G.R. No. 101538 June 23, 1992 3.
3. the court where it has a place of business through which the contract had
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian,
Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.
CRUZ, J.:
This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention,
reading as follows:
Art. 28. (1) An action for damage must be brought at the option of the
plaintiff, in the territory of one of the High Contracting Parties, either before
the court of the domicile of the carrier or of his principal place of business, or
where he has a place of business through which the contract has been
made, or before the court at the place of destination.
The petitioner is a minor and a resident of the Philippines. Private respondent Northwest
Orient Airlines (NOA) is a foreign corporation with principal office in Minnesota, U.S.A. and
licensed to do business and maintain a branch office in the Philippines.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco.
U.S.A., for his flight from San Francisco to Manila via Tokyo and back. The scheduled
departure date from Tokyo was December 20, 1986. No date was specified for his return to
San Francisco. 1
On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco
airport for his scheduled departure to Manila. Despite a previous confirmation and re-
confirmation, he was informed that he had no reservation for his flight from Tokyo to Manila.
He therefore had to be wait-listed.
On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of
Makati. On April 13, 1987, NOA moved to dismiss the complaint on the ground of lack of
jurisdiction. Citing the above-quoted article, it contended that the complaint could be instituted
only in the territory of one of the High Contracting Parties, before:
1. the court of the domicile of the carrier;
2. the court of its principal place of business;
been made;
4. the court of the place of destination.
The private respondent contended that the Philippines was not its domicile nor was this its
principal place of business. Neither was the petitioner's ticket issued in this country nor was
his destination Manila but San Francisco in the United States.
On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The
petitioner appealed to the Court of Appeals, which affirmed the decision of the lower
court. 3 On June 26, 1991, the petitioner filed a motion for reconsideration, but the same was
denied. 4 The petitioner then came to this Court, raising substantially the same issues it
submitted in the Court of Appeals.
The assignment of errors may be grouped into two major issues, viz:
(1) the constitutionality of Article 28(1) of the Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the case.
The petitioner also invokes Article 24 of the Civil Code on the protection of minors.
I
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court erred in not ruling that Article
28(1) of the Warsaw Convention violates the constitutional guarantees of due
process and equal protection.
The Republic of the Philippines is a party to the Convention for the Unification of Certain
Rules Relating to International Transportation by Air, otherwise known as the Warsaw
Convention. It took effect on February 13, 1933. The Convention was concurred in by the
Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of
accession was signed by President Elpidio Quirino on October 13, 1950, and was deposited
with the Polish government on November 9, 1950. The Convention became applicable to the
Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay
issued Proclamation No. 201, declaring our formal adherence thereto. "to the end that the
same and every article and clause thereof may be observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof." 5
The Convention is thus a treaty commitment voluntarily assumed by the Philippine
government and, as such, has the force and effect of law in this country.
The petitioner contends that Article 28(1) cannot be applied in the present case because it is
unconstitutional. He argues that there is no substantial distinction between a person who
purchases a ticket in Manila and a person who purchases his ticket in San Francisco. The
classification of the places in which actions for damages may be brought is arbitrary and
irrational and thus violates the due process and equal protection clauses.
It is well-settled that courts will assume jurisdiction over a constitutional question only if it is
shown that the essential requisites of a judicial inquiry into such a question are first satisfied.
Thus, there must be an actual case or controversy involving a conflict of legal rights
susceptible of judicial determination; the constitutional question must have been opportunely
raised by the proper party; and the resolution of the question is unavoidably necessary to the
decision of the case itself. 6
Courts generally avoid having to decide a constitutional question. This attitude is based on
the doctrine of separation of powers, which enjoins upon the departments of the government
a becoming respect for each other's acts.
The treaty which is the subject matter of this petition was a joint legislative-executive act. The
presumption is that it was first carefully studied and determined to be constitutional before it
was adopted and given the force of law in this country.
The petitioner's allegations are not convincing enough to overcome this presumption.
Apparently, the Convention considered the four places designated in Article 28 the most
convenient forums for the litigation of any claim that may arise between the airline and its
passenger, as distinguished from all other places. At any rate, we agree with the respondent
court that this case can be decided on other grounds without the necessity of resolving the
constitutional issue.
B. The petitioner claims that the lower court erred in not ruling that Art. 28(1)
of the Warsaw Convention is inapplicable because of a fundamental change
in the circumstances that served as its basis.
The petitioner goes at great lengths to show that the provisions in the Convention were
intended to protect airline companies under "the conditions prevailing then and which have
long ceased to exist." He argues that in view of the significant developments in the airline
industry through the years, the treaty has become irrelevant. Hence, to the extent that it has
lost its basis for approval, it has become unconstitutional.
The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this
doctrine constitutes an attempt to formulate a legal principle which would justify non-
performance of a treaty obligation if the conditions with relation to which the parties
contracted have changed so materially and so unexpectedly as to create a situation in which
the exaction of performance would be unreasonable." 7 The key element of this doctrine is
the vital change in the condition of the contracting parties that they could not have foreseen at
the time the treaty was concluded.
The Court notes in this connection the following observation made in Day v. Trans World
Airlines, Inc.: 8
The Warsaw drafters wished to create a system of liability rules that would
cover all the hazards of air travel . . . The Warsaw delegates knew that, in the
years to come, civil aviation would change in ways that they could not
foresee. They wished to design a system of air law that would be both
durable and flexible enough to keep pace with these changes . . . The ever-
changing needs of the system of civil aviation can be served within the
framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline industry was still in
its infancy. However, that circumstance alone is not sufficient justification for the rejection of
the treaty at this time. The changes recited by the petitioner were, realistically, not entirely
unforeseen although they were expected in a general sense only. In fact, the Convention
itself, anticipating such developments, contains the following significant provision:
Article 41. Any High Contracting Party shall be entitled not earlier than two
years after the coming into force of this convention to call for the assembling
of a new international conference in order to consider any improvements
which may be made in this convention. To this end, it will communicate with
the Government of the French Republic which will take the necessary
measures to make preparations for such conference.
But the more important consideration is that the treaty has not been rejected by the Philippine
government. The doctrine of rebus sic stantibus does not operate automatically to render the
treaty inoperative. There is a necessity for a formal act of rejection, usually made by the head
of State, with a statement of the reasons why compliance with the treaty is no longer
required.
In lieu thereof, the treaty may be denounced even without an expressed justification for this
action. Such denunciation is authorized under its Article 39, viz:
Article 39. (1) Any one of the High Contracting Parties may denounce this
convention by a notification addressed to the Government of the Republic of
Poland, which shall at once inform the Government of each of the High
Contracting Parties.
(2) Denunciation shall take effect six months after the notification of
denunciation, and shall operate only as regards the party which shall have
proceeded to denunciation.
Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to
Article 39, is not a function of the courts but of the other branches of government. This is a
political act. The conclusion and renunciation of treaties is the prerogative of the political
departments and may not be usurped by the judiciary. The courts are concerned only with the
interpretation and application of laws and treaties in force and not with their wisdom or
efficacy.
C. The petitioner claims that the lower court erred in ruling that the plaintiff
must sue in the United States, because this would deny him the right to
access to our courts.
The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the
United States would constitute a constructive denial of his right to access to our courts for the
protection of his rights. He would consequently be deprived of this vital guaranty as embodied
in the Bill of Rights.
Obviously, the constitutional guaranty of access to courts refers only to courts with
appropriate jurisdiction as defined by law. It does not mean that a person can go to any  court
for redress of his grievances regardless of the nature or value of his claim. If the petitioner is
barred from filing his complaint before our courts, it is because they are not vested with the
appropriate jurisdiction under the Warsaw Convention, which is part of the law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court erred in not ruling that Article
28(1) of the Warsaw Convention is a rule merely of venue and was
waived by defendant when it did not move to dismiss on the ground of
improper venue.
JURISDICTION!
By its own terms, the Convention applies to all international transportation of persons
performed by aircraft for hire.
International transportation is defined in paragraph (2) of Article 1 as follows:
(2) For the purposes of this convention, the expression "international
transportation" shall mean any transportation in which, according to the
contract made by the parties, the place of departure and the place of
destination, whether or not there be a break in the transportation or a
transshipment, are situated [either] within the territories of two High
Contracting Parties . . .
Whether the transportation is "international" is determined by the contract of the parties,
which in the case of passengers is the ticket. When the contract of carriage provides for the
transportation of the passenger between certain designated terminals "within the territories of
two High Contracting Parties," the provisions of the Convention automatically apply and
exclusively govern the rights and liabilities of the airline and its passenger.
Since the flight involved in the case at bar is international, the same being from the United
States to the Philippines and back to the United States, it is subject to the provisions of the
Warsaw Convention, including Article 28(1), which enumerates the four places where an
action for damages may be brought.
Whether Article 28(1) refers to jurisdiction or only to venue is a question over which
authorities are sharply divided. While the petitioner cites several cases holding that Article
28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by the private
respondent supporting the conclusion that the provision is jurisdictional. 10
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by
consent or waiver upon d court which otherwise would have no jurisdiction over the subject-
matter of an action; but the venue of an action as fixed by statute may be changed by the
consent of the parties and an objection that the plaintiff brought his suit in the wrong county
may be waived by the failure of the defendant to make a timely objection . In either case, the
court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or
agreement of the parties, whether or not a prohibition exists against their alteration. 11
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction
and not a venue provision. First, the wording of Article 32, which indicates the places where
the action for damages "must" be brought, underscores the mandatory nature of Article 28(1).
Second, this characterization is consistent with one of the objectives of the Convention, which
is to "regulate in a uniform manner the conditions of international transportation by air ." Third,
the Convention does not contain any provision prescribing rules of jurisdiction other than
Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must
refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the
exclusive enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the
will of the parties regardless of the time when the damage occurred.
This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways,
Ltd., 12 where it was held:
. . . Of more, but still incomplete, assistance is the wording of Article 28(2),
especially when considered in the light of Article 32. Article 28(2) provides
that "questions of  procedure shall be governed by the law of the court to
which the case is submitted" (Emphasis supplied). Section (2) thus may be
read to leave for domestic decision questions regarding the suitability and
location of a particular Warsaw Convention case.
In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on
a dual concept. Jurisdiction in the international sense must be established in accordance with
Article 28(1) of the Warsaw Convention, following which the jurisdiction of a particular court
must be established pursuant to the applicable domestic law. Only after the question of which
court has jurisdiction is determined will the issue of venue be taken up. This second question
shall be governed by the law of the court to which the case is submitted.
The petitioner submits that since Article 32 states that the parties are precluded "before the
damages occurred" from amending the rules of Article 28(1) as to the place where the action
may be brought, it would follow that the Warsaw Convention was not intended to preclude
them from doing so "after the damages occurred."
Article 32 provides:
Art. 32. Any clause contained in the contract and all special agreements
entered into before the damage occurred by which the parties purport to
infringe the rules laid down by this convention, whether by deciding the law to
be applied, or by altering the rules as to jurisdiction, shall be null and void.
Nevertheless for the transportation of goods, arbitration clauses shall be
allowed, subject to this convention, if the arbitration is to take place within
one of the jurisdictions referred to in the first paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be waived "after the damages
(shall have) occurred," the article should be regarded as possessing the character of a
"venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss on the ground of
lack of jurisdiction, the private respondent has waived improper venue as a ground to
dismiss.
The foregoing examination of Article 28(1) in relation to Article 32 does not support this
conclusion. In any event, we agree that even granting arguendo that Article 28(1) is a venue
and not a jurisdictional provision, dismissal of the case was still in order. The respondent
court was correct in affirming the ruling of the trial court on this matter, thus:
Santos' claim that NOA waived venue as a ground of its motion to dismiss is
not correct. True it is that NOA averred in its MOTION TO DISMISS that the
ground thereof is "the Court has no subject matter jurisdiction to entertain the
Complaint" which SANTOS considers as equivalent to "lack of jurisdiction
over the subject matter . . ." However, the gist of NOA's argument in its
