Hilton v. Guyot, 159 U.S.

113 (1895)

Syllabus

A citizen and resident of this country who has his principal place of business
here but has an agent in a foreign country and is accustomed to purchase and
store large quantities of goods there, and, in a suit brought against him by a
citizen and in a court of that country, appears and defends with the sole object
of preventing his property within the jurisdiction, but not in the custody of that
court, from being taken in satisfaction of any judgment that may be recovered
against him there cannot, in an action brought against him in this country
upon such a judgment, impeach it for want of jurisdiction of his person.

The admission at the trial in a court of a foreign country, according to its law
and practice, of testimony not under oath and without opportunity of cross-
examination, and of documents with which the defendant had no connection
and which by our law would not be admissible against him, is not of itself a
sufficient ground for impeaching the judgment of that court in an action
brought upon it in this country.

When an action is brought in a court of this country by a citizen of a foreign

country against one of our own citizens to recover a sum of money adjudged by
a court of that country to be due from the defendant to the plaintiff, and the
foreign judgment appears to have been rendered by a competent court, having
jurisdiction of the cause and of the parties, and upon due allegations and
proofs and opportunity to defend against them, and its proceedings are
according to the course of a civilized jurisprudence, and are stated in a clear
and formal record, the judgment is prima facie evidence, at least, of the truth of
the matter adjudged, and the judgment is conclusive upon the merits tried in
the foreign court unless some special ground is shown for impeaching it, as by
showing that it was affected by fraud or prejudice or that, by the principles of
international law and by the comity of our own country, it is not entitled to full
credit and credit.

A judgment for a sum of money, rendered by a court of a foreign country,

having jurisdiction of the cause and of the parties, in a suit brought by one of
its citizens against one of ours, is prima facie evidence only, and not conclusive
of the merits of the claim in an action brought here upon the judgment if by
the law of the foreign country, as in France, judgments of our own courts are
not recognized as conclusive.

The first of these two cases was an action at law, brought December 18, 1885,
in the Circuit Court of the United States for the Southern District of New York,
by Gustave Bertin Guyot, as official liquidator of the firm of Charles Fortin &
Co., and by the surviving members of that firm, all aliens and citizens of the
Republic of France, against Henry Hilton and William Libbey, citizens of the
United States and of the State of New York and trading as copartners in the
cities of New York and Paris and elsewhere under the firm name of A. T.
Stewart & Co. The action was upon a judgment recovered in a French court at
Paris, in the Republic of France, by the firm of Charles Fortin & Co., all of
whose members were French citizens, against Hilton & Libbey, trading as
copartners, as aforesaid, and citizens of the United States and of the State of
New York.

The complaint alleged that in 1886 and since, during the time of all the
transactions included in the judgment sued on, Hilton and Libbey, as
successors to Alexander T. Stewart and Libbey, under the firm name of A. T.
Stewart & Co., carried on a general business as merchants in the Cities of New
York and Paris and elsewhere, and maintained a regular store and place of
business at Paris; that during the same time, Charles Fortin & Co. carried on
the manufacture and sale of gloves at Paris, and the two firms had there large
dealings in that business, and controversies arose in the adjustment of
accounts between them.

The complaint further alleged that between March 1, 1879, and December 1,
1882, five suits were brought by Fortin & Co. against Stewart & Co. for sums
alleged to be due, and three suits by Stewart & Co. against Fortin & Co., in the
Tribunal of Commerce of the Department of the Seine, a judicial tribunal or
court organized and existing under the laws of France, sitting at Paris and
having jurisdiction of suits and controversies between merchants or traders
growing out of commercial dealings between them; that Stewart & Co. appeared
by their authorized attorneys in all those suits, and that, after full hearing
before an arbitrator appointed by that court and before the court itself, and
after all the suits had been consolidated by the court, final judgment was
rendered on January 20, 1883, that Fortin & Co. recover of Stewart & Co.
various sums, arising out of the dealings between them, amounting to 660,847
francs, with interest, and dismissed part of Fortin & Co.'s claim.

The complaint further alleged that appeals were taken by both parties from
that judgment to the Court of Appeal of Paris, Third Section, an appellate court
of record organized and existing under the laws of the Republic of France and
having jurisdiction of appeals from the final judgments of the Tribunal of
Commerce of the Department of the Seine, where the amount in dispute
exceeded the sum of 1,500 francs, and that the said Court of Appeal, by a final
judgment rendered March 19, 1884, and remaining of record in the office of its
clerk at Paris, after hearing the several parties by their counsel, and upon full
consideration of the merits, dismissed the appeal of the defendants, confirmed
the judgment of the lower court in favor of the plaintiffs, and ordered, upon the
plaintiffs' appeal, that they recover the additional sum of 152,528 francs, with
182,849 francs for interest on all the claims allowed, and 12,559 francs for
costs and expenses.
The complaint further alleged that Guyot had been duly appointed by the
Tribunal of Commerce of the Department of the Seine official liquidator of the
firm of Forth & Co., with full powers, according to law and commercial usage,
for the verification and realization of its property, both real and personal, and
to collect and cause to be executed the judgments aforesaid.

The complaint further alleged that the judgment of the Court of Appeals of
Paris, and the judgment of the Tribunal of Commerce, as modified by the
judgment of the appellate court, still remain in full force and effect;

"that the said courts respectively had jurisdiction of the subject matter of the
controversies so submitted to them, and of the parties, the said defendants
having intervened, by their attorneys and counsel, and applied for affirmative
relief in both courts; that the plaintiffs have hitherto been unable to collect the
said judgments or any part thereof, by reason of the absence of the said
defendants, they having given up their business in Paris prior to the recovery of
the said judgment on appeal, and having left no property within the
jurisdiction of the Republic of France out of which the said judgments might be
made;"

and that there are still justly due and owing from the defendants to the
plaintiffs upon those said judgments certain sums, specified in the complaint,
and amounting in all to 1,008,783 francs in the currency of the Republic of
France, equivalent to $195,122.47.

The defendants, in their answer, set forth in detail the original contracts and
transactions in France between the parties and the subsequent dealings
between them modifying those contracts, and alleged that the plaintiffs had no
just claim against the defendants, but that, on the contrary, the defendants,
upon a just settlement of the accounts, were entitled to recover large sums
from the plaintiffs.

The answer admitted the proceedings and judgments in the French courts and
that the defendants gave up their business in France before the judgment on
appeal, and had no property within the jurisdiction of France out of which that
judgment could be collected.

The answer further alleged that the Tribunal of Commerce of the Department of
the Seine was a tribunal whose judges were merchants, ship captains,
stockbrokers, and persons engaged in commercial pursuits, and of which
Charles Fortin had been a member until shortly before the commencement of
the litigation.
The answer further alleged that in the original suits brought against the
defendants by Fortin & Co., the citations were left at their storehouse in Paris;
that they were then residents and citizens of the State of New York, and neither
of them at that time, or within four years before, had been within, or resident
or domiciled within, the jurisdiction of that tribunal or owed any allegiance to
France, but that they were the owners of property situated in that country
which would by the law of France have been liable to seizure if they did not
appear in that tribunal, and that they unwillingly, and solely for the purpose of
protecting that property, authorized and caused an agent to appear for them in
those proceedings, and that the suits brought by them against Fortin & Co.
were brought for the same purpose, and in order to make a proper defense, and
to establish counterclaims arising out of the transactions between the parties,
and to compel the production and inspection of Fortin & Co.'s books, and that
they sought no other affirmative relief in that tribunal.

The answer further alleged that, pending that litigation, the defendants
discovered gross frauds in the accounts of Fourtin & Co., that the arbitrator
and the tribunal declined to compel Fortin & Co. to produce their books and
papers for inspection, and that, if they had been produced, the judgment would
not have been obtained against the defendants.

The answer further alleged that without any fault or negligence on the part of
the defendants, there was not a full and fair trial of the controversies before the
arbitrator, in that no witness was sworn or affirmed; in that Charles Fortin was
permitted to make, and did make, statements not under oath containing many
falsehoods; in that the privilege of cross-examination of Fortin and other
persons who made statements before the arbitrator was denied to the
defendants, and in that extracts from printed newspapers, the knowledge of
which was not brought home to the defendants, and letters and other
communications in writing between Fortin & Co. and third persons, to which
the defendants were neither privy nor party, were received by the arbitrator;
that without such improper evidence, the judgment would not have been
obtained, and that the arbitrator was deceived and misled by the false and
fraudulent accounts introduced by Fortin & Co. and by the hearsay testimony
given, without the solemnity of an oath and without cross-examination, and by
the fraudulent suppression of the books and papers.

The answer further alleged that Fortin & Co. made up their statements and
accounts falsely and fraudulently, and with intent to deceive the defendants
and the arbitrator and the said courts of France, and those courts were
deceived and misled thereby; that owing to the fraudulent suppression of the
books and papers of Fortin & Co. upon the trial and the false statements of
Fortin regarding matters involved in the controversy, the arbitrator and the
courts of France "were deceived and misled in regard to the merits of the
controversies pending before them, and wrongfully decided against said
Stewart & Co., as hereinbefore stated; that said judgment, hereinbefore
mentioned, is fraudulent, and based upon false and fraudulent accounts and
statements, and is erroneous in fact and in law, and is void; that the trial
hereinbefore mentioned was not conducted according to the usages and
practice of the common law, and the allegations and proofs given by said Fortin
& Co., upon which said judgment is founded, would not be competent or
admissible in any court or tribunal of the United States, in any suit between
the same parties involving the same subject matter, and it is contrary to
natural justice and public policy that the said judgment should be enforced
against a citizen of the United States, and that, if there had been a full and fair
trial upon the merits of the controversies so pending before said tribunals, no
judgment would have been obtained against said Stewart & Co."

"Defendants, further answering, allege that it is contrary to natural justice that

the judgment hereinbefore mentioned should be enforced without an
examination of the merits thereof; that by the laws of the Republic of France,
to-wit, article 181 [121] of the Royal Ordinance of June 15, 1629, it is provided
namely:"

"Judgments rendered, contracts or obligations recognized, in foreign kingdoms

and sovereignties, for any cause whatever shall give rise to no lien or execution
in our Kingdom. Thus, the contracts shall stand for simple promises, and,
notwithstanding such judgments, our subjects against whom they have been
rendered may contest their rights anew before our own judges."

"And it is further provided by the laws of France, by article 546 of the Code de
Procedure Civile, as follows:"

" Judgments rendered by foreign tribunals shall be capable of execution in

France only in the manner and in the cases set forth by articles 2123 and

2128 of the Civil Code."

"And it is further provided by the laws of France, by article 2128 [2123] of the
Code de Procedure Civile [Civil Code]:"

" A lien cannot, in like manner, arise from judgments rendered in any foreign
country, save only as they have been declared in force by a French tribunal,
without prejudice, however, to provisions to the contrary, contained in public
laws and treaties."

"[And by article 2128 of that Code: 'Contracts entered into in a foreign country
cannot give a lien upon property in France if there are no provisions contrary
to this principle in public laws or in treaties.']"
"That the construction given to said statutes by the judicial tribunals of France
is such that no comity is displayed towards the judgments of tribunals of
foreign countries against the citizens of France, when sued upon in said courts
of France, and the merits of the controversies upon which the said judgments
are based are examined anew, unless a treaty to the contrary effect exists
between the said Republic of France and the country in which such judgment
is obtained. That no treaty exists between the said Republic of France and the
United States, by the terms or effect of which the judgments of either country
are prevented from being examined anew upon the merits, when sued upon in
the courts of the country other than that in which it is obtained. That the
tribunals of the Republic of France give no force and effect, within the
jurisdiction of the said country, to the duly rendered judgments of courts of
competent jurisdiction of the United States against citizens of France, after
proper personal service of the process of said courts is made thereon in this
country."

The answer further set up, by way of counterclaim and in detail, various
matters arising out of the dealings between the parties, and alleged that none
of the plaintiffs had since 1881 been residents of the State of New York, or
within the jurisdiction of that state, but the defendants were, and always had
been, residents of that state.

The answer concluded by demanding that the plaintiffs' complaint be

dismissed, and that the defendants have judgment against them upon the
counterclaims, amounting to $102,942.91.

The plaintiffs filed a replication to so much of the answer as made

counterclaims, denying its allegations and setting up in bar thereof the
judgment sued on.

The defendants, on June 22, 1888, filed a bill in equity against the plaintiffs
setting forth the same matters as in their answer to the action at law and
praying for a discovery and for an injunction against the prosecution of the
action. To that bill a plea was filed setting up the French judgments, and upon
a hearing, the bill was dismissed. 42 F. 249. From the decree dismissing the
bill an appeal was taken, which is the second case now before this Court.

The action at law afterwards came on for trial by a jury, and the plaintiffs put
in the records of the proceedings and judgments in the French courts, and
evidence that the jurisdiction of those courts was as alleged in the complaint
and that the practice followed and the method of examining the witnesses were
according to the French law, and also proved the title of Guyot as liquidator.

It was admitted by both parties that for several years prior to 1876, the firm of
Alexander T. Stewart & Co., composed of Stewart and Libbey, conducted their
business as merchants in the City of New York, with branches in other cities of
America and Europe; that both partners were citizens and residents of the City
and State of New York during the entire period mentioned in the complaint,
and that in April, 1876, Stewart died, and Hilton and Libbey formed a
partnership to continue the business under the same firm name, and became
the owners of all the property and rights of the old firm.

The defendants made numerous offers of evidence in support of all the specific
allegations of fact in their answer, including the allegations as to the law and
comity of France. The plaintiffs, in their brief filed in this Court, admitted that
most of these offers "were offers to prove matters in support of the defenses
and counterclaims set up by the defendants in the cases tried before the
French courts, and which, or most of which, would have been relevant and
competent if the plaintiffs in error are not concluded by the result of those
litigations, and have now the right to try those issues, either on the ground
that the French judgments are only prima facie evidence of the correctness of
those judgments, or on the ground that the case is within the exception of a
judgment obtained by fraud."

The defendants, in order to show that they should not be concluded by having
appeared and litigated in the suits brought against them by the plaintiffs in the
French courts, offered to prove that they were residents and citizens of the
State of New York, and neither of them had been, within four years prior to the
commencement of those suits, domiciled or resident within the jurisdiction of
those courts; that they had a purchasing agent and a storehouse in Paris, but
only as a means or facility to aid in the transaction of their principal business,
which was in New York, and they were never otherwise engaged in business in
France; that neither of them owed allegiance to France, but they were the
owners of property there which would, according to the laws of France, have
been liable to seizure if they had not appeared to answer in those suits; that
they unwillingly, and solely for the purpose of protecting their property within
the jurisdiction of the French tribunal, authorized an agent to appear, and he
did appear in the proceedings before it, and that their motion to compel an
inspection of the plaintiffs' books, as well as the suits brought by the
defendants in France, were necessary by way of defense or counterclaim to the
suits there brought by the plaintiffs against them.

Among the matters which the defendants alleged and offered to prove in order
to show that the French judgments were procured by fraud were that Fortin &
Co., with intent to deceive and defraud the defendants, and the arbitrator and
the courts of France, entered in their books, and presented to the defendants,
and to the French courts, accounts bearing upon the transactions in
controversy which were false and fraudulent, and contained excessive and
fraudulent charges against the defendants in various particulars, specified;
that the defendants made due application to the Tribunal of Commerce to
compel Fortin & Co. to allow their account books and letter books to be
inspected by the defendants, and the application was opposed by Fortin & Co.,
and denied by the tribunal; that the discovery and inspection of those books
were necessary to determine the truth of the controversies between the parties;
that before the Tribunal of Commerce, Charles Fortin was permitted to and did
give in evidence statements not under oath relating to the merits of the
controversies there pending, and falsely represented that a certain written
contract made in 1873 between Stewart & Co. and Fortin & Co. concerning
their dealings was not intended by the parties to be operative according to its
terms, and in support of that false representation made statements as to
admissions by Stewart in a private conversation with him, and that the
defendants could not deny those statements, because Stewart was dead, and
they were not protected from the effect of Fortin's statements by the privilege of
cross-examining him under oath, and that the French judgments were based
upon false and fraudulent accounts presented and statements made by Fortin
& Co. before the Tribunal of Commerce during the trial before it.

The records of the judgments of the French courts, put in evidence by the
plaintiffs, showed that all the matters now relied on to show fraud were
contested in and considered by those courts.

The plaintiffs objected to all the evidence offered by the defendants on the
grounds that the matters offered to be proved were irrelevant, immaterial, and
incompetent; that in respect to them the defendants were concluded by the
judgment sued on and given in evidence, and that none of those matters, if
proved, would be a defense to this action upon that judgment.
The court declined to admit any of the evidence so offered by the defendants,
and directed a verdict for the plaintiffs in the sum of $277,775.44, being the
amount of the French judgment and interest. The defendants, having duly
excepted to the rulings and direction of the court, sued out a writ of error.

The writ of error in the action at law and the appeal in the suit in equity were
argued together in this Court in January, 1894, and, by direction of the Court,
were reargued in April, 1894, before a full Bench.
G.R. No. 122191 October 8, 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.

QUISUMBING, J.:

This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to

annul and set aside the Resolution1 dated September 27, 1995 and the
Decision2 dated April 10, 1996 of the Court of Appeals3 in CA-G.R. SP No.
36533,4 and the Orders5 dated August 29, 1994 6 and February 2, 19957 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 Decision9, are as follows:

On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight

Attendant for its airlines based in Jeddah, Saudi Arabia. . . .

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. They then
requested her to go back to Jakarta to help arrange the release of
Thamer 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 lune 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 plaintiffs 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:

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 THIS 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.

x x x           x x x          x x x

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 reauested
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 sigh 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 manger, 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 Philippines 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:

Sec. 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:

x x x           x x x          x x x

(8) In all other cases in which demand, exclusive of

interest, damages of whatever kind, attorney's fees,
litigation expenses, and cots 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)

x x x           x x x          x x x

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) xxx 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 plaintiffs 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 (Emphasis ours.)

After a careful study of the pleadings on record, including allegations in the

Amended Complaint deemed admitted 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 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 totality
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
complained of and the place "having the most interest in the problem", we find,
by way of recapitulation, that the Philippine law on 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 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
respondent instituted this suit, she has the burden of pleading and proving the
applicable Saudi law on the matter." 64 As aptly said by private respondent, she
has "no obligation to plead and prove the law of 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 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, then the burden was
on it [petitioner] to plead and to establish what the law of Saudi Arabia is". 66

Lastly, no error could be imputed to the respondent appellate court in

upholding the trial court's denial of defendant's (herein petitioner's) motion to
dismiss the case. Not only was jurisdiction in order and venue properly laid,
but appeal after trial was obviously available, and expeditious trial itself
indicated by the nature of the case at hand. Indubitably, the Philippines is the
state intimately concerned with the 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 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
construed as prejudging the results of the case in any manner whatsoever.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil
Case No. Q-93-18394 entitled "Milagros P. Morada vs. Saudi Arabia Airlines" is
hereby REMANDED to Regional Trial Court of Quezon City, Branch 89 for
further proceedings.

SO ORDERED.

G.R. No. L-23678             June 6, 1967

TESTATE ESTATE OF AMOS G. BELLIS, deceased.

PEOPLE'S BANK and TRUST COMPANY, executor.
MARIA CRISTINA BELLIS and MIRIAM PALMA BELLIS, oppositors-appellants,
vs.
EDWARD A. BELLIS, ET AL., heirs-appellees.

Vicente R. Macasaet and Jose D. Villena for oppositors appellants.

Paredes, Poblador, Cruz and Nazareno for heirs-appellees E. A. Bellis, et al.
Quijano and Arroyo for heirs-appellees W. S. Bellis, et al.
J. R. Balonkita for appellee People's Bank & Trust Company.
Ozaeta, Gibbs and Ozaeta for appellee A. B. Allsman.

BENGZON, J.P., J.:

This is a direct appeal to Us, upon a question purely of law, from an order of
the Court of First Instance of Manila dated April 30, 1964, approving the
project of partition filed by the executor in Civil Case No. 37089
therein.1äwphï1.ñët

The facts of the case are as follows:

Amos G. Bellis, born in Texas, was "a citizen of the State of Texas and of the
United States." By his first wife, Mary E. Mallen, whom he divorced, he had five
legitimate children: Edward A. Bellis, George Bellis (who pre-deceased him in
infancy), Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman; by his
second wife, Violet Kennedy, who survived him, he had three legitimate
children: Edwin G. Bellis, Walter S. Bellis and Dorothy Bellis; and finally, he
had three illegitimate children: Amos Bellis, Jr., Maria Cristina Bellis and
Miriam Palma Bellis.

On August 5, 1952, Amos G. Bellis executed a will in the Philippines, in which

he directed that after all taxes, obligations, and expenses of administration are
paid for, his distributable estate should be divided, in trust, in the following
order and manner: (a) $240,000.00 to his first wife, Mary E. Mallen; (b)
P120,000.00 to his three illegitimate children, Amos Bellis, Jr., Maria Cristina
Bellis, Miriam Palma Bellis, or P40,000.00 each and (c) after the foregoing two
items have been satisfied, the remainder shall go to his seven surviving
children by his first and second wives, namely: Edward A. Bellis, Henry A.
Bellis, Alexander Bellis and Anna Bellis Allsman, Edwin G. Bellis, Walter S.
Bellis, and Dorothy E. Bellis, in equal shares.1äwphï1.ñët

Subsequently, or on July 8, 1958, Amos G. Bellis died a resident of San

Antonio, Texas, U.S.A. His will was admitted to probate in the Court of First
Instance of Manila on September 15, 1958.

The People's Bank and Trust Company, as executor of the will, paid all the
bequests therein including the amount of $240,000.00 in the form of shares of
stock to Mary E. Mallen and to the three (3) illegitimate children, Amos Bellis,
Jr., Maria Cristina Bellis and Miriam Palma Bellis, various amounts totalling
P40,000.00 each in satisfaction of their respective legacies, or a total of
P120,000.00, which it released from time to time according as the lower court
approved and allowed the various motions or petitions filed by the latter three
requesting partial advances on account of their respective legacies.

On January 8, 1964, preparatory to closing its administration, the executor

submitted and filed its "Executor's Final Account, Report of Administration and
Project of Partition" wherein it reported, inter alia, the satisfaction of the legacy
of Mary E. Mallen by the delivery to her of shares of stock amounting to
$240,000.00, and the legacies of Amos Bellis, Jr., Maria Cristina Bellis and
Miriam Palma Bellis in the amount of P40,000.00 each or a total of
P120,000.00. In the project of partition, the executor — pursuant to the
"Twelfth" clause of the testator's Last Will and Testament — divided the
residuary estate into seven equal portions for the benefit of the testator's seven
legitimate children by his first and second marriages.

On January 17, 1964, Maria Cristina Bellis and Miriam Palma Bellis filed their
respective oppositions to the project of partition on the ground that they were
deprived of their legitimes as illegitimate children and, therefore, compulsory
heirs of the deceased.

Amos Bellis, Jr. interposed no opposition despite notice to him, proof of service
of which is evidenced by the registry receipt submitted on April 27, 1964 by the
executor.1

After the parties filed their respective memoranda and other pertinent
pleadings, the lower court, on April 30, 1964, issued an order overruling the
oppositions and approving the executor's final account, report and
administration and project of partition. Relying upon Art. 16 of the Civil Code,
it applied the national law of the decedent, which in this case is Texas law,
which did not provide for legitimes.
Their respective motions for reconsideration having been denied by the lower
court on June 11, 1964, oppositors-appellants appealed to this Court to raise
the issue of which law must apply — Texas law or Philippine law.

In this regard, the parties do not submit the case on, nor even discuss, the
doctrine of renvoi, applied by this Court in Aznar v. Christensen Garcia, L-
16749, January 31, 1963. Said doctrine is usually pertinent where the
decedent is a national of one country, and a domicile of another. In the present
case, it is not disputed that the decedent was both a national of Texas and a
domicile thereof at the time of his death.2 So that even assuming Texas has a
conflict of law rule providing that the domiciliary system (law of the domicile)
should govern, the same would not result in a reference back (renvoi) to
Philippine law, but would still refer to Texas law. Nonetheless, if Texas has a
conflicts rule adopting the situs theory (lex rei sitae) calling for the application
of the law of the place where the properties are situated, renvoi would arise,
since the properties here involved are found in the Philippines. In the absence,
however, of proof as to the conflict of law rule of Texas, it should not be
presumed different from ours.3 Appellants' position is therefore not rested on
the doctrine of renvoi. As stated, they never invoked nor even mentioned it in
their arguments. Rather, they argue that their case falls under the
circumstances mentioned in the third paragraph of Article 17 in relation to
Article 16 of the Civil Code.

Article 16, par. 2, and Art. 1039 of the Civil Code, render applicable the
national law of the decedent, in intestate or testamentary successions, with
regard to four items: (a) the order of succession; (b) the amount of successional
rights; (e) the intrinsic validity of the provisions of the will; and (d) the capacity
to succeed. They provide that —

ART. 16. Real property as well as personal property is subject to the law
of the country where it is situated.

However, intestate and testamentary successions, both with respect to

the order of succession and to the amount of successional rights and to
the intrinsic validity of testamentary provisions, shall be regulated by the
national law of the person whose succession is under consideration,
whatever may he the nature of the property and regardless of the country
wherein said property may be found.

ART. 1039. Capacity to succeed is governed by the law of the nation of

the decedent.

Appellants would however counter that Art. 17, paragraph three, of the Civil
Code, stating that —
 Prohibitive laws concerning persons, their acts or property, and those
which have for their object public order, public policy and good customs
shall not be rendered ineffective by laws or judgments promulgated, or
by determinations or conventions agreed upon in a foreign country.

prevails as the exception to Art. 16, par. 2 of the Civil Code afore-quoted. This
is not correct. Precisely, Congress deleted the phrase, "notwithstanding the
provisions of this and the next preceding article" when they incorporated Art.
11 of the old Civil Code as Art. 17 of the new Civil Code, while reproducing
without substantial change the second paragraph of Art. 10 of the old Civil
Code as Art. 16 in the new. It must have been their purpose to make the
second paragraph of Art. 16 a specific provision in itself which must be applied
in testate and intestate succession. As further indication of this legislative
intent, Congress added a new provision, under Art. 1039, which decrees that
capacity to succeed is to be governed by the national law of the decedent.

It is therefore evident that whatever public policy or good customs may be

involved in our System of legitimes, Congress has not intended to extend the
same to the succession of foreign nationals. For it has specifically chosen to
leave, inter alia, the amount of successional rights, to the decedent's national
law. Specific provisions must prevail over general ones.

Appellants would also point out that the decedent executed two wills — one to
govern his Texas estate and the other his Philippine estate — arguing from this
that he intended Philippine law to govern his Philippine estate. Assuming that
such was the decedent's intention in executing a separate Philippine will, it
would not alter the law, for as this Court ruled in Miciano v. Brimo, 50 Phil.
867, 870, a provision in a foreigner's will to the effect that his properties shall
be distributed in accordance with Philippine law and not with his national law,
is illegal and void, for his national law cannot be ignored in regard to those
matters that Article 10 — now Article 16 — of the Civil Code states said
national law should govern.

The parties admit that the decedent, Amos G. Bellis, was a citizen of the State
of Texas, U.S.A., and that under the laws of Texas, there are no forced heirs or
legitimes. Accordingly, since the intrinsic validity of the provision of the will
and the amount of successional rights are to be determined under Texas law,
the Philippine law on legitimes cannot be applied to the testacy of Amos G.
Bellis.

Wherefore, the order of the probate court is hereby affirmed in toto, with costs
against appellants. So ordered.
G.R. No. L-2935             March 23, 1909

THE GOVERNMENT OF THE PHILIPPINE ISLANDS, plaintiff-appellee,

vs.
GEORGE I. FRANK, defendant-appellant.

Bishop and O'Brien for appellant.

Attorney-General Wilfley for appellee.

JOHNSON, J.:

Judgment was rendered in the lower court on the 5th day of September, 1905.
The defendant appealed. On the 12th day of October, 1905, the appellant filed
his printed bill of exceptions with the clerk of the Supreme Court. On the 5th
day of December, 1905, the appellant filed his brief with the clerk of the
Supreme Court. On the 19th day of January, 1906, the Attorney-General filed
his brief in said cause. Nothing further was done in said cause until on or
about the 30th day of January, 1909, when the respective parties were
requested by this court to prosecute the appeal under the penalty of having the
same dismissed for failure so to do; whereupon the appellant, by petition, had
the caused placed upon the calendar and the same was heard on the 2d day of
February, 1909.

