1st Conflicts of Law Case Pool (Full Text)

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CONFLICTS OF LAW
ATTY. WILLIAM GACETA CARPENTERO
FULL TEXT
1. Republic v. Ferdinand Marcos, G.R. No. 152154, July 15, 2003 Atup
G.R. No. 152154 July 15, 2003
REPUBLIC OF THE PHILIPPINES, petitioner,

vs.
HONORABLE SANDIGANBAYAN (SPECIAL FIRST DIVISION), FERDINAND E. MARCOS (REPRESENTED BY HIS ESTATE/HEIRS: IMELDA R.
MARCOS, MARIA IMELDA [IMEE] MARCOS-MANOTOC, FERDINAND R. MARCOS, JR. AND IRENE MARCOS-ARANETA) AND IMELDA
ROMUALDEZ MARCOS, respondents.
CORONA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking to (1) set aside the Resolution dated January 31, 2002 issued by
the Special First Division of the Sandiganbayan in Civil Case No. 0141 entitled Republic of the Philippines vs. Ferdinand E. Marcos, et. al.,
and (2) reinstate its earlier decision dated September 19, 2000 which forfeited in favor of petitioner Republic of the Philippines
(Republic) the amount held in escrow in the Philippine National Bank (PNB) in the aggregate amount of US$658,175,373.60 as of
January 31, 2002.
BACKGROUND OF THE CASE
On December 17, 1991, petitioner Republic, through the Presidential Commission on Good Government (PCGG), represented by the
Office of the Solicitor General (OSG), filed a petition for forfeiture before the Sandiganbayan, docketed as Civil Case No. 0141 entitled
Republic of the Philippines vs. Ferdinand E. Marcos, represented by his Estate/Heirs and Imelda R. Marcos, pursuant to RA 13791 in
relation to Executive Order Nos. 1,2 2,3 144 and 14-A.5
In said case, petitioner sought the declaration of the aggregate amount of US$356 million (now estimated to be more than US$658
million inclusive of interest) deposited in escrow in the PNB, as ill-gotten wealth. The funds were previously held by the following five
account groups, using various foreign foundations in certain Swiss banks:
(1) Azio-Verso-Vibur Foundation accounts;
(2) Xandy-Wintrop: Charis-Scolari-Valamo-Spinus- Avertina Foundation accounts;
(3) Trinidad-Rayby-Palmy Foundation accounts;
(4) Rosalys-Aguamina Foundation accounts and
(5) Maler Foundation accounts.
In addition, the petition sought the forfeiture of US$25 million and US$5 million in treasury notes which exceeded the Marcos couple's
salaries, other lawful income as well as income from legitimately acquired property. The treasury notes are frozen at the Central Bank of
the Philippines, now Bangko Sentral ng Pilipinas, by virtue of the freeze order issued by the PCGG.
On October 18, 1993, respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and Ferdinand R. Marcos, Jr. filed
their answer.
Before the case was set for pre-trial, a General Agreement and the Supplemental Agreements6 dated December 28, 1993 were
executed by the Marcos children and then PCGG Chairman Magtanggol Gunigundo for a global settlement of the assets of the
Marcos family. Subsequently, respondent Marcos children filed a motion dated December 7, 1995 for the approval of said agreements
and for the enforcement thereof.
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The General Agreement/Supplemental Agreements sought to identify, collate, cause the inventory of and distribute all assets
presumed to be owned by the Marcos family under the conditions contained therein. The aforementioned General Agreement
specified in one of its premises or "whereas clauses" the fact that petitioner "obtained a judgment from the Swiss Federal Tribunal on
December 21, 1990, that the Three Hundred Fifty-six Million U.S. dollars (US$356 million) belongs in principle to the Republic of the
Philippines provided certain conditionalities are met x x x." The said decision of the Swiss Federal Supreme Court affirmed the decision
of Zurich District Attorney Peter Consandey, granting petitioner's request for legal assistance.7 Consandey declared the various
deposits in the name of the enumerated foundations to be of illegal provenance and ordered that they be frozen to await the final
verdict in favor of the parties entitled to restitution.
Hearings were conducted by the Sandiganbayan on the motion to approve the General/Supplemental Agreements. Respondent
Ferdinand, Jr. was presented as witness for the purpose of establishing the partial implementation of said agreements.
On October 18, 1996, petitioner filed a motion for summary judgment and/or judgment on the pleadings. Respondent Mrs. Marcos filed
her opposition thereto which was later adopted by respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr.
In its resolution dated November 20, 1997, the Sandiganbayan denied petitioner's motion for summary judgment and/or judgment on
the pleadings on the ground that the motion to approve the compromise agreement "(took) precedence over the motion for
summary judgment."
Respondent Mrs. Marcos filed a manifestation on May 26, 1998 claiming she was not a party to the motion for approval of the
Compromise Agreement and that she owned 90% of the funds with the remaining 10% belonging to the Marcos estate.
Meanwhile, on August 10, 1995, petitioner filed with the District Attorney in Zurich, Switzerland, an additional request for the immediate
transfer of the deposits to an escrow account in the PNB. The request was granted. On appeal by the Marcoses, the Swiss Federal
Supreme Court, in a decision dated December 10, 1997, upheld the ruling of the District Attorney of Zurich granting the request for the
transfer of the funds. In 1998, the funds were remitted to the Philippines in escrow. Subsequently, respondent Marcos children moved
that the funds be placed in custodia legis because the deposit in escrow in the PNB was allegedly in danger of dissipation by
petitioner. The Sandiganbayan, in its resolution dated September 8, 1998, granted the motion.
After the pre-trial and the issuance of the pre-trial order and supplemental pre-trial order dated October 28, 1999 and January 21,
2000, respectively, the case was set for trial. After several resettings, petitioner, on March 10, 2000, filed another motion for summary
judgment pertaining to the forfeiture of the US$356 million, based on the following grounds:
THE ESSENTIAL FACTS WHICH WARRANT THE FORFEITURE OF THE FUNDS SUBJECT OF THE PETITION UNDER R.A. NO. 1379 ARE ADMITTED BY
RESPONDENTS IN THEIR PLEADINGS AND OTHER SUBMISSIONS MADE IN THE COURSE OF THE PROCEEDING.
II
RESPONDENTS' ADMISSION MADE DURING THE PRE-TRIAL THAT THEY DO NOT HAVE ANY INTEREST OR OWNERSHIP OVER THE FUNDS
SUBJECT OF THE ACTION FOR FORFEITURE TENDERS NO GENUINE ISSUE OR CONTROVERSY AS TO ANY MATERIAL FACT IN THE PRESENT
ACTION, THUS WARRANTING THE RENDITION OF SUMMARY JUDGMENT.8
Petitioner contended that, after the pre-trial conference, certain facts were established, warranting a summary judgment on the funds
sought to be forfeited.
Respondent Mrs. Marcos filed her opposition to the petitioner's motion for summary judgment, which opposition was later adopted by
her co-respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr.
On March 24, 2000, a hearing on the motion for summary judgment was conducted.
In a decision9 dated September 19, 2000, the Sandiganbayan granted petitioner's motion for summary judgment:
CONCLUSION
There is no issue of fact which calls for the presentation of evidence.

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The Motion for Summary Judgment is hereby granted.
The Swiss deposits which were transmitted to and now held in escrow at the PNB are deemed unlawfully acquired as ill-gotten wealth.
DISPOSITION
WHEREFORE, judgment is hereby rendered in favor of the Republic of the Philippines and against the respondents, declaring the Swiss
deposits which were transferred to and now deposited in escrow at the Philippine National Bank in the total aggregate value
equivalent to US$627,608,544.95 as of August 31, 2000 together with the increments thereof forfeited in favor of the State.10
Respondent Mrs. Marcos filed a motion for reconsideration dated September 26, 2000. Likewise, Mrs. Manotoc and Ferdinand, Jr. filed
their own motion for reconsideration dated October 5, 2000. Mrs. Araneta filed a manifestation dated October 4, 2000 adopting the
motion for reconsideration of Mrs. Marcos, Mrs. Manotoc and Ferdinand, Jr.
Subsequently, petitioner filed its opposition thereto.
In a resolution11 dated January 31, 2002, the Sandiganbayan reversed its September 19, 2000 decision, thus denying petitioner's motion
for summary judgment:
CONCLUSION
In sum, the evidence offered for summary judgment of the case did not prove that the money in the Swiss Banks belonged to the
Marcos spouses because no legal proof exists in the record as to the ownership by the Marcoses of the funds in escrow from the Swiss
Banks.
The basis for the forfeiture in favor of the government cannot be deemed to have been established and our judgment thereon,
perforce, must also have been without basis.
WHEREFORE, the decision of this Court dated September 19, 2000 is reconsidered and set aside, and this case is now being set for
further proceedings.12
Hence, the instant petition. In filing the same, petitioner argues that the Sandiganbayan, in reversing its September 19, 2000 decision,
committed grave abuse of discretion amounting to lack or excess of jurisdiction considering that --
PETITIONER WAS ABLE TO PROVE ITS CASE IN ACCORDANCE WITH THE REQUISITES OF SECTIONS 2 AND 3 OF R.A. NO. 1379:
A. PRIVATE RESPONDENTS CATEGORICALLY ADMITTED NOT ONLY THE PERSONAL CIRCUMSTANCES OF FERDINAND E. MARCOS AND
IMELDA R. MARCOS AS PUBLIC OFFICIALS BUT ALSO THE EXTENT OF THEIR SALARIES AS SUCH PUBLIC OFFICIALS, WHO UNDER THE
CONSTITUTION, WERE PROHIBITED FROM ENGAGING IN THE MANAGEMENT OF FOUNDATIONS.
B. PRIVATE RESPONDENTS ALSO ADMITTED THE EXISTENCE OF THE SWISS DEPOSITS AND THEIR OWNERSHIP THEREOF:
1. ADMISSIONS IN PRIVATE RESPONDENTS' ANSWER;
2. ADMISSION IN THE GENERAL / SUPPLEMENTAL AGREEMENTS THEY SIGNED AND SOUGHT TO IMPLEMENT;
3. ADMISSION IN A MANIFESTATION OF PRIVATE RESPONDENT IMELDA R. MARCOS AND IN THE MOTION TO PLACE THE RES IN CUSTODIA
LEGIS; AND
4. ADMISSION IN THE UNDERTAKING TO PAY THE HUMAN RIGHTS VICTIMS.
C. PETITIONER HAS PROVED THE EXTENT OF THE LEGITIMATE INCOME OF FERDINAND E. MARCOS AND IMELDA R. MARCOS AS PUBLIC
OFFICIALS.
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D. PETITIONER HAS ESTABLISHED A PRIMA FACIE PRESUMPTION OF UNLAWFULLY ACQUIRED WEALTH.
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SUMMARY JUDGMENT IS PROPER SINCE PRIVATE RESPONDENTS HAVE NOT RAISED ANY GENUINE ISSUE OF FACT CONSIDERING THAT:
A. PRIVATE RESPONDENTS' DEFENSE THAT SWISS DEPOSITS WERE LAWFULLY ACQUIRED DOES NOT ONLY FAIL TO TENDER AN ISSUE BUT IS
CLEARLY A SHAM; AND
B. IN SUBSEQUENTLY DISCLAIMING OWNERSHIP OF THE SWISS DEPOSITS, PRIVATE RESPONDENTS ABANDONED THEIR SHAM DEFENSE OF
LEGITIMATE ACQUISITION, AND THIS FURTHER JUSTIFIED THE RENDITION OF A SUMMARY JUDGMENT.
III
THE FOREIGN FOUNDATIONS NEED NOT BE IMPLEADED.
IV
THE HONORABLE PRESIDING JUSTICE COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING HIMSELF ON THE GROUND THAT ORIGINAL
COPIES OF THE AUTHENTICATED SWISS DECISIONS AND THEIR "AUTHENTICATED TRANSLATIONS" HAVE NOT BEEN SUBMITTED TO THE COURT,
WHEN EARLIER THE SANDIGANBAYAN HAS QUOTED EXTENSIVELY A PORTION OF THE TRANSLATION OF ONE OF THESE SWISS DECISIONS IN
HIS "PONENCIA" DATED JULY 29, 1999 WHEN IT DENIED THE MOTION TO RELEASE ONE HUNDRED FIFTY MILLION US DOLLARS
($150,000,000.00) TO THE HUMAN RIGHTS VICTIMS.
PRIVATE RESPONDENTS ARE DEEMED TO HAVE WAIVED THEIR OBJECTION TO THE AUTHENTICITY OF THE SWISS FEDERAL SUPREME COURT
DECISIONS.13
Petitioner, in the main, asserts that nowhere in the respondents' motions for reconsideration and supplemental motion for
reconsideration were the authenticity, accuracy and admissibility of the Swiss decisions ever challenged. Otherwise stated, it was
incorrect for the Sandiganbayan to use the issue of lack of authenticated translations of the decisions of the Swiss Federal Supreme
Court as the basis for reversing itself because respondents themselves never raised this issue in their motions for reconsideration and
supplemental motion for reconsideration. Furthermore, this particular issue relating to the translation of the Swiss court decisions could
not be resurrected anymore because said decisions had been previously utilized by the Sandiganbayan itself in resolving a "decisive
issue" before it.
Petitioner faults the Sandiganbayan for questioning the non-production of the authenticated translations of the Swiss Federal Supreme
Court decisions as this was a marginal and technical matter that did not diminish by any measure the conclusiveness and strength of
what had been proven and admitted before the Sandiganbayan, that is, that the funds deposited by the Marcoses constituted ill-
gotten wealth and thus belonged to the Filipino people.
In compliance with the order of this Court, Mrs. Marcos filed her comment to the petition on May 22, 2002. After several motions for
extension which were all granted, the comment of Mrs. Manotoc and Ferdinand, Jr. and the separate comment of Mrs. Araneta were
filed on May 27, 2002.
Mrs. Marcos asserts that the petition should be denied on the following grounds:
A.
PETITIONER HAS A PLAIN, SPEEDY, AND ADEQUATE REMEDY AT THE SANDIGANBAYAN.
B.
THE SANDIGANBAYAN DID NOT ABUSE ITS DISCRETION IN SETTING THE CASE FOR FURTHER PROCEEDINGS.14
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Mrs. Marcos contends that petitioner has a plain, speedy and adequate remedy in the ordinary course of law in view of the resolution
of the Sandiganbayan dated January 31, 2000 directing petitioner to submit the authenticated translations of the Swiss decisions.
Instead of availing of said remedy, petitioner now elevates the matter to this Court. According to Mrs. Marcos, a petition for certiorari
which does not comply with the requirements of the rules may be dismissed. Since petitioner has a plain, speedy and adequate
remedy, that is, to proceed to trial and submit authenticated translations of the Swiss decisions, its petition before this Court must be
dismissed. Corollarily, the Sandiganbayan's ruling to set the case for further proceedings cannot and should not be considered a
capricious and whimsical exercise of judgment.
Likewise, Mrs. Manotoc and Ferdinand, Jr., in their comment, prayed for the dismissal of the petition on the grounds that:
(A)
BY THE TIME PETITIONER FILED ITS MOTION FOR SUMMARY JUDGMENT ON 10 MARCH 2000, IT WAS ALREADY BARRED FROM DOING SO.
(1) The Motion for Summary Judgment was based on private respondents' Answer and other documents that had long been in the
records of the case. Thus, by the time the Motion was filed on 10 March 2000, estoppel by laches had already set in against petitioner.
(2) By its positive acts and express admissions prior to filing the Motion for Summary Judgment on 10 March 1990, petitioner had legally
bound itself to go to trial on the basis of existing issues. Thus, it clearly waived whatever right it had to move for summary judgment.
(B)
EVEN ASSUMING THAT PETITIONER WAS NOT LEGALLY BARRED FROM FILING THE MOTION FOR SUMMARY JUDGMENT, THE
SANDIGANBAYAN IS CORRECT IN RULING THAT PETITIONER HAS NOT YET ESTABLISHED A PRIMA FACIE CASE FOR THE FORFEITURE OF THE
SWISS FUNDS.
(1) Republic Act No. 1379, the applicable law, is a penal statute. As such, its provisions, particularly the essential elements stated in
section 3 thereof, are mandatory in nature. These should be strictly construed against petitioner and liberally in favor of private
respondents.
(2) Petitioner has failed to establish the third and fourth essential elements in Section 3 of R.A. 1379 with respect to the identification,
ownership, and approximate amount of the property which the Marcos couple allegedly "acquired during their incumbency".
(a) Petitioner has failed to prove that the Marcos couple "acquired" or own the Swiss funds.
(b) Even assuming, for the sake of argument, that the fact of acquisition has been proven, petitioner has categorically admitted that it
has no evidence showing how much of the Swiss funds was acquired "during the incumbency" of the Marcos couple from 31
December 1965 to 25 February 1986.
(3) In contravention of the essential element stated in Section 3 (e) of R.A. 1379, petitioner has failed to establish the other proper
earnings and income from legitimately acquired property of the Marcos couple over and above their government salaries.
(4) Since petitioner failed to prove the three essential elements provided in paragraphs (c)15 (d),16 and (e)17 of Section 3, R.A. 1379,
the inescapable conclusion is that the prima facie presumption of unlawful acquisition of the Swiss funds has not yet attached. There
can, therefore, be no premature forfeiture of the funds.
(C)
IT WAS ONLY BY ARBITRARILY ISOLATING AND THEN TAKING CERTAIN STATEMENTS MADE BY PRIVATE RESPONDENTS OUT OF CONTEXT THAT
PETITIONER WAS ABLE TO TREAT THESE AS "JUDICIAL ADMISSIONS" SUFFICIENT TO ESTABLISH A PRIMA FACIE AND THEREAFTER A
CONCLUSIVE CASE TO JUSTIFY THE FORFEITURE OF THE SWISS FUNDS.
(1) Under Section 27, Rule 130 of the Rules of Court, the General and Supplemental Agreements, as well as the other written and
testimonial statements submitted in relation thereto, are expressly barred from being admissible in evidence against private
respondents.
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(2) Had petitioner bothered to weigh the alleged admissions together with the other statements on record, there would be a
demonstrable showing that no such "judicial admissions" were made by private respondents.
(D)
SINCE PETITIONER HAS NOT (YET) PROVEN ALL THE ESSENTIAL ELEMENTS TO ESTABLISH A PRIMA FACIE CASE FOR FORFEITURE, AND PRIVATE
RESPONDENTS HAVE NOT MADE ANY JUDICIAL ADMISSION THAT WOULD HAVE FREED IT FROM ITS BURDEN OF PROOF, THE
SANDIGANBAYAN DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN DENYING THE MOTION FOR SUMMARY JUDGMENT. CERTIORARI,
THEREFORE, DOES NOT LIE, ESPECIALLY AS THIS COURT IS NOT A TRIER OF FACTS.18
For her part, Mrs. Araneta, in her comment to the petition, claims that obviously petitioner is unable to comply with a very plain
requirement of respondent Sandiganbayan. The instant petition is allegedly an attempt to elevate to this Court matters, issues and
incidents which should be properly threshed out at the Sandiganbayan. To respondent Mrs. Araneta, all other matters, save that
pertaining to the authentication of the translated Swiss Court decisions, are irrelevant and impertinent as far as this Court is concerned.
Respondent Mrs. Araneta manifests that she is as eager as respondent Sandiganbayan or any interested person to have the Swiss
Court decisions officially translated in our known language. She says the authenticated official English version of the Swiss Court
decisions should be presented. This should stop all speculations on what indeed is contained therein. Thus, respondent Mrs. Araneta
prays that the petition be denied for lack of merit and for raising matters which, in elaborated fashion, are impertinent and improper
before this Court.
PROPRIETY OF PETITIONER'S ACTION FOR CERTIORARI
But before this Court discusses the more relevant issues, the question regarding the propriety of petitioner Republic's action for certiorari
under Rule 6519 of the 1997 Rules of Civil Procedure assailing the Sandiganbayan Resolution dated January 21, 2002 should be
threshed out.
At the outset, we would like to stress that we are treating this case as an exception to the general rule governing petitions for certiorari.
Normally, decisions of the Sandiganbayan are brought before this Court under Rule 45, not Rule 65.20 But where the case is undeniably
ingrained with immense public interest, public policy and deep historical repercussions, certiorari is allowed notwithstanding the
existence and availability of the remedy of appeal.21
One of the foremost concerns of the Aquino Government in February 1986 was the recovery of the unexplained or ill-gotten wealth
reputedly amassed by former President and Mrs. Ferdinand E. Marcos, their relatives, friends and business associates. Thus, the very first
Executive Order (EO) issued by then President Corazon Aquino upon her assumption to office after the ouster of the Marcoses was EO
No. 1, issued on February 28, 1986. It created the Presidential Commission on Good Government (PCGG) and charged it with the task
of assisting the President in the "recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate
family, relatives, subordinates and close associates, whether located in the Philippines or abroad, including the takeover or
sequestration of all business enterprises and entities owned or controlled by them during his administration, directly or through
nominees, by taking undue advantage of their public office and/or using their powers, authority, influence, connections or
relationship." The urgency of this undertaking was tersely described by this Court in Republic vs. Lobregat22:
surely x x x an enterprise "of great pith and moment"; it was attended by "great expectations"; it was initiated not only out of
considerations of simple justice but also out of sheer necessity - the national coffers were empty, or nearly so.
In all the alleged ill-gotten wealth cases filed by the PCGG, this Court has seen fit to set aside technicalities and formalities that merely
serve to delay or impede judicious resolution. This Court prefers to have such cases resolved on the merits at the Sandiganbayan. But
substantial justice to the Filipino people and to all parties concerned, not mere legalisms or perfection of form, should now be
relentlessly and firmly pursued. Almost two decades have passed since the government initiated its search for and reversion of such ill-
gotten wealth. The definitive resolution of such cases on the merits is thus long overdue. If there is proof of illegal acquisition,
accumulation, misappropriation, fraud or illicit conduct, let it be brought out now. Let the ownership of these funds and other assets be
finally determined and resolved with dispatch, free from all the delaying technicalities and annoying procedural sidetracks.23
We thus take cognizance of this case and settle with finality all the issues therein.
ISSUES BEFORE THIS COURT

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The crucial issues which this Court must resolve are: (1) whether or not respondents raised any genuine issue of fact which would either
justify or negate summary judgment; and (2) whether or not petitioner Republic was able to prove its case for forfeiture in accordance
with Sections 2 and 3 of RA 1379.
(1) THE PROPRIETY OF SUMMARY JUDGMENT
We hold that respondent Marcoses failed to raise any genuine issue of fact in their pleadings. Thus, on motion of petitioner Republic,
summary judgment should take place as a matter of right.
In the early case of Auman vs. Estenzo24, summary judgment was described as a judgment which a court may render before trial but
after both parties have pleaded. It is ordered by the court upon application by one party, supported by affidavits, depositions or other
documents, with notice upon the adverse party who may in turn file an opposition supported also by affidavits, depositions or other
documents. This is after the court summarily hears both parties with their respective proofs and finds that there is no genuine issue
between them. Summary judgment is sanctioned in this jurisdiction by Section 1, Rule 35 of the 1997 Rules of Civil Procedure:
SECTION 1. Summary judgment for claimant.- A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a
declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions
or admissions for a summary judgment in his favor upon all or any part thereof.25
Summary judgment is proper when there is clearly no genuine issue as to any material fact in the action.26 The theory of summary
judgment is that, although an answer may on its face appear to tender issues requiring trial, if it is demonstrated by affidavits,
depositions or admissions that those issues are not genuine but sham or fictitious, the Court is justified in dispensing with the trial and
rendering summary judgment for petitioner Republic.
The Solicitor General made a very thorough presentation of its case for forfeiture:
xxx
4. Respondent Ferdinand E. Marcos (now deceased and represented by his Estate/Heirs) was a public officer for several decades
continuously and without interruption as Congressman, Senator, Senate President and President of the Republic of the Philippines from
December 31, 1965 up to his ouster by direct action of the people of EDSA on February 22-25, 1986.
5. Respondent Imelda Romualdez Marcos (Imelda, for short) the former First Lady who ruled with FM during the 14-year martial law
regime, occupied the position of Minister of Human Settlements from June 1976 up to the peaceful revolution in February 22-25, 1986.
She likewise served once as a member of the Interim Batasang Pambansa during the early years of martial law from 1978 to 1984 and
as Metro Manila Governor in concurrent capacity as Minister of Human Settlements. x x x
xxx xxx xxx
11. At the outset, however, it must be pointed out that based on the Official Report of the Minister of Budget, the total salaries of former
President Marcos as President form 1966 to 1976 was P60,000 a year and from 1977 to 1985, P100,000 a year; while that of the former
First Lady, Imelda R. Marcos, as Minister of Human Settlements from June 1976 to February 22-25, 1986 was P75,000 a year xxx.
ANALYSIS OF RESPONDENTS LEGITIMATE INCOME
xxx
12. Based on available documents, the ITRs of the Marcoses for the years 1965-1975 were filed under Tax Identification No. 1365-055-1.
For the years 1976 until 1984, the returns were filed under Tax Identification No. M 6221-J 1117-A-9.
13. The data contained in the ITRs and Balance Sheet filed by the "Marcoses are summarized and attached to the reports in the
following schedules:
Schedule A:
Schedule of Income (Annex "T" hereof);

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Schedule B:
Schedule of Income Tax Paid (Annex "T-1" hereof);
Schedule C:
Schedule of Net Disposable Income (Annex "T-2" hereof);
Schedule D:
Schedule of Networth Analysis (Annex "T-3" hereof).
14. As summarized in Schedule A (Annex "T" hereof), the Marcoses reported P16,408,442.00 or US$2,414,484.91 in total income over a
period of 20 years from 1965 to 1984. The sources of income are as follows:
Official Salaries
P 2,627,581.00
16.01%
Legal Practice
11,109,836.00
67.71%
Farm Income
149,700.00
.91%
Others
2,521,325.00
15.37%
Total
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P16,408,442.00
100.00%
15. FM's official salary pertains to his compensation as Senate President in 1965 in the amount of P15,935.00 and P1,420,000.00 as
President of the Philippines during the period 1966 until 1984. On the other hand, Imelda reported salaries and allowances only for the
years 1979 to 1984 in the amount of P1,191,646.00. The records indicate that the reported income came from her salary from the
Ministry of Human Settlements and allowances from Food Terminal, Inc., National Home Mortgage Finance Corporation, National Food
Authority Council, Light Rail Transit Authority and Home Development Mutual Fund.
16. Of the P11,109,836.00 in reported income from legal practice, the amount of P10,649,836.00 or 96% represents "receivables from
prior years" during the period 1967 up to 1984.
17. In the guise of reporting income using the cash method under Section 38 of the National Internal Revenue Code, FM made it
appear that he had an extremely profitable legal practice before he became a President (FM being barred by law from practicing his
law profession during his entire presidency) and that, incredibly, he was still receiving payments almost 20 years after. The only problem
is that in his Balance Sheet attached to his 1965 ITR immediately preceeding his ascendancy to the presidency he did not show any
Receivables from client at all, much less the P10,65-M that he decided to later recognize as income. There are no documents showing
any withholding tax certificates. Likewise, there is nothing on record that will show any known Marcos client as he has no known law
office. As previously stated, his networth was a mere P120,000.00 in December, 1965. The joint income tax returns of FM and Imelda
cannot, therefore, conceal the skeletons of their kleptocracy.
18. FM reported a total of P2,521,325.00 as Other Income for the years 1972 up to 1976 which he referred to in his return as
"Miscellaneous Items" and "Various Corporations." There is no indication of any payor of the dividends or earnings.
19. Spouses Ferdinand and Imelda did not declare any income from any deposits and placements which are subject to a 5%
withholding tax. The Bureau of Internal Revenue attested that after a diligent search of pertinent records on file with the Records
Division, they did not find any records involving the tax transactions of spouses Ferdinand and Imelda in Revenue Region No. 1, Baguio
City, Revenue Region No.4A, Manila, Revenue Region No. 4B1, Quezon City and Revenue No. 8, Tacloban, Leyte. Likewise, the Office
of the Revenue Collector of Batac. Further, BIR attested that no records were found on any filing of capital gains tax return involving
spouses FM and Imelda covering the years 1960 to 1965.
20. In Schedule B, the taxable reported income over the twenty-year period was P14,463,595.00 which represents 88% of the gross
income. The Marcoses paid income taxes totaling P8,233,296.00 or US$1,220,667.59. The business expenses in the amount of P861,748.00
represent expenses incurred for subscription, postage, stationeries and contributions while the other deductions in the amount of
P567,097.00 represents interest charges, medicare fees, taxes and licenses. The total deductions in the amount of P1,994,845.00
represents 12% of the total gross income.
21. In Schedule C, the net cumulative disposable income amounts to P6,756,301.00 or US$980,709.77. This is the amount that represents
that portion of the Marcoses income that is free for consumption, savings and investments. The amount is arrived at by adding back to
the net income after tax the personal and additional exemptions for the years 1965-1984, as well as the tax-exempt salary of the
President for the years 1966 until 1972.
22. Finally, the networth analysis in Schedule D, represents the total accumulated networth of spouses, Ferdinand and Imelda.
Respondent's Balance Sheet attached to their 1965 ITR, covering the year immediately preceding their ascendancy to the presidency,
indicates an ending networth of P120,000.00 which FM declared as Library and Miscellaneous assets. In computing for the networth,
the income approach was utilized. Under this approach, the beginning capital is increased or decreased, as the case may be,
depending upon the income earned or loss incurred. Computations establish the total networth of spouses Ferdinand and Imelda, for
the years 1965 until 1984 in the total amount of US$957,487.75, assuming the income from legal practice is real and valid x x x.
G. THE SECRET MARCOS DEPOSITS IN SWISS BANKS
23. The following presentation very clearly and overwhelmingly show in detail how both respondents clandestinely stashed away the
country's wealth to Switzerland and hid the same under layers upon layers of foundations and other corporate entities to prevent its
detection. Through their dummies/nominees, fronts or agents who formed those foundations or corporate entities, they opened and
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maintained numerous bank accounts. But due to the difficulty if not the impossibility of detecting and documenting all those secret
accounts as well as the enormity of the deposits therein hidden, the following presentation is confined to five identified accounts
groups, with balances amounting to about $356-M with a reservation for the filing of a supplemental or separate forfeiture complaint
should the need arise.
H. THE AZIO-VERSO-VIBUR FOUNDATION ACCOUNTS
24. On June 11, 1971, Ferdinand Marcos issued a written order to Dr. Theo Bertheau, legal counsel of Schweizeresche Kreditanstalt or
SKA, also known as Swiss Credit Bank, for him to establish the AZIO Foundation. On the same date, Marcos executed a power of
attorney in favor of Roberto S. Benedicto empowering him to transact business in behalf of the said foundation. Pursuant to the said
Marcos mandate, AZIO Foundation was formed on June 21, 1971 in Vaduz. Walter Fessler and Ernst Scheller, also of SKA Legal Service,
and Dr. Helmuth Merling from Schaan were designated as members of the Board of Trustees of the said foundation. Ferdinand Marcos
was named first beneficiary and the Marcos Foundation, Inc. was second beneficiary. On November 12, 1971, FM again issued another
written order naming Austrahil PTY Ltd. In Sydney, Australia, as the foundation's first and sole beneficiary. This was recorded on
December 14, 1971.
25. In an undated instrument, Marcos changed the first and sole beneficiary to CHARIS FOUNDATION. This change was recorded on
December 4, 1972.
26. On August 29, 1978, the AZIO FOUNDATION was renamed to VERSO FOUNDATION. The Board of Trustees remained the same. On
March 11, 1981, Marcos issued a written directive to liquidated VERSO FOUNDATION and to transfer all its assets to account of FIDES
TRUST COMPANY at Bank Hofman in Zurich under the account "Reference OSER." The Board of Trustees decided to dissolve the
foundation on June 25, 1981.
27. In an apparent maneuver to bury further the secret deposits beneath the thick layers of corporate entities, FM effected the
establishment of VIBUR FOUNDATION on May 13, 1981 in Vaduz. Atty. Ivo Beck and Limag Management, a wholly-owned subsidiary of
Fides Trust, were designated as members of the Board of Trustees. The account was officially opened with SKA on September 10, 1981.
The beneficial owner was not made known to the bank since Fides Trust Company acted as fiduciary. However, comparison of the
listing of the securities in the safe deposit register of the VERSO FOUNDATION as of February 27, 1981 with that of VIBUR FOUNDATION as
of December 31, 1981 readily reveals that exactly the same securities were listed.
28. Under the foregoing circumstances, it is certain that the VIBUR FOUNDATION is the beneficial successor of VERSO FOUNDATION.
29. On March 18, 1986, the Marcos-designated Board of Trustees decided to liquidate VIBUR FOUNDATION. A notice of such liquidation
was sent to the Office of the Public Register on March 21, 1986. However, the bank accounts and respective balances of the said
VIBUR FOUNDATION remained with SKA. Apparently, the liquidation was an attempt by the Marcoses to transfer the foundation's funds
to another account or bank but this was prevented by the timely freeze order issued by the Swiss authorities. One of the latest
documents obtained by the PCGG from the Swiss authorities is a declaration signed by Dr. Ivo Beck (the trustee) stating that the
beneficial owner of VIBUR FOUNDATION is Ferdinand E. Marcos. Another document signed by G. Raber of SKA shows that VIBUR
FOUNDATION is owned by the "Marcos Familie"
30. As of December 31, 1989, the balance of the bank accounts of VIBUR FOUNDATION with SKA, Zurich, under the General Account
No. 469857 totaled $3,597,544.00
I. XANDY-WINTROP: CHARIS-SCOLARI-
VALAMO-SPINUS-AVERTINA FOUNDATION ACCOUNTS
31. This is the most intricate and complicated account group. As the Flow Chart hereof shows, two (2) groups under the foundation
organized by Marcos dummies/nominees for FM's benefit, eventually joined together and became one (1) account group under the
AVERTINA FOUNDATION for the benefit of both FM and Imelda. This is the biggest group from where the $50-M investment fund of the
Marcoses was drawn when they bought the Central Bank's dollar-denominated treasury notes with high-yielding interests.
32. On March 20, 1968, after his second year in the presidency, Marcos opened bank accounts with SKA using an alias or pseudonym
WILLIAM SAUNDERS, apparently to hide his true identity. The next day, March 21, 1968, his First Lady, Mrs. Imelda Marcos also opened
her own bank accounts with the same bank using an American-sounding alias, JANE RYAN. Found among the voluminous documents
in Malacañang shortly after they fled to Hawaii in haste that fateful night of February 25, 1986, were accomplished forms for
"Declaration/Specimen Signatures" submitted by the Marcos couple. Under the caption "signature(s)" Ferdinand and Imelda signed
11
their real names as well as their respective aliases underneath. These accounts were actively operated and maintained by the
Marcoses for about two (2) years until their closure sometime in February, 1970 and the balances transferred to XANDY FOUNDATION.
33. The XANDY FOUNDATION was established on March 3, 1970 in Vaduz. C.W. Fessler, C. Souviron and E. Scheller were named as
members of the Board of Trustees.
34. FM and Imelda issued the written mandate to establish the foundation to Markus Geel of SKA on March 3, 1970. In the handwritten
Regulations signed by the Marcos couple as well as in the type-written Regulations signed by Markus Geel both dated February 13,
1970, the Marcos spouses were named the first beneficiaries, the surviving spouse as the second beneficiary and the Marcos children –
Imee, Ferdinand, Jr. (Bongbong) and Irene – as equal third beneficiaries.
35. The XANDY FOUNDATION was renamed WINTROP FOUNDATION on August 29, 1978. The Board of Trustees remained the same at the
outset. However, on March 27, 1980, Souviron was replaced by Dr. Peter Ritter. On March 10. 1981, Ferdinand and Imelda Marcos
issued a written order to the Board of Wintrop to liquidate the foundation and transfer all its assets to Bank Hofmann in Zurich in favor of
FIDES TRUST COMPANY. Later, WINTROP FOUNDATION was dissolved.
36. The AVERTINA FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo Beck and Limag Management, a wholly-
owned subsidiary of FIDES TRUST CO., as members of the Board of Trustees. Two (2) account categories, namely: CAR and NES, were
opened on September 10, 1981. The beneficial owner of AVERTINA was not made known to the bank since the FIDES TRUST CO. acted
as fiduciary. However, the securities listed in the safe deposit register of WINTROP FOUNDATION Category R as of December 31, 1980
were the same as those listed in the register of AVERTINA FOUNDATION Category CAR as of December 31, 1981. Likewise, the securities
listed in the safe deposit register of WINTROP FOUNDATION Category S as of December 31, 1980 were the same as those listed in the
register of Avertina Category NES as of December 31, 1981.Under the circumstances, it is certain that the beneficial successor of
WINTROP FOUNDATION is AVERTINA FOUNDATION. The balance of Category CAR as of December 31, 1989 amounted to
US$231,366,894.00 while that of Category NES as of 12-31-83 was US$8,647,190.00. Latest documents received from Swiss authorities
included a declaration signed by IVO Beck stating that the beneficial owners of AVERTINA FOUNDATION are FM and Imelda. Another
document signed by G. Raber of SKA indicates that Avertina Foundation is owned by the "Marcos Families."
37. The other groups of foundations that eventually joined AVERTINA were also established by FM through his dummies, which started
with the CHARIS FOUNDATION.
38. The CHARIS FOUNDATION was established in VADUZ on December 27, 1971. Walter Fessler and Ernst Scheller of SKA and Dr. Peter
Ritter were named as directors. Dr. Theo Bertheau, SKA legal counsel, acted as founding director in behalf of FM by virtue of the
mandate and agreement dated November 12, 1971. FM himself was named the first beneficiary and Xandy Foundation as second
beneficiary in accordance with the handwritten instructions of FM on November 12, 1971 and the Regulations. FM gave a power of
attorney to Roberto S. Benedicto on February 15, 1972 to act in his behalf with regard to Charis Foundation.
39. On December 13, 1974, Charis Foundation was renamed Scolari Foundation but the directors remained the same. On March 11,
1981 FM ordered in writing that the Valamo Foundation be liquidated and all its assets be transferred to Bank Hofmann, AG in favor of
Fides Trust Company under the account "Reference OMAL". The Board of Directors decided on the immediate dissolution of Valamo
Foundation on June 25, 1981.
40 The SPINUS FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo Beck and Limag Management, a wholly-owned
subsidiary of Fides Trust Co., as members of the Foundation's Board of Directors. The account was officially opened with SKA on
September 10, 1981. The beneficial owner of the foundation was not made known to the bank since Fides Trust Co. acted as fiduciary.
However, the list of securities in the safe deposit register of Valamo Foundation as of December 31, 1980 are practically the same with
those listed in the safe deposit register of Spinus Foundation as of December 31, 1981. Under the circumstances, it is certain that the
Spinus Foundation is the beneficial successor of the Valamo Foundation.
41. On September 6, 1982, there was a written instruction from Spinus Foundation to SKA to close its Swiss Franc account and transfer
the balance to Avertina Foundation. In July/August, 1982, several transfers from the foundation's German marks and US dollar accounts
were made to Avertina Category CAR totaling DM 29.5-M and $58-M, respectively. Moreover, a comparison of the list of securities of
the Spinus Foundation as of February 3, 1982 with the safe deposit slips of the Avertina Foundation Category CAR as of August 19, 1982
shows that all the securities of Spinus were transferred to Avertina.
J. TRINIDAD-RAYBY-PALMY FOUNDATION ACCOUNTS

12
42. The Trinidad Foundation was organized on August 26, 1970 in Vaduz with C.W. Fessler and E. Scheller of SKA and Dr. Otto Tondury as
the foundation's directors. Imelda issued a written mandate to establish the foundation to Markus Geel on August 26, 1970. The
regulations as well as the agreement, both dated August 28, 1970 were likewise signed by Imelda. Imelda was named the first
beneficiary and her children Imelda (Imee), Ferdinand, Jr. (Bongbong) and, Irene were named as equal second beneficiaries.
43. Rayby Foundation was established on June 22, 1973 in Vaduz with Fessler, Scheller and Ritter as members of the board of directors.
Imelda issued a written mandate to Dr. Theo Bertheau to establish the foundation with a note that the foundation's capitalization as
well as the cost of establishing it be debited against the account of Trinidad Foundation. Imelda was named the first and only
beneficiary of Rayby foundation. According to written information from SKA dated November 28, 1988, Imelda apparently had the
intention in 1973 to transfer part of the assets of Trinidad Foundation to another foundation, thus the establishment of Rayby
Foundation. However, transfer of assets never took place. On March 10, 1981, Imelda issued a written order to transfer all the assets of
Rayby Foundation to Trinidad Foundation and to subsequently liquidate Rayby. On the same date, she issued a written order to the
board of Trinidad to dissolve the foundation and transfer all its assets to Bank Hofmann in favor of Fides Trust Co. Under the account
"Reference Dido," Rayby was dissolved on April 6, 1981 and Trinidad was liquidated on August 3, 1981.
44. The PALMY FOUNDATION was established on May 13, 1981 in Vaduz with Dr. Ivo Beck and Limag Management, a wholly-owned
subsidiary of Fides Trust Co, as members of the Foundation's Board of Directors. The account was officially opened with the SKA on
September 10, 1981. The beneficial owner was not made known to the bank since Fides Trust Co. acted as fiduciary. However, when
one compares the listing of securities in the safe deposit register of Trinidad Foundation as of December 31,1980 with that of the Palmy
Foundation as of December 31, 1980, one can clearly see that practically the same securities were listed. Under the circumstances, it is
certain that the Palmy Foundation is the beneficial successor of the Trinidad Foundation.
45. As of December 31, 1989, the ending balance of the bank accounts of Palmy Foundation under General Account No. 391528 is
$17,214,432.00.
46. Latest documents received from Swiss Authorities included a declaration signed by Dr. Ivo Beck stating that the beneficial owner of
Palmy Foundation is Imelda. Another document signed by Raber shows that the said Palmy Foundation is owned by "Marcos Familie".
K. ROSALYS-AGUAMINA FOUNDATION ACCOUNTS
47. Rosalys Foundation was established in 1971 with FM as the beneficiary. Its Articles of Incorporation was executed on September 24,
1971 and its By-Laws on October 3, 1971. This foundation maintained several accounts with Swiss Bank Corporation (SBC) under the
general account 51960 where most of the bribe monies from Japanese suppliers were hidden.
48. On December 19, 1985, Rosalys Foundation was liquidated and all its assets were transferred to Aguamina Corporation's (Panama)
Account No. 53300 with SBC. The ownership by Aguamina Corporation of Account No. 53300 is evidenced by an opening account
documents from the bank. J. Christinaz and R.L. Rossier, First Vice-President and Senior Vice President, respectively, of SBC, Geneva
issued a declaration dated September 3, 1991 stating that the by-laws dated October 3, 1971 governing Rosalys Foundation was the
same by-law applied to Aguamina Corporation Account No. 53300. They further confirmed that no change of beneficial owner was
involved while transferring the assets of Rosalys to Aguamina. Hence, FM remains the beneficiary of Aguamina Corporation Account
No. 53300.
As of August 30, 1991, the ending balance of Account No. 53300 amounted to $80,566,483.00.
L. MALER FOUNDATION ACCOUNTS
49. Maler was first created as an establishment. A statement of its rules and regulations was found among Malacañang documents. It
stated, among others, that 50% of the Company's assets will be for sole and full right disposal of FM and Imelda during their lifetime,
which the remaining 50% will be divided in equal parts among their children. Another Malacañang document dated October 19,1968
and signed by Ferdinand and Imelda pertains to the appointment of Dr. Andre Barbey and Jean Louis Sunier as attorneys of the
company and as administrator and manager of all assets held by the company. The Marcos couple, also mentioned in the said
document that they bought the Maler Establishment from SBC, Geneva. On the same date, FM and Imelda issued a letter addressed
to Maler Establishment, stating that all instructions to be transmitted with regard to Maler will be signed with the word "JOHN LEWIS". This
word will have the same value as the couple's own personal signature. The letter was signed by FM and Imelda in their signatures and
as John Lewis.
13
50. Maler Establishment opened and maintained bank accounts with SBC, Geneva. The opening bank documents were signed by Dr.
Barbey and Mr. Sunnier as authorized signatories.
51. On November 17, 1981, it became necessary to transform Maler Establishment into a foundation. Likewise, the attorneys were
changed to Michael Amaudruz, et. al. However, administration of the assets was left to SBC. The articles of incorporation of Maler
Foundation registered on November 17, 1981 appear to be the same articles applied to Maler Establishment. On February 28, 1984,
Maler Foundation cancelled the power of attorney for the management of its assets in favor of SBC and transferred such power to
Sustrust Investment Co., S.A.
52. As of June 6, 1991, the ending balance of Maler Foundation's Account Nos. 254,508 BT and 98,929 NY amount SF 9,083,567 and SG
16,195,258, respectively, for a total of SF 25,278,825.00. GM only until December 31, 1980. This account was opened by Maler when it
was still an establishment which was subsequently transformed into a foundation.
53. All the five (5) group accounts in the over-all flow chart have a total balance of about Three Hundred Fifty Six Million Dollars
($356,000,000.00) as shown by Annex "R-5" hereto attached as integral part hereof.
xxx x x x.27
Respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and Ferdinand Marcos, Jr., in their answer, stated the
following:
xxx xxx xxx
4. Respondents ADMIT paragraphs 3 and 4 of the Petition.
5. Respondents specifically deny paragraph 5 of the Petition in so far as it states that summons and other court processes may be
served on Respondent Imelda R. Marcos at the stated address the truth of the matter being that Respondent Imelda R. Marcos may
be served with summons and other processes at No. 10-B Bel Air Condominium 5022 P. Burgos Street, Makati, Metro Manila, and ADMIT
the rest.
xxx xxx xxx
10. Respondents ADMIT paragraph 11 of the Petition.
11. Respondents specifically DENY paragraph 12 of the Petition for lack of knowledge sufficient to form a belief as to the truth of the
allegation since Respondents were not privy to the transactions and that they cannot remember exactly the truth as to the matters
alleged.
12. Respondents specifically DENY paragraph 13 of the Petition for lack of knowledge or information sufficient to form a belief as to the
truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs and Balance Sheet.
truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs.
16. Respondents specifically DENY paragraph 17 of the Petition insofar as it attributes willful duplicity on the part of the late President
Marcos, for being false, the same being pure conclusions based on pure assumption and not allegations of fact; and specifically DENY
the rest for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot
remember with exactitude the contents of the alleged ITRs or the attachments thereto.
14
truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs and that they are not
privy to the activities of the BIR.
22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely stashed the country's wealth in
Switzerland and hid the same under layers and layers of foundation and corporate entities for being false, the truth being that
Respondents aforesaid properties were lawfully acquired.
23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of knowledge or information sufficient
to form a belief as to the truth of the allegation since Respondents were not privy to the transactions regarding the alleged Azio-Verso-
Vibur Foundation accounts, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were
lawfully acquired.
24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36,37, 38, 39, 40, and 41 of the Petition for lack of knowledge or
information sufficient to form a belief as to the truth of the allegations since Respondents are not privy to the transactions and as to
such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as
to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired.
25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and 46, of the Petition for lack of knowledge or information sufficient to
form a belief as to the truth of the allegations since Respondents were not privy to the transactions and as to such transaction they
were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent
Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired.
26. Respondents specifically DENY paragraphs 49, 50, 51 and 52, of the Petition for lack of knowledge or information sufficient to form a
belief as to the truth of the allegations since Respondents were not privy to the transactions and as to such transaction they were privy
to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos
she specifically remembers that the funds involved were lawfully acquired.
Upon careful perusal of the foregoing, the Court finds that respondent Mrs. Marcos and the Marcos children indubitably failed to
tender genuine issues in their answer to the petition for forfeiture. A genuine issue is an issue of fact which calls for the presentation of
evidence as distinguished from an issue which is fictitious and contrived, set up in bad faith or patently lacking in substance so as not to
constitute a genuine issue for trial. Respondents' defenses of "lack of knowledge for lack of privity" or "(inability to) recall because it
happened a long time ago" or, on the part of Mrs. Marcos, that "the funds were lawfully acquired" are fully insufficient to tender
genuine issues. Respondent Marcoses' defenses were a sham and evidently calibrated to compound and confuse the issues.
The following pleadings filed by respondent Marcoses are replete with indications of a spurious defense:
(a) Respondents' Answer dated October 18, 1993;
(b) Pre-trial Brief dated October 4, 1999 of Mrs. Marcos, Supplemental Pre-trial Brief dated October 19, 1999 of Ferdinand, Jr. and Mrs.
Imee Marcos-Manotoc adopting the pre-trial brief of Mrs. Marcos, and Manifestation dated October 19, 1999 of Irene Marcos-Araneta
adopting the pre-trial briefs of her co- respondents;
(c) Opposition to Motion for Summary Judgment dated March 21, 2000, filed by Mrs. Marcos which the other respondents (Marcos
children) adopted;
(d) Demurrer to Evidence dated May 2, 2000 filed by Mrs. Marcos and adopted by the Marcos children;
15
(e) Motion for Reconsideration dated September 26, 2000 filed by Mrs. Marcos; Motion for Reconsideration dated October 5, 2000
jointly filed by Mrs. Manotoc and Ferdinand, Jr., and Supplemental Motion for Reconsideration dated October 9, 2000 likewise jointly
filed by Mrs. Manotoc and Ferdinand, Jr.;
(f) Memorandum dated December 12, 2000 of Mrs. Marcos and Memorandum dated December 17, 2000 of the Marcos children;
(g) Manifestation dated May 26, 1998; and
(h) General/Supplemental Agreement dated December 23, 1993.
An examination of the foregoing pleadings is in order.
• Respondents' Answer dated October 18, 1993.
In their answer, respondents failed to specifically deny each and every allegation contained in the petition for forfeiture in the manner
required by the rules. All they gave were stock answers like "they have no sufficient knowledge" or "they could not recall because it
happened a long time ago," and, as to Mrs. Marcos, "the funds were lawfully acquired," without stating the basis of such assertions.
Section 10, Rule 8 of the 1997 Rules of Civil Procedure, provides:
A defendant must specify each material allegation of fact the truth of which he does not admit and, whenever practicable, shall set
forth the substance of the matters upon which he relies to support his denial. Where a defendant desires to deny only a part of an
averment, he shall specify so much of it as is true and material and shall deny the remainder. Where a defendant is without knowledge
or information sufficient to form a belief as to the truth of a material averment made in the complaint, he shall so state, and this shall
have the effect of a denial.28
The purpose of requiring respondents to make a specific denial is to make them disclose facts which will disprove the allegations of
petitioner at the trial, together with the matters they rely upon in support of such denial. Our jurisdiction adheres to this rule to avoid
and prevent unnecessary expenses and waste of time by compelling both parties to lay their cards on the table, thus reducing the
controversy to its true terms. As explained in Alonso vs. Villamor,29
A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position,
entraps and destroys the other. It is rather a contest in which each contending party fully and fairly lays before the court the facts in
issue and then, brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of procedure, asks that justice
be done upon the merits. Lawsuits, unlike duels, are not to be won by a rapier's thrust.
On the part of Mrs. Marcos, she claimed that the funds were lawfully acquired. However, she failed to particularly state the ultimate
facts surrounding the lawful manner or mode of acquisition of the subject funds. Simply put, she merely stated in her answer with the
other respondents that the funds were "lawfully acquired" without detailing how exactly these funds were supposedly acquired legally
by them. Even in this case before us, her assertion that the funds were lawfully acquired remains bare and unaccompanied by any
factual support which can prove, by the presentation of evidence at a hearing, that indeed the funds were acquired legitimately by
the Marcos family.
Respondents' denials in their answer at the Sandiganbayan were based on their alleged lack of knowledge or information sufficient to
form a belief as to the truth of the allegations of the petition.
It is true that one of the modes of specific denial under the rules is a denial through a statement that the defendant is without
knowledge or information sufficient to form a belief as to the truth of the material averment in the complaint. The question, however, is
whether the kind of denial in respondents' answer qualifies as the specific denial called for by the rules. We do not think so. In Morales
vs. Court of Appeals,30 this Court ruled that if an allegation directly and specifically charges a party with having done, performed or
committed a particular act which the latter did not in fact do, perform or commit, a categorical and express denial must be made.
Here, despite the serious and specific allegations against them, the Marcoses responded by simply saying that they had no knowledge
or information sufficient to form a belief as to the truth of such allegations. Such a general, self-serving claim of ignorance of the facts
alleged in the petition for forfeiture was insufficient to raise an issue. Respondent Marcoses should have positively stated how it was that
they were supposedly ignorant of the facts alleged.31
16
To elucidate, the allegation of petitioner Republic in paragraph 23 of the petition for forfeiture stated:
23. The following presentation very clearly and overwhelmingly show in detail how both respondents clandestinely stashed away the
country's wealth to Switzerland and hid the same under layers upon layers of foundations and other corporate entities to prevent its
detection. Through their dummies/nominees, fronts or agents who formed those foundations or corporate entities, they opened and
maintained numerous bank accounts. But due to the difficulty if not the impossibility of detecting and documenting all those secret
accounts as well as the enormity of the deposits therein hidden, the following presentation is confined to five identified accounts
groups, with balances amounting to about $356-M with a reservation for the filing of a supplemental or separate forfeiture complaint
should the need arise.32
Respondents' lame denial of the aforesaid allegation was:
22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely stashed the country's wealth in
Switzerland and hid the same under layers and layers of foundations and corporate entities for being false, the truth being that
Respondents' aforesaid properties were lawfully acquired.33
Evidently, this particular denial had the earmark of what is called in the law on pleadings as a negative pregnant, that is, a denial
pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied. It was in effect an
admission of the averments it was directed at.34 Stated otherwise, a negative pregnant is a form of negative expression which carries
with it an affirmation or at least an implication of some kind favorable to the adverse party. It is a denial pregnant with an admission of
the substantial facts alleged in the pleading. Where a fact is alleged with qualifying or modifying language and the words of the
allegation as so qualified or modified are literally denied, has been held that the qualifying circumstances alone are denied while the
fact itself is admitted.35
In the instant case, the material allegations in paragraph 23 of the said petition were not specifically denied by respondents in
paragraph 22 of their answer. The denial contained in paragraph 22 of the answer was focused on the averment in paragraph 23 of
the petition for forfeiture that "Respondents clandestinely stashed the country's wealth in Switzerland and hid the same under layers
and layers of foundations and corporate entities." Paragraph 22 of the respondents' answer was thus a denial pregnant with admissions
of the following substantial facts:
(1) the Swiss bank deposits existed and
(2) that the estimated sum thereof was US$356 million as of December, 1990.
Therefore, the allegations in the petition for forfeiture on the existence of the Swiss bank deposits in the sum of about US$356 million, not
having been specifically denied by respondents in their answer, were deemed admitted by them pursuant to Section 11, Rule 8 of the
1997 Revised Rules on Civil Procedure:
Material averment in the complaint, xxx shall be deemed admitted when not specifically denied. xxx.36
By the same token, the following unsupported denials of respondents in their answer were pregnant with admissions of the substantial
facts alleged in the Republic's petition for forfeiture:
23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of knowledge or information sufficient
to form a belief as to the truth of the allegation since respondents were not privy to the transactions regarding the alleged Azio-Verso-
Vibur Foundation accounts, except that, as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were
lawfully acquired.
24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 of the Petition for lack of knowledge or information
sufficient to form a belief as to the truth of the allegations since respondents were not privy to the transactions and as to such
transactions they were privy to, they cannot remember with exactitude the same having occurred a long time ago, except as to
respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully acquired.
25. Respondents specifically DENY paragraphs 42, 43, 45, and 46 of the petition for lack of knowledge or information sufficient to from a
belief as to the truth of the allegations since respondents were not privy to the transactions and as to such transaction they were privy
17
to, they cannot remember with exactitude, the same having occurred a long time ago, except that as to respondent Imelda R.
Marcos, she specifically remembers that the funds involved were lawfully acquired.
26. Respondents specifically DENY paragraphs 49, 50, 51 and 52 of the petition for lack of knowledge and information sufficient to form
a belief as to the truth of the allegations since respondents were not privy to the transactions and as to such transaction they were
privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to respondent Imelda R.
Marcos, she specifically remembers that the funds involved were lawfully acquired.
The matters referred to in paragraphs 23 to 26 of the respondents' answer pertained to the creation of five groups of accounts as well
as their respective ending balances and attached documents alleged in paragraphs 24 to 52 of the Republic's petition for forfeiture.
Respondent Imelda R. Marcos never specifically denied the existence of the Swiss funds. Her claim that "the funds involved were
lawfully acquired" was an acknowledgment on her part of the existence of said deposits. This only reinforced her earlier admission of
the allegation in paragraph 23 of the petition for forfeiture regarding the existence of the US$356 million Swiss bank deposits.
The allegations in paragraphs 4737 and 4838 of the petition for forfeiture referring to the creation and amount of the deposits of the
Rosalys-Aguamina Foundation as well as the averment in paragraph 52-a39 of the said petition with respect to the sum of the Swiss
bank deposits estimated to be US$356 million were again not specifically denied by respondents in their answer. The respondents did
not at all respond to the issues raised in these paragraphs and the existence, nature and amount of the Swiss funds were therefore
deemed admitted by them. As held in Galofa vs. Nee Bon Sing,40 if a defendant's denial is a negative pregnant, it is equivalent to an
admission.
Moreover, respondents' denial of the allegations in the petition for forfeiture "for lack of knowledge or information sufficient to form a
belief as to the truth of the allegations since respondents were not privy to the transactions" was just a pretense. Mrs. Marcos' privity to
the transactions was in fact evident from her signatures on some of the vital documents41 attached to the petition for forfeiture which
Mrs. Marcos failed to specifically deny as required by the rules.42
It is worthy to note that the pertinent documents attached to the petition for forfeiture were even signed personally by respondent Mrs.
Marcos and her late husband, Ferdinand E. Marcos, indicating that said documents were within their knowledge. As correctly pointed
out by Sandiganbayan Justice Francisco Villaruz, Jr. in his dissenting opinion:
The pattern of: 1) creating foundations, 2) use of pseudonyms and dummies, 3) approving regulations of the Foundations for the
distribution of capital and income of the Foundations to the First and Second beneficiary (who are no other than FM and his family), 4)
opening of bank accounts for the Foundations, 5) changing the names of the Foundations, 6) transferring funds and assets of the
Foundations to other Foundations or Fides Trust, 7) liquidation of the Foundations as substantiated by the Annexes U to U-168, Petition
[for forfeiture] strongly indicate that FM and/or Imelda were the real owners of the assets deposited in the Swiss banks, using the
Foundations as dummies.43
How could respondents therefore claim lack of sufficient knowledge or information regarding the existence of the Swiss bank deposits
and the creation of five groups of accounts when Mrs. Marcos and her late husband personally masterminded and participated in the
formation and control of said foundations? This is a fact respondent Marcoses were never able to explain.
Not only that. Respondents' answer also technically admitted the genuineness and due execution of the Income Tax Returns (ITRs) and
the balance sheets of the late Ferdinand E. Marcos and Imelda R. Marcos attached to the petition for forfeiture, as well as the veracity
of the contents thereof.
The answer again premised its denials of said ITRs and balance sheets on the ground of lack of knowledge or information sufficient to
form a belief as to the truth of the contents thereof. Petitioner correctly points out that respondents' denial was not really grounded on
lack of knowledge or information sufficient to form a belief but was based on lack of recollection. By reviewing their own records,
respondent Marcoses could have easily determined the genuineness and due execution of the ITRs and the balance sheets. They also
had the means and opportunity of verifying the same from the records of the BIR and the Office of the President. They did not.
When matters regarding which respondents claim to have no knowledge or information sufficient to form a belief are plainly and
necessarily within their knowledge, their alleged ignorance or lack of information will not be considered a specific denial.44 An
unexplained denial of information within the control of the pleader, or is readily accessible to him, is evasive and is insufficient to
constitute an effective denial.45
18
The form of denial adopted by respondents must be availed of with sincerity and in good faith, and certainly not for the purpose of
confusing the adverse party as to what allegations of the petition are really being challenged; nor should it be made for the purpose
of delay.46 In the instant case, the Marcoses did not only present unsubstantiated assertions but in truth attempted to mislead and
deceive this Court by presenting an obviously contrived defense.
Simply put, a profession of ignorance about a fact which is patently and necessarily within the pleader's knowledge or means of
knowing is as ineffective as no denial at all.47 Respondents' ineffective denial thus failed to properly tender an issue and the averments
contained in the petition for forfeiture were deemed judicially admitted by them.
As held in J.P. Juan & Sons, Inc. vs. Lianga Industries, Inc.:
Its "specific denial" of the material allegation of the petition without setting forth the substance of the matters relied upon to support its
general denial, when such matters were plainly within its knowledge and it could not logically pretend ignorance as to the same,
therefore, failed to properly tender on issue.48
Thus, the general denial of the Marcos children of the allegations in the petition for forfeiture "for lack of knowledge or information
sufficient to form a belief as to the truth of the allegations since they were not privy to the transactions" cannot rightfully be accepted
as a defense because they are the legal heirs and successors-in-interest of Ferdinand E. Marcos and are therefore bound by the acts
of their father vis-a-vis the Swiss funds.
• PRE-TRIAL BRIEF DATED OCTOBER 18, 1993
The pre-trial brief of Mrs. Marcos was adopted by the three Marcos children. In said brief, Mrs. Marcos stressed that the funds involved
were lawfully acquired. But, as in their answer, they failed to state and substantiate how these funds were acquired lawfully. They failed
to present and attach even a single document that would show and prove the truth of their allegations. Section 6, Rule 18 of the 1997
Rules of Civil Procedure provides:
The parties shall file with the court and serve on the adverse party, x x x their respective pre-trial briefs which shall contain, among
others:
xxx
(d) the documents or exhibits to be presented, stating the purpose thereof;
xxx
(f) the number and names of the witnesses, and the substance of their respective testimonies.49
It is unquestionably within the court's power to require the parties to submit their pre-trial briefs and to state the number of witnesses
intended to be called to the stand, and a brief summary of the evidence each of them is expected to give as well as to disclose the
number of documents to be submitted with a description of the nature of each. The tenor and character of the testimony of the
witnesses and of the documents to be deduced at the trial thus made known, in addition to the particular issues of fact and law, it
becomes apparent if genuine issues are being put forward necessitating the holding of a trial. Likewise, the parties are obliged not only
to make a formal identification and specification of the issues and their proofs, and to put these matters in writing and submit them to
the court within the specified period for the prompt disposition of the action.50
The pre-trial brief of Mrs. Marcos, as subsequently adopted by respondent Marcos children, merely stated:
xxx
WITNESSES
4.1 Respondent Imelda will present herself as a witness and reserves the right to present additional witnesses as may be necessary in
the course of the trial.
xxx
19
DOCUMENTARY EVIDENCE
5.1 Respondent Imelda reserves the right to present and introduce in evidence documents as may be necessary in the course of the
trial.
Mrs. Marcos did not enumerate and describe the documents constituting her evidence. Neither the names of witnesses nor the nature
of their testimony was stated. What alone appeared certain was the testimony of Mrs. Marcos only who in fact had previously claimed
ignorance and lack of knowledge. And even then, the substance of her testimony, as required by the rules, was not made known
either. Such cunning tactics of respondents are totally unacceptable to this Court. We hold that, since no genuine issue was raised, the
case became ripe for summary judgment.
• OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