motion is that the Philippines is not the proper place where SANTOS could
file the action — meaning that the venue of the action is improperly laid. Even
assuming then that the specified ground of the motion is erroneous, the fact
is the proper ground of the motion — improper venue — has been discussed
therein.
Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver
if there are special circumstances justifying this conclusion, as in the petition at bar. As we
observed in Javier vs. Intermediate Court of Appeals: 13
Legally, of course, the lack of proper venue was deemed waived by the
petitioners when they failed to invoke it in their original motion to dismiss.
Even so, the motivation of the private respondent should have been taken
into account by both the trial judge and the respondent court in arriving at
their decisions.
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of
Appeals, where it was held that Article 28(1) is a venue provision. However, the private
respondent avers that this was in effect reversed by the case of Aranas v. United
Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision. Neither
of these cases is binding on this Court, of course, nor was either of them appealed to us.
Nevertheless, we here express our own preference for the later case of Aranas insofar as its
pronouncements on jurisdiction conform to the judgment we now make in this petition.
B. The petitioner claims that the lower court erred in not ruling that under
Article 28(1) of the Warsaw Convention, this case was properly filed in
the Philippines, because Manila was the destination of the plaintiff.
Manila is not the destination
The Petitioner contends that the facts of this case are analogous to those in  Aanestad v. Air
Canada. 16 In that case, Mrs. Silverberg purchased a round-trip ticket from Montreal to Los
Angeles and back to Montreal. The date and time of departure were specified but not of the
return flight. The plane crashed while on route from Montreal to Los Angeles, killing Mrs.
Silverberg. Her administratrix filed an action for damages against Air Canada in the U.S.
District Court of California. The defendant moved to dismiss for lack of jurisdiction but the
motion was denied thus:
. . . It is evident that the contract entered into between Air Canada and Mrs.
Silverberg as evidenced by the ticket booklets and the Flight Coupon No. 1,
was a contract for Air Canada to carry Mrs. Silverberg to Los Angeles on a
certain flight, a certain time and a certain class, but that the time for her to
return remained completely in her power. Coupon No. 2 was only a
continuing offer by Air Canada to give her a ticket to return to Montreal
between certain dates. . . .
The only conclusion that can be reached then, is that "the place of
destination" as used in the Warsaw Convention is considered by both the
Canadian C.T.C. and the United States C.A.B. to describe at least two
"places of destination," viz., the "place of destination" of a particular flight
either an "outward destination" from the "point of origin" or from the "outward
point of destination" to any place in Canada.
Thus the place of destination under Art. 28 and Art. 1 of the Warsaw
Convention of the flight on which Mrs. Silverberg was killed, was Los Angeles
 according to the ticket, which was the contract between the parties and the
suit is properly filed in this Court which has jurisdiction.
The Petitioner avers that the present case falls squarely under the above ruling because the
date and time of his return flight to San Francisco were, as in the Aanestad case, also left
open. Consequently, Manila and not San Francisco should be considered the petitioner's
destination.
The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the
United States District Court (Eastern District of Pennsylvania) said:
. . . Although the authorities which addressed this precise issue are not
extensive, both the cases and the commentators are almost unanimous in
concluding that the "place of destination" referred to in the Warsaw
Convention "in a trip consisting of several parts . . . is the ultimate
destination that is accorded treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with the Court's
analysis in Aanestad; whether the return portion of the ticket is characterized
as an option or a contract, the carrier was legally bound to transport the
passenger back to the place of origin within the prescribed time and. the
passenger for her part agreed to pay the fare and, in fact, did pay the fare.
Thus there was mutuality of obligation and a binding contract of carriage, The
fact that the passenger could forego her rights under the contract does not
make it any less a binding contract. Certainly, if the parties did not
contemplate the return leg of the journey, the passenger would not have paid
for it and the carrier would not have issued a round trip ticket.
We agree with the latter case. The place of destination, within the meaning of the Warsaw
Convention, is determined by the terms of the contract of carriage or, specifically in this case,
the ticket between the passenger and the carrier. Examination of the petitioner's ticket shows
that his ultimate destination is San Francisco. Although the date of the return flight was left
open, the contract of carriage between the parties indicates that NOA was bound to transport
the petitioner to San Francisco from Manila. Manila should therefore be considered merely an
agreed stopping place and not the destination.
The petitioner submits that the Butz case could not have overruled the Aanestad case
because these decisions are from different jurisdictions. But that is neither here nor there. In
fact, neither of these cases is controlling on this Court. If we have preferred the Butz case, it
is because, exercising our own freedom of choice, we have decided that it represents the
better, and correct, interpretation of Article 28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It
is the "destination" and not an "agreed stopping place" that controls for purposes of
ascertaining jurisdiction under the Convention.
The contract is a single undivided operation, beginning with the place of departure and
ending with the ultimate destination. The use of the singular in this expression indicates the
understanding of the parties to the Convention that every contract of carriage has one place
of departure and one place of destination. An intermediate place where the carriage may be
broken is not regarded as a "place of destination."
C. The petitioner claims that the lower court erred in not ruling that under Art.
28(1) of the Warsaw Convention, this case was properly filed in the
Philippines because the defendant has its domicile in the Philippines.
The petitioner argues that the Warsaw Convention was originally written in French and that in
interpreting its provisions, American courts have taken the broad view that the French legal
meaning must govern. 18 In French, he says, the "domicile" of the carrier means every place
where it has a branch office.
The private respondent notes, however, that in Compagnie Nationale Air France vs.
Giliberto, 19 it was held:
The plaintiffs' first contention is that Air France is domiciled in the United
States. They say that the domicile of a corporation includes any country
where the airline carries on its business on "a regular and substantial basis,"
and that the United States qualifies under such definition. The meaning of
domicile cannot, however, be so extended. The domicile of a corporation is
customarily regarded as the place where it is incorporated, and the courts
have given the meaning to the term as it is used in article 28(1) of the
Convention. (See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452
F2d 798, 802; Nudo v. Societe Anonyme Belge d' Exploitation de la
Navigation Aerienne Sabena Belgian World Airlines (E.D. pa. 1962). 207 F.
Supp, 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977),
427 F. Suppl. 971, 974). Moreover, the structure of article 28(1), viewed as a
whole, is also incompatible with the plaintiffs' claim. The article, in stating that
places of business are among the bases of the jurisdiction, sets out two
places where an action for damages may be brought; the country where the
carrier's principal place of business is located, and the country in which it has
a place of business through which the particular contract in question was
made, that is, where the ticket was bought, Adopting the plaintiffs' theory
would at a minimum blur these carefully drawn distinctions by creating a third
intermediate category. It would obviously introduce uncertainty into litigation
under the article because of the necessity of having to determine, and
without standards or criteria, whether the amount of business done by a
carrier in a particular country was "regular" and "substantial." The plaintiff's
request to adopt this basis of jurisdiction is in effect a request to create a new
jurisdictional standard for the Convention.
Furthermore, it was argued in another case 20 that:
 . . . In arriving at an interpretation of a treaty whose sole official language is
French, are we bound to apply French law? . . . We think this question and
the underlying choice of law issue warrant some discussion
. . . We do not think this statement can be regarded as a conclusion that
internal French law is to be "applied" in the choice of law sense, to determine
the meaning and scope of the Convention's terms. Of course, French legal
usage must be considered in arriving at an accurate English translation of the
French. But when an accurate English translation is made and agreed upon,
as here, the inquiry into meaning does not then revert to a quest for a past or
present French law to be "applied" for revelation of the proper scope of the
terms. It does not follow from the fact that the treaty is written in French that
in interpreting it, we are forever chained to French law, either as it existed
when the treaty was written or in its present state of development. There is
no suggestion in the treaty that French law was intended to govern the
meaning of Warsaw's terms, nor have we found any indication to this effect in
its legislative history or from our study of its application and interpretation by
other courts. Indeed, analysis of the cases indicates that the courts, in
interpreting and applying the Warsaw Convention, have, not considered
themselves bound to apply French law simply because the Convention is
written in French. . . .
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places where the complaint is allowed to
be filed under Article 28(1). By specifying the three other places, to wit, the principal place of
business of the carrier, its place of business where the contract was made, and the place of
destination, the article clearly meant that these three other places were not comprehended in
the term "domicile."
D. The petitioner claims that the lower court erred in not ruling that Art. 28(1)
of the Warsaw Convention does not apply to actions based on tort.
The petitioner alleges that the gravamen of the complaint is that private respondent acted
arbitrarily and in bad faith, discriminated against the petitioner, and committed a willful
misconduct because it canceled his confirmed reservation and gave his reserved seat to
someone who had no better right to it. In short. the private respondent committed a tort.
Such allegation, he submits, removes the present case from the coverage of the Warsaw
Convention. He argues that in at least two American cases, 21 it was held that Article 28(1) of
the Warsaw Convention does not apply if the action is based on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in
question was interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered" by Article 17,
Article 24 clearly excludes any relief not provided for in the Convention as
modified by the Montreal Agreement. It does not, however, limit the kind of
cause of action on which the relief may be founded; rather it provides that
any action based on the injuries specified in Article 17 "however
founded," i.e., regardless of the type of action on which relief is founded, can
only be brought subject to the conditions and limitations established by the
Warsaw System. Presumably, the reason for the use of the phrase "however
founded," in two-fold: to accommodate all of the multifarious bases on which
a claim might be founded in different countries, whether under code law or
common law, whether under contract or tort, etc.; and to include all bases on
which a claim seeking relief for an injury might be founded in any one
country. In other words, if the injury occurs as described in Article 17, any
relief available is subject to the conditions and limitations established by the
Warsaw System, regardless of the particular cause of action which forms the
basis on which a plaintiff could seek
relief . . .
The private respondent correctly contends that the allegation of willful misconduct resulting in
a tort is insufficient to exclude the case from the comprehension of the Warsaw Convention.
The petitioner has apparently misconstrued the import of Article 25(l) of the Convention,
which reads as follows:
Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions
of this Convention which exclude or limit his liability. if the damage is caused
by his willful misconduct or by such default on his part as, in accordance with
the law of the court to which the case is submitted, is considered to be
equivalent to willful misconduct.
It is understood under this article that the court called upon to determine the applicability of
the limitation provision must first be vested with the appropriate jurisdiction. Article 28(1) is
the provision in the Convention which defines that jurisdiction. Article 22 23 merely fixes the
monetary ceiling for the liability of the carrier in cases covered by the Convention. If the
carrier is indeed guilty of willful misconduct, it can avail itself of the limitations set forth in this
article. But this can be done only if the action has first been commenced properly under the
rules on jurisdiction set forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil Code, which states:
Art. 24. In all contractual property or other relations, when one of the parties
is at a disadvantage on account of his moral dependence, ignorance,
 indigence, mental weakness, tender age or other handicap, the courts must
be vigilant for his protection.
Application of this article to the present case is misplaced. The above provision assumes that
the court is vested with jurisdiction to rule in favor of the disadvantaged minor, As already
explained, such jurisdiction is absent in the case at bar.
CONCLUSION
A number of countries have signified their concern over the problem of citizens being denied
access to their own courts because of the restrictive provision of Article 28(1) of the Warsaw
Convention. Among these is the United States, which has proposed an amendment that
would enable the passenger to sue in his own domicile if the carrier does business in that
jurisdiction. The reason for this proposal is explained thus:
In the event a US citizen temporarily residing abroad purchases a Rome to
New York to Rome ticket on a foreign air carrier which is generally subject to
the jurisdiction of the US, Article 28 would prevent that person from suing the
carrier in the US in a "Warsaw Case" even though such a suit could be
brought in the absence of the Convention.
The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention,
which was adopted at Guatemala City on March 8,
1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum
number of contracting parties. Pending such ratification, the petitioner will still have to file his
complaint only in any of the four places designated by Article 28(1) of the Warsaw
Convention.
The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily
have the right to sue in his own courts simply because the defendant airline has a place of
business in his country.
The Court can only sympathize with the petitioner, who must prosecute his claims in the
United States rather than in his own country at least inconvenience. But we are unable to
grant him the relief he seeks because we are limited by the provisions of the Warsaw
Convention which continues to bind us. It may not be amiss to observe at this point that the
mere fact that he will have to litigate in the American courts does not necessarily mean he will
litigate in vain. The judicial system of that country in known for its sense of fairness and,
generally, its strict adherence to the rule of law.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.
G.R. No. 102223 August 22, 1996
COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-TRADE, INC.,
(formerly ASPAC-ITEC PHILIPPINES, INC.) and FRANCISCO S. AGUIRRE, petitioners,
vs.
THE COURT OF APPEALS, ITEC INTERNATIONAL, INC., and ITEC, INC., respondents.
 