The facts from the record appear to be as follows:

First. That on or about the 17th day of April, 1903, in the city of Chicago, in
the state of Illinois, in the United States, the defendant, through a respective of
the Insular Government of the Philippine Islands, entered into a contract for a
period of two years with the plaintiff, by which the defendant was to receive a
salary of 1,200 dollars per year as a stenographer in the service of the said
plaintiff, and in addition thereto was to be paid in advance the expenses
incurred in traveling from the said city of Chicago to Manila, and one-half
salary during said period of travel.

Second. Said contract contained a provision that in case of a violation of its

terms on the part of the defendant, he should become liable to the plaintiff for
the amount expended by the Government by way of expenses incurred in
traveling from Chicago to Manila and one-half salary paid during such period.
Third. The defendant entered upon the performance of his contract upon the
30th day of April, 1903, and was paid half-salary from that date until June 4,
1903, the date of his arrival in the Philippine Islands.

Fourth. That on the 11th day of February, 1904, the defendant left the service
of the plaintiff and refused to make further compliance with the terms of the
contract.

Fifth. On the 3d day of December, 1904, the plaintiff commenced an action in

the Court of First Instance of the city of Manila to recover from the defendant
the sum of 269.23 dollars, which amount the plaintiff claimed had been paid to
the defendant as expenses incurred in traveling from Chicago to Manila, and as
half salary for the period consumed in travel.

Sixth. It was expressly agreed between the parties to said contract that Laws
No. 80 and No. 224 should constitute a part of said contract.

To the complaint of the plaintiff the defendant filed a general denial and a
special defense, alleging in his special defense that the Government of the
Philippine Islands had amended Laws No. 80 and No. 224 and had thereby
materially altered the said contract, and also that he was a minor at the time
the contract was entered into and was therefore not responsible under the law.

To the special defense of the defendant the plaintiff filed a demurrer, which
demurrer the court sustained.

Upon the issue thus presented, and after hearing the evidence adduced during
the trial of the cause, the lower court rendered a judgment against the
defendant and in favor of the plaintiff for the sum of 265.90 dollars. The lower
court found that at the time the defendant quit the service of the plaintiff there
was due him from the said plaintiff the sum of 3.33 dollars, leaving a balance
due the plaintiff in the sum of 265.90 dollars. From this judgment the
defendant appealed and made the following assignments of error:

1. The court erred in sustaining plaintiff's demurrer to defendant's special

defenses.

2. The court erred in rendering judgment against the defendant on the facts.

With reference to the above assignments of error, it may be said that the mere
fact that the legislative department of the Government of the Philippine Islands
had amended said Acts No. 80 and No. 224 by the Acts No. 643 and No. 1040
did not have the effect of changing the terms of the contract made between the
plaintiff and the defendant. The legislative department of the Government is
expressly prohibited by section 5 of the Act of Congress of 1902 from altering
or changing the terms of the contract. The right which the defendant had
acquired by virtue of Acts No. 80 and No. 224 had not been changed in any
respect by the fact that said laws had been amended. These acts, constituting
the terms of the contract, still constituted a part of said contract and were
enforceable in favor of the defendant.

The defendant alleged in his special defense that he was a minor and therefore
the contract could not be enforced against him. The record discloses that, at
the time the contract was entered into in the State of Illinois, he was an adult
under the laws of that State and had full authority to contract. The plaintiff
[the defendant] claims that, by reason of the fact that, under the laws of the
Philippine Islands at the time the contract was made, male persons in said
Islands did not reach their majority until they had attained the age of 23 years,
he was not liable under said contract, contending that the laws of the
Philippine Islands governed. It is not disputed — upon the contrary the fact is
admitted — that at the time and place of the making of the contract in question
the defendant had full capacity to make the same. No rule is better settled in
law than that matters bearing upon the execution, interpretation and validity
of a contract are determined by the law of the place where the contract is
made. (Scudder vs. Union National Bank, 91 U. S., 406.) Matters connected
with its performance are regulated by the law prevailing at the place of
performance. Matters respecting a remedy, such as the bringing of suit,
admissibility of evidence, and statutes of limitations, depend upon the law of
the place where the suit is brought. (Idem.)

The defendant's claim that he was an adult when he left Chicago but was a
minor when he arrived at Manila; that he was an adult at the time he made the
contract but was a minor at the time the plaintiff attempted to enforce the
contract, more than a year later, is not tenable.

Our conclusions with reference to the first above assignment of error are,
therefore:

First. That the amendments to Acts No. 80 and No. 224 in no way affected the
terms of the contract in question; and

Second. The plaintiff [defendant] being fully qualified to enter into the contract
at the place and time the contract was made, he can not plead infancy as a
defense at the place where the contract is being enforced.

We believe that the above conclusions also dispose of the second assignment of
error.

For the reasons above stated, the judgment of the lower court is affirmed, with
costs.
G.R. No. L-104776 December 5, 1994

BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA,

and the rest of 1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in-
fact, Atty. GERARDO A. DEL MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR,
NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT
INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS
CORPORATION, respondents.

Gerardo A. Del Mundo and Associates for petitioners.

Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for

BRII/AIBC.

Florante M. De Castro for private respondents in 105029-32.

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
and 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 POEA in 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. Nos. 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. Nos. 105029-32, Rollo, p.
1562).

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 complainant's 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, the 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 Arguelles 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 reglamentary 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 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, Rollo, pp. 896-959);

12) Joint Manifestation and Motion involving claimant Ricardo C.

Dayrit and 2 co-claimants 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);
 13) Joint Manifestation and Motion involving claimant Dante C.
Aceres and 37 co-claimants dated September 8, 1993 (G.R. No.
104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp.
987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397);

14) Joint Manifestation and Motion involving Vivencio V. Abella

and 27 co-claimants dated January 10, 1994 (G.R. Nos. 105029-
32, Rollo, Vol. II);

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. Nos. 104911-14).

III

The facts as found by the NLRC are as follows:

We have taken painstaking efforts to sift over the more than fifty
volumes now comprising the records of these cases. From the
records, it appears that the complainants-appellants allege that
they were recruited by respondent-appellant AIBC for its
accredited foreign principal, Brown & Root, on various dates from
1975 to 1983. They were all deployed at various projects
undertaken by Brown & Root in several countries in the Middle
East, such as Saudi Arabia, Libya, United Arab Emirates and
Bahrain, as well as in Southeast Asia, in Indonesia and Malaysia.

Having been officially processed as overseas contract workers by

the Philippine Government, all the individual complainants signed
standard overseas employment contracts (Records, Vols. 25-32.
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 contained the following relevant terms and
conditions.

PART B —

(1) Employment Position Classification :—————————

(Code) :—————————

(2) Company Employment Status :—————————

(3) Date of Employment to Commence on :—————————
(4) Basic Working Hours Per Week :—————————
(5) Basic Working Hours Per Month :—————————
(6) Basic Hourly Rate :—————————
(7) Overtime Rate Per Hour :—————————
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :—————————
Months and/or
Job Completion

xxx xxx xxx

3. HOURS OF WORK AND COMPENSATION

a) The Employee is employed at the hourly rate and overtime rate

as set out in Part B of this Document.

b) The hours of work shall be those set forth by the Employer, and
Employer may, at his sole option, 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 xxx 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 (italics
supplied only for emphasis):

Art. 79: . . . 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. . . .

Art. 80: Friday shall be deemed to be a weekly day of

rest on full pay.

. . . 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. . . .

Art. 81: . . . 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: . . . 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 the filing of these cases (R.R. No. 104776, Rollo, pp.
59-65).

IV

The issues raised before and resolved by the NLRC were:

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.

Second: — Assuming that Amiri Decree No. 23 of Bahrain is

applicable in these cases, whether or not complainants' claim for
the benefits provided therein have prescribed.

Third: — Whether or not the instant cases qualify as a class suit.

Fourth: — Whether or not the proceedings conducted by the POEA,

as well as the decision that is the subject of these appeals,
conformed with the requirements of due process;

(a) Whether or not the respondent-appellant was

denied its right to due process;

(b) Whether or not the admission of evidence by the

POEA after these cases were submitted for decision
was valid;

(c) Whether or not the POEA acquired jurisdiction over

Brown & Root International, Inc.;

(d) Whether or not the judgment awards are supported

by substantial evidence;

(e) Whether or not the awards based on the averages

and formula presented by the complainants-appellants
are supported by substantial evidence;

(f) Whether or not the POEA awarded sums beyond

what the complainants-appellants prayed for; and, if
so, whether or not these awards are valid.

Fifth: — Whether or not the POEA erred in holding respondents

AIBC and Brown & Root jointly are severally liable for the
judgment awards despite the alleged finding that the former was
the employer of the complainants;

(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:

a. Unexpired portion of contract;

b. Interest earnings of Travel and Reserve Fund;

c. Retirement and Savings Plan benefits;

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

basic pay;

e. Area Differential Pay;

f. Accrued interests on all the unpaid benefits;

g. Salary differential pay;

h. Wage differential pay;

i. Refund of SSS premiums not remitted to SSS;

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) the 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.

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) the 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 that considering the staggering amount of the
claims (more than US$50,000,000.00) and the 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. Nos. 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 AIBC 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 petitioner's 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 worker's contracts of employment.
Respondents consciously failed to conform to these provisions
which specifically provide for the increase of the worker's 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:
 Art. 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, 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 . . . 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 Philippines
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 Procedures 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).

The state affirms labor as a primary social economic force. It shall

protect the rights of workers and promote their welfare (Sec. 18).

In article XIII on Social Justice and Human Rights, the 1987 Constitution
provides:

Sec. 3. The State shall afford full protection to labor, local and
overseas, organized and unorganized, and promote full
employment and equality of employment opportunities for all.

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 Labor Code or ten years, as provided
by the Civil Code of the Philippines.
The claimants are of the view that the applicable provision is Article 1144 of
the Civil Code of the 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;

(2) Upon an 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 xxx 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.

As noted by the Court: "That is precisely why petitioners did not make any
reference as to the 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 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 should govern."

Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No.
19933) provides:

Any action to enforce any cause of action under this Act shall be
commenced within three years after the cause of action accrued
otherwise such action shall be forever barred, . . . .

The court further explained:

 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 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. Nos. 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:

1. Unexpired portion of contract;

2. Interest earnings of Travel and Fund;

3. Retirement and Savings Plan benefit;

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

5. Area Differential pay;

6. Accrued Interest of all the unpaid benefits;

7. Salary differential pay;

8. Wage Differential pay;

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).

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.

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 the records dated as far
back as 1975.

The hearings on the merits of the claims before the POEA Administrator were
interrupted several times by the various appeals, first to NLRC and then to the
Supreme Court.

Aside from the inclusion of additional claimants, two new cases were filed
against AIBC and BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on 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. 57). All the three new cases were
consolidated with POEA Case No. L-84-06-555.

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 claimants
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 an 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.
841-844).

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 i.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 xxx 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 . . . .

2. The average wage per hour for the Philippino (sic) employee is
US$2.69 . . . .

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
Philippino (sic) employee . . . (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 amicable 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 defeat 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 ". . . 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 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 that 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 refute 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 before the POEA Administrator and NLRC, the latter
considered that it was not expedient to remand the cases to the POEA
Administrator for that would only prolong the already protracted legal
controversies.

Even the Supreme Court has decided appealed cases on the merits instead of
remanding them to the 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, 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, . . . ."

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.

Notwithstanding the non-applicability of technical rules of procedure and

evidence in administrative 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. Court of Industrial Relations, 69 Phil. 635 (1940).

VIII

The three petitions were filed under Rule 65 of the Revised Rules of Court on
the grounds that NLRC had committed grave abuse of discretion amounting to
lack of jurisdiction in issuing the questioned orders. We find no such abuse of
discretion.

WHEREFORE, all the three petitions are DISMISSED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 72494 August 11, 1989

HONGKONG AND SHANGHAI BANKING CORPORATION, petitioner,

vs.
JACK ROBERT SHERMAN, DEODATO RELOJ and THE INTERMEDIATE
APPELLATE COURT, respondents.

Quiason, Makalintal, Barot & Torres for petitioner.

Alejandro, Aranzaso & Associates for private respondents.

MEDIALDEA, J.:

This is a petition for review on certiorari of the decision of the Intermediate

Appellate Court (now Court of Appeals) dated August 2, 1985, which reversed
the order of the Regional Trial Court dated February 28,1985 denying the
Motion to Dismiss filed by private respondents Jack Robert Sherman and
Deodato Reloj.

A complaint for collection of a sum of money (pp. 49-52, Rollo) was filed by

petitioner Hongkong and Shanghai Banking Corporation (hereinafter referred
to as petitioner BANK) against private respondents Jack Robert Sherman and
Deodato Reloj, docketed as Civil Case No. Q-42850 before the Regional Trial
Court of Quezon City, Branch 84.

It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd.
(hereinafter referred to as COMPANY), a company incorporated in Singapore
applied with, and was granted by, the Singapore branch of petitioner BANK an
overdraft facility in the maximum amount of Singapore dollars 200,000.00
(which amount was subsequently increased to Singapore dollars 375,000.00)
with interest at 3% over petitioner BANK prime rate, payable monthly, on
amounts due under said overdraft facility; as a security for the repayment by
the COMPANY of sums advanced by petitioner BANK to it through the aforesaid
overdraft facility, on October 7, 1982, both private respondents and a certain
Robin de Clive Lowe, all of whom were directors of the COMPANY at such time,
executed a Joint and Several Guarantee (p. 53, Rollo) in favor of petitioner
BANK 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. ... (p.
33-A, Rollo).

The COMPANY failed to pay its obligation. Thus, petitioner BANK demanded
payment of the obligation from private respondents, conformably with the
provisions of the Joint and Several Guarantee. Inasmuch as the private
respondents still failed to pay, petitioner BANK filed the above-mentioned
complaint.

On December 14,1984, private respondents filed a motion to dismiss (pp 54-

56, Rollo) which was opposed by petitioner BANK (pp. 58-62, Rollo). Acting on
the motion, the trial court issued an order dated February 28, 1985 (pp, 64-
65, Rollo), which read as follows:

In a Motion to Dismiss filed on December 14, 1984, the defendants

seek the dismissal of the complaint on two grounds, namely:
 1. That the court has no jurisdiction over the subject matter of the
complaint; and

2. That the court has no jurisdiction over the persons of the

defendants.

In the light of the Opposition thereto filed by plaintiff, the Court

finds no merit in the motion. "On the first ground, defendants
claim that by virtue of the provision in the Guarantee (the
actionable document) which reads —

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 in Singapore shall have
jurisdiction over all disputes arising under this
guarantee,

the Court has no jurisdiction over the subject matter of the case.
The Court finds and concludes otherwise. There is nothing in the
Guarantee which says that the courts of Singapore shall have
jurisdiction to the exclusion of the courts of other countries or
nations. Also, it has long been established in law and
jurisprudence that jurisdiction of courts is fixed by law; it cannot
be conferred by the will, submission or consent of the parties.

On the second ground, it is asserted that defendant Robert' ,

Sherman is not a citizen nor a resident of the Philippines. This
argument holds no water. Jurisdiction over the persons of
defendants is acquired by service of summons and copy of the
complaint on them. There has been a valid service of summons on
both defendants and in fact the same is admitted when said
defendants filed a 'Motion for Extension of Time to File Responsive
Pleading on December 5, 1984.

WHEREFORE, the Motion to Dismiss is hereby DENIED.

SO ORDERED.

A motion for reconsideration of the said order was filed by private respondents
which was, however, denied (p. 66, Rollo).

Private respondents then filed before the respondent Intermediate Appellate

Court (now Court of Appeals) a petition for prohibition with preliminary
injunction and/or prayer for a restraining order (pp. 39-48, Rollo). On August
2, 1985, the respondent Court rendered a decision (p. 37, Rollo), the dispositive
portion of which reads:

WHEREFORE, the petition for prohibition with preliminary

injuction is hereby GRANTED. The respondent Court is enjoined
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. No costs.

SO ORDERED.

The motion for reconsideration was denied (p. 38, Rollo), hence, the present
petition.

The main issue is whether or not Philippine courts have jurisdiction over the
suit.

The controversy stems from the interpretation of a provision in the Joint and
Several Guarantee, to wit:

(14) This guarantee and all rights, obligations and liabilites 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 in Singapore shall have
jurisdiction over all disputes arising under this guarantee. ... (p.
53-A, Rollo)

In rendering the decision in favor of private respondents, the Court of Appeals

made, the following observations (pp. 35-36, Rollo):

There are significant aspects of the case to which our attention is

invited. The loan was obtained by Eastern Book Service PTE, Ltd.,
a company incorporated in Singapore. The loan was granted by
the Singapore Branch of Hongkong and Shanghai Banking
Corporation. The Joint and Several Guarantee was also concluded
in Singapore. The loan was in Singaporean dollars and the
repayment thereof also in the same currency. The transaction, to
say the least, took place in Singporean setting in which the law of
that country is the measure by which that relationship of the
parties will be governed.

xxx xxx xxx

Contrary to the position taken by respondents, the guarantee

agreement compliance that any litigation will be before the courts
of Singapore and that the rights and obligations of the parties shall
 be construed and determined in accordance with the laws of the
Republic of Singapore. A closer examination of paragraph 14 of the
Guarantee Agreement upon which the motion to dismiss is based,
employs in clear and unmistakeable (sic) terms the word 'shall'
which under statutory construction is mandatory.

Thus it was ruled that:

... the word 'shall' is imperative, operating to impose a duty which

may be enforced (Dizon vs. Encarnacion, 9 SCRA 714).lâwphî1.ñèt

There is nothing more imperative and restrictive than what the

agreement categorically commands that '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.'

While it is true that "the transaction took place in Singaporean setting" and
that the Joint and Several Guarantee contains a choice-of-forum clause, the
very essence of due process dictates that the stipulation that "[t]his 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 in Singapore shall have
jurisdiction over all disputes arising under this guarantee" be liberally
construed. 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 (J. Salonga, Private International Law, 1981, p. 46). Indeed,
as pointed-out by petitioner BANK at the outset, the instant case presents a
very odd situation. In the ordinary habits of life, anyone would be disinclined to
litigate before a foreign tribunal, with more reason as a defendant. However, in
this case, private respondents are Philippine residents (a fact which was not
disputed by them) who would rather face a complaint against them before a
foreign court and in the process incur considerable expenses, not to mention
inconvenience, than to have a Philippine court try and resolve the case. Private
respondents' stance is hardly comprehensible, unless their ultimate intent is to
evade, or at least delay, the payment of a just obligation.

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 Polytrade Corporation vs. Blanco, G.R. No. L-27033, October 31,
1969, 30 SCRA 187, it was ruled:

... An accurate reading, however, of the stipulation, 'The parties

agree to sue and be sued in the Courts of Manila,' does not
preclude the filing of suits in the residence of plaintiff or
defendant. The plain meaning is that the parties merely consented
to be sued in Manila. Qualifying or restrictive words which would
indicate that Manila and Manila alone is the venue are totally
absent therefrom. We cannot read into that clause that plaintiff
and defendant bound themselves to file suits with respect to the
last two transactions in question only or exclusively in Manila. For,
that agreement did not change or transfer venue. It simply is
permissive. The parties solely agreed to add the courts of Manila as
tribunals to which they may resort. They did not waive their right
to pursue remedy in the courts specifically mentioned in Section
2(b) of Rule 4. Renuntiatio non praesumitur.

This ruling was reiterated in the case of Neville Y. Lamis Ents., et al. v.
Lagamon, etc., et al., G.R. No. 57250, October 30, 1981, 108 SCRA 740, 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, Rules of Court, 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 (J. Salonga, Private
International Law, 1981, pp. 37-38).lâwphî1.ñèt
As regards the issue on improper venue, petitioner BANK avers that the
objection to improper venue has been waived. However, We agree with the
ruling of the respondent Court that:

While in the main, the motion to dismiss fails to categorically use

with exactitude the words 'improper venue' it can be perceived
from the general thrust and context of the motion that what is
meant is improper venue, The use of the word 'jurisdiction' was
merely an attempt to copy-cat the same word employed in the
guarantee agreement but conveys the concept of venue. Brushing
aside all technicalities, it would appear that jurisdiction was used
loosely as to be synonymous with venue. It is in this spirit that this
Court must view the motion to dismiss. ... (p. 35, Rollo).

At any rate, this issue is now of no moment because We hold that venue here
was properly laid for the same reasons discussed above.

The respondent Court likewise ruled that (pp. 36-37, Rollo):

... 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 (J.
Salonga, Private International Law, 1981, p. 49).lâwphî1.ñèt Thus, the
respondent Court should not have relied on such principle.

Although the Joint and Several Guarantee prepared by petitioner BANK is a

contract of adhesion and that consequently, it cannot be permitted to take a
stand contrary to the stipulations of the contract, substantial bases exist for
petitioner Bank's choice of forum, as discussed earlier.

Lastly, private respondents allege that neither the petitioner based at

Hongkong nor its Philippine branch is involved in the transaction sued upon.
This is a vain attempt on their part to further thwart the proceedings below
inasmuch as well-known is the rule that a defendant cannot plead any defense
that has not been interposed in the court below.

ACCORDINGLY, the decision of the respondent Court is hereby REVERSED

and the decision of the Regional Trial Court is REINSTATED, with costs against
private respondents. This decision is immediately executory.

SO ORDERED.
G.R. No. L-11390            March 26, 1918

EL BANCO ESPAÑOL-FILIPINO, plaintiff-appellant,
vs.
VICENTE PALANCA, administrator of the estate of Engracio Palanca
Tanquinyeng, defendant-appellant.

Aitken and DeSelms for appellant.

Hartigan and Welch for appellee.

STREET, J.:

This action was instituted upon March 31, 1908, by "El Banco Espanol-
Filipino" to foreclose a mortgage upon various parcels of real property situated
in the city of Manila. The mortgage in question is dated June 16, 1906, and
was executed by the original defendant herein, Engracio Palanca Tanquinyeng
y Limquingco, as security for a debt owing by him to the bank. Upon March 31,
1906, the debt amounted to P218,294.10 and was drawing interest at the rate
of 8 per centum per annum, payable at the end of each quarter. It appears that
the parties to this mortgage at that time estimated the value of the property in
question at P292,558, which was about P75,000 in excess of the indebtedness.
After the execution of this instrument by the mortgagor, he returned to China
which appears to have been his native country; and he there died, upon
January 29, 1810, without again returning to the Philippine Islands.
As the defendant was a nonresident at the time of the institution of the present
action, it was necessary for the plaintiff in the foreclosure proceeding to give
notice to the defendant by publication pursuant to section 399 of the Code of
Civil Procedure. An order for publication was accordingly obtained from the
court, and publication was made in due form in a newspaper of the city of
Manila. At the same time that the order of the court should deposit in the post
office in a stamped envelope a copy of the summons and complaint directed to
the defendant at his last place of residence, to wit, the city of Amoy, in the
Empire of China. This order was made pursuant to the following provision
contained in section 399 of the Code of Civil Procedure:

In case of publication, where the residence of a nonresident or absent

defendant is known, the judge must direct a copy of the summons and
complaint to be forthwith deposited by the clerk in the post-office,
postage prepaid, directed to the person to be served, at his place of
residence

Whether the clerk complied with this order does not affirmatively appear. There
is, however, among the papers pertaining to this case, an affidavit, dated April
4, 1908, signed by Bernardo Chan y Garcia, an employee of the attorneys of
the bank, showing that upon that date he had deposited in the Manila post-
office a registered letter, addressed to Engracio Palanca Tanquinyeng, at
Manila, containing copies of the complaint, the plaintiff's affidavit, the
summons, and the order of the court directing publication as aforesaid. It
appears from the postmaster's receipt that Bernardo probably used an
envelope obtained from the clerk's office, as the receipt purports to show that
the letter emanated from the office.

The cause proceeded in usual course in the Court of First Instance; and the
defendant not having appeared, judgment was, upon July 2, 1908, taken
against him by default. Upon July 3, 1908, a decision was rendered in favor of
the plaintiff. In this decision it was recited that publication had been properly
made in a periodical, but nothing was said about this notice having been given
mail. The court, upon this occasion, found that the indebtedness of the
defendant amounted to P249,355. 32, with interest from March 31, 1908.
Accordingly it was ordered that the defendant should, on or before July 6,
1908, deliver said amount to the clerk of the court to be applied to the
satisfaction of the judgment, and it was declared that in case of the failure of
the defendant to satisfy the judgment within such period, the mortgage
property located in the city of Manila should be exposed to public sale. The
payment contemplated in said order was never made; and upon July 8, 1908,
the court ordered the sale of the property. The sale took place upon July 30,
1908, and the property was bought in by the bank for the sum of P110,200.
Upon August 7, 1908, this sale was confirmed by the court.
About seven years after the confirmation of this sale, or to the precise, upon
June 25, 1915, a motion was made in this cause by Vicente Palanca, as
administrator of the estate of the original defendant, Engracio Palanca
Tanquinyeng y Limquingco, wherein the applicant requested the court to set
aside the order of default of July 2, 1908, and the judgment rendered upon
July 3, 1908, and to vacate all the proceedings subsequent thereto. The basis
of this application, as set forth in the motion itself, was that the order of
default and the judgment rendered thereon were void because the court had
never acquired jurisdiction over the defendant or over the subject of the action.

At the hearing in the court below the application to vacate the judgment was
denied, and from this action of the court Vicente Planca, as administrator of
the estate of the original defendant, has appealed. No other feature of the case
is here under consideration than such as related to the action of the court
upon said motion.

The case presents several questions of importance, which will be discussed in

what appears to be the sequence of most convenient development. In the first
part of this opinion we shall, for the purpose of argument, assume that the
clerk of the Court of First Instance did not obey the order of the court in the
matter of mailing the papers which he was directed to send to the defendant in
Amoy; and in this connection we shall consider, first, whether the court
acquired the necessary jurisdiction to enable it to proceed with the foreclosure
of the mortgage and, secondly, whether those proceedings were conducted in
such manner as to constitute due process of law.

The word "jurisdiction," as applied to the faculty of exercising judicial power, is

used in several different, though related, senses since it may have reference (1)
to the authority of the court to entertain a particular kind of action or to
administer a particular kind of relief, or it may refer to the power of the court
over the parties, or (2) over the property which is the subject to the litigation.

The sovereign authority which organizes a court determines the nature and
extent of its powers in general and thus fixes its competency or jurisdiction
with reference to the actions which it may entertain and the relief it may grant.

Jurisdiction over the person is acquired by the voluntary appearance of a party

in court and his submission to its authority, or it is acquired by the coercive
power of legal process exerted over the person.

Jurisdiction over the property which is the subject of the litigation may result
either from a seizure of the property under legal process, whereby it is brought
into the actual custody of the law, or it may result from the institution of legal
proceedings wherein, under special provisions of law, the power of the court
over the property is recognized and made effective. In the latter case the
property, though at all times within the potential power of the court, may never
be taken into actual custody at all. An illustration of the jurisdiction acquired
by actual seizure is found in attachment proceedings, where the property is
seized at the beginning of the action, or some subsequent stage of its progress,
and held to abide the final event of the litigation. An illustration of what we
term potential jurisdiction over the res, is found in the proceeding to register
the title of land under our system for the registration of land. Here the court,
without taking actual physical control over the property assumes, at the
instance of some person claiming to be owner, to exercise a jurisdiction in rem
over the property and to adjudicate the title in favor of the petitioner against all
the world.

In the terminology of American law the action to foreclose a mortgage is said to

be a proceeding quasi in rem, by which is expressed the idea that while it is not
strictly speaking an action in rem yet it partakes of that nature and is
substantially such. The expression "action in rem" is, in its narrow application,
used only with reference to certain proceedings in courts of admiralty wherein
the property alone is treated as responsible for the claim or obligation upon
which the proceedings are based. The action quasi rem differs from the true
action in rem in the circumstance that in the former an individual is named as
defendant, and the purpose of the proceeding is to subject his interest therein
to the obligation or lien burdening the property. All proceedings having for their
sole object the sale or other disposition of the property of the defendant,
whether by attachment, foreclosure, or other form of remedy, are in a general
way thus designated. The judgment entered in these proceedings is conclusive
only between the parties.

In speaking of the proceeding to foreclose a mortgage the author of a well

known treaties, has said:

Though nominally against person, such suits are to vindicate liens; they
proceed upon seizure; they treat property as primarily indebted; and,
with the qualification above-mentioned, they are substantially property
actions. In the civil law, they are styled hypothecary actions, and their
sole object is the enforcement of the lien against the res; in the common
law, they would be different in chancery did not treat the conditional
conveyance as a mere hypothecation, and the creditor's right ass an
equitable lien; so, in both, the suit is real action so far as it is against
property, and seeks the judicial recognition of a property debt, and an
order for the sale of the res. (Waples, Proceedings In Rem. sec. 607.)