DATED MARCH 21, 2000
The opposition filed by Mrs. Marcos to the motion for summary judgment dated March 21, 2000 of petitioner Republic was merely
adopted by the Marcos children as their own opposition to the said motion. However, it was again not accompanied by affidavits,
depositions or admissions as required by Section 3, Rule 35 of the 1997 Rules on Civil Procedure:
x x x The adverse party may serve opposing affidavits, depositions, or admissions at least three (3) days before hearing. After hearing,
the judgment sought shall be rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions on file, show that,
except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.51
The absence of opposing affidavits, depositions and admissions to contradict the sworn declarations in the Republic's motion only
demonstrated that the averments of such opposition were not genuine and therefore unworthy of belief.
• Demurrer to Evidence dated May 2, 2000;52

Motions for Reconsideration;53 and Memoranda
of Mrs. Marcos and the Marcos children54
All these pleadings again contained no allegations of facts showing their lawful acquisition of the funds. Once more, respondents
merely made general denials without alleging facts which would have been admissible in evidence at the hearing, thereby failing to
raise genuine issues of fact.
Mrs. Marcos insists in her memorandum dated October 21, 2002 that, during the pre-trial, her counsel stated that his client was just a
beneficiary of the funds, contrary to petitioner Republic's allegation that Mrs. Marcos disclaimed ownership of or interest in the funds.
This is yet another indication that respondents presented a fictitious defense because, during the pre-trial, Mrs. Marcos and the Marcos
children denied ownership of or interest in the Swiss funds:
PJ Garchitorena:
Make of record that as far as Imelda Marcos is concerned through the statement of Atty. Armando M. Marcelo that the US$360 million
more or less subject matter of the instant lawsuit as allegedly obtained from the various Swiss Foundations do not belong to the estate
of Marcos or to Imelda Marcos herself. That's your statement of facts?
Atty. MARCELO:
Yes, Your Honor.
PJ Garchitorena:
That's it. Okay. Counsel for Manotoc and Manotoc, Jr. What is your point here? Does the estate of Marcos own anything of the $360
million subject of this case.
Atty. TECSON:
20
We joined the Manifestation of Counsel.
PJ Garchitorena:
You do not own anything?
Atty. TECSON:
Yes, Your Honor.
PJ Garchitorena:
Counsel for Irene Araneta?
Atty. SISON:
I join the position taken by my other compañeros here, Your Honor.
xxx
Atty. SISON:
Irene Araneta as heir do (sic) not own any of the amount, Your Honor.55
We are convinced that the strategy of respondent Marcoses was to confuse petitioner Republic as to what facts they would prove or
what issues they intended to pose for the court's resolution. There is no doubt in our mind that they were leading petitioner Republic,
and now this Court, to perplexity, if not trying to drag this forfeiture case to eternity.
• Manifestation dated May 26, 1998 filed by MRS.

Marcos; General/Supplemental Compromise
Agreement dated December 28, 1993
These pleadings of respondent Marcoses presented nothing but feigned defenses. In their earlier pleadings, respondents alleged either
that they had no knowledge of the existence of the Swiss deposits or that they could no longer remember anything as it happened a
long time ago. As to Mrs. Marcos, she remembered that it was lawfully acquired.
In her Manifestation dated May 26, 1998, Mrs. Marcos stated that:
COMES NOW undersigned counsel for respondent Imelda R. Marcos, and before this Honorable Court, most respectfully manifests:
That respondent Imelda R, Marcos owns 90% of the subject matter of the above-entitled case, being the sole beneficiary of the dollar
deposits in the name of the various foundations alleged in the case;
That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of the late President Ferdinand E. Marcos.
In the Compromise/Supplemental Agreements, respondent Marcoses sought to implement the agreed distribution of the Marcos
assets, including the Swiss deposits. This was, to us, an unequivocal admission of ownership by the Marcoses of the said deposits.
But, as already pointed out, during the pre-trial conference, respondent Marcoses denied knowledge as well as ownership of the Swiss
funds.
Anyway we look at it, respondent Marcoses have put forth no real defense. The "facts" pleaded by respondents, while ostensibly raising
important questions or issues of fact, in reality comprised mere verbiage that was evidently wanting in substance and constituted no
genuine issues for trial.
We therefore rule that, under the circumstances, summary judgment is proper.

21
In fact, it is the law itself which determines when summary judgment is called for. Under the rules, summary judgment is appropriate
when there are no genuine issues of fact requiring the presentation of evidence in a full-blown trial. Even if on their face the pleadings
appear to raise issue, if the affidavits, depositions and admissions show that such issues are not genuine, then summary judgment as
prescribed by the rules must ensue as a matter of law.56
In sum, mere denials, if unaccompanied by any fact which will be admissible in evidence at a hearing, are not sufficient to raise
genuine issues of fact and will not defeat a motion for summary judgment.57 A summary judgment is one granted upon motion of a
party for an expeditious settlement of the case, it appearing from the pleadings, depositions, admissions and affidavits that there are
no important questions or issues of fact posed and, therefore, the movant is entitled to a judgment as a matter of law. A motion for
summary judgment is premised on the assumption that the issues presented need not be tried either because these are patently
devoid of substance or that there is no genuine issue as to any pertinent fact. It is a method sanctioned by the Rules of Court for the
prompt disposition of a civil action where there exists no serious controversy.58 Summary judgment is a procedural device for the
prompt disposition of actions in which the pleadings raise only a legal issue, not a genuine issue as to any material fact. The theory of
summary judgment is that, although an answer may on its face appear to tender issues requiring trial, if it is established by affidavits,
depositions or admissions that those issues are not genuine but fictitious, the Court is justified in dispensing with the trial and rendering
summary judgment for petitioner.59
In the various annexes to the petition for forfeiture, petitioner Republic attached sworn statements of witnesses who had personal
knowledge of the Marcoses' participation in the illegal acquisition of funds deposited in the Swiss accounts under the names of five
groups or foundations. These sworn statements substantiated the ill-gotten nature of the Swiss bank deposits. In their answer and other
subsequent pleadings, however, the Marcoses merely made general denials of the allegations against them without stating facts
admissible in evidence at the hearing, thereby failing to raise any genuine issues of fact.
Under these circumstances, a trial would have served no purpose at all and would have been totally unnecessary, thus justifying a
summary judgment on the petition for forfeiture. There were no opposing affidavits to contradict the sworn declarations of the
witnesses of petitioner Republic, leading to the inescapable conclusion that the matters raised in the Marcoses' answer were false.
Time and again, this Court has encountered cases like this which are either only half-heartedly defended or, if the semblance of a
defense is interposed at all, it is only to delay disposition and gain time. It is certainly not in the interest of justice to allow respondent
Marcoses to avail of the appellate remedies accorded by the Rules of Court to litigants in good faith, to the prejudice of the Republic
and ultimately of the Filipino people. From the beginning, a candid demonstration of respondents' good faith should have been made
to the court below. Without the deceptive reasoning and argumentation, this protracted litigation could have ended a long time ago.
Since 1991, when the petition for forfeiture was first filed, up to the present, all respondents have offered are foxy responses like "lack of
sufficient knowledge or lack of privity" or "they cannot recall because it happened a long time ago" or, as to Mrs. Marcos, "the funds
were lawfully acquired." But, whenever it suits them, they also claim ownership of 90% of the funds and allege that only 10% belongs to
the Marcos estate. It has been an incredible charade from beginning to end.
In the hope of convincing this Court to rule otherwise, respondents Maria Imelda Marcos-Manotoc and Ferdinand R. Marcos Jr.
contend that "by its positive acts and express admissions prior to filing the motion for summary judgment on March 10, 2000, petitioner
Republic had bound itself to go to trial on the basis of existing issues. Thus, it had legally waived whatever right it had to move for
summary judgment."60
We do not think so. The alleged positive acts and express admissions of the petitioner did not preclude it from filing a motion for
summary judgment.
Rule 35 of the 1997 Rules of Civil Procedure provides:
Rule 35
Summary Judgment
Section 1. Summary judgment for claimant. - A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a
declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions
or admissions for a summary judgment in his favor upon all or any part thereof.
22
Section 2. Summary judgment for defending party. - A party against whom a claim, counterclaim, or cross-claim is asserted or a
declaratory relief is sought may, at any time, move with supporting affidavits, depositions or admissions for a summary judgment in his
favor as to all or any part thereof. (Emphasis ours)61
Under the rule, the plaintiff can move for summary judgment "at any time after the pleading in answer thereto (i.e., in answer to the
claim, counterclaim or cross-claim) has been served." No fixed reglementary period is provided by the Rules. How else does one
construe the phrase "any time after the answer has been served?"
This issue is actually one of first impression. No local jurisprudence or authoritative work has touched upon this matter. This being so, an
examination of foreign laws and jurisprudence, particularly those of the United States where many of our laws and rules were copied, is
in order.
Rule 56 of the Federal Rules of Civil Procedure provides that a party seeking to recover upon a claim, counterclaim or cross-claim may
move for summary judgment at any time after the expiration of 20 days from the commencement of the action or after service of a
motion for summary judgment by the adverse party, and that a party against whom a claim, counterclaim or cross-claim is asserted
may move for summary judgment at any time.
However, some rules, particularly Rule 113 of the Rules of Civil Practice of New York, specifically provide that a motion for summary
judgment may not be made until issues have been joined, that is, only after an answer has been served.62 Under said rule, after issues
have been joined, the motion for summary judgment may be made at any stage of the litigation.63 No fixed prescriptive period is
provided.
Like Rule 113 of the Rules of Civil Practice of New York, our rules also provide that a motion for summary judgment may not be made
until issues have been joined, meaning, the plaintiff has to wait for the answer before he can move for summary judgment.64 And like
the New York rules, ours do not provide for a fixed reglementary period within which to move for summary judgment.
This being so, the New York Supreme Court's interpretation of Rule 113 of the Rules of Civil Practice can be applied by analogy to the
interpretation of Section 1, Rule 35, of our 1997 Rules of Civil Procedure.
Under the New York rule, after the issues have been joined, the motion for summary judgment may be made at any stage of the
litigation. And what exactly does the phrase "at any stage of the litigation" mean? In Ecker vs. Muzysh,65 the New York Supreme Court
ruled:
"PER CURIAM.
Plaintiff introduced her evidence and the defendants rested on the case made by the plaintiff. The case was submitted. Owing to the
serious illness of the trial justice, a decision was not rendered within sixty days after the final adjournment of the term at which the case
was tried. With the approval of the trial justice, the plaintiff moved for a new trial under Section 442 of the Civil Practice Act. The plaintiff
also moved for summary judgment under Rule 113 of the Rules of Civil Practice. The motion was opposed mainly on the ground that,
by proceeding to trial, the plaintiff had waived her right to summary judgment and that the answer and the opposing affidavits raised
triable issues. The amount due and unpaid under the contract is not in dispute. The Special Term granted both motions and the
defendants have appealed.
The Special Term properly held that the answer and the opposing affidavits raised no triable issue. Rule 113 of the Rules of Civil Practice
and the Civil Practice Act prescribe no limitation as to the time when a motion for summary judgment must be made. The object of
Rule 113 is to empower the court to summarily determine whether or not a bona fide issue exists between the parties, and there is no
limitation on the power of the court to make such a determination at any stage of the litigation." (emphasis ours)
On the basis of the aforequoted disquisition, "any stage of the litigation" means that "even if the plaintiff has proceeded to trial, this
does not preclude him from thereafter moving for summary judgment."66
In the case at bar, petitioner moved for summary judgment after pre-trial and before its scheduled date for presentation of evidence.
Respondent Marcoses argue that, by agreeing to proceed to trial during the pre-trial conference, petitioner "waived" its right to
summary judgment.
This argument must fail in the light of the New York Supreme Court ruling which we apply by analogy to this case. In Ecker,67 the
defendant opposed the motion for summary judgment on a ground similar to that raised by the Marcoses, that is, "that plaintiff had
23
waived her right to summary judgment" by her act of proceeding to trial. If, as correctly ruled by the New York court, plaintiff was
allowed to move for summary judgment even after trial and submission of the case for resolution, more so should we permit it in the
present case where petitioner moved for summary judgment before trial.
Therefore, the phrase "anytime after the pleading in answer thereto has been served" in Section 1, Rule 35 of our Rules of Civil
Procedure means "at any stage of the litigation." Whenever it becomes evident at any stage of the litigation that no triable issue exists,
or that the defenses raised by the defendant(s) are sham or frivolous, plaintiff may move for summary judgment. A contrary
interpretation would go against the very objective of the Rule on Summary Judgment which is to "weed out sham claims or defenses
thereby avoiding the expense and loss of time involved in a trial."68
In cases with political undertones like the one at bar, adverse parties will often do almost anything to delay the proceedings in the
hope that a future administration sympathetic to them might be able to influence the outcome of the case in their favor. This is rank
injustice we cannot tolerate.
The law looks with disfavor on long, protracted and expensive litigation and encourages the speedy and prompt disposition of cases.
That is why the law and the rules provide for a number of devices to ensure the speedy disposition of cases. Summary judgment is one
of them.
Faithful therefore to the spirit of the law on summary judgment which seeks to avoid unnecessary expense and loss of time in a trial, we
hereby rule that petitioner Republic could validly move for summary judgment any time after the respondents' answer was filed or, for
that matter, at any subsequent stage of the litigation. The fact that petitioner agreed to proceed to trial did not in any way prevent it
from moving for summary judgment, as indeed no genuine issue of fact was ever validly raised by respondent Marcoses.
This interpretation conforms with the guiding principle enshrined in Section 6, Rule 1 of the 1997 Rules of Civil Procedure that the "[r]ules
should be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action
and proceeding."69
Respondents further allege that the motion for summary judgment was based on respondents' answer and other documents that had
long been in the records of the case. Thus, by the time the motion was filed on March 10, 2000, estoppel by laches had already set in
against petitioner.
We disagree. Estoppel by laches is the failure or neglect for an unreasonable or unexplained length of time to do that which, by
exercising due diligence, could or should have been done earlier, warranting a presumption that the person has abandoned his right
or declined to assert it.70 In effect, therefore, the principle of laches is one of estoppel because "it prevents people who have slept on
their rights from prejudicing the rights of third parties who have placed reliance on the inaction of the original parties and their
successors-in-interest".71
A careful examination of the records, however, reveals that petitioner was in fact never remiss in pursuing its case against respondent
Marcoses through every remedy available to it, including the motion for summary judgment.
Petitioner Republic initially filed its motion for summary judgment on October 18, 1996. The motion was denied because of the pending
compromise agreement between the Marcoses and petitioner. But during the pre-trial conference, the Marcoses denied ownership of
the Swiss funds, prompting petitioner to file another motion for summary judgment now under consideration by this Court. It was the
subsequent events that transpired after the answer was filed, therefore, which prevented petitioner from filing the questioned motion. It
was definitely not because of neglect or inaction that petitioner filed the (second) motion for summary judgment years after
respondents' answer to the petition for forfeiture.
In invoking the doctrine of estoppel by laches, respondents must show not only unjustified inaction but also that some unfair injury to
them might result unless the action is barred.72
This, respondents failed to bear out. In fact, during the pre-trial conference, the Marcoses disclaimed ownership of the Swiss deposits.
Not being the owners, as they claimed, respondents did not have any vested right or interest which could be adversely affected by
petitioner's alleged inaction.
But even assuming for the sake of argument that laches had already set in, the doctrine of estoppel or laches does not apply when the
government sues as a sovereign or asserts governmental rights.73 Nor can estoppel validate an act that contravenes law or public
policy.74
24
As a final point, it must be emphasized that laches is not a mere question of time but is principally a question of the inequity or
unfairness of permitting a right or claim to be enforced or asserted.75 Equity demands that petitioner Republic should not be barred
from pursuing the people's case against the Marcoses.
(2) The Propriety of Forfeiture
The matter of summary judgment having been thus settled, the issue of whether or not petitioner Republic was able to prove its case
for forfeiture in accordance with the requisites of Sections 2 and 3 of RA 1379 now takes center stage.
The law raises the prima facie presumption that a property is unlawfully acquired, hence subject to forfeiture, if its amount or value is
manifestly disproportionate to the official salary and other lawful income of the public officer who owns it. Hence, Sections 2 and 6 of
RA 137976 provide:
xxx xxx
Section 2. Filing of petition. – Whenever any public officer or employee has acquired during his incumbency an amount or property
which is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income
from legitimately acquired property, said property shall be presumed prima facie to have been unlawfully acquired.
xxx xxx
Sec. 6. Judgment – If the respondent is unable to show to the satisfaction of the court that he has lawfully acquired the property in
question, then the court shall declare such property in question, forfeited in favor of the State, and by virtue of such judgment the
property aforesaid shall become the property of the State. Provided, That no judgment shall be rendered within six months before any
general election or within three months before any special election. The Court may, in addition, refer this case to the corresponding
Executive Department for administrative or criminal action, or both.
From the above-quoted provisions of the law, the following facts must be established in order that forfeiture or seizure of the Swiss
deposits may be effected:
(1) ownership by the public officer of money or property acquired during his incumbency, whether it be in his name or otherwise, and
(2) the extent to which the amount of that money or property exceeds, i. e., is grossly disproportionate to, the legitimate income of the
public officer.
That spouses Ferdinand and Imelda Marcos were public officials during the time material to the instant case was never in dispute.
Paragraph 4 of respondent Marcoses' answer categorically admitted the allegations in paragraph 4 of the petition for forfeiture as to
the personal circumstances of Ferdinand E. Marcos as a public official who served without interruption as Congressman, Senator,
Senate President and President of the Republic of the Philippines from December 1, 1965 to February 25, 1986.77 Likewise, respondents
admitted in their answer the contents of paragraph 5 of the petition as to the personal circumstances of Imelda R. Marcos who once
served as a member of the Interim Batasang Pambansa from 1978 to 1984 and as Metro Manila Governor, concurrently Minister of
Human Settlements, from June 1976 to February 1986.78
Respondent Mrs. Marcos also admitted in paragraph 10 of her answer the allegations of paragraph 11 of the petition for forfeiture
which referred to the accumulated salaries of respondents Ferdinand E. Marcos and Imelda R. Marcos.79 The combined accumulated
salaries of the Marcos couple were reflected in the Certification dated May 27, 1986 issued by then Minister of Budget and
Management Alberto Romulo.80 The Certification showed that, from 1966 to 1985, Ferdinand E. Marcos and Imelda R. Marcos had
accumulated salaries in the amount of P1,570,000 and P718,750, respectively, or a total of P2,288,750:
Ferdinand E. Marcos, as President
1966-1976
at P60,000/year
P660,000
25
1977-1984
at P100,000/year
800,000
1985
at P110,000/year
110,000
P1,570,00
Imelda R. Marcos, as Minister
June 1976-1985
at P75,000/year
P718,000
In addition to their accumulated salaries from 1966 to 1985 are the Marcos couple's combined salaries from January to February 1986
in the amount of P30,833.33. Hence, their total accumulated salaries amounted to P2,319,583.33. Converted to U.S. dollars on the basis
of the corresponding peso-dollar exchange rates prevailing during the applicable period when said salaries were received, the total
amount had an equivalent value of $304,372.43.
The dollar equivalent was arrived at by using the official annual rates of exchange of the Philippine peso and the US dollar from 1965 to
1985 as well as the official monthly rates of exchange in January and February 1986 issued by the Center for Statistical Information of
the Bangko Sentral ng Pilipinas.
Prescinding from the aforesaid admissions, Section 4, Rule 129 of the Rules of Court provides that:
Section 4. – Judicial admissions – An admission, verbal or written, made by a party in the course of the proceedings in the same case
does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no
such admission was made.81
It is settled that judicial admissions may be made: (a) in the pleadings filed by the parties; (b) in the course of the trial either by verbal
or written manifestations or stipulations; or (c) in other stages of judicial proceedings, as in the pre-trial of the case.82 Thus, facts
pleaded in the petition and answer, as in the case at bar, are deemed admissions of petitioner and respondents, respectively, who are
not permitted to contradict them or subsequently take a position contrary to or inconsistent with such admissions.83
The sum of $304,372.43 should be held as the only known lawful income of respondents since they did not file any Statement of Assets
and Liabilities (SAL), as required by law, from which their net worth could be determined. Besides, under the 1935 Constitution,
Ferdinand E. Marcos as President could not receive "any other emolument from the Government or any of its subdivisions and
instrumentalities".84 Likewise, under the 1973 Constitution, Ferdinand E. Marcos as President could "not receive during his tenure any
other emolument from the Government or any other source."85 In fact, his management of businesses, like the administration of
foundations to accumulate funds, was expressly prohibited under the 1973 Constitution:
Article VII, Sec. 4(2) – The President and the Vice-President shall not, during their tenure, hold any other office except when otherwise
provided in this Constitution, nor may they practice any profession, participate directly or indirectly in the management of any
business, or be financially interested directly or indirectly in any contract with, or in any franchise or special privilege granted by the
Government or any other subdivision, agency, or instrumentality thereof, including any government owned or controlled corporation.
Article VII, Sec. 11 – No Member of the National Assembly shall appear as counsel before any court inferior to a court with appellate
jurisdiction, x x x. Neither shall he, directly or indirectly, be interested financially in any contract with, or in any franchise or special
26
privilege granted by the Government, or any subdivision, agency, or instrumentality thereof including any government owned or
controlled corporation during his term of office. He shall not intervene in any matter before any office of the government for his
pecuniary benefit.
Article IX, Sec. 7 – The Prime Minister and Members of the Cabinet shall be subject to the provision of Section 11, Article VIII hereof and
may not appear as counsel before any court or administrative body, or manage any business, or practice any profession, and shall
also be subject to such other disqualification as may be provided by law.
Their only known lawful income of $304,372.43 can therefore legally and fairly serve as basis for determining the existence of a prima
facie case of forfeiture of the Swiss funds.
Respondents argue that petitioner was not able to establish a prima facie case for the forfeiture of the Swiss funds since it failed to
prove the essential elements under Section 3, paragraphs (c), (d) and (e) of RA 1379. As the Act is a penal statute, its provisions are
mandatory and should thus be construed strictly against the petitioner and liberally in favor of respondent Marcoses.
We hold that it was not for petitioner to establish the Marcoses' other lawful income or income from legitimately acquired property for
the presumption to apply because, as between petitioner and respondents, the latter were in a better position to know if there were
such other sources of lawful income. And if indeed there was such other lawful income, respondents should have specifically stated
the same in their answer. Insofar as petitioner Republic was concerned, it was enough to specify the known lawful income of
respondents.
Section 9 of the PCGG Rules and Regulations provides that, in determining prima facie evidence of ill-gotten wealth, the value of the
accumulated assets, properties and other material possessions of those covered by Executive Order Nos. 1 and 2 must be out of
proportion to the known lawful income of such persons. The respondent Marcos couple did not file any Statement of Assets and
Liabilities (SAL) from which their net worth could be determined. Their failure to file their SAL was in itself a violation of law and to allow
them to successfully assail the Republic for not presenting their SAL would reward them for their violation of the law.
Further, contrary to the claim of respondents, the admissions made by them in their various pleadings and documents were valid. It is of
record that respondents judicially admitted that the money deposited with the Swiss banks belonged to them.
We agree with petitioner that respondent Marcoses made judicial admissions of their ownership of the subject Swiss bank deposits in
their answer, the General/Supplemental Agreements, Mrs. Marcos' Manifestation and Constancia dated May 5, 1999, and the
Undertaking dated February 10, 1999. We take note of the fact that the Associate Justices of the Sandiganbayan were unanimous in
holding that respondents had made judicial admissions of their ownership of the Swiss funds.
In their answer, aside from admitting the existence of the subject funds, respondents likewise admitted ownership thereof. Paragraph
22 of respondents' answer stated:
22. Respondents specifically DENY PARAGRAPH 23 insofar as it alleges that respondents clandestinely stashed the country's wealth in
Switzerland and hid the same under layers and layers of foundations and corporate entities for being false, the truth being that
respondents' aforesaid properties were lawfully acquired. (emphasis supplied)
By qualifying their acquisition of the Swiss bank deposits as lawful, respondents unwittingly admitted their ownership thereof.
Respondent Mrs. Marcos also admitted ownership of the Swiss bank deposits by failing to deny under oath the genuineness and due
execution of certain actionable documents bearing her signature attached to the petition. As discussed earlier, Section 11, Rule 886 of
the 1997 Rules of Civil Procedure provides that material averments in the complaint shall be deemed admitted when not specifically
denied.
The General87 and Supplemental88 Agreements executed by petitioner and respondents on December 28, 1993 further bolstered the
claim of petitioner Republic that its case for forfeiture was proven in accordance with the requisites of Sections 2 and 3 of RA 1379. The
whereas clause in the General Agreement declared that:
WHEREAS, the FIRST PARTY has obtained a judgment from the Swiss Federal Tribunal on December 21, 1990, that the $356 million
belongs in principle to the Republic of the Philippines provided certain conditionalities are met, but even after 7 years, the FIRST PARTY
has not been able to procure a final judgment of conviction against the PRIVATE PARTY.
27
While the Supplemental Agreement warranted, inter alia, that:
In consideration of the foregoing, the parties hereby agree that the PRIVATE PARTY shall be entitled to the equivalent of 25% of the
amount that may be eventually withdrawn from said $356 million Swiss deposits.
The stipulations set forth in the General and Supplemental Agreements undeniably indicated the manifest intent of respondents to
enter into a compromise with petitioner. Corollarily, respondents' willingness to agree to an amicable settlement with the Republic only
affirmed their ownership of the Swiss deposits for the simple reason that no person would acquiesce to any concession over such huge
dollar deposits if he did not in fact own them.
Respondents make much capital of the pronouncement by this Court that the General and Supplemental Agreements were null and
void.89 They insist that nothing in those agreements could thus be admitted in evidence against them because they stood on the
same ground as an accepted offer which, under Section 27, Rule 13090 of the 1997 Rules of Civil Procedure, provides that "in civil
cases, an offer of compromise is not an admission of any liability and is not admissible in evidence against the offeror."
We find no merit in this contention. The declaration of nullity of said agreements was premised on the following constitutional and
statutory infirmities: (1) the grant of criminal immunity to the Marcos heirs was against the law; (2) the PCGG's commitment to exempt
from all forms of taxes the properties to be retained by the Marcos heirs was against the Constitution; and (3) the government's
undertaking to cause the dismissal of all cases filed against the Marcoses pending before the Sandiganbayan and other courts
encroached on the powers of the judiciary. The reasons relied upon by the Court never in the least bit even touched on the veracity
and truthfulness of respondents' admission with respect to their ownership of the Swiss funds. Besides, having made certain admissions in
those agreements, respondents cannot now deny that they voluntarily admitted owning the subject Swiss funds, notwithstanding the
fact that the agreements themselves were later declared null and void.
The following observation of Sandiganbayan Justice Catalino Castañeda, Jr. in the decision dated September 19, 2000 could not have
been better said:
x x x The declaration of nullity of the two agreements rendered the same without legal effects but it did not detract from the admissions
of the respondents contained therein. Otherwise stated, the admissions made in said agreements, as quoted above, remain binding
on the respondents.91
A written statement is nonetheless competent as an admission even if it is contained in a document which is not itself effective for the
purpose for which it is made, either by reason of illegality, or incompetency of a party thereto, or by reason of not being signed,
executed or delivered. Accordingly, contracts have been held as competent evidence of admissions, although they may be
unenforceable.92
The testimony of respondent Ferdinand Marcos, Jr. during the hearing on the motion for the approval of the Compromise Agreement
on April 29, 1998 also lent credence to the allegations of petitioner Republic that respondents admitted ownership of the Swiss bank
accounts. We quote the salient portions of Ferdinand Jr.'s formal declarations in open court:
ATTY. FERNANDO:
Mr. Marcos, did you ever have any meetings with PCGG Chairman Magtanggol C. Gunigundo?
F. MARCOS, JR.:
Yes. I have had very many meetings in fact with Chairman.
ATTY. FERNANDO:
Would you recall when the first meeting occurred?
PJ GARCHITORENA:
In connection with what?
ATTY. FERNANDO:
28
In connection with the ongoing talks to compromise the various cases initiated by PCGG against your family?
F. MARCOS, JR.:
The nature of our meetings was solely concerned with negotiations towards achieving some kind of agreement between the Philippine
government and the Marcos family. The discussions that led up to the compromise agreement were initiated by our then counsel Atty.
Simeon Mesina x x x.93
xxx xxx xxx
ATTY. FERNANDO:
What was your reaction when Atty. Mesina informed you of this possibility?
F. MARCOS, JR.:
My reaction to all of these approaches is that I am always open, we are always open, we are very much always in search of resolution
to the problem of the family and any approach that has been made us, we have entertained. And so my reaction was the same as
what I have always … why not? Maybe this is the one that will finally put an end to this problem.94
xxx xxx xxx
ATTY. FERNANDO:
Basically, what were the true amounts of the assets in the bank?
PJ GARCHITORENA:
So, we are talking about liquid assets here? Just Cash?
F. MARCOS, JR.:
Well, basically, any assets. Anything that was under the Marcos name in any of the banks in Switzerland which may necessarily be not
cash.95
xxx xxx xxx
PJ GARCHITORENA:
x x x What did you do in other words, after being apprised of this contract in connection herewith?
F. MARCOS, JR.:
I assumed that we are beginning to implement the agreement because this was forwarded through the Philippine government lawyers
through our lawyers and then, subsequently, to me. I was a little surprised because we hadn't really discussed the details of the transfer
of the funds, what the bank accounts, what the mechanism would be. But nevertheless, I was happy to see that as far as the PCGG is
concerned, that the agreement was perfected and that we were beginning to implement it and that was a source of satisfaction to
me because I thought that finally it will be the end.96
Ferdinand Jr.'s pronouncements, taken in context and in their entirety, were a confirmation of respondents' recognition of their
ownership of the Swiss bank deposits. Admissions of a party in his testimony are receivable against him. If a party, as a witness,
deliberately concedes a fact, such concession has the force of a judicial admission.97 It is apparent from Ferdinand Jr.'s testimony that
the Marcos family agreed to negotiate with the Philippine government in the hope of finally putting an end to the problems besetting
the Marcos family regarding the Swiss accounts. This was doubtlessly an acknowledgment of ownership on their part. The rule is that the
testimony on the witness stand partakes of the nature of a formal judicial admission when a party testifies clearly and unequivocally to
a fact which is peculiarly within his own knowledge.98
29
In her Manifestation99 dated May 26, 1998, respondent Imelda Marcos furthermore revealed the following:
That respondent Imelda R. Marcos owns 90% of the subject matter of the above-entitled case, being the sole beneficiary of the dollar
deposits in the name of the various foundations alleged in the case;
That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of the late President Ferdinand E. Marcos;
xxx xxx xxx
Respondents' ownership of the Swiss bank accounts as borne out by Mrs. Marcos' manifestation is as bright as sunlight. And her claim
that she is merely a beneficiary of the Swiss deposits is belied by her own signatures on the appended copies of the documents
substantiating her ownership of the funds in the name of the foundations. As already mentioned, she failed to specifically deny under
oath the authenticity of such documents, especially those involving "William Saunders" and "Jane Ryan" which actually referred to
Ferdinand Marcos and Imelda Marcos, respectively. That failure of Imelda Marcos to specifically deny the existence, much less the
genuineness and due execution, of the instruments bearing her signature, was tantamount to a judicial admission of the genuineness
and due execution of said instruments, in accordance with Section 8, Rule 8100 of the 1997 Rules of Civil Procedure.
Likewise, in her Constancia101 dated May 6, 1999, Imelda Marcos prayed for the approval of the Compromise Agreement and the
subsequent release and transfer of the $150 million to the rightful owner. She further made the following manifestations:
xxx xxx xxx
2. The Republic's cause of action over the full amount is its forfeiture in favor of the government if found to be ill-gotten. On the other
hand, the Marcoses defend that it is a legitimate asset. Therefore, both parties have an inchoate right of ownership over the account.
If it turns out that the account is of lawful origin, the Republic may yield to the Marcoses. Conversely, the Marcoses must yield to the
Republic. (underscoring supplied)
xxx xxx xxx
3. Consistent with the foregoing, and the Marcoses having committed themselves to helping the less fortunate, in the interest of peace,
reconciliation and unity, defendant MADAM IMELDA ROMUALDEZ MARCOS, in firm abidance thereby, hereby affirms her agreement
with the Republic for the release and transfer of the US Dollar 150 million for proper disposition, without prejudice to the final outcome
of the litigation respecting the ownership of the remainder.
Again, the above statements were indicative of Imelda's admission of the Marcoses' ownership of the Swiss deposits as in fact "the
Marcoses defend that it (Swiss deposits) is a legitimate (Marcos) asset."
On the other hand, respondents Maria Imelda Marcos-Manotoc, Ferdinand Marcos, Jr. and Maria Irene Marcos-Araneta filed a
motion102 on May 4, 1998 asking the Sandiganbayan to place the res (Swiss deposits) in custodia legis:
7. Indeed, the prevailing situation is fraught with danger! Unless the aforesaid Swiss deposits are placed in custodia legis or within the
Court's protective mantle, its dissipation or misappropriation by the petitioner looms as a distinct possibility.
Such display of deep, personal interest can only come from someone who believes that he has a marked and intimate right over the
considerable dollar deposits. Truly, by filing said motion, the Marcos children revealed their ownership of the said deposits.
Lastly, the Undertaking103 entered into by the PCGG, the PNB and the Marcos foundations on February 10, 1999, confirmed the
Marcoses' ownership of the Swiss bank deposits. The subject Undertaking brought to light their readiness to pay the human rights victims
out of the funds held in escrow in the PNB. It stated:
WHEREAS, the Republic of the Philippines sympathizes with the plight of the human rights victims-plaintiffs in the aforementioned
litigation through the Second Party, desires to assist in the satisfaction of the judgment awards of said human rights victims-plaintiffs, by
releasing, assigning and or waiving US$150 million of the funds held in escrow under the Escrow Agreements dated August 14, 1995,
although the Republic is not obligated to do so under final judgments of the Swiss courts dated December 10 and 19, 1997, and
January 8, 1998;
30
WHEREAS, the Third Party is likewise willing to release, assign and/or waive all its rights and interests over said US$150 million to the
aforementioned human rights victims-plaintiffs.
All told, the foregoing disquisition negates the claim of respondents that "petitioner failed to prove that they acquired or own the Swiss
funds" and that "it was only by arbitrarily isolating and taking certain statements made by private respondents out of context that
petitioner was able to treat these as judicial admissions." The Court is fully aware of the relevance, materiality and implications of every
pleading and document submitted in this case. This Court carefully scrutinized the proofs presented by the parties. We analyzed,
assessed and weighed them to ascertain if each piece of evidence rightfully qualified as an admission. Owing to the far-reaching
historical and political implications of this case, we considered and examined, individually and totally, the evidence of the parties,
even if it might have bordered on factual adjudication which, by authority of the rules and jurisprudence, is not usually done by this
Court. There is no doubt in our mind that respondent Marcoses admitted ownership of the Swiss bank deposits.
We have always adhered to the familiar doctrine that an admission made in the pleadings cannot be controverted by the party
making such admission and becomes conclusive on him, and that all proofs submitted by him contrary thereto or inconsistent
therewith should be ignored, whether an objection is interposed by the adverse party or not.104 This doctrine is embodied in Section 4,
Rule 129 of the Rules of Court:
SEC. 4. Judicial admissions. ─ An admission, verbal or written, made by a party in the course of the proceedings in the same case, does
not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such
admission was made.105
In the absence of a compelling reason to the contrary, respondents' judicial admission of ownership of the Swiss deposits is definitely
binding on them.
The individual and separate admissions of each respondent bind all of them pursuant to Sections 29 and 31, Rule 130 of the Rules of
Court:
SEC. 29. Admission by co-partner or agent. ─ The act or declaration of a partner or agent of the party within the scope of his authority
and during the existence of the partnership or agency, may be given in evidence against such party after the partnership or agency is
shown by evidence other than such act or declaration. The same rule applies to the act or declaration of a joint owner, joint debtor, or
other person jointly interested with the party.106
SEC. 31. Admission by privies. ─ Where one derives title to property from another, the act, declaration, or omission of the latter, while
holding the title, in relation to the property, is evidence against the former.107
The declarations of a person are admissible against a party whenever a "privity of estate" exists between the declarant and the party,
the term "privity of estate" generally denoting a succession in rights.108 Consequently, an admission of one in privity with a party to the
record is competent.109 Without doubt, privity exists among the respondents in this case. And where several co-parties to the record
are jointly interested in the subject matter of the controversy, the admission of one is competent against all.110
Respondents insist that the Sandiganbayan is correct in ruling that petitioner Republic has failed to establish a prima facie case for the
forfeiture of the Swiss deposits.
We disagree. The sudden turn-around of the Sandiganbayan was really strange, to say the least, as its findings and conclusions were
not borne out by the voluminous records of this case.
Section 2 of RA 1379 explicitly states that "whenever any public officer or employee has acquired during his incumbency an amount of
property which is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the
income from legitimately acquired property, said property shall be presumed prima facie to have been unlawfully acquired. x x x"
The elements which must concur for this prima facie presumption to apply are:
(1) the offender is a public officer or employee;
(2) he must have acquired a considerable amount of money or property during his incumbency; and
31
(3) said amount is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the
income from legitimately acquired property.
It is undisputed that spouses Ferdinand and Imelda Marcos were former public officers. Hence, the first element is clearly extant.
The second element deals with the amount of money or property acquired by the public officer during his incumbency. The Marcos
couple indubitably acquired and owned properties during their term of office. In fact, the five groups of Swiss accounts were
admittedly owned by them. There is proof of the existence and ownership of these assets and properties and it suffices to comply with
the second element.
The third requirement is met if it can be shown that such assets, money or property is manifestly out of proportion to the public officer's
salary and his other lawful income. It is the proof of this third element that is crucial in determining whether a prima facie presumption
has been established in this case.
Petitioner Republic presented not only a schedule indicating the lawful income of the Marcos spouses during their incumbency but
also evidence that they had huge deposits beyond such lawful income in Swiss banks under the names of five different foundations.
We believe petitioner was able to establish the prima facie presumption that the assets and properties acquired by the Marcoses were
manifestly and patently disproportionate to their aggregate salaries as public officials. Otherwise stated, petitioner presented enough
evidence to convince us that the Marcoses had dollar deposits amounting to US $356 million representing the balance of the Swiss
accounts of the five foundations, an amount way, way beyond their aggregate legitimate income of only US$304,372.43 during their
incumbency as government officials.
Considering, therefore, that the total amount of the Swiss deposits was considerably out of proportion to the known lawful income of
the Marcoses, the presumption that said dollar deposits were unlawfully acquired was duly established. It was sufficient for the petition
for forfeiture to state the approximate amount of money and property acquired by the respondents, and their total government
salaries. Section 9 of the PCGG Rules and Regulations states:
Prima Facie Evidence. – Any accumulation of assets, properties, and other material possessions of those persons covered by Executive
Orders No. 1 and No. 2, whose value is out of proportion to their known lawful income is prima facie deemed ill-gotten wealth.
Indeed, the burden of proof was on the respondents to dispute this presumption and show by clear and convincing evidence that the
Swiss deposits were lawfully acquired and that they had other legitimate sources of income. A presumption is prima facie proof of the
fact presumed and, unless the fact thus prima facie established by legal presumption is disproved, it must stand as proved.111
Respondent Mrs. Marcos argues that the foreign foundations should have been impleaded as they were indispensable parties without
whom no complete determination of the issues could be made. She asserts that the failure of petitioner Republic to implead the
foundations rendered the judgment void as the joinder of indispensable parties was a sine qua non exercise of judicial power.
Furthermore, the non-inclusion of the foreign foundations violated the conditions prescribed by the Swiss government regarding the
deposit of the funds in escrow, deprived them of their day in court and denied them their rights under the Swiss constitution and
international law.112
The Court finds that petitioner Republic did not err in not impleading the foreign foundations. Section 7, Rule 3 of the 1997 Rules of Civil
Procedure,113 taken from Rule 19b of the American Federal Rules of Civil Procedure, provides for the compulsory joinder of
indispensable parties. Generally, an indispensable party must be impleaded for the complete determination of the suit. However,
failure to join an indispensable party does not divest the court of jurisdiction since the rule regarding indispensable parties is founded
on equitable considerations and is not jurisdictional. Thus, the court is not divested of its power to render a decision even in the
absence of indispensable parties, though such judgment is not binding on the non-joined party.114
An indispensable party115 has been defined as one:
[who] must have a direct interest in the litigation; and if this interest is such that it cannot be separated from that of the parties to the
suit, if the court cannot render justice between the parties in his absence, if the decree will have an injurious effect upon his interest, or
if the final determination of the controversy in his absence will be inconsistent with equity and good conscience.
There are two essential tests of an indispensable party: (1) can relief be afforded the plaintiff without the presence of the other party?
and (2) can the case be decided on its merits without prejudicing the rights of the other party?116 There is, however, no fixed formula
32
for determining who is an indispensable party; this can only be determined in the context and by the facts of the particular suit or
litigation.
In the present case, there was an admission by respondent Imelda Marcos in her May 26, 1998 Manifestation before the
Sandiganbayan that she was the sole beneficiary of 90% of the subject matter in controversy with the remaining 10% belonging to the
estate of Ferdinand Marcos.117 Viewed against this admission, the foreign foundations were not indispensable parties. Their non-
participation in the proceedings did not prevent the court from deciding the case on its merits and according full relief to petitioner
Republic. The judgment ordering the return of the $356 million was neither inimical to the foundations' interests nor inconsistent with
equity and good conscience. The admission of respondent Imelda Marcos only confirmed what was already generally known: that the
foundations were established precisely to hide the money stolen by the Marcos spouses from petitioner Republic. It negated whatever
illusion there was, if any, that the foreign foundations owned even a nominal part of the assets in question.
The rulings of the Swiss court that the foundations, as formal owners, must be given an opportunity to participate in the proceedings
hinged on the assumption that they owned a nominal share of the assets.118 But this was already refuted by no less than Mrs. Marcos
herself. Thus, she cannot now argue that the ruling of the Sandiganbayan violated the conditions set by the Swiss court. The directive
given by the Swiss court for the foundations to participate in the proceedings was for the purpose of protecting whatever nominal
interest they might have had in the assets as formal owners. But inasmuch as their ownership was subsequently repudiated by Imelda
Marcos, they could no longer be considered as indispensable parties and their participation in the proceedings became unnecessary.
In Republic vs. Sandiganbayan,119 this Court ruled that impleading the firms which are the res of the action was unnecessary:
"And as to corporations organized with ill-gotten wealth, but are not themselves guilty of misappropriation, fraud or other illicit conduct
– in other words, the companies themselves are not the object or thing involved in the action, the res thereof – there is no need to
implead them either. Indeed, their impleading is not proper on the strength alone of their having been formed with ill-gotten funds,
absent any other particular wrongdoing on their part…
Such showing of having been formed with, or having received ill-gotten funds, however strong or convincing, does not, without more,
warrant identifying the corporations in question with the person who formed or made use of them to give the color or appearance of
lawful, innocent acquisition to illegally amassed wealth – at the least, not so as place on the Government the onus of impleading the
former with the latter in actions to recover such wealth. Distinguished in terms of juridical personality and legal culpability from their
erring members or stockholders, said corporations are not themselves guilty of the sins of the latter, of the embezzlement, asportation,
etc., that gave rise to the Government's cause of action for recovery; their creation or organization was merely the result of their
members' (or stockholders') manipulations and maneuvers to conceal the illegal origins of the assets or monies invested therein. In this
light, they are simply the res in the actions for the recovery of illegally acquired wealth, and there is, in principle, no cause of action
against them and no ground to implead them as defendants in said actions."
Just like the corporations in the aforementioned case, the foreign foundations here were set up to conceal the illegally acquired funds
of the Marcos spouses. Thus, they were simply the res in the action for recovery of ill-gotten wealth and did not have to be impleaded
for lack of cause of action or ground to implead them.
Assuming arguendo, however, that the foundations were indispensable parties, the failure of petitioner to implead them was a curable
error, as held in the previously cited case of Republic vs. Sandiganbayan:120
"Even in those cases where it might reasonably be argued that the failure of the Government to implead the sequestered corporations
as defendants is indeed a procedural abberation, as where said firms were allegedly used, and actively cooperated with the
defendants, as instruments or conduits for conversion of public funds and property or illicit or fraudulent obtention of favored
government contracts, etc., slight reflection would nevertheless lead to the conclusion that the defect is not fatal, but one correctible
under applicable adjective rules – e.g., Section 10, Rule 5 of the Rules of Court [specifying the remedy of amendment during trial to
authorize or to conform to the evidence]; Section 1, Rule 20 [governing amendments before trial], in relation to the rule respecting
omission of so-called necessary or indispensable parties, set out in Section 11, Rule 3 of the Rules of Court. It is relevant in this context to
advert to the old familiar doctrines that the omission to implead such parties "is a mere technical defect which can be cured at any
stage of the proceedings even after judgment"; and that, particularly in the case of indispensable parties, since their presence and
participation is essential to the very life of the action, for without them no judgment may be rendered, amendments of the complaint
in order to implead them should be freely allowed, even on appeal, in fact even after rendition of judgment by this Court, where it
appears that the complaint otherwise indicates their identity and character as such indispensable parties."121
33
Although there are decided cases wherein the non-joinder of indispensable parties in fact led to the dismissal of the suit or the
annulment of judgment, such cases do not jibe with the matter at hand. The better view is that non-joinder is not a ground to dismiss
the suit or annul the judgment. The rule on joinder of indispensable parties is founded on equity. And the spirit of the law is reflected in
Section 11, Rule 3122 of the 1997 Rules of Civil Procedure. It prohibits the dismissal of a suit on the ground of non-joinder or misjoinder of
parties and allows the amendment of the complaint at any stage of the proceedings, through motion or on order of the court on its
own initiative.123
Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section 7, Rule 3124 on indispensable parties was copied,
allows the joinder of indispensable parties even after judgment has been entered if such is needed to afford the moving party full
relief.125 Mere delay in filing the joinder motion does not necessarily result in the waiver of the right as long as the delay is
excusable.126 Thus, respondent Mrs. Marcos cannot correctly argue that the judgment rendered by the Sandiganbayan was void due
to the non-joinder of the foreign foundations. The court had jurisdiction to render judgment which, even in the absence of
indispensable parties, was binding on all the parties before it though not on the absent party.127 If she really felt that she could not be
granted full relief due to the absence of the foreign foundations, she should have moved for their inclusion, which was allowable at
any stage of the proceedings. She never did. Instead she assailed the judgment rendered.
In the face of undeniable circumstances and the avalanche of documentary evidence against them, respondent Marcoses failed to
justify the lawful nature of their acquisition of the said assets. Hence, the Swiss deposits should be considered ill-gotten wealth and
forfeited in favor of the State in accordance with Section 6 of RA 1379:
SEC. 6. Judgment.─ If the respondent is unable to show to the satisfaction of the court that he has lawfully acquired the property in
question, then the court shall declare such property forfeited in favor of the State, and by virtue of such judgment the property
aforesaid shall become property of the State x x x.
THE FAILURE TO PRESENT AUTHENTICATED TRANSLATIONS OF THE SWISS DECISIONS
Finally, petitioner Republic contends that the Honorable Sandiganbayan Presiding Justice Francis Garchitorena committed grave
abuse of discretion in reversing himself on the ground that the original copies of the authenticated Swiss decisions and their
authenticated translations were not submitted to the court a quo. Earlier PJ Garchitorena had quoted extensively from the unofficial
translation of one of these Swiss decisions in his ponencia dated July 29, 1999 when he denied the motion to release US$150 Million to
the human rights victims.
While we are in reality perplexed by such an incomprehensible change of heart, there might nevertheless not be any real need to
belabor the issue. The presentation of the authenticated translations of the original copies of the Swiss decision was not de rigueur for
the public respondent to make findings of fact and reach its conclusions. In short, the Sandiganbayan's decision was not dependent
on the determination of the Swiss courts. For that matter, neither is this Court's.
The release of the Swiss funds held in escrow in the PNB is dependent solely on the decision of this jurisdiction that said funds belong to
the petitioner Republic. What is important is our own assessment of the sufficiency of the evidence to rule in favor of either petitioner
Republic or respondent Marcoses. In this instance, despite the absence of the authenticated translations of the Swiss decisions, the
evidence on hand tilts convincingly in favor of petitioner Republic.
WHEREFORE, the petition is hereby GRANTED. The assailed Resolution of the Sandiganbayan dated January 31, 2002 is SET ASIDE. The
Swiss deposits which were transferred to and are now deposited in escrow at the Philippine National Bank in the estimated aggregate
amount of US$658,175,373.60 as of January 31, 2002, plus interest, are hereby forfeited in favor of petitioner Republic of the Philippines.
2. Saudi Arabian Airlines v. Court of Appeals, G.R. No. 122191, [October 8, 1998], 358 PHIL 105-129 Banggat
G.R. No. 122191 October 8, 1998
SAUDI ARABIAN AIRLINES, Petitioner, vs. COURT OF APPEALS, MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in his capacity as
Presiding Judge of Branch 89, Regional Trial Court of Quezon City, Respondents.
QUISUMBING, J.:
34
This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside the Resolution 1 dated September 27,
1995 and the Decision 2 dated April 10, 1996 of the Court of Appeals 3 in CA-G.R. SP No. 36533, 4 and the Orders 5 dated August 29, 1994
6
and February 2, 1995 7 that were issued by the trial court in Civil Case No. Q-93-18394. 8
The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned Decision 9, are as follows:
On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines based in Jeddah, Saudi Arabia. . . .
On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance with fellow crew members Thamer Al-
Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it was almost morning when they returned to their hotels, they agreed to
have breakfast together at the room of Thamer. When they were in te ( sic) room, Allah left on some pretext. Shortly after he did,
Thamer attempted to rape plaintiff. Fortunately, a roomboy and several security personnel heard her cries for help and rescued her.
Later, the Indonesian police came and arrested Thamer and Allah Al-Gazzawi, the latter as an accomplice.
When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her about the Jakarta incident. They then
requested her to go back to Jakarta to help arrange the release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad
and base manager Baharini negotiated with the police for the immediate release of the detained crew members but did not succeed
because plaintiff refused to cooperate. She was afraid that she might be tricked into something she did not want because of her
inability to understand the local dialect. She also declined to sign a blank paper and a document written in the local dialect.
Eventually, SAUDIA allowed plaintiff to return to Jeddah but barred her from the Jakarta flights.
Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to deport Thamer
and Allah after two weeks of detention. Eventually, they were again put in service by defendant SAUDI ( sic). In September 1990,
defendant SAUDIA transferred plaintiff to Manila.
On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors requested her to see
Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where
the police took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her
to make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the police return her passport and
allowed her to catch the afternoon flight out of Jeddah.
One year and a half later or on lune 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sign a
document written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila.
Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27, 1993 for further
investigation. Plaintiff did so after receiving assurance from SAUDIA's Manila manager, Aslam Saleemi, that the investigation was
routinary and that it posed no danger to her.
In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but on June 28,
1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of interrogation, they let her
go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her that the airline had forbidden her to take
flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick took away her passport and told her
to remain in Jeddah, at the crew quarters, until further orders.
On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff
guilty of (1) adultery; (2) going to a disco, dancing and listening to the music in violation of Islamic laws; and (3) socializing with the
male crew, in contravention of Islamic tradition. 10
Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA. Unfortunately, she was denied any
assistance. She then asked the Philippine Embassy in Jeddah to help her while her case is on appeal. Meanwhile, to pay for her
upkeep, she worked on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the international
flights. 11
Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and allowed her to leave Saudi Arabia.
Shortly before her return to Manila, 12 she was terminated from the service by SAUDIA, without her being informed of the cause.
On November 23, 1993, Morada filed a Complaint 13