TORRES, JR., J.:p
Business Corporations, according to Lord Coke, "have no souls." They do business
peddling goods, wares or even services across national boundaries in "souless
forms" in quest for profits albeit at times, unwelcomed in these strange lands
venturing into uncertain markets and, the risk of dealing with wily competitors.
This is one of the issues in the case at bar.
Contested in this petition for review on Certiorari is the Decision of the Court of
Appeals on June 7, 1991, sustaining the RTC Order dated February 22, 1991,
denying the petitioners' Motion to Dismiss, and directing the issuance of a writ of
preliminary injunction, and its companion Resolution of October 9, 1991, denying the
petitioners' Motion for Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for brevity)
and ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both domestic
corporations, while petitioner Francisco S. Aguirre is their President and majority
stockholder. Private Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC.
(ITEC, for brevity) are corporations duly organized and existing under the laws of the
State of Alabama, United States of America. There is no dispute that ITEC is a
foreign corporation not licensed to do business in the Philippines.
On August 14, 1987, ITEC entered into a contract with petitioner ASPAC referred to
as "Representative Agreement".1 Pursuant to the contract, ITEC engaged ASPAC as
its "exclusive representative" in the Philippines for the sale of ITEC's products, in
consideration of which, ASPAC was paid a stipulated commission. The agreement
was signed by G.A. Clark and Francisco S. Aguirre, presidents of ITEC and ASPAC
respectively, for and in behalf of their companies. 2 The said agreement was initially
for a term of twenty-four months. After the lapse of the agreed period, the agreement
was renewed for another twenty-four months.
Through a "License Agreement"3 entered into by the same parties on November 10,
1988, ASPAC was able to incorporate and use the name "ITEC" in its own name.
Thus , ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC
(Philippines).
By virtue of said contracts, ASPAC sold electronic products, exported by ITEC, to
their sole customer, the Philippine Long Distance Telephone Company, (PLDT, for
brevity).
To facilitate their transactions, ASPAC, dealing under its new appellation, and PLDT
executed a document entitled "PLDT-ASPAC/ITEC PROTOCOL" 4 which defined the
project details for the supply of ITEC's Interface Equipment in connection with the
Fifth Expansion Program of PLDT.
One year into the second term of the parties' Representative Agreement, ITEC
decided to terminate the same, because petitioner ASPAC allegedly violated its
contractual commitment as stipulated in their agreements.5
ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE
COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of which is likewise
petitioner Aguirre, of using knowledge and information of ITEC's products
specifications to develop their own line of equipment and product support, which are
similar, if not identical to ITEC's own, and offering them to ITEC's former customer.
On January 31, 1991, the complaint6 in Civil Case No. 91-294, was filed with the
Regional Trial Court of Makati, Branch 134 by ITEC, INC. Plaintiff sought to enjoin,
first, preliminarily and then, after trial, permanently; (1) defendants DIGITAL, CMDI,
and Francisco Aguirre and their agents and business associates, to cease and desist
from selling or attempting to sell to PLDT and to any other party, products which have
been copied or manufactured "in like manner, similar or identical to the products,
wares and equipment of plaintiff," and (2) defendant ASPAC, to cease and desist
from using in its corporate name, letter heads, envelopes, sign boards and business
dealings, plaintiff's trademark, internationally known as ITEC; and the recovery from
defendants in solidum, damages of at least P500,000.00, attorney's fees and
litigation expenses.
In due time, defendants filed a motion to dismiss 7 the complaint on the following
grounds:
(1) That plaintiff has no legal capacity to sue as it is a foreign corporation doing
business in the Philippines without the required BOI authority and SEC license, and
(2) that plaintiff is simply engaged in forum shopping which justifies the application
against it of the principle of "forum non conveniens".
On February 8, 1991, the complaint was amended by virtue of which ITEC
INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC. 8
9
In their Supplemental Motion to Dismiss,  defendants took note of the amendment of
the complaint and asked the court to consider in toto their motion to dismiss and their
supplemental motion as their answer to the amended complaint.
After conducting hearings on the prayer for preliminary injunction, the court a quo on
February 22, 1991, issued its Order: 10 (1) denying the motion to dismiss for being
devoid of legal merit with a rejection of both grounds relied upon by the defendants in
their motion to dismiss, and (2) directing the issuance of a writ of preliminary
injunction on the same day.
From the foregoing order, petitioners elevated the case to the respondent Court of
Appeals on a Petition for Certiorari and Prohibition11 under Rule 65 of the Revised
Rules of Court, assailing and seeking the nullification and the setting aside of the
Order and the Writ of Preliminary Injunction issued by the Regional Trial Court.
The respondent appellate court stated, thus:
We find no reason whether in law or from the facts of record, to disagree with
the (lower court's) ruling. We therefore are unable to find in respondent
Judge's issuance of said writ the grave abuse of discretion ascribed thereto
by the petitioners.
In fine, We find that the petition prima facie does not show that Certiorari lies
in the present case and therefore, the petition does not deserve to be given
due course.
WHEREFORE, the present petition should be, as it is hereby, denied due
course and accordingly, is hereby dismissed. Costs against the petitioners.
SO ORDERED.12
Petitioners filed a motion for reconsideration 13 on June 7, 1991, which was likewise
denied by the respondent court.
WHEREFORE, the present motion for reconsideration should be, as it is
hereby, denied for lack of merit. For the same reason, the motion to have the
motion for reconsideration set for oral argument likewise should be and is
hereby denied.
SO ORDERED.14
Petitioners are now before us via Petition for Review on Certiorari15 under Rule 45 of
the Revised Rules of Court.
It is the petitioners' submission that private respondents are foreign corporations
actually doing business in the Philippines without the requisite authority and license
from the Board of Investments and the Securities and Exchange Commission, and
thus, disqualified from instituting the present action in our courts. It is their contention
that the provisions of the Representative Agreement, petitioner ASPAC executed with
private respondent ITEC, are similarly "highly restrictive" in nature as those found in
the agreements which confronted the Court in the case of Top-Weld
Manufacturing, Inc. vs. ECED S.A.  et al.,16 as to reduce petitioner ASPAC to a mere
conduit or extension of private respondents in the Philippines.
In that case, we ruled that respondent foreign corporations are doing business in the
Philippines because when the respondents entered into the disputed contracts with
the petitioner, they were carrying out the purposes for which they were created, i.e.,
to manufacture and market welding products and equipment. The terms and
conditions of the contracts as well as the respondents' conduct indicate that they
established within our country a continuous business, and not merely one of a
temporary character. The respondents could be exempted from the requirements of
Republic Act 5455 if the petitioner is an independent entity which buys and distributes
products not only of the petitioner, but also of other manufacturers or transacts
business in its name and for its account and not in the name or for the account of the
foreign principal. A reading of the agreements between the petitioner and the
respondents shows that they are highly restrictive in nature, thus making the
petitioner a mere conduit or extension of the respondents.
It is alleged that certain provisions of the "Representative Agreement" executed by
the parties are similar to those found in the License Agreement of the parties in the
Top-Weld case which were considered as "highly restrictive" by this Court. The
provisions in point are:
2.0 Terms and Conditions of Sales.
2.1 Sale of ITEC products shall be at the purchase price set by ITEC from
time to time. Unless otherwise expressly agreed to in writing by ITEC the
purchase price is net to ITEC and does not include any transportation
charges, import charges or taxes into or within the Territory. All orders from
customers are subject to formal acceptance by ITEC at its Huntsville,
Alabama U.S.A. facility.
xxx xxx xxx
3.0 Duties of Representative
3.1. REPRESENTATIVE SHALL:
3.1.1. Not represent or offer for sale within the Territory any product which
competes with an existing ITEC product or any product which ITEC has
under active development.
3.1.2. Actively solicit all potential customers within the Territory in a
systematic and business like manner.
3.1.3. Inform ITEC of all request for proposals, requests for bids, invitations
to bid and the like within the Territory.
3.1.4. Attain the Annual Sales Goal for the Territory established by ITEC. The
Sales Goals for the first 24 months is set forth on Attachment two (2) hereto.
The Sales Goal for additional twelve month periods, if any, shall be sent to
the Sales Agent by ITEC at the beginning of each period. These Sales Goals
shall be incorporated into this Agreement and made a part hereof.
xxx xxx xxx
6.0. Representative as Independent Contractor
xxx xxx xxx
6.2. When acting under this Agreement REPRESENTATIVE is authorized to
solicit sales within the Territory on ITEC's behalf but is authorized to bind
ITEC only in its capacity as Representative and no other, and then only to
specific customers and on terms and conditions expressly authorized by
ITEC in writing.17
Aside from the abovestated provisions, petitioners point out the following matters of
record, which allegedly bear witness to the respondents' activities within the
Philippines in pursuit of their business dealings:
a. While petitioner ASPAC was the authorized exclusive representative for
three (3) years, it solicited from and closed several sales for and on behalf of
private respondents as to their products only and no other, to PLDT, worth no
less than US $ 15 Million (p. 20, tsn, Feb. 18, 1991);
b. Contract No. 1 (Exhibit for Petitioners) which covered these sales and
identified by private respondents' sole witness, Mr. Clarence Long, is not in
the name of petitioner ASPAC as such representative, but in the name of
private respondent ITEC, INC. (p. 20, tsn, Feb. 18, 1991);
c. The document denominated as "PLDT-ASPAC/ITEC PROTOCOL (Annex
C of the original and amended complaints) which defined the responsibilities
of the parties thereto as to the supply, installation and maintenance of the
ITEC equipment sold under said Contract No. 1 is, as its very title indicates,
in the names jointly of the petitioner ASPAC and private respondents;
 d. To evidence receipt of the purchase price of US $ 15 Million, private
respondent ITEC, Inc. issued in its letter head, a Confirmation of payment
dated November 13, 1989 and its Invoice dated November 22, 1989
(Annexes 1 and 2 of the Motion to Dismiss and marked as Exhibits 2 and 3
for the petitioners), both of which were identified by private respondent's sole
witness, Mr. Clarence Long (pp. 25-27, tsn, Feb. 18, 1991). 18
Petitioners contend that the above acts or activities belie the supposed independence
of petitioner ASPAC from private respondents. "The unrebutted evidence on record
below for the petitioners likewise reveal the continuous character of doing business in
the Philippines by private respondents based on the standards laid down by this
Court in Wang Laboratories, Inc. vs.  Hon.  Rafael T  . Mendoza, et al.19 and again in
TOP-WELD. (supra)" It thus appears that as the respondent Court of Appeals and the
trial court's failure to give credence on the grounds relied upon in support of their
Motion to Dismiss that petitioners ascribe grave abuse of discretion amounting to an
excess of jurisdiction of said courts.
Petitioners likewise argue that since private respondents have no capacity to bring
suit here, the Philippines is not the "most convenient forum" because the trial court is
devoid of any power to enforce its orders issued or decisions rendered in a case that
could not have been commenced to begin with, such that in insisting to assume and
exercise jurisdiction over the case below, the trial court had gravely abused its
discretion and even actually exceeded its jurisdiction.
As against petitioner's insistence that private respondent is "doing business" in the
Philippines, the latter maintains that it is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules and Regulations
Implementing the Omnibus Investments Code of 1987, the following:
(1) A foreign firm is deemed not engaged in business in the Philippines if it
transacts business through middlemen, acting in their own names, such as
indebtors, commercial bookers commercial merchants.
(2) A foreign corporation is deemed not "doing business" if its representative
domiciled in the Philippines has an independent status in that it transacts
business in its name and for its account. 20
Private respondent argues that a scrutiny of its Representative Agreement with the
Petitioners will show that although ASPAC was named as representative of ITEC.,
ASPAC actually acted in its own name and for its own account. The following
provisions are particularly mentioned:
3.1.7.1. In the event that REPRESENTATIVE imports directly from ITEC,
REPRESENTATIVE will pay for its own account; all customs duties and
import fees imposed on any ITEC products; all import expediting or handling
charges and expenses imposed on ITEC products; and any stamp tax fees
imposed on ITEC.
xxx xxx xxx
4.1. As complete consideration and payment for acting as representative
under this Agreement, REPRESENTATIVE shall receive a sales commission
equivalent to a  per centum of the FOB value of all ITEC equipment sold to
customers within the territory as a direct result of REPRESENTATIVE's sales
efforts.21
More importantly, private respondent charges ASPAC of admitting its independence
from ITEC by entering and ascribing to provision No. 6 of the Representative
Agreement.
6.0 Representative as Independent Contractor
6.1. When performing any of its duties under this Agreement,
REPRESENTATIVE shall act as an independent contractor and not as an
employee, worker, laborer, partner, joint venturer of ITEC as these terms are
defined by the laws, regulations, decrees or the like of any jurisdiction,
including the jurisdiction of the United States, the state of Alabama and the
Territory.22
Although it admits that the Representative Agreement contains provisions which both
support and belie the independence of ASPAC, private respondent echoes the
respondent court's finding that the lower court did not commit grave abuse of
discretion nor acted in excess of jurisdiction when it found that the ground relied upon
by the petitioners in their motion to dismiss does not appear to be indubitable. 23
The issues before us now are whether or not private respondent ITEC is an
unlicensed corporation doing business in the Philippines, and if it is, whether or not
this fact bars it from invoking the injunctive authority of our courts. NO
Considering the above, it is necessary to state what is meant by "doing business" in
the Philippines. Section 133 of the Corporation Code, provides that "No foreign
corporation, transacting business in the Philippines without a license, or its
successors or assigns, shall be permitted to maintain or intervene in any action, suit
or proceeding in any court or administrative agency of the Philippines; but such
corporation may be sued or proceeded against before Philippine Courts or
administrative tribunals on any valid cause of action recognized under Philippine
laws."24
Generally, a "foreign corporation" has no legal existence within the state in which it is
foreign. This proceeds from the principle that juridical existence of a corporation is
confined within the territory of the state under whose laws it was incorporated and
organized, and it has no legal status beyond such territory. Such foreign corporation