It is true that in proceedings of this character, if the defendant for whom

publication is made appears, the action becomes as to him a personal action
and is conducted as such. This, however, does not affect the proposition that
where the defendant fails to appear the action is quasi in rem; and it should
therefore be considered with reference to the principles governing actions in
rem.

There is an instructive analogy between the foreclosure proceeding and an

action of attachment, concerning which the Supreme Court of the United
States has used the following language:

If the defendant appears, the cause becomes mainly a suit in personam,

with the added incident, that the property attached remains liable, under
the control of the court, to answer to any demand which may be
established against the defendant by the final judgment of the court.
But, if there is no appearance of the defendant, and no service of process
on him, the case becomes, in its essential nature, a proceeding in rem,
the only effect of which is to subject the property attached to the
payment of the defendant which the court may find to be due to the
plaintiff. (Cooper vs. Reynolds, 10 Wall., 308.)

In an ordinary attachment proceeding, if the defendant is not personally

served, the preliminary seizure is to, be considered necessary in order to confer
jurisdiction upon the court. In this case the lien on the property is acquired by
the seizure; and the purpose of the proceedings is to subject the property to
that lien. If a lien already exists, whether created by mortgage, contract, or
statute, the preliminary seizure is not necessary; and the court proceeds to
enforce such lien in the manner provided by law precisely as though the
property had been seized upon attachment. (Roller vs. Holly, 176 U. S., 398,
405; 44 L. ed., 520.) It results that the mere circumstance that in an
attachment the property may be seized at the inception of the proceedings,
while in the foreclosure suit it is not taken into legal custody until the time
comes for the sale, does not materially affect the fundamental principle
involved in both cases, which is that the court is here exercising a jurisdiction
over the property in a proceeding directed essentially in rem.

Passing now to a consideration of the jurisdiction of the Court of First Instance

in a mortgage foreclosure, it is evident that the court derives its authority to
entertain the action primarily from the statutes organizing the court. The
jurisdiction of the court, in this most general sense, over the cause of action is
obvious and requires no comment. Jurisdiction over the person of the
defendant, if acquired at all in such an action, is obtained by the voluntary
submission of the defendant or by the personal service of process upon him
within the territory where the process is valid. If, however, the defendant is a
nonresident and, remaining beyond the range of the personal process of the
court, refuses to come in voluntarily, the court never acquires jurisdiction over
the person at all. Here the property itself is in fact the sole thing which is
impleaded and is the responsible object which is the subject of the exercise of
judicial power. It follows that the jurisdiction of the court in such case is based
exclusively on the power which, under the law, it possesses over the property;
and any discussion relative to the jurisdiction of the court over the person of
the defendant is entirely apart from the case. The jurisdiction of the court over
the property, considered as the exclusive object of such action, is evidently
based upon the following conditions and considerations, namely: (1) that the
property is located within the district; (2) that the purpose of the litigation is to
subject the property by sale to an obligation fixed upon it by the mortgage; and
(3) that the court at a proper stage of the proceedings takes the property into
custody, if necessary, and expose it to sale for the purpose of satisfying the
mortgage debt. An obvious corollary is that no other relief can be granted in
this proceeding than such as can be enforced against the property.

We may then, from what has been stated, formulated the following proposition
relative to the foreclosure proceeding against the property of a nonresident
mortgagor who fails to come in and submit himself personally to the
jurisdiction of the court: (I) That the jurisdiction of the court is derived from the
power which it possesses over the property; (II) that jurisdiction over the
person is not acquired and is nonessential; (III) that the relief granted by the
court must be limited to such as can be enforced against the property itself.

It is important that the bearing of these propositions be clearly apprehended,

for there are many expressions in the American reports from which it might be
inferred that the court acquires personal jurisdiction over the person of the
defendant by publication and notice; but such is not the case. In truth the
proposition that jurisdiction over the person of a nonresident cannot be
acquired by publication and notice was never clearly understood even in the
American courts until after the decision had been rendered by the Supreme
Court of the United States in the leading case of Pennoyer vs. Neff (95 U. S.
714; 24 L. ed., 565). In the light of that decision, and of other decisions which
have subsequently been rendered in that and other courts, the proposition that
jurisdiction over the person cannot be thus acquired by publication and notice
is no longer open to question; and it is now fully established that a personal
judgment upon constructive or substituted service against a nonresident who
does not appear is wholly invalid. This doctrine applies to all kinds of
constructive or substituted process, including service by publication and
personal service outside of the jurisdiction in which the judgment is rendered;
and the only exception seems to be found in the case where the nonresident
defendant has expressly or impliedly consented to the mode of service. (Note to
Raher vs. Raher, 35 L. R. A. [N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A.
[N. S.], 312

The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that
the process from the tribunals of one State cannot run into other States or
countries and that due process of law requires that the defendant shall be
brought under the power of the court by service of process within the State, or
by his voluntary appearance, in order to authorize the court to pass upon the
question of his personal liability. The doctrine established by the Supreme
Court of the United States on this point, being based upon the constitutional
conception of due process of law, is binding upon the courts of the Philippine
Islands. Involved in this decision is the principle that in proceedings in rem or
quasi in rem against a nonresident who is not served personally within the
state, and who does not appear, the relief must be confined to the res, and the
court cannot lawfully render a personal judgment against him. (Dewey vs. Des
Moines, 173 U. S., 193; 43 L. ed., 665; Heidritter vs. Elizabeth Oil Cloth Co.,
112 U. S., 294; 28 L. ed., 729.) Therefore in an action to foreclose a mortgage
against a nonresident, upon whom service has been effected exclusively by
publication, no personal judgment for the deficiency can be entered. (Latta vs.
Tutton, 122 Cal., 279; Blumberg vs. Birch, 99 Cal., 416.)

It is suggested in the brief of the appellant that the judgment entered in the
court below offends against the principle just stated and that this judgment is
void because the court in fact entered a personal judgment against the absent
debtor for the full amount of the indebtedness secured by the mortgage. We do
not so interpret the judgment.

In a foreclosure proceeding against a nonresident owner it is necessary for the

court, as in all cases of foreclosure, to ascertain the amount due, as prescribed
in section 256 of the Code of Civil Procedure, and to make an order requiring
the defendant to pay the money into court. This step is a necessary precursor
of the order of sale. In the present case the judgment which was entered
contains the following words:

Because it is declared that the said defendant Engracio Palanca

Tanquinyeng y Limquingco, is indebted in the amount of P249,355.32,
plus the interest, to the 'Banco Espanol-Filipino' . . . therefore said
appellant is ordered to deliver the above amount etc., etc.

This is not the language of a personal judgment. Instead it is clearly intended

merely as a compliance with the requirement that the amount due shall be
ascertained and that the evidence of this it may be observed that according to
the Code of Civil Procedure a personal judgment against the debtor for the
deficiency is not to be rendered until after the property has been sold and the
proceeds applied to the mortgage debt. (sec. 260).

The conclusion upon this phase of the case is that whatever may be the effect
in other respects of the failure of the clerk of the Court of First Instance to mail
the proper papers to the defendant in Amoy, China, such irregularity could in
no wise impair or defeat the jurisdiction of the court, for in our opinion that
jurisdiction rest upon a basis much more secure than would be supplied by
any form of notice that could be given to a resident of a foreign country.
Before leaving this branch of the case, we wish to observe that we are fully
aware that many reported cases can be cited in which it is assumed that the
question of the sufficiency of publication or notice in a case of this kind is a
question affecting the jurisdiction of the court, and the court is sometimes said
to acquire jurisdiction by virtue of the publication. This phraseology was
undoubtedly originally adopted by the court because of the analogy between
service by the publication and personal service of process upon the defendant;
and, as has already been suggested, prior to the decision of Pennoyer vs. Neff
(supra) the difference between the legal effects of the two forms of service was
obscure. It is accordingly not surprising that the modes of expression which
had already been molded into legal tradition before that case was decided have
been brought down to the present day. But it is clear that the legal principle
here involved is not effected by the peculiar language in which the courts have
expounded their ideas.

We now proceed to a discussion of the question whether the supposed

irregularity in the proceedings was of such gravity as to amount to a denial of
that "due process of law" which was secured by the Act of Congress in force in
these Islands at the time this mortgage was foreclosed. (Act of July 1, 1902,
sec. 5.) In dealing with questions involving the application of the constitutional
provisions relating to due process of law the Supreme Court of the United
States has refrained from attempting to define with precision the meaning of
that expression, the reason being that the idea expressed therein is applicable
under so many diverse conditions as to make any attempt ay precise definition
hazardous and unprofitable. As applied to a judicial proceeding, however, it
may be laid down with certainty that the requirement of due process is
satisfied if the following conditions are present, namely; (1) There must be a
court or tribunal clothed with judicial power to hear and determine the matter
before it; (2) jurisdiction must be lawfully acquired over the person of the
defendant or over the property which is the subject of the proceeding; (3) the
defendant must be given an opportunity to be heard; and (4) judgment must be
rendered upon lawful hearing.

Passing at once to the requisite that the defendant shall have an opportunity to
be heard, we observe that in a foreclosure case some notification of the
proceedings to the nonresident owner, prescribing the time within which
appearance must be made, is everywhere recognized as essential. To answer
this necessity the statutes generally provide for publication, and usually in
addition thereto, for the mailing of notice to the defendant, if his residence is
known. Though commonly called constructive, or substituted service of process
in any true sense. It is merely a means provided by law whereby the owner may
be admonished that his property is the subject of judicial proceedings and that
it is incumbent upon him to take such steps as he sees fit to protect it. In
speaking of notice of this character a distinguish master of constitutional law
has used the following language:
 . . . if the owners are named in the proceedings, and personal notice is
provided for, it is rather from tenderness to their interests, and in order
to make sure that the opportunity for a hearing shall not be lost to them,
than from any necessity that the case shall assume that form. (Cooley on
Taxation [2d. ed.], 527, quoted in Leigh vs. Green, 193 U. S., 79, 80.)

It will be observed that this mode of notification does not involve any absolute
assurance that the absent owner shall thereby receive actual notice. The
periodical containing the publication may never in fact come to his hands, and
the chances that he should discover the notice may often be very slight. Even
where notice is sent by mail the probability of his receiving it, though much
increased, is dependent upon the correctness of the address to which it is
forwarded as well as upon the regularity and security of the mail service. It will
be noted, furthermore, that the provision of our law relative to the mailing of
notice does not absolutely require the mailing of notice unconditionally and in
every event, but only in the case where the defendant's residence is known. In
the light of all these facts, it is evident that actual notice to the defendant in
cases of this kind is not, under the law, to be considered absolutely necessary.

The idea upon which the law proceeds in recognizing the efficacy of a means of
notification which may fall short of actual notice is apparently this: Property is
always assumed to be in the possession of its owner, in person or by agent;
and he may be safely held, under certain conditions, to be affected with
knowledge that proceedings have been instituted for its condemnation and
sale.

It is the duty of the owner of real estate, who is a nonresident, to take

measures that in some way he shall be represented when his property is
called into requisition, and if he fails to do this, and fails to get notice by
the ordinary publications which have usually been required in such
cases, it is his misfortune, and he must abide the consequences. (6 R. C.
L., sec. 445 [p. 450]).

It has been well said by an American court:

If property of a nonresident cannot be reached by legal process upon the

constructive notice, then our statutes were passed in vain, and are mere
empty legislative declarations, without either force, or meaning; for if the
person is not within the jurisdiction of the court, no personal judgment
can be rendered, and if the judgment cannot operate upon the property,
then no effective judgment at all can be rendered, so that the result
would be that the courts would be powerless to assist a citizen against a
nonresident. Such a result would be a deplorable one. (Quarl vs. Abbett,
102 Ind., 233; 52 Am. Rep., 662, 667.)
It is, of course universally recognized that the statutory provisions relative to
publication or other form of notice against a nonresident owner should be
complied with; and in respect to the publication of notice in the newspaper it
may be stated that strict compliance with the requirements of the law has been
held to be essential. In Guaranty Trust etc. Co. vs. Green Cove etc., Railroad
Co. (139 U. S., 137, 138), it was held that where newspaper publication was
made for 19 weeks, when the statute required 20, the publication was
insufficient.

With respect to the provisions of our own statute, relative to the sending of
notice by mail, the requirement is that the judge shall direct that the notice be
deposited in the mail by the clerk of the court, and it is not in terms declared
that the notice must be deposited in the mail. We consider this to be of some
significance; and it seems to us that, having due regard to the principles upon
which the giving of such notice is required, the absent owner of the mortgaged
property must, so far as the due process of law is concerned, take the risk
incident to the possible failure of the clerk to perform his duty, somewhat as he
takes the risk that the mail clerk or the mail carrier might possibly lose or
destroy the parcel or envelope containing the notice before it should reach its
destination and be delivered to him. This idea seems to be strengthened by the
consideration that placing upon the clerk the duty of sending notice by mail,
the performance of that act is put effectually beyond the control of the plaintiff
in the litigation. At any rate it is obvious that so much of section 399 of the
Code of Civil Procedure as relates to the sending of notice by mail was complied
with when the court made the order. The question as to what may be the
consequences of the failure of the record to show the proof of compliance with
that requirement will be discussed by us further on.

The observations which have just been made lead to the conclusion that the
failure of the clerk to mail the notice, if in fact he did so fail in his duty, is not
such an irregularity, as amounts to a denial of due process of law; and hence
in our opinion that irregularity, if proved, would not avoid the judgment in this
case. Notice was given by publication in a newspaper and this is the only form
of notice which the law unconditionally requires. This in our opinion is all that
was absolutely necessary to sustain the proceedings.

It will be observed that in considering the effect of this irregularity, it makes a

difference whether it be viewed as a question involving jurisdiction or as a
question involving due process of law. In the matter of jurisdiction there can be
no distinction between the much and the little. The court either has
jurisdiction or it has not; and if the requirement as to the mailing of notice
should be considered as a step antecedent to the acquiring of jurisdiction,
there could be no escape from the conclusion that the failure to take that step
was fatal to the validity of the judgment. In the application of the idea of due
process of law, on the other hand, it is clearly unnecessary to be so rigorous.
The jurisdiction being once established, all that due process of law thereafter
requires is an opportunity for the defendant to be heard; and as publication
was duly made in the newspaper, it would seem highly unreasonable to hold
that failure to mail the notice was fatal. We think that in applying the
requirement of due process of law, it is permissible to reflect upon the
purposes of the provision which is supposed to have been violated and the
principle underlying the exercise of judicial power in these proceedings. Judge
in the light of these conceptions, we think that the provision of Act of Congress
declaring that no person shall be deprived of his property without due process
of law has not been infringed.

In the progress of this discussion we have stated the two conclusions; (1) that
the failure of the clerk to send the notice to the defendant by mail did not
destroy the jurisdiction of the court and (2) that such irregularity did not
infringe the requirement of due process of law. As a consequence of these
conclusions the irregularity in question is in some measure shorn of its
potency. It is still necessary, however, to consider its effect considered as a
simple irregularity of procedure; and it would be idle to pretend that even in
this aspect the irregularity is not grave enough. From this point of view,
however, it is obvious that any motion to vacate the judgment on the ground of
the irregularity in question must fail unless it shows that the defendant was
prejudiced by that irregularity. The least, therefore, that can be required of the
proponent of such a motion is to show that he had a good defense against the
action to foreclose the mortgage. Nothing of the kind is, however, shown either
in the motion or in the affidavit which accompanies the motion.

An application to open or vacate a judgment because of an irregularity or defect

in the proceedings is usually required to be supported by an affidavit showing
the grounds on which the relief is sought, and in addition to this showing also
a meritorious defense to the action. It is held that a general statement that a
party has a good defense to the action is insufficient. The necessary facts must
be averred. Of course if a judgment is void upon its face a showing of the
existence of a meritorious defense is not necessary. (10 R. C. L., 718.)

The lapse of time is also a circumstance deeply affecting this aspect of the case.
In this connection we quote the following passage from the encyclopedic
treatise now in course of publication:

Where, however, the judgment is not void on its face, and may therefore
be enforced if permitted to stand on the record, courts in many instances
refuse to exercise their quasi equitable powers to vacate a judgement
after the lapse of the term ay which it was entered, except in clear cases,
to promote the ends of justice, and where it appears that the party
making the application is himself without fault and has acted in good
faith and with ordinary diligence. Laches on the part of the applicant, if
 unexplained, is deemed sufficient ground for refusing the relief to which
he might otherwise be entitled. Something is due to the finality of
judgments, and acquiescence or unnecessary delay is fatal to motions of
this character, since courts are always reluctant to interfere with
judgments, and especially where they have been executed or satisfied.
The moving party has the burden of showing diligence, and unless it is
shown affirmatively the court will not ordinarily exercise its discretion in
his favor. (15 R. C. L., 694, 695.)

It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y

Limquingco, died January 29, 1910. The mortgage under which the property
was sold was executed far back in 1906; and the proceedings in the foreclosure
were closed by the order of court confirming the sale dated August 7, 1908. It
passes the rational bounds of human credulity to suppose that a man who had
placed a mortgage upon property worth nearly P300,000 and had then gone
away from the scene of his life activities to end his days in the city of Amoy,
China, should have long remained in ignorance of the fact that the mortgage
had been foreclosed and the property sold, even supposing that he had no
knowledge of those proceedings while they were being conducted. It is more in
keeping with the ordinary course of things that he should have acquired
information as to what was transpiring in his affairs at Manila; and upon the
basis of this rational assumption we are authorized, in the absence of proof to
the contrary, to presume that he did have, or soon acquired, information as to
the sale of his property.

The Code of Civil Procedure, indeed, expressly declares that there is a

presumption that things have happened according to the ordinary habits of life
(sec. 334 [26]); and we cannot conceive of a situation more appropriate than
this for applying the presumption thus defined by the lawgiver. In support of
this presumption, as applied to the present case, it is permissible to consider
the probability that the defendant may have received actual notice of these
proceedings from the unofficial notice addressed to him in Manila which was
mailed by an employee of the bank's attorneys. Adopting almost the exact
words used by the Supreme Court of the United States in Grannis vs. Ordeans
(234 U. S., 385; 58 L. ed., 1363), we may say that in view of the well-known
skill of postal officials and employees in making proper delivery of letters
defectively addressed, we think the presumption is clear and strong that this
notice reached the defendant, there being no proof that it was ever returned by
the postal officials as undelivered. And if it was delivered in Manila, instead of
being forwarded to Amoy, China, there is a probability that the recipient was a
person sufficiently interested in his affairs to send it or communicate its
contents to him.

Of course if the jurisdiction of the court or the sufficiency of the process of law
depended upon the mailing of the notice by the clerk, the reflections in which
we are now indulging would be idle and frivolous; but the considerations
mentioned are introduced in order to show the propriety of applying to this
situation the legal presumption to which allusion has been made. Upon that
presumption, supported by the circumstances of this case, ,we do not hesitate
to found the conclusion that the defendant voluntarily abandoned all thought
of saving his property from the obligation which he had placed upon it; that
knowledge of the proceedings should be imputed to him; and that he
acquiesced in the consequences of those proceedings after they had been
accomplished. Under these circumstances it is clear that the merit of this
motion is, as we have already stated, adversely affected in a high degree by the
delay in asking for relief. Nor is it an adequate reply to say that the proponent
of this motion is an administrator who only qualified a few months before this
motion was made. No disability on the part of the defendant himself existed
from the time when the foreclosure was effected until his death; and we believe
that the delay in the appointment of the administrator and institution of this
action is a circumstance which is imputable to the parties in interest whoever
they may have been. Of course if the minor heirs had instituted an action in
their own right to recover the property, it would have been different.

It is, however, argued that the defendant has suffered prejudice by reason of
the fact that the bank became the purchaser of the property at the foreclosure
sale for a price greatly below that which had been agreed upon in the mortgage
as the upset price of the property. In this connection, it appears that in article
nine of the mortgage which was the subject of this foreclosure, as amended by
the notarial document of July 19, 1906, the parties to this mortgage made a
stipulation to the effect that the value therein placed upon the mortgaged
properties should serve as a basis of sale in case the debt should remain
unpaid and the bank should proceed to a foreclosure. The upset price stated in
that stipulation for all the parcels involved in this foreclosure was P286,000. It
is said in behalf of the appellant that when the bank bought in the property for
the sum of P110,200 it violated that stipulation.

It has been held by this court that a clause in a mortgage providing for a tipo,
or upset price, does not prevent a foreclosure, nor affect the validity of a sale
made in the foreclosure proceedings. (Yangco vs. Cruz Herrera and Wy Piaco,
11 Phil. Rep., 402; Banco-Español Filipino vs. Donaldson, Sim and Co., 5 Phil.
Rep., 418.) In both the cases here cited the property was purchased at the
foreclosure sale, not by the creditor or mortgagee, but by a third party.
Whether the same rule should be applied in a case where the mortgagee
himself becomes the purchaser has apparently not been decided by this court
in any reported decision, and this question need not here be considered, since
it is evident that if any liability was incurred by the bank by purchasing for a
price below that fixed in the stipulation, its liability was a personal liability
derived from the contract of mortgage; and as we have already demonstrated
such a liability could not be the subject of adjudication in an action where the
court had no jurisdiction over the person of the defendant. If the plaintiff bank
became liable to account for the difference between the upset price and the
price at which in bought in the property, that liability remains unaffected by
the disposition which the court made of this case; and the fact that the bank
may have violated such an obligation can in no wise affect the validity of the
judgment entered in the Court of First Instance.

In connection with the entire failure of the motion to show either a meritorious
defense to the action or that the defendant had suffered any prejudice of which
the law can take notice, we may be permitted to add that in our opinion a
motion of this kind, which proposes to unsettle judicial proceedings long ago
closed, can not be considered with favor, unless based upon grounds which
appeal to the conscience of the court. Public policy requires that judicial
proceedings be upheld. The maximum here applicable is non quieta movere. As
was once said by Judge Brewer, afterwards a member of the Supreme Court of
the United States:

Public policy requires that judicial proceedings be upheld, and that titles
obtained in those proceedings be safe from the ruthless hand of collateral
attack. If technical defects are adjudged potent to destroy such titles, a
judicial sale will never realize that value of the property, for no prudent
man will risk his money in bidding for and buying that title which he has
reason to fear may years thereafter be swept away through some occult
and not readily discoverable defect. (Martin vs. Pond, 30 Fed., 15.)

In the case where that language was used an attempt was made to annul
certain foreclosure proceedings on the ground that the affidavit upon which the
order of publication was based erroneously stated that the State of Kansas,
when he was in fact residing in another State. It was held that this mistake did
not affect the validity of the proceedings.

In the preceding discussion we have assumed that the clerk failed to send the
notice by post as required by the order of the court. We now proceed to
consider whether this is a proper assumption; and the proposition which we
propose to establish is that there is a legal presumption that the clerk
performed his duty as the ministerial officer of the court, which presumption is
not overcome by any other facts appearing in the cause.

In subsection 14 of section 334 of the Code of Civil Procedure it is declared that

there is a presumption "that official duty has been regularly performed;" and in
subsection 18 it is declared that there is a presumption "that the ordinary
course of business has been followed." These presumptions are of course in no
sense novelties, as they express ideas which have always been recognized.
Omnia presumuntur rite et solemniter esse acta donec probetur in contrarium.
There is therefore clearly a legal presumption that the clerk performed his duty
about mailing this notice; and we think that strong considerations of policy
require that this presumption should be allowed to operate with full force
under the circumstances of this case. A party to an action has no control over
the clerk of the court; and has no right to meddle unduly with the business of
the clerk in the performance of his duties. Having no control over this officer,
the litigant must depend upon the court to see that the duties imposed on the
clerk are performed.

Other considerations no less potent contribute to strengthen the conclusion

just stated. There is no principle of law better settled than that after
jurisdiction has once been required, every act of a court of general jurisdiction
shall be presumed to have been rightly done. This rule is applied to every
judgment or decree rendered in the various stages of the proceedings from their
initiation to their completion (Voorhees vs. United States Bank, 10 Pet., 314;
35 U. S., 449); and if the record is silent with respect to any fact which must
have been established before the court could have rightly acted, it will be
presumed that such fact was properly brought to its knowledge. (The Lessee of
Grignon vs. Astor, 2 How., 319; 11 L. ed., 283.)

In making the order of sale [of the real state of a decedent] the court are
presumed to have adjudged every question necessary to justify such
order or decree, viz: The death of the owners; that the petitioners were
his administrators; that the personal estate was insufficient to pay the
debts of the deceased; that the private acts of Assembly, as to the
manner of sale, were within the constitutional power of the Legislature,
and that all the provisions of the law as to notices which are directory to
the administrators have been complied with. . . . The court is not bound
to enter upon the record the evidence on which any fact was decided.
(Florentine vs. Barton, 2 Wall., 210; 17 L. ed., 785.) Especially does all
this apply after long lapse of time.

Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255)
contains an instructive discussion in a case analogous to that which is now
before us. It there appeared that in order to foreclose a mortgage in the State of
Kentucky against a nonresident debtor it was necessary that publication
should be made in a newspaper for a specified period of time, also be posted at
the front door of the court house and be published on some Sunday,
immediately after divine service, in such church as the court should direct. In
a certain action judgment had been entered against a nonresident, after
publication in pursuance of these provisions. Many years later the validity of
the proceedings was called in question in another action. It was proved from
the files of an ancient periodical that publication had been made in its columns
as required by law; but no proof was offered to show the publication of the
order at the church, or the posting of it at the front door of the court-house. It
was insisted by one of the parties that the judgment of the court was void for
lack of jurisdiction. But the Supreme Court of the United States said:

The court which made the decree . . . was a court of general jurisdiction.
Therefore every presumption not inconsistent with the record is to be
indulged in favor of its jurisdiction. . . . It is to be presumed that the
court before making its decree took care of to see that its order for
constructive service, on which its right to make the decree depended,
had been obeyed.

It is true that in this case the former judgment was the subject of collateral , or
indirect attack, while in the case at bar the motion to vacate the judgment is
direct proceeding for relief against it. The same general presumption, however,
is indulged in favor of the judgment of a court of general jurisdiction, whether
it is the subject of direct or indirect attack the only difference being that in case
of indirect attack the judgment is conclusively presumed to be valid unless the
record affirmatively shows it to be void, while in case of direct attack the
presumption in favor of its validity may in certain cases be overcome by proof
extrinsic to the record.

The presumption that the clerk performed his duty and that the court made its
decree with the knowledge that the requirements of law had been complied
with appear to be amply sufficient to support the conclusion that the notice
was sent by the clerk as required by the order. It is true that there ought to be
found among the papers on file in this cause an affidavit, as required by
section 400 of the Code of Civil Procedure, showing that the order was in fact
so sent by the clerk; and no such affidavit appears. The record is therefore
silent where it ought to speak. But the very purpose of the law in recognizing
these presumptions is to enable the court to sustain a prior judgment in the
face of such an omission. If we were to hold that the judgment in this case is
void because the proper affidavit is not present in the file of papers which we
call the record, the result would be that in the future every title in the Islands
resting upon a judgment like that now before us would depend, for its
continued security, upon the presence of such affidavit among the papers and
would be liable at any moment to be destroyed by the disappearance of that
piece of paper. We think that no court, with a proper regard for the security of
judicial proceedings and for the interests which have by law been confided to
the courts, would incline to favor such a conclusion. In our opinion the proper
course in a case of this kind is to hold that the legal presumption that the clerk
performed his duty still maintains notwithstanding the absence from the
record of the proper proof of that fact.

In this connection it is important to bear in mind that under the practice

prevailing in the Philippine Islands the word "record" is used in a loose and
broad sense, as indicating the collective mass of papers which contain the
history of all the successive steps taken in a case and which are finally
deposited in the archives of the clerk's office as a memorial of the litigation. It
is a matter of general information that no judgment roll, or book of final record,
is commonly kept in our courts for the purpose of recording the pleadings and
principal proceedings in actions which have been terminated; and in
particular, no such record is kept in the Court of First Instance of the city of
Manila. There is, indeed, a section of the Code of Civil Procedure which directs
that such a book of final record shall be kept; but this provision has, as a
matter of common knowledge, been generally ignored. The result is that in the
present case we do not have the assistance of the recitals of such a record to
enable us to pass upon the validity of this judgment and as already stated the
question must be determined by examining the papers contained in the entire
file.

