the Philippines. Respondent

Santos signified his acceptance by writing a letter while he was in the Republic of
Oman. This letter was sent to the Palace Hotel in the People's Republic of China.

No power to determine the facts. — Neither can the NLRC determine the facts
surrounding the alleged illegal dismissal as all acts complained of took place in
Beijing, People's Republic of China. The NLRC was not in a position to determine
whether the Tiannamen Square incident truly adversely affected operations of the
Palace Hotel as to justify respondent Santos' retrenchment.

Principle of effectiveness, no power to execute decision. — Even assuming that a

proper decision could be reached by the NLRC, such would not have any binding
effect against the employer, the Palace Hotel. The Palace Hotel is a corporation
incorporated under the laws of China and was not even served with summons.
Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to solve
controversies involving foreign employers. Neither are we saying that we do not
have power over an employment contract executed in a foreign country. If Santos
were an "overseas contract worker", a Philippine forum, specifically the POEA, not
the NLRC, would protect him.³⁹ He is not an "overseas contract worker" a fact
which he admits with conviction.⁴⁰
Even assuming that the NLRC was the proper forum, even on the merits, the
NLRC's decision cannot be sustained.

SALVACION
VS CENTRAL BANK

FACTS:

Greg Bartelli, an American tourist, was arrested for committing four counts of rape
and serious illegal detention against Karen Salvacion. Police recovered from him
several dollar checks and a dollar account in the China Banking Corp. He was,
however, able to escape from prison. In a civil case filed against him, the trial court
awarded Salvacion moral, exemplary and attorneyʼs fees amounting to almost
P1,000,000.00.

Salvacion tried to execute the judgment on the dollar deposit of Bartelli with the
China Banking Corp. but the latter refused arguing that Section 11 of Central Bank
Circular No. 960 exempts foreign currency deposits from attachment,
garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever. Salvacion therefore
filed this action for declaratory relief in the Supreme Court.

ISSUE:    

Should Section 113 of Central Bank Circular No. 960 and Section 8 of Republic Act
No. 6426, as amended by PD 1246, otherwise known as the Foreign Currency
Deposit Act be made applicable to a foreign transient?

HELD:   

The provisions of Section 113 of Central Bank Circular No. 960 and PD No. 1246,
insofar as it amends Section 8 of Republic Act No. 6426, are hereby held to be
INAPPLICABLE to this case because of its peculiar circumstances. Respondents
are hereby required to comply with the writ of execution issued in the civil case
and to release to petitioners the dollar deposit of Bartelli in such amount as would
satisfy the judgment.

Supreme Court ruled that the questioned law makes futile the favorable judgment
and award of damages that Salvacion and her parents fully deserve. It then
proceeded to show that the economic basis for the enactment of RA No. 6426 is
not anymore present; and even if it still exists, the questioned law still denies
those entitled to due process of law for being unreasonable and oppressive. The
intention of the law may be good when enacted. The law failed to anticipate the
iniquitous effects producing outright injustice and inequality such as the case
before us.
The SC adopted the comment of the Solicitor General who argued that the
Offshore Banking System and the Foreign Currency Deposit System were
designed to draw deposits from foreign lenders and investors and, subsequently,
to give the latter protection. However, the foreign currency deposit made by a
transient or a tourist is not the kind of deposit encouraged by PD Nos. 1034 and
1035 and given incentives and protection by said laws because such depositor
stays only for a few days in the country and, therefore, will maintain his deposit in
the bank only for a short time. Considering that Bartelli is just a tourist or a
transient, he is not entitled to the protection of Section 113 of Central Bank
Circular No. 960 and PD No. 1246 against attachment, garnishment or other court
processes.

Further, the SC said: “In fine, the application of the law depends on the extent of
its justice. Eventually, if we rule that the questioned Section 113 of Central Bank
Circular No. 960 which exempts from attachment, garnishment, or any other order
or process of any court, legislative body, government agency or any administrative
body whatsoever, is applicable to a foreign transient, injustice would result
especially to a citizen aggrieved by a foreign guest like accused Greg Bartelli. This
would negate Article 10 of the New Civil Code which provides that “in case of
doubt in the interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail.”