may be excluded by any other state from doing business within its limits, or
conditions may be imposed on the exercise of such privileges. 25 Before a foreign
corporation can transact business in this country, it must first obtain a license to
transact business in the Philippines, and a certificate from the appropriate
government agency. If it transacts business in the Philippines without such a license,
it shall not be permitted to maintain or intervene in any action, suit, or proceeding in
any court or administrative agency of the Philippines, but it may be sued on any valid
cause of action recognized under Philippine laws.26
In a long line of decisions, this Court has not altogether prohibited foreign corporation
not licensed to do business in the Philippines from suing or maintaining an action in
Philippine Courts. What it seeks to prevent is a foreign corporation doing business in
the Philippines without a licensed from gaining access to Philippine Courts. 27
The purpose of the law in requiring that foreign corporations doing business in the
Philippines be licensed to do so and that they appoint an agent for service of process
is to subject the foreign corporation doing business in the Philippines to the
jurisdiction of its courts. The object is not to prevent the foreign corporation from
performing single acts, but to prevent it from acquiring a domicile for the purpose of
business without taking steps necessary to render it amenable to suit in the local
courts.28 The implication of the law is that it was never the purpose of the legislature
to exclude a foreign corporation which happens to obtain an isolated order for
business from the Philippines, and thus, in effect, to permit persons to avoid their
contracts made with such foreign corporations.29
There is no exact rule or governing principle as to what constitutes "doing" or
"engaging" or "transacting" business. Indeed, such case must be judged in the light of
its peculiar circumstances, upon its peculiar facts and upon the language of the
statute applicable. The true test, however, seems to be whether the foreign
corporation is continuing the body or substance of the business or enterprise for
which it was organized.30
Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include:
soliciting orders, purchases, service contracts, opening offices, whether
called "liaison" offices or branches; appointing representatives or distributors
who are domiciled in the Philippines or who in any calendar year stay in the
Philippines for a period or periods totalling one hundred eighty (180) days or
more; participating in the management, supervision or control of any
domestic business firm, entity or corporation in the Philippines, and any other
act or acts that imply a continuity or commercial dealings or arrangements
and contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business
organization.
Thus, a foreign corporation with a settling agent in the Philippines which issued
twelve marine policies covering different shipments to the Philippines 31 and a foreign
corporation which had been collecting premiums on outstanding policies 32 were
regarded as doing business here.
The same rule was observed relating to a foreign corporation with an "exclusive
distributing agent" in the Philippines, and which has been selling its products here
since 1929,33 and a foreign corporation engaged in the business of manufacturing
and selling computers worldwide, and had installed at least 26 different products in
several corporations in the Philippines, and allowed its registered logo and trademark
to be used and made it known that there exists a designated distributor in the
Philippines.34
In Georg Grotjahn GMBH and Co. vs. Isnani,35 it was held that the uninterrupted
performance by a foreign corporation of acts pursuant to its primary purposes and
functions as a regional area headquarters for its home office, qualifies such
corporation as one doing business in the country.
These foregoing instances should be distinguished from a single or isolated
transaction or occasional, incidental, or casual transactions, which do not come
within the meaning of the law, 36 for in such case, the foreign corporation is deemed
not engaged in business in the Philippines.
Where a single act or transaction, however, is not merely incidental or casual but
indicates the foreign corporation's intention to do other business in the Philippines,
said single act or transaction constitutes "doing" or "engaging in" or "transacting"
business in the Philippines.3 7
In determining whether a corporation does business in the Philippines or not, aside
from their activities within the forum, reference may be made to the contractual
agreements entered into by it with other entities in the country. Thus, in the Top-Weld
case (supra), the foreign corporation's LICENSE AND TECHNICAL AGREEMENT
and DISTRIBUTOR AGREEMENT with their local contacts were made the basis of
their being regarded by this Tribunal as corporations doing business in the country.
Likewise, in Merill Lynch Futures,  Inc.  vs. Court of Appeals, etc. 38 the FUTURES
CONTRACT entered into by the petitioner foreign corporation weighed heavily in the
court's ruling.
With the abovestated precedents in mind, we are persuaded to conclude that private
respondent had been "engaged in" or "doing business" in the Philippines for some
time now. This is the inevitable result after a scrutiny of the different contracts and
agreements entered into by ITEC with its various business contacts in the country,
particularly ASPAC and Telephone Equipment Sales and Services, Inc. (TESSI, for
brevity). The latter is a local electronics firm engaged by ITEC to be its local technical
representative, and to create a service center for ITEC products sold locally. Its
arrangements, with these entities indicate convincingly ITEC's purpose to bring about
the situation among its customers and the general public that they are dealing directly
with ITEC, and that ITEC is actively engaging in business in the country.
In its Master Service Agreement39 with TESSI, private respondent required its local
technical representative to provide the employees of the technical and service center
with ITEC identification cards and business cards, and to correspond only on ITEC,
Inc., letterhead. TESSI personnel are instructed to answer the telephone with "ITEC
Technical Assistance Center.", such telephone being listed in the telephone book
under the heading of ITEC Technical Assistance Center, and all calls being recorded
and forwarded to ITEC on a weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly report detailing the
failure and repair of ITEC products, and to requisition monthly the materials and
components needed to replace stock consumed in the warranty repairs of the prior
month.
A perusal of the agreements between petitioner ASPAC and the respondents shows
that there are provisions which are highly restrictive in nature, such as to reduce
petitioner ASPAC to a mere extension or instrument of the private respondent.
The "No Competing Product" provision of the Representative Agreement between
ITEC and ASPAC provides: "The Representative shall not represent or offer for sale
within the Territory any product which competes with an existing ITEC product or any
product which ITEC has under active development." Likewise pertinent is the
following provision: "When acting under this Agreement, REPRESENTATIVE is
authorized to solicit sales within the Territory on ITEC's behalf but is authorized to
bind ITEC only in its capacity as Representative and no other, and then only to
specific customers and on terms and conditions expressly authorized by ITEC in
writing."
When ITEC entered into the disputed contracts with ASPAC and TESSI, they were
carrying out the purposes for which it was created, i.e., to market electronics and
communications products. The terms and conditions of the contracts as well as
ITEC's conduct indicate that they established within our country a continuous
business, and not merely one of a temporary character. 40
Notwithstanding such finding that ITEC is doing business in the country, petitioner is
nonetheless estopped from raising this fact to bar ITEC from instituting this injunction
case against it.
A foreign corporation doing business in the Philippines may sue in Philippine Courts
although not authorized to do business here against a Philippine citizen or entity who
had contracted with and benefited by said corporation. 41 To put it in another way, a
party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. And the doctrine of
estoppel to deny corporate existence applies to a foreign as well as to domestic
corporations.42 One who has dealt with a corporation of foreign origin as a corporate
entity is estopped to deny its corporate existence and capacity: The principle will be
applied to prevent a person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes chiefly in cases where such person
has received the benefits of the contract.43
The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua
non habere debet — no person ought to derive any advantage of his own wrong. This
is as it should be for as mandated by law, "every person must in the exercise of his
rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith."44
Concededly, corporations act through agents, like directors and officers. Corporate
dealings must be characterized by utmost good faith and fairness. Corporations
cannot just feign ignorance of the legal rules as in most cases, they are manned by
sophisticated officers with tried management skills and legal experts with practiced
eye on legal problems. Each party to a corporate transaction is expected to act with
utmost candor and fairness and, thereby allow a reasonable proportion between
benefits and expected burdens. This is a norm which should be observed where one
or the other is a foreign entity venturing in a global market.
As observed by this Court in TOP-WELD (supra), viz:
The parties are charged with knowledge of the existing law at the time they enter into
a contract and at the time it is to become operative. (Twiehaus v. Rosner, 245 SW 2d
107; Hall v. Bucher, 227 SW 2d 98). Moreover, a person is presumed to be more
knowledgeable about his own state law than his alien or foreign contemporary. In this
case, the record shows that, at least, petitioner had actual knowledge of the
applicability of R.A. No. 5455 at the time the contract was executed and at all times
thereafter. This conclusion is compelled by the fact that the same statute is now
being propounded by the petitioner to bolster its claim. We, therefore sustain the
appellate court's view that "it was incumbent upon TOP-WELD to know whether or
not IRTI and ECED were properly authorized to engage in business in the Philippines
when they entered into the licensing and distributorship agreements." The very
purpose of the law was circumvented and evaded when the petitioner entered into
said agreements despite the prohibition of R.A. No. 5455. The parties in this case
being equally guilty of violating R.A. No. 5455, they are in pari delicto, in which case it
follows as a consequence that petitioner is not entitled to the reli3ef prayed for in this
case.
The doctrine of lack of capacity to sue based on the failure to acquire a local license
is based on considerations of sound public policy. The license requirement was
imposed to subject the foreign corporation doing business in the Philippines to the
jurisdiction of its courts. It was never intended to favor domestic corporations who
enter into solitary transactions with unwary foreign firms and then repudiate their
obligations simply because the latter are not licensed to do business in this country. 45
In Antam Consolidated Inc. vs. Court of Appeals, et al.46 we expressed our chagrin
over this commonly used scheme of defaulting local companies which are being sued
by unlicensed foreign companies not engaged in business in the Philippines to invoke
the lack of capacity to sue of such foreign companies. Obviously, the same ploy is
resorted to by ASPAC to prevent the injunctive action filed by ITEC to enjoin
petitioner from using knowledge possibly acquired in violation of fiduciary
arrangements between the parties.
By entering into the "Representative Agreement" with ITEC, Petitioner is charged with
knowledge that ITEC was not licensed to engage in business activities in the country,
and is thus estopped from raising in defense such incapacity of ITEC, having chosen
to ignore or even presumptively take advantage of the same.
In Top-Weld, we ruled that a foreign corporation may be exempted from the license
requirement in order to institute an action in our courts if its representative in the
country maintained an independent status during the existence of the disputed
contract. Petitioner is deemed to have acceded to such independent character when
it entered into the Representative Agreement with ITEC, particularly, provision 6.2
(supra).
Petitioner's insistence on the dismissal of this action due to the application, or non
application, of the private international law rule of forum non conveniens defies well-
settled rules of fair play. According to petitioner, the Philippine Court has no venue to
apply its discretion whether to give cognizance or not to the present action, because
it has not acquired jurisdiction over the person of the plaintiff in the case, the latter
allegedly having no personality to sue before Philippine Courts. This argument is
misplaced because the court has already acquired jurisdiction over the plaintiff in the
suit, by virtue of his filing the original complaint. And as we have already observed,
petitioner is not at liberty to question plaintiff's standing to sue, having already
acceded to the same by virtue of its entry into the Representative Agreement referred
to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the
facts of the case, whether to give due course to the suit or dismiss it, on the principle
of forum non convenience.4 7 Hence, the Philippine Court may refuse to assume
jurisdiction in spite of its having acquired jurisdiction. Conversely, the court may
assume jurisdiction over the case if it chooses to do so; provided, that the following
requisites are met: 1) That the Philippine Court is one to which the parties may
conveniently resort to; 2) That the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and, 3) That the Philippine Court has
or is likely to have power to enforce its decision.48
The aforesaid requirements having been met, and in view of the court's disposition to
give due course to the questioned action, the matter of the present forum not being
the "most convenient" as a ground for the suit's dismissal, deserves scant
consideration.
IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby
DISMISSED. The decision of the Court of Appeals dated June 7, 1991, upholding the
RTC Order dated February 22, 1991, denying the petitioners' Motion to Dismiss, and
ordering the issuance of the Writ of Preliminary Injunction, is hereby affirmed in toto.
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 Appeals 1 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 We shall be very glad to hear your position on the on the matter.
Makati, Metro Manila
Best regards.
Attn. Mr. Mercurio Q. Rivera
Manager, Property Management Dept. (4) On September 17, 1987, plaintiff Janolo, responding to Rivera's aforequoted
reply, wrote (Exh. "D"):
Gentleman:
September 17, 1987
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. Producers Bank
Paseo de Roxas
Makati, Metro Manila
TCT NO. AREA
T-106932 113,580 sq. m. Attention: Mr. Mercurio Rivera
T-106933 70,899 sq. m.
Gentlemen:
T-106934 52,246 sq. m.
T-106935 96,768 sq. m. In reply to your letter regarding my proposal to purchase your 101-hectare lot located
T-106936 187,114 sq. m. 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..
T-106937 481,481 sq. m.
Hoping that this proposal meets your satisfaction.
My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND
(P3,500,000.00) PESOS, in cash.
(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
Kindly contact me at Telephone Number 921-1344. 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
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal Janolo sent to the bank, through Rivera, the following letter (Exh. "E"):
reply by letter which is hereunder quoted (Exh. "C"):
The Producers Bank of the Philippines
September 1, 1987 Paseo de Roxas, Makati
Metro Manila
JP M-P GUTIERREZ ENTERPRISES
142 Charisma St., Doña Andres II Attention: Mr. Mercurio Rivera
Rosario, Pasig, Metro Manila
Re: 101 Hectares of Land
Attention: JOSE O. JANOLO in Sta. Rosa, Laguna