for damages against SAUDIA, and Khaled Al-Balawi ("Al-Balawi"), its country
manager.
35
On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss 14 which raised the following grounds, to wit: (1) that the Complaint
states no cause of action against Saudia; (2) that defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set
forth in the Complaint has been waived, abandoned or otherwise extinguished; and (4) that the trial court has no jurisdiction to try the
case.
On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss) 15. Saudia filed a reply 16 thereto on March 3, 1994.
On June 23, 1994, Morada filed an Amended Complaint 17 wherein Al-Balawi was dropped as party defendant. On August 11, 1994,
Saudia filed its Manifestation and Motion to Dismiss Amended Complaint 18.
The trial court issued an Order 19 dated August 29, 1994 denying the Motion to Dismiss Amended Complaint filed by Saudia.
From the Order of respondent Judge 20 denying the Motion to Dismiss, SAUDIA filed on September 20, 1994, its Motion for
Reconsideration 21 of the Order dated August 29, 1994. It alleged that the trial court has no jurisdiction to hear and try the case on the
basis of Article 21 of the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi Arabia. On October 14, 1994,
Morada filed her Opposition 22 (To Defendant's Motion for Reconsideration).
In the Reply 23 filed with the trial court on October 24, 1994, SAUDIA alleged that since its Motion for Reconsideration raised lack of
jurisdiction as its cause of action, the Omnibus Motion Rule does not apply, even if that ground is raised for the first time on appeal.
Additionally, SAUDIA alleged that the Philippines does not have any substantial interest in the prosecution of the instant case, and
hence, without jurisdiction to adjudicate the same.
Respondent Judge subsequently issued another Order 24

dated February 2, 1995, denying SAUDIA's Motion for Reconsideration. The
pertinent portion of the assailed Order reads as follows:
Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru counsel, on September 20, 1994, and the
Opposition thereto of the plaintiff filed, thru counsel, on October 14, 1994, as well as the Reply therewith of defendant Saudi Arabian
Airlines filed, thru counsel, on October 24, 1994, considering that a perusal of the plaintiffs Amended Complaint, which is one for the
recovery of actual, moral and exemplary damages plus attorney's fees, upon the basis of the applicable Philippine law, Article 21 of
the New Civil Code of the Philippines, is, clearly, within the jurisdiction of this Court as regards the subject matter, and there being
nothing new of substance which might cause the reversal or modification of the order sought to be reconsidered, the motion for
reconsideration of the defendant, is DENIED.
SO ORDERED. 25
Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition with Prayer for Issuance of Writ of Preliminary
Injunction and/or Temporary Restraining Order 26 with the Court of Appeals.
Respondent Court of Appeals promulgated a Resolution with Temporary Restraining Order 27 dated February 23, 1995, prohibiting the
respondent Judge from further conducting any proceeding, unless otherwise directed, in the interim.
In another Resolution 28 promulgated on September 27, 1995, now assailed, the appellate court denied SAUDIA's Petition for the
Issuance of a Writ of Preliminary Injunction dated February 18, 1995, to wit:
The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after considering the Answer, with Prayer to Deny Writ
of Preliminary Injunction (Rollo, p. 135) the Reply and Rejoinder, it appearing that herein petitioner is not clearly entitled thereto
(Unciano Paramedical College, et. Al., v. Court of Appeals, et. Al., 100335, April 7, 1993, Second Division).
SO ORDERED.
On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petition 29
for Review with Prayer for Temporary Restraining
Order dated October 13, 1995.
However, during the pendency of the instant Petition, respondent Court of Appeals rendered the Decision 30 dated April 10, 1996, now
also assailed. It ruled that the Philippines is an appropriate forum considering that the Amended Complaint's basis for recovery of
damages is Article 21 of the Civil Code, and thus, clearly within the jurisdiction of respondent Court. It further held that certiorari is not
the proper remedy in a denial of a Motion to Dismiss, inasmuch as the petitioner should have proceeded to trial, and in case of an
adverse ruling, find recourse in an appeal.
On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary Restraining Order 31 dated April 30, 1996,
given due course by this Court. After both parties submitted their Memoranda, 32 the instant case is now deemed submitted for
decision.
Petitioner SAUDIA raised the following issues:

36
I
The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based on Article 21 of the New Civil Code since the proper
law applicable is the law of the Kingdom of Saudi Arabia inasmuch as this case involves what is known in private international law as a
"conflicts problem". Otherwise, the Republic of the Philippines will sit in judgment of the acts done by another sovereign state which is
abhorred.
II
Leave of court before filing a supplemental pleading is not a jurisdictional requirement. Besides, the matter as to absence of leave of
court is now moot and academic when this Honorable Court required the respondents to comment on petitioner's April 30, 1996
Supplemental Petition For Review With Prayer For A Temporary Restraining Order Within Ten (10) Days From Notice Thereof. Further, the
Revised Rules of Court should be construed with liberality pursuant to Section 2, Rule 1 thereof.
III
Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533 entitled "Saudi Arabian Airlines v. Hon. Rodolfo
A. Ortiz, et al." and filed its April 30, 1996 Supplemental Petition For Review With Prayer For A Temporary Restraining Order on May 7,
1996 at 10:29 a.m. or within the 15-day reglementary period as provided for under Section 1, Rule 45 of the Revised Rules of Court.
Therefore, the decision in CA-G.R. SP NO. 36533 has not yet become final and executory and this Honorable Court can take
cognizance of this case. 33
From the foregoing factual and procedural antecedents, the following issues emerge for our resolution:
I.
WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON CITY HAS JURISDICTION TO
HEAR AND TRY CIVIL CASE NO. Q-93-18394 ENTITLED "MILAGROS P. MORADA V. SAUDI ARABIAN AIRLINES".
II.
WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THIS CASE PHILIPPINE LAW SHOULD GOVERN.
Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It maintains that private respondent's
claim for alleged abuse of rights occurred in the Kingdom of Saudi Arabia. It alleges that the existence of a foreign element qualifies
the instant case for the application of the law of the Kingdom of Saudi Arabia, by virtue of the lex loci delicti commissi rule. 34
On the other hand, private respondent contends that since her Amended Complaint is based on Articles 19 35
and 21 36
of the Civil
Code, then the instant case is properly a matter of domestic law. 37
Under the factual antecedents obtaining in this case, there is no dispute that the interplay of events occurred in two states, the
Philippines and Saudi Arabia.
As stated by private respondent in her Amended Complaint 38 dated June 23, 1994:
2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing business in the Philippines. It may be served with
summons and other court processes at Travel Wide Associated Sales (Phils.). Inc., 3rd Floor, Cougar Building, 114 Valero St., Salcedo
Village, Makati, Metro Manila.
xxx xxx xxx
6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to deport Thamer
and Allah after two weeks of detention. Eventually, they were again put in service by defendant SAUDIA. In September 1990,
defendant SAUDIA transferred plaintiff to Manila.
7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors reauested her to see
MR. Ali Meniewy, Chief Legal Officer of SAUDIA in Jeddah, Saudi Arabia . When she saw him, he brought her to the police station where
the police took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her
to make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the police return her passport and
allowed her to catch the afternoon flight out of Jeddah.
8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to Manila,
plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal
Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sigh a
37
document written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As it turned out, plaintiff
signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila.
9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27, 1993 for
further investigation. Plaintiff did so after receiving assurance from SAUDIA's Manila manger, Aslam Saleemi, that the investigation was
routinary and that it posed no danger to her.
10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but on June
28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of interrogation, they let
her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her that the airline had forbidden her to
take that flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick took away her passport and
told her to remain in Jeddah, at the crew quarters, until further orders.
11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment and shock,
rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286 lashes. Only then did she
realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff
guilty of (1) adultery; (2) going to a disco, dancing, and listening to the music in violation of Islamic laws; (3) socializing with the male
crew, in contravention of Islamic tradition.
12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the Philippines Embassy in Jeddah . The latter
helped her pursue an appeal from the decision of the court. To pay for her upkeep, she worked on the domestic flights of defendant
SAUDIA while, ironically, Thamer and Allah freely served the international flights. 39
Where the factual antecedents satisfactorily establish the existence of a foreign element, we agree with petitioner that the problem
herein could present a "conflicts" case.
A factual situation that cuts across territorial lines and is affected by the diverse laws of two or more states is said to contain a "foreign
element". The presence of a foreign element is inevitable since social and economic affairs of individuals and associations are rarely
confined to the geographic limits of their birth or conception. 40
The forms in which this foreign element may appear are many. 41 The foreign element may simply consist in the fact that one of the
parties to a contract is an alien or has a foreign domicile, or that a contract between nationals of one State involves properties
situated in another State. In other cases, the foreign element may assume a complex form. 42
In the instant case, the foreign element consisted in the fact that private respondent Morada is a resident Philippine national, and that
petitioner SAUDIA is a resident foreign corporation. Also, by virtue of the employment of Morada with the petitioner Saudia as a flight
stewardess, events did transpire during her many occasions of travel across national borders, particularly from Manila, Philippines to
Jeddah, Saudi Arabia, and vice versa, that caused a "conflicts" situation to arise.
We thus find private respondent's assertion that the case is purely domestic, imprecise. A conflicts problem presents itself here, and the
question of jurisdiction 43 confronts the court a quo.
After a careful study of the private respondent's Amended Complaint, 44

and the Comment thereon, we note that she aptly
predicated her cause of action on Articles 19 and 21 of the New Civil Code.
On one hand, Article 19 of the New Civil Code provides:
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
On the other hand, Article 21 of the New Civil Code provides:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy
shall compensate the latter for damages.
Thus, in Philippine National Bank (PNB) vs. Court of Appeals , 45 this Court held that:
The aforecited provisions on human relations were intended to expand the concept of torts in this jurisdiction by granting adequate
legal remedy for the untold number of moral wrongs which is impossible for human foresight to specifically provide in the statutes.
Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions. Thus, we agree with private respondent's
assertion that violations of Articles 19 and 21 are actionable, with judicially enforceable remedies in the municipal forum.
38
Based on the allegations 46 in the Amended Complaint, read in the light of the Rules of Court on jurisdiction 47 we find that the Regional
Trial Court (RTC) of Quezon City possesses jurisdiction over the subject matter of the suit. 48 Its authority to try and hear the case is
provided for under Section 1 of Republic Act No. 7691, to wit:
Sec. 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the "Judiciary Reorganization Act of 1980", is hereby amended to
read as follows:
Sec. 19. Jurisdiction in Civil Cases. - Regional Trial Courts shall exercise exclusive jurisdiction:
xxx xxx xxx
(8) In all other cases in which demand, exclusive of interest, damages of whatever kind , attorney's fees, litigation expenses, and cots or
the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila,
where the demand, exclusive of the above-mentioned items exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis ours)
xxx xxx xxx
And following Section 2 (b), Rule 4 of the Revised Rules of Court - the venue, Quezon City, is appropriate:
Sec. 2 Venue in Courts of First Instance. - [Now Regional Trial Court]
(a) xxx xxx xxx
(b) Personal actions. - All other actions may be commenced and tried where the defendant or any of the defendants resides or may
be found, or where the plaintiff or any of the plaintiff resides, at the election of the plaintiff.
Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of the RTC Quezon City assuming
jurisdiction. Paramount is the private interest of the litigant. Enforceability of a judgment if one is obtained is quite obvious. Relative
advantages and obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient forum, "vex", "harass", or
"oppress" the defendant, e.g. by inflicting upon him needless expense or disturbance. But unless the balance is strongly in favor of the
defendant, the plaintiffs choice of forum should rarely be disturbed. 49
Weighing the relative claims of the parties, the court a quo found it best to hear the case in the Philippines. Had it refused to take
cognizance of the case, it would be forcing plaintiff (private respondent now) to seek remedial action elsewhere, i.e. in the Kingdom of
Saudi Arabia where she no longer maintains substantial connections. That would have caused a fundamental unfairness to her.
Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience have been shown by either of the
parties. The choice of forum of the plaintiff (now private respondent) should be upheld.
Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By filing her Complaint and Amended
Complaint with the trial court, private respondent has voluntary submitted herself to the jurisdiction of the court.
The records show that petitioner SAUDIA has filed several motions 50 praying for the dismissal of Morada's Amended Complaint. SAUDIA
also filed an Answer In Ex Abundante Cautelam dated February 20, 1995. What is very patent and explicit from the motions filed, is that
SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has effectively submitted to the trial court's
jurisdiction by praying for the dismissal of the Amended Complaint on grounds other than lack of jurisdiction.
As held by this Court in Republic vs. Ker and Company, Ltd.: 51
We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower court's jurisdiction over defendant's person,
prayed for dismissal of the complaint on the ground that plaintiff's cause of action has prescribed. By interposing such second ground
in its motion to dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis of which it prayed the court to resolve
controversy in its favor. For the court to validly decide the said plea of defendant Ker & Co., Ltd., it necessarily had to acquire
jurisdiction upon the latter's person, who, being the proponent of the affirmative defense, should be deemed to have abandoned its
special appearance and voluntarily submitted itself to the jurisdiction of the court.
Similarly, the case of De Midgely vs. Ferandos, held that;
When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person, it must be for the sole
and separate purpose of objecting to the jurisdiction of the court. If his motion is for any other purpose than to object to the jurisdiction
of the court over his person, he thereby submits himself to the jurisdiction of the court. A special appearance by motion made for the
purpose of objecting to the jurisdiction of the court over the person will be held to be a general appearance, if the party in said motion
should, for example, ask for a dismissal of the action upon the further ground that the court had no jurisdiction over the subject matter.
52
39
Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City. Thus, we find that the trial court has
jurisdiction over the case and that its exercise thereof, justified.
As to the choice of applicable law, we note that choice-of-law problems seek to answer two important questions: (1) What legal
system should control a given situation where some of the significant facts occurred in two or more states; and (2) to what extent
should the chosen legal system regulate the situation. 53
Several theories have been propounded in order to identify the legal system that should ultimately control. Although ideally, all choice-
of-law theories should intrinsically advance both notions of justice and predictability, they do not always do so. The forum is then faced
with the problem of deciding which of these two important values should be stressed. 54
Before a choice can be made, it is necessary for us to determine under what category a certain set of facts or rules fall. This process is
known as "characterization", or the "doctrine of qualification". It is the "process of deciding whether or not the facts relate to the kind of
question specified in a conflicts rule." 55 The purpose of "characterization" is to enable the forum to select the proper law. 56
Our starting point of analysis here is not a legal relation, but a factual situation, event, or operative fact. 57 An essential element of
conflict rules is the indication of a "test" or "connecting factor" or "point of contact". Choice-of-law rules invariably consist of a factual
relationship (such as property right, contract claim) and a connecting factor or point of contact, such as the situs of the res, the place
of celebration, the place of performance, or the place of wrongdoing. 58
Note that one or more circumstances may be present to serve as the possible test for the determination of the applicable law. 59
These
"test factors" or "points of contact" or "connecting factors" could be any of the following:
(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin;
(2) the seat of a legal or juridical person, such as a corporation;
(3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In particular, the lex situs is decisive when real
rights are involved;
(4) the place where an act has been done, the locus actus, such as the place where a contract has been made, a marriage
celebrated, a will signed or a tort committed. The lex loci actus is particularly important in contracts and torts;
(5) the place where an act is intended to come into effect, e.g., the place of performance of contractual duties, or the place where a
power of attorney is to be exercised;
(6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci intentionis;
(7) the place where judicial or administrative proceedings are instituted or done. The lex fori - the law of the forum - is particularly
important because, as we have seen earlier, matters of "procedure" not going to the substance of the claim involved are governed by
it; and because the lex fori applies whenever the content of the otherwise applicable foreign law is excluded from application in a
given case for the reason that it falls under one of the exceptions to the applications of foreign law; and
(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and of its master or owner as such. It
also covers contractual relationships particularly contracts of affreightment. 60 (Emphasis ours.)
After a careful study of the pleadings on record, including allegations in the Amended Complaint deemed admitted for purposes of
the motion to dismiss, we are convinced that there is reasonable basis for private respondent's assertion that although she was already
working in Manila, petitioner brought her to Jeddah on the pretense that she would merely testify in an investigation of the charges she
made against the two SAUDIA crew members for the attack on her person while they were in Jakarta. As it turned out, she was the one
made to face trial for very serious charges, including adultery and violation of Islamic laws and tradition.
There is likewise logical basis on record for the claim that the "handing over" or "turning over" of the person of private respondent to
Jeddah officials, petitioner may have acted beyond its duties as employer. Petitioner's purported act contributed to and amplified or
even proximately caused additional humiliation, misery and suffering of private respondent. Petitioner thereby allegedly facilitated the
arrest, detention and prosecution of private respondent under the guise of petitioner's authority as employer, taking advantage of the
trust, confidence and faith she reposed upon it. As purportedly found by the Prince of Makkah, the alleged conviction and
imprisonment of private respondent was wrongful. But these capped the injury or harm allegedly inflicted upon her person and
reputation, for which petitioner could be liable as claimed, to provide compensation or redress for the wrongs done, once duly proven.
Considering that the complaint in the court a quo is one involving torts, the "connecting factor" or "point of contact" could be the
place or places where the tortious conduct or lex loci actus occurred. And applying the torts principle in a conflicts case, we find that
the Philippines could be said as a situs of the tort (the place where the alleged tortious conduct took place). This is because it is in the
Philippines where petitioner allegedly deceived private respondent, a Filipina residing and working here. According to her, she had
honestly believed that petitioner would, in the exercise of its rights and in the performance of its duties, "act with justice, give her due
40
and observe honesty and good faith." Instead, petitioner failed to protect her, she claimed. That certain acts or parts of the injury
allegedly occurred in another country is of no moment. For in our view what is important here is the place where the over-all harm or
the totality of the alleged injury to the person, reputation, social standing and human rights of complainant, had lodged, according to
the plaintiff below (herein private respondent). All told, it is not without basis to identify the Philippines as the situs of the alleged tort.
Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi, modern theories and rules on tort liability 61
have been advanced to offer fresh judicial approaches to arrive at just results. In keeping abreast with the modern theories on tort
liability, we find here an occasion to apply the "State of the most significant relationship" rule, which in our view should be appropriate
to apply now, given the factual context of this case.
In applying said principle to determine the State which has the most significant relationship, the following contacts are to be taken into
account and evaluated according to their relative importance with respect to the particular issue: (a) the place where the injury
occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation
and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered. 62
As already discussed, there is basis for the claim that over-all injury occurred and lodged in the Philippines. There is likewise no question
that private respondent is a resident Filipina national, working with petitioner, a resident foreign corporation engaged here in the
business of international air carriage. Thus, the "relationship" between the parties was centered here, although it should be stressed that
this suit is not based on mere labor law violations. From the record, the claim that the Philippines has the most significant contact with
the matter in this dispute, 63 raised by private respondent as plaintiff below against defendant (herein petitioner), in our view, has been
properly established.
Prescinding from this premise that the Philippines is the situs of the tort complained of and the place "having the most interest in the
problem", we find, by way of recapitulation, that the Philippine law on tort liability should have paramount application to and control in
the resolution of the legal issues arising out of this case. Further, we hold that the respondent Regional Trial Court has jurisdiction over
the parties and the subject matter of the complaint; the appropriate venue is in Quezon City, which could properly apply Philippine
law. Moreover, we find untenable petitioner's insistence that "[s]ince private respondent instituted this suit, she has the burden of
pleading and proving the applicable Saudi law on the matter." 64 As aptly said by private respondent, she has "no obligation to plead
and prove the law of the Kingdom of Saudi Arabia since her cause of action is based on Articles 19 and 21" of the Civil Code of the
Philippines. In her Amended Complaint and subsequent pleadings, she never alleged that Saudi law should govern this case. 65 And as
correctly held by the respondent appellate court, "considering that it was the petitioner who was invoking the applicability of the law
of Saudi Arabia, then the burden was on it [petitioner] to plead and to establish what the law of Saudi Arabia is". 66
Lastly, no error could be imputed to the respondent appellate court in upholding the trial court's denial of defendant's (herein
petitioner's) motion to dismiss the case. Not only was jurisdiction in order and venue properly laid, but appeal after trial was obviously
available, and expeditious trial itself indicated by the nature of the case at hand. Indubitably, the Philippines is the state intimately
concerned with the ultimate outcome of the case below, not just for the benefit of all the litigants, but also for the vindication of the
country's system of law and justice in a transnational setting. With these guidelines in mind, the trial court must proceed to try and
adjudge the case in the light of relevant Philippine law, with due consideration of the foreign element or elements involved. Nothing
said herein, of course, should be construed as prejudging the results of the case in any manner whatsoever.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-18394 entitled "Milagros P. Morada vs. Saudi
Arabia Airlines" is hereby REMANDED to Regional Trial Court of Quezon City, Branch 89 for further proceedings.
SO ORDERED.
3. Dacasin v. Dacasin, G.R. No. 168785, [February 5, 2010], 625 PHIL 494-513 Cambe
G.R. No. 168785 February 5, 2010
HERALD BLACK DACASIN, Petitioner,
vs.
SHARON DEL MUNDO DACASIN, Respondent.
DECISION
CARPIO, J.:
41
The Case
For review1 is a dismissal2 of a suit to enforce a post-foreign divorce child custody agreement for lack of jurisdiction.
The Facts
Petitioner Herald Dacasin (petitioner), American, and respondent Sharon Del Mundo Dacasin (respondent), Filipino, were married in
Manila in April 1994. They have one daughter, Stephanie, born on 21 September 1995. In June 1999, respondent sought and obtained
from the Circuit Court, 19th Judicial Circuit, Lake County, Illinois (Illinois court) a divorce decree against petitioner. 3 In its ruling, the Illinois
court dissolved the marriage of petitioner and respondent, awarded to respondent sole custody of Stephanie and retained jurisdiction
over the case for enforcement purposes.
On 28 January 2002, petitioner and respondent executed in Manila a contract (Agreement 4 ) for the joint custody of Stephanie. The
parties chose Philippine courts as exclusive forum to adjudicate disputes arising from the Agreement. Respondent undertook to obtain
from the Illinois court an order "relinquishing" jurisdiction to Philippine courts.
In 2004, petitioner sued respondent in the Regional Trial Court of Makati City, Branch 60 (trial court) to enforce the Agreement.
Petitioner alleged that in violation of the Agreement, respondent exercised sole custody over Stephanie.
Respondent sought the dismissal of the complaint for, among others, lack of jurisdiction because of the Illinois court’s retention of
jurisdiction to enforce the divorce decree.
The Ruling of the Trial Court
In its Order dated 1 March 2005, the trial court sustained respondent’s motion and dismissed the case for lack of jurisdiction. The trial
court held that: (1) it is precluded from taking cognizance over the suit considering the Illinois court’s retention of jurisdiction to enforce
its divorce decree, including its order awarding sole custody of Stephanie to respondent; (2) the divorce decree is binding on
petitioner following the "nationality rule" prevailing in this jurisdiction; 5 and (3) the Agreement is void for contravening Article 2035,
paragraph 5 of the Civil Code6 prohibiting compromise agreements on jurisdiction.7
Petitioner sought reconsideration, raising the new argument that the divorce decree obtained by respondent is void. Thus, the divorce
decree is no bar to the trial court’s exercise of jurisdiction over the case.
In its Order dated 23 June 2005, the trial court denied reconsideration, holding that unlike in the case of respondent, the divorce
decree is binding on petitioner under the laws of his nationality.
Hence, this petition.
Petitioner submits the following alternative theories for the validity of the Agreement to justify its enforcement by the trial court: (1) the
Agreement novated the valid divorce decree, modifying the terms of child custody from sole (maternal) to joint; 8 or (2) the Agreement
is independent of the divorce decree obtained by respondent.
The Issue
The question is whether the trial court has jurisdiction to take cognizance of petitioner’s suit and enforce the Agreement on the joint
custody of the parties’ child.
The Ruling of the Court
The trial court has jurisdiction to entertain petitioner’s suit but not to enforce the Agreement which is void. However, factual and equity
considerations militate against the dismissal of petitioner’s suit and call for the remand of the case to settle the question of Stephanie’s
custody.
Regional Trial Courts Vested With Jurisdiction
to Enforce Contracts
Subject matter jurisdiction is conferred by law. At the time petitioner filed his suit in the trial court, statutory law vests on Regional Trial
Courts exclusive original jurisdiction over civil actions incapable of pecuniary estimation. 9 An action for specific performance, such as
petitioner’s suit to enforce the Agreement on joint child custody, belongs to this species of actions. 10 Thus, jurisdiction-wise, petitioner
went to the right court.
Indeed, the trial court’s refusal to entertain petitioner’s suit was grounded not on its lack of power to do so but on its thinking that the
Illinois court’s divorce decree stripped it of jurisdiction. This conclusion is unfounded. What the Illinois court retained was "jurisdiction x x x
for the purpose of enforcing all and sundry the various provisions of [its] Judgment for Dissolution." 11 Petitioner’s suit seeks the
42
enforcement not of the "various provisions" of the divorce decree but of the post-divorce Agreement on joint child custody. Thus, the
action lies beyond the zone of the Illinois court’s so-called "retained jurisdiction."
Petitioner’s Suit Lacks Cause of Action
The foregoing notwithstanding, the trial court cannot enforce the Agreement which is contrary to law.
In this jurisdiction, parties to a contract are free to stipulate the terms of agreement subject to the minimum ban on stipulations contrary
to law, morals, good customs, public order, or public policy. 12 Otherwise, the contract is denied legal existence, deemed "inexistent
and void from the beginning."13 For lack of relevant stipulation in the Agreement, these and other ancillary Philippine substantive law
serve as default parameters to test the validity of the Agreement’s joint child custody stipulations. 14
At the time the parties executed the Agreement on 28 January 2002, two facts are undisputed: (1) Stephanie was under seven years
old (having been born on 21 September 1995); and (2) petitioner and respondent were no longer married under the laws of the United
States because of the divorce decree. The relevant Philippine law on child custody for spouses separated in fact or in law 15 (under the
second paragraph of Article 213 of the Family Code) is also undisputed: "no child under seven years of age shall be separated from
the mother x x x."16 (This statutory awarding of sole parental custody17 to the mother is mandatory,18 grounded on sound policy
consideration,19 subject only to a narrow exception not alleged to obtain here. 20 ) Clearly then, the Agreement’s object to establish a
post-divorce joint custody regime between respondent and petitioner over their child under seven years old contravenes Philippine
law.
The Agreement is not only void ab initio for being contrary to law, it has also been repudiated by the mother when she refused to allow
joint custody by the father. The Agreement would be valid if the spouses have not divorced or separated because the law provides for
joint parental authority when spouses live together.21 However, upon separation of the spouses, the mother takes sole custody under
the law if the child is below seven years old and any agreement to the contrary is void. Thus, the law suspends the joint custody regime
for (1) children under seven of (2) separated or divorced spouses. Simply put, for a child within this age bracket (and for
commonsensical reasons), the law decides for the separated or divorced parents how best to take care of the child and that is to give
custody to the separated mother. Indeed, the separated parents cannot contract away the provision in the Family Code on the
maternal custody of children below seven years anymore than they can privately agree that a mother who is unemployed, immoral,
habitually drunk, drug addict, insane or afflicted with a communicable disease will have sole custody of a child under seven as these
are reasons deemed compelling to preclude the application of the exclusive maternal custody regime under the second paragraph
of Article 213.22
It will not do to argue that the second paragraph of Article 213 of the Family Code applies only to judicial custodial agreements based
on its text that "No child under seven years of age shall be separated from the mother, unless the court finds compelling reasons to
order otherwise." To limit this provision’s enforceability to court sanctioned agreements while placing private agreements beyond its
reach is to sanction a double standard in custody regulation of children under seven years old of separated parents. This effectively
empowers separated parents, by the simple expedient of avoiding the courts, to subvert a legislative policy vesting to the separated
mother sole custody of her children under seven years of age "to avoid a tragedy where a mother has seen her baby torn away from
her."23 This ignores the legislative basis that "[n]o man can sound the deep sorrows of a mother who is deprived of her child of tender
age."24
It could very well be that Article 213’s bias favoring one separated parent (mother) over the other (father) encourages paternal
neglect, presumes incapacity for joint parental custody, robs the parents of custodial options, or hijacks decision-making between the
separated parents.25 However, these are objections which question the law’s wisdom not its validity or uniform enforceability. The forum
to air and remedy these grievances is the legislature, not this Court. At any rate, the rule’s seeming harshness or undesirability is
tempered by ancillary agreements the separated parents may wish to enter such as granting the father visitation and other privileges.
These arrangements are not inconsistent with the regime of sole maternal custody under the second paragraph of Article 213 which
merely grants to the mother final authority on the care and custody of the minor under seven years of age, in case of
disagreements.1avvphi1
Further, the imposed custodial regime under the second paragraph of Article 213 is limited in duration, lasting only until the child’s
seventh year. From the eighth year until the child’s emancipation, the law gives the separated parents freedom, subject to the usual
contractual limitations, to agree on custody regimes they see fit to adopt. Lastly, even supposing that petitioner and respondent are
not barred from entering into the Agreement for the joint custody of Stephanie, respondent repudiated the Agreement by asserting
sole custody over Stephanie. Respondent’s act effectively brought the parties back to ambit of the default custodial regime in the
second paragraph of Article 213 of the Family Code vesting on respondent sole custody of Stephanie.
Nor can petitioner rely on the divorce decree’s alleged invalidity - not because the Illinois court lacked jurisdiction or that the divorce
decree violated Illinois law, but because the divorce was obtained by his Filipino spouse 26 - to support the Agreement’s enforceability.
The argument that foreigners in this jurisdiction are not bound by foreign divorce decrees is hardly novel. Van Dorn v. Romillo 27 settled
the matter by holding that an alien spouse of a Filipino is bound by a divorce decree obtained abroad. 28 There, we dismissed the alien
divorcee’s Philippine suit for accounting of alleged post-divorce conjugal property and rejected his submission that the foreign divorce
(obtained by the Filipino spouse) is not valid in this jurisdiction in this wise:
43
There can be no question as to the validity of that Nevada divorce in any of the States of the United States. The decree is binding on
private respondent as an American citizen. For instance, private respondent cannot sue petitioner, as her husband, in any State of the
Union. What he is contending in this case is that the divorce is not valid and binding in this jurisdiction, the same being contrary to local
law and public policy.
It is true that owing to the nationality principle embodied in Article 15 of the Civil Code, only Philippine nationals are covered by the
policy against absolute divorces the same being considered contrary to our concept of public policy and morality. However, aliens
may obtain divorces abroad, which may be recognized in the Philippines, provided they are valid according to their national law. In
this case, the divorce in Nevada released private respondent from the marriage from the standards of American law, under which
divorce dissolves the marriage.
xxxx
Thus, pursuant to his national law, private respondent is no longer the husband of petitioner. He would have no standing to sue in the
case below as petitioner’s husband entitled to exercise control over conjugal assets. As he is bound by the Decision of his own
country’s Court, which validly exercised jurisdiction over him, and whose decision he does not repudiate, he is estopped by his own
representation before said Court from asserting his right over the alleged conjugal property. (Emphasis supplied)
We reiterated Van Dorn in Pilapil v. Ibay-Somera 29 to dismiss criminal complaints for adultery filed by the alien divorcee (who obtained
the foreign divorce decree) against his former Filipino spouse because he no longer qualified as "offended spouse" entitled to file the
complaints under Philippine procedural rules. Thus, it should be clear by now that a foreign divorce decree carries as much validity
against the alien divorcee in this jurisdiction as it does in the jurisdiction of the alien’s nationality, irrespective of who obtained the
divorce.
The Facts of the Case and Nature of Proceeding
Justify Remand
Instead of ordering the dismissal of petitioner’s suit, the logical end to its lack of cause of action, we remand the case for the trial court
to settle the question of Stephanie’s custody. Stephanie is now nearly 15 years old, thus removing the case outside of the ambit of the
mandatory maternal custody regime under Article 213 and bringing it within coverage of the default standard on child custody
proceedings – the best interest of the child. 30 As the question of custody is already before the trial court and the child’s parents, by
executing the Agreement, initially showed inclination to share custody, it is in the interest of swift and efficient rendition of justice to
allow the parties to take advantage of the court’s jurisdiction, submit evidence on the custodial arrangement best serving Stephanie’s
interest, and let the trial court render judgment. This disposition is consistent with the settled doctrine that in child custody proceedings,
equity may be invoked to serve the child’s best interest.31
WHEREFORE, we REVERSE the Orders dated 1 March 2005 and 23 June 2005 of the Regional Trial Court of Makati City, Branch 60. The
case is REMANDED for further proceedings consistent with this ruling.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
4. Northwest Airlines, Inc. v. Court of Appeals, G.R. Nos. 120334 & 120337, [January 20, 1998] Castillo
G.R. No. 120334. January 20, 1998
NORTHWEST AIRLINES, INC. Petitioner, v. COURT OF APPEALS and ROLANDO I. TORRES, Respondents.
G.R. No. 120337. January 20, 1998
ROLANDO I. TORRES, Petitioner, v. COURT OF APPEALS and NORTHWEST AIRLINES, INC., Respondents.
DECISION
DAVIDE, JR., J.:

44
Unable to accept the decision of the Court of Appeals in CA-G.R. CV No. 24068, 1 petitioner Northwest Airlines, Inc., (hereafter
NORTHWEST) and petitioner Rolando I. Torres (hereafter TORRES) filed separate petitions for review under Rule 45 of the Rules of Court,
which were docketed as G.R. No. 120334 and G.R. No. 120337 and thereafter consolidated.
The antecedents of these cases were summarized by the Court of Appeals as follows: 2cräläwvirtualibräry
The plaintiff, [Torres], allegedly on a special mission to purchase firearms for the Philippine Senate, purchased a round trip ticket from
defendant [Northwest] for his travel to Chicago and back to Manila. Via defendants flight, plaintiff left for United States.
After purchasing firearms and on the way back to Manila, plaintiff checked-in and presented before defendants representative his two
identical baggage, one of which contained firearms. Defendants representative required the baggage to be opened and the
supporting evidence to be presented. Plaintiff showed them his authorization from the Philippine government and the purchase
receipts. Plaintiff thereafter sealed the baggage and defendants representative placed a red tag on the baggage with firearms with
the marking "CONTAINS FIREARMS".
Upon arrival in Manila on June 22, 1988 plaintiff was not able to claim one of his baggages. Plaintiff was informed by defendants
representative that his baggage containing firearms was recalled back to Chicago by defendant for US Customs verification. A telex
to this effect was shown to plaintiff.
On June 28, 1988, after being advised of the arrival of his other baggage, plaintiff claimed and opened the baggage in the presence
of defendants representative and found out that the firearms were missing. A Personal Property Missing Damage Report was issued by
defendant to plaintiff.
On account of the continuous refusal of defendant to settle amicably, plaintiff then prayed before the trial court that defendant be
ordered to pay actual damages, moral damages, temperate damages, exemplary damages and attorney's fees (pp. 1-6, Complaint;
p. 1, Record).
In its answer, defendant pleaded: a) that it was the agents from the US Customs who ordered for the return of the weapons which
plaintiff checked-in; b) that when opened in the presence of US Customs agents the box contained no firearms; and c) that since the
baggage which was returned back to Chicago did not contain any firearms, then the baggage which plaintiff received upon arrival in
Manila must have contained the firearms (pp. 3-5, Answer; pp. 32-34, Record).
After plaintiff had presented its evidence, defendant filed a "Motion to Dismiss (By Way of Demurrer to the Evidence with Motion for
Summary Judgment)" dated April 24, 1989.
In said motion, defendant moved for the dismissal of the complaint in so far as it prays for moral, exemplary and temperate damages
and attorney's fees and further moved for "Summary Judgment to be rendered awarding the plaintiff $640.00 as actual damages."
(Motion to Dismiss By Way of Demurrer to Evidence with Motion for Summary Judgment; p. 115, Records).
Plaintiff on the other hand, offered no objection to the submission of the case for decision but insisted that he is entitled to damages as
prayed for (p. 1, Comment on Defendant's Motion to Dismiss by Way of Demurrer to Evidence with Summary Judgment; pp. 136-169,
Records).
We add to this summary the following relevant matters:
NORTHWEST argued in its motion for summary judgment that the Warsaw Convention and the contract of carriage limited its liability to
US$640 and that the evidence presented by TORRES did not entitle him to moral, exemplary, and temperate damages and attorneys
fees.3cräläwvirtualibräry
Instead of just ruling on NORTHWESTs Motion to Dismiss (By Way of Demurrer to Evidence) with Motion for Summary Judgment, which it
considered submitted for resolution in the order of 14 June 1989, 4 the trial court rendered on 13 September 1989 a full-blown decision 5
ordering NORTHWEST to pay TORRES the following amounts:
1. The amount of $9,009.32, with legal interest thereon from the date of the filing of the complaint, in its peso equivalent at the official
rate of exchange at the time payment is made, representing the value of the goods lost by the plaintiff;
2. The amount of P100,000.00 by way of attorney's fees;
3. The amount of P5,181.09 as filing fees paid by the plaintiff and the amount of P20,000.00 for expenses of litigation, representing travel
expenses and hotel accommodations of plaintiff's counsels; and
4. The amount of P50,000.00 as moral damages.
The award of US$9,009.32, representing the value of the lost firearms, was grounded on the trial courts finding that the act of
[NORTHWESTs] personnel in Tokyo or Narita Airport in just guessing which baggage contained the firearms was careless and imprudent,
45
amounting to careless disregard for the safety of the luggage of the passenger. According to the trial court, such act constituted willful
misconduct which brought the case beyond the application of Section 22(2) of the Warsaw Convention, thereby depriving
NORTHWEST of the limitation of the liability provided for in said section.
The awards of attorneys fees and expenses of litigation were premised on NORTHWESTs having ignored the demands of TORRES forcing
the latter to litigate in order to assert his right. TORRES was also awarded moral damages because of the inconvenience, anxiety and
worry he suffered by reason of NORTHWESTs unjustifiable refusal to settle his claim.
Both TORRES and NORTHWEST appealed from the decision to the Court of Appeals, which docketed the case as CA-G.R. CV No.
24068. Torres assailed the failure of the trial court to award the actual, moral, and exemplary damages prayed for by him.6 Northwest,
on the other hand, alleged that in prematurely resolving the case on the merits the court prevented it from presenting evidence,
thereby denying it due process; and that even assuming that the trial court could resolve the entire case on the merits, it erred in
awarding damages, attorneys fees, and expenses of litigation.7cräläwvirtualibräry
In its Decision8 of 14 September 1994, the Court of Appeals sustained the trial courts judgment that TORRES was entitled to actual
damages, since NORTHWEST had, in effect, admitted the loss of the firearms when it insisted that its liability was limited to $9.07 per
pound or $20 per kilo. The appellate court then concluded that NORTHWESTs guessing of which luggage contained the firearms
amounted to willful misconduct under Section 25(1) of the Warsaw Convention which entitled TORRES to claim actual damages in
excess of the limitation provided for under Section 22(2) of said Convention.
Nevertheless, the Court of Appeals held that while the trial court properly ruled on the right of TORRES to actual damages, it erred in
determining by way of summary judgment the amount of damages; for under Section 3 of Rule 34 of the Rules of Court, a summary
judgment may be rendered upon proper motion except as to the amount of damages.
As to the trial courts act of disposing of the entire case by way of summary judgment, the Court of Appeals noted that NORTHWEST
categorically moved for summary judgment only on the issue of actual damages, but not on the claims for moral damages and
attorneys fees. NORTHWEST moved for the dismissal of the latter claims by way of demurrer to evidence. That being so, the trial court
could not, by way of summary judgment, dispose of the case on its entirety. Section 2 of Rule 34 of the Rules of Court required that
summary judgment should be issued only after the motion therefor has been heard. Since there was no such motion as to the claims for
moral damages and attorneys fees, no summary judgment thereon could be made.
Anent the demurrer to evidence, the Court of Appeals held that the trial court had to either grant or deny it. If granted, no award
therefor could have been validly made. If denied, then under Section 1 of Rule 35 of the Rules of Court, NORTHWEST should have been
allowed to present its evidence, as it was not deemed to have waived that right. This section provided:
SECTION 1. Effect of judgment on demurrer to evidence. -- After the plaintiff has completed the presentation of his evidence, the
defendant without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground
that upon facts and the law the plaintiff has shown no right to relief. However, if the motion is granted and order of dismissal is reversed
on appeal, the movant loses his right to present evidence in his behalf.9cräläwvirtualibräry
The Court of Appeals then held that since the demurrer was impliedly denied by the trial court, NORTHWEST should have been allowed
to present its evidence in accordance with the above rule.
Accordingly, the Court of Appeals affirmed the trial courts finding as to the right of TORRES to actual damages but set aside the rest of
the appealed decision. It then remanded the case to the court a quo for further proceedings.
On 23 May 1995, the Court of Appeals denied10 NORTHWESTs motion for a partial reconsideration of the decision.
Hence, the present petitions.
NORTHWEST contests the right of TORRES to actual damages on the following grounds: (1) the loss of firearms was disputed; (2) the
finding of willful misconduct was arbitrary; and (3) TORRES failed to produce a United States license for the shipment of the firearms;
hence, the importation was illegal and no damages could arise therefrom.
TORRES, on the other hand, claims that the Court of Appeals erred (1) in setting aside the appealed decision of the court a quo as to
the awards of damages, attorneys fees, and cost of suit; (2) in remanding the case to the court a quo for further proceedings; and (3)
in failing to award other damages for breach of contract and willful misconduct committed by Northwest for mishandling the cargo.
NORTHWESTs Motion to Dismiss (By Way of Demurrer to Evidence) with Motion for Summary Judgment involved two distinct and
separate processes, viz: (1) demurrer to evidence, which was then governed by Rule 35, now by Rule 33; and (2) motion for summary
judgment, which was then governed by Rule 34, now Rule 35, of the Rules of Court. The subject of the demurrer were the claims for
moral, exemplary, and temperate damages and attorneys fees; while the target of the motion for summary judgment was the claim
for actual damages.
46
We agree with the Court of Appeals in its holding that the trial court erred in deciding the entire case on its merits. Indeed, as to the
demurrer to evidence, the trial court should have been solely guided by the procedure laid down in the abovementioned rule on
demurrer to evidence. It had no choice other than to grant or to deny the demurrer. It could not, without committing grave abuse of
discretion amounting to excess of jurisdiction, deny the motion and then forthwith grant TORRES claims on a finding that TORRES has
established a preponderance of evidence in support of such claims. In the instant case, the trial court did just that insofar as moral
damages, attorneys fees, and expenses of litigation were concerned. What it should have done was to merely deny the demurrer and
set a date for the reception of NORTHWESTs evidence in chief.
As to the motion for summary judgment, both the trial court and the Court of Appeals were in error . Summary judgments were formerly
governed by Rule 34 of the Rules of Court. The rule is now Rule 35 of the 1987 Rules of Civil Procedure with the amendments allowing
the parties to submit not only affidavits but also depositions or admissions in support of their respective contentions. 11 Motions for
summary judgment may be filed by the claimant or by the defending party. Sections 1, 2, and 3 of the old Rule 34, the governing law in
this case, provided as follows:
SECTION 1. Summary judgment for claimant. -- A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a
declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits for a
summary judgment in his favor upon all or any part thereof.
SEC. 2. Summary judgment for defending party . -- A party against whom a claim, counterclaim, or cross-claim is asserted or a
declaratory relief is sought may, at any time, move with supporting affidavits for a summary judgment in his favor as to all or any part
thereof.
SEC. 3. Motion and proceedings thereon . -- The motion shall be served at least ten (10) days before the time specified for the hearing.
The adverse party prior to the day of hearing may serve opposing affidavits. After the hearing, the judgment sought shall be rendered
forthwith if the pleadings, depositions, and admissions on file together with the affidavits, show that, except as to the amount of
damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
NORTHWEST, the defending party, moved for summary judgment on the claim for actual damages after TORRES had presented his
evidence in chief. This was allowed by Section 2 where the motion may be filed at any time, as distinguished from section 1 where the
claimant, like TORRES, may file the motion at any time after the answer is filed.
Summary judgment is allowed if, except as to the amount of damages, there is no genuine issue as to any material fact and the
moving party is entitled to a judgment as a matter of law.
In this case, NORTHWEST denied in its Answer the material allegations in the complaint and asserted, in fact, that it was not liable for
actual damages because the box containing the alleged lost firearms was the one received by TORRES when he arrived in Manila. It
likewise contended that, even granting that the firearms were lost, its liability was limited by the Warsaw Convention and the contract
of transportation to $9.07 per pound, or a total of $640 as the box weighed 70 pounds. 12 It also denied having acted fraudulently or in
bad faith.13cräläwvirtualibräry
In thus submitting for summary judgment the matter of its liability only to the maximum allowed in Section 22(2) of the Warsaw
Convention, NORTHWEST was deemed to have hypothetically admitted arguendo that the firearms were lost. It did not waive the
presentation of evidence that it was not in fact liable for the alleged loss of firearms. And even if it were so liable, NORTHWEST could still
prove at the appropriate time that it was not liable beyond the maximum provided in said Section 22(2). Notably, TORRES prayed for
actual damages in the amounts of (1) $9,009.32 representing the value of the lost firearms; and (2) P39,06514 representing the cost of his
plane tickets.
Concretely then, there remained a genuine issue on the fact and amount of actual damages. The motion for summary judgment was
not therefore in order. NORTHWEST must have resorted to it, in like manner as it did in filing the demurrer, to delay the progress of the
trial of the case. Verily, it was grave abuse of discretion on the part of the trial court to grant such motion and award TORRES actual
damages commensurate to the value of the firearms and based on his evidence alone.
We, however, agree with both the trial court and the Court of Appeals that NORTHWESTs liability for actual damages may not be
limited to that prescribed in Section 22(2) of the Warsaw Convention. In Alitalia v. Intermediate Appellate Court,15 we held:
The [Warsaw] Convention does not operate as an exclusive enumeration of the instances of an airlines liability, or as an absolute limit
of the extent of that liability. Such a proposition is not borne out by the language of the Convention, as this Court has now, and at an
earlier time, pointed out. Moreover, slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in
those cases where the cause of the death or injury to person, or destruction, loss or damage to property or delay in its transport is not
attributable to or attended by any willful misconduct, bad faith, recklessness, or otherwise improper conduct on the part of any official
or employee for which the carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury. The
Conventions provisions, in short, do not regulate or exclude liability for other breaches of contract by the carrier or misconduct of its
officers and employees, or for some particular or exceptional type of damage.
47
IN VIEW WHEREOF, judgment is hereby rendered (1) PARTLY GRANTING the petition in G.R. No. 120334 by setting aside that portion of
the challenged decision of the Court of Appeals in CA-G.R. CV No. 24068 affirming the summary judgment as to the right of
respondent ROLANDO I. TORRES to actual damages; (2) DENYING for want of merit the petition in G.R. No. 120337; and (3) REMANDING
this case to the trial court for the reception of the evidence for Northwest Airlines, Inc. in Civil Case No. 88-46117 and, thereafter, for the
rendition of the judgment therein on the merits.
No pronouncement as to costs.
SO ORDERED.
5. Spouses Valmonte v. Court of Appeals, G.R. No. 108538, [January 22, 1996], 322 PHIL 96-111 De Gala
6. Romualdez-Licaros v. Licaros, G.R. No. 150656, [April 29, 2003], 449 PHIL 824-838 Delute
G.R. No. 150656 April 29, 2003
MARGARITA ROMUALDEZ-LICAROS, petitioner, vs. ABELARDO B. LICAROS, respondent.
CARPIO, J.:
The Case
This is a petition for review on certiorari 1 to annul the Decision2 dated 9 August 2001 of the Court of Appeals in CA-G.R. SP No. 58487, as
well as the Resolution dated 23 October 2001 denying the motion for reconsideration. The Court of Appeals dismissed the petition to
annul the following decisions3 rendered by Branch 143 of the Regional Trial Court of Makati:
(1) The Decision dated 27 December 1990 4 granting the dissolution of the conjugal partnership of gains of the spouses Abelardo B.
Licaros and Margarita Romualdez-Licaros;
(2) The Decision dated 8 November 1991 5 declaring the marriage between the same spouses null and void.
The Facts
The antecedent facts as found by the Court of Appeals are as follows:
x x x Abelardo Licaros (Abelardo, for short) and Margarita Romualdez-Licaros (Margarita, hereafter) were lawfully married on
December 15, 1968. Out of this marital union were born Maria Concepcion and Abelardo, Jr. Ironically, marital differences, squabbles
and irreconcilable conflicts transpired between the spouses, such that sometime in 1979, they agreed to separate from bed and
board.
In 1982, Margarita left for the United States and there, to settle down with her two (2) children. In the United States, on April 26, 1989,
Margarita applied for divorce before the Superior Court of California, County of San Mateo (Annex "1", Rejoinder, pp. 164-165) where
she manifested that she does not desire counseling at that time (Quotation, p. 166, Rollo). On August 6, 1990, Margarita was granted
the decree of divorce (Annex 2, Answer, p. 108, Rollo) together with a distribution of properties between her and Abelardo (pp. 167-
168, Rollo).
Not long after, on August 17, 1990, Abelardo and Margarita executed an "Agreement of Separation of Properties" (pp. 60-64, Rollo).
This was followed-up by a petition filed on August 21, 1990 before the Regional Trial Court of Makati for the dissolution of the conjugal
partnership of gains of the spouses and for the approval of the agreement of separation of their properties. This was docketed as
Special Proceeding No. 2551. On December 27, 1990, a decision was issued granting the petition and approving the separation of
property agreement.
For his part, on June 24, 1991, Abelardo commenced Civil Case No. 91-1757, for the declaration of nullity of his marriage with
Margarita, based on psychological incapacity under the New Family Code. As Margarita was then residing at 96 Mulberry Lane,
Atherton, California, U.S.A., Abelardo initially moved that summons be served through the International Express Courier Service. The
court a quo denied the motion. Instead, it ordered that summons be served by publication in a newspaper of general circulation once
a week for three (3) consecutive weeks, at the same time furnishing respondent a copy of the order, as well as the corresponding
summons and a copy of the petition at the given address in the United States through the Department of Foreign Affairs, all at the
expense of Abelardo. Respondent was given sixty (60) days after publication to file a responsive pleading.
On July 15, 1991, Process Server, Maximo B. Dela Rosa, submitted his Officer’s Return quoted hereunder:
"OFFICER’S RETURN
48
THIS IS TO CERTIFY that on July 3, 1991, I have served a copy of summons and complaint with annexes together with order dated June
28, 1991 issued by the Court in the above-entitled case upon defendant Margarita Romualdez-Licaros c/o DFA. (sent by Mail) thru Pat
G. Martines receiving Clerk of Department of Foreign Affairs a person authorized to receive this kind of process who acknowledged the
receipt thereof at ADB Bldg., Roxas Blvd., Pasay City, Metro Manila." ( p. 40, Rollo)
As required by law, the case was referred to Trial Prosecutor Bruselas, Jr. to find out any possible collusion between the parties in the
case. Thereafter, with the negative report of collusion, Abelardo was allowed to present his evidence ex-parte. On November 8, 1991,
the Decision (Annex "A", Petition) was handed down in Civil Case No. 91-1757 declaring the marriage between Abelardo and
Margarita null and void.
Almost nine (9) years later, on April 28, 2000, the petition at bench was commenced when Margarita received a letter dated
November 18, 1991 from a certain Atty. Angelo Q. Valencia informing her that she no longer has the right to use the family name
"Licaros" inasmuch as her marriage to Abelardo had already been judicially dissolved by the Regional Trial Court of Makati on
November 8, 1991. Asseverating to have immediately made some verifications and finding the information given to be true, petitioner
commenced the instant petition on the following grounds:
(A) THERE WAS EXTRINSIC FRAUD IN THE PREPARATION AND FILING BY ABELARDO OF THE PETITION FOR DISSOLUTION OF THE CONJUGAL
PARTNERSHIP OF GAINS AND ITS ANNEX, THE AGREEMENT OF SEPARATION OF PROPERTIES.
(B) THE TRIAL COURT LACKED JURISDICTION TO HEAR AND DECIDE THE PETITION FOR DECLARATION OF NULLITY OF MARRIAGE. 6
The Ruling of the Court of Appeals
The Court of Appeals debunked the claim of Margarita that there was extrinsic fraud in the preparation and filing by Abelardo of the
Petition for Dissolution of Conjugal Partnership of Gains and its annex, the Agreement of Separation of Properties. The Court of Appeals
stated:
x x x, the extrinsic fraud alluded to consists of Abelardo coercing Margarita into signing the petition to dissolve their conjugal
partnership of gains together with the agreement of separation of properties, by threatening to cut-off all financial and material
support of their children then still studying in the United States; that petitioner had no hand directly or indirectly in the preparation of the
petition and agreement of separation of properties; that petitioner never met the counsel for the petitioner, nor the notary public who
notarized the deed; and, petitioner never received any notice of the pendency of the petition nor a copy of the decision.
Antithetically, a meticulous perusal of the controversial petition (Annex "B-1") and the agreement of separation of properties (pp. 60-
64, Rollo) readily shows that the same were signed by the petitioner on the proper space after the prayer and on the portion for the
verification of the petition. The same is true with the agreement of separation of properties. What is striking to note is that on August 6,
1990, Margarita appeared before Amado P. Cortez, Consul of the Republic of the Philippines at the San Francisco, California, United
States Consulate Office, to affirm and acknowledge before said official that she executed the agreement of separation of properties
of her own free will and deed, after being informed of the contents thereof. And yet, there is no showing that Abelardo was with her at
the Philippine Consulate Office in confirming the separation of property agreement. Moreover, on page 2 of the same agreement, it is
specifically stated that such property separation document shall be "subject to approval later on by the proper court of competent
jurisdiction." The clear import of this is that the agreement must have to be submitted before the proper court for approval, which
explains and confirms petitioner’s signature on the petition filed in court.
In main, We see no indication nor showing of coercion or fraud from these facts, which could very well be considered as extrinsic or
collateral fraud to justify a petition under Rule 47. From all indications, the pretended coerced documents were rather freely and
voluntarily executed by the parties therein knowing fully well the imports thereof. This conclusion finds more weight if We consider the
fact that the separation of property was fully implemented and enforced, when apparently both parties correspondingly received the
properties respectively assigned to each of them under the said document.7
The Court of Appeals also rejected Margarita’s claim that the trial court lacked jurisdiction to hear and decide the Petition for
Declaration of Nullity of Marriage for improper service of summons on her. The case involves the marital status of the parties, which is an
action in rem or quasi in rem. The Court of Appeals ruled that in such an action the purpose of service of summons is not to vest the trial
court with jurisdiction over the person of the defendant, but "only" to comply with due process. The Court of Appeals concluded that
any irregularity in the service of summons involves due process which does not destroy the trial court’s jurisdiction over the res which is
the parties’ marital status. Neither does such irregularity invalidate the judgment rendered in the case. Thus, the Court of Appeals
dismissed the petition for annulment of judgment, stating that:
At bar, the case involves the personal (marital) status of the plaintiff and the defendant. This status is the res over which the Philippine
court has acquired jurisdiction. This is also the kind of action which the Supreme Court had ruled that service of summons may be
served extraterritorially under Section 15 (formerly Section 17) of Rule 14 and where such service of summons is not for the purpose of
vesting the trial court with jurisdiction over the person of the defendant but only for the purpose of complying with the requirements of
fair play and due process. A fortiori, the court a quo had properly acquired jurisdiction over the person of herein petitioner-defendant
when summons was served by publication and a copy of the summons, the complaint with annexes, together with the Order of June
28, 1991, was served to the defendant through the Department of Foreign Affairs by registered mail and duly received by said office to
49
top it all. Such mode was upon instruction and lawful order of the court and could even be treated as ‘any other manner the court
may deem sufficient’.8
Hence, the instant petition.
The Issues
The issues raised by Margarita are restated as follows:
I. Whether Margarita was validly served with summons in the case for declaration of nullity of her marriage with Abelardo;
II. Whether there was extrinsic fraud in the preparation and filing by Abelardo of the Petition for Dissolution of the Conjugal Partnership
of Gains and its annex, the Agreement of Separation of Properties.
The Court’s Ruling
The petition is bereft of merit.
First Issue: Validity of the Service of Summons on Margarita
Margarita insists that the trial court never acquired jurisdiction over her person in the petition for declaration of nullity of marriage since
she was never validly served with summons. Neither did she appear in court to submit voluntarily to its jurisdiction.
On the other hand, Abelardo argues that jurisdiction over the person of a non-resident defendant in an action in rem or quasi in rem is
not necessary. The trial and appellate courts made a clear factual finding that there was proper summons by publication effected
through the Department of Foreign Affairs as directed by the trial court. Thus, the trial court acquired jurisdiction to render the decision
declaring the marriage a nullity.
Summons is a writ by which the defendant is notified of the action brought against him. Service of such writ is the means by which the
court acquires jurisdiction over his person.9
As a rule, when the defendant does not reside and is not found in the Philippines, Philippine courts cannot try any case against him
because of the impossibility of acquiring jurisdiction over his person unless he voluntarily appears in court. But when the case is one of
actions in rem or quasi in rem enumerated in Section 15, 10 Rule 14 of the Rules of Court, Philippine courts have jurisdiction to hear and
decide the case. In such instances, Philippine courts have jurisdiction over the res, and jurisdiction over the person of the non-resident
defendant is not essential.11
Actions in personam12 and actions in rem or quasi in rem differ in that actions in personam are directed against specific persons and
seek personal judgments. On the other hand, actions in rem or quasi in rem are directed against the thing or property or status of a
person and seek judgments with respect thereto as against the whole world. 13
At the time Abelardo filed the petition for nullity of the marriage in 1991, Margarita was residing in the United States. She left the
Philippines in 1982 together with her two children. The trial court considered Margarita a non-resident defendant who is not found in the
Philippines. Since the petition affects the personal status of the plaintiff, the trial court authorized extraterritorial service of summons
under Section 15, Rule 14 of the Rules of Court. The term "personal status" includes family relations, particularly the relations between
husband and wife.14
Under Section 15 of Rule 14, a defendant who is a non-resident and is not found in the country may be served with summons by
extraterritorial service in four instances: (1) when the action affects the personal status of the plaintiff; (2) when the action relates to, or
the subject of which is property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent; (3)
when the relief demanded consists, wholly or in part, in excluding the defendant from any interest in property located in the Philippines;
or (4) when the property of the defendant has been attached within the Philippines.
In these instances, extraterritorial service of summons may be effected under any of three modes: (1) by personal service out of the
country, with leave of court; (2) by publication and sending a copy of the summons and order of the court by registered mail to the
defendant’s last known address, also with leave of court; or (3) by any other means the judge may consider sufficient.
Applying the foregoing rule, the trial court required extraterritorial service of summons to be effected on Margarita in the following
manner:
x x x, service of Summons by way of publication in a newspaper of general circulation once a week for three (3) consecutive weeks, at
the same time, furnishing respondent copy of this Order as well as the corresponding Summons and copy of the petition at her given
address at No. 96 Mulberry Lane, Atherton, California, U.S.A., thru the Department of Foreign Affairs, all at the expense of petitioner.15
(Emphasis ours)
50
The trial court’s prescribed mode of extraterritorial service does not fall under the first or second mode specified in Section 15 of Rule 14,
but under the third mode. This refers to "any other means that the judge may consider sufficient."
The Process Server’s Return of 15 July 1991 shows that the summons addressed to Margarita together with the complaint and its
annexes were sent by mail to the Department of Foreign Affairs with acknowledgment of receipt. The Process Server’s certificate of
service of summons is prima facie evidence of the facts as set out in the certificate. 16 Before proceeding to declare the marriage
between Margarita and Abelardo null and void, the trial court stated in its Decision dated 8 November 1991 that "compliance with the
jurisdictional requirements hav(e) (sic) been duly established." We hold that delivery to the Department of Foreign Affairs was sufficient
compliance with the rule. After all, this is exactly what the trial court required and considered as sufficient to effect service of summons
under the third mode of extraterritorial service pursuant to Section 15 of Rule 14.
Second Issue: Validity of the Judgment Dissolving the Conjugal Partnership of Gains
Margarita claims that Abelardo coerced her into signing the Petition for Dissolution of the Conjugal Partnership of Gains ("Petition") and
its annex, the Agreement of Separation of Properties ("Agreement"). Abelardo allegedly threatened to cut off all financial and material
support to their children if Margarita did not sign the documents.
The trial court did not find anything amiss in the Petition and Agreement that Abelardo filed, and thus the trial court approved the
same. The Court of Appeals noted that a meticulous perusal of the Petition and Agreement readily shows that Margarita signed the
same on the proper space after the prayer and on the portion for the verification of the petition. The Court of Appeals observed further
that on 6 August 1990, Margarita appeared before Consul Amado Cortez in the Philippine Consulate Office in San Francisco,
California, to affirm that she executed the Agreement of her own free will. There was no showing that Abelardo was at that time with
her at the Philippine Consulate Office. Abelardo secured judicial approval of the Agreement as specifically required in the Agreement.
The Court is bound by the factual findings of the trial and appellate courts that the parties freely and voluntarily executed the
documents and that there is no showing of coercion or fraud. As a rule, in an appeal by certiorari under Rule 45, the Court does not
pass upon questions of fact as the factual findings of the trial and appellate courts are binding on the Court. The Court is not a trier of
facts. The Court will not examine the evidence introduced by the parties below to determine if the trial and appellate courts correctly
assessed and evaluated the evidence on record. 17
The due and regular execution of an instrument acknowledged before an officer authorized to administer oaths cannot be overthrown
by bare allegations of coercion but only by clear and convincing proof. 18 A person acknowledging an instrument before an officer
authorized to administer oaths acknowledges that he freely and voluntarily executed the instrument, giving rise to a prima facie
presumption of such fact.
In the instant case, Margarita acknowledged the Agreement before Consul Cortez. The certificate of acknowledgment signed by
Consul Cortez states that Margarita personally appeared before him and "acknowledged before me that SHE executed the same of
her own free will and deed."19 Thus, there is a prima facie presumption that Margarita freely and voluntarily executed the Agreement.
Margarita has failed to rebut this prima facie presumption with clear and convincing proof of coercion on the part of Abelardo.
A document acknowledged before a notary public is prima facie evidence of the due and regular execution of the document. 20 A
notarized document has in its favor the presumption of regularity in its execution, and to contradict the same, there must be evidence
that is clear, convincing and more than merely preponderant.21
WHEREFORE, the Decision of the Court of Appeals in CA-G.R. SP No. 58487 dismissing the petition to annul judgment is AFFIRMED.
SO ORDERED.
7. Banco Do Brasil v. Court of Appeals, G.R. Nos. 121576-78, June 16, 2000 Eliab
G.R. Nos. 121576-78 June 16, 2000
BANCO DO BRASIL, petitioner, vs. THE COURT OF APPEALS, HON. ARSENIO M. GONONG, and CESAR S. URBINO, SR., respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision 1 and the Resolution 2 of the Court of Appeals 3 dated July 19, 1993 and
August 15, 1995, respectively, which reinstated the entire Decision 4 dated February 18, 1991 of the Regional Trial Court of Manila,
Branch 8, holding, among others, petitioner Banco do Brasil liable to private respondent Cesar Urbino, Sr. for damages amounting to
$300,000.00. 5
At the outset, let us state that this case should have been consolidated with the recently decided case of Vlason Enterprises
Corporation v. Court of Appeals and Duraproof Services , represented by its General Manager, Cesar Urbino Sr. 6 , for these two (2)
cases involved the same material antecedents, though the main issue proffered in the present petition vary with the Vlason case.
The material antecedents, as quoted from the Vlason 7 case, are:

51
Poro Point Shipping Services, then acting as the local agent of Omega Sea Transport Company of Honduras & Panama, a
Panamanian Company (hereafter referred to as Omega), requested permission for its vessel M/V Star Ace, which had engine trouble,
to unload its cargo and to store it at the Philippine Ports Authority (PPA) compound in San Fernando, La Union while awaiting
transhipment to Hongkong. The request was approved by the Bureau of Customs. 8 Despite the approval, the customs personnel
boarded the vessel when it docked on January 7, 1989, on suspicion that it was the hijacked M/V Silver Med owned by Med Line
Philippines Co., and that its cargo would be smuggled into the country. 9 The district customs collector seized said vessel and its cargo
pursuant to Section 2301, Tariff and Customs Code. A notice of hearing of SFLU Seizure Identification No. 3-89 was served on its
consignee, Singkong Trading Co. of Hongkong, and its shipper, Dusit International Co., Ltd. of Thailand.
While seizure proceedings were ongoing, La Union was hit by three typhoons, and the vessel ran aground and was abandoned. On
June 8, 1989, its authorized representative, Frank Cadacio, entered into salvage agreement with private respondent to secure and
repair the vessel at the agreed consideration of $1 million and "fifty percent (50%) [of] the cargo after all expenses, cost and taxes." 10
Finding that no fraud was committed, the District Collector of Customs, Aurelio M. Quiray, lifted the warrant of seizure on July 1989. 11
However, in a Second Indorsement dated November 11, 1989, then Customs Commissioner Salvador M. Mison declined to issue a
clearance for Quiray's Decision; instead, he forfeited the vessel and its cargo in accordance with Section 2530 of the Tariff and
Customs Code. 12 Accordingly, acting District Collector of Customs John S. Sy issued a Decision decreeing the forfeiture and the sale of
the cargo in favor of the government. 13
To enforce its preferred salvor's lien, herein Private Respondent Duraproof Services filed with the Regional Trial Court of Manila a Petition
for Certiorari, Prohibition and Mandamus 14 assailing the actions of Commissioner Mison and District Collector Sy. Also impleaded as
respondents were PPA Representative Silverio Mangaoang and Med Line Philippines, Inc.
On January 10, 1989, private respondent amended its Petition 15 to include former District Collector Quiray; PPA Port Manager Adolfo Ll.
Amor, Jr.; x Vlason Enterprises as represented by its president, Vicente Angliongto; Singkong Trading Company as represented by Atty.
Eddie Tamondong; Banco Du Brasil; Dusit International Co.; Thai-Nan Enterprises Ltd., and Thai-United Trading Co., Ltd. 16 . . .
Summonses for the amended Petition were served on Atty. Joseph Capuyan for Med Line Philippines: Anglionto (through his secretary,
Betty Bebero), Atty. Tamondong and Commissioner Mison. 17 Upon motion of the private respondent, the trial court allowed summons
by publication to be served upon defendants who were not residents and had no direct representative in the country. 18
On January 29, 1990, private respondent moved to declare respondents in default, but the trial court denied the motion in its February
23, 1990 Order 19 , because Mangaoang and Amor had jointly filed a Motion to Dismiss, while Mison and Med Line had moved
separately for an extension to file a similar motion. 20 Later it rendered an Order dated July 2, 1990, giving due course to the motions to
dismiss filed by Mangaoang and Amor on the ground of litis pendentia, and by the commissioner and district collector of customs on
the ground of lack of jurisdiction. 21 In another Order, the trial court dismissed the action against Med Line Philippines on the ground of
litis pendentia. 22
On two other occasions, private respondent again moved to declare the following in default: [Vlason], Quiray, Sy and Mison on March
26, 1990; 23 and Banco [do] Bra[s]il, Dusit International Co., Inc., Thai-Nan Enterprises Ltd. and Thai-United Trading Co., Ltd. on August 24,
1990. 24 There is no record, however, that the trial court acted upon the motions. On September 18, 1990, [private respondent] filed
another Motion for leave to amend the petition, 25 alleging that its counsel failed to include "necessary and/or indispensable parties":
Omega represented by Cadacio; and M/V Star Ace represented by Capt. Nahon Rada, relief captain. Aside from impleading these
additional respondents, private respondent also alleged in the Second (actually, third) Amended Petition 26 that the owners of the
vessel intended to transfer and alienate their rights and interest over the vessel and its cargo, to the detriment of the private
respondent.
The trial court granted leave to private respondent to amend its Petition, but only to exclude the customs commissioner and the district
collector. 27 Instead, private respondent filed the "Second Amended Petition with Supplemental Petition" against Singkong Trading
Company; and Omega and M/V Star Ace, 28 to which Cadacio and Rada filed a Joint Answer. 29
Declared in default in an Order issued by the trial court on January 23, 1991, were the following: Singkong Trading Co., Commissioner
Mison, M/V Star Ace and Omega. 30 Private respondent filed, and the trial court granted, an ex parte Motion to present evidence
against the defaulting respondents. 31 Only private respondent, Atty. Tamondong, Commissioner Mison, Omega and M/V Star Ace
appeared in the next pretrial hearing; thus, the trial court declared the other respondents in default and allowed private respondent to
present evidence against them. 32 Cesar Urbino, general manager of private respondent, testified and adduced evidence against the
other respondents, . . . 33
On December 29, 1990, private respondent and Rada, representing Omega, entered into a Memorandum of Agreement stipulating
that Rada would write and notify Omega regarding the demand for salvage fees of private respondent; and that if Rada did not
receive any instruction from his principal, he would assign the vessel in favor of the salvor. 34
On February 18, 1991, the trial court disposed as follows:

52
WHEREFORE, IN VIEW OF THE FOREGOING, based on the allegations, prayer and evidence adduced, both testimonial and
documentary, the Court is convinced, that, indeed, defendants/respondents are liable to [private respondent] in the amount as
prayed for in the petition for which it renders judgment as follows:
1. Respondent M/V Star Ace, represented by Capt. Nahum Rada, [r]elief [c]aptain of the vessel and Omega Sea Transport Company,
Inc., represented by Frank Cadacio[,] is ordered to refrain from alienating or [transferring] the vessel M/V Star Ace to any third parties;
2. Singkong Trading Company to pay the following:
a. Taxes due the government;
b. Salvage fees on the vessel in the amount of $1,000,000.00 based on . . . Lloyd's Standard Form of Salvage Agreement;
c. Preservation, securing and guarding fees on the vessel in the amount of $225,000.00;
d. Maintenance fees in the amount of P2,685,000.00;
e. Salaries of the crew from August 16, 1989 to December 1989 in the amount of $43,000.00 and unpaid salaries from January 1990 up
to the present;
f. Attorney's fees in the amount of P656,000.00;
3. [Vlason] Enterprises to pay [private respondent] in the amount of P3,000,000.00 for damages;
4. Banco [Du] Brasil to pay [private respondent] in the amount of $300,000.00 in damages; 35 and finally,
5. Costs of [s]uit.
Subsequently, upon the motion of Omega, Singkong Trading Co., and private respondent, the trial court approved a Compromise
Agreement 36 among the movants, reducing by 20 percent the amounts adjudged. For their part, respondents-movants agreed not to
appeal the Decision. 37 On March 8, 1991, private respondent moved for the execution of judgment, claiming that the trial court
Decision had already become final and executory. The Motion was granted and a Writ of Execution was issued. To satisfy the Decision,
Sheriffs Jorge Victorino, Amado Sevilla and Dionisio Camañgon were deputized on March 13, 1991 to levy and to sell on execution the
defendants vessel and personal property.
xxx xxx xxx
On March 18, 1991, the Bureau of Customs also filed an ex parte Motion to recall the execution, and to quash the notice of levy and
the sale on execution. Despite this Motion, the auction sale was conducted on March 21, 1991 by Sheriff Camañgon, with private
respondent submitting the winning bid. The trial court ordered the deputy sheriffs to cease and desist from implementing the Writ of
Execution and from levying on the personal property of the defendants. Nevertheless, Sheriff Camañgon issued the corresponding
Certificate of Sale on March 27, 1991.
On April 10, 1991, petitioner Banco do Brasil filed, by special appearance, an Urgent Motion to Vacate Judgement and to Dismiss Case
38
on the ground that the February 18, 1991 Decision of the trial court is void with respect to it for having been rendered without validly
acquiring jurisdiction over the person of Banco do Brasil. Petitioner subsequently amended its petition 39 to specifically aver that its
special appearance is solely for the purpose of questioning the Court's exercise of personal jurisdiction.
On May 20, 1991, the trial court issued an Order 40 acting favorably on petitioner's motion and set aside as against petitioner the
decision dated February 18, 1991 for having been rendered without jurisdiction over Banco do Brasil's person. Private respondent
sought reconsideration 41 of the Order dated May 20, 1991. However, the trial court in an Order 42 dated June 21, 1991 denied said
motion.
Meanwhile, a certiorari petition 43 was filed by private respondent before public respondent Court of Appeals seeking to nullify the
cease and desist Order dated April 5, 1991 issued by Judge Arsenio M. Gonong. Two (2) more separate petitions for certiorari were
subsequently filed by private respondent. The second petition 44 sought to nullify the Order 45 dated June 26, 1992 setting aside the
Deputy Sheriff's return dated April 1, 1991 as well as the certificate of sale issued by Deputy Sheriff Camañgon. The third petition 46
sought to nullify the Order dated October 5, 1992 of the Court of Tax Appeals directing the Commissioner of Customs to place Bureau
of Customs and PNP officers and guards to secure the M/V Star Ace and its cargoes, make inventory of the goods stored in the
premises as indicated to belong to the private respondent. Likewise challenged was the Order dated August 17, 1992 authorizing the
sale of M/V Star Ace and its cargoes.
These three (3) petitions were consolidated and on July 19, 1993, the appellate court rendered its Decision 47 granting private
respondent's petitions, thereby nullifying and setting aside the disputed orders and effectively "giving way to the entire decision dated
February 18, 1991 of the . . . Regional Trial Court of Manila, Branch 8, in Civil Case No. 89-51451 which remains valid, final and executory,
if not yet wholly executed." 48
53
Private respondent Urbino, Vlason Enterprises and petitioner Banco do Brasil filed separate motions for reconsideration. For its part,
petitioner Banco do Brasil sought reconsideration, insofar as its liability for damages, on the ground that there was no valid service of
summons as service was on the wrong party — the ambassador of Brazil. Hence, it argued, the trial court did not acquire jurisdiction
over petitioner Banco do Brasil. 49 Nonetheless, the appellate court denied the motions for reconsideration in its Resolution 50 dated
August 15, 1995.
Hence, the instant petition.
Petitioner Banco do Brasil takes exception to the appellate court's declaration that the suit below is in rem, not in personam, 51 thus,
service of summons by publication was sufficient for the court to acquire jurisdiction over the person of petitioner Banco do Brasil, and
thereby liable to private respondent Cesar Urbino for damages claimed, amounting to $300,000.00. Petitioner further challenges the
finding that the February 18, 1991 decision of the trial court was already final and thus, cannot be modified or assailed. 52
Petitioner avers that the action filed against it is an action for damages, as such it is an action in personam which requires personal
service of summons be made upon it for the court to acquire jurisdiction over it. However, inasmuch as petitioner Banco do Brasil is a
non-resident foreign corporation, not engaged in business in the Philippines, unless it has property located in the Philippines which may
be attached to convert the action into an action in rem, the court cannot acquire jurisdiction over it in respect of an action in
personam.
The petition bears merit, thus the same should be as it is hereby granted.
First. When the defendant is a nonresident and he is not found in the country, summons may be served extraterritorially in accordance
with Rule 14, Section 17 53 of the Rules of Court. Under this provision, there are only four (4) instances when extraterritorial service of
summons is proper, namely: "(1) when the action affects the personal status of the plaintiffs; (2) when the action relates to, or the
subject of which is property, within the Philippines, in which the defendant claims a lien or interest, actual or contingent; (3) when the
relief demanded in such action consists, wholly or in part, in excluding the defendant from any interest in property located in the
Philippines; and (4) when the defendant non-resident's property has been attached within the Philippines." 54 In these instances, service
of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court; or
(c) any other manner the court may deem sufficient. 55
Clear from the foregoing, extrajudicial service of summons apply only where the action is in rem, an action against the thing itself
instead of against the person, or in an action quasi in rem, where an individual is named as defendant and the purpose of the
proceeding is to subject his interest therein to the obligation or loan burdening the property. This is so inasmuch as, in in rem and quasi
in rem actions, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court provided that the
court acquires jurisdiction over the res. 56
However, where the action is in personam, one brought against a person on the basis of his personal liability, jurisdiction over the
person of the defendant is necessary for the court to validly try and decide the case. When the defendant is a non-resident, personal
service of summons within the state is essential to the acquisition of jurisdiction over the person. 57 This cannot be done, however, if the
defendant is not physically present in the country, and thus, the court cannot acquire jurisdiction over his person and therefore cannot
validly try and decide the case against him. 58
In the instant case, private respondent's suit against petitioner is premised on petitioner's being one of the claimants of the subject
vessel M/V Star Ace. 59 Thus, it can be said that private respondent initially sought only to exclude petitioner from claiming interest over
the subject vessel M/V Star Ace. However, private respondent testified during the presentation of evidence that, for being a nuisance
defendant, petitioner caused irreparable damage to private respondent in the amount of $300,000.00. 60 Therefore, while the action is
in rem, by claiming damages, the relief demanded went beyond the res and sought a relief totally alien to the action.
It must be stressed that any relief granted in rem or quasi in rem actions must be confined to the res, and the court cannot lawfully
render a personal judgment against the defendant. 61 Clearly, the publication of summons effected by private respondent is invalid
and ineffective for the trial court to acquire jurisdiction over the person of petitioner, since by seeking to recover damages from
petitioner for the alleged commission of an injury to his person or property 62 caused by petitioner's being a nuisance defendant, private
respondent's action became in personam. Bearing in mind the in personam nature of the action, personal or, if not possible, substituted
service of summons on petitioner, and not extraterritorial service, is necessary to confer jurisdiction over the person of petitioner and
validly hold it liable to private respondent for damages. Thus, the trial court had no jurisdiction to award damages amounting to
$300,000.00 in favor of private respondent and as against herein petitioner.1awphil
Second. We settled the issue of finality of the trial court's decision dated February 18, 1991 in the Vlason case, wherein we stated that,
considering the admiralty case involved multiple defendants, "each defendant had a different period within which to appeal,
depending on the date of receipt of decision." 63 Only upon the lapse of the reglementary period to appeal, with no appeal perfected
within such period, does the decision become final and executory. 64
In the case of petitioner, its Motion to Vacate Judgment and to Dismiss Case was filed on April 10, 1991, only six (6) days after it learned
of the existence of the case upon being informed by the Embassy of the Federative Republic of Brazil in the Philippines, on April 4, 1991,
of the February 18, 1991 decision. 65 Thus, in the absence of any evidence on the date of receipt of decision, other than the alleged
54
April 4, 1991 date when petitioner learned of the decision, the February 18, 1991 decision of the trial court cannot be said to have
attained finality as regards the petitioner.
WHEREFORE, the subject petition is hereby GRANTED. The Decision and the Resolution of the Court of Appeals dated July 19, 1993 and
August 15, 1995, respectively, in CA-G.R. SP Nos. 24669, 28387 and 29317 are hereby REVERSED and SET ASIDE insofar as they affect
petitioner Banco do Brasil. The Order dated May 20, 1991 of the Regional Trial Court of Manila, Branch 8 in Civil Case No. 89-51451 is
REINSTATED.
SO ORDERED.1âwphi1.nêt
8. Asiavest Limited v. Court of Appeals, G.R. No. 128803, [September 25, 1998], 357 PHIL 536-558 Gonzales, Cyril
8. G.R. No. 128803 September 25, 1998

ASIAVEST LIMITED, petitioner,
vs.THE COURT OF APPEALS and ANTONIO HERAS, respondents.
DAVIDE, JR., J.:
In issue is the enforceability in the Philippines of a foreign judgment. The antecedents are summarized in the 24 August 1990 Decision1
of Branch 107 of the Regional Trial Court of Quezon City in Civil Case No. Q-52452; thus:
The plaintiff Asiavest Limited filed a complaint on December 3, 1987 against the defendant Antonio Heras praying that said defendant
be ordered to pay to the plaintiff the amounts awarded by the Hong Kong Court Judgment dated December 28, 1984 and amended
on April 13, 1987, to wit:
1) US$1,810,265.40 or its equivalent in Hong Kong currency at the time of payment with legal interest from December 28, 1984 until fully
paid;
2) interest on the sum of US$1,500.00 at 9.875% per annum from October 31, 1984 to December 28, 1984; and
3) HK$905.00 at fixed cost in the action; and
4) at least $80,000.00 representing attorney's fees, litigation expenses and cost, with interest thereon from the date of the judgment until
fully paid.
On March 3, 1988, the defendant filed a Motion to Dismiss. However, before the court could resolve the said motion, a fire which
partially razed the Quezon City Hall Building on June 11, 1988 totally destroyed the office of this Court, together with all its records,
equipment and properties. On July 26, 1988, the plaintiff, through counsel filed a Motion for Reconstitution of Case Records. The Court,
after allowing the defendant to react thereto, granted the said Motion and admitted the annexes attached thereto as the
reconstituted records of this case per Order dated September 6, 1988. Thereafter, the Motion to Dismiss, the resolution of which had
been deferred; was denied by the Court in its Order of October 4, 1988.
On October 19, 1988, defendant filed his Answer. The case was then set for pre-trial conference. At the conference, the parties could
not arrive at any settlement. However, they agreed on the following stipulations of facts:
1. The defendant admits the existence of the judgment dated December 28, 1984 as well as its amendment dated April 13, 1987, but
not necessarily the authenticity or validity thereof;
2. The plaintiff is not doing business and is not licensed to do business in the Philippines;
3. The residence of defendant, Antonio Heras, is New Manila, Quezon City.
The only issue for this Court to determine is, whether or not the judgment of the Hong Kong Court has been repelled by evidence of
want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact, such as to overcome the presumption
established in Section 50, Rule 39 of the Rules of Court in favor of foreign judgments.
55
In view of the admission by the defendant of the existence of the aforementioned judgment (Pls. See Stipulations of Facts in the Order
dated January 5, 1989 as amended by the Order of January 18, 1989), as well as the legal presumption in favor of the plaintiff as
provided for in paragraph (b); Sec. 50, (Ibid.), the plaintiff presented only documentary evidence to show rendition, existence, and
authentication of such judgment by the proper officials concerned (Pls. See Exhibits "A" thru "B", with their submarkings). In addition, the
plaintiff presented testimonial and documentary evidence to show its entitlement to attorney's fees and other expenses of litigation. . . .
.
On the other hand, the defendant presented two witnesses, namely. Fortunata dela Vega and Russel Warren Lousich.
The gist of Ms. dela Vega's testimony is to the effect that no writ of summons or copy of a statement of claim of Asiavest Limited was
ever served in the office of the Navegante Shipping Agency Limited and/or for Mr. Antonio Heras, and that no service of the writ of
summons was either served on the defendant at his residence in New Manila, Quezon City. Her knowledge is based on the fact that
she was the personal secretary of Mr. Heras during his JD Transit days up to the latter part of 1972 when he shifted or diversified to
shipping business in Hong Kong; that she was in-charge of all his letters and correspondence, business commitments, undertakings,
conferences and appointments, until October 1984 when Mr. Heras left Hong Kong for good; that she was also the Officer-in-Charge or
Office Manager of Navegante Shipping Agency LTD, a Hong Kong registered and based company acting as ships agent, up to and
until the company closed shop sometime in the first quarter of 1985, when shipping business collapsed worldwide; that the said
company held office at 34-35 Connaught Road, Central Hong Kong and later transferred to Carton House at Duddel Street, Hong
Kong, until the company closed shop in 1985; and that she was certain of such facts because she held office at Caxton House up to
the first quarter of 1985.
Mr. Lousich was presented as an expert on the laws of Hong Kong, and as a representative of the law office of the defendant's counsel
who made a verification of the record of the case filed by the plaintiff in Hong Kong against the defendant, as well as the procedure in
serving Court processes in Hong Kong.
In his affidavit (Exh. "2") which constitutes his direct testimony, the said witness stated that:
The defendant was sued on the basis of his personal guarantee of the obligations of Compania Hermanos de Navegacion S.A. There is
no record that a writ of summons was served on the person of the defendant in Hong Kong, or that any such attempt at service was
made. Likewise, there is no record that a copy of the judgment of the High Court was furnished or served on the defendant; anyway, it
is not a legal requirement to do so under Hong Kong laws;
a) The writ of summons or claim can be served by the solicitor (lawyer) of the claimant or plaintiff. In Hong Kong there are no Court
personnel who serve writs of summons and/or most other processes.
b) If the writ of summons or claim (or complaint) is not contested, the claimant or the plaintiff is not required to present proof of his
claim or complaint nor present evidence under oath of the claim in order to obtain a Judgment.
c) There is no legal requirement that such a Judgment or decision rendered by the Court in Hong Kong [to] make a recitation of the
facts or the law upon which the claim is based.
d) There is no necessity to furnish the defendant with a copy of the Judgment or decision rendered against him.
e) In an action based on a guarantee, there is no established legal requirement or obligation under Hong Kong laws that the creditor
must first bring proceedings against the principal debtor. The creditor can immediately go against the guarantor.
On cross examination, Mr. Lousich stated that before he was commissioned by the law firm of the defendant's counsel as an expert
witness and to verify the records of the Hong Kong case, he had been acting as counsel for the defendant in a number of commercial
matters; that there was an application for service of summons upon the defendant outside the jurisdiction of Hong Kong; that there
was an order of the Court authorizing service upon Heras outside of Hong Kong, particularly in Manila or any other place in the
Philippines (p. 9, TSN, 2/14/90); that there must be adequate proof of service of summons, otherwise the Hong Kong Court will refuse to
render judgment (p. 10, ibid); that the mere fact that the Hong Kong Court rendered judgment, it can be presumed that there was
service of summons; that in this case, it is not just a presumption because there was an affidavit stating that service was effected in [sic]
a particular man here in Manila; that such affidavit was filed by one Jose R. Fernandez of the firm Sycip Salazar on the 21st of
December 1984, and stated in essence that "on Friday, the 23rd of November 1984 he served the 4th defendant at No. 6 First Street,
56
Quezon City by leaving it at that address with Mr. Dionisio Lopez, the son-in-law of the 4th defendant the copy of the writ and Mr.
Lopez informed me and I barely believed that he would bring the said writ to the attention of the 4th defendant" (pp. 11-12, ibid.); that
upon filing of that affidavit, the Court was asked and granted judgment against the 4th defendant; and that if the summons or claim is
not contested, the claimant of the plaintiff is not required to present proof of his claim or complaint or present evidence under oath of
the claim in order to obtain judgment; and that such judgment can be enforced in the same manner as a judgment rendered after full
hearing.
The trial court held that since the Hong Kong court judgment had been duly proved, it is a presumptive evidence of a right as between
the parties; hence, the party impugning it had the burden to prove want of jurisdiction over his person. HERAS failed to discharge that
burden. He did not testify to state categorically and under oath that he never received summons. Even his own witness Lousich
admitted that HERAS was served with summons in his Quezon City residence. As to De la Vega's testimony regarding non-service of
summons, the same was hearsay and had no probative value.
As to HERAS' contention that the Hong Kong court judgment violated the Constitution and the procedural laws of the Philippines
because it contained no statements of the facts and the law on which it was based, the trial court ruled that since the issue relate to
procedural matters, the law of the forum, i.e., Hong Kong laws, should govern. As testified by the expert witness Lousich, such legalities
were not required under Hong Kong laws. The trial Court also debunked HERAS' contention that the principle of excussion under Article
2058 of the Civil Code of the Philippines was violated. It declared that matters of substance are subject to the law of the place where
the transaction occurred; in this case, Hong Kong laws must govern.
The trial court concluded that the Hong Kong court judgment should be recognized and given effect in this jurisdiction for failure of
HERAS to overcome the legal presumption in favor of the foreign judgment. It then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to pay to the plaintiff the following sums or their equivalents in Philippine
currency at the time of payment: US$1,810,265.40 plus interest on the sum of US$1,500,000.00 at 9.875% per annum from October 31,
1984 to December 28, 1984, and HK$905 as fixed cost, with legal interests on the aggregate amount from December 28, 1984, and to
pay attorney's fees in the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought an award of judicial costs and an increase in attorney's fees in the
amount of US$19,346.45 with interest until full payment of the said obligations. On the other hand, HERAS no longer opposed the motion
and instead appealed the decision to the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 29513.
In its order2 of 2 November 1990, the trial court granted ASIAVEST's motion for reconsideration by increasing the award of attorney's
fees to "US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE CURRENCY, AND TO PAY THE COSTS OF THIS SUIT," provided that ASIAVEST would
pay the corresponding filing fees for the increase. ASIAVEST appealed the order requiring prior payment of filing fees. However, it later
withdrew its appeal and paid the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its decision3 reversing the decision of the trial court and dismissing ASIAVEST's complaint
without prejudice. It underscored the fact that a foreign judgment does not of itself have any extraterritorial application. For it to be
given effect, the foreign tribunal should have acquired jurisdiction over the person and the subject matter. If such tribunal has not
acquired jurisdiction, its judgment is void.
The Court of Appeals agreed with the trial court that matters of remedy and procedure, such as those relating to service of summons
upon the defendant are governed by the lex fori, which was, in this case, the law of Hong Kong. Relative thereto, it gave weight to
Lousich's testimony that under the Hong Kong law, the substituted service of summons upon HERAS effected in the Philippines by the
clerk of Sycip Salazar Hernandez & Gatmaitan firm would be valid provided that it was done in accordance with Philippine laws. It then
stressed that where the action is in personam and the defendant is in the Philippines, the summons should be personally served on the
defendant pursuant to Section 7, Rule 14 of the Rules of Court.4 Substituted service may only be availed of where the defendant
cannot be promptly served in person, the fact of impossibility of personal service should be explained in the proof of service. It also
found as persuasive HERAS' argument that instead of directly using the clerk of the Sycip Salazar Hernandez & Gatmaitan law office,
who was not authorized by the judge of the court issuing the summons, ASIAVEST should have asked for leave of the local courts to
have the foreign summons served by the sheriff or other court officer of the place where service was to be made, or for special reasons
by any person authorized by the judge.
The Court of Appeals agreed with HERAS that "notice sent outside the state to a non-resident is unavailing to give jurisdiction in an
action against him personally for money recovery." Summons should have been personally served on HERAS in Hong Kong, for, as
57
claimed by ASIAVEST, HERAS was physically present in Hong Kong for nearly 14 years. Since there was not even an attempt to serve
summons on HERAS in Hong Kong, the Hong Kong Supreme Court did not acquire jurisdiction over HERAS. Nonetheless it did not totally
foreclose the claim of ASIAVEST; thus:
While We are not fully convinced that [HERAS] has a meritorious defense against [ASIAVEST's] claims or that [HERAS] ought to be
absolved of any liability, nevertheless, in view of the foregoing discussion, there is a need to deviate front the findings of the lower court
in the interest of justice and fair play. This, however, is without prejudice to whatever action [ASIAVEST] might deem proper in order to
enforce its claims against [HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was necessary that evidence supporting the validity of the foreign
judgment be submitted, and that our courts are not bound to give effect to foreign judgments which contravene our laws and the
principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court of Appeals erred in ruling that
I.
. . . IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT EVIDENCE "SUPPORTING THE VALIDITY OF THE JUDGMENT";
II.
. . . THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER PHILIPPINES LAW;
III.
. . . SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN HONG KONG;
IV.
. . . THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH LEAVE OF PHILIPPINE COURTS;
V.
. . . THE FOREIGN JUDGMENT "CONTRAVENES PHILIPPINE LAWS, THE PRINCIPLES OF SOUND MORALITY, AND THE PUBLIC POLICY OF THE
PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of Court,5 which was the governing law at the time this case was decided by
the trial court and respondent Court of Appeals, a foreign judgment against a person rendered by a court having jurisdiction to
pronounce the judgment is presumptive evidence of a right as between the parties and their successors in interest by the subsequent
title. However, the judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear
mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that in the absence of proof to the contrary, a court, or judge
acting as such, whether in the Philippines or elsewhere, is presumed to have acted in the lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the burden to repel it on grounds provided for in paragraph (b) of
Section 50, Rule 39 of the Rules of Court is on the party challenging the foreign judgment — HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the Hong Kong judgment. On the other hand, ASIAVEST presented
evidence to prove rendition, existence, and authentication of the judgment by the proper officials. The judgment is thus presumed to
be valid and binding in the country from which it comes, until the contrary is shown. 6 Consequently, the first ground relied upon by
ASIAVEST has merit. The presumption of validity accorded foreign judgment would be rendered meaningless were the party seeking to
enforce it be required to first establish its validity.
58
The main argument raised against the Hong Kong judgment is that the Hong Kong Supreme Court did not acquire jurisdiction over the
person of HERAS. This involves the issue of whether summons was properly and validly served on HERAS. It is settled that matters of
remedy and procedure such as those relating to the service of process upon the defendant are governed by the lex fori or the law of
the forum, 7 i.e., the law of Hong Kong in this case. HERAS insisted that according to his witness Mr. Lousich, who was presented as an
expert on Hong Kong laws, there was no valid service of summons on him.
In his counter-affidavit,8 which served as his direct testimony per agreement of the parties,9 Lousich declared that the record of the
Hong Kong case failed to show that a writ of summons was served upon HERAS in Hong Kong or that any such attempt was made.
Neither did the record show that a copy of the judgment of the court was served on HERAS. He stated further that under Hong Kong
laws (a) a writ of summons could be served by the solicitor of the claimant or plaintiff; and (b) where the said writ or claim was not
contested, the claimant or plaintiff was not required to present proof under oath in order to obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich' testified that the Hong Kong court authorized service of summons on HERAS
outside of its jurisdiction, particularly in the Philippines. He admitted also the existence of an affidavit of one Jose R. Fernandez of the
Sycip Salazar Hernandez & Gatmaitan law firm stating that he (Fernandez) served summons on HERAS on 13 November 1984 at No. 6,
1st St., Quezon City, by leaving a copy with HERAS's son-in-law Dionisio Lopez. 10 On redirect examination, Lousich declared that such
service of summons would be valid under Hong Kong laws provided that it was in accordance with Philippine laws. 11
We note that there was no objection on the part of ASIAVEST on the qualification of Mr. Lousich as an expert on the Hong Kong law.
Under Sections 24 and 25, Rule 132 of the New Rules of Evidence, the record of public documents of a sovereign authority, tribunal,
official body, or public officer may be proved by (1) an official publication thereof or (2) a copy attested by the officer having the
legal custody thereof, which must be accompanied, if the record is not kept in the Philippines, with a certificate that such officer has
the custody. The certificate may be issued by a secretary of the embassy or legation, consul general, consul, vice consul, or consular
agent, or any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office. The attestation must state, in substance, that the copy is a correct copy of the original, or a
specific part thereof, as the case may be, and must be under the official seal of the attesting officer.
Nevertheless, the testimony of an expert witness may be allowed to prove a foreign law. An authority 12 on private international law
thus noted:
Although it is desirable that foreign law be proved in accordance with the above rule, however, the Supreme Court held in the case of
Willamette Iron and Steel Works v. Muzzal, 13 that Section 41, Rule 123 (Section 25, Rule 132 of the Revised Rules of Court) does not
exclude the presentation of other competent evidence to prove the existence of a foreign law. In that case, the Supreme Court
considered the testimony under oath of an attorney-at-law of San Francisco, California, who quoted verbatim a section of California
Civil Code and who stated that the same was in force at the time the obligations were contracted, as sufficient evidence to establish
the existence of said law. Accordingly, in line with this view, the Supreme Court in the Collector of Internal Revenue v. Fisher et al., 14
upheld the Tax Court in considering the pertinent law of California as proved by the respondents' witness. In that case, the counsel for
respondent "testified that as an active member of the California Bar since 1951, he is familiar with the revenue and taxation laws of the
State of California. When asked by the lower court to state the pertinent California law as regards exemption of intangible personal
properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the California Internal and Revenue Code as published in Derring's
California Code, a publication of Bancroft-Whitney Co., Inc. And as part of his testimony, a full quotation of the cited section was
offered in evidence by respondents." Likewise, in several naturalization cases, it was held by the Court that evidence of the law of a
foreign country on reciprocity regarding the acquisition of citizenship, although not meeting the prescribed rule of practice, may be
allowed and used as basis for favorable action, if, in the light of all the circumstances, the Court is "satisfied of the authenticity of the
written proof offered." 15 Thus, in, a number of decisions, mere authentication of the Chinese Naturalization Law by the Chinese
Consulate General of Manila was held to be competent proof of that law. 16
There is, however, nothing in the testimony of Mr. Lousich that touched on the specific law of Hong Kong in respect of service of
summons either in actions in rem or in personam, and where the defendant is either a resident or nonresident of Hong Kong. In view of
the absence of proof of the Hong Kong law on this particular issue, the presumption of identity or similarity or the so-called processual
presumption shall come into play. It will thus be presumed that the Hong Kong law on the matter is similar to the Philippine law. 17
As stated in Valmonte vs. Court of Appeals, 18 it will be helpful to determine first whether the action is in personam, in rem, or quasi in
rem because the rules on service of summons under Rule 14 of the Rules of Court of the Philippines apply according to the nature of
the action.
59
An action in personam is an action against a person on the basis of his personal liability. An action in rem is an action against the thing
itself instead of against the person. 19 An action quasi in rem is one wherein an individual is named as defendant and the purpose of
the proceeding is to subject his interest therein to the obligation or lien burdening the property. 20
In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and decide the case.
Jurisdiction over the person of a resident defendant who does not voluntarily appear in court can be acquired by personal service of
summons as provided under Section 7, Rule 14 of the Rules of Court. If he cannot be personally served with summons within a
reasonable time, substituted service may be made in accordance with Section 8 of said Rule. If he is temporarily out of the country,
any of the following modes of service may be resorted to: (1) substituted service set forth in Section 8; 21 (2) personal service outside
the country, with leave of court; (3) service by publication, also with leave of court; 22 or (4) any other manner the court may deem
sufficient. 23
However, in an action in personam wherein the defendant is a non-resident who does not voluntarily submit himself to the authority of
the court, personal service of summons within the state is essential to the acquisition of jurisdiction over her person. 24 This method of
service is possible if such defendant is physically present in the country. If he is not found therein, the court cannot acquire jurisdiction
over his person and therefore cannot validly try and decide the case against him. 25 An exception was laid down in Gemperle v.
Schenker 26 wherein a non-resident was served with summons through his wife, who was a resident of the Philippines and who was his
representatives and attorney-in-fact in a prior civil case filed by him; moreover, the second case was a mere offshoot of the first case.
On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer
jurisdiction on the court provided that the court acquires jurisdiction over the res. Nonetheless summons must be served upon the
defendant not for the purpose of vesting the court with jurisdiction but merely for satisfying the due process requirements. 27 Thus,
where the defendant is a non-resident who is not found in the Philippines and (1) the action affects the personal status of the plaintiff;
(2) the action relates to, or the subject matter of which is property in the Philippines in which the defendant has or claims a lien or
interest; (3) the action seeks the exclusion of the defendant from any interest in the property located in the Philippines; or (4) the
property of the defendant has been attached in the Philippines — service of summons may be effected by (a) personal service out of
the country, with leave of court; (b) publication, also with leave of court, or (c) any other manner the court may deem sufficient. 28
In the case at bar, the action filed in Hong Kong against HERAS was in personam, since it was based on his personal guarantee of the
obligation of the principal debtor. Before we can apply the foregoing rules, we must determine first whether HERAS was a resident of
Hong Kong.
Fortunata de la Vega, HERAS's personal secretary in Hong Kong since 1972 until 1985, 29 testified that HERAS was the President and part
owner of a shipping company in Hong Kong during all those times that she served as his secretary. He had in his employ a staff of
twelve. 30 He had "business commitments, undertakings, conferences, and appointments until October 1984 when [he] left Hong Kong
for good," 31 HERAS's other witness, Russel Warren Lousich, testified that he had acted as counsel for HERAS "for a number of
commercial matters." 32 ASIAVEST then infers that HERAS was a resident of Hong Kong because he maintained a business there.
It must be noted that in his Motion to Dismiss, 33 as well as in his