Annesley v. Annesley

Facts
Sybil Annesley ("Annesley"), a British subject, was married to a British domiciliary.
The spouses resided in France until the death of the husband. Annesley remained
in France without taking the steps set forth under French law for the formal
acquisition of domicile in that country and seldom returned to Britain until her
death. She left a will executed in France but in British form bequeathing her estate
to her daughter. By French law, Annesley is not a domiciliary of France, but by
British law, Annesley is a domiciliary of France. By the laws of France, the estate of
Annesley is governed by the laws of her nationality, but by the laws of Britain, the
estate of Annesley is governed by the laws of the domicile. French law only allows
the testator to freely dispose of one-third of her estate.

Issue
Whether or not the succession is governed by French law.

Held
Yes. French law governs.

Notwithstanding the lack of a formal French domicile, Annesley is a French

domiciliary by British law given the concurrence of actual residence in a
foreign jurisdiction coupled with the intent to remain there.  Thus, French law
refers the matter to English law which, in turn, will refer the matter back to French
law. Consequently, in these circumstances, French law dictates that French courts
will apply the domestic law. Hence, French law governs the succession and
Annesley may only dispose of one-third of her estate.

Haumschild v. Continental Casualty Co.

Facts
Mrs. Haumschild (Plaintiff) and her husband (Defendant) were residents of
Wisconsin travelling in California. While in California, Plaintiff was injured in an
automobile accident as a result of her husbandʼs negligence.  California law
prohibited a husband or wife from bringing suit against a spouse for negligence,
however, the law of Wisconsin did not.Mrs. Haumschild (Plaintiff) sued her
husband (Defendant) in Wisconsin.

Issue
Where the place of the wrong prohibits husbands and wives from suing each other
for negligence, may the court of the spousesʼ domicile apply its own law which
would allow such suits?

Held
Yes. Where the place of the wrong prohibits husbands and wives from suing each
other for negligence, the court of the spousesʼ domicile may apply its own law that
would allow such suits.  This case presents the issue of capacity to sue due to
marital status.  This relates to substantive family law and not to substantive tort
law.  While the majority of the states recognize the place of the wrong as
governing capacity, we feel that the state of the domicile has a greater interest in
such cases than the state where the wrong took place.  While Californiaʼs conflict
of laws rule would refer to our law to determine the wifeʼs capacity, we do not feel
it proper to resort to the awkward principles of renvoi to accomplish what we feel
to be the desired result.  The law of the place of the wrong will govern as to
substantive tort law, but the law of the domicile will govern as to capacity to sue. 
Mrs. Haumschild (Plaintiff) should be allowed to recover.  Reversed and
remanded.

If the state of domicile will govern on the issue of interspousal immunity, then a
California wife injured by her husband would be denied recovery in a Wisconsin
court.  But if the state of domicile views the immunity question as procedural tort
law, the courtʼs decision would appear unsatisfactory.  Wisconsin would then be
imposing its substantive family law in substitution for the other stateʼs procedural
tort law.  However, on balance, the Wisconsin courtʼs approach would appear to
be well-reasoned, since the marital partnersʼ expectations (one could suppose)
would appear to be grounded in their domicileʼs family law.

Davao
Light v. Court of Appeals

Facts
The Davao Light and Power Co., Inc. ("Davao Light") filed a collection suit against
Queensland Hotel ("Queensland") and Teodorico Adarna ("Adarna") with an ex
parte application for a writ of preliminary attachment. On 3 May 1989, the trial
court issued an Order of Attachment, and the corresponding Writ of Attachment
on 11 May 1989. On 12 May 1989, the summons, a copy of the complaint, and the
writ of attachment was served upon Queensland and Adarna. Queensland and
Adarna filed a motion to discharge the attachment on the ground that at the time
the Order of Attachment and Writ of Attachment were issued, the trial court has
yet to acquire jurisdiction over the cause of action and over the persons of the
defendants.

Issue
Whether or not the writ of preliminary attachment was validly issued.
Held
Yes. A writ of preliminary attachment may be issued before the court acquires
jurisdiction over the person of the defendant.