Dear Sir: Gentlemen:

Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Pursuant to our discussion last 28 September 1987, we are pleased to inform you
Laguna (formerly owned by Byme Industrial Corp.). Please be informed however that that we are accepting your offer for us to purchase the property at Sta. Rosa,
the bank's counter-offer is at P5.5 million for more than 101 hectares on lot basis.
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 In their Petition6 and Memorandum7 , petitioners summarized their position as follows:
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 I.
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 The Court of Appeals erred in declaring that a contract of sale was perfected
through Acting Conservator Encarnacion repudiated the authority of defendant Rivera between Ejercito (in substitution of Demetria and Janolo) and the bank.
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 II.
the plaintiffs considered to be a perfected contract of sale.
The Court of Appeals erred in declaring the existence of an enforceable contract of
(10) On May 16, 1988, plaintiffs filed a suit for specific performance with damages sale between the parties.
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 III.
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 The Court of Appeals erred in declaring that the conservator does not have the power
was no meeting of the minds as to the price. to overrule or revoke acts of previous management.

On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip IV.
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 The findings and conclusions of the Court of Appeals do not conform to the evidence
substantial interest in resisting the complaint. On July 8, 1991, the trial court issued on record.
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.
On the other hand, petitioners prayed for dismissal of the instant suit on the ground 8 that:
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 I.
intervention.
Petitioners have engaged in forum shopping.
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 II.
litigation to said private respondent.
The factual findings and conclusions of the Court of Appeals are supported by the
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co evidence on record and may no longer be questioned in this case.
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 III.
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 The Court of Appeals correctly held that there was a perfected contract between
property as unenforceable and to stop Ejercito from enforcing or implementing the sale" 4 In Demetria and Janolo (substituted by; respondent Ejercito) and the bank.
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. IV.
"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 The Court of Appeals has correctly held that the conservator, apart from being
his memorandum, averred that this motion is still pending in the Makati RTC. 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? YES
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 Dear Atty. Zarate:
the Perfected and Enforceable Contract.
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank Demetria regarding the six (6) parcels of land located at Sta. Rosa, Laguna.
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 We deny that Producers Bank has ever made a legal counter-offer to any of your
or overrule actions of the management or the board of directors of a bank, under Section 28- clients nor perfected a "contract to sell and buy" with any of them for the following
A of Republic Act No. 265 (otherwise known as the Central Bank Act) as follows: reasons.

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:
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.