Answer 34 to ASIAVEST's complaint for the enforcement of the Hong Kong court judgment, HERAS maintained that the Hong Kong
court did not have jurisdiction over him because the fundamental rule is that jurisdiction in personam over non-resident defendants, so
as to sustain a money judgment, must be based upon personal service of summons within the state which renders the judgment. 35
For its part, ASIAVEST, in its Opposition to the Motion to Dismiss 36 contended: "The question of Hong Kong court's 'want of jurisdiction' is
therefore a triable issue if it is to be pleaded by the defendant to 'repel' the foreign judgment. Facts showing jurisdictional lack (e.g.
that the Hong Kong suit was in personam, that defendant was not a resident of Hong Kong when the suit was filed or that he did not
voluntarily submit to the Hong Kong court's jurisdiction) should be alleged and proved by the defendant." 37
In his Reply (to the Opposition to Motion to Dismiss), 38 HERAS argued that the lack of jurisdiction over his person was corroborated by
ASIAVEST's allegation in the complaint that he "has his residence at No. 6, 1st St., New Manila, Quezon City, Philippines." He then
concluded that such judicial admission amounted to evidence that he was and is not a resident of Hong Kong.
Significantly, in the pre-trial conference, the parties came up with stipulations of facts, among which was that "the residence of
defendant, Antonio Heras, is New Manila, Quezon City." 39
60
We note that the residence of HERAS insofar as the action for the enforcement of the Hong Kong court judgment is concerned, was
never in issue. He never challenged the service of summons on him through a security guard in his Quezon City residence and through
a lawyer in his office in that city. In his Motion to Dismiss, he did not question the jurisdiction of the Philippine court over his person on the
ground of invalid service of summons. What was in issue was his residence as far as the Hong Kong suit was concerned. We therefore
conclude that the stipulated fact that HERAS "is a resident of New Manila, Quezon City, Philippines" refers to his residence at the time
jurisdiction over his person was being sought by the Hong Kong court. With that stipulation of fact, ASIAVEST cannot now claim that
HERAS was a resident of Hong Kong at the time.
Accordingly, since HERAS was not a resident of Hong Kong and the action against him was, indisputably, one in personam, summons
should have been personally served on him in Hong Kong. The extraterritorial service in the Philippines was therefore invalid and did not
confer on the Hong Kong court jurisdiction over his person. It follows that the Hong Kong court judgment cannot be given force and
effect here in the Philippines for having been rendered without jurisdiction.
Even assuming that HERAS was formerly a resident of Hong Kong, he was no longer so in November 1984 when the extraterritorial
service of summons was attempted to be made on him. As declared by his secretary, which statement was not disputed by ASIAVEST,
HERAS left Hong Kong in October 1984 "for good." 40 His absence in Hong Kong must have been the reason why summons was not
served on him therein; thus, ASIAVEST was constrained to apply for leave to effect service in the Philippines, and upon obtaining a
favorable action on the matter, it commissioned the Sycip Salazar Hernandez & Gatmaitan law firm to serve the summons here in the
Philippines.
In Brown v. Brown, 41 the defendant was previously a resident of the Philippines. Several days after a criminal action for concubinage
was filed against him, he abandoned the Philippines. Later, a proceeding quasi in rem was instituted against him. Summons in the latter
case was served on the defendant's attorney-in-fact at the latter's address. The Court held that under the facts of the case, it could not
be said that the defendant was "still a resident of the Philippines because he ha[d] escaped to his country and [was] therefore an
absentee in the Philippines." As such, he should have been "summoned in the same manner as one who does not reside and is not
found in the Philippines."
Similarly, HERAS, who was also an absentee, should have been served with summons in the same manner as a non-resident not found
in Hong Kong. Section 17, Rule 14 of the Rules of Court providing for extraterritorial service will not apply because the suit against him
was in personam. Neither can we apply Section 18, which allows extraterritorial service on a resident defendant who is temporarily
absent from the country, because even if HERAS be considered as a resident of Hong Kong, the undisputed fact remains that he left
Hong Kong not only "temporarily" but "for good."
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING the petition in this case and AFFIRMING the assailed judgment
of the Court of Appeals in CA-G.R. CV No. 29513.
No costs.
SO ORDERED.
9. Gomez v. Court of Appeals, G.R. No. 77770, [December 15, 1988], 250 PHIL 504-513 Gonzales, Jashera
G.R. No. 77770 December 15, 1988
ATTY. JOSE S. GOMEZ, DELFINA GOMEZ ESTRADA, ENRIQUITA GOMEZ OXCIANO, BENITA GOMEZ GARLITOS, REYNALDO GOMEZ ESPEJO,
ARMANDO GOMEZ, ERLINDA GOMEZ GUICO, EUGENIA GOMEZ CALICDAN, AZUCENA GOMEZ ORENCIA, TEODORO S. GOMEZ, JR., and
ALEJO S. GOMEZ (now deceased) represented by his wife, LETICIA Y. GOMEZ, and children, namely, MARGIE GOMEZ GOB, JACINTO Y.
GOMEZ, ALEJO Y. GOMEZ, JR., and MARY ANN Y. GOMEZ, petitioners,
vs.
HON. COURT OF APPEALS, HON. PEDRO G. ADUCAYEN Judge Regional Trial Court, San Carlos City (Pangasinan) Branch LVI, HON. CHIEF,
LAND REGISTRATION COMMISSION, Quezon City, Metro Manila, and SILVERIO G. PEREZ, Chief, Division of Original Registration, Land
Registration Commission, Quezon City, Metro Manila, respondents.
61
PADILLA, J.:
The present case originated with the filing by petitioners on 30 August 1968 in the Court of First Instance (now Regional Trial Court) of
San Carlos City, Pangasinan, of an application for registration of several lots situated in Bayambang, Pangasinan.
The lots applied for were Lots Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 1 0, 11 and 12 of Plan Psu-54792 Amd.-2. The lots were among those involved in
the case of Government of the Philippine Islands vs. Abran ,1 wherein this Court declared Consolacion M. Gomez owner of certain lots
in Sitio Poponto Bayambang, Pangasinan. Petitioners are the heirs of Teodoro Y. Gomez (father of Consolacion) who, together with
Consolacion's son, Luis Lopez, inherited from her parcels of land when Consolacion Gomez died intestate. Petitioners alleged that after
the death of Teodoro Y. Gomez, they became the absolute owners of the subject lots by virtue of a Quitclaim executed in their favor
by Luis Lopez. The lots (formerly portions of Lots 15,16, 34 and 41 covered by Plan Ipd-92) were subdivided into twelve lots—Lots Nos. 1,
2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12. The subdivision plan was duly approved by the Bureau of Lands on 30 November 1963. Petitioners
agreed to allocate the lots among themselves.
After notice and publication, and there being no opposition to the application, the trial court issued an order of general default. On 5
August 1981, the court rendered its decision adjudicating the subject lots in petitioners' favor. 2
On 6 October 1981, the trial court issued an order 3 expressly stating that the decision of 5 August 1981 had become final and directed
the Chief of the General Land Registration Office to issue the corresponding decrees of registration over the lots adjudicated in the
decision of 5 August 1981.
On 11 July 1984, respondent Silverio G. Perez, Chief of the Division of Original Registration, Land Registration Commission (now known as
the National Land Titles and Deeds Registration Administration), submitted a report to the court a quo stating that Lots 15, 16, 34 and 41
of Ipd-92 were already covered by homestead patents issued in 1928 and 1929 and registered under the Land Registration Act. He
recommended that the decision of 5 August 1981, and the order of 6 October 1981 be set aside. Petitioners opposed the report,
pointing out that no opposition was raised by the Bureau of Lands during the registration proceedings and that the decision of 5
August 1981 should be implemented because it had long become final and executory.
After hearing, the lower court rendered a second decision on 25 March 1985 setting aside the decision dated 5 August 1981 and the
order dated 6 October 1981 for the issuance of decrees. 4 Petitioners moved for reconsideration but the motion was denied by
respondent judge on 6 August 1985 for lack of merit. 5
Petitioners filed a petition for certiorari and mandamus with this Court which in turn referred the petition to the Court of Appeals. 6
On 17 September 1986, the appellate court rendered judgment, 7 dismissing the petition and stating, among others, thus—
In resumé, prior to the issuance of the decree of registration, the respondent Judge has still the power and control
over the decision he rendered. The finality of an adjudication of land in a registration or cadastral case takes place
only after the expiration of the one-year period after entry of the final decree of registration (Afalla vs. Rosauro, 60
Phil. 622; Valmonte vs. Nable, 85 Phil. 256; Capio vs. Capio, 94 Phil. 113). When the respondent Judge amended his
decision after the report of the respondent officials of the Land Registration office had shown that homestead
patents had already been issued on some of the lots, respondents cannot be faulted because land already
granted by homestead patent can no longer be the subject of another registration (Manalo vs. Lukban, et al., 48
Phil. 973).
WHEREFORE, in view of the foregoing, We resolve to DISMISS the petition for lack of merit.
SO ORDERED.
Petitioners' motion for reconsideration was denied by the appellate court in its Resolution dated 10 March 1987. 8 Hence, this recourse.
Several issues are raised by petitioners in this petition. The more important issues before the Court are: (a) whether or not respondent
Judge had jurisdiction to issue the decision of 25 March 1985 which set aside the lower court's earlier decision of 5 August 1981 and the
order of 6 October 1981; (b) whether or not the respondents Acting Land Registration Commissioner and Engr. Silverio Perez, Chief,
Division of Original Registration, Land Registration Commission, have no alternative but to issue the decrees of registration pursuant to
the decision of 5 August 1981 and the order for issuance of decrees, dated 6 October 1981, their duty to do so being purely ministerial;
(c) whether or not "the law of the case" is the decision in Government of the Philippine Islands v. Abran, supra, which held that the
lands adjudicated to Consolacion Gomez were not public lands, and therefore they could not have been acquired by holders of
homestead titles as against petitioners herein.
It is not disputed that the decision dated 5 August 1981 had become final and executory. Petitioners vigorously maintain that said
decision having become final, it may no longer be reopened, reviewed, much less, set aside. They anchor this claim on section 30 of
P.D. No. 1529 (Property Registration Decree) which provides that, after judgment has become final and executory, the court shall
forthwith issue an order to the Commissioner of Land Registration for the issuance of the decree of registration and certificate of title.
Petitioners contend that section 30 should be read in relation to section 32 of P.D. 1529 in that, once the judgment becomes final and
62
executory under section 30, the decree of registration must issue as a matter of course. This being the law, petitioners assert, when
respondent Judge set aside in his decision, dated 25 March 1985, the decision of 5 August 1981 and the order of 6 October 1981, he
clearly acted without jurisdiction.
Petitioners' contention is not correct. Unlike ordinary civil actions, the adjudication of land in a cadastral or land registration proceeding
does not become final, in the sense of incontrovertibility until after the expiration of one (1) year after the entry of the final decree of
registration.9 This Court, in several decisions, has held that as long as a final decree has not been entered by the Land Registration
Commission (now NLTDRA) and the period of one (1) year has not elapsed from date of entry of such decree, the title is not finally
adjudicated and the decision in the registration proceeding continues to be under the control and sound discretion of the court
rendering it.10
Petitioners contend that the report of respondent Silverio Perez should have been submitted to the court a quo before its decision
became final. But were we to sustain this argument, we would be pressuring respondent land registration officials to submit a report or
study even if haphazardly prepared just to beat the reglementary deadline for the finality of the court decision. As said by this Court in
De los Reyes vs. de Villa: 11
Examining section 40, we find that the decrees of registration must be stated in convenient form for transcription
upon the certificate of title and must contain an accurate technical description of the land. This requires technical
men. Moreover, it frequently occurs that only portions of a parcel of land included in an application are ordered
registered and that the limits of such portions can only be roughly indicated in the decision of the court. In such
cases amendments of the plans and sometimes additional surveys become necessary before the final decree can
be entered. That can hardly be done by the court itself; the law very wisely charges the Chief Surveyor of the
General Land Registration Office with such duties (Administrative Code, section 177).
Thus, the duty of respondent land registration officials to render reports is not limited to the period before the court's decision becomes
final, but may extend even after its finality but not beyond the lapse of one (1) year from the entry of the decree.
Petitioners insist that the duty of the respondent land registration officials to issue the decree is purely ministerial. It is ministerial in the
sense that they act under the orders of the court and the decree must be in conformity with the decision of the court and with the
data found in the record, and they have no discretion in the matter. However, if they are in doubt upon any point in relation to the
preparation and issuance of the decree, it is their duty to refer the matter to the court. They act, in this respect, as officials of the court
and not as administrative officials, and their act is the act of the court. 12 They are specifically called upon to "extend assistance to
courts in ordinary and cadastral land registration proceedings ." 13
The foregoing observations resolve the first two (2) issues raised by petitioners.
Petitioners next contend that "the law of the case" is found in Government of the Philippine Islands vs. Abran, et al., supra , where it was
decided by this Court that the lands of Consolacion M. Gomez, from whom petitioners derive their ownership over the lots in question,
were not public lands. A reading of the pertinent and dispositive portions of the aforesaid decision will show, however, that the lots
earlier covered by homestead patents were not included among the lands adjudicated to Consolacion M. Gomez. The decision
states:
With respect to the portions of land covered by homestead certificates of title, we are of opinion that such
certificates are sufficient to prevent the title to such portion from going to appellants aforesaid, for they carry with
them preponderating evidence that the respective homesteaders held adverse possession of such portions, dating
back to 1919 or 1920, accordingly to the evidence, and the said appellants failed to object to that possession in
time. (Emphasis supplied)
Wherefore modifying the judgment appealed from, it is hereby ordered that the lots respectively claimed by Agustin
V. Gomez, Consolacion M. Gomez, and Julian Macaraeg, be registered in their name, with the exclusion of the
portions covered by the homestead certificates ... . (Emphasis supplied.) 14
The report of respondent land registration officials states that the holders of the homestead patents registered the lots in question in the
years 1928 and 1929. The decision in Government of the Philippine Islands vs. Abran was promulgated on 31 December 1931. Hence,
the subject lots are specifically excluded from those adjudicated by the aforesaid decision to Consolacion M. Gomez.
It is a settled rule that a homestead patent, once registered under the Land Registration Act, becomes indefeasible and
incontrovertible as a Torrens title, and may no longer be the subject of an investigation for determination or judgment in cadastral
proceeding. 15
The aforecited case of Government vs. Abran, therefore, is not "the law of the case", for the lots in question were not private lands of
Consolacion M. Gomez when homestead patents were issued over them in 1928-1929. There is sufficient proof to show that Lots 15, 16,
34 and 41 of Ipd-92 were already titled lands way back in 1928 and 1929 as shown by Annexes "A", "B", "C", and "D" of respondents'
Memorandum. 16
63
Lastly, petitioners claim that if the decision of 5 August 1981 of the lower court is sustained, the homestead title holders may still
vindicate their rights by filing a separate civil action for cancellation of titles and for reconveyance in a court of ordinary civil
jurisdiction. Conversely, the same recourse may be resorted to by petitioners. "(T)he true owner may bring an action to have the
ownership or title to land judicially settled, and if the allegations of the plaintiff that he is the true owner of the parcel of land granted as
free patent and described in the Torrens title and that the defendant and his predecessor-in-interest were never in possession of the
parcel of land and knew that the plaintiff and his predecessor-in-interest have been in possession thereof be established, then the
court in the exercise of its equity jurisdiction, without ordering the cancellation of the Torrens title issued upon the patent, may direct
the defendant, the registered owner, to reconvey the parcel of land to the plaintiff who has been found to be the true owner thereof."
17
WHEREFORE, the petition is DENIED. The appealed decision of the Court of Appeals is AFFIRMED. Costs against the petitioners-
appellants.
SO ORDERED.
10. St. Aviation Services Co., Pte., Ltd. v. Grand International Airways, Inc., G.R. No. 140288, [October 23, 2006], 535 PHIL 757-765
Guinto
G.R. No. 140288 October 23, 2006
ST. AVIATION SERVICES CO., PTE., LTD., petitioner,
vs.
GRAND INTERNATIONAL AIRWAYS, INC., respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Challenged in the instant Petition for Review on Certiorari are the Decision of the Court of Appeals dated July 30, 1999 and its
Resolution dated September 29, 1999 in CA-G.R. SP No. 51134 setting aside the Orders dated October 30, 1998 and December 16, 1998
of the Regional Trial Court (RTC), Branch 117, Pasay City in Civil Case No. 98-1389.
St. Aviation Services Co., Pte., Ltd., petitioner, is a foreign corporation based in Singapore. It is engaged in the manufacture, repair, and
maintenance of airplanes and aircrafts. Grand International Airways, Inc., respondent, is a domestic corporation engaged in airline
operations.
Sometime in January 1996, petitioner and respondent executed an "Agreement for the Maintenance and Modification of Airbus A 300
B4-103 Aircraft Registration No. RP-C8882" (First Agreement). Under this stipulation, petitioner agreed to undertake maintenance and
modification works on respondent's aircraft. The parties agreed on the mode and manner of payment by respondent of the contract
price, including interest in case of default. They also agreed that the "construction, validity and performance thereof" shall be
governed by the laws of Singapore. They further agreed to submit any suit arising from their agreement to the non-exclusive jurisdiction
of the Singapore courts.
64
At about the same time, or on January 12, 1996, the parties verbally agreed that petitioner will repair and undertake maintenance
works on respondent's other aircraft, Aircraft No. RP-C8881; and that the works shall be based on a General Terms of Agreement (GTA).
The GTA terms are similar to those of their First Agreement.
Petitioner undertook the contracted works and thereafter promptly delivered the aircrafts to respondent. During the period from March
1996 to October 1997, petitioner billed respondent in the total amount of US$303,731.67 or S$452,560.18. But despite petitioner's
repeated demands, respondent failed to pay, in violation of the terms agreed upon.
On December 12, 1997, petitioner filed with the High Court of the Republic of Singapore an action for the sum of S$452,560.18,
including interest and costs, against respondent, docketed as Suit No. 2101. Upon petitioner's motion, the court issued a Writ of
Summons to be served extraterritorially or outside Singapore upon respondent. The court sought the assistance of the sheriff of Pasay
City to effect service of the summons upon respondent. However, despite receipt of summons, respondent failed to answer the claim.
On February 17, 1998, on motion of petitioner, the Singapore High Court rendered a judgment by default against respondent.
On August 4, 1998, petitioner filed with the RTC, Branch 117, Pasay City, a Petition for Enforcement of Judgment, docketed as Civil
Case No. 98-1389.
Respondent filed a Motion to Dismiss the Petition on two grounds: (1) the Singapore High Court did not acquire jurisdiction over its
person; and (2) the foreign judgment sought to be enforced is void for having been rendered in violation of its right to due process.
On October 30, 1998, the RTC denied respondent's motion to dismiss, holding that "neither one of the two grounds (of Grand) is among
the grounds for a motion to dismiss under Rule 16 of the 1997 Rules of Civil Procedure."
Respondent filed a motion for reconsideration but was denied by the RTC in its Order dated December 16, 1998.
On February 15, 1999, respondent filed with the Court of Appeals a Petition for Certiorari assailing the RTC Order denying its motion to
dismiss. Respondent alleged that the extraterritorial service of summons on its office in the Philippines is defective and that the
Singapore court did not acquire jurisdiction over its person. Thus, its judgment sought to be enforced is void. Petitioner, in its comment,
moved to dismiss the petition for being unmeritorious.
On July 30, 1999, the Court of Appeals issued its Decision granting the petition and setting aside the Orders dated October 30, 1998
and December 16, 1998 of the RTC "without prejudice to the right of private respondent to initiate another proceeding before the
proper court to enforce its claim." It found:
In the case at bar, the complaint does not involve the personal status of plaintiff, nor any property in which the defendant has
a claim or interest, or which the private respondent has attached but purely an action for collection of debt. It is a personal
action as well as an action in personam, not an action in rem or quasi in rem. As a personal action, the service of summons
should be personal or substituted, not extraterritorial, in order to confer jurisdiction on the court.
Petitioner seasonably filed a motion for reconsideration but it was denied on September 29, 1999.
Hence, the instant Petition for Review on Certiorari.

65
The issues to be resolved are: (1) whether the Singapore High Court has acquired jurisdiction over the person of respondent by the
service of summons upon its office in the Philippines; and (2) whether the judgment by default in Suit No. 2101 by the Singapore High
Court is enforceable in the Philippines.
Generally, in the absence of a special contract, no sovereign is bound to give effect within its dominion to a judgment rendered by a
tribunal of another country; however, under the rules of comity, utility and convenience, nations have established a usage among
civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered
efficacious under certain conditions that may vary in different countries. 1 Certainly, the Philippine legal system has long ago accepted
into its jurisprudence and procedural rules the viability of an action for enforcement of foreign judgment, as well as the requisites for
such valid enforcement, as derived from internationally accepted doctrines.2
The conditions for the recognition and enforcement of a foreign judgment in our legal system are contained in Section 48, Rule 39 of
the 1997 Rules of Civil Procedure, as amended, thus:
SEC. 48. Effect of foreign judgments. – The effect of a judgment or final order of a tribunal of a foreign country, having
jurisdiction to render the judgment or final order is as follows:
(a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title
to the thing; and
(b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a
right as between the parties and their successors in interest by a subsequent title;
In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.
Under the above Rule, a foreign judgment or order against a person is merely presumptive evidence of a right as between the parties.
It may be repelled, among others, by want of jurisdiction of the issuing authority or by want of notice to the party against whom it is
enforced. The party attacking a foreign judgment has the burden of overcoming the presumption of its validity. 3
Respondent, in assailing the validity of the judgment sought to be enforced, contends that the service of summons is void and that the
Singapore court did not acquire jurisdiction over it.
Generally, matters of remedy and procedure such as those relating to the service of process upon a defendant are governed by the
lex fori or the internal law of the forum, 4 which in this case is the law of Singapore. Here, petitioner moved for leave of court to serve a
copy of the Writ of Summons outside Singapore. In an Order dated December 24, 1997, the Singapore High Court granted "leave to
serve a copy of the Writ of Summons on the Defendant by a method of service authorized by the law of the Philippines for service of
any originating process issued by the Philippines at ground floor, APMC Building, 136 Amorsolo corner Gamboa Street, 1229 Makati City,
or elsewhere in the Philippines ."5 This service of summons outside Singapore is in accordance with Order 11, r. 4(2) of the Rules of Court
19966 of Singapore, which provides.
(2) Where in accordance with these Rules, an originating process is to be served on a defendant in any country with respect
to which there does not subsist a Civil Procedure Convention providing for service in that country of process of the High Court,
the originating process may be served –
a) through the government of that country, where that government is willing to effect service;
b) through a Singapore Consular authority in that country, except where service through such an authority is contrary to the
law of the country; or
c) by a method of service authorized by the law of that country for service of any originating process issued by that country.
In the Philippines, jurisdiction over a party is acquired by service of summons by the sheriff, 7 his deputy or other proper court officer
either personally by handing a copy thereof to the defendant 8 or by substituted service.9 In this case, the Writ of Summons issued by the
Singapore High Court was served upon respondent at its office located at Mercure Hotel (formerly Village Hotel), MIA Road, Pasay
City. The Sheriff's Return shows that it was received on May 2, 1998 by Joyce T. Austria, Secretary of the General Manager of
respondent company.10 But respondent completely ignored the summons, hence, it was declared in default.
66
Considering that the Writ of Summons was served upon respondent in accordance with our Rules, jurisdiction was acquired by the
Singapore High Court over its person. Clearly, the judgment of default rendered by that court against respondent is valid.
WHEREFORE, we GRANT the petition. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 51134 are set
aside.
The RTC, Branch 117, Pasay City is hereby DIRECTED to hear Civil Case No. 98-1389 with dispatch.
SO ORDERED.
Puno, J., Chairperson, Corona, Azcuna, and Garcia, JJ., concur.
11. Pioneer International, Ltd. v. Guadiz, Jr., G.R. No. 156848, [October 11, 2007], 561 PHIL 688-711 Josol
SECOND DIVISION
G.R. No. 156848 October 11, 2007
PIONEER INTERNATIONAL, LTD., petitioner,
vs.
HON. TEOFILO GUADIZ, JR., in his capacity as Presiding Judge of Regional Trial Court, Branch 147, Makati City, and ANTONIO D.
TODARO, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari 1 of the Decision2 dated 27 September 2001 and of the Resolution 3 dated 14 January 2003 of the
Court of Appeals (appellate court) in CA-G.R. SP No. 54062. The Decision affirmed the Orders 4 dated 4 January 19995 and 3 June 19996
of Branch 147 of the Regional Trial Court of Makati City (trial court) in Civil Case No. 98-124. The trial court denied the motion to dismiss
filed by Pioneer International, Ltd. (PIL)7 in its special appearance.
The Facts
On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint for sum of money and damages with preliminary attachment
against PIL, Pioneer Concrete Philippines, Inc. (PCPI), Pioneer Philippines Holdings, Inc. (PPHI), John G. McDonald (McDonald), and
Philip J. Klepzig (Klepzig). PIL and its co-defendants were served copies of the summons and of the complaint at PPHI and PCPI’s office
in Alabang, Muntinlupa, through Cecille L. De Leon (De Leon), who was Klepzig’s Executive Assistant.
Todaro alleged that PIL is a corporation duly organized under Australian laws, while PCPI and PPHI are corporations duly organized
under Philippine laws. PIL is engaged in the ready-mix and concrete aggregates business and has established a presence worldwide.
PIL established PPHI as the holding company of the stocks of its operating company in the Philippines, PCPI. McDonald is the Chief
Executive Officer of PIL’s Hong Kong office while Klepzig is the President and Managing Director of PPHI and PCPI. For his part, Todaro
further alleged that he was the managing director of Betonval Readyconcrete, Inc. (Betonval) from June 1975 up to his resignation in
February 1996.
67
Before Todaro filed his complaint, there were several meetings and exchanges of letters between Todaro and the officers of Pioneer
Concrete (Hong Kong) Limited, Pioneer Concrete Group HK, PPHI, and PIL. According to Todaro, PIL contacted him in May 1996 and
asked if he could join it in establishing a pre-mixed concrete plant and in overseeing its operations in the Philippines. Todaro confirmed
his availability and expressed interest in joining PIL. Todaro met with several of PIL’s representatives and even gave PIL the names of
three of his subordinates in Betonval whom he would like to join him in PIL.
Todaro attached nine letters, marked as Annexes "A" to "I," to his complaint. Annex "A" 8 shows that on 15 July 1996, Todaro, under the
letterhead of Ital Tech Distributors, Inc., sent a letter to Max Lindsay (Lindsay) of Pioneer Concrete (Hong Kong) Limited. Todaro wrote
that "[m]y aim is to run again a ready-mix concrete company in the Philippines and not to be a part-time consultant. Otherwise, I could
have charged your company with a much higher fee."
Annex "B"9 shows that on 4 September 1996, Lindsay, under the letterhead of Pioneer Concrete (Hong Kong) Limited, responded by fax
to Todaro’s faxed letter to McDonald and proposed that Todaro "join Pioneer on a retainer basis for 2 to 3 months on the
understanding that [Todaro] would become a permanent employee if as we expect, our entry proceeds." The faxed letter to
McDonald referred to by Lindsay is not found in the rollo and was not attached to Todaro’s complaint.
Annex "C"10 shows that on the same date as that of Annex "B," Todaro, under the letterhead of Ital Tech Distributors, Inc., faxed another
letter to Lindsay of Pioneer Concrete (Hong Kong) Limited. Todaro asked for a formal letter addressed to him about the proposed
retainer. Todaro requested that the letter contain a statement on his remuneration package and on his permanent employment "with
PIONEER once it has established itself on a permanent basis in the Philippines."
Annex "D"11 shows that Todaro, under the letterhead of Ital Tech Distributors, Inc., sent a letter to McDonald of PIL. Todaro confirmed the
following to McDonald:
1. That I am accepting the proposal of PIONEER INT’L. as a consultant for three (3) months, starting October 1, 1996, with a
retainer fee of U.S. $15,000.00 per month;
2. That after three (3) months consultancy, I should be employed by PIONEER INT’L., on a permanent basis, as its Managing
Director or CEO in the Philippines. Remuneration package will be mutually agreed upon by PIONEER and the undersigned;
3. That Gino Martinel and the Sales Manager – Jun Ong, will be hired as well, on a permanent basis, by PIONEER as soon as
the company is established. Salary, likewise, will be accepted by both PIONEER and the respective parties.
Annex "E"12 is a faxed letter dated 18 November 1996 of McDonald, under the letterhead of Pioneer Concrete Group HK, to Todaro of
Ital Tech Distributors, Inc. The first three paragraphs of McDonald’s letter read:
Further to our recent meeting in Hong Kong, I am now able to confirm my offer to engage you as a consultant to Pioneer
International Ltd. Should Pioneer proceed with an investment in the Philippines, then Pioneer would offer you a position to
manage the premixed concrete operations.
Pioneer will probably be in a position to make a decision on proceeding with an investment by mid January ‘97.
The basis for your consultancy would be:
· Monthly fee USD 15,000 per month billed on monthly basis and payable 15 days from billing date.
· Additional pre-approved expenses to be reimbursed.
· Driver and secretarial support-basis for reimbursement of this to be agreed.
· Arrangement to commence from 1 st November ‘96, reflecting your contributions so far and to
continue until Pioneer makes a decision.
Annex "F"13 shows Todaro’s faxed reply, under the letterhead of Ital Tech Distributors, Inc., to McDonald of Pioneer Concrete Group HK
dated 19 November 1996. Todaro confirmed McDonald’s package concerning the consultancy and reiterated his desire to be the
manager of Pioneer’s Philippine business venture.
Annex "G"14 shows Todaro’s faxed reply, under the letterhead of Ital Tech Distributors, Inc., to McDonald of PIL dated 8 April 1997.
Todaro informed McDonald that he was willing to extend assistance to the Pioneer representative from Queensland. The tenor of the
letter revealed that Todaro had not yet occupied his expected position.
Annex "H"15 shows Klepzig’s letter, under the letterhead of PPHI, to Todaro dated 18 September 1997. Klepzig’s message reads:
68
It has not proven possible for this company to meet with your expectations regarding the conditions of your providing Pioneer
with consultancy services. This, and your refusal to consider my terms of offer of permanent employment, leave me no
alternative but to withdraw these offers of employment with this company.
As you provided services under your previous agreement with our Pioneer Hong Kong office during the month of August, I will
see that they pay you at the previous rates until the end of August. They have authorized me on behalf of Pioneer
International Ltd. to formally advise you that the agreement will cease from August 31 st as per our previous discussions.
Annex "I"16 shows the letter dated 20 October 1997 of K.M. Folwell (Folwell), PIL’s Executive General Manager of Australia and Asia, to
Todaro. Folwell confirmed the contents of Klepzig’s 18 September 1997 letter. Folwell’s message reads:
Thank you for your letter to Dr. Schubert dated 29 th September 1997 regarding the alleged breach of contract with you. Dr.
Schubert has asked me to investigate this matter.
I have discussed and examined the material regarding your association with Pioneer over the period from mid 1996 through
to September 1997.
Clearly your consultancy services to Pioneer Hong Kong are well documented and have been appropriately rewarded.
However, in regard to your request and expectation to be given permanent employment with Pioneer Philippines Holdings,
Inc. I am informed that negotiations to reach agreement on appropriate terms and conditions have not been successful.
The employment conditions you specified in your letter to John McDonald dated 11 th September are well beyond our
expectations.
Mr. Todaro, I regret that we do not wish to pursue our association with you any further. Mr. Klepzig was authorized to terminate
this association and the letter he sent to you dated 18th September has my support.
Thank you for your involvement with Pioneer. I wish you all the best for the future. (Emphasis added)
PIL filed, by special appearance, a motion to dismiss Todaro’s complaint. PIL’s co-defendants, PCPI, PPHI, and Klepzig, filed a separate
motion to dismiss.17 PIL asserted that the trial court has no jurisdiction over PIL because PIL is a foreign corporation not doing business in
the Philippines. PIL also questioned the service of summons on it. Assuming arguendo that Klepzig is PIL’s agent in the Philippines, it was
not Klepzig but De Leon who received the summons for PIL. PIL further stated that the National Labor Relations Commission (NLRC), and
not the trial court, has jurisdiction over the subject matter of the action. It claimed that assuming that the trial court has jurisdiction over
the subject matter of the action, the complaint should be dismissed on the ground of forum non-conveniens. Finally, PIL maintained
that the complaint does not state a cause of action because there was no perfected contract, and no personal judgment could be
rendered by the trial court against PIL because PIL is a foreign corporation not doing business in the Philippines and there was improper
service of summons on PIL.
Todaro filed a Consolidated Opposition dated 26 August 1998 to refute PIL’s assertions. PIL filed, still by special appearance, a Reply on
2 October 1998.
The Ruling of the Trial Court
On 4 January 1999, the trial court issued an order 18 which ruled in favor of Todaro. The trial court denied the motions to dismiss filed by
PIL, PCPI, PPHI, and Klepzig.
The trial court stated that the merits of a motion to dismiss a complaint for lack of cause of action are tested on the strength of the
allegation of facts in the complaint. The trial court found that the allegations in the complaint sufficiently establish a cause of action.
The trial court declared that Todaro’s cause of action is based on an alleged breach of a contractual obligation and an alleged
violation of Articles 19 and 21 of the Civil Code. Therefore, the cause of action does not lie within the jurisdiction of the NLRC but with
the trial court.
The trial court also asserted its jurisdiction over PIL, holding that PIL did business in the Philippines when it entered into a contract with
Todaro. Although PIL questions the service of summons on Klepzig, whom PIL claims is not its agent, the trial court ruled that PIL failed to
adduce evidence to prove its contention. Finally, on the issue of forum non-conveniens, the trial court found that it is more convenient
to hear and decide the case in the Philippines because Todaro resides in the Philippines and the contract allegedly breached involves
employment in the Philippines.
PIL filed an urgent omnibus motion for the reconsideration of the trial court’s 4 January 1999 order and for the deferment of filing its
answer. PCPI, PPHI, and Klepzig likewise filed an urgent omnibus motion. Todaro filed a consolidated opposition, to which PIL, PCPI,
PPHI, and Klepzig filed a joint reply. The trial court issued an order 19 on 3 June 1999 denying the motions of PIL, PCPI, PPHI, and Klepzig.
The trial court gave PIL, PCPI, PPHI, and Klepzig 15 days within which to file their respective answers.
PIL did not file an answer before the trial court and instead filed a petition for certiorari before the appellate court.
69
The Ruling of the Appellate Court
The appellate court denied PIL’s petition and affirmed the trial court’s ruling in toto. The dispositive portion of the appellate court’s
decision reads:
WHEREFORE, premises considered, the present petition for certiorari is hereby DENIED DUE COURSE and accordingly
DISMISSED. The assailed Orders dated January 4, 1999 and June 3, 1999 of the Regional Trial Court of Makati City, Branch 147,
in Civil Case No, 98-124 are hereby AFFIRMED in toto.
SO ORDERED.20
On 14 January 2003, the appellate court dismissed 21 PIL’s motion for reconsideration for lack of merit. The appellate court stated that
PIL’s motion raised no new substantial or weighty arguments that could impel the appellate court from departing or overturning its
previous decision. PIL then filed a petition for review on certiorari before this Court.
The Issues
PIL raised the following issues before this Court:
A. [The trial court] did not and cannot acquire jurisdiction over the person of [PIL] considering that:
A.1. [PIL] is a foreign corporation "not doing business" in the Philippines.
A.2. Moreover, the complaint does not contain appropriate allegations of ultimate facts showing that [PIL] is doing
or transacting business in the Philippines.
A.3. Assuming arguendo that jurisdiction may be acquired over the person of [PIL], [the trial court] still failed to
acquire jurisdiction since summons was improperly served on [PIL].
B. [Todaro] does not have a cause of action and the complaint fails to state a cause of action. Jurisprudence is settled in that
in resolving a motion to dismiss, a court can consider all the pleadings filed in the case, including annexes, motions and all
evidence on record.
C. [The trial court] did not and cannot acquire jurisdiction over the subject matter of the complaint since the allegations
contained therein indubitably show that [Todaro] bases his claims on an alleged breach of an employment contract. Thus,
exclusive jurisdiction is vested with the [NLRC].
D. Pursuant to the principle of forum non-conveniens, [the trial court] committed grave abuse of discretion when it took
cognizance of the case.22
The Ruling of the Court
The petition has partial merit. We affirm with modification the rulings of the trial and appellate courts. Apart from the issue on service of
summons, the rulings of the trial and appellate courts on the issues raised by PIL are correct.
Cause of Action
Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a cause of action is the act or omission by which a party violates a right
of another.
The general rule is that the allegations in a complaint are sufficient to constitute a cause of action against the defendants if,
admitting the facts alleged, the court can render a valid judgment upon the same in accordance with the prayer therein. A
cause of action exists if the following elements are present, namely: (1) a right in favor of the plaintiff by whatever means and
under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect or not to violate
such right; and (3) an act or omission on the part of such defendant violative of the right of the plaintiff or constituting a
breach of the obligation of the defendant to the plaintiff for which the latter may maintain an action for recovery of
damages.23
In the present case, the summary of Todaro’s allegations states that PIL, PCPI, PPHI, McDonald, and Klepzig did not fulfill their
contractual obligation to employ Todaro on a permanent basis in PIL’s Philippine office. Todaro’s allegations are thus sufficient to
establish a cause of action. We quote with approval the trial court’s ruling on this matter:
On the issue of lack of cause of action – It is well-settled that the merits of a motion to dismiss a complaint for lack of cause of
action is tested on the strength of the allegations of fact contained in the complaint and no other (De Jesus, et al. vs.
70
Belarmino, et al., 95 Phil. 366 [1954]). This Court finds that the allegations of the complaint, specifically paragraphs 13-33
thereof, paragraphs 30-33 alleging as follows:
"30. All of the acts set forth in the foregoing have been done with the knowledge, consent and/or approval of the
defendants who acted in concert and/or in conspiracy with one another.
31. Under the circumstances, there is a valid contract entered into between [Todaro] and the Pioneer Group,
whereby, among others, the Pioneer Group would employ [Todaro], on a permanent basis, to manage and operate
the ready-mix concrete operations, if the Pioneer Group decides to invest in the Philippines.
32. The Pioneer Group has decided to invest in the Philippines. The refusal of the defendants to comply with the
Pioneer Group’s undertaking to employ [Todaro] to manage their Philippine ready-mix operations, on a permanent
basis, is a direct breach of an obligation under a valid and perfected contract.
33. Alternatively, assuming without conceding, that there was no contractual obligation on the part of the Pioneer
Group to employ [Todaro] on a permanent basis, in their Philippine operations, the Pioneer Group and the other
defendants did not act with justice, give [Todaro] his due and observe honesty and good faith and/or they have
willfully caused injury to [Todaro] in a manner that is contrary to morals, good customs, and public policy, as
mandated under Arts. 19 and 21 of the New Civil Code."
sufficiently establish a cause of action for breach of contract and/or violation of Articles 19 and 21 of the New Civil Code.
Whether or not these allegations are true is immaterial for the court cannot inquire into the truth thereof, the test being
whether, given the allegations of fact in the complaint, a valid judgment could be rendered in accordance with the prayer in
the complaint.24
It should be emphasized that the presence of a cause of action rests on the sufficiency, and not on the veracity, of the allegations in
the complaint. The veracity of the allegations will have to be examined during the trial on the merits. In resolving a motion to dismiss
based on lack of cause of action, the trial court is limited to the four corners of the complaint and its annexes. It is not yet necessary for
the trial court to examine the truthfulness of the allegations in the complaint. Such examination is proper during the trial on the merits.
Forum Non-Conveniens
The doctrine of forum non-conveniens requires an examination of the truthfulness of the allegations in the complaint. Section 1, Rule 16
of the 1997 Rules of Civil Procedure does not mention forum non-conveniens as a ground for filing a motion to dismiss. The propriety of
dismissing a case based on forum non-conveniens requires a factual determination; hence, it is more properly considered a matter of
defense. While it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, the trial court should do so
only after vital facts are established to determine whether special circumstances require the court’s desistance. 25
Jurisdiction over PIL
PIL questions the trial court’s exercise of jurisdiction over it on two levels. First, that PIL is a foreign corporation not doing business in the
Philippines and because of this, the service of summons on PIL did not follow the mandated procedure. Second, that Todaro’s claims
are based on an alleged breach of an employment contract so Todaro should have filed his complaint before the NLRC and not
before the trial court.
Transacting Business in the Philippines and Service of Summons
The first level has two sub-issues: PIL’s transaction of business in the Philippines and the service of summons on PIL. Section 12, Rule 14 of
the 1997 Rules of Civil Procedure provides the manner by which summons may be served upon a foreign juridical entity which has
transacted business in the Philippines. Thus:
Service upon foreign private juridical entity. — When the defendant is a foreign juridical entity which has transacted business
in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there
be no such agent, on the government official designated by law to that effect, or any of its officers or agents within the
Philippines.
As to the first sub-issue, PIL insists that its sole act of "transacting" or "doing business" in the Philippines consisted of its investment in PPHI.
Under Philippine law, PIL’s mere investment in PPHI does not constitute "doing business." However, we affirm the lower courts’ ruling and
declare that, based on the allegations in Todaro’s complaint, PIL was doing business in the Philippines when it negotiated Todaro’s
employment with PPHI. Section 3(d) of Republic Act No. 7042, Foreign Investments Act of 1991, states:
The phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the
country for a period or periods totaling 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
71
continuity of 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: Provided, however, That the phrase "doing business" shall not be deemed to include
mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having a nominee director or officer to represent its interests in such corporation; nor
appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own
account; (Emphases added)
PIL’s alleged acts in actively negotiating to employ Todaro to run its pre-mixed concrete operations in the Philippines, which acts are
hypothetically admitted in PIL’s motion to dismiss, are not mere acts of a passive investor in a domestic corporation. Such are
managerial and operational acts in directing and establishing commercial operations in the Philippines. The annexes that Todaro
attached to his complaint give us an idea on the extent of PIL’s involvement in the negotiations regarding Todaro’s employment. In
Annex "E," McDonald of Pioneer Concrete Group HK confirmed his offer to engage Todaro as a consultant of PIL. In Annex "F," Todaro
accepted the consultancy. In Annex "H," Klepzig of PPHI stated that PIL authorized him to tell Todaro about the cessation of his
consultancy. Finally, in Annex "I," Folwell of PIL wrote to Todaro to confirm that "Pioneer" no longer wishes to be associated with Todaro
and that Klepzig is authorized to terminate this association. Folwell further referred to a Dr. Schubert and to Pioneer Hong Kong. These
confirmations and references tell us that, in this instance, the various officers and companies under the Pioneer brand name do not
work independently of each other. It cannot be denied that PIL had knowledge of and even authorized the non-implementation of
Todaro’s alleged permanent employment. In fact, in the letters to Todaro, the word "Pioneer" was used to refer not just to PIL alone but
also to all corporations negotiating with Todaro under the Pioneer name.
As further proof of the interconnection of the various Pioneer corporations with regard to their negotiations with Todaro, McDonald of
Pioneer Concrete Group HK confirmed Todaro’s engagement as consultant of PIL (Annex "E") while Folwell of PIL stated that Todaro
rendered consultancy services to Pioneer HK (Annex "I"). In this sense, the various Pioneer corporations were not acting as separate
corporations. The behavior of the various Pioneer corporations shoots down their defense that the corporations have separate and
distinct personalities, managements, and operations. The various Pioneer corporations were all working in concert to negotiate an
employment contract between Todaro and PPHI, a domestic corporation.
Finally, the phrase "doing business in the Philippines" in the former version of Section 12, Rule 14 now reads "has transacted business in
the Philippines." The scope is thus broader in that it is enough for the application of the Rule that the foreign private juridical entity "has
transacted business in the Philippines."26
As to the second sub-issue, the purpose of summons is not only to acquire jurisdiction over the person of the defendant, but also to give
notice to the defendant that an action has been commenced against it and to afford it an opportunity to be heard on the claim
made against it. The requirements of the rule on summons must be strictly followed; otherwise, the trial court will not acquire jurisdiction
over the defendant.
When summons is to be served on a natural person, service of summons should be made in person on the defendant. 27 Substituted
service is resorted to only upon the concurrence of two requisites: (1) when the defendant cannot be served personally within a
reasonable time and (2) when there is impossibility of prompt service as shown by the statement in the proof of service in the efforts
made to find the defendant personally and that such efforts failed. 28
The statutory requirements of substituted service must be followed strictly, faithfully, and fully, and any substituted service other than by
the statute is considered ineffective. Substituted service is in derogation of the usual method of service. It is a method extraordinary in
character and may be used only as prescribed and in the circumstances authorized by the statute. 29 The need for strict compliance
with the requirements of the rule on summons is also exemplified in the exclusive enumeration of the agents of a domestic private
juridical entity who are authorized to receive summons.
At present, Section 11 of Rule 14 provides that when the defendant is a domestic private juridical entity, service may be made on the
"president, managing partner, general manager, corporate secretary, treasurer, or in-house counsel." The previous version of Section 11
allowed for the service of summons on the "president, manager, secretary, cashier, agent, or any of its directors." The present Section
11 qualified "manager" to "general manager" and "secretary" to "corporate secretary." The present Section 11 also removed "cashier,
agent, or any of its directors" from the exclusive enumeration.
When summons is served on a foreign juridical entity, there are three prescribed ways: (1) service on its resident agent designated in
accordance with law for that purpose, (2) service on the government official designated by law to receive summons if the corporation
does not have a resident agent, and (3) service on any of the corporation’s officers or agents within the Philippines. 30
In the present case, service of summons on PIL failed to follow any of the prescribed processes. PIL had no resident agent in the
Philippines. Summons was not served on the Securities and Exchange Commission (SEC), the designated government agency, 31 since
PIL is not registered with the SEC. Summons for PIL was served on De Leon, Klepzig’s Executive Assistant. Klepzig is PIL’s "agent within the
Philippines" because PIL authorized Klepzig to notify Todaro of the cessation of his consultancy (Annexes "H" and "I"). 32 The authority
given by PIL to Klepzig to notify Todaro implies that Klepzig was likewise authorized to receive Todaro’s response to PIL’s notice. Todaro
responded to PIL’s notice by filing a complaint before the trial court.
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However, summons was not served personally on Klepzig as agent of PIL. Instead, summons was served on De Leon, Klepzig’s Executive
Assistant. In this instance, De Leon was not PIL’s agent but a mere employee of Klepzig. In effect, the sheriff 33 resorted to substituted
service. For symmetry, we apply the rule on substituted service of summons on a natural person and we find that no reason was given
to justify the service of PIL’s summons on De Leon.
Thus, we rule that PIL transacted business in the Philippines and Klepzig was its agent within the Philippines. However, there was
improper service of summons on PIL since summons was not served personally on Klepzig.
NLRC Jurisdiction
As to the second level, Todaro prays for payment of damages due him because of PIL’s non-implementation of Todaro’s alleged
employment agreement with PPHI. The appellate court stated its ruling on this matter, thus:
It could not be denied that there was no existing contract yet to speak of between PIONEER INTL. and [Todaro]. Since there
was an absence of an employment contract between the two parties, this Court is of the opinion and so holds that no
employer-employee relationship actually exists. Record reveals that all that was agreed upon by [Todaro] and the Pioneer
Concrete, acting in behalf of PIONEER INTL., was the confirmation of the offer to engage the services of the former as
consultant of PIONEER INTL. (Rollo, p. 132). The failure on the part of PIONEER INTL. to abide by the said agreement, which was
duly confirmed by PIONEER INTL., brought about a breach of an obligation on a valid and perfected agreement. There being
no employer-employee relationship established between [PIL] and [Todaro], it could be said that the instant case falls within
the jurisdiction of the regular courts of justice as the money claim of [Todaro] did not arise out of or in connection with [an]
employer-employee relationship.34
Todaro’s employment in the Philippines would not be with PIL but with PPHI as stated in the 20 October 1997 letter of Folwell. Assuming
the existence of the employment agreement, the employer-employee relationship would be between PPHI and Todaro, not between
PIL and Todaro. PIL’s liability for the non-implementation of the alleged employment agreement is a civil dispute properly belonging to
the regular courts. Todaro’s causes of action as stated in his complaint are, in addition to breach of contract, based on "violation of
Articles 19 and 21 of the New Civil Code" for the "clear and evident bad faith and malice" 35 on the part of defendants. The NLRC’s
jurisdiction is limited to those enumerated under Article 217 of the Labor Code.36
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision dated 27 September 2001 and the Resolution dated 14 January 2003 of
the appellate court are AFFIRMED with the MODIFICATION that there was improper service of summons on Pioneer International, Ltd.
The case is remanded to the trial court for proper service of summons and trial. No costs.
SO ORDERED.
12. Regner v. Logarta, G.R. No. 168747, [October 19, 2007], 562 PHIL 862-886 Jueves
13. Perkin Elmer Singapore Pte Ltd. v. Dakila Trading Corp. , G.R. No. 172242, [August 14, 2007], 556 PHIL 822-852 Jungco
14. Palma v. Galvez, G.R. No. 165273, [March 10, 2010], 629 PHIL 86-100 Maturan
CASE NO. 14
G.R. No. 165273. March 10, 2010.*
LEAH PALMA, petitioner, vs. HON. DANILO P. GALVEZ, in his capacity as PRESIDING JUDGE of the REGIONAL TRIAL COURT OF ILOILO CITY,
BRANCH 24; and PSYCHE ELENA AGUDO, respondents.
Remedial Law; Certiorari; A petition for certiorari is proper when any tribunal, board or officer exercising judicial or quasi-judicial
functions has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction and
there in no appeal, or any plain, speedy and adequate remedy at law. —Private respondent’s claim that the petition for certiorari
under Rule 65 is a wrong remedy thus the petition should be dismissed, is not persuasive. A petition for certiorari is proper when any
tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction, or with grave abuse
of discretion amounting to lack or excess of jurisdiction and there is no appeal, or any plain, speedy, and adequate remedy at law.
There is “grave abuse of discretion” when public respondent acts in a capricious or whimsical manner in the exercise of its judgment as
to be equivalent to lack of jurisdiction.
Same; Same; While Section 1, Rule 65 requires that the petition for certiorari be verified, this is not an absolute necessity where
the material facts alleged are a matter of record and the questions raised are mainly of law. —Anent private respondent’s allegation
that the petition was not properly verified, we find the same to be devoid of merit. The purpose of requiring a verification is to secure
an assurance that the allegations of the petition have been made in good faith, or are true and correct, not merely speculative. In this
instance, petitioner attached a verification to her petition although dated earlier than the filing of her petition. Petitioner explains that
73
since a draft of the petition and the verification were earlier sent to her in New York for her signature, the verification was earlier dated
than the petition for certiorari filed with us. We accept such explanation. While Section 1, Rule 65 requires that the petition for certiorari
be verified, this is not an absolute necessity where the material facts alleged are a matter of record and the questions raised are
mainly of law. In this case, the issue raised is purely of law.
Same; Summons; Jurisdiction; Methods of service of summons under Section 16 of Rule 14 is not mandatory; Modes of service of
a resident defendants in temporarily out of the Philippines. —In Montefalcon v. Vasquez, 554 SCRA 513 (2008) we said that because
Section 16 of Rule 14 uses the words “may” and “also,” it is not mandatory. Other methods of service of summons allowed under the
Rules may also be availed of by the serving officer on a defendant-resident who is temporarily out of the Philippines. Thus, if a resident
defendant is temporarily out of the country, any of the following modes of service may be resorted to: (1) substituted service set forth in
section 7 (formerly Section 8), Rule 14; (2) personal service outside the country, with leave of court; (3) service by publication, also with
leave of court; or (4) in any other manner the court may deem sufficient.
Same; Same; Same; A dwelling house or residence refers to the place where the person named in the summons is living at the
time when the service is made, even though he may be temporarily out of the country at the time. —We have held that a dwelling,
house or residence refers to the place where the person named in the summons is living at the time when the service is made, even
though he may be temporarily out of the country at the time. It is, thus, theservice of the summons intended for the defendant that
must be left with the person of suitable age and discretion residing in the house of the defendant. Compliance with the rules regarding
the service of summons is as important as the issue of due process as that of jurisdiction.
Same; Same; Same; The filing of motions seeking affirmative relief such as to admit answer, for additional ti me to file answer, for
reconsideration of a default judgement and to lift order of default with motion for reconsideration and considered voluntary
submission to the jurisdiction of the court. —We agree with petitioner that the RTC had indeed acquired jurisdiction over the person of
private respondent when the latter’s counsel entered his appearance on private respondent’s behalf, without qualification and
without questioning the propriety of the service of summons, and even filed two Motions for Extension of Time to File Answer. In effect,
private respondent, through counsel, had already invoked the RTC’s jurisdiction over her person by praying that the motions for
extension of time to file answer be granted. We have held that the filing of motions seeking affirmative relief, such as, to admit answer,
for additional time to file answer, for reconsideration of a default judgment, and to lift order of default with motion for reconsideration,
are considered voluntary submission to the jurisdiction of the court . When private respondent earlier invoked the jurisdiction of the RTC
to secure affirmative relief in her motions for additional time to file answer, she voluntarily submitted to the jurisdiction of the RTC and is
thereby estopped from asserting otherwise.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
Rico & Associates for petitioner.
Alcantara Law Office for Psyche Elena Agudo.
PERALTA, J.:
Assailed in this petition for certiorari under Rule 65 of the Rules of Court are the Orders dated May 7, 2004 1 and July 21, 2004 of the
Regional Trial Court (RTC) of Iloilo City, Branch 24, granting the motion to dismiss filed by private respondent Psyche Elena Agudo and
denying reconsideration thereof, respectively.
On July 28, 2003, petitioner Leah Palma filed with the RTC an action for damages against the Philippine Heart Center (PHC), Dr.
Danilo Giron and Dr. Bernadette O. Cruz, alleging that the defendants committed professional fault, negligence and omission for
having removed her right ovary against her will, and losing the same and the tissues extracted from her during the surgery; and that
although the specimens were subsequently found, petitioner was doubtful and uncertain that the same was hers as the label therein
pertained that of somebody else. Defendants filed their respective Answers. Petitioner subsequently filed a Motion for Leave to Admit
Amended Complaint, praying for the inclusion of additional defendants who were all nurses at the PHC, namely, Karla Reyes, Myra
Mangaser and herein private respondent Agudo. Thus, summons were subsequently issued to them.
On February 17, 2004, the RTC’s process server submitted his return of summons stating that the alias summons, together with a
copy of the amended complaint and its annexes, were served upon private respondent thru her husband Alfredo Agudo, who
received and signed the same as private respondent was out of the country.3
On March 1, 2004, counsel of private respondent filed a Notice of Appearance and a Motion for Extension of Time to File Answer 4
stating that he was just engaged by private respondent’s husband as she was out of the country and the Answer was already due.
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On March 15, 2004, private respondent’s counsel filed a Motion for Another Extension of Time to File Answer, 5 and stating that while
the draft answer was already finished, the same would be sent to private respondent for her clarification/verification before the
Philippine Consulate in Ireland; thus, the counsel prayed for another 20 days to file the Answer.
On March 30, 2004, private respondent filed a Motion to Dismiss 6 on the ground that the RTC had not acquired jurisdiction over her
as she was not properly served with summons, since she was temporarily out of the country; that service of summons on her should
conform to Section 16, Rule 14 of the Rules of Court. Petitioner filed her Opposition 7 to the motion to dismiss, arguing that a substituted
service of summons on private respondent’s husband was valid and binding on her; that service of summons under Section 16, Rule 14
was not exclusive and may be effected by other modes of service, i.e., by personal or substituted service. Private respondent filed a
Comment8 on petitioner’s Opposition, and petitioner filed a Reply9 thereto.
On May 7, 2004, the RTC issued its assailed Order granting private respondent’s motion to dismiss. It found that while the summons
was served at private respondent’s house and received by respondent’s husband, such service did not qualify as a valid service of
summons on her as she was out of the country at the time the summons was served, thus, she was not personally served a summons;
and even granting that she knew that a complaint was filed against her, nevertheless, the court did not acquire jurisdiction over her
person as she was not validly served with summons; that substituted service could not be resorted to since it was established that
private respondent was out of the country, thus, Section 16, Rule 14 provides for the service of summons on her by publication.
Petitioner filed a motion for reconsideration, which the RTC denied in its Order dated July 21, 2004.
Petitioner is now before us alleging that the public respondent committed a grave abuse of discretion amounting to lack or excess
of jurisdiction when he ruled that:
I. Substituted service of summons upon private respondent, a defendant residing in the Philippines but temporarily outside the
country is invalid;
II. Section 16, Rule 14, of the 1997 Rules of Civil Procedure limits the mode of service of summons upon a defendant residing in the
Philippines, but temporarily outside the country, exclusively to extraterritorial service of summons under section 15 of the same rule;
III. In not ruling that by filing two (2) motions for extension of time to file Answer, private respondent had voluntarily submitted herself
to the jurisdiction of respondent court, pursuant to Section 20, Rule 14 of the 1997 Rules of Civil Procedure, hence, equivalent to having
been served with summons;
IV. The cases cited in his challenged Order of May 7, 2004 constitute stare decisis despite his own admission that the factual
landscape in those decided cases are entirely different from those in this case. 10
Petitioner claims that the RTC committed a grave abuse of discretion in ruling that Section 16, Rule 14, limits the service of summons
upon the defendant-resident who is temporarily out of the country exclusively by means of extraterritorial service, i.e., by personal
service or by publication, pursuant to Section 15 of the same Rule. Petitioner further argues that in filing two motions for extension of
time to file answer, private respondent voluntarily submitted to the jurisdiction of the court.
In her Comment, private respondent claims that petitioner’s certiorari under Rule 65 is not the proper remedy but a petition for
review under Rule 45, since the RTC ruling cannot be considered as having been issued with grave abuse of discretion; that the petition
was not properly verified because while the verification was dated September 15, 2004, the petition was dated September 30, 2004.
She insists that since she was out of the country at the time the service of summons was made, such service should be governed by
Section 16, in relation to Section 15, Rule 14 of the Rules of Court; that there was no voluntary appearance on her part when her
counsel filed two motions for extension of time to file answer, since she filed her motion to dismiss on the ground of lack of jurisdiction
within the period provided under Section 1, Rule 16 of the Rules of Court.
In her Reply, petitioner claims that the draft of the petition and the verification and certification against forum shopping were sent
to her for her signature earlier than the date of the finalized petition, since the petition could not be filed without her signed verification.
Petitioner avers that when private respondent filed her two motions for extension of time to file answer, no special appearance was
made to challenge the validity of the service of summons on her.
The parties subsequently filed their respective memoranda as required.
We shall first resolve the procedural issues raised by private respondent.
Private respondent’s claim that the petition for certiorari under Rule 65 is a wrong remedy thus the petition should be dismissed, is
not persuasive. A petition for certiorari is proper when any tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction and there is no
appeal, or any plain, speedy, and adequate remedy at law. 11 There is “grave abuse of discretion” when public respondent acts in a
capricious or whimsical manner in the exercise of its judgment as to be equivalent to lack of jurisdiction.
75
Section 1, Rule 41 of the 1997 Rules of Civil Procedure states that an appeal may be taken only from a final order that completely
disposes of the case; that no appeal may be taken from (a) an order denying a motion for new trial or reconsideration; (b) an order
denying a petition for relief or any similar motion seeking relief from judgment; (c) an interlocutory order; (d) an order disallowing or
dismissing an appeal; (e) an order denying a motion to set aside a judgment by consent, confession or compromise on the ground of
fraud, mistake or duress, or any other ground vitiating consent; (f) an order of execution; (g) a judgment or final order for or against one
or more of several parties or in separate claims, counterclaims, cross-claims and third-party complaints, while the main case is
pending, unless the court allows an appeal therefrom; or (h) an order dismissing an action without prejudice. In all the above instances
where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action for certiorari
under Rule 65.
In this case, the RTC Order granting the motion to dismiss filed by private respondent is a final order because it terminates the
proceedings against her, but it falls within exception (g) of the Rule since the case involves several defendants, and the complaint for
damages against these defendants is still pending. 12 Since there is no appeal, or any plain, speedy, and adequate remedy in law, the
remedy of a special civil action for certiorari is proper as there is a need to promptly relieve the aggrieved party from the injurious
effects of the acts of an inferior court or tribunal. 13
Anent private respondent’s allegation that the petition was not properly verified, we find the same to be devoid of merit. The
purpose of requiring a verification is to secure an assurance that the allegations of the petition have been made in good faith, or are
true and correct, not merely speculative.14 In this instance, petitioner attached a verification to her petition although dated earlier than
the filing of her petition. Petitioner explains that since a draft of the petition and the verification were earlier sent to her in New York for
her signature, the verification was earlier dated than the petition for certiorari filed with us. We accept such explanation. While Section
1, Rule 65 requires that the petition for certiorari be verified, this is not an absolute necessity where the material facts alleged are a
matter of record and the questions raised are mainly of law. 15 In this case, the issue raised is purely of law.
Now on the merits, the issue for resolution is whether there was a valid service of summons on private respondent.
In civil cases, the trial court acquires jurisdiction over the person of the defendant either by the service of summons or by the
latter’s voluntary appearance and submission to the authority of the former. 16 Private respondent was a Filipino resident who was
temporarily out of the Philippines at the time of the service of summons; thus, service of summons on her is governed by Section 16, Rule
14 of the Rules of Court, which provides:
“Sec. 16. Residents temporarily out of the Philippines .—When an action is commenced against a defendant who ordinarily resides
within the Philippines, but who is temporarily out of it, service may, by leave of court, be also effected out of the Philippines, as under
the preceding section.” (Emphasis supplied)
The preceding section referred to in the above provision is Section 15, which speaks of extraterritorial service, thus:
“SEC. 15. Extraterritorial service.—When the defendant does not reside and is not found in the Philippines, and the action affects
the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or
claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant
from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be
effected out of the Philippines by personal service as under section 6; or by publication in a newspaper of general circulation in such
places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by
registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting
such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must
answer.”
The RTC found that since private respondent was abroad at the time of the service of summons, she was a resident who was
temporarily out of the country; thus, service of summons may be made only by publication.
We do not agree.
In Montefalcon v. Vasquez,17 we said that because Section 16 of Rule 14 uses the words “may” and “also,” it is not mandatory.
Other methods of service of summons allowed under the Rules may also be availed of by the serving officer on a defendant-resident
who is temporarily out of the Philippines. Thus, if a resident defendant is temporarily out of the country, any of the following modes of
service may be resorted to: (1) substituted service set forth in section 7 (formerly Section 8), Rule 14; (2) personal service outside the
country, with leave of court; (3) service by publication, also with leave of court; or (4) in any other manner the court may deem
sufficient.18
In Montalban v. Maximo,19 we held that substituted service of summons under the present Section 7, Rule 14 of the Rules of Court in
a suit in personam against residents of the Philippines temporarily absent therefrom is the normal method of service of summons that
will confer jurisdiction on the court over such defendant. In the same case, we expounded on the rationale in providing for substituted
service as the normal mode of service for residents temporarily out of the Philippines.
76
“x x x A man temporarily absent from this country leaves a definite place of residence, a dwelling where he lives, a local base, so to
speak, to which any inquiry about him may be directed and where he is bound to return. Where one temporarily absents himself, he
leaves his affairs in the hands of one who may be reasonably expected to act in his place and stead; to do all that is necessary to
protect his interests; and to communicate with him from time to time any incident of importance that may affect him or his business or
his affairs. It is usual for such a man to leave at his home or with his business associates information as to where he may be contacted in
the event a question that affects him crops up. If he does not do what is expected of him, and a case comes up in court against him,
he cannot just raise his voice and say that he is not subject to the processes of our courts. He cannot stop a suit from being filed against
him upon a claim that he cannot be summoned at his dwelling house or residence or his office or regular place of business.
Not that he cannot be reached within a reasonable time to enable him to contest a suit against him. There are now advanced
facilities of communication. Long distance telephone calls and cablegrams make it easy for one he left behind to communicate with
him.”20
Considering that private respondent was temporarily out of the country, the summons and complaint may be validly served on her
through substituted service under Section 7, Rule 14 of the Rules of Court which reads:
“SEC. 7. Substituted service.—If, for justifiable causes, the defendant cannot be served within a reasonable time as provided in the
preceding section, service may be effected (a) by leaving copies of the summons at the defendant’s residence with some person of
suitable age and discretion then residing therein, or (b) by leaving the copies at defendant’s office or regular place of business with
some competent person in charge thereof.”
We have held that a dwelling, house or residence refers to the place where the person named in the summons is living at the time
when the service is made, even though he may be temporarily out of the country at the time. 21 It is, thus, the service of the summons
intended for the defendant that must be left with the person of suitable age and discretion residing in the house of the defendant.
Compliance with the rules regarding the service of summons is as important as the issue of due process as that of jurisdiction. 22
Section 7 also designates the persons with whom copies of the process may be left. The rule presupposes that such a relation of
confidence exists between the person with whom the copy is left and the defendant and, therefore, assumes that such person will
deliver the process to defendant or in some way give him notice thereof. 23
In this case, the Sheriff’s Return stated that private respondent was out of the country; thus, the service of summons was made at
her residence with her husband, Alfredo P. Agudo, acknowledging receipt thereof. Alfredo was presumably of suitable age and
discretion, who was residing in that place and, therefore, was competent to receive the summons on private respondent’s behalf.
Notably, private respondent makes no issue as to the fact that the place where the summons was served was her residence,
though she was temporarily out of the country at that time, and that Alfredo is her husband. In fact, in the notice of appearance and
motion for extension of time to file answer submitted by private respondent’s counsel, he confirmed the Sheriff’s Return by stating that
private respondent was out of the country and that his service was engaged by respondent’s husband. In his motion for another
extension of time to file answer, private respondent’s counsel stated that a draft of the answer had already been prepared, which
would be submitted to private respondent, who was in Ireland for her clarification and/or verification before the Philippine Consulate
there. These statements establish the fact that private respondent had knowledge of the case filed against her, and that her husband
had told her about the case as Alfredo even engaged the services of her counsel.
In addition, we agree with petitioner that the RTC had indeed acquired jurisdiction over the person of private respondent when the
latter’s counsel entered his appearance on private respondent’s behalf, without qualification and without questioning the propriety of
the service of summons, and even filed two Motions for Extension of Time to File Answer. In effect, private respondent, through counsel,
had already invoked the RTC’s jurisdiction over her person by praying that the motions for extension of time to file answer be granted.
We have held that the filing of motions seeking affirmative relief, such as, to admit answer, for additional time to file answer, for
reconsideration of a default judgment, and to lift order of default with motion for reconsideration, are considered voluntary submission
to the jurisdiction of the court.24 When private respondent earlier invoked the jurisdiction of the RTC to secure affirmative relief in her
motions for additional time to file answer, she voluntarily submitted to the jurisdiction of the RTC and is thereby estopped from asserting
otherwise.25
Considering the foregoing, we find that the RTC committed a grave abuse of discretion amounting to excess of jurisdiction in
issuing its assailed Orders.
WHEREFORE, the petition is GRANTED. The Orders dated May 7, 2004 and July 21, 2004 of the Regional Trial Court of Iloilo City,
Branch 24, are hereby SET ASIDE. Private respondent is DIRECTED to file her Answer within the reglementary period from receipt of this
decision.
SO ORDERED.
Corona (Chairperson), Velasco, Jr., Nachura and Mendoza, JJ., concur.
Petition granted, orders dated May 7, 2004 and July 21, 2004 of Regional Trial Court of Iloilo City, Br. 24 set aside.
77
Note.—To acquire jurisdiction over the person of a defendant, service of summons must be personal or if this is not feasible within a
reasonable time then by substituted service. (Montefalcon vs. Vasquez, 554 SCRA 513 [2008])
——o0o——
15. Hahn v. Court of Appeals, G.R. No. 113074, [January 22, 1997], 334 PHIL 491-507 Miranda
G.R. No. 113074 January 22, 1997
ALFRED HAHN, Petitioner, v. COURT OF APPEALS and BAYERSCHE MOTOREN WERKE AKTIENGSELLSCHAFT (BMW), Respondents.
MENDOZA, J.:
This is a petition for review of the decision 1 of the Court of Appeals dismissing a complaint for specific performance which petitioner
had filed against private respondent on the ground that the Regional Trial Court of Quezon City did not acquire jurisdiction over private
respondent, a nonresident foreign corporation, and of the appellate court's order denying petitioner's motion for reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila." On the other hand, private
respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign corporation existing under the laws of the
former Federal Republic of Germany, with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with Special Power of Attorney," which
reads in full as follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and device in the Philippines which ASSIGNOR uses
and has been using on the products manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized exclusive Dealer of the
ASSIGNEE in the Philippines, the same being evidenced by certificate of registration issued by the Director of Patents on 12 December
1963 and is referred to as Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer of the said BMW trademark and device in favor
of the ASSIGNEE herein with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration of the stipulations hereunder stated, the ASSIGNOR hereby affirms the
said assignment and transfer in favor of the ASSIGNEE under the following terms and conditions:
1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR or infringer of the BMW trademark in the Philippines;
for such purpose, the ASSIGNOR shall inform the ASSIGNEE immediately of any such use or infringement of the said trademark which
comes to his knowledge and upon such information the ASSIGNOR shall automatically act as Attorney-In-Fact of the ASSIGNEE for such
case, with full power, authority and responsibility to prosecute unilaterally or in concert with ASSIGNEE, any such infringer of the subject
mark and for purposes hereof the ASSIGNOR is hereby named and constituted as ASSIGNEE's Attorney-In-Fact, but any such suit without
ASSIGNEE's consent will exclusively be the responsibility and for the account of the ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been usual in the past without a formal contract, and
for that purpose, the dealership of ASSIGNOR shall cover the ASSIGNEE's complete production program with the only limitation that, for
the present, in view of ASSIGNEE's limited production, the latter shall not be able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has been usual in the past without a formal contract." But on February
16, 1993, in a meeting with a BMW representative and the president of Columbia Motors Corporation (CMC), Jose Alvarez, petitioner
was informed that BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC, which had expressed
interest in acquiring the same. On February 24, 1993, petitioner received confirmation of the information from BMW which, in a letter,
expressed dissatisfaction with various aspects of petitioner's business, mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the standards for an
exclusive BMW dealer. 2 Nonetheless, BMW expressed willingness to continue business relations with the petitioner on the basis of a
"standard BMW importer" contract, otherwise, it said, if this was not acceptable to petitioner, BMW would have no alternative but to
terminate petitioner's exclusive dealership effective June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive dealership would be a breach of the Deed of Assignment. 3 Hahn
insisted that as long as the assignment of its trademark and device subsisted, he remained BMW's exclusive dealer in the Philippines
because the assignment was made in consideration of the exclusive dealership. In the same letter petitioner explained that the
78
decline in sales was due to lower prices offered for BMW cars in the United States and the fact that few customers returned for repairs
and servicing because of the durability of BMW parts and the efficiency of petitioner's service.
Because of Hahn's insistence on the former business relation, BMW withdrew on March 26, 1993 its offer of a "standard importer
contract" and terminated the exclusive dealer relationship effective June 30, 1993. 4 At a conference of BMW Regional Importers held
on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez among those invited from the Asian region. On April 29, 1993, BMW
proposed that Hahn and CMC jointly import and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific performance and damages against BMW
to compel it to continue the exclusive dealership. Later he filed an amended complaint to include an application for temporary
restraining order and for writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive
dealership. Hahn's amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the Philippines with principal offices at Munich, Germany. It may be
served with summons and other court processes through the Secretary of the Department of Trade and Industry of the Philippines. . . .
xxx xxx xxx
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment with Special Power of Attorney covering the
trademark and in consideration thereof, under its first whereas clause, Plaintiff was duly acknowledged as the "exclusive Dealer of the
Assignee in the Philippines. . . .
xxx xxx xxx
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff, through its firm
name "HAHN MANILA" and without any monetary contribution from defendant BMW, established BMW's goodwill and market presence
in the Philippines. Pursuant thereto, Plaintiff has invested a lot of money and resources in order to single-handedly compete against
other motorcycle and car companies. . . . Moreover, Plaintiff has built buildings and other infrastructures such as service centers and
showrooms to maintain and promote the car and products of defendant BMW.
xxx xxx xxx
10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was willing to maintain with Plaintiff a relationship but
only "on the basis of a standard BMW importer contract as adjusted to reflect the particular situation in the Philippines" subject to
certain conditions, otherwise, defendant BMW would terminate Plaintiffs exclusive dealership and any relationship for cause effective
June 30, 1993. . . .
xxx xxx xxx
15. The actuations of defendant BMW are in breach of the assignment agreement between itself and plaintiff since the consideration
for the assignment of the BMW trademark is the continuance of the exclusive dealership agreement. It thus, follows that the exclusive
dealership should continue for so long as defendant BMW enjoys the use and ownership of the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of the Quezon City Regional Trial Court, which on June
14, 1993 issued a temporary restraining order. Summons and copies of the complaint and amended complaint were thereafter served
on the private respondent through the Department of Trade and Industry, pursuant to Rule 14, 14 of the Rules of Court. The order,
summons and copies of the complaint and amended complaint were later sent by the DTI to BMW via registered mail on June 15, 1993
5 and received by the latter on June 24, 1993.
On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of preliminary injunction proceeded ex
parte, with petitioner Hahn testifying. On June 30, 1993, the trial court issued an order granting the writ of preliminary injunction upon
the filing of a bond of P100,000.00. On July 13, 1993, following the posting of the required bond, a writ of preliminary injunction was
issued.
On July 1, 1993, BMW moved to dismiss the case, contending that the trial court did not acquire jurisdiction over it through the service
of summons on the Department of Trade and Industry, because it (BMW) was a foreign corporation and it was not doing business in the
Philippines. It contended that the execution of the Deed of Assignment was an isolated transaction; that Hahn was not its agent
because the latter undertook to assemble and sell BMW cars and products without the participation of BMW and sold other products;
and that Hahn was an indentor or middleman transacting business in his own name and for his own account.
79
Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing business in the Philippines through him as its agent, as
shown by the fact that BMW invoices and order forms were used to document his transactions; that he gave warranties as exclusive
BMW dealer; that BMW officials periodically inspected standards of service rendered by him; and that he was described in service
booklets and international publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines.
The trial court 6 deferred resolution of the motion to dismiss until after trial on the merits for the reason that the grounds advanced by
BMW in its motion did not seem to be indubitable.
Without seeking reconsideration of the aforementioned order, BMW filed a petition for certiorari with the Court of Appeals alleging
that:
I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE INJUDICIOUSLY IN PROCEEDINGS LEADING TOWARD THE ISSUANCE
OF THE WRIT OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE TERMS FOR THE ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF THE MOTION TO DISMISS ON THE GROUND OF LACK OF
JURISDICTION, AND THEREBY FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining order and, after hearing, for a writ of preliminary injunction, to enjoin
the trial court from proceeding further in Civil Case No. Q-93-15933. Private respondent pointed out that, unless the trial court's order
was set aside, it would be forced to submit to the jurisdiction of the court by filing its answer or to accept judgment in default, when the
very question was whether the court had jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20, 1993, it rendered judgment finding
the trial court guilty of grave abuse of discretion in deferring resolution of the motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before it came out with its questioned order of July 26, 1993, we rule
and so hold that petitioner's (BMW) motion to dismiss could be resolved then and there, and that the respondent judge's deferment of
his action thereon until after trial on the merit constitutes, to our mind, grave abuse of discretion.
xxx xxx xxx
. . . [T]here is not much appreciable disagreement as regards the factual matters relating to the motion to dismiss. What truly divide
(sic) the parties and to which they greatly differ is the legal conclusions they respectively draw from such facts, (sic) with Hahn
maintaining that on the basis thereof, BMW is doing business in the Philippines while the latter asserts that it is not.
Then, after stating that any ruling which the trial court might make on the motion to dismiss would anyway be elevated to it on appeal,
the Court of Appeals itself resolved the motion. It ruled that BMW was not doing business in the country and, therefore, jurisdiction over
it could not be acquired through service of summons on the DTI pursuant to Rule 14, 14. 'The court upheld private respondent's
contention that Hahn acted in his own name and for his own account and independently of BMW, based on Alfred Hahn's allegations
that he had invested his own money and resources in establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn sold
products other than those of BMW. It held that petitioner was a mere indentor or broker and not an agent through whom private
respondent BMW transacted business in the Philippines. Consequently, the Court of Appeals dismissed petitioner's complaint against
BMW.
Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in finding that the trial court gravely abused its discretion in
deferring action on the motion to dismiss and (2) in finding that private respondent BMW is not doing business in the Philippines and, for
this reason, dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon private foreign corporations. - If the defendant is a foreign corporation, or a nonresident joint stock company or
association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that
purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents
within the Philippines. (Emphasis added).
What acts are considered "doing business in the Philippines" are enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No.
7042) as follows: 7
d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country 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 of commercial
80
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:
Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign
entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor having a nominee
director or officer to represent its interests in such corporation; nor appointing a representative or distributor domiciled in the Philippines
which transacts business in its own name and for its own account. (Emphasis supplied)
Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not when the representative or distributor
"transacts business in its name and for its own account." In addition, 1(f)(1) of the Rules and Regulations implementing (IRR) the
Omnibus Investment Code of 1987 (E.O. No. 226) provided:
(f) "Doing business" shall be any act or combination of acts, enumerated in Article 44 of the Code. In particular, "doing business"
includes:
(1) . . . A foreign firm which does business through middlemen acting in their own names, such as indentors, commercial brokers or
commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission
merchants shall be the ones deemed to be doing business in the Philippines.
The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW. If he is, BMW may
be considered doing business in the Philippines and the trial court acquired jurisdiction over it (BMW) by virtue of the service of
summons on the Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW but an independent dealer, albeit of
BMW cars and products, BMW, a foreign corporation, is not considered doing business in the Philippines within the meaning of the
Foreign Investments Act of 1991 and the IRR, and the trial court did not acquire jurisdiction over it (BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his own name and for his own account and not as agent or distributor in
the Philippines of BMW on the ground that "he alone had contacts with individuals or entities interested in acquiring BMW vehicles.
Independence characterizes Hahn's undertakings, for which reason he is to be considered, under governing statutes, as doing
business." (p. 13) In support of this conclusion, the appellate court cited the following allegations in Hahn's amended complaint:
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff, through its firm
name "HAHN MANILA" and without any monetary contributions from defendant BMW, established BMW's goodwill and market
presence in the Philippines. Pursuant thereto, Plaintiff invested a lot of money and resources in order to single-handedly compete
against other motorcycle and car companies. . . . Moreover, Plaintiff has built buildings and other infrastructures such as service centers
and showrooms to maintain and promote the car and products of defendant BMW.
As the above quoted allegations of the amended complaint show, however, there is nothing to support the appellate court's finding
that Hahn solicited orders alone and for his own account and without "interference from, let alone direction of, BMW." (p. 13) To the
contrary, Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the
downpayment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by
signing and returning to Hahn the acceptance sheets. Payment was made by the buyer directly to BMW. Title to cars purchased
passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a
commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the
vehicles had been registered in the Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn
performed after-sale services, including warranty services, for which he received reimbursement from BMW. All orders were on invoices
and forms of BMW. 8
These allegations were substantially admitted by BMW which, in its petition for certiorari before the Court of Appeals, stated: 9
9.4. As soon as the vehicles are fully manufactured and full payment of the purchase prices are made, the vehicles are shipped to the
Philippines. (The payments may be made by the purchasers or third-persons or even by Hahn.) The bills of lading are made up in the
name of the purchasers, but Hahn-Manila is therein indicated as the person to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of conducting pre-delivery inspections. Thereafter, he
delivers the vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission of fourteen percent (14%) of the full purchase
price thereof, and as soon as he confirms in writing that the vehicles have been registered in the Philippines and have been serviced
by him, he will receive an additional three percent (3%) of the full purchase prices as commission.
Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is
eventually made.
81
As to the service centers and showrooms which he said he had put up at his own expense, Hahn said that he had to follow BMW
specifications as exclusive dealer of BMW in the Philippines. According to Hahn, BMW periodically inspected the service centers to see
to it that BMW standards were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure to
maintain BMW standards that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an
agent of BMW. For as already noted, there are facts in the record which suggest that BMW exercised control over Hahn's activities as a
dealer and made regular inspections of Hahn's premises to enforce compliance with BMW standards and specifications. 10 For
example, in its letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions and letters that we have to tackle the Philippine market more
professionally and that we are through your present activities not adequately prepared to cope with the forthcoming challenges. 11
In effect, BMW was holding Hahn accountable to it under the 1967 Agreement.
This case fits into the mould of Communications Materials, Inc. v. Court of Appeals, 12 in which the foreign corporation entered into a
"Representative Agreement" and a "Licensing Agreement" with a domestic corporation, by virtue of which the latter was appointed
"exclusive representative" in the Philippines for a stipulated commission. Pursuant to these contracts, the domestic corporation sold
products exported by the foreign corporation and put up a service center for the products sold locally. This Court held that these acts
constituted doing business in the Philippines. The arrangement showed that the foreign corporation's purpose was to penetrate the
Philippine market and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it announced in the Asian
region that Hahn was the "official BMW agent" in the Philippines. 13
The Court of Appeals also found that petitioner Alfred Hahn dealt in other products, and not exclusively in BMW products, and, on this
basis, ruled that Hahn was not an agent of BMW. (p. 14) This finding is based entirely on allegations of BMW in its motion to dismiss filed
in the trial court and in its petition for certiorari before the Court of Appeals. 14 But this allegation was denied by Hahn 15 and therefore
the Court of Appeals should not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should have indicated to the Court of Appeals the necessity of affirming the trial
court's order deferring resolution of BMW's motion to dismiss. Petitioner alleged that whether or not he is considered an agent of BMW,
the fact is that BMW did business in the Philippines because it sold cars directly to Philippine buyers. 16 This was denied by BMW, which
claimed that Hahn was not its agent and that, while it was true that it had sold cars to Philippine buyers, this was done without
solicitation on its part. 17
It is not true then that the question whether BMW is doing business could have been resolved simply by considering the parties'
pleadings. There are genuine issues of facts which can only be determined on the basis of evidence duly presented. BMW cannot short
circuit the process on the plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the trial court
which precisely it denies. Rule 16, 3 authorizes courts to defer the resolution of a motion to dismiss until after the trial if the ground on
which the motion is based does not appear to be indubitable. Here the record of the case bristles with factual issues and it is not at all
clear whether some allegations correspond to the proof.
Anyway, private respondent need not apprehend that by responding to the summons it would be waiving its objection to the trial
court's jurisdiction. It is now settled that, for purposes of having summons served on a foreign corporation in accordance with Rule 14,
14, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines. The court need not
go beyond the allegations of the complaint in order to determine whether it has Jurisdiction. 18 A determination that the foreign
corporation is doing business is only tentative and is made only for the purpose of enabling the local court to acquire jurisdiction over
the foreign corporation through service of summons pursuant to Rule 14, 14. Such determination does not foreclose a contrary finding
should evidence later show that it is not transacting business in the country. As this Court has explained:
This is not to say, however, that the petitioner's right to question the jurisdiction of the court over its person is now to be deemed a
foreclosed matter. If it is true, as Signetics claims, that its only involvement in the Philippines was through a passive investment in Sigfil,
which it even later disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to be doing business in the
Philippines. It is a defense, however, that requires the contravention of the allegations of the complaint, as well as a full ventilation, in
effect, of the main merits of the case, which should not thus be within the province of a mere motion to dismiss. So, also, the issue
posed by the petitioner as to whether a foreign corporation which has done business in the country, but which has ceased to do
business at the time of the filing of a complaint, can still be made to answer for a cause of action which accrued while it was doing
business, is another matter that would yet have to await the reception and admission of evidence. Since these points have seasonably
been raised by the petitioner, there should be no real cause for what may understandably be its apprehension, i.e., that by its
82
participation during the trial on the merits, it may, absent an invocation of separate or independent reliefs of its own, be considered to
have voluntarily submitted itself to the court's jurisdiction. 19
Far from committing an abuse of discretion, the trial court properly deferred resolution of the motion to dismiss and thus avoided
prematurely deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally
assumed jurisdiction. It is the Court of Appeals which, by ruling that BMW is not doing business on the basis merely of uncertain
allegations in the pleadings, disposed of the whole case with finality and thereby deprived petitioner of his right to be heard on his
cause of action. Nor was there justification for nullifying the writ of preliminary injunction issued by the trial court. Although the injunction
was issued ex parte, the fact is that BMW was subsequently heard on its defense by filing a motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the trial court for further proceedings.
SO ORDERED.
16. Communications Materials and Design, Inc. v. Court of Appeals, G.R. No. 102223, [August 22, 1996], 329 PHIL 487-511 Muana
17. Manila Hotel Corp. v. National Labor Relations Commission, G.R. No. 120077, [October 13, 2000], 397 PHIL 1-23 Santiago
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 C. SANTOS, respondents.
Certiorari; Pleadings and Practice; Where the petition involves pure questions of law, the same may be exempted from the ruling in St.
Martin Funeral Home v. NLRC, 295 SCRA 494 (1998).—On October 7, 1997, we resolved to give due course to the petition (Rollo, p. 217).
Petitioners filed their memorandum on December 1, 1997. The petition involves pure questions of law; thus, we except this case from
the ruling in St. Martin Funeral Home vs. NLRC, 295 SCRA 494 [1998]. Rather than refer the case to the Court of Appeals, whose decision
would be appealable to the Supreme Court, our ruling would finally put an end to the litigation.
Conflict of Laws; Forum Non Conveniens; Not all cases involving Filipino citizens can be tried in the Philippines.—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.
Same; Same; Requisites before a Philippine court or agency may assume jurisdiction over a conflict of laws case.—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. The
conditions are unavailing in the case at bar.
Same; Same; Labor Law; The Supreme Court cannot see how the NLRC is a convenient forum where all the incidents of the case–from
the time of recruitment, to employment to dismissal occurred outside the Philippines, an inconvenience is compounded by the fact
that the proper defendants are not nationals of the Philippines.—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.
Same; Same; Same; An intelligent decision cannot be made as to the law governing the employment contract where the same was
perfected in foreign soil.—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). 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.
Same; Same; Same; The NLRC cannot determine the facts surrounding the alleged illegal dismissal where all acts complained of took
place in a foreign country.—Neither can the NLRC determine the facts surrounding the alleged illegal dismissal as all acts complained
83
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.
Same; Same; Same: Principle of Effectiveness; Jurisdiction; Even if a proper decision could be reached by the NLRC, the same would
not have any binding effect against the foreign employer, an incorporated under the laws of a foreign state which was not even
served with summons.—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.
Corporation Law; Piercing the Veil of Corporate Fiction; The fact that a corporation owns fifty percent (50%) of the capital stock of
another corporation is not enough to pierce the veil of corporate fiction between the two corporations.—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. It is done only when a corporation is a mere alter ego or business conduit of a person or another corporation.
Same; Same; Tests in determining whether the corporate veil may be pierced.—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.
Same; Same; Evidence; Clear and convincing evidence is needed to pierce the veil of corporate fiction.—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. Clear and convincing evidence is needed to pierce the veil of corporate fiction. In this case, we find no evidence to show
that MHICL and MHC are one and the same entity.
Evidence; Witnesses; Words and Phrases; When one “notes” a contract, one is not expressing his agreement or approval, as a party
would– 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.—When one “notes” a contract, one is not expressing his agreement or approval, as
a party would. In Sichangco v. Board of Commissioners of Immigration, 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.
Same; Same; Same; 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.”—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).” 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.” One who “notes” something
just makes a “brief written statement” a memorandum or observation.
Labor Law; Employer-Employee Relationships; Elements.—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: “(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.”
Corporation Law; Piercing the Veil of Corporate Fiction; The fact that the Palace Hotel is a member of the “Manila Hotel Group” is not
enough to pierce the corporate veil.—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.
PARDO, J.:
The case before the Court is a petition for certiorari1 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
84
(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.