The court may validly issue a writ of preliminary injunction prior to the acquisition
of jurisdiction over the person of the defendant. There is an appreciable period of
time between the commencement of the action (takes place upon the filing of an
initiatory pleading) and the service of summons to the defendant. In the
meanwhile, there are a number of actions which the plaintiff or the court may
validly take, including the application for and grant of the provisional remedy of
preliminary attachment. There is nothing in the law which prohibits the court from
granting the remedy prior to the acquisition of jurisdiction over the person of the
defendant. In fact, Rule 57 of the Rules of Court allows the granting of a writ of
preliminary injunction at the commencement of the suit. In the cases of Toledo v.
Burgos and Filinvest Credit Corporation v. Relova, it was held that notice and
hearing are not prerequisites to the issuance of a writ of preliminary attachment.
Further, in the case of Mindanao Savings & Loan Association, Inc. v. Court of
Appeals, it was ruled that giving notice to the defendant would defeat the purpose
of the remedy by affording him or her the opportunity to dispose of his properties
before the writ can be issued.
A preliminary attachment may be discharged with the same ease as obtaining it. In
any case, the ease of availing the provisional remedy of preliminary attachment is
matched by the ease with which it can be remedied by either the posting of a
counterbond, or by a showing of its improper or irregular issuance. The second
means of defeating a preliminary attachement, however, may not be availed of if
the writ was issued upon a ground which is at the same time the applicant's cause
of action.
Preliminary attachment not binding until jurisdiction over the person of the
defendant is acquired. The writ of preliminary attachment, however, even though
validly issued, is not binding upon the defendant until jurisdiction over his person
is first acquired.

MULLANE v.
Central Hanover Bank & Trust Co

Facts.
Appellee, Central Hanover Bank & Trust, set up common fund pursuant to a New
York statute allowing the creation of common funds for distribution of judicial
settlement trusts. There were 113 participating trusts. Appellee petitioned for
settlement of its first account as common trustee. Some of the beneficiaries were
not residents of New York. “Notice” was by publication for four weeks in a local
newspaper. Appellee had notified those people by mail that were of full age and
sound mind who would be entitled to share in the principal if the interest they held
became distributable. Appellant was appointed as special guardian and attorney
for all persons known or unknown not otherwise appearing who had or might
thereafter have any interest in the income of the common trust fund. Appellee was
appointed to represent those interested in the principal. Appellant appeared
specially, objecting that notice by publication, permitted under the applicable
statute was inadequate to afford t
he beneficiaries due process under the Fourteenth Amendment and that therefore
jurisdiction was lacking.

Issue.
Is notice by publication of a judicial settlement to unknown beneficiaries of a
common trust reasonable notice under the due process requirements of the
Fourteenth Amendment?

Is notice by publication to all of the beneficiaries of a common trust whose

residences are known reasonable notice under the due process requirements of
the Fourteenth Amendment?

Held.

First issue: Yes.

Second issue: No.

Whether or not the action is in personam or in rem, the court can determine the
interests of all claimants as long as there is a procedure allowing for notice and an
opportunity to be heard.
There has to be notice and opportunity for a hearing appropriate to the nature of
the case. The claimants at issue could potentially be deprived of property here, as
the proposed disposition cuts off their rights to sue for negligent or illegal
impairments of their interests. In addition, the courtʼs decision appoints someone
who, without their knowledge, could use the trust to obtain the fees and expenses
necessary for a sham proceeding.
There need not be personal service because the state has an interest in settling
trusts. “Notice has to be reasonably calculated, under all the circumstances, to
apprise interested parties of the pending action and afford them an opportunity to
present their objections.” You do not have to notify all the beneficiaries when the
trust concerns many small interests. Sending notice to most of them will protect
their interests sufficiently.
The New York Banking Law, however, that does not require notice to all persons
whose whereabouts are known, violates the due process clause of the Fourteenth
Amendment because contacting beneficiaries by mail at their last known address
is not particularly burdensome.
Dissent. Justice Burton: Omitted from casebook.

The majorityʼs opinion illustrates that notice by publication will not suffice only
because it would be burdensome for the plaintiff to notify all parties involved. If
the plaintiff knows of a way to contact the parties, then the plaintiff must bear that
expense. Mailing notice to an address, if known, will suffice. Notice by publication
will suffice only if there is no practical way of knowing the identity or location of
the party.
Notice must be “reasonably calculated under all the circumstances, to apprise
interested parties of the action and give them an opportunity to object.