But it is insisted by counsel for this motion that the affidavit of Bernardo Chan
y Garcia showing that upon April 4, 1908, he sent a notification through the
mail addressed to the defendant at Manila, Philippine Islands, should be
accepted as affirmative proof that the clerk of the court failed in his duty and
that, instead of himself sending the requisite notice through the mail, he relied
upon Bernardo to send it for him. We do not think that this is by any means a
necessary inference. Of course if it had affirmatively appeared that the clerk
himself had attempted to comply with this order and had directed the
notification to Manila when he should have directed it to Amoy, this would be
conclusive that he had failed to comply with the exact terms of the order; but
such is not this case. That the clerk of the attorneys for the plaintiff
erroneously sent a notification to the defendant at a mistaken address affords
in our opinion very slight basis for supposing that the clerk may not have sent
notice to the right address.

There is undoubtedly good authority to support the position that when the
record states the evidence or makes an averment with reference to a
jurisdictional fact, it will not be presumed that there was other or different
evidence respecting the fact, or that the fact was otherwise than stated. If, to
give an illustration, it appears from the return of the officer that the summons
was served at a particular place or in a particular manner, it will not be
presumed that service was also made at another place or in a different manner;
or if it appears that service was made upon a person other than the defendant,
it will not be presumed, in the silence of the record, that it was made upon the
defendant also (Galpin vs. Page, 18 Wall., 350, 366; Settlemier vs. Sullivan, 97
U. S., 444, 449). While we believe that these propositions are entirely correct as
applied to the case where the person making the return is the officer who is by
law required to make the return, we do not think that it is properly applicable
where, as in the present case, the affidavit was made by a person who, so far
as the provisions of law are concerned, was a mere intermeddler.
The last question of importance which we propose to consider is whether a
motion in the cause is admissible as a proceeding to obtain relief in such a
case as this. If the motion prevails the judgment of July 2, 1908, and all
subsequent proceedings will be set aside, and the litigation will be renewed,
proceeding again from the date mentioned as if the progress of the action had
not been interrupted. The proponent of the motion does not ask the favor of
being permitted to interpose a defense. His purpose is merely to annul the
effective judgment of the court, to the end that the litigation may again resume
its regular course.

There is only one section of the Code of Civil Procedure which expressly
recognizes the authority of a Court of First Instance to set aside a final
judgment and permit a renewal of the litigation in the same cause. This is as
follows:

SEC. 113. Upon such terms as may be just the court may relieve a party
or legal representative from the judgment, order, or other proceeding
taken against him through his mistake, inadvertence, surprise, or
excusable neglect; Provided, That application thereof be made within a
reasonable time, but in no case exceeding six months after such
judgment, order, or proceeding was taken.

An additional remedy by petition to the Supreme Court is supplied by section

513 of the same Code. The first paragraph of this section, in so far as pertinent
to this discussion, provides as follows:

When a judgment is rendered by a Court of First Instance upon default,

and a party thereto is unjustly deprived of a hearing by fraud, accident,
mistake or excusable negligence, and the Court of First Instance which
rendered the judgment has finally adjourned so that no adequate remedy
exists in that court, the party so deprived of a hearing may present his
petition to the Supreme Court within sixty days after he first learns of
the rendition of such judgment, and not thereafter, setting forth the facts
and praying to have judgment set aside. . . .

It is evident that the proceeding contemplated in this section is intended to

supplement the remedy provided by section 113; and we believe the conclusion
irresistible that there is no other means recognized by law whereby a defeated
party can, by a proceeding in the same cause, procure a judgment to be set
aside, with a view to the renewal of the litigation.

The Code of Civil Procedure purports to be a complete system of practice in

civil causes, and it contains provisions describing with much fullness the
various steps to be taken in the conduct of such proceedings. To this end it
defines with precision the method of beginning, conducting, and concluding
the civil action of whatever species; and by section 795 of the same Code it is
declared that the procedure in all civil action shall be in accordance with the
provisions of this Code. We are therefore of the opinion that the remedies
prescribed in sections 113 and 513 are exclusive of all others, so far as relates
to the opening and continuation of a litigation which has been once concluded.

The motion in the present case does not conform to the requirements of either
of these provisions; and the consequence is that in our opinion the action of
the Court of First Instance in dismissing the motion was proper.

If the question were admittedly one relating merely to an irregularity of

procedure, we cannot suppose that this proceeding would have taken the form
of a motion in the cause, since it is clear that, if based on such an error, the
came to late for relief in the Court of First Instance. But as we have already
seen, the motion attacks the judgment of the court as void for want of
jurisdiction over the defendant. The idea underlying the motion therefore is
that inasmuch as the judgment is a nullity it can be attacked in any way and
at any time. If the judgment were in fact void upon its face, that is, if it were
shown to be a nullity by virtue of its own recitals, there might possibly be
something in this. Where a judgment or judicial order is void in this sense it
may be said to be a lawless thing, which can be treated as an outlaw and slain
at sight, or ignored wherever and whenever it exhibits its head.

But the judgment in question is not void in any such sense. It is entirely
regular in form, and the alleged defect is one which is not apparent upon its
face. It follows that even if the judgment could be shown to be void for want of
jurisdiction, or for lack of due process of law, the party aggrieved thereby is
bound to resort to some appropriate proceeding to obtain relief. Under accepted
principles of law and practice, long recognized in American courts, a proper
remedy in such case, after the time for appeal or review has passed, is for the
aggrieved party to bring an action to enjoin the judgment, if not already carried
into effect; or if the property has already been disposed of he may institute suit
to recover it. In every situation of this character an appropriate remedy is at
hand; and if property has been taken without due process, the law concedes
due process to recover it. We accordingly old that, assuming the judgment to
have been void as alleged by the proponent of this motion, the proper remedy
was by an original proceeding and not by motion in the cause. As we have
already seen our Code of Civil Procedure defines the conditions under which
relief against a judgment may be productive of conclusion for this court to
recognize such a proceeding as proper under conditions different from those
defined by law. Upon the point of procedure here involved, we refer to the case
of People vs. Harrison (84 Cal., 607) wherein it was held that a motion will not
lie to vacate a judgment after the lapse of the time limited by statute if the
judgment is not void on its face; and in all cases, after the lapse of the time
limited by statute if the judgment is not void on its face; and all cases, after the
lapse of such time, when an attempt is made to vacate the judgment by a
proceeding in court for that purpose an action regularly brought is preferable,
and should be required. It will be noted taken verbatim from the California
Code (sec. 473).

The conclusions stated in this opinion indicate that the judgment appealed
from is without error, and the same is accordingly affirmed, with costs. So
ordered.

G.R. No. L-5675             April 27, 1953

ANTONIO CARBALLO, petitioner,
vs.
DEMETRIO B. ENCARNACION in his capacity as Judge of First Instance of
Manila and MARIANO ANG, respondents.

J. Gonzales Orense for petitioner.

Antonio Gonzales for respondents.

MONTEMAYOR, J.:

In the Municipal Court of Manila, Mariano Ang filed a complaint (civil case No.
8769) against Antonio Carballo for the collection of P1,860.84. The
corresponding summons was served upon defendant Carballo for appearance
and trial on October 10, 1949. As counsel for him Atty. J. Gonzales entered his
written appearance on October 12, 1949. On the same day said counsel filed a
motion for postponement of the hearing for one month on the ground that he
was sick, attaching a medical certificate to prove his illness. Hearing was
postponed to October 14, 1949 at which time defendant asked for another
postponement on the ground that his counsel was still sick. The hearing was
again postponed to October 24, 1949. Inn said last two postponement of the
hearing, the municipal court warned the defendant that the hearing could not
wait until his counsel recovered from his illness, and that if said counsel could
not attend the trial he should obtain the services of another lawyer.

On the day set for hearing, namely, October 24, 1949, neither defendant nor
his counsel appeared although there was a written manifestation of defendant's
counsel requesting further postponement because he was still sick. At the
request of plaintiff's counsel, defendant was declared in default. The evidence
for the plaintiff was received after which judgment was rendered against the
defendant ordering him to pay the sum of P1,860 with legal interest. Counsel
for defendant was duly notified of said decision and he filed a motion for new
trial on the ground that injustice had been done, and that an error was
committed in the decision. The motion for new trial was denied. Through his
counsel defendant perfected his appeal to the Court of First Instance of Manila
and he later filed an answer.

When the case was called for hearing on March 18, 1952, counsel for plaintiff
argued that the decision appealed from had become final and executory for the
reason that said judgment having been rendered by default, no appeal could be
validly taken from it. Despite opposition of the defendant, the Court of First
Instance in an order dated March 18, 1952, considering said decision final and
unappealable because it had been rendered by default, and held that the only
jurisdiction left to it was to order the execution of said decision, so it ordered
the return of the record to the municipal court for that purpose.

Defendant Carballo filed a motion for reconsideration of the order dismissing

his appeal which motion was denied by an order 353 dated March 21, 1952,
whereupon Carballo filed the present petition for certiorari, injunction,
prohibition and mandamus wherein he asks that after due hearing the order
and actuations of respondent Judge Encarnacion of the Court of First Instance
of Manila be declared null and void; that he be ordered to desist from executing
said order and that furthermore, he be commanded to proceed with the trial of
the case "de novo."

We agree that a decision by default rendered by an inferior court is not

appealable (Lim Toco vs. Co. Fay,1 45 Off. Gaz., No. 8, p. 3350). The question
now is whether defendant (now petitioner Carballo) defaulted in the municipal
court of Manila. True, he filed no answer, but his counsel filed a written
appearance. In addition, said counsel filed a motion or manifestation asking for
postponement of the hearing on the ground that he was ill. In the case of
Flores vs. Zurbito, (37 Phil., 746), this Court held that an appearance in
whatever form without expressly objecting to the jurisdiction of the court over
the person, is a submission to the jurisdiction of the court over the person. It
is, therefore, clear that petitioner Carballo made an appearance in the
municipal court. Could he then be declared in default just because he filed no
answer? The answer must be in the negative. In the case of Quinzan vs.
Arellano,2 G.R. No. 4461, December 28, 1951, the Supreme Court said that in
the justice of the peace court failure to appear, not failure to answer is the sole
ground for default. What really happened in the municipal court was that the
defendant tho he filed no answer to the complaint, nevertheless, he made his
appearance and in writing at that, but because of his failure and that of his
counsel to appear on the date of the trial, a hearing ex-parte was held and
judgment was rendered thereafter. The judgment, therefore, was not by default.
So defendant Antonio Carballo had a right to appeal as in fact he appealed,
and the Court of First Instance should not have declared the decision appealed
from final and executory under the theory that it was not appealable.

The present petition is granted and the respondent judge is hereby directed to
proceed with the trial of the case. Respondent Mariano Ang will pay the costs.

G.R. No. L-18164           January 23, 1967

WILLIAM F. GEMPERLE, plaintiff-appellant,
vs.
HELEN SCHENKER and PAUL SCHENKER as her husband, defendants-
appellees.

Gamboa & Gamboa for plaintiff-appellant.

A. R. Narvasa for defendants-appellees.

CONCEPCION, C. J.:

Appeal, taken by plaintiff, William F. Gemperle, from a decision of the Court of

First Instance of Rizal dismissing this case for lack of jurisdiction over the
person of defendant Paul Schenker and for want of cause of action against his
wife and co-defendant, Helen Schenker said Paul Schenker "being in no
position to be joined with her as party defendant, because he is beyond the
reach of the magistracy of the Philippine courts."

The record shows that sometime in 1952, Paul Schenker-hereinafter referred to

as Schenker — acting through his wife and attorney-in-fact, Helen Schenker —
herein-after referred to as Mrs. Schenker — filed with the Court of First
Instance of Rizal, a complaint — which was docketed as Civil Case No. Q-2796
thereof — against herein plaintiff William F. Gemperle, for the enforcement of
Schenker's allegedly initial subscription to the shares of stock of the
Philippines-Swiss Trading Co., Inc. and the exercise of his alleged pre-emptive
rights to the then unissued original capital stock of said corporation and the
increase thereof, as well as for an accounting and damages. Alleging that, in
connection with said complaint, Mrs. Schenker had caused to be published
some allegations thereof and other matters, which were impertinent, irrelevant
and immaterial to said case No. Q-2796, aside from being false and derogatory
to the reputation, good name and credit of Gemperle, "with the only purpose of
attacking" his" honesty, integrity and reputation" and of bringing him "into
public hatred, discredit, disrepute and contempt as a man and a
businessman", Gemperle commenced the present action against the Schenkers
for the recovery of P300,000 as damages, P30,000 as attorney's fees, and costs,
in addition to praying for a judgment ordering Mrs. Schenker "to retract in
writing the said defamatory expressions". In due course, thereafter, the lower
court, rendered the decision above referred to. A reconsiderating thereof having
been denied, Gemperle interposed the present appeal.

The first question for determination therein is whether or not the lower court
had acquired jurisdiction over the person of Schenker. Admittedly, he, a Swiss
citizen, residing in Zurich, Switzerland, has not been actually served with
summons in the Philippines, although the summons address to him and Mrs.
Schenker had been served personally upon her in the Philippines. It is urged
by plaintiff that jurisdiction over the person of Schenker has been secured
through voluntary appearance on his part, he not having made a special
appearance to assail the jurisdiction over his person, and an answer having
been filed in this case, stating that "the defendants, by counsel, answering the
plaintiff's complaint, respectfully aver", which is allegedly a general appearance
amounting to a submission to the jurisdiction of the court, confirmed,
according to plaintiff, by a P225,000 counterclaim for damages set up in said
answer; but this counterclaim was set up by Mrs. Schenker alone, not
including her husband. Moreover, said answer contained several affirmative
defenses, one of which was lack of jurisdiction over the person of Schenker,
thus negating the alleged waiver of this defense. Nevertheless, We hold that the
lower court had acquired jurisdiction over said defendant, through service of
the summons addressed to him upon Mrs. Schenker, it appearing from said
answer that she is the representative and attorney-in-fact of her husband
aforementioned civil case No. Q-2796, which apparently was filed at her
behest, in her aforementioned representative capacity. In other words, Mrs.
Schenker had authority to sue, and had actually sued on behalf of her
husband, so that she was, also, empowered to represent him in suits filed
against him, particularly in a case, like the of the one at bar, which is
consequence of the action brought by her on his behalf.

Inasmuch as the alleged absence of a cause of action against Mrs. Schenker is

premised upon the alleged lack of jurisdiction over the person of Schenker,
which cannot be sustained, it follows that the conclusion drawn therefore from
is, likewise, untenable.

Wherefore, the decision appealed from should be, is hereby, reversed, and the
case remanded to the lower court for proceedings, with the costs of this
instance defendants-appellees. It is so ordered.
G.R. No. L-1403             October 29, 1948

VICENTE CALUAG and JULIANA GARCIA, petitioners,

vs.
POTENCIANO PECSON and ANGEL H. MOJICA, Judges of the Court of
First Instance of Bulacan, and LEON ALEJO, respondents.

Marcial G. Mendiola for petitioners.

Antonio Gonzalez for respondent L. Alejo.
The respondent Judge Pecson in his own behalf.

FERIA, J.:

This is a petition for certiorari and prohibition filed by the petitioners on the

ground that the respondent judge acted without or in excess of the jurisdiction
of the court in rendering the resolution dated April 1, 1947, which declares the
petitioners guilty of contempt of court for not complying or performing the
order of the court of January 7, 1947, in case No. 5486 of the Court of First
Instance of Bulacan, requiring the petitioners to execute a deed of sale in favor
of plaintiff over one-half of the land pro indiviso in question, within ten days
from the receipt of copy of said resolution, and which orders that the
petitioners be imprisoned until they perform the said act.

The first ground on which the petition is based is that the judgment of the
court which the petitioners are ordered to perform has not yet become final.
This ground is unfounded. From the pleadings and annexes it appears that the
judgment of the lower against the petitioners was appealed to the Court of
Appeals and was affirmed by the latter in its decision promulgated on May 30,
1944; that the petition to appeal to the Supreme Court by certiorari filed by the
petitioners was denied on July 24, 1944; that a motion for reconsideration filed
by the petitioners was also denied on August 21, 1944; that the record of the
case, having been destroyed during the liberation, was reconstituted; that on
September 24, 1945, the Deputy Clerk of this Court wrote a letter to and
notified the petitioners of the resolution of the Court declaring said record
reconstituted, together with the copies of the decision of the Court of Appeals
and resolutions of the Supreme Court during Japanese occupation of June 24
and August 21, 1944; and that on October 23, 1946, the clerk of Court of First
Instance of Bulacan notified the attorneys for both parties of the said decision
of the Court of Appeals and resolutions of the Supreme Court. There can be no
question, therefore, that the judgment of the Court of First Instance above-
mentioned, as affirmed by the Court of Appeals, has become final and
executory.

The other two grounds alleged by the petitioners in support of the present
petition for certiorari are: that plaintiff's action abated or was extinguished
upon the death of the plaintiff Fortunato Alejo, because his right of legal
redemption was a personal one, and therefore not transferable to his
successors in interest; and that, even assuming that it is a personal one and
therefore transferable, his successors in interest have failed to secure the
substitution of said deceased by his legal representative under section 17, Rule
3. These reasons or grounds do not deserve any serious consideration, not only
because they are without merits, but because the Court of First Instance of
Bulacan, having jurisdiction to render that judgment, the latter cannot be
disobeyed however erroneous it may be (Compañia General de Tabacos vs.
Alhambra Cigar & Cigarette Mfg. Co., 33 Phil., 503; Golding vs. Balatbat, 36
Phil., 941). And this Court cannot in this proceeding correct any error which
may have been committed by the lower court.

However, although not alleged, we may properly take judicial notice of the fact
that the respondent Judges have acted without jurisdiction in proceeding
against and declaring the petitioners guilty of contempt of court.

The contempt supposed to have been committed by the petitioners is not a

direct contempt under section 1, Rule 64, for it is not a misbehavior in the
presence of or so near a court or judge as to interrupt the administration of
justice. It is an indirect contempt or disobedience of a lawful order of the court,
under section 3, Rule 64, of the Rules of Court. According to sections 4 and 5
of said rule, where a contempt under section 3 has been committed against a
superior court or judge the charge may be filed with such superior court, and
the accused put under custody; but if the hearing is ordered to be had
forthwith, the accused may be released from custody upon filing a bond in an
amount to be fixed by the court for his appearance to answer the charge. From
the record it appears that no charge for contempt was filed against the
petitioners nor was a trial held. The only proceeding had in this case which led
to the conviction of the defendants are: the order of January 7, 1947, issued by
the lower court requiring the defendants to execute the deed of conveyance as
direct in the judgment within ten days from the receipt of the copy of said
order, with the admonition that upon failure to do so said petitioners will be
dealt with for contempt of court; the motion of March 21, 1947, filed by the
attorney for the respondent Leon Alejo, administrator of the estate of Fortunato
Alejo, that the petitioners be punished for contempt; and the resolution of the
court of April 1, 1947, denying the second motion for reconsideration of March
17, 1947, of the order of January 7, 1947, filed by the petitioners, and ordering
the petitioners to be imprisoned in the provincial jail until they have complied
with the order of the court above mentioned.

It is well settled that jurisdiction of the subject matter of a particular case is

something more than the general power conferred by law upon a court to take
cognizance of cases of the general class to which the particular case belongs. It
is not enough that a court has power in abstract to try and decide the class of
litigations to which a case belongs; it is necessary that said power be properly
invoked, or called into activity, by the filing of a petition, complaint or other
appropriate pleading. A Court of First Instance has an abstract jurisdiction or
power to try and decide criminal cases for homicide committed within its
territorial jurisdiction; but it has no power to try and decide a criminal case
against a person for homicide committed within its territory, unless a
complaint or information against him be filed with the said court. And it has
also power to try civil cases involving title to real estate situated within its
district; but it has no jurisdiction to take cognizance of a dispute or
controversy between two persons over title of real property located in his
province, unless a proper complaint be filed with its court. So, although the
Court of First Instance of Bulacan has power conferred by law to punish as
guilty of indirect contempt a party who disobeys its order or judgment, it did
not have or acquire jurisdiction of the particular case under consideration to
declare the petitioners guilty of indirect contempt, and order their confinement
until they have executed the deed of conveyance in question, because neither a
charge has been filed against them nor a hearing thereof held as required by
law.

The respondent Judge Angel Mojica acted not only without jurisdiction in
proceeding against and declaring the petitioners guilty of contempt, but also in
excess of jurisdiction in ordering the confinement of the petitioners, because it
had no power to impose such punishment upon the latter.

The respondent judge has no power under the law to order the confinement of
the petitioners until they have compiled with the order of the court. Section 9,
Rule 39, in connection with section 7 of Rule 64, provides that if a person is
required by a judgment or order of the court to perform any other act than the
payment of money or sale or delivery of real or personal property, and said
person disobeys such judgment or order while it is yet in his power to perform
it, he may be punished for contempt and imprisoned until he performs said
order. This provision is applicable only to specific acts other than those
provided for or covered by section 10 of the same Rule, that is, it refers to a
specific act which the party or person must personally do, because his
personal qualification and circumstances have been taken into consideration in
accordance with the provision of article 1161 of the Civil Code. But if a
judgment directs a party to execute a conveyance of land or to deliver deeds or
other documents or to perform any specific act which may be performed by
some other person, or in some other way provided by law with the same effect,
as in the present case, section 10, and not said section 9 of Rule 39 applies;
and under the provision of said section 10, the court may direct the act to be
done at the cost of the disobedient party, by some other person appointed or
designated by the court, and the act when so done shall have like effect as if
done by the party himself.
It is also well settled by the authorities that a judgment may be void for want of
power to render the particular judgment, though the court may have had
jurisdiction over the subject matter and the parties. A wrong decision made
within the limits of the court's authority is erroneous and may be corrected on
appeal or other direct review, but a wrong, or for that matter a correct, decision
is void, and may be set aside either directly or collaterally, where the court
exceeds its jurisdiction and power in rendering it. Hence though the court has
acquired jurisdiction over the subject matter and the particular case has been
submitted properly to it for hearing and decision, it will overstep its jurisdiction
if it renders a judgment which it has no power under the law to render. A
sentence which imposes upon the defendant in a criminal prosecution a
penalty different from or in excess of the maximum which the court is
authorized by law to impose for the offense of which the defendant was
convicted, is void for want or excess of jurisdiction, as to the excess in the
latter case. And a judgment of imprisonment which the court has no
constitutional or statutory power to impose, as in the present case, may also be
collaterally attacked for want or rather in excess of jurisdiction.

In Cruz vs. Director of Prisons (17 Phil., 269, 272, 273), this Court said the
following applicable to punishment imposed for contempt of court:

. . . The courts uniformly hold that where a sentence imposes a

punishment in excess of the power of the court to impose, such sentence
is void as to the excess, and some of the courts hold that the sentence is
void in toto; but the weight of authority sustains the proposition that
such a sentence is void only as to the excess imposed in case the parts
are separable, the rule being that the petitioner is not entitled to his
discharge on a writ of habeas corpus unless he has served out so much
of the sentence as was valid. (Ex parte Erdmann, 88 Cal., 579; Lowrey
vs. Hogue, 85 Cal., 600; Armstrong vs. People, 37 Ill., 459; State vs.
Brannon, 34 La Ann., 942; People vs. Liscomb, 19 Am. Rep., 211; In
re Taylor, 7 S. D., 382, 45 L. R. A., 136; Ex parte Mooney, 26 W. Va.,
36, 53 Am. Rep., 59; U. S. vs. Pridgeon, 153 U. S., 48; In re Graham,
138 U. S., 461.)

In the present case, in view of the failure of the petitioners to execute the deed
of conveyance directed in the judgment of the court, the respondent may,
under section 10, Rule 39, either order its execution by some other person
appointed or designated by the court at the expense of the petitioners, or enter
a judgment divesting the title of the petitioner over the property in question
and vesting it in Leon Alejo, administrator of estate of the deceased Fortunato
Alejo, and such judgment has the force and effect of a conveyance executed in
due form of law.
In view of the foregoing, the order of the court of April 7, 1947, ordering the
confinement of the petitioners in the provincial jail until they have complied
with the order of the court, is set aside without costs. So ordered.

Moran, C.J., Pablo, Bengzon, Briones and Tuason, JJ., concur.

Paras, J., concurs in the result.

Separate Opinions

PERFECTO, J.,  concurring and dissenting:

On August 10, 1937, Fortunato Alejo filed a complaint against the spouses
Vicente Caluag and Juliana Garcia, herein petitioners, for the redemption of
one-half pro indiviso of a parcel of land in Guiguinto, Bulacan, covered by
transfer certificate No. 19178. After trial, the Court of First Instance of Bulacan
rendered judgment on June 23, 1941, ordering petitioners to execute a deed of
sale in favor of Fortunato Alejo, upon payment by plaintiff, as purchase price,
of the amount of P2,551. The judgment was affirmed by the Court of Appeals of
Central Luzon on May 30, 1944. A petition for review on certiorari was denied
by the Supreme Court of the so-called Republic of the Philippines on July 28,
1944. Petitioners' counsel alleges, under oath, that he was not notified of said
denial. The record of the case was lost or burned during the liberation of
Manila. Fortunato Alejo died on December 10, 1944, petitioners made aware of
the fact only on December 1, 1946. The record, upon petition, was duly
reconstituted on August 30, 1946, a resolution to said effect having been
issued by this Court.

On October 21, 1946, respondent Leon Alejo, judicial administrator of the

estate of Fortunato Alejo, filed a motion with the Court of First Instance of
Bulacan for the execution of the judgment. On October 28, the motion was
indefinitely postponed. On November 21, Leon Alejo filed another motion for
the execution of the judgment, which was granted on January 7, 1947, Judge
Potenciano Pecson ordering defendants "to execute the deed of sale in favor of
the plaintiff for the sum of P2,551 over one-half of the land pro
indiviso described in transfer certificate of title No. 19178 within ten days from
the receipt of a copy of this order; upon failure to do so the said defendants will
be dealt with for contempt of court:"

On February 3, 1947, Leon Alejo filed a petition praying that defendants be

punished for contempt for having failed to comply with the order of January 7.
On February 19, defendants filed a petition seeking reconsidering of the order
of January 7, and dismissal of the complaint for contempt, upon three
grounds: (a) That the judgment of the Court of Appeals of Central Luzon, has
not become final and executory; (b) That the plaintiff's action was abated or
extinguished upon Fortunato Alejo's death, his right to legal redemption being
personal; and (c) That his successors cannot ask for the execution of the
judgment because they failed to secure the reglementary substitution of parties
and amendment of the judgment.

On March 3, Judge Pecson denied defendants' petition and granted them five
days within which to comply with the order of January 7, otherwise they would
be held in contempt of court. On March 17, defendants filed another petition
for reconsideration. On March 21, Leon Alejo moved again that defendants be
punished for contempt. On April 1, Judge Angel H. Mojica issued a resolution
denying the second petition for reconsideration, finding defendants guilty of
contempt of court and ordering their confinement in the provincial jail of
Bulacan until they have complied with the order of January 7, directing further
that warrant of arrest be issued to said effect. On April 1, 1947, Leon Alejo
deposited with the court of first instance the amount of P2,261.63, evidenced
by provincial receipt No. 211013.

Upon the above facts, petitioners raise before us several questions.

(a) LACK OF NOTIFICATION

Petitioners maintain that the decision of the Court of Appeals of Central Luzon,
promulgated on May 30, 1944, and the resolution of the Supreme Court of the
so-called Republic of the Philippines, issued on July 24, 1944, denying their
petition for review on certiorari, had not yet become final, because their counsel
has not yet received a copy of the resolution of denial dated July 24, 1944.

Although the allegation of non-receipt of notice is made under oath and the
opposing party does not specifically contradict the allegation, in respondent
Leon Alejo's answer it is stated that petitioners filed a motion for
reconsideration of the resolution of denial of July 24, 1944, and the motion
was denied on August 21, 1944.

A perusal of the record as declared reconstituted by this Court demonstrates

that on August 11, 1944, the Supreme Court of the so-called Republic of the
Philippines adopted a resolution granting petitioners an extension of five days
only of the reglementary period within which to file a motion for
reconsideration of the resolution of denial of July 24, 1944, the extension
granted being in response to petitioners' prayer for an extension of ten days,
and that on August 21, 1944, said Supreme Court issued a resolution denying
the motion for reconsideration, with Mr. Justice Ozaeta dissenting.

The authenticity of the copies of papers forming part of the reconstituted

record has not been disputed by petitioners. We may, therefore, assume that
said record represents the proceedings which have taken place. Upon this
premise, we are constrained to dismiss petitioners' allegation that they were
not notified of the resolution of denial of July 24, 1944, as, otherwise, they
could not have filed a petition for extension of ten days and, after being given
an extension of only five days, a motion for reconsideration, the filing of which
was necessarily based on petitioners' knowledge of the resolution of denial of
July 24, 1944, knowledge that they should have obtained, in the ordinary
course of judicial proceedings, from official notification.