May 12, 1988 Very truly yours,

(Sgd.) Leonida T. Encarnacion

Atty. Noe C. Zarate
LEONIDA T. EDCARNACION
Zarate Carandang Perlas & Ass.
Acting Conservator
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro-Manila
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. 120077             October 13, 2000
THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ARBITER CEFERINA J. DIOSANA AND
MARCELO G. SANTOS, respondents.
PARDO, J.:
The case before the Court is a petition for certiorari 1 to annul the following orders of the
National Labor Relations Commission (hereinafter referred to as "NLRC") for having been
issued without or with excess jurisdiction and with grave abuse of discretion: 2
(1) Order of May 31, 1993.3 Reversing and setting aside its earlier resolution of
August 28, 1992.4 The questioned order declared that the NLRC, not the Philippine
Overseas Employment Administration (hereinafter referred to as "POEA"), had
jurisdiction over private respondent's complaint;
(2) Decision of December 15, 1994.5 Directing petitioners to jointly and severally pay
private respondent twelve thousand and six hundred dollars (US$ 12,600.00)
representing salaries for the unexpired portion of his contract; three thousand six
hundred dollars (US$3,600.00) as extra four months salary for the two (2) year period
of his contract, three thousand six hundred dollars (US$3,600.00) as "14th month
pay" or a total of nineteen thousand and eight hundred dollars (US$19,800.00) or its
peso equivalent and attorney's fees amounting to ten percent (10%) of the total
award; and
(3) Order of March 30, 1995.6 Denying the motion for reconsideration of the
petitioners.
In May, 1988, private respondent Marcelo Santos (hereinafter referred to as "Santos") was an
overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of Oman.
Subsequently, in June 1988, he was directly hired by the Palace Hotel, Beijing, People's
Republic of China and later terminated due to retrenchment.
Petitioners are the Manila Hotel Corporation (hereinafter referred to as "MHC") and the
Manila Hotel International Company, Limited (hereinafter referred to as "MHICL").
When the case was filed in 1990, MHC was still a government-owned and controlled
corporation duly organized and existing under the laws of the Philippines.
MHICL is a corporation duly organized and existing under the laws of Hong Kong .7 MHC is an
"incorporator" of MHICL, owning 50% of its capital stock. 8
By virtue of a "management agreement" 9 with the Palace Hotel (Wang Fu Company Limited),
MHICL10 trained the personnel and staff of the Palace Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press in the Sultanate of Oman, respondent
Santos received a letter dated May 2, 1988 from Mr. Gerhard R. Shmidt, General Manager,
Palace Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that he was
recommended by one Nestor Buenio, a friend of his.
Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly
salary and increased benefits. The position was slated to open on October 1, 1988. 11
On May 8, 1988, respondent Santos wrote to Mr. Shmidt and signified his acceptance of the
offer.
On May 19, 1988, the Palace Hotel Manager, Mr. Hans J. Henk mailed a ready to sign
employment contract to respondent Santos. Mr. Henk advised respondent Santos that if the
contract was acceptable, to return the same to Mr. Henk in Manila, together with his passport
and two additional pictures for his visa to China.
On May 30, 1988, respondent Santos resigned from the Mazoon Printing Press, effective
June 30, 1988, under the pretext that he was needed at home to help with the family's
piggery and poultry business.
On June 4, 1988, respondent Santos wrote the Palace Hotel and acknowledged Mr. Henk's
letter. Respondent Santos enclosed four (4) signed copies of the employment contract (dated
June 4, 1988) and notified them that he was going to arrive in Manila during the first week of
July 1988.
The employment contract of June 4, 1988 stated that his employment would commence
September 1, 1988 for a period of two years. 12 It provided for a monthly salary of nine
hundred dollars (US$900.00) net of taxes, payable fourteen (14) times a year. 13
On June 30, 1988, respondent Santos was deemed resigned from the Mazoon Printing
Press.
On July 1, 1988, respondent Santos arrived in Manila.
On November 5, 1988, respondent Santos left for Beijing, China. He started to work at the
Palace Hotel.14
Subsequently, respondent Santos signed an amended "employment agreement" with the
Palace Hotel, effective November 5, 1988. In the contract, Mr. Shmidt represented the Palace
Hotel. The Vice President (Operations and Development) of petitioner MHICL Miguel D.
Cergueda signed the employment agreement under the word "noted".
From June 8 to 29, 1989, respondent Santos was in the Philippines on vacation leave. He
returned to China and reassumed his post on July 17, 1989.
On July 22, 1989, Mr. Shmidt's Executive Secretary, a certain Joanna suggested in a
handwritten note that respondent Santos be given one (1) month notice of his release from
employment.
On August 10, 1989, the Palace Hotel informed respondent Santos by letter signed by Mr.
Shmidt that his employment at the Palace Hotel print shop would be terminated due to
business reverses brought about by the political upheaval in China.15 We quote the letter:16
"After the unfortunate happenings in China and especially Beijing (referring to
Tiannamen Square incidents), our business has been severely affected. To reduce
expenses, we will not open/operate printshop for the time being.
"We sincerely regret that a decision like this has to be made, but rest assured this
does in no way reflect your past performance which we found up to our
expectations."
"Should a turnaround in the business happen, we will contact you directly and give
you priority on future assignment."
On September 5, 1989, the Palace Hotel terminated the employment of respondent Santos
and paid all benefits due him, including his plane fare back to the Philippines.
On October 3, 1989, respondent Santos was repatriated to the Philippines.
On October 24, 1989, respondent Santos, through his lawyer, Atty. Ednave wrote Mr. Shmidt,
demanding full compensation pursuant to the employment agreement.
On November 11, 1989, Mr. Shmidt replied, to wit: 17
His service with the Palace Hotel, Beijing was not abruptly terminated but we
followed the one-month notice clause and Mr. Santos received all benefits due him.
"For your information the Print Shop at the Palace Hotel is still not operational and
with a low business outlook, retrenchment in various departments of the hotel is
going on which is a normal management practice to control costs.
"When going through the latest performance ratings, please also be advised that his
performance was below average and a Chinese National who is doing his job now
shows a better approach.
"In closing, when Mr. Santos received the letter of notice, he hardly showed up for
work but still enjoyed free accommodation/laundry/meals up to the day of his
departure."
On February 20, 1990, respondent Santos filed a complaint for illegal dismissal with the
Arbitration Branch, National Capital Region, National Labor Relations Commission (NLRC).
He prayed for an award of nineteen thousand nine hundred and twenty three dollars
(US$19,923.00) as actual damages, forty thousand pesos (P40,000.00) as exemplary
damages and attorney's fees equivalent to 20% of the damages prayed for. The complaint
named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents.
The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in
the proceedings before the Labor Arbiter.18
On June 27, 1991, Labor Arbiter Ceferina J. Diosana, decided the case against petitioners,
thus:19
"WHEREFORE, judgment is hereby rendered:
"1. directing all the respondents to pay complainant jointly and severally;
"a) $20,820 US dollars or its equivalent in Philippine currency as unearned
salaries;
"b) P50,000.00 as moral damages;
"c) P40,000.00 as exemplary damages; and
 "d) Ten (10) percent of the total award as attorney's fees.
"SO ORDERED."
On July 23, 1991, petitioners appealed to the NLRC, arguing that the POEA, not the NLRC
had jurisdiction over the case.
On August 28, 1992, the NLRC promulgated a resolution, stating:20
"WHEREFORE, let the appealed Decision be, as it is hereby, declared null and void
for want of jurisdiction. Complainant is hereby enjoined to file his complaint with the
POEA.
"SO ORDERED."
On September 18, 1992, respondent Santos moved for reconsideration of the afore-quoted
resolution. He argued that the case was not cognizable by the POEA as he was not an
"overseas contract worker."21
On May 31, 1993, the NLRC granted the motion and reversed itself. The NLRC directed
Labor Arbiter Emerson Tumanon to hear the case on the question of whether private
respondent was retrenched or dismissed.22
On January 13, 1994, Labor Arbiter Tumanon completed the proceedings based on the
testimonial and documentary evidence presented to and heard by him. 23
Subsequently, Labor Arbiter Tumanon was re-assigned as trial Arbiter of the National Capital
Region, Arbitration Branch, and the case was transferred to Labor Arbiter Jose G. de Vera. 24
On November 25, 1994, Labor Arbiter de Vera submitted his report. 25 He found that
respondent Santos was illegally dismissed from employment and recommended that he be
paid actual damages equivalent to his salaries for the unexpired portion of his contract.26
On December 15, 1994, the NLRC ruled in favor of private respondent, to wit: 27
"WHEREFORE, finding that the report and recommendations of Arbiter de Vera are
supported by substantial evidence, judgment is hereby rendered, directing the
respondents to jointly and severally pay complainant the following computed
contractual benefits: (1) US$12,600.00 as salaries for the unexpired portion of the
parties' contract; (2) US$3,600.00 as extra four (4) months salary for the two (2)
years period (sic) of the parties' contract; (3) US$3,600.00 as "14th month pay" for
the aforesaid two (2) years contract stipulated by the parties or a total of
US$19,800.00 or its peso equivalent, plus (4) attorney's fees of 10% of complainant's
total award.
"SO ORDERED."
On February 2, 1995, petitioners filed a motion for reconsideration arguing that Labor Arbiter
de Vera's recommendation had no basis in law and in fact. 28
On March 30, 1995, the NLRC denied the motion for reconsideration. 29
Hence, this petition.30
On October 9, 1995, petitioners filed with this Court an urgent motion for the issuance of a
temporary restraining order and/or writ of preliminary injunction and a motion for the
annulment of the entry of judgment of the NLRC dated July 31, 1995. 31
On November 20, 1995, the Court denied petitioner's urgent motion. The Court required
respondents to file their respective comments, without giving due course to the petition. 32
On March 8, 1996, the Solicitor General filed a manifestation stating that after going over the
petition and its annexes, they can not defend and sustain the position taken by the NLRC in
its assailed decision and orders. The Solicitor General prayed that he be excused from filing a
comment on behalf of the NLRC33
On April 30,1996, private respondent Santos filed his comment. 34
On June 26, 1996, the Court granted the manifestation of the Solicitor General and required
the NLRC to file its own comment to the petition. 35
On January 7, 1997, the NLRC filed its comment.
The petition is meritorious.
WON NLRC has jurisdiction over the case. NO
I. Forum Non-Conveniens
The NLRC was a seriously inconvenient forum.
We note that the main aspects of the case transpired in two foreign jurisdictions and the case
involves purely foreign elements. The only link that the Philippines has with the case is that
respondent Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign
corporations. Not all cases involving our citizens can be tried here.
The employment contract. — Respondent Santos was hired directly by the Palace Hotel, a
foreign employer, through correspondence sent to the Sultanate of Oman, where respondent
Santos was then employed. He was hired without the intervention of the POEA or any
authorized recruitment agency of the government.36
Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction
over the case if it chooses to do so provided: (1) that the Philippine court is one to which the
parties may conveniently resort to; (2) that the Philippine court is in a position to make an
intelligent decision as to the law and the facts; and (3) that the Philippine court has or is likely
to have power to enforce its decision.37 The conditions are unavailing in the case at bar.
Not Convenient. — We fail to see how the NLRC is a convenient forum given that all the
incidents of the case — from the time of recruitment, to employment to dismissal occurred
outside the Philippines. The inconvenience is compounded by the fact that the proper
defendants, the Palace Hotel and MHICL are not nationals of the Philippines. Neither .are
they "doing business in the Philippines." Likewise, the main witnesses, Mr. Shmidt and Mr.
Henk are non-residents of the Philippines.
No power to determine applicable law. — Neither can an intelligent decision be made as to
the law governing the employment contract as such was perfected in foreign soil. This calls to
fore the application of the principle of lex loci contractus (the law of the place where the
contract was made).38
The employment contract was not perfected in the Philippines. Respondent Santos signified
his acceptance by writing a letter while he was in the Republic of Oman. This letter was sent
to the Palace Hotel in the People's Republic of China.
No power to determine the facts. — Neither can the NLRC determine the facts surrounding
the alleged illegal dismissal as all acts complained of took place in Beijing, People's Republic
of China. The NLRC was not in a position to determine whether the Tiannamen Square
incident truly adversely affected operations of the Palace Hotel as to justify respondent
Santos' retrenchment.
Principle of effectiveness, no power to execute decision. — Even assuming that a proper
decision could be reached by the NLRC, such would not have any binding effect against the
employer, the Palace Hotel. The Palace Hotel is a corporation incorporated under the laws of
China and was not even served with summons. Jurisdiction over its person was not acquired.
This is not to say that Philippine courts and agencies have no power to solve controversies
involving foreign employers. Neither are we saying that we do not have power over an
employment contract executed in a foreign country. If Santos were an "overseas contract
worker", a Philippine forum, specifically the POEA, not the NLRC, would protect him.39 He is
not an "overseas contract worker" a fact which he admits with conviction. 40
Even assuming that the NLRC was the proper forum, even on the merits, the NLRC's
decision cannot be sustained.
II. MHC Not Liable
Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that
MHICL was liable for Santos' retrenchment, still MHC, as a separate and distinct juridical
entity cannot be held liable.
True, MHC is an incorporator of MHICL and owns fifty percent (50%) of its capital stock.
However, this is not enough to pierce the veil of corporate fiction between MHICL and MHC.
Piercing the veil of corporate entity is an equitable remedy. It is resorted to when the
corporate fiction is used to defeat public convenience, justify wrong, protect fraud or defend a
crime. 41 It is done only when a corporation is a mere alter ego or business conduit of a
person or another corporation.
In Traders Royal Bank v. Court of Appeals,42 we held that "the mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is
not of itself a sufficient reason for disregarding the fiction of separate corporate personalities."
The tests in determining whether the corporate veil may be pierced are: First, the defendant
must have control or complete domination of the other corporation's finances, policy and
business practices with regard to the transaction attacked. There must be proof that the other
corporation had no separate mind, will or existence with respect the act complained
of. Second, control must be used by the defendant to commit fraud or wrong. Third, the
aforesaid control or breach of duty must be the proximate cause of the injury or loss
complained of. The absence of any of the elements prevents the piercing of the corporate
veil.43
It is basic that a corporation has a personality separate and distinct from those composing it
as well as from that of any other legal entity to which it may be related. 44 Clear and convincing
evidence is needed to pierce the veil of corporate fiction. 45 In this case, we find no evidence to
show that MHICL and MHC are one and the same entity.
III. MHICL not Liable
Respondent Santos predicates MHICL's liability on the fact that MHICL "signed" his
employment contract with the Palace Hotel. This fact fails to persuade us.
First, we note that the Vice President (Operations and Development) of MHICL, Miguel D.
Cergueda signed the employment contract as a mere witness. He merely signed under the
word "noted".
When one "notes" a contract, one is not expressing his agreement or approval, as a party
would.46 In Sichangco v. Board of Commissioners of Immigration,47 the Court recognized that
the term "noted" means that the person so noting has merely taken cognizance of the
existence of an act or declaration, without exercising a judicious deliberation or rendering a
decision on the matter.
Mr. Cergueda merely signed the "witnessing part" of the document. The "witnessing part" of
the document is that which, "in a deed or other formal instrument is that part which comes
after the recitals, or where there are no recitals, after the parties (emphasis ours)."48 As
opposed to a party to a contract, a witness is simply one who, "being present, personally sees
or perceives a thing; a beholder, a spectator, or eyewitness." 49 One who "notes" something
just makes a "brief written statement"50 a memorandum or observation.
Second, and more importantly, there was no existing employer-employee relationship
between Santos and MHICL. In determining the existence of an employer-employee
relationship, the following elements are considered:51
"(1) the selection and engagement of the employee;
"(2) the payment of wages;
"(3) the power to dismiss; and
"(4) the power to control employee's conduct."
MHICL did not have and did not exercise any of the aforementioned powers. It did not select
respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel
by his friend, Nestor Buenio. MHICL did not engage respondent Santos to work. The terms of
employment were negotiated and finalized through correspondence between respondent
Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel
and not MHICL. Neither did respondent Santos adduce any proof that MHICL had the power
to control his conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL
that terminated respondent Santos' services.
Neither is there evidence to suggest that MHICL was a "labor-only contractor." 52 There is no
proof that MHICL "supplied" respondent Santos or even referred him for employment to the
Palace Hotel.
Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the
same entity. The fact that the Palace Hotel is a member of the "Manila Hotel Group" is not
enough to pierce the corporate veil between MHICL and the Palace Hotel.
IV. Grave Abuse of Discretion
Considering that the NLRC was forum non-conveniens and considering further that no
employer-employee relationship existed between MHICL, MHC and respondent Santos,
Labor Arbiter Ceferina J. Diosana clearly had no jurisdiction over respondent's claim in NLRC
NCR Case No. 00-02-01058-90.
Labor Arbiters have exclusive and original jurisdiction only over the following: 53
"1. Unfair labor practice cases;
"2. Termination disputes;
"3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;
"4. Claims for actual, moral, exemplary and other forms of damages arising from
employer-employee relations;
"5. Cases arising from any violation of Article 264 of this Code, including questions
involving legality of strikes and lockouts; and
"6. Except claims for Employees Compensation, Social Security, Medicare and
maternity benefits, all other claims, arising from employer-employee relations,
including those of persons in domestic or household service, involving an amount
exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with
a claim for reinstatement."
In all these cases, an employer-employee relationship is an indispensable jurisdictional
requirement.
The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor Code is limited
to disputes arising from an employer-employee relationship which can be resolved by
reference to the Labor Code, or other labor statutes, or their collective bargaining
agreements.54
"To determine which body has jurisdiction over the present controversy, we rely on the sound
judicial principle that jurisdiction over the subject matter is conferred by law and is determined
by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some
of the claims asserted therein."55
The lack of jurisdiction of the Labor Arbiter was obvious from the allegations of the complaint.
His failure to dismiss the case amounts to grave abuse of discretion. 56
V. The Fallo
WHEREFORE, the Court hereby GRANTS the petition for certiorari and ANNULS the orders
and resolutions of the National Labor Relations Commission dated May 31, 1993, December
15, 1994 and March 30, 1995 in NLRC NCR CA No. 002101-91 (NLRC NCR Case No. 00-
02-01058-90).
No costs.
SO ORDERED.
Plaintiff, the Islamic Republic of Iran, brings this action against Iran's former ruler, Shah
Mohammed Reza Pahlavi, and his wife, Empress Farah Diba Pahlavi. It alleges in its
complaint that defendants accepted bribes and misappropriated, embezzled or converted 35
billion dollars in Iranian funds in breach of their fiduciary duty to the Iranian people and it
seeks to recover those funds and 20 billion dollars in exemplary damages. It asks the court to
impress a constructive trust on defendants' assets located throughout the world, for an
accounting of all moneys and property received by the defendants from the government of
Iran, and for other incidental relief.

62 N.Y.2d 474 (1984)

The action was commenced in November, 1979 by substituted service on the Shah made at
Islamic Republic of Iran, Appellant,
New York Hospital where he was undergoing cancer therapy. The Empress was personally
served at the same time at the New York residence of the Shah's sister, Ashraf Pahlavi.
v. Thereafter, defendants moved to dismiss the complaint alleging that it raised nonjusticiable
political questions, that the court lacked personal jurisdiction due to defective service of
Mohammed Reza Pahlavi, Respondent, and Farah Diba Pahlavi, Defendant. process on them and that the complaint should be dismissed on grounds of forum non
conveniens.[1] Special Term granted defendants' motion based on forum non conveniens
Court of Appeals of the State of New York. concluding that the parties had no connection with New [478] York other than a claim that the
Shah had deposited funds in New York banks, a claim which it found insufficient under the
circumstances to justify the court in retaining jurisdiction. A divided Appellate Division
affirmed, Justice Fein arguing in dissent that jurisdiction must be assumed because no other
forum was available to plaintiff.[2]
Argued June 6, 1984.

Decided July 5, 1984.