85
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
86
"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
87
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.
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
88
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

89
"(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).
90
No costs.
SO ORDERED.
18. Puyat v. Zabarte, G.R. No. 141536, [February 26, 2001], 405 PHIL 413-434 Said
GIL MIGUEL T. PUYAT, Petitioner, v. RON ZABARTE, Respondent.
G.R. No. 141536. February 26, 2001
DECISION
PANGANIBAN, J.:
Summary judgment in a litigation is resorted to if there is no genuine issue as to any material fact, other than the amount of damages. If
this verity is evident from the pleadings and the supporting affidavits, depositions and admissions on file with the court, the moving
party is entitled to such remedy as a matter of course.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, challenging the August 31, 1999 Decision 1 of the
Court of Appeals (CA), which affirmed the Regional Trial Court (RTC) of Pasig City, Branch 67 in Civil Case No. 64107; and the January
20, 2000 CA Resolution 2 which denied reconsideration.
The assailed CA Decision disposed as follows:
WHEREFORE, finding no error in the judgment appealed from, the same is AFFIRMED." 3
The Facts
The facts of this case, as narrated by the Court of Appeals, are as follows: 4cräläwvirtualibräry
It appears that on 24 January 1994, [Respondent] Ron Zabarte commenced [an action] to enforce the money judgment rendered by
the Superior Court for the State of California, County of Contra Costa, U.S.A. On 18 March 1994, [petitioner] filed his Answer with the
following special and affirmative defenses:
xxx
8) The Superior Court for the State of California, County of Contra Costa[,] did not properly acquire jurisdiction over the subject matter
of and over the persons involved in [C]ase #C21-00265.
9) The Judgment on Stipulations for Entry in Judgment in Case #C21-00265 dated December 12, 1991 was obtained without the
assistance of counsel for [petitioner] and without sufficient notice to him and therefore, was rendered in clear violation of [petitioners]
constitutional rights to substantial and procedural due process.
10) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated December 12, 1991 was procured by means of fraud
or collusion or undue influence and/or based on a clear mistake of fact and law.
11) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated December 12, 1991 is contrary to the laws, public
policy and canons of morality obtaining in the Philippines and the enforcement of such judgment in the Philippines would result in the
unjust enrichment of [respondent] at the expense of [petitioner] in this case.
12) The Judgment on Stipulation for Entry in Judgment in Case #C21-00265 dated December 12, 1991 is null and void and
unenforceable in the Philippines.
13) In the transaction, which is the subject matter in Case #C21-00265, [petitioner] is not in any way liable, in fact and in law, to
[respondent] in this case, as contained in [petitioners] Answer to Complaint in Case #C21-00265 dated April 1, 1991, Annex B of
[respondents] Complaint dated December 6, 1993.
14) [Respondent] is guilty of misrepresentation or falsification in the filing of his Complaint in this case dated December 6, 1993. Worse,
[respondent] has no capacity to sue in the Philippines.
91
15) Venue has been improperly laid in this case.
(Record, pp. 42-44)
On 1 August 1994, [respondent] filed a [M]otion for [S]ummary [J]udgment under Rule 34 of the Rules of Court alleging that the
[A]nswer filed by [petitioner] failed to tender any genuine issue as to the material facts. In his [O]pposition to [respondents]
motion, [petitioner] demurred as follows:
2) [Petitioner] begs to disagree[;] in support hereof, [he] wishes to mention that in his Answer with Special and Affirmative Defenses
dated March 16, 1994 [petitioner] has interposed that the Judgment on Stipulations for Entry in Judgment is null and void, fraudulent,
illegal and unenforceable, the same having been obtained by means of fraud, collusion, undue influence and/or clear mistake of fact
and law. In addition, [he] has maintained that said Judgment on Stipulations for Entry in Judgment was obtained without the
assistance of counsel for [petitioner] and without sufficient notice to him and therefore, was rendered in violation of his constitutional
rights to substantial and procedural due process.
The [M]otion for [S]ummary [J]udgment was set for hearing on 12 August 1994 during which [respondent] marked and submitted
in evidence the following:
Exhibit A - x x x Judgment on Stipulation For Entry In Judgment of the Supreme Court of the State of
California[,] County of Contra Costa[,] signed by Hon. Ellen James, Judge of the
Superior Court.
Exhibit B - x x x Certificate of Authentication of the [O]rder signed by the Hon. Ellen James, issued by the
Consulate General of the Republic of the Philippines.
Exhibit C - [R]eturn of the [W]rit of [E]xecution (writ unsatisfied) issued by the sheriff/marshall, County of
Santa Clara, State of California.
Exhibit D - [W]rit of [E]xecution
Exhibit 'E' [P]roof of [S]ervice of copies of [W]rit of [E]xecution, [N]otice of [L]evy, [M]emorandum of
[G]arnishee, [E]xemptions from [E]nforcement of [J]udgment.
Exhibit F - Certification issued by the Secretary of State, State of California that Stephen Weir is the duly
elected, qualified and acting [c]ounty [c]lerk of the County of Contra Costa of the
State of California.
Exhibit G - Certificate of [A]uthentication of the [W]rit of [E]xecution.
On 6 April 1995, the court a quo issued an [O]rder granting [respondents] [M]otion for [S]ummary [J]udgment [and] likewise granting
[petitioner] ten (10) days to submit opposing affidavits, after which the case would be deemed submitted for resolution (Record, pp.
152-153). [Petitioner] filed a [M]otion for [R]econsideration of the aforesaid [O]rder and [respondent] filed [C]omment. On 30 June
1995, [petitioner] filed a [M]otion to [D]ismiss on the ground of lack of jurisdiction over the subject matter of the case and forum-non-
conveniens (Record, pp. 166-170). In his [O]pposition to the [M]otion (Record, pp. 181-182) [respondent] contended that [petitioner
could] no longer question the jurisdiction of the lower court on the ground that [the latters] Answer had failed to raise the issue of
jurisdiction. [Petitioner] countered by asserting in his Reply that jurisdiction [could] not be fixed by agreement of the parties. The lower
court dismissed [his] [M]otion for [R]econsideration and [M]otion [to] [D]ismiss (Record, pp. 196-198), x x x.
The RTC 5 eventually rendered its February 21, 1997 Decision, 6 which disposed as follows:
WHEREFORE, judgment is hereby rendered, ordering [petitioner] to pay [respondent] the following amounts:
1. The amount of U.S. dollars $241,991.33, with the interest of legal rate from October 18, 1991, or its peso equivalent, pursuant to the
[J]udgment of [S]tipulation for [E]ntry in [J]udgment dated December 19, 1991;
2. The amount of P30,000.00 as attorneys fees;
3. To pay the costs of suit.
The claim for moral damages, not having been substantiated, it is hereby denied.7
Ruling of the Court of Appeals

92
Affirming the trial court, the Court of Appeals held that petitioner was estopped from assailing the judgment that had become final
and had, in fact, been partially executed. The CA also ruled that summary judgment was proper, because petitioner had failed to
tender any genuine issue of fact and was merely maneuvering to delay the full effects of the judgment.
Citing Ingenohl v. Olsen, 8 the CA also rejected petitioners argument that the RTC should have dismissed the action for the
enforcement of a foreign judgment, on the ground of forum non conveniens. It reasoned out that the recognition of the foreign
judgment was based on comity, reciprocity and res judicata.
Hence, this Petition. 9
Issue
In his Memorandum, petitioner submits this lone but all-embracing issue:
Whether or not the Court of Appeals acted in a manner x x x contrary to law when it affirmed the Order of the trial court granting
respondents Motion for Summary Judgment and rendering judgment against the petitioner.
In his discussion, petitioner contends that the CA erred in ruling in this wise:
1. That his Answer failed to tender a genuine issue of fact regarding the following:
(a) the jurisdiction of a foreign court over the subject matter
(b) the validity of the foreign judgment
(c) the judgments conformity to Philippine laws, public policy, canons of morality, and norms against unjust enrichment
2. That the principle of forum non conveniens was inapplicable to the instant case.
This Courts Ruling
The Petition has no merit.
First Question: Summary Judgment
Petitioner vehemently insists that summary judgment is inappropriate to resolve the case at bar, arguing that his Answer allegedly
raised genuine and material factual matters which he should have been allowed to prove during trial.
On the other hand, respondent argues that the alleged genuine issues of fact raised by petitioner are mere conclusions of law, or
propositions arrived at not by any process of natural reasoning from a fact or a combination of facts stated but by the application of
the artificial rules of law to the facts pleaded. 11cräläwvirtualibräry
The RTC granted respondents Motion for Summary Judgment because petitioner, in his Answer, admitted the existence of the
Judgment on Stipulation for Entry in Judgment. Besides, he had already paid $5,000 to respondent, as provided in the foreign judgment
sought to be enforced. 12 Hence, the trial court ruled that, there being no genuine issue as to any material fact, the case should
properly be resolved through summary judgment. The CA affirmed this ruling.
We concur with the lower courts. Summary judgment is a procedural device for the prompt disposition of actions in which the
pleadings raise only a legal issue, and not a genuine issue as to any material fact. By genuine issue is meant a question of fact that
calls for the presentation of evidence. It should be distinguished from an issue that is sham, contrived, set in bad faith and patently
unsubstantial. 13cräläwvirtualibräry
Summary judgment is resorted to in order to avoid long drawn out litigations and useless delays. When affidavits, depositions and
admissions on file show that there are no genuine issues of fact to be tried, the Rules allow a party to pierce the allegations in the
pleadings and to obtain immediate relief by way of summary judgment. In short, since the facts are not in dispute, the court is allowed
to decide the case summarily by applying the law to the material facts.
Petitioner contends that by allowing summary judgment, the two courts a quo prevented him from presenting evidence to
substantiate his claims. We do not agree. Summary judgment is based on facts directly proven by affidavits, depositions or admissions.
14
In this case, the CA and the RTC both merely ruled that trial was not necessary to resolve the case. Additionally and correctly, the
RTC specifically ordered petitioner to submit opposing affidavits to support his contentions that (1) the Judgment on Stipulation for Entry
in Judgment was procured on the basis of fraud, collusion, undue influence, or a clear mistake of law or fact; and (2) that it was
contrary to public policy or the canons of morality. 15cräläwvirtualibräry
93
Again, in its Order 16 dated November 29, 1995, the trial court clarified that the opposing affidavits were for [petitioner] to spell out the
facts or circumstances [that] would constitute lack of jurisdiction over the subject matter of and over the persons involved in Case No.
C21-00265, and that would render the judgment therein null and void. In this light, petitioners contention that he was not allowed to
present evidence to substantiate his claims is clearly untenable.
For summary judgment to be valid, Rule 34, Section 3 of the Rules of Court, requires (a) that there must be no genuine issue as to any
material fact, except for the amount of damages; and (b) that the party presenting the motion for summary judgment must be
entitled to a judgment as a matter of law. 17 As mentioned earlier, petitioner admitted that a foreign judgment had been rendered
against him and in favor of respondent, and that he had paid $5,000 to the latter in partial compliance therewith. Hence, respondent,
as the party presenting the Motion for Summary Judgment, was shown to be entitled to the judgment.
The CA made short shrift of the first requirement. To show that petitioner had raised no genuine issue, it relied instead on the finality of
the foreign judgment which was, in fact, partially executed. Hence, we shall show in the following discussion how the defenses
presented by petitioner failed to tender any genuine issue of fact, and why a full-blown trial was not necessary for the resolution of the
issues.
Jurisdiction
Petitioner alleges that jurisdiction over Case No. C21-00265, which involved partnership interest, was vested in the Securities and
Exchange Commission, not in the Superior Court of California, County of Contra Costa.
We disagree. In the absence of proof of California law on the jurisdiction of courts, we presume that such law, if any, is similar to
Philippine law. We base this conclusion on the presumption of identity or similarity, also known as processual presumption. 18 The
Complaint, 19 which respondent filed with the trial court, was for the enforcement of a foreign judgment. He alleged therein that the
action of the foreign court was for the collection of a sum of money, breach of promissory notes, and damages. 20cräläwvirtualibräry
In our jurisdiction, such a case falls under the jurisdiction of civil courts, not of the Securities and Exchange Commission (SEC). The
jurisdiction of the latter is exclusively over matters enumerated in Section 5, PD 902-A, 21 prior to its latest amendment. If the foreign court
did not really have jurisdiction over the case, as petitioner claims, it would have been very easy for him to show this. Since jurisdiction is
determined by the allegations in a complaint, he only had to submit a copy of the complaint filed with the foreign court. Clearly, this
issue did not warrant trial.
Rights to Counsel and to Due Process
Petitioner contends that the foreign judgment, which was in the form of a Compromise Agreement, cannot be executed without the
parties being assisted by their chosen lawyers. The reason for this, he points out, is to eliminate collusion, undue influence and/or
improper exertion of ascendancy by one party over the other. He alleges that he discharged his counsel during the proceedings,
because he felt that the latter was not properly attending to the case. The judge, however, did not allow him to secure the services of
another counsel. Insisting that petitioner settle the case with respondent, the judge practically imposed the settlement agreement on
him. In his Opposing Affidavit, petitioner states:
It is true that I was initially represented by a counsel in the proceedings in #C21-00625. I discharged him because I then felt that he was
not properly attending to my case or was not competent enough to represent my interest. I asked the Judge for time to secure
another counsel but I was practically discouraged from engaging one as the Judge was insistent that I settle the case at once with the
[respondent]. Being a foreigner and not a lawyer at that I did not know what to do. I felt helpless and the Judge and [respondents]
lawyer were the ones telling me what to do. Under ordinary circumstances, their directives should have been taken with a grain of salt
especially so [since respondents] counsel, who was telling me what to do, had an interest adverse to mine. But [because] time
constraints and undue influence exerted by the Judge and [respondents] counsel on me disturbed and seriously affected my freedom
to act according to my best judgment and belief. In point of fact, the terms of the settlement were practically imposed on me by the
Judge seconded all the time by [respondents] counsel. I was then helpless as I had no counsel to assist me and the collusion between
the Judge and [respondents] counsel was becoming more evident by the way I was treated in the Superior Court of [t]he State of
California. I signed the Judgment on Stipulation for Entry in Judgment without any lawyer assisting me at the time and without being
fully aware of its terms and stipulations.22cräläwvirtualibräry
The manifestation of petitioner that the judge and the counsel for the opposing party had pressured him would gain credibility only if
he had not been given sufficient time to engage the services of a new lawyer. Respondents Affidavit 23 dated May 23, 1994, clarified,
however, that petitioner had sufficient time, but he failed to retain a counsel. Having dismissed his lawyer as early as June 19, 1991,
petitioner directly handled his own defense and negotiated a settlement with respondent and his counsel in December 1991.
Respondent also stated that petitioner, ignoring the judges reminder of the importance of having a lawyer, argued that he would be
the one to settle the case and pay anyway. Eventually, the Compromise Agreement was presented in court and signed before Judge
Ellen James on January 3, 1992. Hence, petitioners rights to counsel and to due process were not violated.
Unjust Enrichment
94
Petitioner avers that the Compromise Agreement violated the norm against unjust enrichment because the judge made him shoulder
all the liabilities in the case, even if there were two other defendants, G.S.P & Sons, Inc. and the Genesis Group.
We cannot exonerate petitioner from his obligation under the foreign judgment, even if there are other defendants who are not being
held liable together with him. First, the foreign judgment itself does not mention these other defendants, their participation or their
liability to respondent. Second, petitioners undated Opposing Affidavit states: [A]lthough myself and these entities were initially
represented by Atty. Lawrence L. Severson of the Law Firm Kouns, Quinlivan & Severson, x x x I discharged x x x said lawyer.
Subsequently, I assumed the representation for myself and these firms and this was allowed by the Superior Court of the State of
California without any authorization from G.G.P. & Sons, Inc. and the Genesis Group. 24 Clearly, it was petitioner who chose to represent
the other defendants; hence, he cannot now be allowed to impugn a decision based on this ground.
In any event, contrary to petitioners contention, unjust enrichment or solutio indebiti does not apply to this case. This doctrine
contemplates payment when there is no duty to pay, and the person who receives the payment has no right to receive it. 25 In this
case, petitioner merely argues that the other two defendants whom he represented were liable together with him. This is not a case of
unjust enrichment.
We do not see, either, how the foreign judgment could be contrary to law, morals, public policy or the canons of morality obtaining in
the country. Petitioner owed money, and the judgment required him to pay it. That is the long and the short of this case.
In addition, the maneuverings of petitioner before the trial court reinforce our belief that his claims are unfounded. Instead of filing
opposing affidavits to support his affirmative defenses, he filed a Motion for Reconsideration of the Order allowing summary judgment,
as well as a Motion to Dismiss the action on the ground of forum non conveniens. His opposing affidavits were filed only after the Order
of November 29, 1995 had denied both Motions. 26 Such actuation was considered by the trial court as a dilatory ploy which justified
the resolution of the action by summary judgment. According to the CA, petitioners allegations sought to delay the full effects of the
judgment; hence, summary judgment was proper. On this point, we concur with both courts.
Second Question: Forum Non Conveniens
Petitioner argues that the RTC should have refused to entertain the Complaint for enforcement of the foreign judgment on the
principle of forum non conveniens. He claims that the trial court had no jurisdiction, because the case involved partnership interest,
and there was difficulty in ascertaining the applicable law in California. All the aspects of the transaction took place in a foreign
country, and respondent is not even Filipino.
We disagree. Under the principle of forum non conveniens, even if the exercise of jurisdiction is authorized by law, courts may
nonetheless refuse to entertain a case for any of the following practical reasons:
1) The belief that the matter can be better tried and decided elsewhere, either because the main aspects of the case transpired in a
foreign jurisdiction or the material witnesses have their residence there;
2) The belief that the non-resident plaintiff sought the forum[,] a practice known as forum shopping[,] merely to secure procedural
advantages or to convey or harass the defendant;
3) The unwillingness to extend local judicial facilities to non-residents or aliens when the docket may already be overcrowded;
4) The inadequacy of the local judicial machinery for effectuating the right sought to be maintained; and
The difficulty of ascertaining foreign law.27cräläwvirtualibräry
None of the aforementioned reasons barred the RTC from exercising its jurisdiction. In the present action, there was no more need for
material witnesses, no forum shopping or harassment of petitioner, no inadequacy in the local machinery to enforce the foreign
judgment, and no question raised as to the application of any foreign law.
Authorities agree that the issue of whether a suit should be entertained or dismissed on the basis of the above-mentioned principle
depends largely upon the facts of each case and on the sound discretion of the trial court. 28 Since the present action lodged in the
RTC was for the enforcement of a foreign judgment, there was no need to ascertain the rights and the obligations of the parties based
on foreign laws or contracts. The parties needed only to perform their obligations under the Compromise Agreement they had entered
into.
Under Section 48, Rule 39 of the 1997 Rules of Civil Procedure, a judgment in an action in personam rendered by a foreign tribunal
clothed with jurisdiction is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title.
29
cräläwvirtualibräry
Also, under Section 5(n) of Rule 131, a court -- whether in the Philippines or elsewhere -- enjoys the presumption that it is acting in the
lawful exercise of its jurisdiction, and that it is regularly performing its official duty. 30 Its judgment may, however, be assailed if there is
95
evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact. But precisely, this possibility
signals the need for a local trial court to exercise jurisdiction. Clearly, the application of forum non coveniens is not called for.
The grounds relied upon by petitioner are contradictory. On the one hand, he insists that the RTC take jurisdiction over the enforcement
case in order to invalidate the foreign judgment; yet, he avers that the trial court should not exercise jurisdiction over the same case on
the basis of forum non conveniens. Not only do these defenses weaken each other, but they bolster the finding of the lower courts that
he was merely maneuvering to avoid or delay payment of his obligation.
WHEREFORE , the Petition is hereby DENIEDand the assailed Decision and Resolution AFFIRMED. Double costs against petitioner.
SO ORDERED
19. Philsec Investment Corp. v. Court of Appeals, G.R. No. 103493, [June 19, 1997], 340 PHIL 232-244 Atup
G.R. No. 103493 June 19, 1997
PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and ATHONA HOLDINGS, N.V., petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H. CRAIG,
respondents.
MENDOZA, J.:
This case presents for determination the conclusiveness of a foreign judgment upon the rights of the parties under the same cause of
action asserted in a case in our local court. Petitioners brought this case in the Regional Trial Court of Makati, Branch 56, which, in view
of the pendency at the time of the foreign action, dismissed Civil Case No. 16563 on the ground of litis pendentia, in addition to forum
non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for review on certiorari.
The facts are as follows:
On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners Ayala International Finance
Limited (hereafter called AYALA) 1 and Philsec Investment Corporation (hereafter called PHILSEC) in the sum of US$2,500,000.00,
secured by shares of stock owned by Ducat with a market value of P14,088,995.00. In order to facilitate the payment of the loans,
private respondent 1488, Inc., through its president, private respondent Drago Daic, assumed Ducat's obligation under an Agreement,
dated January 27, 1983, whereby 1488, Inc. executed a Warranty Deed with Vendor's Lien by which it sold to petitioner Athona
Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for US$2,807,209.02, while PHILSEC and AYALA
extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the purchase price. The balance of US$307,209.02
was to be paid by means of a promissory note executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the
US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and delivered to 1488, Inc. all the shares of
stock in their possession belonging to Ducat.
As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered by the note became due and
demandable. Accordingly, on October 17, 1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the
United States for payment of the balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly
perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to 1488, Inc. under the Agreement.
Originally instituted in the United States District Court of Texas, 165th Judicial District, where it was docketed as Case No. 85-57746, the
venue of the action was later transferred to the United States District Court for the Southern District of Texas, where 1488, Inc. filed an
amended complaint, reiterating its allegations in the original complaint. ATHONA filed an answer with counterclaim, impleading
private respondents herein as counterdefendants, for allegedly conspiring in selling the property at a price over its market value.
Private respondent Perlas, who had allegedly appraised the property, was later dropped as counterdefendant. ATHONA sought the
recovery of damages and excess payment allegedly made to 1488, Inc. and, in the alternative, the rescission of sale of the property.
For their part, PHILSEC and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their person, but, as their motion
was denied, they later filed a joint answer with counterclaim against private respondents and Edgardo V. Guevarra, PHILSEC's own
former president, for the rescission of the sale on the ground that the property had been overvalued. On March 13, 1990, the United
States District Court for the Southern District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was
"frivolous and [was] brought against him simply to humiliate and embarrass him." For this reason, the U.S. court imposed so-called Rule
11 sanctions on PHILSEC and AYALA and ordered them to pay damages to Guevarra.
96
On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners filed a complaint "For Sum of Money with
Damages and Writ of Preliminary Attachment" against private respondents in the Regional Trial Court of Makati, where it was docketed
as Civil Case No. 16563. The complaint reiterated the allegation of petitioners in their respective counterclaims in Civil Action No. H-86-
440 of the United States District Court of Southern Texas that private respondents committed fraud by selling the property at a price 400
percent more than its true value of US$800,000.00. Petitioners claimed that, as a result of private respondents' fraudulent
misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement and to purchase the Houston property.
Petitioners prayed that private respondents be ordered to return to ATHONA the excess payment of US$1,700,000.00 and to pay
damages. On April 20, 1987, the trial court issued a writ of preliminary attachment against the real and personal properties of private
respondents. 2
Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis pendentia, vis-a-vis Civil Action No. H-86-440
filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of
action. Ducat contended that the alleged overpricing of the property prejudiced only petitioner ATHONA, as buyer, but not PHILSEC
and BPI-IFL which were not parties to the sale and whose only participation was to extend financial accommodation to ATHONA under
a separate loan agreement. On the other hand, private respondents 1488, Inc. and its president Daic filed a joint "Special Appearance
and Qualified Motion to Dismiss," contending that the action being in personam, extraterritorial service of summons by publication was
ineffectual and did not vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign corporation, and Daic, who is a
non-resident alien.
On January 26, 1988, the trial court granted Ducat's motion to dismiss, stating that "the evidentiary requirements of the controversy may
be more suitably tried before the forum of the litis pendentia in the U.S., under the principle in private international law of forum non
conveniens," even as it noted that Ducat was not a party in the U.S. case.
A separate hearing was held with regard to 1488, Inc. and Daic's motion to dismiss. On March 9, 1988, the trial court 3
granted the
motion to dismiss filed by 1488, Inc. and Daic on the ground of litis pendentia considering that
the "main factual element" of the cause of action in this case which is the validity of the sale of real property in the United States
between defendant 1488 and plaintiff ATHONA is the subject matter of the pending case in the United States District Court which,
under the doctrine of forum non conveniens, is the better (if not exclusive) forum to litigate matters needed to determine the
assessment and/or fluctuations of the fair market value of real estate situated in Houston, Texas, U.S.A. from the date of the transaction
in 1983 up to the present and verily, . . . (emphasis by trial court)
The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were non-residents and the action was not an
action in rem or quasi in rem, so that extraterritorial service of summons was ineffective. The trial court subsequently lifted the writ of
attachment it had earlier issued against the shares of stocks of 1488, Inc. and Daic.
Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the principle of litis pendentia and forum
non conveniens and in ruling that it had no jurisdiction over the defendants, despite the previous attachment of shares of stocks
belonging to 1488, Inc. and Daic.
On January 6, 1992, the Court of Appeals 4