Petitioners' contention, being based on a fact that is unacceptable, has no leg

to stand on.

(b) EFFECT OF FORTUNATO ALEJO'S DEATH

The next question raised by petitioners is that upon Fortunato Alejo's death on
December 10, 1944, the complaint "was abated or extinguished," his "act of
legal redemption being personal and not real," and his heirs "could not have
acquired that right" (of legal redemption).

Petitioners appear to labor under the confusion of mistaken concepts. They

assume that the right of legal redemption of Fortunato Alejo is of such personal
nature that it could not be transmitted to his heirs. The proposition has no
basis in law. There is absolutely no reason why his heirs could not inherit said
right of legal redemption. Petitioners then jump to the proposition that
Fortunato Alejo's death "abated or extinguished" his complaint, premised on
the wrong idea that the right of legal redemption is not transmissible by
inheritance. The reasoning is the result of a confusion of petitioners' wrong
concept on substantive law with a mistaken idea of adjective law.

Petitioners' contention has no merit.

(c) NINE-DAY PERIOD

Petitioners contend that, granting arguendo that the judgment has become
final and executory and that Fortunato Alejo's heirs stepped into his shoes
after his death and could have exercised his right of legal redemption, "they
should have done or exercised it within nine days from his death or knowledge
thereof."

Petitioners chose not to adduce any reason in support of the theory which has
absolutely no basis in law.

(d) PROCEDURAL OMISSIONS

Petitioners allege that Fortunato Alejo's heirs, or the administrator or executor

of his estate, are not entitled to the execution of the judgment due to three
procedural omissions, i.e.: (a) No petition for substitution has been filed with
the Court of Appeals of Central Luzon; (b) No petition to secure amendment of
the judgment so as to make effective the substitution; and (c) No petition to
remand the record to the Court of First Instance of Bulacan.

The grounds alleged are exclusively technical in nature and of scant

importance. After the judgment became final and executory, it is late to raise
the question of substitution. In the present case, it happens that Leon Alejo is
appearing as the judicial administrator of the deceased Fortunato Alejo. Such a
representative capacity, undoubtedly given to him by proper judicial
appointment, satisfies fully the legal purposes of substitution. The remanding
of the record to the Court of First Instance of Bulacan is a matter of official
duty, compliance of which does not require any initiative from any party.

(e) CONTEMPT OF COURT

Petitioners allege that they could not properly and legally be declared in
contempt of court because: (a) The judgment sought to be executed ordered
them to execute the corresponding deed of sale upon payment by plaintiff of
the sum of P2,551, and only the sum of P2,261.63 has so far been paid or
consigned, thus leaving a balance of P289.37, and (b). The judgment provides
that the sale be executed "in favor of Fortunato Alejo, who is now dead."

Respondent Leon Alejo answered that the amount deposited with the Court of
First Instance of Bulacan is P2,551. At the hearing, his attorney explained that
two deposits were made, one in the sum of P2,261.63 and the other in the
amount of P289.37, due to a misunderstanding of the clerk of the lower court
of said respondent. But the fact that the deposit was made only on April 1,
1947, as alleged under oath by petitioners, is not denied by respondent. April
1, 1947, is the date of the resolution issued by Judge Mojica, ordering
confinement of petitioners in the provincial jail of Bulacan until they comply
with the order of January 7, 1947.

Upon the technicality of substitution, petitioners' contention is without merit.

We are of opinion that the resolution holding petitioners guilty of contempt and
ordering their confinement in the provincial jail of Bulacan should be denied
force and effect upon weightier grounds than the ones alleged by petitioners.

The applicable provisions of law in this case is section 10 of Rule 39 which

provides:

Judgment for specific acts; vesting title. — If a judgment directs a party to

execute a conveyance of land, or to deliver deeds or other documents, or
to perform any other specific act, and the party fails to comply within the
time specified, the court may direct the act to be done at the cost of the
disobedient party by some other person appointed by the court and the
 act when so done shall have like effect as if done by the party. If real or
personal property is within the Philippines, the court in lieu of directing
a conveyance thereof may enter a judgment divesting the title of any
party and vesting it in others and such judgment shall have the force
and effect of a conveyance executed in due form of law.

Accordingly, instead of intimidating petitioners to be dealt with for contempt of

court, as provided in the last part of its order of January 7, 1947, and insisting
in its order of March 3, 1947, that petitioners should comply with said order of
January 7, reiterating that, otherwise, "the court will be constrained to hold
said defendants in contempt of court" and, lastly, in issuing the resolution of
April 1, 1947, finding petitioners guilty of contempt, ordering their confinement
in the provincial jail of Bulacan, until they have complied with the order of
January 7, and, to said effect, ordering their arrest, the lower court should
have directed that the deed of sale provided in the judgment and in the order of
January 7, to be executed by petitioners, be done by some other person
"appointed by the court" and "at the cost of the disobedient party." The lower
court's orders intimidating petitioners with punishment for contempt, and
ordering their arrest and confinement in the provincial jail of Bulacan for an
indeterminate period, until they have complied with the order of January 7, a
course of action that petitioners may not follow until their respective deaths,
must be declared null and void.

There are members of this Court which hold the position that the lower court
could have legally followed two alternatives, either by applying the above-
quoted section 10 of Rule 39 or by punishing petitioners for contempt, by
applying section 9 of the same Rule 39, but they are of opinion that the lower
court acted with grave abuse of discretion by resorting to the drastic measure
of contempt proceedings, when the proceeding outlined by section 10 of Rule
39 could be availed of easily and without causing unnecessary suffering to any
party. The rule is that when two or more means are available to attain a legal
end, harsher ones should only be adopted as a last resort.

There are other members of this Court, among them the writer of this opinion,
that are convinced that in the case at bar section 9 of Rule 39 is not applicable
and the lower court could not have followed other proceeding than the one
outlined by section 10 of Rule 39. Furthermore, those of us who maintain such
position, are of opinion that, even in the hypothesis that the lower court could
have followed the contempt proceedings outlined by section 9 of Rule 39, the
lower court could only punish petitioners with fine or fixed term of
imprisonment, or both, as provided by section 6 of Rule 64, but never to hold
them in confinement, as provided in the resolution of April 1, 1947, for an
indefinite period, until petitioners should choose to execute the deed of sale in
question. Although that authority is granted in section 7 of Rule 64, we hold
that said section cannot be given force nor effect, because it is null and void as
violative of the following constitutional mandate: "Excessive fines shall not be
imposed, nor cruel and unusual punishment inflicted." (Section 1 [19], Article
III of the Constitution.).

While petitioners could have avoided altogether any imprisonment or they

could reduce its term to any period of time they may choose, there is nothing to
preclude them from undergoing forty or more years imprisonment, if they
decide to continue refusing that long, while the life imprisonment provided by
the Revised Penal Code for the most heinous crimes, murder, parricide,
treason, and others, is limited to a maximum of thirty years. Is it not shocking
that a longer term should be imposed for a simple refusal to sign a deed of sale,
for which refusal the disobedient party may have strong reasons, because he
may deem it humiliating, than for the most hateful crimes known under our
laws? By the way, is it not absurd for the lower court to wait for petitioners to
execute the deed of sale until they choose to perform the action required of
them, which may take years, instead of appointing a third person to perform
the act according to section 10 Rule 39, which will take just a small fraction of
a day?lawphil.net

For all the foregoing, the orders of the lower court of January 7, March 3, and
April 1, 1947, are set aside. To make effective the execution of the deed of sale
as provided in the judgment in question, upon the validity of which the
members of this Court follow the same alignment as that in the case of Co Kim
Cham vs. Valdez, L-5, 1 the lower court is ordered to follow the procedure
outlined by section 10 of Rule 39. The petition is denied in all other respects.
G.R. No. 47517             June 27, 1941

IDONAH SLADE PERKINS, petitioner,

vs.
MAMERTO ROXAS, ET AL., respondents.

Alva J. Hill for petitioner.

DeWitt, Perkins & Ponce Enrile for respondent Judge and respondent Perkins.
Ross, Lawrence, Selph & Carrascoso, Jr., for respondent Benguet Consolidated
Mining Co.

LAUREL, J.:

On July 5, 1938, the respondent Eugene Arthur Perkins, filed a complaint in

the Court of First Instance of Manila against the Benguet Consolidated Mining
Company for the recovery of the sum of P71,379.90, consisting of dividends
which have been declared and made payable on 52,874 shares of stock
registered in his name, payment of which was being withheld by the company,
and for the recognition of his right to the control and disposal of said shares, to
the exclusion of all others. To the complaint, the company filed its answer,
alleging, by way of defense, that the withholding of plaintiff's right to the
disposal and control of the shares was due to certain demands made with
respect to said shares by the petitioner herein. Idonah Slade Perkins, and by
one George H. Engelhard. The answer prays that the adverse claimants be
made parties to the action and served with notice thereof by publication, and
that thereafter all such parties be required to interplead and settle the rights
among themselves.

On September 5, 1938, the trial court ordered the respondent, Eugene Arthur
Perkins, to include in his complaint as parties defendants petitioner, Idonah
Slade Perkins, and George H. Engelhard. The complaint was accordingly
amended and in addition to the relief prayed for in the original complaint,
respondent Perkins prayed that petitioner Idonah Slade Perkins and George H.
Engelhard be adjudged without interest in the shares of stock in question and
excluded from any claim they assert thereon. Thereafter, summons by
publication were served upon the non-resident defendants, Idonah Slade
Perkins and George H. Engelhard, pursuant to the order of the trial court. On
December 9, 1938, Engelhard filed his answer to the amended complaint, and
on January 8, 1940, petitioner's objection to the court's jurisdiction over her
person having been overruled by the trial court and by this court in G. R. No.
46831, petitioner filed her answer with a cross-complaint in which she sets up
a judgment allegedly obtained by her against respondent, Eugene Arthur
Perkins, from the Supreme Court of the State of New York, wherein it is
declared that she is the sole legal owner and entitled to the possession and
control of the shares of stock in question together with all the cash dividends
declared thereon by the Benguet Consolidated Mining Company, and prays for
various affirmative reliefs against the respondent. To the answer and cross-
complaint thus filed, the respondent, Eugene Arthur Perkins, filed a reply and
an answer in which he sets up several defenses to the enforcement in this
jurisdiction of the judgment of the Supreme Court of the State of New York
above alluded to. Instead of demurring to the reply on either of the two grounds
specified in section 100 of the Code of Civil Procedure, petitioner, Idonah Slade
Perkins, on June 5, 1940, filed a demurrer thereto on the ground that "the
court has no jurisdiction of the subject of the action," because the alleged
judgment of the Supreme Court of the State of New York is res judicata.

Petitioner's demurrer having been overruled, she now filed in this court a
petition entitled "Certiorari, Prohibition and Mandamus," alleging that "the
respondent judge is about to and will render judgment in the above-mentioned
case disregarding the constitutional rights of this petitioner; contrary to and
annulling the final, subsisting, valid judgment rendered and entered in this
petitioner's favor by the courts of the State of New York, ... which decision
is res judicata on all the questions constituting the subject matter of civil case
No. 53317, of the Court of First Instance of Manila; and which New York
judgment the Court of First Instance of Manila is without jurisdiction to annul,
amend, reverse, or modify in any respect whatsoever"; and praying that the
order of the respondent judge overruling the demurrer be annulled, and that he
and his successors be permanently prohibited from taking any action on the
case, except to dismiss the same.

The only question here to be determined, therefore, is whether or not, in view of

the alleged judgment entered in favor of the petitioner by the Supreme Court of
New York, and which is claimed by her to be res judicata on all questions
raised by the respondent, Eugene Arthur Perkins, in civil case No. 53317 of the
Court of First Instace of Manila, the local court has jurisdiction over the
subject matter of the action in the said case. By jurisdiction over the subject
matter is meant the nature of the cause of action and of the relief sought, and
this is conferred by the sovereign authority which organizes the court, and is to
be sought for in general nature of its powers, or in authority specially
conferred. In the present case, the amended complaint filed by the respondent,
Eugene Arthur Perkins, in the court below alleged the ownership in himself of
the conjugal partnership between him and his wife, Idonah Slade Perkins; that
the petitioner, Idonah Slade Perkins, and George H. Engelhard assert claims to
and interests in the said stock adverse to Eugene Arthur Perkins; that such
claims are invalid, unfounded, and made only for the purpose of vexing,
hindering and delaying Eugene Arthur Perkins in the exercise of the lawful
control over and use of said shares and dividends accorded to him and by law
and by previous orders and decrees of this court; and the said amended
complaint prays, inter alia, "that defendant Benguet Consolidated Mining
Company be required and ordered to recognize the right of the plaintiff to the
control and disposal of said shares so standing in his name to the exclusion of
all others; that the additional defendants, Idonah Slade Perkins and George H.
Engelhard, be each held to have no interest or claim in the subject matter of
the controversy between plaintiff and defendant Benguet Consolidated Mining
Company, or in or under the judgment to be rendered herein and that by said
judgment they, and each of them be excluded therefrom; and that the plaintiff
be awarded the costs of this suit and general relief." The respondent's action,
therefore, calls for the adjudication of title to certain shares of stock of the
Benguet Consolidated Mining Company, and the granting of affirmative reliefs,
which fall within the general jurisdiction of the Court of First Instance of
Manila. (Vide: sec. 146, et seq., Adm. Code, as amended by Commonwealth Act
No. 145; sec. 56, Act No. 136, as amended by Act No. 400.)

Similarly, the Court of First Instance of Manila is empowered to adjudicate the

several demands contained in petitioner's cross-complaint. The cross-
complaint sets up a judgment allegedly recovered by Idonah Slade Perkins
against Eugene Arthur Perkins in the Supreme Court of New York and by way
of relief prays:

(1) Judgment against the plaintiff Eugene Arthur Perkins in the sum of
one hundred eighty-five thousand and four hundred dollars ($185,400),
representing cash dividends paid to him by defendant Benguet
Consolidated Mining Co. from February, 1930, up to and including the
dividend of March 30, 1937.

(2) That plaintiff Eugene Arthur Perkins be required to deliver to this

defendant the certificates representing the 48,000 shares of capital stock
of Benguet Consolidated Mining Co. issued as a stock dividend on the
24,000 shares owned by this defendant as described in the judgment
Exhibit 1-A.

(3) That this defendant recover under that judgment Exhibit 1-A interest
upon the amount of each cash dividend referred to in that judgment
received by plaintiff Eugene Arthur Perkins from February, 1930, to and
including the dividend of March 30, 1937, from the date of payment of
each of such dividends at the rate of 7 per cent per annum until paid.

(4) That this defendant recover of plaintiff her costs and disbursements
in that New York action amounting to the sum of one thousand five
hundred eighty-four and 20/00 dollars ($1,584.20), and the further sum
 of two thousand dollars ($2,000) granted her in that judgment Exhibit 1-
A as an extra allowance, together with interest.

(5) For an order directing an execution to be issued in favor of this

defendant and against the plaintiff for amounts sufficient to satisfy the
New York judgment Exhibit 1-A in its entirety, and against the plaintiff
and the defendant Benguet Consolidated Mining Co. for such other
amounts prayed for herein as this court may find to be due and payable
by each of them; and ordering them to comply with all other orders
which this court may issue in favor of the defendant in this case.

(6) For the costs of this action, and

(7) For such other relief as may be appropriate and proper in the
premises.

In other words, Idonah Slade Perkins in her cross-complaint brought suit

against Eugene Arthur Perkins and the Benguet Consolidated Mining Company
upon the alleged judgment of the Supreme Court of the State of New York and
asked the court below to render judgment enforcing that New York judgment,
and to issue execution thereon. This is a form of action recognized by section
309 of the Code of Civil Procedure (now section 47, Rule 39, Rules of Court)
and which falls within the general jurisdiction of the Court of First Instance of
Manila, to adjudicate, settled and determine.

The petitioner expresses the fear that the respondent judge may render
judgment "annulling the final, subsisting, valid judgment rendered and entered
in this petitioner's favor by the courts of the State of New York, ... which
decision is res judicata on all the questions constituting the subject matter of
civil case No. 53317," and argues on the assumption that the respondent judge
is without jurisdiction to take cognizance of the cause. Whether or not the
respondent judge in the course of the proceedings will give validity and efficacy
to the New York judgment set up by the petitioner in her cross-complaint is a
question that goes to the merits of the controversy and relates to the rights of
the parties as between each other, and not to the jurisdiction or power of the
court. The test of jurisdiction is whether or not the tribunal has power to enter
upon the inquiry, not whether its conclusion in the course of it is right or
wrong. If its decision is erroneous, its judgment case be reversed on appeal;
but its determination of the question, which the petitioner here anticipates and
seeks to prevent, is the exercise by that court — and the rightful exercise — of
its jurisdiction.

The petition is, therefore, hereby denied, with costs against the petitioner. So
ordered.
G.R. No. 115849             January 24, 1996

FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of

the Philippines) and MERCURIO RIVERA, petitioners,
vs.
COURT OF APPEALS, CARLOS EJERCITO, in substitution of DEMETRIO
DEMETRIA, and JOSE JANOLO, respondents.

DECISION

PANGANIBAN, J.:

In the absence of a formal deed of sale, may commitments given by bank

officers in an exchange of letters and/or in a meeting with the buyers
constitute a perfected and enforceable contract of sale over 101 hectares of
land in Sta. Rosa, Laguna? Does the doctrine of "apparent authority" apply in
this case? If so, may the Central Bank-appointed conservator of Producers
Bank (now First Philippine International Bank) repudiate such "apparent
authority" after said contract has been deemed perfected? During the pendency
of a suit for specific performance, does the filing of a "derivative suit" by the
majority shareholders and directors of the distressed bank to prevent the
enforcement or implementation of the sale violate the ban against forum-
shopping?

Simply stated, these are the major questions brought before this Court in the
instant Petition for review on certiorari under Rule 45 of the Rules of Court, to
set aside the Decision promulgated January 14, 1994 of the respondent Court
of Appeals1 in CA-G.R CV No. 35756 and the Resolution promulgated June 14,
1994 denying the motion for reconsideration. The dispositive portion of the said
Decision reads:

WHEREFORE, the decision of the lower court is MODIFIED by the

elimination of the damages awarded under paragraphs 3, 4 and 6 of its
dispositive portion and the reduction of the award in paragraph 5 thereof
to P75,000.00, to be assessed against defendant bank. In all other
aspects, said decision is hereby AFFIRMED.
 All references to the original plaintiffs in the decision and its dispositive
portion are deemed, herein and hereafter, to legally refer to the plaintiff-
appellee Carlos C. Ejercito.

Costs against appellant bank.

The dispositive portion of the trial court's2 decision dated July 10, 1991, on the
other hand, is as follows:

WHEREFORE, premises considered, judgment is hereby rendered in

favor of the plaintiffs and against the defendants as follows:

1. Declaring the existence of a perfected contract to buy and sell over the
six (6) parcels of land situated at Don Jose, Sta. Rosa, Laguna with an
area of 101 hectares, more or less, covered by and embraced in Transfer
Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land
Records of Laguna, between the plaintiffs as buyers and the defendant
Producers Bank for an agreed price of Five and One Half Million
(P5,500,000.00) Pesos;

2. Ordering defendant Producers Bank of the Philippines, upon finality of

this decision and receipt from the plaintiffs the amount of P5.5 Million,
to execute in favor of said plaintiffs a deed of absolute sale over the
aforementioned six (6) parcels of land, and to immediately deliver to the
plaintiffs the owner's copies of T.C.T. Nos. T-106932 to T- 106937,
inclusive, for purposes of registration of the same deed and transfer of
the six (6) titles in the names of the plaintiffs;

3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A.

Janolo and Demetrio Demetria the sums of P200,000.00 each in moral
damages;

4. Ordering the defendants, jointly and severally, to pay plaintiffs the

sum of P100,000.00 as exemplary damages ;

5. Ordering the defendants, jointly and severally, to pay the plaintiffs the
amount of P400,000.00 for and by way of attorney's fees;

6. Ordering the defendants to pay the plaintiffs, jointly and severally,

actual and moderate damages in the amount of P20,000.00;

With costs against the defendants.

After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply
to sur-rejoinder, the petition was given due course in a Resolution dated
January 18, 1995. Thence, the parties filed their respective memoranda and
reply memoranda. The First Division transferred this case to the Third Division
per resolution dated October 23, 1995. After carefully deliberating on the
aforesaid submissions, the Court assigned the case to the
undersigned ponente for the writing of this Decision.

The Parties

Petitioner First Philippine International Bank (formerly Producers Bank of the

Philippines; petitioner Bank, for brevity) is a banking institution organized and
existing under the laws of the Republic of the Philippines. Petitioner Mercurio
Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times
material to this case, Head-Manager of the Property Management Department
of the petitioner Bank.

Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and
is the assignee of original plaintiffs-appellees Demetrio Demetria and Jose
Janolo.

Respondent Court of Appeals is the court which issued the Decision and
Resolution sought to be set aside through this petition.

The Facts

The facts of this case are summarized in the respondent Court's Decision 3 as
follows:

(1) In the course of its banking operations, the defendant Producer Bank
of the Philippines acquired six parcels of land with a total area of 101
hectares located at Don Jose, Sta. Rose, Laguna, and covered by
Transfer Certificates of Title Nos. T-106932 to T-106937. The property
used to be owned by BYME Investment and Development Corporation
which had them mortgaged with the bank as collateral for a loan. The
original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to
purchase the property and thus initiated negotiations for that purpose.

(2) In the early part of August 1987 said plaintiffs, upon the suggestion
of BYME investment's legal counsel, Jose Fajardo, met with defendant
Mercurio Rivera, Manager of the Property Management Department of
the defendant bank. The meeting was held pursuant to plaintiffs' plan to
buy the property (TSN of Jan. 16, 1990, pp. 7-10). After the meeting,
plaintiff Janolo, following the advice of defendant Rivera, made a formal
purchase offer to the bank through a letter dated August 30, 1987 (Exh.
"B"), as follows:

August 30, 1987

The Producers Bank of the Philippines
Makati, Metro Manila

Attn. Mr. Mercurio Q. Rivera

Manager, Property Management Dept.

Gentleman:

I have the honor to submit my formal offer to purchase your properties

covered by titles listed hereunder located at Sta. Rosa, Laguna, with a
total area of 101 hectares, more or less.

TCT NO. AREA

T-106932 113,580 sq.
m.
T-106933 70,899 sq.
m.
T-106934 52,246 sq.
m.
T-106935 96,768 sq.
m.
T-106936 187,114 sq.
m.
T-106937 481,481 sq.
m.

My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND

(P3,500,000.00) PESOS, in cash.

Kindly contact me at Telephone Number 921-1344.

(3) On September 1, 1987, defendant Rivera made on behalf of the bank

a formal reply by letter which is hereunder quoted (Exh. "C"):

September 1, 1987

JP M-P GUTIERREZ ENTERPRISES

142 Charisma St., Doña Andres II
Rosario, Pasig, Metro Manila

Attention: JOSE O. JANOLO

Dear Sir:
Thank you for your letter-offer to buy our six (6) parcels of acquired lots
at Sta. Rosa, Laguna (formerly owned by Byme Industrial Corp.). Please
be informed however that the bank's counter-offer is at P5.5 million for
more than 101 hectares on lot basis.

We shall be very glad to hear your position on the on the matter.

Best regards.

(4) On September 17, 1987, plaintiff Janolo, responding to Rivera's

aforequoted reply, wrote (Exh. "D"):

September 17, 1987

Producers Bank
Paseo de Roxas
Makati, Metro Manila

Attention: Mr. Mercurio Rivera

Gentlemen:

In reply to your letter regarding my proposal to purchase your 101-

hectare lot located at Sta. Rosa, Laguna, I would like to amend my
previous offer and I now propose to buy the said lot at P4.250 million in
CASH..

Hoping that this proposal meets your satisfaction.

(5) There was no reply to Janolo's foregoing letter of September 17, 1987.
What took place was a meeting on September 28, 1987 between the
plaintiffs and Luis Co, the Senior Vice-President of defendant bank.
Rivera as well as Fajardo, the BYME lawyer, attended the meeting. Two
days later, or on September 30, 1987, plaintiff Janolo sent to the bank,
through Rivera, the following letter (Exh. "E"):

The Producers Bank of the Philippines

Paseo de Roxas, Makati
Metro Manila

Attention: Mr. Mercurio Rivera

Re: 101 Hectares of Land

in Sta. Rosa, Laguna
Gentlemen:

Pursuant to our discussion last 28 September 1987, we are pleased to

inform you that we are accepting your offer for us to purchase the
property at Sta. Rosa, Laguna, formerly owned by Byme Investment, for a
total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND
(P5,500,000.00).

Thank you.

(6) On October 12, 1987, the conservator of the bank (which has been
placed under conservatorship by the Central Bank since 1984) was
replaced by an Acting Conservator in the person of defendant Leonida T.
Encarnacion. On November 4, 1987, defendant Rivera wrote plaintiff
Demetria the following letter (Exh. "F"):

Attention: Atty. Demetrio Demetria

Dear Sir:

Your proposal to buy the properties the bank foreclosed from Byme
investment Corp. located at Sta. Rosa, Laguna is under study yet as of
this time by the newly created committee for submission to the newly
designated Acting Conservator of the bank.

For your information.

(7) What thereafter transpired was a series of demands by the plaintiffs

for compliance by the bank with what plaintiff considered as a perfected
contract of sale, which demands were in one form or another refused by
the bank. As detailed by the trial court in its decision, on November 17,
1987, plaintiffs through a letter to defendant Rivera (Exhibit "G")
tendered payment of the amount of P5.5 million "pursuant to (our)
perfected sale agreement." Defendants refused to receive both the
payment and the letter. Instead, the parcels of land involved in the
transaction were advertised by the bank for sale to any interested buyer
(Exh, "H" and "H-1"). Plaintiffs demanded the execution by the bank of
the documents on what was considered as a "perfected agreement."
Thus:

Mr. Mercurio Rivera

Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila

Dear Mr. Rivera:

This is in connection with the offer of our client, Mr. Jose O. Janolo, to
purchase your 101-hectare lot located in Sta. Rosa, Laguna, and which
are covered by TCT No. T-106932 to 106937.

From the documents at hand, it appears that your counter-offer dated

September 1, 1987 of this same lot in the amount of P5.5 million was
accepted by our client thru a letter dated September 30, 1987 and was
received by you on October 5, 1987.

In view of the above circumstances, we believe that an agreement has

been perfected. We were also informed that despite repeated follow-up to
consummate the purchase, you now refuse to honor your commitment.
Instead, you have advertised for sale the same lot to others.

In behalf of our client, therefore, we are making this formal demand

upon you to consummate and execute the necessary
actions/documentation within three (3) days from your receipt hereof.
We are ready to remit the agreed amount of P5.5 million at your advice.
Otherwise, we shall be constrained to file the necessary court action to
protect the interest of our client.

We trust that you will be guided accordingly.

(8) Defendant bank, through defendant Rivera, acknowledged receipt of

the foregoing letter and stated, in its communication of December 2,
1987 (Exh. "I"), that said letter has been "referred . . . to the office of our
Conservator for proper disposition" However, no response came from the
Acting Conservator. On December 14, 1987, the plaintiffs made a second
tender of payment (Exh. "L" and "L-1"), this time through the Acting
Conservator, defendant Encarnacion. Plaintiffs' letter reads:

PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila

Attn.: Atty. NIDA ENCARNACION

Central Bank Conservator

We are sending you herewith, in - behalf of our client, Mr. JOSE O.

JANOLO, MBTC Check No. 258387 in the amount of P5.5 million as our
agreed purchase price of the 101-hectare lot covered by TCT Nos.
106932, 106933, 106934, 106935, 106936 and 106937 and registered
under Producers Bank.
 This is in connection with the perfected agreement consequent from your
offer of P5.5 Million as the purchase price of the said lots. Please inform
us of the date of documentation of the sale immediately.

Kindly acknowledge receipt of our payment.

(9) The foregoing letter drew no response for more than four months.
Then, on May 3, 1988, plaintiff, through counsel, made a final demand
for compliance by the bank with its obligations under the considered
perfected contract of sale (Exhibit "N"). As recounted by the trial court
(Original Record, p. 656), in a reply letter dated May 12, 1988 (Annex "4"
of defendant's answer to amended complaint), the defendants through
Acting Conservator Encarnacion repudiated the authority of defendant
Rivera and claimed that his dealings with the plaintiffs, particularly his
counter-offer of P5.5 Million are unauthorized or illegal. On that basis,
the defendants justified the refusal of the tenders of payment and the
non-compliance with the obligations under what the plaintiffs considered
to be a perfected contract of sale.