On this appeal plaintiff claims that the courts below erred, that the New York courts must
Brian O'Dwyer, Paul O'Dwyer, Gary Silverman, Abram Chayes and Bruno A. Ristau for
entertain this action because the record does not indicate that there is any alternative forum
appellant.
available and because the United States Government undertook to guarantee plaintiff an
American forum to litigate its claims against the former royal family in the hostage settlement
agreements between it and plaintiff known as the Algerian Accords.

Roger Boyle for Farah Diba Pahlavi, respondent. WON the New York court can dismiss the case based on forum non conveniens. YES

Chief Judge COOKE and Judges JASEN, JONES and WACHTLER concur with Judge
SIMONS; Judge MEYER dissents and votes to reverse on the appeal as against Farah Diba
Pahlavi in a separate opinion; Judge KAYE taking no part.
There should be an affirmance. The application of the doctrine of forum non conveniens is a
matter of discretion to be exercised by the trial court and the Appellate Division. We do not
find that those courts abused their discretion as a matter of law under the circumstances
presented, even though it appears that there may be no other forum in which plaintiff can
obtain the relief it seeks. Nor is reversal required by the provisions of the Algerian Accords.

[477] SIMONS, J.

I
Ordinarily, nonresidents are permitted to enter New York courts to litigate their disputes as a
matter of comity. Obviously, however, our courts are not required to add to their financial and
administrative burdens by entertaining litigation which does not have any connection with this
State. The common-law doctrine of forum non conveniens, also articulated in CPLR 327,[3]
permits a court to stay or [479] dismiss such actions where it is determined that the action,
although jurisdictionally sound, would be better adjudicated elsewhere (see, generally, Siegel,
NY Prac, § 28; 1 Weinstein-Korn-Miller, NY Civ Prac, par 327.01, pp 3-469 — 3-470). The
burden rests upon the defendant challenging the forum to demonstrate relevant private or
public interest factors which militate against accepting the litigation (see Piper Aircraft Co. v
Reyno, 454 US 235; Bader & Bader v Fort, 66 AD2d 642) and the court, after considering and
balancing the various competing factors, must determine in the exercise of its sound
discretion whether to retain jurisdiction or not. Among the factors to be considered are the
burden on the New York courts, the potential hardship to the defendant, and the unavailability
of an alternative forum in which plaintiff may bring suit (Banco Ambrosiano, S.p.A. v Artoc
Bank & Trust, 62 N.Y.2d 65; Irrigation & Ind. Dev. Corp. v Indag S. A., 37 N.Y.2d 522, 525;
Varkonyi v S. A. Empresa De Viacao Airea Rio Grandense [Varig], 22 N.Y.2d 333, 335). The
court may also consider that both parties to the action are nonresidents (Bata v Bata, 304
N.Y. 51) and that the transaction out of which the cause of action arose occurred primarily in
a foreign jurisdiction (Silver v Great Amer. Ins. Co., 29 N.Y.2d 356, 361). No one factor is
controlling (see Irrigation & Ind. Dev. Corp. v Indag S. A., supra; see, also, Piper Aircraft Co.
v Reyno, 454 US 235, supra; Gulf Oil Corp. v Gilbert, 330 US 501, 508). The great advantage
of the rule of forum non conveniens is its flexibility based upon the facts and circumstances of
each case (Martin v Mieth, 35 N.Y.2d 414, 418; Silver v Great Amer. Ins. Co., supra). The
rule rests upon justice, fairness and convenience and we have held that when the court takes
these various factors into account in making its decision, there has been no abuse of
discretion reviewable by this court (Banco Ambrosiano, S.p.A. v Artoc Bank & Trust, supra;
Irrigation & Ind. Dev. Corp. v Indag S. A., supra; Varkonyi v Varig, supra, at p 337).
Here, the trial court and the Appellate Division considered all of the relevant factors, including
the fact that there may be no alternative forum in which this claim can be tried because of the
political situation in Iran under [480] the Khomeini regime. They also noted the substantial
financial and administrative burden on the New York courts, the genesis of the claims in Iran,
the likely applicability of Iranian law, the nonresidence of both parties and that plaintiff was
requesting a sweeping review of the conduct of the Shah's government during the 38 years of
his reign, a review which undoubtedly would require extended trial and pretrial proceedings
and which would necessitate the appearance of many foreign witnesses not only to establish
liability but also to discover and evaluate defendant's assets. Indeed, plaintiff's appendix lists
two and one-half pages of single-spaced typewritten entries of property of all kinds
throughout the world allegedly owned or controlled by defendant and the royal family through
the Pahlavi Foundation. The courts below, after reviewing these factors, concluded that the
public interest factors involving the court system and the private interest factors affecting
defendant outweighed plaintiff's claim to litigate this action in the New York courts
notwithstanding the unavailability of an alternative forum.
Plaintiff contends that this was error because the availability of an alternative forum is not
merely an additional factor for the court to consider but constitutes an absolute precondition
to dismissal on conveniens grounds.
The perceived requirement that an alternative forum must be available had its origin in dicta
by the United States Supreme Court in Gulf Oil Corp. v Gilbert (330 US 501, 507, supra).
Writing for the court, Justice Jackson stated (at pp 506-507): "In all cases in which the
doctrine of forum non conveniens comes into play, it presupposes at least two forums in
which the defendant is amenable to process; the doctrine furnishes criteria for choice
between them." The Gulf Oil case involved a New York dismissal of a Virginia-based action
on the ground that all the relevant contracts were with Virginia. Unlike the present case, there
was plainly an alternative forum present in Gulf Oil and the court's statement was
unnecessary to the result. Nevertheless, the dictum has persisted and has been quoted in
subsequent cases (see, e.g., Piper Aircraft Co. v Reyno, 454 US 235, supra; Calavo Growers
v Belgium, 632 F.2d 963, 968) and scholarly treatises (1 Weinstein-Korn-Miller, [481] NY Civ
Prac, par 327.02, p 3-479). Indeed, dicta in many of this court's decisions have also stated it
as a general rule (see, e.g., Irrigation & Ind. Dev. Corp. v Indag S. A., 37 N.Y.2d 522, 525,
supra; Silver v Great Amer. Ins. Co., 29 N.Y.2d 356, 361, supra; Varkonyi v Varig, 22 N.Y.2d
333, supra).
Without doubt, the availability of another suitable forum is a most important factor to be
considered in ruling on a motion to dismiss but we have never held that it was a prerequisite
for applying the conveniens doctrine and in Varkonyi we expressly described the availability
of an alternative forum as a "pertinent factor", not as a precondition to dismissal (at p 338).
Nor should proof of the availability of another forum be required in all cases before dismissal
is permitted. That would place an undue burden on New York courts forcing them to accept
foreign-based actions unrelated to this State merely because a more appropriate forum is
unwilling or unable to accept jurisdiction (see Korbel, Law of Federal Venue and Choice of
Most Convenient Forum, 15 Rutgers L Rev 607, 611, n 28; see, also, Ferguson v Neilson, 58
Hun 604, opn in 33 NY St Rep 814, 11 NYS 524; Noto v Cia Secula di Armanento, 310 F
Supp 639). Moreover, even if we were to hold that the motion should be denied if no
alternative forum is available, then the burden of demonstrating that fact should fall on
plaintiff. Its presence in the New York courts is a matter of choice and permitted because of
comity and the public and private burden of its action appearing, it should justify the need for
New York to assume jurisdiction (Blair, Doctrine of Forum Non Conveniens in Anglo-
American Law, 29 Col L Rev 1, 33-34 [holding that there need not be an alternative forum
available before dismissal is warranted]). The result may appear arbitrary to some but forum
non conveniens dismissals are not the only instance in which New York courts decline to
entertain jurisdiction even though no alternative forum may exist. Typically, the courts also
refuse to adjudicate claims otherwise actionable because they involve unclean hands,
diplomatic immunity and claims in which the applicable law is penal in nature or is contrary to
the public policy of the forum State (see Restatement, Conflict of Laws 2d, § 85, and
Comment a; §§ 89, 90; Siegel, Conflicts in a Nutshell, §§ 49-53).
[482] In this case the convenience of the plaintiff is served because it acquired jurisdiction
over defendant in New York. That circumstance is entitled to some weight, although less than
usual because nonresident parties are involved (see Piper Aircraft Co. v Reyno, 454 US 235,
255-256, supra), but generally, a plaintiff must be able to show more than its own
convenience for selecting the forum when the choice imposes a heavy burden on the court
and the defendant (Gulf Oil Corp. v Gilbert, supra, at p 508). To that end, plaintiff claims the
action should proceed in this jurisdiction because assets of the Shah are located here.
Nothing before us establishes that fact, however, and the Surrogate's Court has apparently
found no grounds for ancillary administration of the estate yet (see n 1, infra). The absence of
an alternative forum is the only substantial consideration advanced for denial of the motion.
Arrayed against this is the substantial burden upon the courts of this State and the possibility
that its judgment may be ineffectual because of its inability to impose a constructive trust on
defendant's assets if they are not in New York. Moreover, defendant probably cannot defend
this claim in any realistic way because the witnesses and evidence are located in Iran under
plaintiff's control and are not subject to the mandate of New York's courts. Indeed, plaintiff's
counsel conceded on oral argument that ideally the action should be maintained in Iran but
contended that New York was the better forum. If the action cannot be maintained in Iran,
however, under laws which result in judgments cognizable in the United States or other
foreign jurisdictions where the Shah's assets may be found, then that failure must be charged
to plaintiff. It is, after all, the government in power, not a hapless national victimized by its
country's policies. Any infirmity in plaintiff's legal system should weigh against its claim of
venue, not impose disadvantage on defendant or the judicial system of this State.
As the dissent states (and as has been noted above), some courts and commentators have
taken the view that an action will not be dismissed on forum non conveniens grounds unless
a suitable alternative forum is available to plaintiff (see Gulf Oil Corp. v Gilbert, 330 US 501,
508, supra [dictum]; [483] Restatement, Conflict of Laws 2d, § 84, p 251; see, also, Vandam v
Smit, 101 NM 508; Hill v Upper Miss. Towing Corp., 252 Minn 165). At the threshold we note
that the Supreme Court, while ruling with respect to procedural rights in the Federal courts,
has never suggested that the doctrine of forum non conveniens implicates constitutional due
process rights. Although the existence of a suitable alternative forum is a most important
factor to be considered in applying the forum non conveniens doctrine, its alleged absence
does not require the court to retain jurisdiction. Plaintiff has failed to establish that no
alternative forum exists and, even if it were assumed that normally an alternative forum is a
prerequisite and that plaintiff has none, a forum non conveniens dismissal is still warranted
when plaintiff's chosen forum is unable to afford the parties appropriate relief (Restatement,
Conflict of Laws 2d, § 85). Despite the fact that plaintiff's complaint requests monetary relief,
it really seeks a sweeping review of the political and financial management of the Iranian
government during the several years of the late Shah's reign with the object of accounting for
and repossessing the nation's claimed lost wealth wherever it may be located throughout the
world. For the reasons stated, that relief cannot properly be afforded by a New York forum
with little if any nexus to the controversy and the taxpayers of this State should not be
compelled to assume the heavy financial burden attributable to the cost of administering the
litigation contemplated when their interest in the suit and the connection of its subject matter
to the State of New York is so ephemeral (Silver v Great Amer. Ins. Co., 29 N.Y.2d 356, 361,
supra; Bata v Bata, 304 N.Y. 51, 56, supra; Pietraroia v New Jersey & Hudson Riv. Ry. &
Ferry Co., 197 N.Y. 434, 439).
Finally, it should be noted that the Federal cases cited in the dissent rest upon the Federal
"change of venue" statute (US Code, tit 28, § 1404, subd [a]) which is substantially different
from New York's CPLR 327 because a successful motion under Federal law results in a
transfer of the case to another district within the country. New York's statute contains no
similar provision (Siegel, NY Prac, § 28, p 28).
In sum, the record does not demonstrate a substantial nexus between this State and plaintiff's
cause of the action. [484] That being so the courts below could, in the exercise of their
discretion, dismiss the action on grounds of forum non conveniens notwithstanding the fact
that the record does not establish an alternative forum where the action may be maintained
and they could do so without conditioning their dismissal on defendant's acceptance of
process in another jurisdiction.
II
The crisis arising from the seizure of American hostages in Iran was settled on January 19,
1981 when Iran and the United States executed the General Declaration and the Claims
Settlement Declaration, agreements commonly known as the Algerian Accords. These
agreements dealt primarily with the unfreezing of Iranian assets located in the United States
and the method for resolving suits by nationals of the United States against the government
of Iran. They also provided that the United States Government would take certain steps in
connection with legal actions involving the Shah's property. Specifically, the United States
agreed to freeze the Shah's assets within this country, to inform United States courts that in
any litigation involving Iran and the Shah's estate sovereign immunity and the Act of State
doctrine were not available as defenses and to guarantee the enforcement of any final
judgments involving these matters. Any claimed failure of the United States to meet these
treaty obligations was made subject to arbitration between the signatories in a specially
designated international tribunal and its award of damages to plaintiff for the breach could be
enforced in the courts of any nation. In addition, a summary statement issued by the United
States Government prior to the signing of the Accords stated that it would advise American
courts of the right of the Iranian government to bring an action in this country to recover the
Shah's assets. Plaintiff contends that these promises preclude New York courts from
dismissing the action on forum non conveniens grounds.
At the time the Accords were executed, this action had been instituted in Supreme Court and
there was pending a motion to dismiss, made several months earlier, [485] based upon
defendant's contentions that the action involved a nonjusticiable political question, that
plaintiff had unclean hands and on grounds of forum non conveniens. Indeed, the action was
mentioned in an earlier communication of the United States directed to the government of
Iran on December 3, 1980. Nevertheless, although the Accords when finally concluded
contained specific provisions concerning plaintiff's claims against the Shah and his family,
they contained no reference to the pending suit asserting those claims nor did the United
States guarantee that a forum would be available to plaintiff to litigate them.
Plaintiff asserts, however, that various statements issued by the State Department when read
in conjunction with these treaties evidence a commitment by the United States to assure that
New York courts would entertain plaintiff's claim. It refers particularly to a State Department
summary of the United States position on the Iranian situation, which indicated that the
Federal Government would "facilitate any legal action" brought by the government of Iran to
recover on claims to the former Shah's assets and request the court's assistance in obtaining
information about such assets (Summary Report, Hostage Crisis in Iran, 1979-1981,
submitted by Secretary of State Edmund Muskie in Hearings before the Senate Committee
on Foreign Relations, 97th Cong, 1st Sess, Feb. 17, 18 and March 4, 1981, p 14).
Generally, a treaty is to be construed according to principles applied to written contracts
between individuals and the clear language of the treaty controls unless it is inconsistent with
the intent or expectations of the parties (Sumitomo Shoji Amer. v Avagliano, 457 US 176;
Sullivan v Kidd, 254 US 433, 439; Hamilton v Erie R. R. Co., 219 N.Y. 343, 352-353).
Permissibly the history of the treaty, diplomatic correspondence and other extraneous
documents may be considered to discover that intent (see Sumitomo Shoji Amer. v
Avagliano, supra, at p 180; Maximov v United States, 373 US 49, 54; Ross v Pan Amer.
Airways, 299 N.Y. 88; and see, generally, Restatement, Foreign Relations Law of United
States [rev-Tent Draft No. 1], § 329 et seq.). We have no difficulty interpreting the Accords
and [486] the extraneous evidence submitted by the parties to determine that the United
States Government did not guarantee plaintiff a New York forum for its claim. Neither the
agreements nor the statement of the Summary Report indicates otherwise when analyzed in
terms of the natural and ordinary meaning of the words used (see Sullivan v Kidd, supra, at p
439; Hamilton v Erie R. R. Co., 219 N.Y. 343, 352-353, supra). The Federal Government
simply expressed a willingness to "facilitate" or aid Iran in bringing the claims, presumably by
complying with the limited promises it made in the Accords. Indeed, inasmuch as treaties are
subject to constitutional restraints (Reid v Covert, 354 US 1; Restatement, Foreign Relations
Law of United States [rev-Tent Draft No. 1], § 304), it is questionable whether the Federal
Government could guarantee a New York forum by treaty without violating constitutional
principles of federalism and separation of powers (see, generally, Guaranty Trust Co. v
United States, 304 US 126, 140 [Statute of Limitations]; see, also, United States v Pink, 315
US 203, 216, 230-234).
The precedents cited by plaintiff are not helpful (Dames & Moore v Regan, 453 US 654;
United States v Pink, 315 US 203, supra; United States v Belmont, 301 US 324). Those
cases concern the broad powers of the Federal Government to mandate that the resolution of
claims against Iran by nationals of the United States shall be pursued in an international
tribunal (Dames & Moore v Regan, supra), or to implement the right of the Soviet government
(by assignment to the United States) to recapture Russian assets held by Americans or
American institutions in this country (United States v Pink, supra; United States v Belmont,
supra). Such commitments of the Federal Government to resolve claims between the
signatories or nationals are viewed liberally because unless resolved the claims may provide
continuing irritations and conflicts which interfere with peaceful relations between the nations.
Similar commitments are made in Points I-III of the General Declaration and in the Claims
Settlement Declaration of the Accords and are not at issue here. This is litigation by a foreign
government against its own national who happened to be within the State of New York at the
[487] time this suit was commenced. It involves an internal dispute, not normally a matter
considered in the exercise of treaty powers and a matter which does not generally engage
the national interest to the same extent as claims by nationals of one signatory nation against
the other signatory nation (see Nowak-Rotunda-Young, Constitutional Law [2d ed], p 202).
The parties have culled statements from the various documents and communiques and the
testimony of witnesses before the Senate allegedly supporting their respective positions. The
evidence suggests, however, that the State Department recognized the problems inherent in
this litigation and the restraints of federalism in our system of government and that, as Mr.
Warren Christopher, the United States negotiator, stated in his testimony before the Senate,
the courts would have to decide whether plaintiff had "a right [to maintain this action] within
our legal system" (Senate Committee on Foreign Relations Hearing, 97th Cong, 1st Sess,
Feb. 17, 1981, at p 56). The United States agreed that plaintiff would not be foreclosed from
pursuing its claim in our courts by preclusive doctrines of international law but it did not
undertake to guarantee the opportunity for plaintiff to prove its claim in the New York courts.
The United States has met its commitment to "facilitate" this lawsuit by freezing the Shah's
assets and by advising the courts that the Act of State doctrine and sovereign immunity
principles are not to apply to plaintiff's claim. Nothing in the record or in its communication to
the trial court suggests that a promise was made that it or the courts would do more.
Accordingly, the order of the Appellate Division should be affirmed, with costs.
U.S. Supreme Court
Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981)
Piper Aircraft Co. v. Reyno
No. 8048
Argued October 14, 1981
Decided December 8, 1981*
454 U.S. 235
Syllabus
Respondent, as representative of the estates of several citizens and residents of Scotland
who were killed in an airplane crash in Scotland during a charter flight, instituted wrongful
death litigation in a California state court against petitioners, which are the company that
manufactured the plane in Pennsylvania and the company that manufactured the plane's
propellers in Ohio. At the time of the crash, the plane was registered in Great Britain and was
owned and operated by companies organized in the United Kingdom. The pilot and all of the
decedents' heirs and next of kin were Scottish subjects and citizens, and the investigation of
the accident was conducted by British authorities. Respondent sought to recover from
petitioners on the basis of negligence or strict liability (not recognized by Scottish law), and
admitted that the action was filed in the United States because its laws regarding liability,
capacity to sue, and damages are more favorable to respondent's position than those of
Scotland. On petitioners' motion, the action was removed to a Federal District Court in
California and was then transferred to the United States District Court for the Middle District
of Pennsylvania, pursuant to 28 U.S.C. § 1404(a). The District Court granted petitioners'
motion to dismiss the action on the ground offorum non conveniens. Relying on the test set
forth in Gulf Oil Corp. v. Gilbert, 330 U. S. 501, and analyzing the "private interest factors"
affecting the litigants' convenience and the "public interest factors" affecting the forum's
convenience, as set forth in Gilbert, the District Court concluded that Scotland was the
appropriate forum. However, the Court of Appeals reversed, holding that the District Court
had abused its discretion in conducting the Gilbert analysis and that, in any event, dismissal
is automatically barred where
Page 454 U. S. 236
the law of the alternative forum is less favorable to the plaintiff than the law of the forum
chosen by the plaintiff.
WON the case should be dismissed on the ground of forum non conveniens. YES
Held:
1. Plaintiffs may not defeat a motion to dismiss on the ground of forum non
conveniens merely by showing that the substantive law that would be applied in the
alternative forum is less favorable to the plaintiffs than that of the chosen forum. The
possibility of a change in substantive law should ordinarily not be given conclusive or even
substantial weight in the forum non conveniens inquiry. Canada Malting Co. v. Paterson
Steamships, Ltd., 285 U. S. 413. Pp. 454 U. S. 247-255.
(a) Under Gilbert, supra, dismissal will ordinarily be appropriate where trial in the plaintiff's
chosen forum imposes a heavy burden on the defendant or the court, and where the plaintiff
is unable to offer any specific reasons of convenience supporting his choice. If substantial
weight were given to the possibility of an unfavorable change in law, however, dismissal
might be barred even where trial in the chosen forum was plainly inconvenient, and the forum
non conveniens doctrine would become virtually useless. Such an approach not only would
be inconsistent with the purpose of the forum non conveniens doctrine, but also would pose
substantial practical problems, requiring that trial courts determine complex problems in
conflict of laws and comparative law, and increasing the flow into American courts of litigation
by foreign plaintiffs against American manufacturers. Pp. 454 U. S. 248-252.
(b) Nor may an analogy be drawn between forum non conveniens dismissals and transfers
between federal courts pursuant to 28 U.S.C. § 1404(a), which was construed in Van Dusen
v. Barrack, 376 U. S. 612, as precluding a transfer if it resulted in a change in the applicable
law. The statute was enacted to permit change of venue between federal courts, and
although it was drafted in accordance with the doctrine of forum non conveniens, it was
intended to be a revision, rather than a codification of the common law. District courts were
given more discretion to transfer under § 1404(a) than they had to dismiss on grounds
of forum non conveniens. Van Dusen v. Barrack, supra, distinguished. Pp. 454 U. S. 253-254.
2. The District Court properly decided that the presumption in favor of the plaintiff's forum
choice applied with less than maximum force when the plaintiff or (as here) the real parties in
interest are foreign. When the plaintiff has chosen the home forum, it is reasonable to
assume that the choice is convenient; but when the plaintiff or real parties in interest are
foreign, this assumption is much less reasonable, and the plaintiff's choice deserves less
deference. Pp. 454 U. S. 255-256.
Page 454 U. S. 237