affirmed the dismissal of Civil Case No. 16563 against Ducat, 1488, Inc., and Daic on the
ground of litis pendentia, thus:
The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while the defendants are Philsec, the Ayala International Finance Ltd.
(BPI-IFL's former name) and the Athona Holdings, NV. The case at bar involves the same parties. The transaction sued upon by the
parties, in both cases is the Warranty Deed executed by and between Athona Holdings and 1488 Inc. In the U.S. case, breach of
contract and the promissory note are sued upon by 1488 Inc., which likewise alleges fraud employed by herein appellants, on the
marketability of Ducat's securities given in exchange for the Texas property. The recovery of a sum of money and damages, for fraud
purportedly committed by appellees, in overpricing the Texas land, constitute the action before the Philippine court, which likewise
stems from the same Warranty Deed.
The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the recovery of a sum of money for alleged
tortious acts, so that service of summons by publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic. The
dismissal of Civil Case No. 16563 on the ground of forum non conveniens was likewise affirmed by the Court of Appeals on the ground
that the case can be better tried and decided by the U.S. court:
The U.S. case and the case at bar arose from only one main transaction, and involve foreign elements, to wit: 1) the property subject
matter of the sale is situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-resident foreign corporation; 3) although the buyer, Athona
Holdings, a foreign corporation which does not claim to be doing business in the Philippines, is wholly owned by Philsec, a domestic
corporation, Athona Holdings is also owned by BPI-IFL, also a foreign corporation; 4) the Warranty Deed was executed in Texas, U.S.A.
In their present appeal, petitioners contend that:
1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME PARTIES FOR THE SAME CAUSE ( LITIS PENDENTIA) RELIED UPON
BY THE COURT OF APPEALS IN AFFIRMING THE TRIAL COURT'S DISMISSAL OF THE CIVIL ACTION IS NOT APPLICABLE.
97
2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL
COURT OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.
3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY
REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR
THERE IS EVERY REASON TO PROTECT AND VINDICATE PETITIONERS' RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE
RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE IN THE PHILIPPINES.
We will deal with these contentions in the order in which they are made.
First. It is important to note in connection with the first point that while the present case was pending in the Court of Appeals, the United
States District Court for the Southern District of Texas rendered judgment 5 in the case before it. The judgment, which was in favor of
private respondents, was affirmed on appeal by the Circuit Court of Appeals. 6 Thus, the principal issue to be resolved in this case is
whether Civil Case No. 16536 is barred by the judgment of the U.S. court.
Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment admitting the foreign decision is
not necessary. On the other hand, petitioners argue that the foreign judgment cannot be given the effect of res judicata without
giving them an opportunity to impeach it on grounds stated in Rule 39, §50 of the Rules of Court, to wit: "want of jurisdiction, want of
notice to the party, collusion, fraud, or clear mistake of law or fact."
Petitioners' contention is meritorious. While this Court has given the effect of res judicata to foreign judgments in several cases, 7 it was
after the parties opposed to the judgment had been given ample opportunity to repel them on grounds allowed under the law. 8 It is
not necessary for this purpose to initiate a separate action or proceeding for enforcement of the foreign judgment. What is essential is
that there is opportunity to challenge the foreign judgment, in order for the court to properly determine its efficacy. This is because in
this jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a foreign judgment merely constitutes prima
facie evidence of
the justness of the claim of a party and, as such, is subject to proof to the contrary. 9 Rule 39, §50 provides:
Sec. 50. Effect of foreign judgments. — The effect of a judgment of a tribunal of a foreign country, having jurisdiction to pronounce the
judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title; but the judgment may be repelled by evidence of a want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.
Thus, in the case of General Corporation of the Philippines v . Union Insurance Society of Canton, Ltd ., 10 which private respondents
invoke for claiming conclusive effect for the foreign judgment in their favor, the foreign judgment was considered res judicata because
this Court found "from the evidence as well as from appellant's own pleadings" 11 that the foreign court did not make a "clear mistake
of law or fact" or that its judgment was void for want of jurisdiction or because of fraud or collusion by the defendants. Trial had been
previously held in the lower court and only afterward was a decision rendered, declaring the judgment of the Supreme Court of the
State of Washington to have the effect of res judicata in the case before the lower court. In the same vein, in Philippines International
Shipping Corp. v. Court of Appeals, 12 this Court held that the foreign judgment was valid and enforceable in the Philippines there
being no showing that it was vitiated by want of notice to the party, collusion, fraud or clear mistake of law or fact. The prima facie
presumption under the Rule had not been rebutted.
In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the judgment of the U.S. court as basis for
declaring it res judicata or conclusive of the rights of private respondents. The proceedings in the trial court were summary. Neither the
trial court nor the appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the evidence presented
thereat, to assure a proper determination of whether the issues then being litigated in the U.S. court were exactly the issues raised in this
case such that the judgment that might be rendered would constitute res judicata. As the trial court stated in its disputed order dated
March 9, 1988.
On the plaintiff's claim in its Opposition that the causes of action of this case and the pending case in the United States are not
identical, precisely the Order of January 26, 1988 never found that the causes of action of this case and the case pending before the
USA Court, were identical. (emphasis added)
It was error therefore for the Court of Appeals to summarily rule that petitioners' action is barred by the principle of res judicata.
Petitioners in fact questioned the jurisdiction of the U.S. court over their persons, but their claim was brushed aside by both the trial
court and the Court of Appeals. 13
Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the enforcement of judgment in the Regional
Trial Court of Makati, where it was docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the proceedings were
suspended because of the pendency of this case. To sustain the appellate court's ruling that the foreign judgment constitutes res
98
judicata and is a bar to the claim of petitioners would effectively preclude petitioners from repelling the judgment in the case for
enforcement. An absurdity could then arise: a foreign judgment is not subject to challenge by the plaintiff against whom it is invoked, if
it is pleaded to resist a claim as in this case, but it may be opposed by the defendant if the foreign judgment is sought to be enforced
against him in a separate proceeding. This is plainly untenable. It has been held therefore that:
[A] foreign judgment may not be enforced if it is not recognized in the jurisdiction where affirmative relief is being sought. Hence, in the
interest of justice, the complaint should be considered as a petition for the recognition of the Hongkong judgment under Section 50
(b), Rule 39 of the Rules of Court in order that the defendant, private respondent herein, may present evidence of lack of jurisdiction,
notice, collusion, fraud or clear mistake of fact and law, if applicable. 14
Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070 should be consolidated. 15 After all, the
two have been filed in the Regional Trial Court of Makati, albeit in different salas, this case being assigned to Branch 56 (Judge
Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such proceedings,
petitioners should have the burden of impeaching the foreign judgment and only in the event they succeed in doing so may they
proceed with their action against private respondents.
Second. Nor is the trial court's refusal to take cognizance of the case justifiable under the principle of forum non conveniens. First, a
motion to dismiss is limited to the grounds under Rule 16, §1, which does not include forum non conveniens. 16 The propriety of dismissing
a case based on this principle requires a factual determination, hence, it is more properly considered a matter of defense. Second,
while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after "vital facts
are established, to determine whether special circumstances" require the court's desistance. 17
In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed by private respondents in
connection with the motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and one of the
defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of the latter's debt which was the object of the transaction
under litigation. The trial court arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S. case.
Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over 1488, Inc. and Daic could not be
obtained because this is an action in personam and summons were served by extraterritorial service. Rule 14, §17 on extraterritorial
service provides that service of summons on a non-resident defendant may be effected out of the Philippines by leave of Court where,
among others, "the property of the defendant has been attached within the Philippines." 18 It is not disputed that the properties, real
and personal, of the private respondents had been attached prior to service of summons under the Order of the trial court dated April
20, 1987. 19
Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the proceedings in Civil Case No. 92-
1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S. court, the Court finds
that the judgment sought to be enforced is severable from the main judgment under consideration in Civil Case No. 16563. The
separability of Guevara's claim is not only admitted by petitioners, 20 it appears from the pleadings that petitioners only belatedly
impleaded Guevarra as defendant in Civil Case No. 16563. 21 Hence, the TRO should be lifted and Civil Case No. 92-1445 allowed to
proceed.
WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is REMANDED to the Regional Trial Court of
Makati for consolidation with Civil Case No. 92-1070 and for further proceedings in accordance with this decision. The temporary
restraining order issued on June 29, 1994 is hereby LIFTED.
20. Hasegawa v. Kitamura, G.R. No. 149177, [November 23, 2007], 563 PHIL 572-590 Banggat
G.R. No. 149177
November 23, 2007
KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD., Petitioners,
vs.
MINORU KITAMURA, Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the April 18, 2001 Decision 1 of the Court
of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25, 2001 Resolution 2 denying the motion for reconsideration thereof.
99
On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese consultancy firm providing technical
and management support in the infrastructure projects of foreign governments, 3 entered into an Independent Contractor Agreement
(ICA) with respondent Minoru Kitamura, a Japanese national permanently residing in the Philippines. 4 The agreement provides that
respondent was to extend professional services to Nippon for a year starting on April 1, 1999. 5 Nippon then assigned respondent to work
as the project manager of the Southern Tagalog Access Road (STAR) Project in the Philippines, following the company's consultancy
contract with the Philippine Government.6
When the STAR Project was near completion, the Department of Public Works and Highways (DPWH) engaged the consultancy
services of Nippon, on January 28, 2000, this time for the detailed engineering and construction supervision of the Bongabon-Baler
Road Improvement (BBRI) Project.7 Respondent was named as the project manager in the contract's Appendix 3.1. 8
On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its International Division, informed respondent that
the company had no more intention of automatically renewing his ICA. His services would be engaged by the company only up to the
substantial completion of the STAR Project on March 31, 2000, just in time for the ICA's expiry. 9
Threatened with impending unemployment, respondent, through his lawyer, requested a negotiation conference and demanded that
he be assigned to the BBRI project. Nippon insisted that respondent’s contract was for a fixed term that had already expired, and
refused to negotiate for the renewal of the ICA. 10
As he was not able to generate a positive response from the petitioners, respondent consequently initiated on June 1, 2000 Civil Case
No. 00-0264 for specific performance and damages with the Regional Trial Court of Lipa City.11
For their part, petitioners, contending that the ICA had been perfected in Japan and executed by and between Japanese nationals,
moved to dismiss the complaint for lack of jurisdiction. They asserted that the claim for improper pre-termination of respondent's ICA
could only be heard and ventilated in the proper courts of Japan following the principles of lex loci celebrationis and lex contractus.12
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of Kitamura by a certain Y. Kotake as
project manager of the BBRI Project.13
On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank14 that matters connected with the performance of
contracts are regulated by the law prevailing at the place of performance, 15 denied the motion to dismiss. 16 The trial court
subsequently denied petitioners' motion for reconsideration, 17 prompting them to file with the appellate court, on August 14, 2000, their
first Petition for Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205]. 18 On August 23, 2000, the CA resolved to dismiss the
petition on procedural grounds—for lack of statement of material dates and for insufficient verification and certification against forum
shopping.19 An Entry of Judgment was later issued by the appellate court on September 20, 2000. 20
Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within the reglementary period, a second
Petition for Certiorari under Rule 65 already stating therein the material dates and attaching thereto the proper verification and
certification. This second petition, which substantially raised the same issues as those in the first, was docketed as CA-G.R. SP No.
60827.21
Ruling on the merits of the second petition, the appellate court rendered the assailed April 18, 2001 Decision 22 finding no grave abuse
of discretion in the trial court's denial of the motion to dismiss. The CA ruled, among others, that the principle of lex loci celebrationis
was not applicable to the case, because nowhere in the pleadings was the validity of the written agreement put in issue. The CA thus
declared that the trial court was correct in applying instead the principle of lex loci solutionis.23
Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25, 2001 Resolution. 24
Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant Petition for Review on Certiorari25
imputing the following errors to the appellate court:
A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE TRIAL COURT VALIDLY EXERCISED JURISDICTION
OVER THE INSTANT CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS
ENTERED INTO BY AND BETWEEN TWO JAPANESE NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN
TOKYO, JAPAN.
B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE NEED TO REVIEW OUR ADHERENCE TO THE
PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.26
The pivotal question that this Court is called upon to resolve is whether the subject matter jurisdiction of Philippine courts in civil cases
for specific performance and damages involving contracts executed outside the country by foreign nationals may be assailed on the
principles of lex loci celebrationis, lex contractus, the "state of the most significant relationship rule," or forum non conveniens.
However, before ruling on this issue, we must first dispose of the procedural matters raised by the respondent.
100
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has already barred the filing of the second
petition docketed as CA-G.R. SP No. 60827 (fundamentally raising the same issues as those in the first one) and the instant petition for
review thereof.
We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's defective certification of non-forum
shopping, it was a dismissal without prejudice. 27 The same holds true in the CA's dismissal of the said case due to defects in the formal
requirement of verification28 and in the other requirement in Rule 46 of the Rules of Court on the statement of the material dates. 29 The
dismissal being without prejudice, petitioners can re-file the petition, or file a second petition attaching thereto the appropriate
verification and certification—as they, in fact did—and stating therein the material dates, within the prescribed period 30 in Section 4,
Rule 65 of the said Rules.31
The dismissal of a case without prejudice signifies the absence of a decision on the merits and leaves the parties free to litigate the
matter in a subsequent action as though the dismissed action had not been commenced. In other words, the termination of a case
not on the merits does not bar another action involving the same parties, on the same subject matter and theory. 32
Necessarily, because the said dismissal is without prejudice and has no res judicata effect, and even if petitioners still indicated in the
verification and certification of the second certiorari petition that the first had already been dismissed on procedural grounds, 33
petitioners are no longer required by the Rules to indicate in their certification of non-forum shopping in the instant petition for review
of the second certiorari petition , the status of the aforesaid first petition before the CA. In any case, an omission in the certificate of
non-forum shopping about any event that will not constitute res judicata and litis pendentia, as in the present case, is not a fatal
defect. It will not warrant the dismissal and nullification of the entire proceedings, considering that the evils sought to be prevented by
the said certificate are no longer present.34
The Court also finds no merit in respondent's contention that petitioner Hasegawa is only authorized to verify and certify, on behalf of
Nippon, the certiorari petition filed with the CA and not the instant petition. True, the Authorization 35 dated September 4, 2000, which is
attached to the second certiorari petition and which is also attached to the instant petition for review, is limited in scope—its wordings
indicate that Hasegawa is given the authority to sign for and act on behalf of the company only in the petition filed with the appellate
court, and that authority cannot extend to the instant petition for review. 36 In a plethora of cases, however, this Court has liberally
applied the Rules or even suspended its application whenever a satisfactory explanation and a subsequent fulfillment of the
requirements have been made.37 Given that petitioners herein sufficiently explained their misgivings on this point and appended to
their Reply38 an updated Authorization39 for Hasegawa to act on behalf of the company in the instant petition, the Court finds the same
as sufficient compliance with the Rules.
However, the Court cannot extend the same liberal treatment to the defect in the verification and certification. As respondent pointed
out, and to which we agree, Hasegawa is truly not authorized to act on behalf of Nippon in this case. The aforesaid September 4, 2000
Authorization and even the subsequent August 17, 2001 Authorization were issued only by Nippon's president and chief executive
officer, not by the company's board of directors. In not a few cases, we have ruled that corporate powers are exercised by the board
of directors; thus, no person, not even its officers, can bind the corporation, in the absence of authority from the board. 40 Considering
that Hasegawa verified and certified the petition only on his behalf and not on behalf of the other petitioner, the petition has to be
denied pursuant to Loquias v. Office of the Ombudsman.41 Substantial compliance will not suffice in a matter that demands strict
observance of the Rules.42 While technical rules of procedure are designed not to frustrate the ends of justice, nonetheless, they are
intended to effect the proper and orderly disposition of cases and effectively prevent the clogging of court dockets. 43
Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to question the trial court's denial of their motion to
dismiss. It is a well-established rule that an order denying a motion to dismiss is interlocutory, and cannot be the subject of the
extraordinary petition for certiorari or mandamus. The appropriate recourse is to file an answer and to interpose as defenses the
objections raised in the motion, to proceed to trial, and, in case of an adverse decision, to elevate the entire case by appeal in due
course.44 While there are recognized exceptions to this rule,45 petitioners' case does not fall among them.
This brings us to the discussion of the substantive issue of the case.
Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its jurisdiction to hear and resolve the civil case for
specific performance and damages filed by the respondent. The ICA subject of the litigation was entered into and perfected in Tokyo,
Japan, by Japanese nationals, and written wholly in the Japanese language. Thus, petitioners posit that local courts have no
substantial relationship to the parties46 following the [state of the] most significant relationship rule in Private International Law. 47
The Court notes that petitioners adopted an additional but different theory when they elevated the case to the appellate court. In the
Motion to Dismiss48 filed with the trial court, petitioners never contended that the RTC is an inconvenient forum. They merely argued that
the applicable law which will determine the validity or invalidity of respondent's claim is that of Japan, following the principles of lex
loci celebrationis and lex contractus.49 While not abandoning this stance in their petition before the appellate court, petitioners on
certiorari significantly invoked the defense of forum non conveniens.50 On petition for review before this Court, petitioners dropped their
other arguments, maintained the forum non conveniens defense, and introduced their new argument that the applicable principle is
the [state of the] most significant relationship rule. 51
101
Be that as it may, this Court is not inclined to deny this petition merely on the basis of the change in theory, as explained in Philippine
Ports Authority v. City of Iloilo.52 We only pointed out petitioners' inconstancy in their arguments to emphasize their incorrect assertion of
conflict of laws principles.
To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved: jurisdiction, choice of law, and
recognition and enforcement of judgments. Corresponding to these phases are the following questions: (1) Where can or should
litigation be initiated? (2) Which law will the court apply? and (3) Where can the resulting judgment be enforced? 53
Analytically, jurisdiction and choice of law are two distinct concepts. 54 Jurisdiction considers whether it is fair to cause a defendant to
travel to this state; choice of law asks the further question whether the application of a substantive law which will determine the merits
of the case is fair to both parties. The power to exercise jurisdiction does not automatically give a state constitutional authority to apply
forum law. While jurisdiction and the choice of the lex fori will often coincide, the "minimum contacts" for one do not always provide
the necessary "significant contacts" for the other. 55 The question of whether the law of a state can be applied to a transaction is
different from the question of whether the courts of that state have jurisdiction to enter a judgment. 56
In this case, only the first phase is at issue—jurisdiction.1âwphi1 Jurisdiction, however, has various aspects. For a court to validly exercise
its power to adjudicate a controversy, it must have jurisdiction over the plaintiff or the petitioner, over the defendant or the respondent,
over the subject matter, over the issues of the case and, in cases involving property, over the res or the thing which is the subject of the
litigation.57 In assailing the trial court's jurisdiction herein, petitioners are actually referring to subject matter jurisdiction.
Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority which establishes and organizes the
court. It is given only by law and in the manner prescribed by law. 58 It is further determined by the allegations of the complaint
irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein. 59 To succeed in its motion for the dismissal of
an action for lack of jurisdiction over the subject matter of the claim, 60 the movant must show that the court or tribunal cannot act on
the matter submitted to it because no law grants it the power to adjudicate the claims. 61
In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not properly vested by law with jurisdiction to
hear the subject controversy for, indeed, Civil Case No. 00-0264 for specific performance and damages is one not capable of
pecuniary estimation and is properly cognizable by the RTC of Lipa City. 62 What they rather raise as grounds to question subject matter
jurisdiction are the principles of lex loci celebrationis and lex contractus, and the "state of the most significant relationship rule."
The Court finds the invocation of these grounds unsound.
Lex loci celebrationis relates to the "law of the place of the ceremony" 63 or the law of the place where a contract is made. 64 The
doctrine of lex contractus or lex loci contractus means the "law of the place where a contract is executed or to be performed." 65 It
controls the nature, construction, and validity of the contract 66 and it may pertain to the law voluntarily agreed upon by the parties or
the law intended by them either expressly or implicitly. 67 Under the "state of the most significant relationship rule," to ascertain what
state law to apply to a dispute, the court should determine which state has the most substantial connection to the occurrence and the
parties. In a case involving a contract, the court should consider where the contract was made, was negotiated, was to be
performed, and the domicile, place of business, or place of incorporation of the parties. 68 This rule takes into account several contacts
and evaluates them according to their relative importance with respect to the particular issue to be resolved. 69
Since these three principles in conflict of laws make reference to the law applicable to a dispute, they are rules proper for the second
phase, the choice of law. 70 They determine which state's law is to be applied in resolving the substantive issues of a conflicts problem. 71
Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for.
Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have not yet pointed out any conflict
between the laws of Japan and ours. Before determining which law should apply, first there should exist a conflict of laws situation
requiring the application of the conflict of laws rules. 72 Also, when the law of a foreign country is invoked to provide the proper rules for
the solution of a case, the existence of such law must be pleaded and proved. 73
It should be noted that when a conflicts case, one involving a foreign element, is brought before a court or administrative agency,
there are three alternatives open to the latter in disposing of it: (1) dismiss the case, either because of lack of jurisdiction or refusal to
assume jurisdiction over the case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume
jurisdiction over the case and take into account or apply the law of some other State or States. 74 The court’s power to hear cases and
controversies is derived from the Constitution and the laws. While it may choose to recognize laws of foreign nations, the court is not
limited by foreign sovereign law short of treaties or other formal agreements, even in matters regarding rights provided by foreign
sovereigns.75
Neither can the other ground raised, forum non conveniens,76 be used to deprive the trial court of its jurisdiction herein. First, it is not a
proper basis for a motion to dismiss because Section 1, Rule 16 of the Rules of Court does not include it as a ground. 77 Second, whether
a suit should be entertained or dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and is
addressed to the sound discretion of the trial court.78 In this case, the RTC decided to assume jurisdiction. Third, the propriety of
dismissing a case based on this principle requires a factual determination; hence, this conflicts principle is more properly considered a
matter of defense.79
102
Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed by respondent and the grounds
raised by petitioners to assail that jurisdiction are inappropriate, the trial and appellate courts correctly denied the petitioners’ motion
to dismiss.
WHEREFORE, premises considered, the petition for review on certiorari is DENIED.
SO ORDERED.
21. Raytheon International, Inc. v. Rouzie, Jr., G.R. No. 162894, [February 26, 2008], 570 PHIL 151-160 Cambe
G.R. No. 162894 February 26, 2008
RAYTHEON INTERNATIONAL, INC., petitioner,
vs.
STOCKTON W. ROUZIE, JR., respondent.
DECISION
TINGA, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure which seeks the reversal of the
Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 67001 and the dismissal of the civil case filed by respondent against
petitioner with the trial court.
As culled from the records of the case, the following antecedents appear:
Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing under the laws of the State of
Connecticut, United States of America, and respondent Stockton W. Rouzie, Jr., an American citizen, entered into a contract whereby
BMSI hired respondent as its representative to negotiate the sale of services in several government projects in the Philippines for an
agreed remuneration of 10% of the gross receipts. On 11 March 1992, respondent secured a service contract with the Republic of the
Philippines on behalf of BMSI for the dredging of rivers affected by the Mt. Pinatubo eruption and mudflows. 3
On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations Commission (NLRC) a suit against BMSI
and Rust International, Inc. (RUST), Rodney C. Gilbert and Walter G. Browning for alleged nonpayment of commissions, illegal
termination and breach of employment contract. 4 On 28 September 1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered judgment
ordering BMSI and RUST to pay respondent’s money claims.5 Upon appeal by BMSI, the NLRC reversed the decision of the Labor Arbiter
and dismissed respondent’s complaint on the ground of lack of jurisdiction. 6 Respondent elevated the case to this Court but was
dismissed in a Resolution dated 26 November 1997. The Resolution became final and executory on 09 November 1998.
On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before the Regional Trial Court (RTC) of
Bauang, La Union. The Complaint,7 docketed as Civil Case No. 1192-BG, named as defendants herein petitioner Raytheon
International, Inc. as well as BMSI and RUST, the two corporations impleaded in the earlier labor case. The complaint essentially
reiterated the allegations in the labor case that BMSI verbally employed respondent to negotiate the sale of services in government
projects and that respondent was not paid the commissions due him from the Pinatubo dredging project which he secured on behalf
of BMSI. The complaint also averred that BMSI and RUST as well as petitioner itself had combined and functioned as one company.
In its Answer,8 petitioner alleged that contrary to respondent’s claim, it was a foreign corporation duly licensed to do business in the
Philippines and denied entering into any arrangement with respondent or paying the latter any sum of money. Petitioner also denied
combining with BMSI and RUST for the purpose of assuming the alleged obligation of the said companies. 9 Petitioner also referred to the
NLRC decision which disclosed that per the written agreement between respondent and BMSI and RUST, denominated as "Special
Sales Representative Agreement," the rights and obligations of the parties shall be governed by the laws of the State of Connecticut. 10
103
Petitioner sought the dismissal of the complaint on grounds of failure to state a cause of action and forum non conveniens and prayed
for damages by way of compulsory counterclaim.11
On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on Affirmative Defenses and for Summary
Judgment12 seeking the dismissal of the complaint on grounds of forum non conveniens and failure to state a cause of action.
Respondent opposed the same. Pending the resolution of the omnibus motion, the deposition of Walter Browning was taken before the
Philippine Consulate General in Chicago.13
In an Order14 dated 13 September 2000, the RTC denied petitioner’s omnibus motion. The trial court held that the factual allegations in
the complaint, assuming the same to be admitted, were sufficient for the trial court to render a valid judgment thereon. It also ruled
that the principle of forum non conveniens was inapplicable because the trial court could enforce judgment on petitioner, it being a
foreign corporation licensed to do business in the Philippines.15
Petitioner filed a Motion for Reconsideration 16 of the order, which motion was opposed by respondent. 17 In an Order dated 31 July
2001,18 the trial court denied petitioner’s motion. Thus, it filed a Rule 65 Petition 19 with the Court of Appeals praying for the issuance of a
writ of certiorari and a writ of injunction to set aside the twin orders of the trial court dated 13 September 2000 and 31 July 2001 and to
enjoin the trial court from conducting further proceedings.20
On 28 August 2003, the Court of Appeals rendered the assailed Decision 21 denying the petition for certiorari for lack of merit. It also
denied petitioner’s motion for reconsideration in the assailed Resolution issued on 10 March 2004. 22
The appellate court held that although the trial court should not have confined itself to the allegations in the complaint and should
have also considered evidence aliunde in resolving petitioner’s omnibus motion, it found the evidence presented by petitioner, that is,
the deposition of Walter Browning, insufficient for purposes of determining whether the complaint failed to state a cause of action. The
appellate court also stated that it could not rule one way or the other on the issue of whether the corporations, including petitioner,
named as defendants in the case had indeed merged together based solely on the evidence presented by respondent. Thus, it held
that the issue should be threshed out during trial.23 Moreover, the appellate court deferred to the discretion of the trial court when the
latter decided not to desist from assuming jurisdiction on the ground of the inapplicability of the principle of forum non conveniens.
Hence, this petition raising the following issues:
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION
AGAINST RAYTHEON INTERNATIONAL, INC.
WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT ON THE GROUND OF FORUM NON
CONVENIENS.24
Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua Law Office, counsel on record for
respondent, manifested that the lawyer handling the case, Atty. Rogelio Karagdag, had severed relations with the law firm even
before the filing of the instant petition and that it could no longer find the whereabouts of Atty. Karagdag or of respondent despite
diligent efforts. In a Resolution25 dated 20 November 2006, the Court resolved to dispense with the filing of a comment.
The instant petition lacks merit.
Petitioner mainly asserts that the written contract between respondent and BMSI included a valid choice of law clause, that is, that the
contract shall be governed by the laws of the State of Connecticut. It also mentions the presence of foreign elements in the dispute –
namely, the parties and witnesses involved are American corporations and citizens and the evidence to be presented is located
outside the Philippines – that renders our local courts inconvenient forums. Petitioner theorizes that the foreign elements of the dispute
necessitate the immediate application of the doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in judicial resolution of conflicts-of-laws
problems, namely: jurisdiction, choice of law, and recognition and enforcement of judgments. Thus, in the instances 27 where the Court
held that the local judicial machinery was adequate to resolve controversies with a foreign element, the following requisites had to be
proved: (1) that the Philippine Court is one to which the parties may conveniently resort; (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 the power to enforce
its decision.28
On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine court and where the court has
jurisdiction over the subject matter, the parties and the res, it may or can proceed to try the case even if the rules of conflict-of-laws or
the convenience of the parties point to a foreign forum. This is an exercise of sovereign prerogative of the country where the case is
filed.29
Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the law 30 and by the material
allegations in the complaint, irrespective of whether or not the plaintiff is entitled to recover all or some of the claims or reliefs sought
therein.31 Civil Case No. 1192-BG is an action for damages arising from an alleged breach of contract. Undoubtedly, the nature of the
action and the amount of damages prayed are within the jurisdiction of the RTC.
104
As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent (as party plaintiff) upon the filing of
the complaint. On the other hand, jurisdiction over the person of petitioner (as party defendant) was acquired by its voluntary
appearance in court.32
That the subject contract included a stipulation that the same shall be governed by the laws of the State of Connecticut does not
suggest that the Philippine courts, or any other foreign tribunal for that matter, are precluded from hearing the civil action. Jurisdiction
and choice of law are two distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice
of law asks the further question whether the application of a substantive law which will determine the merits of the case is fair to both
parties.33 The choice of law stipulation will become relevant only when the substantive issues of the instant case develop, that is, after
hearing on the merits proceeds before the trial court.
Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse impositions on its jurisdiction where it is not
the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere. 34 Petitioner’s averments
of the foreign elements in the instant case are not sufficient to oust the trial court of its jurisdiction over Civil Case No. No. 1192-BG and
the parties involved.
Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires a factual determination; hence,
it is more properly considered as a matter of defense. While it is within the discretion of the trial court to abstain from assuming
jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the
court’s desistance.35
Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its conclusion that it can assume jurisdiction
over the dispute notwithstanding its foreign elements. In the same manner, the Court defers to the sound discretion of the lower courts
because their findings are binding on this Court.
Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause of action against petitioner. Failure to
state a cause of action refers to the insufficiency of allegation in the pleading. 36 As a general rule, the elementary test for failure to
state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded. 37
The complaint alleged that petitioner had combined with BMSI and RUST to function as one company. Petitioner contends that the
deposition of Walter Browning rebutted this allegation. On this score, the resolution of the Court of Appeals is instructive, thus:
x x x Our examination of the deposition of Mr. Walter Browning as well as other documents produced in the hearing shows that these
evidence aliunde are not quite sufficient for us to mete a ruling that the complaint fails to state a cause of action.
Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs that Raytheon Engineers and Constructors, Inc.
(REC) assumed the warranty obligations of defendant Rust International in the Makar Port Project in General Santos City, after Rust
International ceased to exist after being absorbed by REC. Other documents already submitted in evidence are likewise meager to
preponderantly conclude that Raytheon International, Inc., Rust International[,] Inc. and Brand Marine Service, Inc. have combined
into one company, so much so that Raytheon International, Inc., the surviving company (if at all) may be held liable for the obligation
of BMSI to respondent Rouzie for unpaid commissions. Neither these documents clearly speak otherwise. 38
As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and RUST merged together requires the
presentation of further evidence, which only a full-blown trial on the merits can afford.
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
67001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
22. Singapore Airlines Limited v. Court of Appeals, G.R. No. 107356, [March 31, 1995], 312 PHIL 1081-1092 Castillo
G.R. No. 107356 March 31, 1995
SINGAPORE AIRLINES LIMITED, petitioner,
vs.
THE COURT OF APPEALS and PHILIPPINE AIRLINES, respondents.

105
ROMERO, J.:
Sancho Rayos was an overseas contract worker who had a renewed contract with the Arabian American Oil Company (Aramco) for
the period covering April 16, 1980, to April 15, 1981. As part of Aramco's policy, its employees returning to Dhahran, Saudi Arabia from
Manila are allowed to claim reimbursement for amounts paid for excess baggage of up to 50 kilograms, as long as it is properly
supported by receipt. On April 1980, Rayos took a Singapore Airlines (SIA) flight to report for his new assignment, with a 50-kilogram
excess baggage for which he paid P4,147.50. Aramco reimbursed said. amount upon presentation of the excess baggage ticket.
In December 1980, Rayos learned that he was one of several employees being investigated by Aramco for fraudulent claims. He
immediately asked his wife Beatriz in Manila to seek a written confirmation from SIA that he indeed paid for an excess baggage of 50
kilograms. On December 10, 1980, SIA's manager, Johnny Khoo, notified Beatriz of their inability to issue the certification requested
because their records showed that only three kilograms were entered as excess and accordingly charged. SIA issued the certification
requested by the spouses Rayos only on April 8, 1981, after its investigation of the anomaly and after Beatriz, assisted by a lawyer,
threatened it with a lawsuit. On April 14, 1981, Aramco gave Rayos his travel documents without a return visa. His employment contract
was not renewed.
On August 5, 1981, the spouses Rayos, convinced that SIA was responsible for the non-renewal of Rayos' employment contract with
Aramco, sued it for damages. SIA claimed that it was not liable to the Rayoses because the tampering was committed by its handling
agent, Philippine Airlines (PAL). It then filed a third-party complaint against PAL. PAL, in turn, countered that its personnel did not collect
any charges for excess baggage; that it had no participation in the tampering of any excess baggage ticket; and that if any
tampering was made, it was done by SIA's personnel.
Judge Jesus O. Ibay of the Regional Trial Court of Manila, Branch 30, rendered judgment on September 9, 1988, in favor of the plaintiffs,
the dispositive portion of which reads thus:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendant Singapore Airlines Limited, sentencing
the latter to pay the former the following:
1. The sum of Four Hundred Thirty Thousand Nine Hundred Pesos and Eighty Centavos (P430,900.80) as actual damages, with interest at
the legal rate from the date of the filing of the complaint until fully paid.
2. The sum of Four Thousand One Hundred Forty-Seven Pesos and Fifty Centavos (P4,147.50) as reimbursement for the amount
deducted from Mr. Rayos' salary, also with legal rate of interest from the filing of the complaint until paid in full;
3. The sum of Fifty Thousand Pesos (P50,000.00) as moral damages;
4. The sum equivalent to ten Per Cent (10th) of the total amount due as and for attorney's fees; and
5. The cost of suit.
The defendant's counterclaim is hereby dismissed.
ON THE THIRD PARTY COMPLAINT, the third-party defendant PAL is ordered to pay defendant and third-party plaintiff SIA whatever the
latter has paid the plaintiffs.
SO ORDERED.
In so ruling, the court a quo concluded that the excess baggage ticket of Rayos was tampered with by the employees of PAL and that
the fraud was the direct and proximate cause of the non-renewal of Rayos' contract with Aramco.
All parties appealed to the Court of Appeals. SIA's appeal was dismissed for non-payment of docket fees, which dismissal was
eventually sustained by this Court. The Rayos spouses withdrew their appeal when SIA satisfied the judgment totaling P802,435.34.
In its appeal, PAL claimed that the spouses Rayos had no valid claim against SIA because it was the inefficiency of Rayos which led to
the non-renewal of his contract with Aramco, and not the alleged tampering of his excess bagged ticket On the other hand, SIA
argued that the only issue in the said appeal is whether or not it was entitled to reimbursement from PAL, citing
the case of Firestone Tire and Rubber Company of the Philippines v. Tempongko.1
The appellate court disagreed with SIA's contention that PAL could no longer raise the issue of SIA's liability to the Rayoses and opined
"that SIA's answer to the complaint should inure to the benefit of PAL, and the latter may challenge the lower court's findings against
SIA in favor of plaintiffs-appellees (the Rayos spouses) for the purpose of defeating SIA's claim against it, and not for the purpose of
altering in any way the executed judgment against SIA." In its answer to the main complaint, SIA set up the defense that the excess
106
baggage ticket was indeed tampered with but it was committed by PAL's personnel. On September 21, 1992, the appellate court
granted PAL's appeal and absolved it from any liability to SIA.
In this petition for review, SIA argues that PAL cannot validly assail for the first time on appeal the trial court's decision sustaining the
validity of plaintiff's complaint against SIA if PAL did not raise this issue in the lower court. It added that the appellate court should have
restricted its ruling on the right of SIA to seek reimbursement from PAL, as this was the only issue raised by SIA in its third-party complaint
against PAL.
The instant appeal is impressed with merit.
The petitioner correctly pointed out that the case of Firestone squarely applies to the case at bench. In said case, the Court
expounded on the nature of a third-party complaint and the effect of a judgment in favor of the plaintiff against the defendant and in
favor of such defendant as third-party plaintiff against, ultimately, the third-party defendant. Speaking through then Justice and later
Chief Justice Claudio Teehankee, the Court stated:
The third-party complaint is, therefore, a procedural device whereby a "third party" who is neither a party nor privy to the act or deed
complained of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-party plaintiff to
enforce against such third-party defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the plaintiff's
claim. The third-party complaint is actually independent of and separate and distinct from the plaintiff's complaint. . . . When leave to
file the third-party complaint is properly granted, the Court renders in effect two judgments in the same case, one on the plaintiff's
complaint and the other on the third-party complaint. When he finds favorably on both complaints, as in this case, he renders
judgment on the principal complaint in favor of plaintiff against defendant and renders another judgment on the third-party complaint
in favor of defendant as third-party plaintiff, ordering the third-party defendant to reimburse the defendant whatever amount said
defendant is ordered to pay plaintiff in the case. Failure of any of said parties in such a case to appeal the judgment as against him
makes such judgment final and executory. By the same token, an appeal by one party from such judgment does not inure to the
benefit of the other party who has not appealed nor can it be deemed to be an appeal of such other party from the judgment
against him.
It must be noted that in the proceedings below, PAL disclaimed any liability to the Rayoses and imputed the alleged tampering to SIA's
personnel. On appeal, however, PAL changed its theory and averred that the spouses Rayos had no valid claim against SIA on the
around that the non-renewal of Sancho's contract with Aramco was his unsatisfactory performance rather than the alleged tampering
of his excess baggage ticket. In response to PAL's appeal, SIA argued that it was improper for PAL to question SIA's liability to the
plaintiff, since this was no longer an issue on account of the finality and, in fact, satisfaction of the judgment.
Surprisingly, the appellate court ignored the Court's pronouncements in Firestone and declared:
[T]here is nothing in the citation which would suggest that the appellant cannot avail of the defenses which would have been
available to the non-appealing party against the prevailing party which would be beneficial to the appellant. After all, PAL's liability
here is premised on the liability of SIA to plaintiffs-appellees, In its own defense, it should have the right to avail of defenses of SIA
against plaintiffs-appellees which would redound to its benefit. This is especially true here where SIA lost the capability to defend itself
on the technicality of failure to pay docket fee, rather than on the merits of its appeal. To hold otherwise would be to open the door to
a possible collusion between the plaintiff and defendant which would leave the third-party defendant holding the bag.
There is no question that a third-party defendant is allowed to set up in his answer the defenses which the third-party plaintiff (original
defendant) has or may have to the plaintiff's claim. There are, however, special circumstances present in this case which preclude
third-party defendant PAL from benefiting from the said principle.
One of the defenses available to SIA was that the plaintiffs had no cause of action, that is, it had no valid claim against SIA. SIA
investigated the matter and discovered that tampering was, indeed, committed, not by its personnel but by PAL's. This became its
defense as well as its main cause of action in the third-party complaint it filed against PAL. For its part, PAL could have used the
defense that the plaintiffs had no valid claim against it or against SIA. This could be done indirectly by adopting such a defense in its
answer to the third-party complaint if only SIA had raised the same in its answer to the main complaint, or directly by so stating in
unequivocal terms in its answer to SIA's complaint that SIA and PAL were both blameless. Yet, PAL opted to deny any liability which it
imputed to SIA's personnel. It was only on appeal — in a complete turn around of theory — that PAL raised the issue of no valid claim
by the plaintiff against SIA. This simply cannot be allowed.
While the third-party defendant; would benefit from a victory by the third-party plaintiff against the plaintiff, this is true only when the
third-party plaintiff and third-party defendant have non-contradictory defenses. Here, the defendant and third-party defendant had
no common defense against the plaintiffs' complaint, and they were even blaming each other for the fiasco.
Fear of collusion between the third-party plaintiff and the plaintiffs aired by the appellate court is misplaced if not totally unfounded.
The stand of SIA as against the plaintiffs' claim was transparent from the beginning. PAL was aware of SIA's defense, and if it was
convinced that SIA should have raised the defense of no valid claim by the plaintiffs, it should have so stated in its answer as one of its
defenses, instead of waiting for an adverse judgment and raising it for the first time on appeal.
107
The judgment, therefore, as far as the Rayoses and SIA are concerned, has already gained finality. What remains to be resolved, as
correctly pointed out by petitioner, is whether it is entitled to reimbursement from PAL, considering that PAL appealed that part of the
decision to the appellate court. This is where the rule laid down in Firestone becomes applicable.
The trial court's decision, although adverse to SIA as defendant, made PAL ultimately answerable for the judgment by ordering the
latter to reimburse the former for the entire monetary award. On appeal, PAL tried to exonerate itself by arguing that the Rayoses had
no valid claim against SIA. From PAL's viewpoint, this seemed to be the only way to extricate itself from a mess which the court a quo
ascribed to it. This cannot, however, be allowed because it was neither raised by SIA in its answer to the main complaint nor by PAL in
its answer to the third-party complaint. The prudent thing that PAL should have done was to state in its answer to the third-party
complaint filed by SIA against it everything that it may conceivably interpose by way of its defense, including specific denials of
allegations in the main complaint which implicated it along with SIA.
The appellate court was in error when it opined that SIA's answer inured to the benefit of PAL for the simple reason that the complaint
and the third-party complaint are actually two separate cases involving the same set of facts which is allowed by the court to be
resolved in a single proceeding only to avoid a multiplicity of actions. Such a proceeding obviates the need of trying two cases,
receiving the same or similar evidence for both, and enforcing separate judgments therefor. This situation is not, as claimed by the
appellate court, analogous to a case where there are several defendants against whom a complaint is filed stating a common cause
of action, where the answer of some of the defendants inures to the benefit of those who did not file an answer. While such a
complaint speaks of a single suit, a third-party complaint involves an action separate and distinct from, although related to the main
complaint. A third-party defendant who feels aggrieved by some allegations in the main complaint should, aside from answering the
third-party complaint, also answer the main complaint.
We do not, however, agree with the petitioner that PAL is solely liable for the satisfaction of the judgment. While the trial court found,
and this has not been adequately rebutted by PAL, that the proximate cause of the non-renewal of Rayos' employment contract with
Aramco was the tampering of his excess baggage ticket by PAL's personnel, it failed to consider that the immediate cause of such
non-renewal was SIA's delayed transmittal of the certification needed by Rayos to prove his innocence to his employer.
SIA was informed of the anomaly in December 1980 but only issued the certification four months later or, more specifically, on April 8,
1981, a few days before the expiration of Rayos' contract. Surely, the investigation conducted by SIA could not have lasted for four
months as the information needed by the Rayoses could easily be verified by comparing the duplicate excess baggage tickets which
they and their handling agent, PAL, kept the record purposes. The fact that the Rayos spouses had to be assisted by counsel who
threatened to file a damage suit against SIA if the certification they urgently needed was not immediately issued only strengthens the
suspicion that SIA was not dealing with them in utmost good faith. The effect of SIA's mishandling of Beatriz Rayos' request became
instantly apparent when her husband's contract was not renewed in spite of his performance which was constantly "highly regarded"
by the manager of Aramco's equipment services department.
Former Chief Justice and noted remedial law expert Manuel V. Moran opined that "in an action upon a tort, the defendant may file a
third-party complaint against a joint tort-feasor for contribution."2
The non-renewal of Rayos employment contract was the natural and probable consequence of the separate tortious acts of SIA and
PAL. Under mandate of Article 2176 of the Civil Code, Rayos is entitled to be compensated for such damages. Inasmuch as the
responsibility of two or more persons, or tort-feasors, liable for a quasi-delict is joint and several, 3 and the sharing as between such
solidary debtors is pro-rata,4 it is but logical, fair, and equitable to require PAL to contribute to the amount awarded to the Rayos
spouses and already paid by SIA, instead of totally indemnifying the latter.
WHEREFORE, the decision of the respondent Court of Appeals in CA-G.R. CV No. 20488 dated September 21, 1992, is hereby REVERSED
and a new one is entered ordering private respondent Philippine Airlines to pay, by way of contribution, petitioner Singapore Airlines
one-half (1/2) of the amount it actually paid to Sancho and Beatriz Rayos in satisfaction of the judgment in Civil Case No. 142252,
dated September 9, 1988.
SO ORDERED.
23. Dumez Company of France v. National Labor Relations Commission, G.R. No. 82340 (Resolution), [August 12, 1991], 277 PHIL
576-583 De Gala
24. Philippine Commercial and Industrial Bank v. Escolin, G.R. Nos. L-27860 & L-27896, L-27937, [March 29, 1974], 155 PHIL 228-400
Delute
G.R. Nos. L-27860 and L-27896 March 29, 1974