PHILSEC
INVESTMENT et al vs CA et al

Facts:

On January 15, 1983, private respondent Ventura O. Ducat obtained separate

loans from petitioners Ayala International Finance Limited (hereafter called AYALA)
[1] and Philsec Investment Corporation (hereafter called PHILSEC) in the sum of
US$2,500,000.00,... secured by shares of stock owned by Ducat with a market
value of P14,088,995.00. In order to facilitate the payment of the loans, private
respondent 1488, Inc., through its president, private respondent Drago Daic,
assumed Ducat's obligation under an Agreement, dated January 27,... 1983,
whereby 1488, Inc. executed a Warranty Deed with Vendor's Lien by which it sold
to petitioner Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in
Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC and AYALA
extended a loan to ATHONA in the... amount of US$2,500,000.00 as initial
payment of the purchase price. The balance of US$307,209.02 was to be paid by
means of a promissory note executed by ATHONA in favor of 1488, Inc.
Subsequently, upon their receipt of the US$2,500,000.00 from 1488, Inc.,
PHILSEC and AYALA... released Ducat from his indebtedness and delivered to
1488, Inc. all the shares of stock in their possession belonging to Ducat.
On April 10, 1987, while Civil Case No. H-86-440 was pending in the United
States, petitioners filed a complaint "For Sum of Money with Damages and Writ of
Preliminary Attachment" against private respondents in the Regional Trial Court of
Makati, where it was docketed as Civil
Case No. 16563.
The complaint reiterated the allegation of petitioners in their respective
counterclaims in Civil Action No. H-86-440 of the United States District Court of
Southern Texas that private respondents committed fraud by selling the property
at a price 400 percent... more than its true value of US$800,000.00.
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds
of (1) litis pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and
Daic in the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC
and BPI-IFL to state a cause of... action.
On the other hand, private respondents 1488, Inc. and its president Daic filed a
joint "Special Appearance and Qualified Motion to Dismiss," contending that the
action being in personam, extraterritorial service of summons by publication was
ineffectual and did not... vest the court with jurisdiction over 1488, Inc., which is a
non-resident foreign corporation, and Daic, who is a non-resident alien.

Issues:

the principal issue to be resolved in this case is whether Civil Case No. 16536 is
barred by the judgment of the U.S. court.

Ruling:

Private respondents contend that for a foreign judgment to be pleaded as res

judicata, a judgment admitting the foreign decision is not necessary. On the other
hand, petitioners argue that the foreign judgment cannot be given the effect of res
judicata without giving them an... opportunity to impeach it on grounds stated in
Rule 39, §50 of the Rules of Court, to wit: "want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact."
Petitioners' contention is meritorious. While this Court has given the effect of res
judicata to foreign judgments in several cases,[7] it was after the parties opposed
to the judgment had been given ample opportunity to repel them on grounds
allowed under... the law.[8] It is not necessary for this purpose to initiate a
separate action or proceeding for enforcement of the foreign judgment. What is
essential is that there is opportunity to challenge the foreign judgment, in order for
the court to properly... determine its efficacy. This is because in this jurisdiction,
with respect to actions in personam, as distinguished from actions in rem, a
foreign judgment merely constitutes prima facie evidence of the justness of the
claim of a party and, as such, is subject to proof to the... contrary.
In the case at bar, it cannot be said that petitioners were given the opportunity to
challenge the judgment of the U.S. court as basis for declaring it res judicata or
conclusive of the rights of private respondents. The proceedings in the trial court
were summary. Neither the... trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence presented
thereat, to assure a proper determination of whether the issues then being
litigated in the U.S. court were exactly the issues raised in this... case such that
the judgment that might be rendered would constitute res judicata.
Nor is the trial court's refusal to take cognizance of the case justifiable under the
principle of forum non conveniens. First, a motion to dismiss is limited to the
grounds under Rule 16, §1, which does not include forum non conveniens.[16]
The... propriety of dismissing a case based on this principle requires a factual
determination, hence, it is more properly considered a matter of defense.
In this case, the trial court abstained from taking jurisdiction solely on the basis of
the pleadings filed by private respondents in connection with the motion to
dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a domestic
corporation and one of the... defendants (Ventura Ducat) is a Filipino, and that it
was the extinguishment of the latter's debt which was the object of the
transaction under litigation. The trial court arbitrarily dismissed the case even
after finding that Ducat was not a party in the U.S. case.