(10) On May 16, 1988, plaintiffs filed a suit for specific performance with
damages against the bank, its Manager Rivers and Acting Conservator
Encarnacion. The basis of the suit was that the transaction had with the
bank resulted in a perfected contract of sale, The defendants took the
position that there was no such perfected sale because the defendant
Rivera is not authorized to sell the property, and that there was no
meeting of the minds as to the price.

On March 14, 1991, Henry L. Co (the brother of Luis Co), through

counsel Sycip Salazar Hernandez and Gatmaitan, filed a motion to
intervene in the trial court, alleging that as owner of 80% of the Bank's
outstanding shares of stock, he had a substantial interest in resisting
the complaint. On July 8, 1991, the trial court issued an order denying
the motion to intervene on the ground that it was filed after trial had
already been concluded. It also denied a motion for reconsideration filed
thereafter. From the trial court's decision, the Bank, petitioner Rivera
and conservator Encarnacion appealed to the Court of Appeals which
subsequently affirmed with modification the said judgment. Henry Co did
not appeal the denial of his motion for intervention.

In the course of the proceedings in the respondent Court, Carlos Ejercito was
substituted in place of Demetria and Janolo, in view of the assignment of the
latters' rights in the matter in litigation to said private respondent.

On July 11, 1992, during the pendency of the proceedings in the Court of
Appeals, Henry Co and several other stockholders of the Bank, through
counsel Angara Abello Concepcion Regala and Cruz, filed an action (hereafter,
the "Second Case") — purportedly a "derivative suit" — with the Regional Trial
Court of Makati, Branch 134, docketed as Civil Case No. 92-1606, against
Encarnacion, Demetria and Janolo "to declare any perfected sale of the
property as unenforceable and to stop Ejercito from enforcing or implementing
the sale"4 In his answer, Janolo argued that the Second Case was barred
by litis pendentia by virtue of the case then pending in the Court of Appeals.
During the pre-trial conference in the Second Case, plaintiffs filed a Motion for
Leave of Court to Dismiss the Case Without Prejudice. "Private respondent
opposed this motion on the ground, among others, that plaintiff's act of forum
shopping justifies the dismissal of both cases, with prejudice." 5 Private
respondent, in his memorandum, averred that this motion is still pending in
the Makati RTC.

In their Petition6 and Memorandum7 , petitioners summarized their position as

follows:

I.

The Court of Appeals erred in declaring that a contract of sale was

perfected between Ejercito (in substitution of Demetria and Janolo) and
the bank.

II.

The Court of Appeals erred in declaring the existence of an enforceable

contract of sale between the parties.

III.

The Court of Appeals erred in declaring that the conservator does not
have the power to overrule or revoke acts of previous management.

IV.

The findings and conclusions of the Court of Appeals do not conform to

the evidence on record.

On the other hand, petitioners prayed for dismissal of the instant suit on the
ground8 that:

I.

Petitioners have engaged in forum shopping.

II.
 The factual findings and conclusions of the Court of Appeals are
supported by the evidence on record and may no longer be questioned in
this case.

III.

The Court of Appeals correctly held that there was a perfected contract
between Demetria and Janolo (substituted by; respondent Ejercito) and
the bank.

IV.

The Court of Appeals has correctly held that the conservator, apart from
being estopped from repudiating the agency and the contract, has no
authority to revoke the contract of sale.

The Issues

From the foregoing positions of the parties, the issues in this case may be
summed up as follows:

1) Was there forum-shopping on the part of petitioner Bank?

2) Was there a perfected contract of sale between the parties?

3) Assuming there was, was the said contract enforceable under the
statute of frauds?

4) Did the bank conservator have the unilateral power to repudiate the
authority of the bank officers and/or to revoke the said contract?

5) Did the respondent Court commit any reversible error in its findings of
facts?

The First Issue: Was There Forum-Shopping?

In order to prevent the vexations of multiple petitions and actions, the Supreme
Court promulgated Revised Circular No. 28-91 requiring that a party "must
certify under oath . . . [that] (a) he has not (t)heretofore commenced any other
action or proceeding involving the same issues in the Supreme Court, the
Court of Appeals, or any other tribunal or agency; (b) to the best of his
knowledge, no such action or proceeding is pending" in said courts or agencies.
A violation of the said circular entails sanctions that include the summary
dismissal of the multiple petitions or complaints. To be sure, petitioners have
included a VERIFICATION/CERTIFICATION in their Petition stating "for the
record(,) the pendency of Civil Case No. 92-1606 before the Regional Trial Court
of Makati, Branch 134, involving a derivative suit filed by stockholders of
petitioner Bank against the conservator and other defendants but which is the
subject of a pending Motion to Dismiss Without Prejudice. 9

Private respondent Ejercito vigorously argues that in spite of this verification,

petitioners are guilty of actual forum shopping because the instant petition
pending before this Court involves "identical parties or interests represented,
rights asserted and reliefs sought (as that) currently pending before the
Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the
issues in the two cases are so interwined that a judgement or resolution in
either case will constitute res judicata in the other." 10

On the other hand, petitioners explain 11 that there is no forum-shopping

because:

1) In the earlier or "First Case" from which this proceeding arose, the
Bank was impleaded as a defendant, whereas in the "Second Case"
(assuming the Bank is the real party in interest in a derivative suit), it
was plaintiff;

2) "The derivative suit is not properly a suit for and in behalf of the
corporation under the circumstances";

3) Although the CERTIFICATION/VERIFICATION (supra) signed by the

Bank president and attached to the Petition identifies the action as a
"derivative suit," it "does not mean that it is one" and "(t)hat is a legal
question for the courts to decide";

4) Petitioners did not hide the Second Case at they mentioned it in the
said VERIFICATION/CERTIFICATION.

We rule for private respondent.

To begin with, forum-shopping originated as a concept in private international

law.12 , where non-resident litigants are given the option to choose the forum or
place wherein to bring their suit for various reasons or excuses, including to
secure procedural advantages, to annoy and harass the defendant, to avoid
overcrowded dockets, or to select a more friendly venue. To combat these less
than honorable excuses, the principle of forum non conveniens was developed
whereby a court, in conflicts of law cases, may refuse impositions on its
jurisdiction where it is not the most "convenient" or available forum and the
parties are not precluded from seeking remedies elsewhere.

In this light, Black's Law Dictionary 13 says that forum shopping "occurs when a

party attempts to have his action tried in a particular court or jurisdiction
where he feels he will receive the most favorable judgment or verdict." Hence,
according to Words and Phrases14 , "a litigant is open to the charge of "forum
shopping" whenever he chooses a forum with slight connection to factual
circumstances surrounding his suit, and litigants should be encouraged to
attempt to settle their differences without imposing undue expenses and
vexatious situations on the courts".

In the Philippines, forum shopping has acquired a connotation encompassing

not only a choice of venues, as it was originally understood in conflicts of laws,
but also to a choice of remedies. As to the first (choice of venues), the Rules of
Court, for example, allow a plaintiff to commence personal actions "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" (Rule 4,
Sec, 2 [b]). As to remedies, aggrieved parties, for example, are given a choice of
pursuing civil liabilities independently of the criminal, arising from the same
set of facts. A passenger of a public utility vehicle involved in a vehicular
accident may sue on culpa contractual, culpa aquiliana or culpa criminal — each
remedy being available independently of the others — although he cannot
recover more than once.

In either of these situations (choice of venue or choice of remedy), the

litigant actually shops for a forum of his action, This was the original
concept of the term forum shopping.

Eventually, however, instead of actually making a choice of the forum of

their actions, litigants, through the encouragement of their lawyers, file
their actions in all available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic) conflicting
adjudications among different courts and consequent confusion enimical
(sic) to an orderly administration of justice. It had created extreme
inconvenience to some of the parties to the action.

Thus, "forum shopping" had acquired a different concept — which is

unethical professional legal practice. And this necessitated or had given
rise to the formulation of rules and canons discouraging or altogether
prohibiting the practice. 15

What therefore originally started both in conflicts of laws and in our domestic
law as a legitimate device for solving problems has been abused and mis-used
to assure scheming litigants of dubious reliefs.

To avoid or minimize this unethical practice of subverting justice, the Supreme

Court, as already mentioned, promulgated Circular 28-91. And even before
that, the Court had prescribed it in the Interim Rules and Guidelines issued on
January 11, 1983 and had struck down in several cases 16 the inveterate use of
this insidious malpractice. Forum shopping as "the filing of repetitious suits in
different courts" has been condemned by Justice Andres R. Narvasa (now Chief
Justice) in Minister of Natural Resources, et al., vs. Heirs of Orval Hughes, et
al., "as a reprehensible manipulation of court processes and
proceedings . . ." 17 when does forum shopping take place?

There is forum-shopping whenever, as a result of an adverse opinion in

one forum, a party seeks a favorable opinion (other than by appeal
or certiorari) in another. The principle applies not only with respect to
suits filed in the courts but also in connection with litigations
commenced in the courts while an administrative proceeding is pending,
as in this case, in order to defeat administrative processes and in
anticipation of an unfavorable administrative ruling and a favorable
court ruling. This is specially so, as in this case, where the court in
which the second suit was brought, has no jurisdiction. 18

The test for determining whether a party violated the rule against forum
shopping has been laid dawn in the 1986 case of Buan vs. Lopez 19 , also by
Chief Justice Narvasa, and that is, forum shopping exists where the elements
of litis pendentia are present or where a final judgment in one case will amount
to res judicata in the other, as follows:

There thus exists between the action before this Court and RTC Case No.
86-36563 identity of parties, or at least such parties as represent the
same interests in both actions, as well as identity of rights asserted and
relief prayed for, the relief being founded on the same facts, and the
identity on the two preceding particulars is such that any judgment
rendered in the other action, will, regardless of which party is successful,
amount to res adjudicata in the action under consideration: all the
requisites, in fine, of auter action pendant.

xxx       xxx       xxx

As already observed, there is between the action at bar and RTC Case
No. 86-36563, an identity as regards parties, or interests represented,
rights asserted and relief sought, as well as basis thereof, to a degree
sufficient to give rise to the ground for dismissal known as auter action
pendant or lis pendens. That same identity puts into operation the
sanction of twin dismissals just mentioned. The application of this
sanction will prevent any further delay in the settlement of the
controversy which might ensue from attempts to seek reconsideration of
or to appeal from the Order of the Regional Trial Court in Civil Case No.
86-36563 promulgated on July 15, 1986, which dismissed the petition
upon grounds which appear persuasive.

Consequently, where a litigant (or one representing the same interest or

person) sues the same party against whom another action or actions for the
alleged violation of the same right and the enforcement of the same relief is/are
still pending, the defense of litis pendencia in one case is bar to the others;
and, a final judgment in one would constitute res judicata and thus would
cause the dismissal of the rest. In either case, forum shopping could be cited
by the other party as a ground to ask for summary dismissal of the two 20 (or
more) complaints or petitions, and for imposition of the other sanctions, which
are direct contempt of court, criminal prosecution, and disciplinary action
against the erring lawyer.

Applying the foregoing principles in the case before us and comparing it with
the Second Case, it is obvious that there exist identity of parties or interests
represented, identity of rights or causes and identity of reliefs sought.

Very simply stated, the original complaint in the court a quo which gave rise to
the instant petition was filed by the buyer (herein private respondent and his
predecessors-in-interest) against the seller (herein petitioners) to enforce the
alleged perfected sale of real estate. On the other hand, the complaint 21 in the
Second Case seeks to declare such purported sale involving the same real
property "as unenforceable as against the Bank", which is the petitioner herein.
In other words, in the Second Case, the majority stockholders, in
representation of the Bank, are seeking to accomplish what the Bank itself
failed to do in the original case in the trial court. In brief, the objective or the
relief being sought, though worded differently, is the same, namely, to enable
the petitioner Bank to escape from the obligation to sell the property to
respondent. In Danville Maritime, Inc. vs. Commission on Audit. 22 , this Court
ruled that the filing by a party of two apparently different actions, but with
the same objective, constituted forum shopping:

In the attempt to make the two actions appear to be different, petitioner

impleaded different respondents therein — PNOC in the case before the
lower court and the COA in the case before this Court and sought what
seems to be different reliefs. Petitioner asks this Court to set aside the
questioned letter-directive of the COA dated October 10, 1988 and to
direct said body to approve the Memorandum of Agreement entered into
by and between the PNOC and petitioner, while in the complaint before
the lower court petitioner seeks to enjoin the PNOC from conducting a
rebidding and from selling to other parties the vessel "T/T Andres
Bonifacio", and for an extension of time for it to comply with the
paragraph 1 of the memorandum of agreement and damages. One can
see that although the relief prayed for in the two (2) actions are ostensibly
different, the ultimate objective in both actions is the same, that is,
approval of the sale of vessel in favor of petitioner and to overturn the
letter-directive of the COA of October 10, 1988 disapproving the
sale. (emphasis supplied).

In an earlier case 23 but with the same logic and vigor, we held:

 In other words, the filing by the petitioners of the instant special civil
action for certiorari and prohibition in this Court despite the pendency of
their action in the Makati Regional Trial Court, is a species of forum-
shopping. Both actions unquestionably involve the same transactions,
the same essential facts and circumstances. The petitioners' claim of
absence of identity simply because the PCGG had not been impleaded in
the RTC suit, and the suit did not involve certain acts which transpired
after its commencement, is specious. In the RTC action, as in the action
before this Court, the validity of the contract to purchase and sell of
September 1, 1986, i.e., whether or not it had been efficaciously
rescinded, and the propriety of implementing the same (by paying the
pledgee banks the amount of their loans, obtaining the release of the
pledged shares, etc.) were the basic issues. So, too, the relief was the
same: the prevention of such implementation and/or the restoration of
the status quo ante. When the acts sought to be restrained took place
anyway despite the issuance by the Trial Court of a temporary
restraining order, the RTC suit did not become functus oficio. It
remained an effective vehicle for obtention of relief; and petitioners'
remedy in the premises was plain and patent: the filing of an amended
and supplemental pleading in the RTC suit, so as to include the PCGG as
defendant and seek nullification of the acts sought to be enjoined but
nonetheless done. The remedy was certainly not the institution of
another action in another forum based on essentially the same facts, The
adoption of this latter recourse renders the petitioners amenable to
disciplinary action and both their actions, in this Court as well as in the
Court a quo, dismissible.

In the instant case before us, there is also identity of parties, or at least, of
interests represented. Although the plaintiffs in the Second Case (Henry L. Co.
et al.) are not name parties in the First Case, they represent the same interest
and entity, namely, petitioner Bank, because:

Firstly, they are not suing in their personal capacities, for they have no direct
personal interest in the matter in controversy. They are not principally or even
subsidiarily liable; much less are they direct parties in the assailed contract of
sale; and

Secondly, the allegations of the complaint in the Second Case show that the
stockholders are bringing a "derivative suit". In the caption itself, petitioners
claim to have brought suit "for and in behalf of the Producers Bank of the
Philippines" 24 . Indeed, this is the very essence of a derivative suit:

An individual stockholder is permitted to institute a derivative suit on

behalf of the corporation wherein he holdsstock in order to protect or
vindicate corporate rights, whenever the officials of the corporation refuse
 to sue, or are the ones to be sued or hold the control of the corporation.
In such actions, the suing stockholder is regarded as a nominal
party, with the corporation as the real party in interest. (Gamboa v.
Victoriano, 90 SCRA 40, 47 [1979]; emphasis supplied).

In the face of the damaging admissions taken from the complaint in the Second
Case, petitioners, quite strangely, sought to deny that the Second Case was a
derivative suit, reasoning that it was brought, not by the minority shareholders,
but by Henry Co et al., who not only own, hold or control over 80% of the
outstanding capital stock, but also constitute the majority in the Board of
Directors of petitioner Bank. That being so, then they really represent the
Bank. So, whether they sued "derivatively" or directly, there is undeniably an
identity of interests/entity represented.

Petitioner also tried to seek refuge in the corporate fiction that the personality
Of the Bank is separate and distinct from its shareholders. But the rulings of
this Court are consistent: "When the fiction is urged as a means of perpetrating
a fraud or an illegal act or as a vehicle for the evasion of an existing obligation,
the circumvention of statutes, the achievement or perfection of a monopoly or
generally the perpetration of knavery or crime, the veil with which the law
covers and isolates the corporation from the members or stockholders who
compose it will be lifted to allow for its consideration merely as an aggregation
of individuals." 25

In addition to the many cases 26 where the corporate fiction has been

disregarded, we now add the instant case, and declare herewith that the
corporate veil cannot be used to shield an otherwise blatant violation of the
prohibition against forum-shopping. Shareholders, whether suing as the
majority in direct actions or as the minority in a derivative suit, cannot be
allowed to trifle with court processes, particularly where, as in this case, the
corporation itself has not been remiss in vigorously prosecuting or defending
corporate causes and in using and applying remedies available to it. To rule
otherwise would be to encourage corporate litigants to use their shareholders
as fronts to circumvent the stringent rules against forum shopping.

Finally, petitioner Bank argued that there cannot be any forum shopping, even
assuming arguendo that there is identity of parties, causes of action and
reliefs sought, "because it (the Bank) was the defendant in the (first) case while
it was the plaintiff in the other (Second Case)",citing as authority Victronics
Computers, Inc., vs. Regional Trial Court, Branch 63, Makati, etc. et al., 27 where
Court held:

The rule has not been extended to a defendant who, for reasons known
only to him, commences a new action against the plaintiff — instead of
filing a responsive pleading in the other case — setting forth therein, as
 causes of action, specific denials, special and affirmative defenses or
even counterclaims, Thus, Velhagen's and King's motion to dismiss Civil
Case No. 91-2069 by no means negates the charge of forum-shopping as
such did not exist in the first place. (emphasis supplied)

Petitioner pointed out that since it was merely the defendant in the original
case, it could not have chosen the forum in said case.

Respondent, on the other hand, replied that there is a difference in factual

setting between Victronics and the present suit. In the former, as underscored
in the above-quoted Court ruling, the defendants did not file any responsive
pleading in the first case. In other words, they did not make any denial or raise
any defense or counter-claim therein In the case before us however, petitioners
filed a responsive pleading to the complaint — as a result of which, the issues
were joined.

Indeed, by praying for affirmative reliefs and interposing counter–claims in

their responsive pleadings, the petitioners became plaintiffs themselves in the
original case, giving unto themselves the very remedies they repeated in the
Second Case.

Ultimately, what is truly important to consider in determining whether forum-

shopping exists or not is the vexation caused the courts and parties-litigant by
a party who asks different courts and/or administrative agencies to rule on the
same or related causes and/or to grant the same or substantially the same
reliefs, in the process creating the possibility of conflicting decisions being
rendered by the different fora upon the same issue. In this case, this is exactly
the problem: a decision recognizing the perfection and directing the
enforcement of the contract of sale will directly conflict with a possible decision
in the Second Case barring the parties front enforcing or implementing the said
sale. Indeed, a final decision in one would constitute res judicata in the
other 28 .

The foregoing conclusion finding the existence of forum-shopping

notwithstanding, the only sanction possible now is the dismissal of both cases
with prejudice, as the other sanctions cannot be imposed because petitioners'
present counsel entered their appearance only during the proceedings in this
Court, and the Petition's VERIFICATION/CERTIFICATION contained sufficient
allegations as to the pendency of the Second Case to show good faith in
observing Circular 28-91. The Lawyers who filed the Second Case are not
before us; thus the rudiments of due process prevent us from motu
propio imposing disciplinary measures against them in this Decision. However,
petitioners themselves (and particularly Henry Co, et al.) as litigants are
admonished to strictly follow the rules against forum-shopping and not to trifle
with court proceedings and processes They are warned that a repetition of the
same will be dealt with more severely.

Having said that, let it be emphasized that this petition should be dismissed
not merely because of forum-shopping but also because of the substantive
issues raised, as will be discussed shortly.

The Second Issue: Was The Contract Perfected?

The respondent Court correctly treated the question of whether or not there
was, on the basis of the facts established, a perfected contract of sale as the
ultimate issue. Holding that a valid contract has been established, respondent
Court stated:

There is no dispute that the object of the transaction is that property

owned by the defendant bank as acquired assets consisting of six (6)
parcels of land specifically identified under Transfer Certificates of Title
Nos. T-106932 to T-106937. It is likewise beyond cavil that the bank
intended to sell the property. As testified to by the Bank's Deputy
Conservator, Jose Entereso, the bank was looking for buyers of the
property. It is definite that the plaintiffs wanted to purchase the property
and it was precisely for this purpose that they met with defendant
Rivera, Manager of the Property Management Department of the
defendant bank, in early August 1987. The procedure in the sale of
acquired assets as well as the nature and scope of the authority of Rivera
on the matter is clearly delineated in the testimony of Rivera himself,
which testimony was relied upon by both the bank and by Rivera in their
appeal briefs. Thus (TSN of July 30, 1990. pp. 19-20):

A: The procedure runs this way: Acquired assets was turned over
to me and then I published it in the form of an inter-office
memorandum distributed to all branches that these are acquired
assets for sale. I was instructed to advertise acquired assets for
sale so on that basis, I have to entertain offer; to accept offer,
formal offer and upon having been offered, I present it to the
Committee. I provide the Committee with necessary information
about the property such as original loan of the borrower, bid price
during the foreclosure, total claim of the bank, the appraised value
at the time the property is being offered for sale and then the
information which are relative to the evaluation of the bank to buy
which the Committee considers and it is the Committee that
evaluate as against the exposure of the bank and it is also the
Committee that submit to the Conservator for final approval and
once approved, we have to execute the deed of sale and it is the
Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their
purpose of buying the property, dealt with and talked to the right person.
Necessarily, the agenda was the price of the property, and plaintiffs were
dealing with the bank official authorized to entertain offers, to accept
offers and to present the offer to the Committee before which the said
official is authorized to discuss information relative to price
determination. Necessarily, too, it being inherent in his authority, Rivera
is the officer from whom official information regarding the price, as
determined by the Committee and approved by the Conservator, can be
had. And Rivera confirmed his authority when he talked with the plaintiff
in August 1987. The testimony of plaintiff Demetria is clear on this point
(TSN of May 31,1990, pp. 27-28):

Q: When you went to the Producers Bank and talked with Mr.
Mercurio Rivera, did you ask him point-blank his authority to sell
any property?

A: No, sir. Not point blank although it came from him, (W)hen I
asked him how long it would take because he was saying that the
matter of pricing will be passed upon by the committee. And when
I asked him how long it will take for the committee to decide and
he said the committee meets every week. If I am not mistaken
Wednesday and in about two week's (sic) time, in effect what he
was saying he was not the one who was to decide. But he would
refer it to the committee and he would relay the decision of the
committee to me.

Q — Please answer the question.

A — He did not say that he had the authority (.) But he said he
would refer the matter to the committee and he would relay the
decision to me and he did just like that.

"Parenthetically, the Committee referred to was the Past Due Committee

of which Luis Co was the Head, with Jose Entereso as one of the
members.

What transpired after the meeting of early August 1987 are consistent
with the authority and the duties of Rivera and the bank's internal
procedure in the matter of the sale of bank's assets. As advised by
Rivera, the plaintiffs made a formal offer by a letter dated August 20,
1987 stating that they would buy at the price of P3.5 Million in cash. The
letter was for the attention of Mercurio Rivera who was tasked to convey
and accept such offers. Considering an aspect of the official duty of
Rivera as some sort of intermediary between the plaintiffs-buyers with
their proposed buying price on one hand, and the bank Committee, the
 Conservator and ultimately the bank itself with the set price on the
other, and considering further the discussion of price at the meeting of
August resulting in a formal offer of P3.5 Million in cash, there can be no
other logical conclusion than that when, on September 1, 1987, Rivera
informed plaintiffs by letter that "the bank's counter-offer is at P5.5
Million for more than 101 hectares on lot basis," such counter-offer price
had been determined by the Past Due Committee and approved by the
Conservator after Rivera had duly presented plaintiffs' offer for
discussion by the Committee of such matters as original loan of
borrower, bid price during foreclosure, total claim of the bank, and
market value. Tersely put, under the established facts, the price of P5.5
Million was, as clearly worded in Rivera's letter (Exh. "E"), the official and
definitive price at which the bank was selling the property.

There were averments by defendants below, as well as before this Court,

that the P5.5 Million price was not discussed by the Committee and that
price. As correctly characterized by the trial court, this is not credible.
The testimonies of Luis Co and Jose Entereso on this point are at best
equivocal and considering the gratuitous and self-serving character of
these declarations, the bank's submission on this point does not inspire
belief. Both Co ad Entereso, as members of the Past Due Committee of
the bank, claim that the offer of the plaintiff was never discussed by the
Committee. In the same vein, both Co and Entereso openly admit that
they seldom attend the meetings of the Committee. It is important to note
that negotiations on the price had started in early August and the
plaintiffs had already offered an amount as purchase price, having been
made to understand by Rivera, the official in charge of the negotiation,
that the price will be submitted for approval by the bank and that the
bank's decision will be relayed to plaintiffs. From the facts, the official
bank price. At any rate, the bank placed its official, Rivera, in a position
of authority to accept offers to buy and negotiate the sale by having the
offer officially acted upon by the bank. The bank cannot turn around and
later say, as it now does, that what Rivera states as the bank's action on
the matter is not in fact so. It is a familiar doctrine, the doctrine of
ostensible authority, that if a corporation knowingly permits one of its
officers, or any other agent, to do acts within the scope of an apparent
authority, and thus holds him out to the public as possessing power to
do those acts, the corporation will, as against any one who has in good
faith dealt with the corporation through such agent, he estopped from
denying his authority (Francisco v. GSIS, 7 SCRA 577, 583-584; PNB v.
Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court of
Appeals, G.R. No. 103957, June 14, 1993). 29

Article 1318 of the Civil Code enumerates the requisites of a valid and
perfected contract as follows: "(1) Consent of the contracting parties; (2) Object
certain which is the subject matter of the contract; (3) Cause of the obligation
which is established."

There is no dispute on requisite no. 2. The object of the questioned contract

consists of the six (6) parcels of land in Sta. Rosa, Laguna with an aggregate
area of about 101 hectares, more or less, and covered by Transfer Certificates
of Title Nos. T-106932 to T-106937. There is, however, a dispute on the first
and third requisites.

Petitioners allege that "there is no counter-offer made by the Bank, and any
supposed counter-offer which Rivera (or Co) may have made is unauthorized.
Since there was no counter-offer by the Bank, there was nothing for Ejercito (in
substitution of Demetria and Janolo) to accept." 30 They disputed the factual
basis of the respondent Court's findings that there was an offer made by Janolo
for P3.5 million, to which the Bank counter-offered P5.5 million. We have
perused the evidence but cannot find fault with the said Court's findings of
fact. Verily, in a petition under Rule 45 such as this, errors of fact — if there be
any - are, as a rule, not reviewable. The mere fact that respondent Court (and
the trial court as well) chose to believe the evidence presented by respondent
more than that presented by petitioners is not by itself a reversible error. In
fact, such findings merit serious consideration by this Court, particularly
where, as in this case, said courts carefully and meticulously discussed their
findings. This is basic.

Be that as it may, and in addition to the foregoing disquisitions by the Court of

Appeals, let us review the question of Rivera's authority to act and petitioner's
allegations that the P5.5 million counter-offer was extinguished by the P4.25
million revised offer of Janolo. Here, there are questions of law which could be
drawn from the factual findings of the respondent Court. They also delve into
the contractual elements of consent and cause.

The authority of a corporate officer in dealing with third persons may be actual
or apparent. The doctrine of "apparent authority", with special reference to
banks, was laid out in Prudential Bank vs. Court of Appeals31 , where it was
held that:

Conformably, we have declared in countless decisions that the principal

is liable for obligations contracted by the agent. The agent's apparent
representation yields to the principal's true representation and the
contract is considered as entered into between the principal and the
third person (citing National Food Authority vs. Intermediate Appellate
Court, 184 SCRA 166).

A bank is liable for wrongful acts of its officers done in the

interests of the bank or in the course of dealings of the officers in
their representative capacity but not for acts outside the scape of
 their authority (9 C.J.S., p. 417). A bank holding out its officers
and agents as worthy of confidence will not be permitted to profit
by the frauds they may thus be enabled to perpetrate in the
apparent scope of their employment; nor will it be permitted to
shirk its responsibility for such frauds even though no benefit may
accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly,
a banking corporation is liable to innocent third persons where the
representation is made in the course of its business by an agent
acting within the general scope of his authority even though, in the
particular case, the agent is secretly abusing his authority and
attempting to perpetrate a fraud upon his principal or some other
person, for his own ultimate benefit (McIntosh v. Dakota Trust Co.,
52 ND 752, 204 NW 818, 40 ALR 1021).