3. The forum non conveniens determination is committed to the trial court's sound discretion,

and may be reversed only when there has been a clear abuse of discretion. Here, the District
Court did not abuse its discretion in weighing the private and public interests under
the Gilbert analysis, and thereby determining that the trial should be held in Scotland. Pp. 454
U. S. 257-261.

(a) In analyzing the private interest factors, the District Court did not act unreasonably in
concluding that fewer evidentiary problems would be posed if the trial were held in Scotland,
a large proportion of the relevant evidence being located there. The District Court also
correctly concluded that the problems posed by the petitioners' inability to implead potential
Scottish third-party defendants -- the pilot's estate, the plane's owners, and the charter
company -- supported holding the trial in Scotland. Pp. 454 U. S. 257-259.

(b) The District Court's review of the factors relating to the public interest was also
reasonable. Even aside from the question whether Scottish law might be applicable in part, all
other public interest factors favor trial in Scotland, which has a very strong interest in this
litigation. The accident occurred there, all of the decedents were Scottish, and apart from
petitioners, all potential parties are either Scottish or English. As to respondent's argument
that American citizens have an interest in ensuring that American manufacturers are deterred
from producing defective products and that additional deterrence might be obtained by trial in
the United States where they could be sued on the basis of both negligence and strict liability,
any incremental deterrence from trial in an American court is likely to be insignificant and is
not sufficient to justify the enormous commitment of judicial time and resources that would be
required. Pp. 454 U. S. 259-261.

630 F.2d 149, reversed.

MARSHALL, J., delivered the opinion of the Court, in which BURGER, C.J., and BLACKMUN
and REHNQUIST, JJ., joined, and in Parts I and II of which WHITE, J., joined. WHITE J., filed
an opinion concurring in part and dissenting in part, post, p. 454 U. S. 261. STEVENS, J.,
filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 454 U. S. 261. POWELL, J.,
took no part in the decision of the cases. O'CONNOR, J., took no part in the consideration or
decision of the cases.