Application of these principles is especially necessary because banks

have a fiduciary relationship with the public and their stability depends
on the confidence of the people in their honesty and efficiency. Such faith
will be eroded where banks do not exercise strict care in the selection
and supervision of its employees, resulting in prejudice to their
depositors.

From the evidence found by respondent Court, it is obvious that petitioner

Rivera has apparent or implied authority to act for the Bank in the matter of
selling its acquired assets. This evidence includes the following:

(a) The petition itself in par. II-i (p. 3) states that Rivera was "at all times
material to this case, Manager of the Property Management Department
of the Bank". By his own admission, Rivera was already the person in
charge of the Bank's acquired assets (TSN, August 6, 1990, pp. 8-9);

(b) As observed by respondent Court, the land was definitely being sold
by the Bank. And during the initial meeting between the buyers and
Rivera, the latter suggested that the buyers' offer should be no less than
P3.3 million (TSN, April 26, 1990, pp. 16-17);

(c) Rivera received the buyers' letter dated August 30, 1987 offering P3.5
million (TSN, 30 July 1990, p.11);

(d) Rivera signed the letter dated September 1, 1987 offering to sell the
property for P5.5 million (TSN, July 30, p. 11);

(e) Rivera received the letter dated September 17, 1987 containing the
buyers' proposal to buy the property for P4.25 million (TSN, July 30,
1990, p. 12);
 (f) Rivera, in a telephone conversation, confirmed that the P5.5 million
was the final price of the Bank (TSN, January 16, 1990, p. 18);

(g) Rivera arranged the meeting between the buyers and Luis Co on
September 28, 1994, during which the Bank's offer of P5.5 million was
confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting,
Co, a major shareholder and officer of the Bank, confirmed Rivera's
statement as to the finality of the Bank's counter-offer of P5.5 million
(TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);

(h) In its newspaper advertisements and announcements, the Bank

referred to Rivera as the officer acting for the Bank in relation to parties
interested in buying assets owned/acquired by the Bank. In fact, Rivera
was the officer mentioned in the Bank's advertisements offering for sale
the property in question (cf. Exhs. "S" and "S-1").

In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals,

et. al.32 , the Court, through Justice Jose A. R. Melo, affirmed the doctrine of
apparent authority as it held that the apparent authority of the officer of the
Bank of P.I. in charge of acquired assets is borne out by similar circumstances
surrounding his dealings with buyers.

To be sure, petitioners attempted to repudiate Rivera's apparent authority

through documents and testimony which seek to establish
Rivera's actual authority. These pieces of evidence, however, are inherently
weak as they consist of Rivera's self-serving testimony and various inter-office
memoranda that purport to show his limited actual authority, of which private
respondent cannot be charged with knowledge. In any event, since the issue is
apparent authority, the existence of which is borne out by the respondent
Court's findings, the evidence of actual authority is immaterial insofar as the
liability of a corporation is concerned 33 .

Petitioners also argued that since Demetria and Janolo were experienced
lawyers and their "law firm" had once acted for the Bank in three criminal
cases, they should be charged with actual knowledge of Rivera's limited
authority. But the Court of Appeals in its Decision (p. 12) had already made a
factual finding that the buyers had no notice of Rivera's actual authority prior
to the sale. In fact, the Bank has not shown that they acted as its counsel in
respect to any acquired assets; on the other hand, respondent has proven that
Demetria and Janolo merely associated with a loose aggrupation of lawyers (not
a professional partnership), one of whose members (Atty. Susana Parker) acted
in said criminal cases.

Petitioners also alleged that Demetria's and Janolo's P4.25 million counter-offer
in the letter dated September 17, 1987 extinguished the Bank's offer of P5.5
million 34 .They disputed the respondent Court's finding that "there was a
meeting of minds when on 30 September 1987 Demetria and Janolo through
Annex "L" (letter dated September 30, 1987) "accepted" Rivera's counter offer of
P5.5 million under Annex "J" (letter dated September 17, 1987)", citing the late
Justice Paras35 , Art. 1319 of the Civil Code 36 and related Supreme Court
rulings starting with Beaumont vs. Prieto 37 .

However, the above-cited authorities and precedents cannot apply in the

instant case because, as found by the respondent Court which reviewed the
testimonies on this point, what was "accepted" by Janolo in his letter dated
September 30, 1987 was the Bank's offer of P5.5 million as confirmed and
reiterated to Demetria and Atty. Jose Fajardo by Rivera and Co during their
meeting on September 28, 1987. Note that the said letter of September 30,
1987 begins with"(p)ursuant to our discussion last 28 September 1987 . . .

Petitioners insist that the respondent Court should have believed the
testimonies of Rivera and Co that the September 28, 1987 meeting "was meant
to have the offerors improve on their position of P5.5. million."38 However, both
the trial court and the Court of Appeals found petitioners' testimonial evidence
"not credible", and we find no basis for changing this finding of fact.

Indeed, we see no reason to disturb the lower courts' (both the RTC and the
CA) common finding that private respondents' evidence is more in keeping with
truth and logic — that during the meeting on September 28, 1987, Luis Co and
Rivera "confirmed that the P5.5 million price has been passed upon by the
Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-
35)"39 . Hence, assuming arguendo that the counter-offer of P4.25 million
extinguished the offer of P5.5 million, Luis Co's reiteration of the said P5.5
million price during the September 28, 1987 meeting revived the said offer.
And by virtue of the September 30, 1987 letter accepting this revived offer,
there was a meeting of the minds, as the acceptance in said letter was absolute
and unqualified.

We note that the Bank's repudiation, through Conservator Encarnacion, of

Rivera's authority and action, particularly the latter's counter-offer of P5.5
million, as being "unauthorized and illegal" came only on May 12, 1988 or more
than seven (7) months after Janolo' acceptance. Such delay, and the absence of
any circumstance which might have justifiably prevented the Bank from acting
earlier, clearly characterizes the repudiation as nothing more than a last-
minute attempt on the Bank's part to get out of a binding contractual
obligation.

Taken together, the factual findings of the respondent Court point to an

implied admission on the part of the petitioners that the written offer made on
September 1, 1987 was carried through during the meeting of September 28,
1987. This is the conclusion consistent with human experience, truth and good
faith.

It also bears noting that this issue of extinguishment of the Bank's offer of P5.5
million was raised for the first time on appeal and should thus be disregarded.

This Court in several decisions has repeatedly adhered to the principle

that points of law, theories, issues of fact and arguments not adequately
brought to the attention of the trial court need not be, and ordinarily will
not be, considered by a reviewing court, as they cannot be raised for the
first time on appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145
SCRA 592).40

. . . It is settled jurisprudence that an issue which was neither averred in

the complaint nor raised during the trial in the court below cannot be
raised for the first time on appeal as it would be offensive to the basic
rules of fair play, justice and due process (Dihiansan vs. CA, 153 SCRA
713 [1987]; Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty &
Development Corp. vs. CA, 157 SCRA 425 [1988]; Ramos vs. IAC, 175
SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).41

Since the issue was not raised in the pleadings as an affirmative defense,
private respondent was not given an opportunity in the trial court to controvert
the same through opposing evidence. Indeed, this is a matter of due process.
But we passed upon the issue anyway, if only to avoid deciding the case on
purely procedural grounds, and we repeat that, on the basis of the evidence
already in the record and as appreciated by the lower courts, the inevitable
conclusion is simply that there was a perfected contract of sale.

The Third Issue: Is the Contract Enforceable?

The petition alleged42 :

Even assuming that Luis Co or Rivera did relay a verbal offer to sell at
P5.5 million during the meeting of 28 September 1987, and it was this
verbal offer that Demetria and Janolo accepted with their letter of 30
September 1987, the contract produced thereby would be unenforceable
by action — there being no note, memorandum or writing subscribed by
the Bank to evidence such contract. (Please see article 1403[2], Civil
Code.)

Upon the other hand, the respondent Court in its Decision (p, 14) stated:

. . . Of course, the bank's letter of September 1, 1987 on the official price

and the plaintiffs' acceptance of the price on September 30, 1987, are
not, in themselves, formal contracts of sale. They are however clear
 embodiments of the fact that a contract of sale was perfected between the
parties, such contract being binding in whatever form it may have been
entered into (case citations omitted). Stated simply, the banks' letter of
September 1, 1987, taken together with plaintiffs' letter dated September
30, 1987, constitute in law a sufficient memorandum of a perfected
contract of sale.

The respondent Court could have added that the written communications
commenced not only from September 1, 1987 but from Janolo's August 20,
1987 letter. We agree that, taken together, these letters constitute sufficient
memoranda — since they include the names of the parties, the terms and
conditions of the contract, the price and a description of the property as the
object of the contract.

But let it be assumed arguendo that the counter-offer during the meeting on

September 28, 1987 did constitute a "new" offer which was accepted by Janolo
on September 30, 1987. Still, the statute of frauds will not apply by reason of
the failure of petitioners to object to oral testimony proving petitioner Bank's
counter-offer of P5.5 million. Hence, petitioners — by such utter failure to
object — are deemed to have waived any defects of the contract under the
statute of frauds, pursuant to Article 1405 of the Civil Code:

Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2

of article 1403, are ratified by the failure to object to the presentation of
oral evidence to prove the same, or by the acceptance of benefits under
them.

As private respondent pointed out in his Memorandum, oral testimony on the

reaffirmation of the counter-offer of P5.5 million is a plenty — and the silence
of petitioners all throughout the presentation makes the evidence binding on
them thus;

A Yes, sir, I think it was September 28, 1987 and I was again present
because Atty. Demetria told me to accompany him we were able to meet
Luis Co at the Bank.

xxx       xxx       xxx

Q Now, what transpired during this meeting with Luis Co of the

Producers Bank?

A Atty. Demetria asked Mr. Luis Co whether the price could be reduced,
sir.

Q What price?
 A The 5.5 million pesos and Mr. Luis Co said that the amount cited by
Mr. Mercurio Rivera is the final price and that is the price they intends
(sic) to have, sir.

Q What do you mean?.

A That is the amount they want, sir.

Q What is the reaction of the plaintiff Demetria to Luis Co's statement

(sic) that the defendant Rivera's counter-offer of 5.5 million was the
defendant's bank (sic) final offer?

A He said in a day or two, he will make final acceptance, sir.

Q What is the response of Mr. Luis Co?.

A He said he will wait for the position of Atty. Demetria, sir.

[Direct testimony of Atty. Jose Fajardo, TSN, January 16, 1990, at pp. 18-21.]

Q What transpired during that meeting between you and Mr. Luis Co of
the defendant Bank?

A We went straight to the point because he being a busy person, I told

him if the amount of P5.5 million could still be reduced and he said that
was already passed upon by the committee. What the bank expects
which was contrary to what Mr. Rivera stated. And he told me that is the
final offer of the bank P5.5 million and we should indicate our position
as soon as possible.

Q What was your response to the answer of Mr. Luis Co?

A I said that we are going to give him our answer in a few days and he
said that was it. Atty. Fajardo and I and Mr. Mercurio [Rivera] was with
us at the time at his office.

Q For the record, your Honor please, will you tell this Court who was
with Mr. Co in his Office in Producers Bank Building during this
meeting?

A Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.

Q By Mr. Co you are referring to?

A Mr. Luis Co.

 Q After this meeting with Mr. Luis Co, did you and your partner accede
on (sic) the counter offer by the bank?

A Yes, sir, we did.? Two days thereafter we sent our acceptance to the
bank which offer we accepted, the offer of the bank which is P5.5 million.

[Direct testimony of Atty. Demetria, TSN, 26 April 1990, at pp. 34-36.]

Q According to Atty. Demetrio Demetria, the amount of P5.5 million was

reached by the Committee and it is not within his power to reduce this
amount. What can you say to that statement that the amount of P5.5
million was reached by the Committee?

A It was not discussed by the Committee but it was discussed initially by

Luis Co and the group of Atty. Demetrio Demetria and Atty. Pajardo (sic)
in that September 28, 1987 meeting, sir.

[Direct testimony of Mercurio Rivera, TSN, 30 July 1990, pp. 14-15.]

The Fourth Issue: May the Conservator Revoke

the Perfected and Enforceable Contract.

It is not disputed that the petitioner Bank was under a conservator placed by
the Central Bank of the Philippines during the time that the negotiation and
perfection of the contract of sale took place. Petitioners energetically contended
that the conservator has the power to revoke or overrule actions of the
management or the board of directors of a bank, under Section 28-A of
Republic Act No. 265 (otherwise known as the Central Bank Act) as follows:

Whenever, on the basis of a report submitted by the appropriate

supervising or examining department, the Monetary Board finds that a
bank or a non-bank financial intermediary performing quasi-banking
functions is in a state of continuing inability or unwillingness to
maintain a state of liquidity deemed adequate to protect the interest of
depositors and creditors, the Monetary Board may appoint a conservator
to take charge of the assets, liabilities, and the management of that
institution, collect all monies and debts due said institution and exercise
all powers necessary to preserve the assets of the institution, reorganize
the management thereof, and restore its viability. He shall have the
power to overrule or revoke the actions of the previous management and
board of directors of the bank or non-bank financial intermediary
performing quasi-banking functions, any provision of law to the contrary
notwithstanding, and such other powers as the Monetary Board shall
deem necessary.
In the first place, this issue of the Conservator's alleged authority to revoke or
repudiate the perfected contract of sale was raised for the first time in this
Petition — as this was not litigated in the trial court or Court of Appeals. As
already stated earlier, issues not raised and/or ventilated in the trial court, let
alone in the Court of Appeals, "cannot be raised for the first time on appeal as
it would be offensive to the basic rules of fair play, justice and due process." 43

In the second place, there is absolutely no evidence that the Conservator, at

the time the contract was perfected, actually repudiated or overruled said
contract of sale. The Bank's acting conservator at the time, Rodolfo Romey,
never objected to the sale of the property to Demetria and Janolo. What
petitioners are really referring to is the letter of Conservator Encarnacion, who
took over from Romey after the sale was perfected on September 30, 1987
(Annex V, petition) which unilaterally repudiated — not the contract — but the
authority of Rivera to make a binding offer — and which unarguably came
months after the perfection of the contract. Said letter dated May 12, 1988 is
reproduced hereunder:

May 12, 1988

Atty. Noe C. Zarate

Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila

Dear Atty. Zarate:

This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo
and Demetria regarding the six (6) parcels of land located at Sta. Rosa,
Laguna.

We deny that Producers Bank has ever made a legal counter-offer to any
of your clients nor perfected a "contract to sell and buy" with any of them
for the following reasons.

In the "Inter-Office Memorandum" dated April 25, 1986 addressed to and

approved by former Acting Conservator Mr. Andres I. Rustia, Producers
Bank Senior Manager Perfecto M. Pascua detailed the functions of
Property Management Department (PMD) staff and officers (Annex A.),
you will immediately read that Manager Mr. Mercurio Rivera or any of his
subordinates has no authority, power or right to make any alleged
counter-offer. In short, your lawyer-clients did not deal with the
authorized officers of the bank.
 Moreover, under Sec. 23 and 36 of the Corporation Code of the
Philippines (Bates Pambansa Blg. 68.) and Sec. 28-A of the Central Bank
Act (Rep. Act No. 265, as amended), only the Board of
Directors/Conservator may authorize the sale of any property of the
corportion/bank..

Our records do not show that Mr. Rivera was authorized by the old board
or by any of the bank conservators (starting January, 1984) to sell the
aforesaid property to any of your clients. Apparently, what took place
were just preliminary discussions/consultations between him and your
clients, which everyone knows cannot bind the Bank's Board or
Conservator.

We are, therefore, constrained to refuse any tender of payment by your

clients, as the same is patently violative of corporate and banking laws.
We believe that this is more than sufficient legal justification for refusing
said alleged tender.

Rest assured that we have nothing personal against your clients. All our
acts are official, legal and in accordance with law. We also have no
personal interest in any of the properties of the Bank.

Please be advised accordingly.

Very truly yours,

(Sgd.) Leonida T. Encarnacion

LEONIDA T. EDCARNACION
Acting Conservator

In the third place, while admittedly, the Central Bank law gives vast and far-
reaching powers to the conservator of a bank, it must be pointed out that such
powers must be related to the "(preservation of) the assets of the bank, (the
reorganization of) the management thereof and (the restoration of) its viability."
Such powers, enormous and extensive as they are, cannot extend to the post-
facto repudiation of perfected transactions, otherwise they would infringe
against the non-impairment clause of the Constitution 44 . If the legislature
itself cannot revoke an existing valid contract, how can it delegate such non-
existent powers to the conservator under Section 28-A of said law?

Obviously, therefore, Section 28-A merely gives the conservator power to revoke
contracts that are, under existing law, deemed to be defective — i.e., void,
voidable, unenforceable or rescissible. Hence, the conservator merely takes the
place of a bank's board of directors. What the said board cannot do — such as
repudiating a contract validly entered into under the doctrine of implied
authority — the conservator cannot do either. Ineluctably, his power is not
unilateral and he cannot simply repudiate valid obligations of the Bank. His
authority would be only to bring court actions to assail such contracts — as he
has already done so in the instant case. A contrary understanding of the law
would simply not be permitted by the Constitution. Neither by common sense.
To rule otherwise would be to enable a failing bank to become solvent, at the
expense of third parties, by simply getting the conservator to unilaterally
revoke all previous dealings which had one way or another or come to be
considered unfavorable to the Bank, yielding nothing to perfected contractual
rights nor vested interests of the third parties who had dealt with the Bank.

The Fifth Issue: Were There Reversible Errors of Facts?

Basic is the doctrine that in petitions for review under Rule 45 of the Rules of
Court, findings of fact by the Court of Appeals are not reviewable by the
Supreme Court. In Andres vs. Manufacturers Hanover & Trust Corporation, 45 ,
we held:

. . . The rule regarding questions of fact being raised with this Court in a
petition for certiorari under Rule 45 of the Revised Rules of Court has
been stated in Remalante vs. Tibe, G.R. No. 59514, February 25, 1988,
158 SCRA 138, thus:

The rule in this jurisdiction is that only questions of law may be raised in
a petition for certiorari under Rule 45 of the Revised Rules of Court. "The
jurisdiction of the Supreme Court in cases brought to it from the Court of
Appeals is limited to reviewing and revising the errors of law imputed to
it, its findings of the fact being conclusive " [Chan vs. Court of Appeals,
G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of
decisions]. This Court has emphatically declared that "it is not the
function of the Supreme Court to analyze or weigh such evidence all over
again, its jurisdiction being limited to reviewing errors of law that might
have been committed by the lower court" (Tiongco v. De la Merced, G. R.
No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals,
G.R. No. L-62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of
Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596).
"Barring, therefore, a showing that the findings complained of are totally
devoid of support in the record, or that they are so glaringly erroneous as
to constitute serious abuse of discretion, such findings must stand, for
this Court is not expected or required to examine or contrast the oral and
documentary evidence submitted by the parties" [Santa Ana, Jr. vs.
Hernandez, G. R. No. L-16394, December 17, 1966, 18 SCRA 973] [at pp.
144-145.]

Likewise, in Bernardo vs. Court of Appeals 46 , we held:

 The resolution of this petition invites us to closely scrutinize the facts of
the case, relating to the sufficiency of evidence and the credibility of
witnesses presented. This Court so held that it is not the function of the
Supreme Court to analyze or weigh such evidence all over again. The
Supreme Court's jurisdiction is limited to reviewing errors of law that
may have been committed by the lower court. The Supreme Court is not
a trier of facts. . . .

As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock
Construction and Development Corp. 47 :

The Court has consistently held that the factual findings of the trial
court, as well as the Court of Appeals, are final and conclusive and may
not be reviewed on appeal. Among the exceptional circumstances where a
reassessment of facts found by the lower courts is allowed are when the
conclusion is a finding grounded entirely on speculation, surmises or
conjectures; when the inference made is manifestly absurd, mistaken or
impossible; when there is grave abuse of discretion in the appreciation of
facts; when the judgment is premised on a misapprehension of facts;
when the findings went beyond the issues of the case and the same are
contrary to the admissions of both appellant and appellee. After a careful
study of the case at bench, we find none of the above grounds present to
justify the re-evaluation of the findings of fact made by the courts below.

In the same vein, the ruling of this Court in the recent case of South Sea Surety
and Insurance Company Inc. vs. Hon. Court of Appeals, et al. 48 is equally
applicable to the present case:

We see no valid reason to discard the factual conclusions of the appellate

court, . . . (I)t is not the function of this Court to assess and evaluate all
over again the evidence, testimonial and documentary, adduced by the
parties, particularly where, such as here, the findings of both the trial
court and the appellate court on the matter coincide. (emphasis supplied)

Petitioners, however, assailed the respondent Court's Decision as "fraught with

findings and conclusions which were not only contrary to the evidence on
record but have no bases at all," specifically the findings that (1) the "Bank's
counter-offer price of P5.5 million had been determined by the past due
committee and approved by conservator Romey, after Rivera presented the
same for discussion" and (2) "the meeting with Co was not to scale down the
price and start negotiations anew, but a meeting on the already determined
price of P5.5 million" Hence, citing Philippine National Bank vs. Court of
Appeals 49 , petitioners are asking us to review and reverse such factual
findings.

The first point was clearly passed upon by the Court of Appeals 50 , thus:
 There can be no other logical conclusion than that when, on September
1, 1987, Rivera informed plaintiffs by letter that "the bank's counter-offer
is at P5.5 Million for more than 101 hectares on lot basis, "such counter-
offer price had been determined by the Past Due Committee and
approved by the Conservator after Rivera had duly presented plaintiffs'
offer for discussion by the Committee . . . Tersely put, under the
established fact, the price of P5.5 Million was, as clearly worded in
Rivera's letter (Exh. "E"), the official and definitive price at which the
bank was selling the property. (p. 11, CA Decision)

xxx       xxx       xxx

. . . The argument deserves scant consideration. As pointed out by

plaintiff, during the meeting of September 28, 1987 between the
plaintiffs, Rivera and Luis Co, the senior vice-president of the bank,
where the topic was the possible lowering of the price, the bank official
refused it and confirmed that the P5.5 Million price had been passed
upon by the Committee and could no longer be lowered (TSN of April 27,
1990, pp. 34-35) (p. 15, CA Decision).

The respondent Court did not believe the evidence of the petitioners on this
point, characterizing it as "not credible" and "at best equivocal and considering
the gratuitous and self-serving character of these declarations, the bank's
submissions on this point do not inspire belief."

To become credible and unequivocal, petitioners should have presented then

Conservator Rodolfo Romey to testify on their behalf, as he would have been in
the best position to establish their thesis. Under the rules on evidence 51 , such
suppression gives rise to the presumption that his testimony would have been
adverse, if produced.

The second point was squarely raised in the Court of Appeals, but petitioners'
evidence was deemed insufficient by both the trial court and the respondent
Court, and instead, it was respondent's submissions that were believed and
became bases of the conclusions arrived at.

In fine, it is quite evident that the legal conclusions arrived at from the findings
of fact by the lower courts are valid and correct. But the petitioners are now
asking this Court to disturb these findings to fit the conclusion they are
espousing, This we cannot do.

To be sure, there are settled exceptions where the Supreme Court may
disregard findings of fact by the Court of Appeals 52 . We have studied both the
records and the CA Decision and we find no such exceptions in this case. On
the contrary, the findings of the said Court are supported by a preponderance
of competent and credible evidence. The inferences and conclusions are
seasonably based on evidence duly identified in the Decision. Indeed, the
appellate court patiently traversed and dissected the issues presented before it,
lending credibility and dependability to its findings. The best that can be said
in favor of petitioners on this point is that the factual findings of respondent
Court did not correspond to petitioners' claims, but were closer to the evidence
as presented in the trial court by private respondent. But this alone is no
reason to reverse or ignore such factual findings, particularly where, as in this
case, the trial court and the appellate court were in common agreement
thereon. Indeed, conclusions of fact of a trial judge — as affirmed by the Court
of Appeals — are conclusive upon this Court, absent any serious abuse or
evident lack of basis or capriciousness of any kind, because the trial court is in
a better position to observe the demeanor of the witnesses and their courtroom
manner as well as to examine the real evidence presented.

Epilogue.

In summary, there are two procedural issues involved forum-shopping and the
raising of issues for the first time on appeal [viz., the extinguishment of the
Bank's offer of P5.5 million and the conservator's powers to repudiate contracts
entered into by the Bank's officers] — which per se could justify the dismissal
of the present case. We did not limit ourselves thereto, but delved as well into
the substantive issues — the perfection of the contract of sale and its
enforceability, which required the determination of questions of fact. While the
Supreme Court is not a trier of facts and as a rule we are not required to look
into the factual bases of respondent Court's decisions and resolutions, we did
so just the same, if only to find out whether there is reason to disturb any of its
factual findings, for we are only too aware of the depth, magnitude and vigor by
which the parties through their respective eloquent counsel, argued their
positions before this Court.

We are not unmindful of the tenacious plea that the petitioner Bank is
operating abnormally under a government-appointed conservator and "there is
need to rehabilitate the Bank in order to get it back on its feet . . . as many
people depend on (it) for investments, deposits and well as employment. As of
June 1987, the Bank's overdraft with the Central Bank had already reached
P1.023 billion . . . and there were (other) offers to buy the subject properties for
a substantial amount of money." 53

While we do not deny our sympathy for this distressed bank, at the same time,
the Court cannot emotionally close its eyes to overriding considerations of
substantive and procedural law, like respect for perfected contracts, non-
impairment of obligations and sanctions against forum-shopping, which must
be upheld under the rule of law and blind justice.
This Court cannot just gloss over private respondent's submission that, while
the subject properties may currently command a much higher price, it is
equally true that at the time of the transaction in 1987, the price agreed upon
of P5.5 million was reasonable, considering that the Bank acquired these
properties at a foreclosure sale for no more than P3.5 million 54 . That the Bank
procrastinated and refused to honor its commitment to sell cannot now be
used by it to promote its own advantage, to enable it to escape its binding
obligation and to reap the benefits of the increase in land values. To rule in
favor of the Bank simply because the property in question has algebraically
accelerated in price during the long period of litigation is to reward lawlessness
and delays in the fulfillment of binding contracts. Certainly, the Court cannot
stamp its imprimatur on such outrageous proposition.

WHEREFORE, finding no reversible error in the questioned Decision and

Resolution, the Court hereby DENIES the petition. The assailed Decision is
AFFIRMED. Moreover, petitioner Bank is REPRIMANDED for engaging in
forum-shopping and WARNED that a repetition of the same or similar acts will
be dealt with more severely. Costs against petitioners.

SO ORDERED.
G.R. No. L-32636             March 17, 1930

In the matter Estate of Edward Randolph Hix, deceased.

A.W. FLUEMER, petitioner-appellant,
vs.
ANNIE COUSHING HIX, oppositor-appellee.

C.A. Sobral for appellant.

Harvey & O' Brien and Gibbs & McDonough for appellee.

MALCOLM, J.:

The special administrator of the estate of Edward Randolph Hix appeals from a
decision of Judge of First Instance Tuason denying the probate of the
document alleged to by the last will and testament of the deceased. Appellee is
not authorized to carry on this appeal. We think, however, that the appellant,
who appears to have been the moving party in these proceedings, was a
"person interested in the allowance or disallowance of a will by a Court of First
Instance," and so should be permitted to appeal to the Supreme Court from the
disallowance of the will (Code of Civil Procedure, sec. 781, as amended;
Villanueva vs. De Leon [1925], 42 Phil., 780).

It is theory of the petitioner that the alleged will was executed in Elkins, West
Virginia, on November 3, 1925, by Hix who had his residence in that
jurisdiction, and that the laws of West Verginia Code, Annotated, by Hogg,
Charles E., vol. 2, 1914, p. 1690, and as certified to by the Director of the
National Library. But this was far from a compliance with the law. The laws of
a foreign jurisdiction do not prove themselves in our courts. the courts of the
Philippine Islands are not authorized to take American Union. Such laws must
be proved as facts. (In re Estate of Johnson [1918], 39 Phil., 156.) Here the
requirements of the law were not met. There was no was printed or published
under the authority of the State of West Virginia, as provided in section 300 of
the Code of Civil Procedure. Nor was the extract from the law attested by the
certificate of the officer having charge of the original, under the sale of the
State of West Virginia, as provided in section 301 of the Code of Civil
Procedure. No evidence was introduced to show that the extract from the laws
of West Virginia was in force at the time the alleged will was executed.

In addition, the due execution of the will was not established. The only
evidence on this point is to be found in the testimony of the petitioner. Aside
from this, there was nothing to indicate that the will was acknowledged by the
testator in the presence of two competent witnesses, of that these witnesses
subscribed the will in the presence of the testator and of each other as the law
of West Virginia seems to require. On the supposition that the witnesses to the
will reside without the Philippine Islands, it would then the duty of the
petitioner to prove execution by some other means (Code of Civil Procedure,
sec. 633.)

It was also necessary for the petitioner to prove that the testator had his
domicile in West Virginia and not establish this fact consisted of the recitals in
the CATHY will and the testimony of the petitioner. Also in beginning
administration proceedings orginally in the Philippine Islands, the petitioner
violated his own theory by attempting to have the principal administration in
the Philippine Islands.

While the appeal pending submission in this court, the attorney for the
appellant presented an unverified petition asking the court to accept as part of
the evidence the documents attached to the petition. One of these documents
discloses that a paper writing purporting to be the was presented for probate
on June 8, 1929, to the clerk of Randolph Country, State of West Virginia, in
vacation, and was duly proven by the oaths of Dana Wamsley and Joseph L.
MAdden, the subscribing witnesses thereto , and ordered to be recorded and
filed. It was shown by another document that, in vacation, on June 8, 1929,
the clerk of court of Randolph Country, West Virginia, appointed Claude W.
Maxwell as administrator, cum testamento annexo, of the estate of Edward
Randolph Hix, deceased. In this connection, it is to be noted that the
application for the probate of the will in the Philippines was filed on February
20, 1929, while the proceedings in West Virginia appear to have been initiated
on June 8, 1929. These facts are strongly indicative of an intention to make the
Philippines the principal administration and West Virginia the ancillary
administration. However this may be, no attempt has been made to comply
with Civil Procedure, for no hearing on the question of the allowance of a will
said to have been proved and allowed in West Virginia has been requested.
There is no showing that the deceased left any property at any place other than
the Philippine Islands and no contention that he left any in West Virginia.

Reference has been made by the parties to a divorce purported to have been
awarded Edward Randolph Hix from Annie Cousins Hix on October 8, 1925, in
the State of West specific pronouncements on the validity or validity of this
alleged divorce.

For all of the foregoing, the judgment appealed from will be affirmed, with the
costs of this instance against the appellant.

G.R. No. 93262 December 29, 1991

DAVAO LIGHT & POWER CO., INC., petitioner,

vs.
THE COURT OF APPEALS, QUEENSLAND HOTEL or MOTEL or
QUEENSLAND TOURIST INN, and TEODORICO ADARNA, respondents.

Breva & Breva Law Offices for petitioner.

Goc-Ong & Associates for private respondents.

NARVASA, J.:

Subject of the appellate proceedings at bar is the decision of the Court of

Appeals in CA-G.R. Sp. No. 1967 entitled "Queensland Hotel, Inc., etc. and
Adarna v. Davao Light & Power Co., Inc.," promulgated on May 4, 1990. 1 That
decision nullified and set aside the writ of preliminary attachment issued by
the Regional Trial Court of Davao City 2 in Civil Case No. 19513-89 on
application of the plaintiff (Davao Light & Power Co.), before the service of
summons on the defendants (herein respondents Queensland Co., Inc. and
Adarna).

Following is the chronology of the undisputed material facts culled from the
Appellate Tribunal's judgment of May 4, 1990.
1. On May 2, 1989 Davao Light & Power Co., Inc. (hereafter, simply Davao
Light) filed a verified complaint for recovery of a sum of money and damages
against Queensland Hotel, etc. and Teodorico Adarna (docketed as Civil Case
No. 19513-89). The complaint contained an ex parte application for a writ of
preliminary attachment.

2. On May 3, 1989 Judge Nartatez, to whose branch the case was assigned by
raffle, issued an Order granting the ex parte application and fixing the
attachment bond at P4,600,513.37.

3. On May 11, 1989 the attachment bond having been submitted by Davao
Light, the writ of attachment issued.

4. On May 12, 1989, the summons and a copy of the complaint, as well as the
writ of attachment and a copy of the attachment bond, were served on
defendants Queensland and Adarna; and pursuant to the writ, the sheriff
seized properties belonging to the latter.

5. On September 6, 1989, defendants Queensland and Adarna filed a motion to

discharge the attachment for lack of jurisdiction to issue the same because at
the time the order of attachment was promulgated (May 3, 1989) and the
attachment writ issued (May 11, 1989), the Trial Court had not yet acquired
jurisdiction over the cause and over the persons of the defendants.

6. On September 14, 1989, Davao Light filed an opposition to the motion to

discharge attachment.

7. On September 19, 1989, the Trial Court issued an Order denying the motion
to discharge.

This Order of September 19, 1989 was successfully challenged by Queensland

and Adarna in a special civil action of certiorari instituted by them in the Court
of Appeals. The Order was, as aforestated, annulled by the Court of Appeals in
its Decision of May 4, 1990. The Appellate Court's decision closed with the
following disposition:

. . . the Orders dated May 3, 1989 granting the issuance of a writ of

preliminary attachment, dated September 19, 1989 denying the motion
to discharge attachment; dated November 7, 1989 denying petitioner's
motion for reconsideration; as well as all other orders emanating
therefrom, specially the Writ of Attachment dated May 11, 1989 and
Notice of Levy on Preliminary Attachment dated May 11, 1989, are
hereby declared null and void and the attachment hereby ordered
DISCHARGED.

The Appellate Tribunal declared that —

 . . . While it is true that a prayer for the issuance of a writ of preliminary
attachment may be included m the complaint, as is usually done, it is
likewise true that the Court does not acquire jurisdiction over the person
of the defendant until he is duly summoned or voluntarily appears, and
adding the phrase that it be issued "ex parte" does not confer said
jurisdiction before actual summons had been made, nor retroact
jurisdiction upon summons being made. . . .

It went on to say, citing Sievert v. Court of Appeals, 3 that "in a proceedings in

attachment," the "critical time which must be identified is . . . when the trial
court acquires authority under law to act coercively against the defendant or
his property . . .;" and that "the critical time is the of the vesting of jurisdiction
in the court over the person of the defendant in the main case."

Reversal of this Decision of the Court of Appeals of May 4, 1990 is what Davao
Light seeks in the present appellate proceedings.

The question is whether or not a writ of preliminary attachment may issue ex

parte against a defendant before acquisition of jurisdiction of the latter's person
by service of summons or his voluntary submission to the Court's authority.

The Court rules that the question must be answered in the affirmative and that
consequently, the petition for review will have to be granted.

It is incorrect to theorize that after an action or proceeding has been

commenced and jurisdiction over the person of the plaintiff has been vested in
the court, but before the acquisition of jurisdiction over the person of the
defendant (either by service of summons or his voluntary submission to the
court's authority), nothing can be validly done by the plaintiff or the court. It is
wrong to assume that the validity of acts done during this period should be
defendant on, or held in suspension until, the actual obtention of jurisdiction
over the defendant's person. The obtention by the court of jurisdiction over the
person of the defendant is one thing; quite another is the acquisition of
jurisdiction over the person of the plaintiff or over the subject-matter or nature
of the action, or the res or object hereof.

An action or proceeding is commenced by the filing of the complaint or other

initiatory pleading. 4 By that act, the jurisdiction of the court over the subject matter or nature of the action or proceeding
is invoked or called into activity; 5
 and it is thus that the court acquires jurisdiction over said
subject matter or nature of the action. 6 And it is by that self-same act of the
plaintiff (or petitioner) of filing the complaint (or other appropriate pleading) —
by which he signifies his submission to the court's power and authority — that
jurisdiction is acquired by the court over his person. 7 On the other hand,
jurisdiction over the person of the defendant is obtained, as above stated, by
the service of summons or other coercive process upon him or by his voluntary
submission to the authority of the court. 8
The events that follow the filing of the complaint as a matter of routine are well known. After the complaint is filed, summons issues to

the defendant, the summons is then transmitted to the sheriff, and finally, service of the summons is effected on the defendant in any of

the ways authorized by the Rules of Court. There is thus ordinarily some appreciable interval of time between the day of the filing of the

complaint and the day of service of summons of the defendant. During this period, different acts may be done by the plaintiff or by the

Court, which are unquestionable validity and propriety. Among these, for example, are the appointment of a guardian ad litem, 9
 the
grant of authority to the plaintiff to prosecute the suit as a pauper
litigant, 10 the amendment of the complaint by the plaintiff as a matter of right
without leave of court, 11 authorization by the Court of service of summons by
publication, 12 the dismissal of the action by the plaintiff on mere notice. 13
This, too, is true with regard to the provisional remedies of preliminary attachment, preliminary injunction, receivership or

replevin. 14
 They may be validly and properly applied for and granted even before
the defendant is summoned or is heard from.

A preliminary attachment may be defined, paraphrasing the Rules of Court, as

the provisional remedy in virtue of which a plaintiff or other party may, at the
commencement of the action or at any time thereafter, have the property of the
adverse party taken into the custody of the court as security for the
satisfaction of any judgment that may be recovered. 15 It is a remedy which is
purely statutory in respect of which the law requires a strict construction of the
provisions granting it. 16 Withal no principle, statutory or jurisprudential,
prohibits its issuance by any court before acquisition of jurisdiction over the
person of the defendant.

Rule 57 in fact speaks of the grant of the remedy "at the commencement of the
action or at any time thereafter." 17 The phase, "at the commencement of the
action," obviously refers to the date of the filing of the complaint — which, as
above pointed out, is the date that marks "the commencement of the
action;" 18 and the reference plainly is to a time before summons is served on
the defendant, or even before summons issues. What the rule is saying quite
clearly is that after an action is properly commenced — by the filing of the
complaint and the payment of all requisite docket and other fees — the plaintiff
may apply for and obtain a writ of preliminary attachment upon fulfillment of
the pertinent requisites laid down by law, and that he may do so at any time,
either before or after service of summons on the defendant. And this indeed,
has been the immemorial practice sanctioned by the courts: for the plaintiff or
other proper party to incorporate the application for attachment in the
complaint or other appropriate pleading (counter-claim, cross-claim, third-
party claim) and for the Trial Court to issue the writ ex-parte at the
commencement of the action if it finds the application otherwise sufficient in
form and substance.

In Toledo v. Burgos, 19 this Court ruled that a hearing on a motion or

application for preliminary attachment is not generally necessary unless
otherwise directed by the Trial Court in its discretion. 20 And in Filinvest Credit
Corporation v. Relova, 21 the Court declared that "(n)othing in the Rules of
Court makes notice and hearing indispensable and mandatory requisites for
the issuance of a writ of attachment." The only pre-requisite is that the Court
be satisfied, upon consideration of "the affidavit of the applicant or of some
other person who personally knows the facts, that a sufficient cause of action
exists, that the case is one of those mentioned in Section 1 . . . (Rule 57), that
there is no other sufficient security for the claim sought to be enforced by the
action, and that the amount due to the applicant, or the value of the property
the possession of which he is entitled to recover, is as much as the sum for
which the order (of attachment) is granted above all legal counterclaims." 22 If
the court be so satisfied, the "order of attachment shall be granted," 23 and the
writ shall issue upon the applicant's posting of "a bond executed to the adverse
party in an amount to be fixed by the judge, not exceeding the plaintiffs claim,
conditioned that the latter will pay all the costs which may be adjudged to the
adverse party and all damages which he may sustain by reason of the
attachment, if the court shall finally adjudge that the applicant was not
entitled thereto." 24
In Mindanao Savings & Loan Association, Inc. v. Court of Appeals, decided on April 18, 1989, 25
 this Court had
occasion to emphasize the postulate that no hearing is required on an
application for preliminary attachment, with notice to the defendant, for the
reason that this "would defeat the objective of the remedy . . . (since the) time
which such a hearing would take, could be enough to enable the defendant to
abscond or dispose of his property before a writ of attachment issues." As
observed by a former member of this Court, 26 such a procedure would warn
absconding debtors-defendants of the commencement of the suit against them
and the probable seizure of their properties, and thus give them the advantage
of time to hide their assets, leaving the creditor-plaintiff holding the proverbial
empty bag; it would place the creditor-applicant in danger of losing any
security for a favorable judgment and thus give him only an illusory victory.

Withal, ample modes of recourse against a preliminary attachment are secured

by law to the defendant. The relative ease with which a preliminary attachment
may be obtained is matched and paralleled by the relative facility with which
the attachment may legitimately be prevented or frustrated. These modes of
recourse against preliminary attachments granted by Rule 57 were discussed
at some length by the separate opinion in Mindanao Savings & Loans Asso. Inc.
v. CA., supra.

That separate opinion stressed that there are two (2) ways of discharging an
attachment: first, by the posting of a counterbond; and second, by a showing
of its improper or irregular issuance.
1.0. The submission of a counterbond is an efficacious mode of lifting an
attachment already enforced against property, or even of preventing its
enforcement altogether.

1.1. When property has already been seized under attachment, the attachment
may be discharged upon counterbond in accordance with Section 12 of Rule
57.

Sec. 12. Discharge of attachment upon giving counterbond. — At any time

after an order of attachment has been granted, the party whose property
has been attached or the person appearing in his behalf, may, upon
reasonable notice to the applicant, apply to the judge who granted the
order, or to the judge of the court in which the action is pending, for an
order discharging the attachment wholly or in part on the security given .
. . in an amount equal to the value of the property attached as
determined by the judge to secure the payment of any judgment that the
attaching creditor may recover in the action. . . .

1.2. But even before actual levy on property, seizure under attachment may be
prevented also upon counterbond. The defendant need not wait until his
property is seized before seeking the discharge of the attachment by a
counterbond. This is made possible by Section 5 of Rule 57.

Sec. 5. Manner of attaching property. — The officer executing the order

shall without delay attach, to await judgment and execution in the
action, all the properties of the party against whom the order is issued in
the province, not exempt from execution, or so much thereof as may be
sufficient to satisfy the applicant's demand, unless the former makes a
deposit with the clerk or judge of the court from which the order issued, or
gives a counter-bond executed to the applicant, in an amount sufficient to
satisfy such demand besides costs, or in an amount equal to the value of
the property which is about to be attached, to secure payment to the
applicant of any judgment which he may recover in the action. . . .
(Emphasis supplied)

2.0. Aside from the filing of a counterbond, a preliminary attachment may also
be lifted or discharged on the ground that it has been irregularly or improperly
issued, in accordance with Section 13 of Rule 57. Like the first, this second
mode of lifting an attachment may be resorted to even before any property has
been levied on. Indeed, it may be availed of after property has been released
from a levy on attachment, as is made clear by said Section 13, viz.:

Sec. 13. Discharge of attachment for improper or irregular issuance. —

The party whose property has been attached may also, at any time
either BEFORE or AFTER the release of the attached property, or before
any attachment shall have been actually levied, upon reasonable notice to
 the attaching creditor, apply to the judge who granted the order, or to the
judge of the court in which the action is pending, for an order to
discharge the attachment on the ground that the same was improperly or
irregularly issued. If the motion be made on affidavits on the part of the
party whose property has been attached, but not otherwise, the
attaching creditor may oppose the same by counter-affidavits or other
evidence in addition to that on which the attachment was made. . . .
(Emphasis supplied)

This is so because "(a)s pointed out in Calderon v. I.A.C., 155 SCRA 531 (1987),
The attachment debtor cannot be deemed to have waived any defect in the
issuance of the attachment writ by simply availing himself of one way of
discharging the attachment writ, instead of the other. Moreover, the filing of a
counterbond is a speedier way of discharging the attachment writ maliciously
sought out by the attaching creditor instead of the other way, which, in most
instances . . . would require presentation of evidence in a fullblown trial on the
merits, and cannot easily be settled in a pending incident of the case." 27
It may not be amiss to here reiterate other related principles dealt with in Mindanao Savings & Loans Asso. Inc. v. C.A., supra., 28
 to
wit:

(a) When an attachment may not be dissolved by a showing of its irregular

or improper issuance:

. . . (W)hen the preliminary attachment is issued upon a ground which is

at the same time the applicant's cause of action; e.g., "an action for
money or property embezzled or fraudulently misapplied or converted to
his own use by a public officer, or an officer of a corporation, or an
attorney, factor, broker, agent, or clerk, in the course of his employment
as such, or by any other person in a fiduciary capacity, or for a willful
violation of duty." (Sec. 1 [b], Rule 57), or "an action against a party who
has been guilty of fraud m contracting the debt or incurring the
obligation upon which the action is brought" (Sec. 1 [d], Rule 57), the
defendant is not allowed to file a motion to dissolve the attachment
under Section 13 of Rule 57 by offering to show the falsity of the factual
averments in the plaintiff's application and affidavits on which the writ
was based — and consequently that the writ based thereon had been
improperly or irregularly issued (SEE Benitez v. I.A.C., 154 SCRA 41) —
the reason being that the hearing on such a motion for dissolution of the
writ would be tantamount to a trial of the merits of the action. In other
words, the merits of the action would be ventilated at a mere hearing of a
motion, instead of at the regular trial. Therefore, when the writ of
attachment is of this nature, the only way it can be dissolved is by a
counterbond (G.B. Inc. v. Sanchez, 98 Phil. 886).
(b) Effect of the dissolution of a preliminary attachment on the plaintiffs
attachment bond:

. . . The dissolution of the preliminary attachment upon security given, or

a showing of its irregular or improper issuance, does not of course
operate to discharge the sureties on plaintiff's own attachment bond. The
reason is simple. That bond is "executed to the adverse party, . . .
conditioned that the . . . (applicant) will pay all the costs which may be
adjudged to the adverse party and all damages which he may sustain by
reason of the attachment, if the court shall finally adjudge that the
applicant was not entitled thereto" (SEC. 4, Rule 57). Hence, until that
determination is made, as to the applicant's entitlement to the
attachment, his bond must stand and cannot be with-drawn.

With respect to the other provisional remedies, i.e., preliminary injunction

(Rule 58), receivership (Rule 59), replevin or delivery of personal property (Rule
60), the rule is the same: they may also issue ex parte. 29
It goes without saying that whatever be the acts done by the Court prior to the acquisition of jurisdiction over the person of defendant, as

above indicated — issuance of summons, order of attachment and writ of attachment (and/or appointments of guardian ad litem, or

grant of authority to the plaintiff to prosecute the suit as a pauper litigant, or amendment of the complaint by the plaintiff as a matter of

right without leave of court 30

 — and however valid and proper they might otherwise be,
these do not and cannot bind and affect the defendant until and unless
jurisdiction over his person is eventually obtained by the court, either by
service on him of summons or other coercive process or his voluntary
submission to the court's authority. Hence, when the sheriff or other proper
officer commences implementation of the writ of attachment, it is essential that
he serve on the defendant not only a copy of the applicant's affidavit and
attachment bond, and of the order of attachment, as explicity required by
Section 5 of Rule 57, but also the summons addressed to said defendant as
well as a copy of the complaint and order for appointment of guardian ad
litem, if any, as also explicity directed by Section 3, Rule 14 of the Rules of
Court. Service of all such documents is indispensable not only for the
acquisition of jurisdiction over the person of the defendant, but also upon
considerations of fairness, to apprise the defendant of the complaint against
him, of the issuance of a writ of preliminary attachment and the grounds
therefor and thus accord him the opportunity to prevent attachment of his
property by the posting of a counterbond in an amount equal to the plaintiff's
claim in the complaint pursuant to Section 5 (or Section 12), Rule 57, or
dissolving it by causing dismissal of the complaint itself on any of the grounds
set forth in Rule 16, or demonstrating the insufficiency of the applicant's
affidavit or bond in accordance with Section 13, Rule 57.

It was on account of the failure to comply with this fundamental requirement of

service of summons and the other documents above indicated that writs of
attachment issued by the Trial Court ex parte were struck down by this Court's
Third Division in two (2) cases, namely: Sievert v. Court of Appeals, 31 and BAC
Manufacturing and Sales Corporation v. Court of Appeals, et al. 32 In contrast to
the case at bar — where the summons and a copy of the complaint, as well as
the order and writ of attachment and the attachment bond were served on the
defendant — in Sievert, levy on attachment was attempted notwithstanding
that only the petition for issuance of the writ of preliminary attachment was
served on the defendant, without any prior or accompanying summons and
copy of the complaint; and in BAC Manufacturing and Sales Corporation,
neither the summons nor the order granting the preliminary attachment or the
writ of attachment itself was served on the defendant "before or at the time the
levy was made."

For the guidance of all concerned, the Court reiterates and reaffirms the
proposition that writs of attachment may properly issue ex parte provided that
the Court is satisfied that the relevant requisites therefor have been fulfilled by
the applicant, although it may, in its discretion, require prior hearing on the
application with notice to the defendant; but that levy on property pursuant to
the writ thus issued may not be validly effected unless preceded, or
contemporaneously accompanied, by service on the defendant of summons, a
copy of the complaint (and of the appointment of guardian ad litem, if any), the
application for attachment (if not incorporated in but submitted separately
from the complaint), the order of attachment, and the plaintiff's attachment
bond.

WHEREFORE, the petition is GRANTED; the challenged decision of the Court

of Appeals is hereby REVERSED, and the order and writ of attachment issued
by Hon. Milagros C. Nartatez, Presiding Judge of Branch 8, Regional Trial
Court of Davao City in Civil Case No. 19513-89 against Queensland Hotel or
Motel or Queensland Tourist Inn and Teodorico Adarna are hereby
REINSTATED. Costs against private respondents.

SO ORDERED.
 45 F.2d 426 (1930)
HEINE
v.
NEW YORK LIFE INS. CO.
No. 10465.

District Court, D. Oregon.

December 1, 1930.

C. T. Haas and E. B. Seabrook, both of Portland, Or., for plaintiff.

Huntington, Wilson & Huntington and Clark & Clark, all of Portland, Or., for
defendant.

BEAN, District Judge.

This is one of a series of cases pending in this court against the New York Life
Insurance Company and the Guardian Insurance Company, each of which is a
New York corporation, to recover on some two hundred and forty life insurance
policies made and issued by the defendants in Germany, in favor of German
citizens and subjects, and payable in German marks. The policies of the New
York Life Insurance Company were issued prior to August 1, 1914, and those
of the Guardian prior to May 1, 1918. As a condition to their right to do
business in Germany, the insurance companies were required to and did
submit to the supervision and control of the German insurance officials, to
invest the reserves arising from German policies in German securities, and to
establish, and they do now maintain, an office in that country with a resident
representative or agent upon whom service of process can be made.

The actions now pending are brought and prosecuted in the name of, or as
assignee of the insured by, certain parties in the United States and Germany,
under an irrevocable power of attorney, by which they are authorized and
empowered to sue for, collect, receive, and receipt for all sums due or owing
under the policies, or compromise the same in consideration of an assignment
and transfer to them of the undivided 25 per cent. interest in the policies and
all rights accruing thereunder.

None of the parties to the litigation are residents or inhabitants of this district.
The plaintiffs reside in, and are citizens of, the republic of Germany. The
defendants are corporations organized and existing under the laws of New
York, with their principal offices in that state, with statutory agents in Oregon,
upon whom service can be made. None of the causes of action arose here, nor
do any of the material witnesses reside in the district, nor are any of the
records of the defendant companies pertaining to the policies in suit in the
district, but such records are either at the home office in New York or at their
offices in Germany. The courts of Germany and New York are open and
functioning and competent to take jurisdiction of the controversies, and service
can be made upon the defendants in either of such jurisdictions. To require the
defendants to defend the actions in this district would impose upon them great
and unnecessary inconvenience and expense, and probably compel them to
produce here (three thousand miles from their home office) numerous records,
books, and papers, all of which are in daily use by it in taking care of current
business.

In addition, it would no doubt consume months of the time of this court to try
and dispose of these cases, thus necessarily disarranging the calendar,
resulting in delay, inconvenience, and expense to other litigants who are
entitled to invoke its jurisdiction.

Under these circumstances, the defendants, while conceding that the court has
jurisdiction of the person and subject-matter, urges that it should refuse, in its
discretion, to exercise such jurisdiction.

I unhesitatingly concur in this view, for, as said by Mr. Justice Holmes in Cuba
Railroad Co. v. Crosby, 222 U.S. 473, 32 S. Ct. 132, 133, 56 L. Ed. 274, 38 L.
R. A. (N. S.) 40: "It should be remembered that parties do not enter into civil
relations in foreign jurisdictions in reliance upon our courts. They could not
complain if our courts refused to meddle with their affairs, and remitted them
to the place that established and would enforce their rights. * * * The only just
ground for complaint would be if their rights and liabilities, when enforced by
our courts, should be measured by a different rule from that under which the
parties dealt."

*427 It is apparent that the plaintiffs are seeking by these actions to impose on
the defendants a liability under a different rule than "that under which the
parties dealt."

The courts of Germany have ruled that any person seeking to recover on a civil
contract made in Germany prior to August, 1924, and payable in marks, can
only recover on the basis provided in the monetary law of 1924. Manifestly the
plaintiffs are not proceeding on any such theory.

It is argued by the plaintiffs that, because the court has jurisdiction of the
subject-matter and the parties, it has no discretion, but should proceed with
the case, regardless of where the cause of action arose, or the law by which it is
controlled, or the residence or convenience of the parties and witnesses, or the
difficulty the court would encounter in attempting to interpret and enforce a
foreign contract, or the interference with the other business of the court. But
that is a matter resting in its discretion. It may retain jurisdiction, or it may, in
the exercise of a sound discretion, decline to do so, as the circumstances
suggest. The courts have repeatedly refused, in their discretion, to entertain
jurisdiction of causes of action arising in a foreign jurisdiction, where both
parties are nonresidents of the forum. Gregonis v. Philadelphia & R. Coal &
Iron Co., 235 N.Y. 152, 139 N.E. 223, 32 A. L. R. 1, and note; Pietraroia v. New
Jersey & Hudson River Ry. & Ferry Co., 197 N.Y. 434, 91 N.E. 120; Gregonis v.
P. & R. Coal & Iron Co., 235 N.Y. 152, 139 N.E. 223, 32 A. L. R. 1; Stewart v.
Litchenberg, 148 La. 195, 86 So. 734; Smith v. Mutual Life Insurance Co., 14
Allen (96 Mass.) 336-343; National Telephone Mfg. Co. v. Du Bois, 165 Mass.
117, 42 N.E. 510, 30 L. R. A. 628, 52 Am. St. Rep. 503; Collard v. Beach, 81
App. Div. 582, 81 N.Y.S. 619; Great Western Railway Co. v. Miller, 19 Mich.
305; Disconto Gesellschat v. Umbreit, 127 Wis. 651, 106 N.W. 821, 15 L. R. A.
(N. S.) 1045, 115 Am. St. Rep. 1063.

As said by Mr. Justice Bradley in The Belgenland, 114 U.S. 355, 5 S. Ct. 860,
864, 29 L. Ed. 152: "Circumstances often exist which render it inexpedient for
the court to take jurisdiction of controversies between foreigners in cases not
arising in the country of the forum; as, where they are governed by the laws of
the country to which the parties belong, and there is no difficulty in a resort to
its courts; or where they have agreed to resort to no other tribunals * * * not on
the ground that it has not jurisdiction, but that, from motives of convenience,
or international comity, it will use its discretion whether to exercise jurisdiction
or not."

See, also, Charter Shipping Co. v. Bowring, 281 U.S. 515, 50 S. Ct. 400, 74 L.
Ed. 1008.
These, in my judgment, are cases of that kind. They are actions brought on
causes of action arising in Germany. The contract of insurance was made and
to be paid there and in German currency. It is to be construed and given effect
according to the laws of the place where it was made. 22 Am. & Eng. Ency. of
Law (2d Ed.) 1350. The courts of this country are established and maintained
primarily to determine controversies between its own citizens and those having
business there, and manifestly the court may protect itself against a flood of
litigation over contracts made and to be performed in a foreign country, where
the parties and witnesses are nonresidents of the forum, and no reason exists
why the liability, if any, cannot be enforced in the courts of the country where
the cause of action arose, or in the state where the defendant was organized
and has its principal offices. True, the courts of New York have declined to
exercise jurisdiction over actions brought on insurance policies similar to those
in suit. Higgins v. N. Y. Ins. Co., 220 App. Div. 760, 222 N.Y.S. 819, and Von
Nessen-Stone v. N. Y. Life Ins. Co.[1] But that affords no reason why this court
should do so. It is to me unthinkable that residents and citizens of Germany
may import bodily into this court numerous actions against a nonresident
defendant, on contracts made and payable in Germany, and insist as a matter
of right that, because it has obtained jurisdiction of the defendant by service of
its statutory agent, the taxpayers, citizens, and residents of the district having
business in the court should stand aside and wait the conclusion of the case,
where, as here, the courts of Germany and of the home state of the defendant
are open and functioning.

Judge Tucker, in the state court of Multnomah county, in an able and well-
considered opinion in a case brought on one of the German policies (Kahn v.
New York), reached the same conclusion.

Motion allowed.