108
PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, Administrator of the Testate Estate of Charles Newton Hodges (Sp. Proc. No. 1672 of the
Court of First Instance of Iloilo), petitioner,
vs.
THE HONORABLE VENICIO ESCOLIN, Presiding Judge of the Court of First Instance of Iloilo, Branch II, and AVELINA A. MAGNO,
respondents.
G.R. Nos. L-27936 & L-27937 March 29, 1974
TESTATE ESTATE OF THE LATE LINNIE JANE HODGES (Sp. Proc. No. 1307). TESTATE ESTATE OF THE LATE CHARLES NEWTON HODGES (Sp. Proc.
No. 1672). PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, administrator-appellant,
vs.
LORENZO CARLES, JOSE PABLICO, ALFREDO CATEDRAL, SALVADOR GUZMAN, BELCESAR CAUSING, FLORENIA BARRIDO, PURIFICACION
CORONADO, GRACIANO LUCERO, ARITEO THOMAS JAMIR, MELQUIADES BATISANAN, PEPITO IYULORES, ESPERIDION PARTISALA,
WINIFREDO ESPADA, ROSARIO ALINGASA, ADELFA PREMAYLON, SANTIAGO PACAONSIS, and AVELINA A. MAGNO, the last as
Administratrix in Sp. Proc. No. 1307, appellees, WESTERN INSTITUTE OF TECHNOLOGY, INC., movant-appellee.
San Juan, Africa, Gonzales and San Agustin for Philippine Commercial and Industrial Bank.
Manglapus Law Office, Antonio Law Office and Rizal R. Quimpo for private respondents and appellees Avelina A. Magno, etc., et al.
BARREDO, J.:p
Certiorari and prohibition with preliminary injunction; certiorari to "declare all acts of the respondent court in the Testate Estate of Linnie
Jane Hodges (Sp. Proc. No. 1307 of the Court of First Instance of Iloilo) subsequent to the order of December 14, 1957 as null and void
for having been issued without jurisdiction"; prohibition to enjoin the respondent court from allowing, tolerating, sanctioning, or abetting
private respondent Avelina A. Magno to perform or do any acts of administration, such as those enumerated in the petition, and from
exercising any authority or power as Regular Administratrix of above-named Testate Estate, by entertaining manifestations, motion and
pleadings filed by her and acting on them, and also to enjoin said court from allowing said private respondent to interfere, meddle or
take part in any manner in the administration of the Testate Estate of Charles Newton Hodges (Sp. Proc. No. 1672 of the same court
and branch); with prayer for preliminary injunction, which was issued by this Court on August 8, 1967 upon a bond of P5,000; the
petition being particularly directed against the orders of the respondent court of October 12, 1966 denying petitioner's motion of April
22, 1966 and its order of July 18, 1967 denying the motion for reconsideration of said order.
Related to and involving basically the same main issue as the foregoing petition, thirty-three (33) appeals from different orders of the
same respondent court approving or otherwise sanctioning the acts of administration of the respondent Magno on behalf of the
testate Estate of Mrs. Hodges.
THE FACTS
On May 23, 1957, Linnie Jane Hodges died in Iloilo City leaving a will executed on November 22, 1952 pertinently providing as follows:
FIRST: I direct that all my just debts and funeral expenses be first paid out of my estate.
SECOND: I give, devise and bequeath all of the rest, residue and remainder of my estate, both personal and real, wherever situated, or
located, to my beloved husband, Charles Newton Hodges, to have and to hold unto him, my said husband, during his natural lifetime.
THIRD: I desire, direct and provide that my husband, Charles Newton Hodges, shall have the right to manage, control, use and enjoy
said estate during his lifetime, and he is hereby given the right to make any changes in the physical properties of said estate, by sale or
any part thereof which he may think best, and the purchase of any other or additional property as he may think best; to execute
conveyances with or without general or special warranty, conveying in fee simple or for any other term or time, any property which he
may deem proper to dispose of; to lease any of the real property for oil, gas and/or other minerals, and all such deeds or leases shall
pass the absolute fee simple title to the interest so conveyed in such property as he may elect to sell. All rents, emoluments and income
from said estate shall belong to him, and he is further authorized to use any part of the principal of said estate as he may need or
desire. It is provided herein, however, that he shall not sell or otherwise dispose of any of the improved property now owned by us
located at, in or near the City of Lubbock, Texas, but he shall have the full right to lease, manage and enjoy the same during his
lifetime, above provided. He shall have the right to subdivide any farm land and sell lots therein. and may sell unimproved town lots.
FOURTH: At the death of my said husband, Charles Newton Hodges, I give, devise and bequeath all of the rest, residue and remainder
of my estate, both real and personal, wherever situated or located, to be equally divided among my brothers and sisters, share and
share alike, namely:
109
Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Saddie Rascoe, Era Roman and Nimroy Higdon.
FIFTH: In case of the death of any of my brothers and/or sisters named in item Fourth, above, prior to the death of my husband, Charles
Newton Hodges, then it is my will and bequest that the heirs of such deceased brother or sister shall take jointly the share which would
have gone to such brother or sister had she or he survived.
SIXTH: I nominate and appoint my said husband, Charles Newton Hodges, to be executor of this, my last will and testament, and direct
that no bond or other security be required of him as such executor.
SEVENTH: It is my will and bequest that no action be had in the probate court, in the administration of my estate, other than that
necessary to prove and record this will and to return an inventory and appraisement of my estate and list of claims. (Pp. 2-4, Petition.)
This will was subsequently probated in aforementioned Special Proceedings No. 1307 of respondent court on June 28, 1957, with the
widower Charles Newton Hodges being appointed as Executor, pursuant to the provisions thereof.
Previously, on May 27, 1957, the said widower (hereafter to be referred to as Hodges) had been appointed Special Administrator, in
which capacity he filed a motion on the same date as follows:
URGENT EX-PARTE MOTION TO ALLOW OR AUTHORIZE PETITIONER TO CONTINUE THE BUSINESS IN WHICH HE WAS ENGAGED AND TO
PERFORM ACTS WHICH HE HAD BEEN DOING WHILE DECEASED WAS LIVING
Come petitioner in the above-entitled special proceedings, thru his undersigned attorneys, to the Hon. Court, most respectfully states:
1. — That Linnie Jane Hodges died leaving her last will and testament, a copy of which is attached to the petition for probate of the
same.
2. — That in said last will and testament herein petitioner Charles Newton Hodges is directed to have the right to manage, control use
and enjoy the estate of deceased Linnie Jane Hodges, in the same way, a provision was placed in paragraph two, the following: "I
give, devise and bequeath all of the rest, residue and remainder of my estate, to my beloved husband, Charles Newton Hodges, to
have and (to) hold unto him, my said husband, during his natural lifetime."
3. — That during the lifetime of Linnie Jane Hodges, herein petitioner was engaged in the business of buying and selling personal and
real properties, and do such acts which petitioner may think best.
4. — That deceased Linnie Jane Hodges died leaving no descendants or ascendants, except brothers and sisters and herein petitioner
as executor surviving spouse, to inherit the properties of the decedent.
5. — That the present motion is submitted in order not to paralyze the business of petitioner and the deceased, especially in the
purchase and sale of properties. That proper accounting will be had also in all these transactions.
WHEREFORE, it is most respectfully prayed that, petitioner C. N. Hodges (Charles Newton Hodges) be allowed or authorized to continue
the business in which he was engaged and to perform acts which he had been doing while deceased Linnie Jane Hodges was living.
City of Iloilo, May 27, 1957. (Annex "D", Petition.)
which the respondent court immediately granted in the following order:
It appearing in the urgent ex-parte motion filed by petitioner C. N. Hodges, that the business in which said petitioner and the deceased
were engaged will be paralyzed, unless and until the Executor is named and appointed by the Court, the said petitioner is allowed or
authorized to continue the business in which he was engaged and to perform acts which he had been doing while the deceased was
living.
SO ORDERED.
City of Iloilo May 27, 1957. (Annex "E", Petition.)
Under date of December 11, 1957, Hodges filed as such Executor another motion thus:
MOTION TO APPROVE ALL SALES, CONVEYANCES, LEASES, MORTGAGES THAT THE EXECUTOR HAD MADE FURTHER AND SUBSEQUENT
TRANSACTIONS WHICH THE EXECUTOR MAY DO IN ACCORDANCE WITH THE LAST WISH OF THE DECEASED LINNIE JANE HODGES.
Comes the Executor in the above-entitled proceedings, thru his undersigned attorney, to the Hon. Court, most respectfully states:
1. — That according to the last will and testament of the deceased Linnie Jane Hodges, the executor as the surviving spouse and
legatee named in the will of the deceased; has the right to dispose of all the properties left by the deceased, portion of which is
quoted as follows:
110
Second: I give, devise and bequeath all of the rest, residue and remainder of my estate, both personal and real, wherever situated, or
located, to my beloved husband, Charles Newton Hodges, to have and to hold unto him, my said husband, during his natural lifetime.
Third: I desire, direct and provide that my husband, Charles Newton Hodges, shall have the right to manage, control, use and enjoy
said estate during his lifetime, and he is hereby given the right to make any changes in the physical properties of said estate, by sale or
desire. ...
2. — That herein Executor, is not only part owner of the properties left as conjugal, but also, the successor to all the properties left by the
deceased Linnie Jane Hodges. That during the lifetime of herein Executor, as Legatee has the right to sell, convey, lease or dispose of
the properties in the Philippines. That inasmuch as C.N. Hodges was and is engaged in the buy and sell of real and personal properties,
even before the death of Linnie Jane Hodges, a motion to authorize said C.N. Hodges was filed in Court, to allow him to continue in
the business of buy and sell, which motion was favorably granted by the Honorable Court.
3. — That since the death of Linnie Jane Hodges, Mr. C.N. Hodges had been buying and selling real and personal properties, in
accordance with the wishes of the late Linnie Jane Hodges.
4. — That the Register of Deeds for Iloilo, had required of late the herein Executor to have all the sales, leases, conveyances or
mortgages made by him, approved by the Hon. Court.
5. — That it is respectfully requested, all the sales, conveyances leases and mortgages executed by the Executor, be approved by the
Hon. Court. and subsequent sales conveyances, leases and mortgages in compliances with the wishes of the late Linnie Jane Hodges,
and within the scope of the terms of the last will and testament, also be approved;
6. — That the Executor is under obligation to submit his yearly accounts, and the properties conveyed can also be accounted for,
especially the amounts received.
WHEREFORE, it is most respectfully prayed that, all the sales, conveyances, leases, and mortgages executed by the Executor, be
approved by the Hon. Court, and also the subsequent sales, conveyances, leases, and mortgages in consonance with the wishes of
the deceased contained in her last will and testament, be with authorization and approval of the Hon. Court.
City of Iloilo, December 11, 1967.
(Annex "G", Petition.)
which again was promptly granted by the respondent court on December 14, 1957 as follows:
ORDER
As prayed for by Attorney Gellada, counsel for the Executor for the reasons stated in his motion dated December 11, 1957, which the
Court considers well taken all the sales, conveyances, leases and mortgages of all properties left by the deceased Linnie Jane Hodges
executed by the Executor Charles N. Hodges are hereby APPROVED. The said Executor is further authorized to execute subsequent
sales, conveyances, leases and mortgages of the properties left by the said deceased Linnie Jane Hodges in consonance with the
wishes conveyed in the last will and testament of the latter.
So ordered.
Iloilo City. December 14, 1957.
(Annex "H", Petition.)
On April 14, 1959, in submitting his first statement of account as Executor for approval, Hodges alleged:
Pursuant to the provisions of the Rules of Court, herein executor of the deceased, renders the following account of his administration
covering the period from January 1, 1958 to December 31, 1958, which account may be found in detail in the individual income tax
return filed for the estate of deceased Linnie Jane Hodges, to wit:
That a certified public accountant has examined the statement of net worth of the estate of Linnie Jane Hodges, the assets and
liabilities, as well as the income and expenses, copy of which is hereto attached and made integral part of this statement of account
as Annex "A".
111
IN VIEW OF THE FOREGOING, it is most respectfully prayed that, the statement of net worth of the estate of Linnie Jane Hodges, the
assets and liabilities, income and expenses as shown in the individual income tax return for the estate of the deceased and marked as
Annex "A", be approved by the Honorable Court, as substantial compliance with the requirements of the Rules of Court.
That no person interested in the Philippines of the time and place of examining the herein accounts be given notice, as herein
executor is the only devisee or legatee of the deceased, in accordance with the last will and testament already probated by the
Honorable court.
City of Iloilo April 14, 1959.
(Annex "I", Petition.)
The respondent court approved this statement of account on April 21, 1959 in its order worded thus:
Upon petition of Atty. Gellada, in representation of the Executor, the statement of net worth of the estate of Linnie Jane Hodges, assets
and liabilities, income and expenses as shown in the individual income tax return for the estate of the deceased and marked as Annex
"A" is approved.
SO ORDERED.
City of Iloilo April 21, 1959.
(Annex "J", Petition.)
His accounts for the periods January 1, 1959 to December 31, 1959 and January 1, 1960 to December 31, 1960 were submitted likewise
accompanied by allegations identical mutatis mutandis to those of April 14, 1959, quoted above; and the respective orders approving
the same, dated July 30, 1960 and May 2, 1961, were substantially identical to the above-quoted order of April 21, 1959. In connection
with the statements of account just mentioned, the following assertions related thereto made by respondent-appellee Magno in her
brief do not appear from all indications discernible in the record to be disputable:
Under date of April 14, 1959, C.N. Hodges filed his first "Account by the Executor" of the estate of Linnie Jane Hodges. In the "Statement
of Networth of Mr. C.N. Hodges and the Estate of Linnie Jane Hodges" as of December 31, 1958 annexed thereto, C.N. Hodges
reported that the combined conjugal estate earned a net income of P328,402.62, divided evenly between him and the estate of
Linnie Jane Hodges. Pursuant to this, he filed an "individual income tax return" for calendar year 1958 on the estate of Linnie Jane
Hodges reporting, under oath, the said estate as having earned income of P164,201.31, exactly one-half of the net income of his
combined personal assets and that of the estate of Linnie Jane Hodges. (p. 91, Appellee's Brief.)
xxx xxx xxx
Under date of July 21, 1960, C.N. Hodges filed his second "Annual Statement of Account by the Executor" of the estate of Linnie Jane
Hodges. In the "Statement of Networth of Mr. C.N. Hodges and the Estate of Linnie Jane Hodges" as of December 31, 1959 annexed
thereto, C.N. Hodges reported that the combined conjugal estate earned a net income of P270,623.32, divided evenly between him
and the estate of Linnie Jane Hodges. Pursuant to this, he filed an "individual income tax return" for calendar year 1959 on the estate of
Linnie Jane Hodges reporting, under oath, the said estate as having earned income of P135,311.66, exactly one-half of the net income
of his combined personal assets and that of the estate of Linnie Jane Hodges. (pp. 91-92. Appellee's Brief.)
xxx xxx xxx
Under date of April 20, 1961, C.N. Hodges filed his third "Annual Statement of Account by the Executor for the Year 1960" of the estate
of Linnie Jane Hodges. In the "Statement of Net Worth of Mr. C.N. Hodges and the Estate of Linnie Jane Hodges" as of December 31,
1960 annexed thereto, C.N. Hodges reported that the combined conjugal estate earned a net income of P314,857.94, divided evenly
between him and the estate of Linnie Jane Hodges. Pursuant to this, he filed an "individual income tax return" for calendar year 1960
on the estate of Linnie Jane Hodges reporting, under oath, the said estate as having earned income of P157,428.97, exactly one-half of
the net income of his combined personal assets and that of the estate of Linnie Jane Hodges. (Pp. 92-93, Appellee's Brief.)
Likewise the following:
In the petition for probate that he (Hodges) filed, he listed the seven brothers and sisters of Linnie Jane as her "heirs" (see p. 2, Green
ROA). The order of the court admitting the will to probate unfortunately omitted one of the heirs, Roy Higdon (see p. 14, Green ROA).
Immediately, C.N. Hodges filed a verified motion to have Roy Higdon's name included as an heir, stating that he wanted to straighten
the records "in order the heirs of deceased Roy Higdon may not think or believe they were omitted, and that they were really and are
interested in the estate of deceased Linnie Jane Hodges. .
As an executor, he was bound to file tax returns for the estate he was administering under American law. He did file such as estate tax
return on August 8, 1958. In Schedule "M" of such return, he answered "Yes" to the question as to whether he was contemplating
"renouncing the will". On the question as to what property interests passed to him as the surviving spouse, he answered:
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"None, except for purposes of administering the Estate, paying debts, taxes and other legal charges. It is the intention of the surviving
husband of deceased to distribute the remaining property and interests of the deceased in their Community estate to the devisees
and legatees named in the will when the debts, liabilities, taxes and expenses of administration are finally determined and paid."
Again, on August 9, 1962, barely four months before his death, he executed an "affidavit" wherein he ratified and confirmed all that he
stated in Schedule "M" of his estate tax returns as to his having renounced what was given him by his wife's will. 1
As appointed executor, C.N. Hodges filed an "Inventory" dated May 12, 1958. He listed all the assets of his conjugal partnership with
Linnie Jane Hodges on a separate balance sheet and then stated expressly that her estate which has come into his possession as
executor was "one-half of all the items" listed in said balance sheet. (Pp. 89-90, Appellee's Brief.)
Parenthetically, it may be stated, at this juncture, that We are taking pains to quote wholly or at least, extensively from some of the
pleadings and orders whenever We feel that it is necessary to do so for a more comprehensive and clearer view of the important and
decisive issues raised by the parties and a more accurate appraisal of their respective positions in regard thereto.
The records of these cases do not show that anything else was done in the above-mentioned Special Proceedings No. 1307 until
December 26, 1962, when on account of the death of Hodges the day before, the same lawyer, Atty. Leon P. Gellada, who had been
previously acting as counsel for Hodges in his capacity as Executor of his wife's estate, and as such had filed the aforequoted motions
and manifestations, filed the following:
URGENT EX-PARTE MOTION FOR THE APPOINTMENT OF A
SPECIAL ADMINISTRATRIX
COMES the undersigned attorney for the Executor in the above-entitled proceedings, to the Honorable Court, most respectfully states:
1. That in accordance with the Last Will and Testament of Linnie Jane Hodges (deceased), her husband, Charles Newton Hodges was
to act as Executor, and in fact, in an order issued by this Hon. Court dated June 28, 1957, the said Charles Newton Hodges was
appointed Executor and had performed the duties as such.
2. That last December 22, 1962, the said Charles Newton Hodges was stricken ill, and brought to the Iloilo Mission Hospital for treatment,
but unfortunately, he died on December 25, 1962, as shown by a copy of the death certificate hereto attached and marked as Annex
"A".
3. That in accordance with the provisions of the last will and testament of Linnie Jane Hodges, whatever real and personal properties
that may remain at the death of her husband Charles Newton Hodges, the said properties shall be equally divided among their heirs.
That there are real and personal properties left by Charles Newton Hodges, which need to be administered and taken care of.
4. That the estate of deceased Linnie Jane Hodges, as well as that of Charles Newton Hodges, have not as yet been determined or
ascertained, and there is necessity for the appointment of a general administrator to liquidate and distribute the residue of the estate
to the heirs and legatees of both spouses. That in accordance with the provisions of Section 2 of Rule 75 of the Rules of Court, the
conjugal partnership of Linnie Jane Hodges and Charles Newton Hodges shall be liquidated in the testate proceedings of the wife.
5. That the undersigned counsel, has perfect personal knowledge of the existence of the last will and testament of Charles Newton
Hodges, with similar provisions as that contained in the last will and testament of Linnie Jane Hodges. However, said last will and
testament of Charles Newton Hodges is kept inside the vault or iron safe in his office, and will be presented in due time before this
honorable Court.
6. That in the meantime, it is imperative and indispensable that, an Administratrix be appointed for the estate of Linnie Jane Hodges
and a Special Administratrix for the estate of Charles Newton Hodges, to perform the duties required by law, to administer, collect, and
take charge of the goods, chattels, rights, credits, and estate of both spouses, Charles Newton Hodges and Linnie Jane Hodges, as
provided for in Section 1 and 2, Rule 81 of the Rules of Court.
7. That there is delay in granting letters testamentary or of administration, because the last will and testament of deceased, Charles
Newton Hodges, is still kept in his safe or vault, and in the meantime, unless an administratrix (and,) at the same time, a Special
Administratrix is appointed, the estate of both spouses are in danger of being lost, damaged or go to waste.
8. That the most trusted employee of both spouses Linnie Jane Hodges and C.N. Hodges, who had been employed for around thirty
(30) years, in the person of Miss Avelina Magno, (should) be appointed Administratrix of the estate of Linnie Jane Hodges and at the
same time Special Administratrix of the estate of Charles Newton Hodges. That the said Miss Avelina Magno is of legal age, a resident
of the Philippines, the most fit, competent, trustworthy and well-qualified person to serve the duties of Administratrix and Special
Administratrix and is willing to act as such.
9. That Miss Avelina Magno is also willing to file bond in such sum which the Hon. Court believes reasonable.
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WHEREFORE, in view of all the foregoing, it is most respectfully prayed that, Miss AVELINA A. MAGNO be immediately appointed
Administratrix of the estate of Linnie Jane Hodges and as Special Administratrix of the estate of Charles Newton Hodges, with powers
and duties provided for by law. That the Honorable Court fix the reasonable bond of P1,000.00 to be filed by Avelina A. Magno.
(Annex "O", Petition.)
which respondent court readily acted on in its order of even date thus: .
For the reasons alleged in the Urgent Ex-parte Motion filed by counsel for the Executor dated December 25, 1962, which the Court finds
meritorious, Miss AVELINA A. MAGNO, is hereby appointed Administratrix of the estate of Linnie Jane Hodges and as Special
Administratrix of the estate of Charles Newton Hodges, in the latter case, because the last will of said Charles Newton Hodges is still
kept in his vault or iron safe and that the real and personal properties of both spouses may be lost, damaged or go to waste, unless a
Special Administratrix is appointed.
Miss Avelina A. Magno is required to file bond in the sum of FIVE THOUSAND PESOS (P5,000.00), and after having done so, let letters of
Administration be issued to her." (Annex "P", Petition.)
On December 29, 1962, however, upon urgent ex-parte petition of respondent Magno herself, thru Atty. Gellada, Harold, R. Davies, "a
representative of the heirs of deceased Charles Newton Hodges (who had) arrived from the United States of America to help in the
administration of the estate of said deceased" was appointed as Co-Special Administrator of the estate of Hodges, (pp. 29-33, Yellow -
Record on Appeal) only to be replaced as such co-special administrator on January 22, 1963 by Joe Hodges, who, according to the
motion of the same attorney, is "the nephew of the deceased (who had) arrived from the United States with instructions from the other
heirs of the deceased to administer the properties or estate of Charles Newton Hodges in the Philippines, (Pp. 47-50, id.)
Meanwhile, under date of January 9, 1963, the same Atty. Gellada filed in Special Proceedings 1672 a petition for the probate of the
will of Hodges,2 with a prayer for the issuance of letters of administration to the same Joe Hodges, albeit the motion was followed on
February 22, 1963 by a separate one asking that Atty. Fernando Mirasol be appointed as his co-administrator. On the same date this
latter motion was filed, the court issued the corresponding order of probate and letters of administration to Joe Hodges and Atty.
Mirasol, as prayed for.
At this juncture, again, it may also be explained that just as, in her will, Mrs. Hodges bequeathed her whole estate to her husband "to
have and to hold unto him, my said husband, during his natural lifetime", she, at the same time or in like manner, provided that "at the
death of my said husband — I give devise and bequeath all of the rest, residue and remainder of my estate, both real and personal,
wherever situated or located, to be equally divided among my brothers and sisters, share and share alike —". Accordingly, it became
incumbent upon Hodges, as executor of his wife's will, to duly liquidate the conjugal partnership, half of which constituted her estate, in
order that upon the eventuality of his death, "the rest, residue and remainder" thereof could be determined and correspondingly
distributed or divided among her brothers and sisters. And it was precisely because no such liquidation was done, furthermore, there is
the issue of whether the distribution of her estate should be governed by the laws of the Philippines or those of Texas, of which State she
was a national, and, what is more, as already stated, Hodges made official and sworn statements or manifestations indicating that as
far as he was concerned no "property interests passed to him as surviving spouse — "except for purposes of administering the estate,
paying debts, taxes and other legal charges" and it was the intention of the surviving husband of the deceased to distribute the
remaining property and interests of the deceased in their Community Estate to the devisees and legatees named in the will when the
debts, liabilities, taxes and expenses of administration are finally determined and paid", that the incidents and controversies now
before Us for resolution arose. As may be observed, the situation that ensued upon the death of Hodges became rather unusual and
so, quite understandably, the lower court's actuations presently under review are apparently wanting in consistency and seemingly
lack proper orientation.
Thus, We cannot discern clearly from the record before Us the precise perspective from which the trial court proceeded in issuing its
questioned orders. And, regretably, none of the lengthy briefs submitted by the parties is of valuable assistance in clearing up the
matter.
To begin with, We gather from the two records on appeal filed by petitioner, as appellant in the appealed cases, one with green cover
and the other with a yellow cover, that at the outset, a sort of modus operandi had been agreed upon by the parties under which the
respective administrators of the two estates were supposed to act conjointly, but since no copy of the said agreement can be found in
the record before Us, We have no way of knowing when exactly such agreement was entered into and under what specific terms.
And while reference is made to said modus operandi in the order of September 11, 1964, on pages 205-206 of the Green Record on
Appeal, reading thus:
The present incident is to hear the side of administratrix, Miss Avelina A. Magno, in answer to the charges contained in the motion filed
by Atty. Cesar Tirol on September 3, 1964. In answer to the said charges, Miss Avelina A. Magno, through her counsel, Atty. Rizal
Quimpo, filed a written manifestation.
After reading the manifestation here of Atty. Quimpo, for and in behalf of the administratrix, Miss Avelina A. Magno, the Court finds that
everything that happened before September 3, 1964, which was resolved on September 8, 1964, to the satisfaction of parties, was
simply due to a misunderstanding between the representative of the Philippine Commercial and Industrial Bank and Miss Magno and in
order to restore the harmonious relations between the parties, the Court ordered the parties to remain in status quo as to their modus
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operandi before September 1, 1964, until after the Court can have a meeting with all the parties and their counsels on October 3, as
formerly agreed upon between counsels, Attys. Ozaeta, Gibbs and Ozaeta, Attys. Tirol and Tirol and Atty. Rizal Quimpo.
In the meantime, the prayers of Atty. Quimpo as stated in his manifestation shall not be resolved by this Court until October 3, 1964.
SO ORDERED.
there is nothing in the record indicating whatever happened to it afterwards, except that again, reference thereto was made in the
appealed order of October 27, 1965, on pages 292-295 of the Green Record on Appeal, as follows:
On record is an urgent motion to allow PCIB to open all doors and locks in the Hodges Office at 206-208 Guanco Street, Iloilo City, to
take immediate and exclusive possession thereof and to place its own locks and keys for security purposes of the PCIB dated October
27, 1965 thru Atty. Cesar Tirol. It is alleged in said urgent motion that Administratrix Magno of the testate estate of Linnie Jane Hodges
refused to open the Hodges Office at 206-208 Guanco Street, Iloilo City where PCIB holds office and therefore PCIB is suffering great
moral damage and prejudice as a result of said act. It is prayed that an order be issued authorizing it (PCIB) to open all doors and locks
in the said office, to take immediate and exclusive possession thereof and place thereon its own locks and keys for security purposes;
instructing the clerk of court or any available deputy to witness and supervise the opening of all doors and locks and taking possession
of the PCIB.
A written opposition has been filed by Administratrix Magno of even date (Oct. 27) thru counsel Rizal Quimpo stating therein that she
was compelled to close the office for the reason that the PCIB failed to comply with the order of this Court signed by Judge Anacleto I.
Bellosillo dated September 11, 1964 to the effect that both estates should remain in status quo to their modus operandi as of
September 1, 1964.
To arrive at a happy solution of the dispute and in order not to interrupt the operation of the office of both estates, the Court aside
from the reasons stated in the urgent motion and opposition heard the verbal arguments of Atty. Cesar Tirol for the PCIB and Atty. Rizal
Quimpo for Administratix Magno.
After due consideration, the Court hereby orders Magno to open all doors and locks in the Hodges Office at 206-208 Guanco Street,
Iloilo City in the presence of the PCIB or its duly authorized representative and deputy clerk of court Albis of this branch not later than
7:30 tomorrow morning October 28, 1965 in order that the office of said estates could operate for business.
Pursuant to the order of this Court thru Judge Bellosillo dated September 11, 1964, it is hereby ordered:
(a) That all cash collections should be deposited in the joint account of the estates of Linnie Jane Hodges and estates of C.N. Hodges;
(b) That whatever cash collections that had been deposited in the account of either of the estates should be withdrawn and since
then deposited in the joint account of the estate of Linnie Jane Hodges and the estate of C.N. Hodges;
(c) That the PCIB should countersign the check in the amount of P250 in favor of Administratrix Avelina A. Magno as her compensation
as administratrix of the Linnie Jane Hodges estate chargeable to the testate estate of Linnie Jane Hodges only;
(d) That Administratrix Magno is hereby directed to allow the PCIB to inspect whatever records, documents and papers she may have
in her possession in the same manner that Administrator PCIB is also directed to allow Administratrix Magno to inspect whatever
records, documents and papers it may have in its possession;
(e) That the accountant of the estate of Linnie Jane Hodges shall have access to all records of the transactions of both estates for the
protection of the estate of Linnie Jane Hodges; and in like manner the accountant or any authorized representative of the estate of
C.N. Hodges shall have access to the records of transactions of the Linnie Jane Hodges estate for the protection of the estate of C.N.
Hodges.
Once the estates' office shall have been opened by Administratrix Magno in the presence of the PCIB or its duly authorized
representative and deputy clerk Albis or his duly authorized representative, both estates or any of the estates should not close it without
previous consent and authority from this court.
SO ORDERED.
As may be noted, in this order, the respondent court required that all collections from the properties in the name of Hodges should be
deposited in a joint account of the two estates, which indicates that seemingly the so-called modus operandi was no longer operative,
but again there is nothing to show when this situation started.
Likewise, in paragraph 3 of the petitioner's motion of September 14, 1964, on pages 188-201 of the Green Record on Appeal, (also
found on pp. 83-91 of the Yellow Record on Appeal) it is alleged that:
3. On January 24, 1964 virtually all of the heirs of C.N. Hodges, Joe Hodges and Fernando P. Mirasol acting as the two co-administrators
of the estate of C.N. Hodges, Avelina A. Magno acting as the administratrix of the estate of Linnie Jane Hodges and Messrs. William
115
Brown and Ardell Young acting for all of the Higdon family who claim to be the sole beneficiaries of the estate of Linnie Jane Hodges
and various legal counsel representing the aforementioned parties entered into an amicable agreement, which was approved by this
Honorable Court, wherein the parties thereto agreed that certain sums of money were to be paid in settlement of different claims
against the two estates and that the assets (to the extent they existed) of both estates would be administered jointly by the PCIB as
administrator of the estate of C.N. Hodges and Avelina A. Magno as administratrix of the estate of Linnie Jane Hodges, subject,
however, to the aforesaid October 5, 1963 Motion, namely, the PCIB's claim to exclusive possession and ownership of one hundred
percent (100%) (or, in the alternative, seventy-five percent (75%) of all assets owned by C.N. Hodges or Linnie Jane Hodges situated in
the Philippines. On February 1, 1964 (pp. 934-935, CFI Rec., S.P. No. 1672) this Honorable Court amended its order of January 24, 1964
but in no way changed its recognition of the afore-described basic demand by the PCIB as administrator of the estate of C.N. Hodges
to one hundred percent (100%) of the assets claimed by both estates.
but no copy of the mentioned agreement of joint administration of the two estates exists in the record, and so, We are not informed as
to what exactly are the terms of the same which could be relevant in the resolution of the issues herein.
On the other hand, the appealed order of November 3, 1965, on pages 313-320 of the Green Record on Appeal, authorized payment
by respondent Magno of, inter alia, her own fees as administratrix, the attorney's fees of her lawyers, etc., as follows:
Administratrix Magno thru Attys. Raul S. Manglapus and Rizal. R. Quimpo filed a Manifestation and Urgent Motion dated June 10, 1964
asking for the approval of the Agreement dated June 6, 1964 which Agreement is for the purpose of retaining their services to protect
and defend the interest of the said Administratrix in these proceedings and the same has been signed by and bears the express
conformity of the attorney-in-fact of the late Linnie Jane Hodges, Mr. James L. Sullivan. It is further prayed that the Administratrix of the
Testate Estate of Linnie Jane Hodges be directed to pay the retailers fee of said lawyers, said fees made chargeable as expenses for
the administration of the estate of Linnie Jane Hodges (pp. 1641-1642, Vol. V, Sp. 1307).
An opposition has been filed by the Administrator PCIB thru Atty. Herminio Ozaeta dated July 11, 1964, on the ground that payment of
the retainers fee of Attys. Manglapus and Quimpo as prayed for in said Manifestation and Urgent Motion is prejudicial to the 100%
claim of the estate of C. N. Hodges; employment of Attys. Manglapus and Quimpo is premature and/or unnecessary; Attys. Quimpo
and Manglapus are representing conflicting interests and the estate of Linnie Jane Hodges should be closed and terminated (pp.
1679-1684, Vol, V, Sp. 1307).
Atty. Leon P. Gellada filed a memorandum dated July 28, 1964 asking that the Manifestation and Urgent Motion filed by Attys.
Manglapus and Quimpo be denied because no evidence has been presented in support thereof. Atty. Manglapus filed a reply to the
opposition of counsel for the Administrator of the C. N. Hodges estate wherein it is claimed that expenses of administration include
reasonable counsel or attorney's fees for services to the executor or administrator. As a matter of fact the fee agreement dated
February 27, 1964 between the PCIB and the law firm of Ozaeta, Gibbs & Ozaeta as its counsel (Pp. 1280-1284, Vol. V, Sp. 1307) which
stipulates the fees for said law firm has been approved by the Court in its order dated March 31, 1964. If payment of the fees of the
lawyers for the administratrix of the estate of Linnie Jane Hodges will cause prejudice to the estate of C. N. Hodges, in like manner the
very agreement which provides for the payment of attorney's fees to the counsel for the PCIB will also be prejudicial to the estate of
Linnie Jane Hodges (pp. 1801-1814, Vol. V, Sp. 1307).
Atty. Herminio Ozaeta filed a rejoinder dated August 10, 1964 to the reply to the opposition to the Manifestation and Urgent Motion
alleging principally that the estates of Linnie Jane Hodges and C. N. Hodges are not similarly situated for the reason that C. N. Hodges
is an heir of Linnie Jane Hodges whereas the latter is not an heir of the former for the reason that Linnie Jane Hodges predeceased C.
N. Hodges (pp. 1839-1848, Vol. V, Sp. 1307); that Attys. Manglapus and Quimpo formally entered their appearance in behalf of
Administratrix of the estate of Linnie Jane Hodges on June 10, 1964 (pp. 1639-1640, Vol. V, Sp. 1307).
Atty. Manglapus filed a manifestation dated December 18, 1964 stating therein that Judge Bellosillo issued an order requiring the
parties to submit memorandum in support of their respective contentions. It is prayed in this manifestation that the Manifestation and
Urgent Motion dated June 10, 1964 be resolved (pp. 6435-6439, Vol. VII, Sp. 1307).
Atty. Roman Mabanta, Jr. for the PCIB filed a counter- manifestation dated January 5, 1965 asking that after the consideration by the
court of all allegations and arguments and pleadings of the PCIB in connection therewith (1) said manifestation and urgent motion of
Attys. Manglapus and Quimpo be denied (pp. 6442-6453, Vol. VII, Sp. 1307). Judge Querubin issued an order dated January 4, 1965
approving the motion dated June 10, 1964 of the attorneys for the administratrix of the estate of Linnie Jane Hodges and agreement
annexed to said motion. The said order further states: "The Administratrix of the estate of Linnie Jane Hodges is authorized to issue or
sign whatever check or checks may be necessary for the above purpose and the administrator of the estate of C. N. Hodges is
ordered to countersign the same. (pp. 6518-6523, Vol VII, Sp. 1307).
Atty. Roman Mabanta, Jr. for the PCIB filed a manifestation and motion dated January 13, 1965 asking that the order of January 4,
1965 which was issued by Judge Querubin be declared null and void and to enjoin the clerk of court and the administratrix and
administrator in these special proceedings from all proceedings and action to enforce or comply with the provision of the aforesaid
order of January 4, 1965. In support of said manifestation and motion it is alleged that the order of January 4, 1965 is null and void
because the said order was never delivered to the deputy clerk Albis of Branch V (the sala of Judge Querubin) and the alleged order
was found in the drawer of the late Judge Querubin in his office when said drawer was opened on January 13, 1965 after the death of
Judge Querubin by Perfecto Querubin, Jr., the son of the judge and in the presence of Executive Judge Rovira and deputy clerk Albis
(Sec. 1, Rule 36, New Civil Code) (Pp. 6600-6606, Vol. VIII, Sp. 1307).
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Atty. Roman Mabanta, Jr. for the PCIB filed a motion for reconsideration dated February 23, 1965 asking that the order dated January
4, 1964 be reversed on the ground that:
1. Attorneys retained must render services to the estate not to the personal heir;
2. If services are rendered to both, fees should be pro-rated between them;
3. Attorneys retained should not represent conflicting interests; to the prejudice of the other heirs not represented by said attorneys;
4. Fees must be commensurate to the actual services rendered to the estate;
5. There must be assets in the estate to pay for said fees (Pp. 6625-6636, Vol. VIII, Sp. 1307).
Atty. Quimpo for Administratrix Magno of the estate of Linnie Jane Hodges filed a motion to submit dated July 15, 1965 asking that the
manifestation and urgent motion dated June 10, 1964 filed by Attys. Manglapus and Quimpo and other incidents directly appertaining
thereto be considered submitted for consideration and approval (pp. 6759-6765, Vol. VIII, Sp. 1307).
Considering the arguments and reasons in support to the pleadings of both the Administratrix and the PCIB, and of Atty. Gellada,
hereinbefore mentioned, the Court believes that the order of January 4, 1965 is null and void for the reason that the said order has not
been filed with deputy clerk Albis of this court (Branch V) during the lifetime of Judge Querubin who signed the said order. However,
the said manifestation and urgent motion dated June 10, 1964 is being treated and considered in this instant order. It is worthy to note
that in the motion dated January 24, 1964 (Pp. 1149- 1163, Vol. V, Sp. 1307) which has been filed by Atty. Gellada and his associates
and Atty. Gibbs and other lawyers in addition to the stipulated fees for actual services rendered. However, the fee agreement dated
February 27, 1964, between the Administrator of the estate of C. N. Hodges and Atty. Gibbs which provides for retainer fee of P4,000
monthly in addition to specific fees for actual appearances, reimbursement for expenditures and contingent fees has also been
approved by the Court and said lawyers have already been paid. (pp. 1273-1279, Vol. V, Sp. Proc. 1307 pp. 1372-1373, Vol. V, Sp. Proc.
1307).
WHEREFORE, the order dated January 4, 1965 is hereby declared null and void.
The manifestation and motion dated June 10, 1964 which was filed by the attorneys for the administratrix of the testate estate of Linnie
Jane Hodges is granted and the agreement annexed thereto is hereby approved.
The administratrix of the estate of Linnie Jane Hodges is hereby directed to be needed to implement the approval of the agreement
annexed to the motion and the administrator of the estate of C. N. Hodges is directed to countersign the said check or checks as the
case may be.
SO ORDERED.
thereby implying somehow that the court assumed the existence of independent but simultaneous administrations.
Be that as it may, again, it appears that on August 6, 1965, the court, acting on a motion of petitioner for the approval of deeds of sale
executed by it as administrator of the estate of Hodges, issued the following order, also on appeal herein:
Acting upon the motion for approval of deeds of sale for registered land of the PCIB, Administrator of the Testate Estate of C. N.
Hodges in Sp. Proc. 1672 (Vol. VII, pp. 2244-2245), dated July 16, 1965, filed by Atty. Cesar T. Tirol in representation of the law firms of
Ozaeta, Gibbs and Ozaeta and Tirol and Tirol and the opposition thereto of Atty. Rizal R. Quimpo (Vol. VIII, pp. 6811-6813) dated July
22, 1965 and considering the allegations and reasons therein stated, the court believes that the deeds of sale should be signed jointly
by the PCIB, Administrator of the Testate Estate of C. N. Hodges and Avelina A. Magno, Administratrix of the Testate Estate of Linnie
Jane Hodges and to this effect the PCIB should take the necessary steps so that Administratrix Avelina A. Magno could sign the deeds
of sale.
SO ORDERED. (p. 248, Green Record on Appeal.)
Notably this order required that even the deeds executed by petitioner, as administrator of the Estate of Hodges, involving properties
registered in his name, should be co-signed by respondent Magno. 3 And this was not an isolated instance.
In her brief as appellee, respondent Magno states:
After the lower court had authorized appellee Avelina A. Magno to execute final deeds of sale pursuant to contracts to sell executed
by C. N. Hodges on February 20, 1963 (pp. 45-46, Green ROA), motions for the approval of final deeds of sale (signed by appellee
Avelina A. Magno and the administrator of the estate of C. N. Hodges, first Joe Hodges, then Atty. Fernando Mirasol and later the
appellant) were approved by the lower court upon petition of appellee Magno's counsel, Atty. Leon P. Gellada, on the basis of section
8 of Rule 89 of the Revised Rules of Court. Subsequently, the appellant, after it had taken over the bulk of the assets of the two estates,
started presenting these motions itself. The first such attempt was a "Motion for Approval of Deeds of Sale for Registered Land and
Cancellations of Mortgages" dated July 21, 1964 filed by Atty. Cesar T. Tirol, counsel for the appellant, thereto annexing two (2) final
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deeds of sale and two (2) cancellations of mortgages signed by appellee Avelina A. Magno and D. R. Paulino, Assistant Vice-President
and Manager of the appellant (CFI Record, Sp. Proc. No. 1307, Vol. V, pp. 1694-1701). This motion was approved by the lower court on
July 27, 1964. It was followed by another motion dated August 4, 1964 for the approval of one final deed of sale again signed by
appellee Avelina A. Magno and D. R. Paulino (CFI Record, Sp. Proc. No. 1307. Vol. V, pp. 1825-1828), which was again approved by
the lower court on August 7, 1964. The gates having been opened, a flood ensued: the appellant subsequently filed similar motions for
the approval of a multitude of deeds of sales and cancellations of mortgages signed by both the appellee Avelina A. Magno and the
appellant.
A random check of the records of Special Proceeding No. 1307 alone will show Atty. Cesar T. Tirol as having presented for court
approval deeds of sale of real properties signed by both appellee Avelina A. Magno and D. R. Paulino in the following numbers: (a)
motion dated September 21, 1964 — 6 deeds of sale; (b) motion dated November 4, 1964 — 1 deed of sale; (c) motion dated
December 1, 1964 — 4 deeds of sale; (d) motion dated February 3, 1965 — 8 deeds of sale; (f) motion dated May 7, 1965 — 9 deeds of
sale. In view of the very extensive landholdings of the Hodges spouses and the many motions filed concerning deeds of sale of real
properties executed by C. N. Hodges the lower court has had to constitute special separate expedientes in Special Proceedings Nos.
1307 and 1672 to include mere motions for the approval of deeds of sale of the conjugal properties of the Hodges spouses.
As an example, from among the very many, under date of February 3, 1965, Atty. Cesar T. Tirol, as counsel for the appellant, filed
"Motion for Approval of Deeds of Sale for Registered Land and Cancellations of Mortgages" (CFI Record, Sp. Proc. No. 1307, Vol. VIII,
pp. 6570-6596) the allegations of which read:
"1. In his lifetime, the late C. N. Hodges executed "Contracts to Sell" real property, and the prospective buyers under said contracts
have already paid the price and complied with the terms and conditions thereof;
"2. In the course of administration of both estates, mortgage debtors have already paid their debts secured by chattel mortgages in
favor of the late C. N. Hodges, and are now entitled to release therefrom;
"3. There are attached hereto documents executed jointly by the Administratrix in Sp. Proc. No. 1307 and the Administrator in Sp. Proc.
No. 1672, consisting of deeds of sale in favor —
Fernando Cano, Bacolod City, Occ. Negros
Fe Magbanua, Iloilo City
Policarpio M. Pareno, La Paz, Iloilo City
Rosario T. Libre, Jaro, Iloilo City
Federico B. Torres, Iloilo City
Reynaldo T. Lataquin, La Paz, Iloilo City
Anatolio T. Viray, Iloilo City
Benjamin Rolando, Jaro, Iloilo City
and cancellations of mortgages in favor of —
Pablo Manzano, Oton, Iloilo
Ricardo M. Diana, Dao, San Jose, Antique
Simplicio Tingson, Iloilo City
Amado Magbanua, Pototan, Iloilo
Roselia M. Baes, Bolo, Roxas City
William Bayani, Rizal Estanzuela, Iloilo City
Elpidio Villarete, Molo, Iloilo City
Norma T. Ruiz, Jaro, Iloilo City
"4. That the approval of the aforesaid documents will not reduce the assets of the estates so as to prevent any creditor from receiving
his full debt or diminish his dividend."
And the prayer of this motion is indeed very revealing:

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"WHEREFORE, it is respectfully prayed that, under Rule 89, Section 8 of the Rules of Court, this honorable court approve the aforesaid
deeds of sale and cancellations of mortgages." (Pp. 113-117, Appellee's Brief.)
None of these assertions is denied in Petitioner's reply brief.
Further indicating lack of concrete perspective or orientation on the part of the respondent court and its hesitancy to clear up matters
promptly, in its other appealed order of November 23, 1965, on pages 334-335 of the Green Record on Appeal, said respondent court
allowed the movant Ricardo Salas, President of appellee Western Institute of Technology (successor of Panay Educational Institutions,
Inc.), one of the parties with whom Hodges had contracts that are in question in the appeals herein, to pay petitioner, as Administrator
of the estate of Hodges and/or respondent Magno, as Administrator of the estate of Mrs. Hodges, thus:
Considering that in both cases there is as yet no judicial declaration of heirs nor distribution of properties to whomsoever are entitled
thereto, the Court believes that payment to both the administrator of the testate estate of C. N. Hodges and the administratrix of the
testate estate of Linnie Jane Hodges or to either one of the two estates is proper and legal.
WHEREFORE, movant Ricardo T. Salas can pay to both estates or either of them.
SO ORDERED.
(Pp. 334-335, Green Record on Appeal.)
On the other hand, as stated earlier, there were instances when respondent Magno was given authority to act alone. For instance, in
the other appealed order of December 19, 1964, on page 221 of the Green Record on Appeal, the respondent court approved
payments made by her of overtime pay to some employees of the court who had helped in gathering and preparing copies of parts
of the records in both estates as follows:
Considering that the expenses subject of the motion to approve payment of overtime pay dated December 10, 1964, are reasonable
and are believed by this Court to be a proper charge of administration chargeable to the testate estate of the late Linnie Jane
Hodges, the said expenses are hereby APPROVED and to be charged against the testate estate of the late Linnie Jane Hodges. The
administrator of the testate estate of the late Charles Newton Hodges is hereby ordered to countersign the check or checks necessary
to pay the said overtime pay as shown by the bills marked Annex "A", "B" and "C" of the motion.
SO ORDERED.
(Pp. 221-222, Green Record on Appeal.)
Likewise, the respondent court approved deeds of sale executed by respondent Magno alone, as Administratrix of the estate of Mrs.
Hodges, covering properties in the name of Hodges, pursuant to "contracts to sell" executed by Hodges, irrespective of whether they
were executed by him before or after the death of his wife. The orders of this nature which are also on appeal herein are the following:
1. Order of March 30, 1966, on p. 137 of the Green Record on Appeal, approving the deed of sale executed by respondent Magno in
favor of appellee Lorenzo Carles on February 24, 1966, pursuant to a "contract to sell" signed by Hodges on June 17, 1958, after the
death of his wife, which contract petitioner claims was cancelled by it for failure of Carles to pay the installments due on January 7,
1965.
2. Order of April 5, 1966, on pp. 139-140, id., approving the deed of sale executed by respondent Magno in favor of appellee Salvador
Guzman on February 28, 1966 pursuant to a "contract to sell" signed by Hodges on September 13, 1960, after the death of his wife,
which contract petitioner claims it cancelled on March 3, 1965 in view of failure of said appellee to pay the installments on time.
3. Order of April 20, 1966, on pp. 167-168, id., approving the deed of sale executed by respondent Magno in favor of appellee
Purificacion Coronado on March 28, 1966 pursuant to a "contract to sell" signed by Hodges on August 14, 1961, after the death of his
wife.
4. Order of April 20, 1966, on pp. 168-169, id., approving the deed of sale executed by respondent Magno in favor of appellee Florenia
Barrido on March 28, 1966, pursuant to a "contract to sell" signed by Hodges on February 21, 1958, after the death of his wife.
5. Order of June 7, 1966, on pp. 184-185, id., approving the deed of sale executed by respondent Magno in favor of appellee Belcezar
Causing on May 2, 1966, pursuant to a "contract to sell" signed by Hodges on February 10, 1959, after the death of his wife.
6. Order of June 21, 1966, on pp. 211-212, id., approving the deed of sale executed by respondent Magno in favor of appellee Artheo
Thomas Jamir on June 3, 1966, pursuant to a "contract to sell" signed by Hodges on May 26, 1961, after the death of his wife.
7. Order of June 21, 1966, on pp. 212-213, id., approving the deed of sale executed by respondent Magno in favor of appellees
Graciano Lucero and Melquiades Batisanan on June 6 and June 3, 1966, respectively, pursuant to "contracts to sell" signed by Hodges
on June 9, 1959 and November 27, 1961, respectively, after the death of his wife.
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8. Order of December 2, 1966, on pp. 303-304, id., approving the deed of sale executed by respondent Magno in favor of appellees
Espiridion Partisala, Winifredo Espada and Rosario Alingasa on September 6, 1966, August 17, 1966 and August 3, 1966, respectively,
pursuant to "contracts to sell" signed by Hodges on April 20, 1960, April 18, 1960 and August 25, 1958, respectively, that is, after the
death of his wife.
9. Order of April 5, 1966, on pp. 137-138, id., approving the deed of sale executed by respondent Magno in favor of appellee Alfredo
Catedral on March 2, 1966, pursuant to a "contract to sell" signed by Hodges on May 29, 1954, before the death of his wife, which
contract petitioner claims it had cancelled on February 16, 1966 for failure of appellee Catedral to pay the installments due on time.
10. Order of April 5, 1966, on pp. 138-139, id., approving the deed of sale executed by respondent Magno in favor of appellee Jose
Pablico on March 7, 1966, pursuant to a "contract to sell" signed by Hodges on March 7, 1950, after the death of his wife, which
contract petitioner claims it had cancelled on June 29, 1960, for failure of appellee Pablico to pay the installments due on time.
11. Order of December 2, 1966, on pp. 303-304, id., insofar as it approved the deed of sale executed by respondent Magno in favor of
appellee Pepito Iyulores on September 6, 1966, pursuant to a "contract to sell" signed by Hodges on February 5, 1951, before the death
of his wife.
12. Order of January 3, 1967, on pp. 335-336, id., approving three deeds of sale executed by respondent Magno, one in favor of
appellees Santiago Pacaonsis and two in favor of appellee Adelfa Premaylon on December 5, 1966 and November 3, 1966,
respectively, pursuant to separate "promises to sell" signed respectively by Hodges on May 26, 1955 and January 30, 1954, before the
death of his wife, and October 31, 1959, after her death.
In like manner, there were also instances when respondent court approved deeds of sale executed by petitioner alone and without
the concurrence of respondent Magno, and such approvals have not been the subject of any appeal. No less than petitioner points
this out on pages 149-150 of its brief as appellant thus:
The points of fact and law pertaining to the two abovecited assignments of error have already been discussed previously. In the first
abovecited error, the order alluded to was general, and as already explained before, it was, as admitted by the lower court itself,
superseded by the particular orders approving specific final deeds of sale executed by the appellee, Avelina A. Magno, which are
subject of this appeal, as well as the particular orders approving specific final deeds of sale executed by the appellant, Philippine
Commercial and Industrial Bank, which were never appealed by the appellee, Avelina A. Magno, nor by any party for that matter,
and which are now therefore final.
Now, simultaneously with the foregoing incidents, others of more fundamental and all embracing significance developed. On October
5, 1963, over the signature of Atty. Allison J. Gibbs in representation of the law firm of Ozaeta, Gibbs & Ozaeta, as counsel for the co-
administrators Joe Hodges and Fernando P. Mirasol, the following self-explanatory motion was filed:
URGENT MOTION FOR AN ACCOUNTING AND DELIVERY TO ADMINISTRATION OF THE ESTATE OF C. N. HODGES OF ALL OF THE ASSETS OF
THE CONJUGAL PARTNERSHIP OF THE DECEASED LINNIE JANE HODGES AND C N. HODGES EXISTING AS OF MAY 23, 1957 PLUS ALL THE
RENTS, EMOLUMENTS AND INCOME THEREFROM.
COMES NOW the co-administrator of the estate of C. N. Hodges, Joe Hodges, through his undersigned attorneys in the above-entitled
proceedings, and to this Honorable Court respectfully alleges:
(1) On May 23, 1957 Linnie Jane Hodges died in Iloilo City.
(2) On June 28, 1957 this Honorable Court admitted to probate the Last Will and Testament of the deceased Linnie Jane Hodges
executed November 22, 1952 and appointed C. N. Hodges as Executor of the estate of Linnie Jane Hodges (pp. 24-25, Rec. Sp. Proc.
1307).
(3) On July 1, 1957 this Honorable Court issued Letters Testamentary to C. N. Hodges in the Estate of Linnie Jane Hodges (p. 30, Rec. Sp.
Proc. 1307).
(4) On December 14, 1957 this Honorable Court, on the basis of the following allegations in a Motion dated December 11, 1957 filed by
Leon P. Gellada as attorney for the executor C. N. Hodges:
"That herein Executor, (is) not only part owner of the properties left as conjugal, but also, the successor to all the properties left by the
deceased Linnie Jane Hodges."
(p. 44, Rec. Sp. Proc. 1307; emphasis supplied.)
issued the following order:
"As prayed for by Attorney Gellada, counsel for the Executory, for the reasons stated in his motion dated December 11, 1957 which the
court considers well taken, all the sales, conveyances, leases and mortgages of all properties left by the deceased Linnie Jane Hodges
are hereby APPROVED. The said executor is further authorized to execute subsequent sales, conveyances, leases and mortgages of
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the properties left by the said deceased Linnie Jane Hodges in consonance with the wishes contained in the last will and testament of
the latter."
(p. 46, Rec. Sp. Proc. 1307; emphasis supplied.)
(5) On April 21, 1959 this Honorable Court approved the inventory and accounting submitted by C. N. Hodges through his counsel Leon
P. Gellada on April 14, 1959 wherein he alleged among other things
"That no person interested in the Philippines of the time and place of examining the herein account, be given notice, as herein
Honorable Court."
(pp. 77-78, Rec. Sp. Proc. 1307; emphasis supplied.).
(6) On July 30, 1960 this Honorable Court approved the "Annual Statement of Account" submitted by C. N. Hodges through his counsel
Leon P. Gellada on July 21, 1960 wherein he alleged among other things:
"That no person interested in the Philippines of the time and place of examining the herein account, be given notice as herein
executor is the only devisee or legatee of the deceased Linnie Jane Hodges , in accordance with the last will and testament of the
deceased, already probated by this Honorable Court."
(pp. 81-82. Rec. Sp. Proc. 1307; emphasis supplied.)
(7) On May 2, 1961 this Honorable court approved the "Annual Statement of Account By The Executor for the Year 1960" submitted
through Leon P. Gellada on April 20, 1961 wherein he alleged:
That no person interested in the Philippines be given notice, of the time and place of examining the herein account, as herein Executor
is the only devisee or legatee of the deceased Linnie Jane Hodges, in accordance with the last will and testament of the deceased,
already probated by this Honorable Court.
(pp. 90-91. Rec. Sp. Proc. 1307; emphasis supplied.)
(8) On December 25, 1962, C.N. Hodges died.
(9) On December 25, 1962, on the Urgent Ex-parte Motion of Leon P. Gellada filed only in Special Proceeding No. 1307, this Honorable
Court appointed Avelina A. Magno
"Administratrix of the estate of Linnie Jane Hodges and as Special Administratrix of the estate of Charles Newton Hodges, in the latter
case, because the last will of said Charles Newton Hodges is still kept in his vault or iron safe and that the real and personal properties
of both spouses may be lost, damaged or go to waste, unless a Special Administratrix is appointed."
(p. 100. Rec. Sp. Proc. 1307)
(10) On December 26, 1962 Letters of Administration were issued to Avelina Magno pursuant to this Honorable Court's aforesaid Order
of December 25, 1962
"With full authority to take possession of all the property of said deceased in any province or provinces in which it may be situated and
to perform all other acts necessary for the preservation of said property, said Administratrix and/or Special Administratrix having filed a
bond satisfactory to the Court."
(p. 102, Rec. Sp. Proc. 1307)
(11) On January 22, 1963 this Honorable Court on petition of Leon P. Gellada of January 21, 1963 issued Letters of Administration to:
(a) Avelina A. Magno as Administratrix of the estate of Linnie Jane Hodges;
(b) Avelina A. Magno as Special Administratrix of the Estate of Charles Newton Hodges; and
(c) Joe Hodges as Co-Special Administrator of the Estate of Charles Newton Hodges.
(p. 43, Rec. Sp. Proc. 1307)
(12) On February 20, 1963 this Honorable Court on the basis of a motion filed by Leon P. Gellada as legal counsel on February 16, 1963
for Avelina A. Magno acting as Administratrix of the Estate of Charles Newton Hodges (pp. 114-116, Sp. Proc. 1307) issued the following
order:
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"... se autoriza a aquella (Avelina A. Magno) a firmar escrituras de venta definitiva de propiedades cubiertas por contratos para
vender, firmados, en vida, por el finado Charles Newton Hodges, cada vez que el precio estipulado en cada contrato este
totalmente pagado. Se autoriza igualmente a la misma a firmar escrituras de cancelacion de hipoteca tanto de bienes reales como
personales cada vez que la consideracion de cada hipoteca este totalmente pagada.
"Cada una de dichas escrituras que se otorguen debe ser sometida para la aprobacion de este Juzgado."
(p. 117, Sp. Proc. 1307).
[Par 1 (c), Reply to Motion For Removal of Joe Hodges]
(13) On September l6, 1963 Leon P. Gellada, acting as attorney for Avelina A. Magno as Administratrix of the estate of Linnie Jane
Hodges, alleges:
3. — That since January, 1963, both estates of Linnie Jane Hodges and Charles Newton Hodges have been receiving in full, payments
for those "contracts to sell" entered into by C. N. Hodges during his lifetime, and the purchasers have been demanding the execution
of definite deeds of sale in their favor.
4. — That hereto attached are thirteen (13) copies deeds of sale executed by the Administratrix and by the co-administrator (Fernando
P. Mirasol) of the estate of Linnie Jane Hodges and Charles Newton Hodges respectively, in compliance with the terms and conditions
of the respective "contracts to sell" executed by the parties thereto."
(14) The properties involved in the aforesaid motion of September 16, 1963 are all registered in the name of the deceased C. N.
Hodges.
(15) Avelina A. Magno, it is alleged on information and belief, has been advertising in the newspaper in Iloilo thusly:
For Sale
Testate Estate of Linnie Jane Hodges and Charles Newton Hodges.
All Real Estate or Personal Property will be sold on First Come First Served Basis.
Avelina A. Magno
Administratrix
(16) Avelina A. Magno, it is alleged on information and belief, has paid and still is paying sums of money to sundry persons.
(17) Joe Hodges through the undersigned attorneys manifested during the hearings before this Honorable Court on September 5 and
6, 1963 that the estate of C. N. Hodges was claiming all of the assets belonging to the deceased spouses Linnie Jane Hodges and C. N.
Hodges situated in Philippines because of the aforesaid election by C. N. Hodges wherein he claimed and took possession as sole
owner of all of said assets during the administration of the estate of Linnie Jane Hodges on the ground that he was the sole devisee
and legatee under her Last Will and Testament.
(18) Avelina A. Magno has submitted no inventory and accounting of her administration as Administratrix of the estate of Linnie Jane
Hodges and Special Administratrix of the estate of C. N. Hodges. However, from manifestations made by Avelina A. Magno and her
legal counsel, Leon P. Gellada, there is no question she will claim that at least fifty per cent (50%) of the conjugal assets of the
deceased spouses and the rents, emoluments and income therefrom belong to the Higdon family who are named in paragraphs
Fourth and Fifth of the Will of Linnie Jane Hodges (p. 5, Rec. Sp. Proc. 1307).
WHEREFORE, premises considered, movant respectfully prays that this Honorable Court, after due hearing, order:
(1) Avelina A. Magno to submit an inventory and accounting of all of the funds, properties and assets of any character belonging to
the deceased Linnie Jane Hodges and C. N. Hodges which have come into her possession, with full details of what she has done with
them;
(2) Avelina A. Magno to turn over and deliver to the Administrator of the estate of C. N. Hodges all of the funds, properties and assets
of any character remaining in her possession;
(3) Pending this Honorable Court's adjudication of the aforesaid issues, Avelina A. Magno to stop, unless she first secures the conformity
of Joe Hodges (or his duly authorized representative, such as the undersigned attorneys) as the Co-administrator and attorney-in-fact
of a majority of the beneficiaries of the estate of C. N. Hodges:
(a) Advertising the sale and the sale of the properties of the estates:
(b) Employing personnel and paying them any compensation.

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(4) Such other relief as this Honorable Court may deem just and equitable in the premises. (Annex "T", Petition.)
Almost a year thereafter, or on September 14, 1964, after the co-administrators Joe Hodges and Fernando P. Mirasol were replaced by
herein petitioner Philippine Commercial and Industrial Bank as sole administrator, pursuant to an agreement of all the heirs of Hodges
approved by the court, and because the above motion of October 5, 1963 had not yet been heard due to the absence from the
country of Atty. Gibbs, petitioner filed the following:
MANIFESTATION AND MOTION, INCLUDING MOTION TO SET FOR HEARING AND RESOLVE "URGENT MOTION FOR AN ACCOUNTING AND
DELIVERY TO ADMINISTRATORS OF THE ESTATE OF C. N. HODGES OF ALL THE ASSETS OF THE CONJUGAL PARTNERSHIP OF THE DECEASED
LINNIE JANE HODGES AND C. N. HODGES EXISTING AS OF MAY 23, 1957 PLUS ALL OF THE RENTS, EMOLUMENTS AND INCOME THEREFROM
OF OCTOBER 5, 1963.
COMES NOW Philippine Commercial and Industrial Bank (hereinafter referred to as PCIB), the administrator of the estate of C. N.
Hodges, deceased, in Special Proceedings No. 1672, through its undersigned counsel, and to this Honorable Court respectfully alleges
that:
1. On October 5, 1963, Joe Hodges acting as the co-administrator of the estate of C. N. Hodges filed, through the undersigned
attorneys, an "Urgent Motion For An Accounting and Delivery To Administrator of the Estate of C. N. Hodges of all Of The Assets Of The
Conjugal Partnership of The Deceased Linnie Jane Hodges and C. N. Hodges Existing as Of May, 23, 1957 Plus All Of The Rents,
Emoluments and Income Therefrom" (pp. 536-542, CFI Rec. S. P. No. 1672).
2. On January 24, 1964 this Honorable Court, on the basis of an amicable agreement entered into on January 23, 1964 by the two co-
administrators of the estate of C. N. Hodges and virtually all of the heirs of C. N. Hodges (p. 912, CFI Rec., S. P. No. 1672), resolved the
dispute over who should act as administrator of the estate of C. N. Hodges by appointing the PCIB as administrator of the estate of C.
N. Hodges (pp. 905-906, CFI Rec. S. P. No. 1672) and issuing letters of administration to the PCIB.
3. On January 24, 1964 virtually all of the heirs of C. N. Hodges, Joe Hodges and Fernando P. Mirasol acting as the two co-administrators
of the estate of C. N. Hodges, Avelina A. Magno acting as the administratrix of the estate of Linnie Jane Hodges, and Messrs. William
Brown and Ardel Young Acting for all of the Higdon family who claim to be the sole beneficiaries of the estate of Linnie Jane Hodges
and various legal counsel representing the aforenamed parties entered into an amicable agreement, which was approved by this
Honorable Court, wherein the parties thereto agreed that certain sums of money were to be paid in settlement of different claims
against the two estates and that the assets (to the extent they existed)of both estates would be administrated jointly by the PCIB as
administrator of the estate of C. N. Hodges and Avelina A. Magno as administratrix of the estate of Linnie Jane Hodges , subject,
however, to the aforesaid October 5, 1963 Motion, namely, the PCIB's claim to exclusive possession and ownership of one-hundred
percent (10017,) (or, in the alternative, seventy-five percent [75%] of all assets owned by C. N. Hodges or Linnie Jane Hodges situated
in the Philippines. On February 1, 1964 (pp. 934-935, CFI Rec., S. P. No. 1672) this Honorable Court amended its order of January 24, 1964
but in no way changes its recognition of the aforedescribed basic demand by the PCIB as administrator of the estate of C. N. Hodges
to one hundred percent (100%) of the assets claimed by both estates.
4. On February 15, 1964 the PCIB filed a "Motion to Resolve" the aforesaid Motion of October 5, 1963. This Honorable Court set for
hearing on June 11, 1964 the Motion of October 5, 1963.
5. On June 11, 1964, because the undersigned Allison J. Gibbs was absent in the United States, this Honorable Court ordered the
indefinite postponement of the hearing of the Motion of October 5, 1963.
6. Since its appointment as administrator of the estate of C. N. Hodges the PCIB has not been able to properly carry out its duties and
obligations as administrator of the estate of C. N. Hodges because of the following acts, among others, of Avelina A. Magno and those
who claim to act for her as administratrix of the estate of Linnie Jane Hodges:
(a) Avelina A. Magno illegally acts as if she is in exclusive control of all of the assets in the Philippines of both estates including those
claimed by the estate of C. N. Hodges as evidenced in part by her locking the premises at 206-208 Guanco Street, Iloilo City on August
31, 1964 and refusing to reopen same until ordered to do so by this Honorable Court on September 7, 1964.
(b) Avelina A. Magno illegally acts as though she alone may decide how the assets of the estate of C.N. Hodges should be
administered, who the PCIB shall employ and how much they may be paid as evidenced in party by her refusal to sign checks issued
by the PCIB payable to the undersigned counsel pursuant to their fee agreement approved by this Honorable Court in its order dated
March 31, 1964.
(c) Avelina A. Magno illegally gives access to and turns over possession of the records and assets of the estate of C.N. Hodges to the
attorney-in-fact of the Higdon Family, Mr. James L. Sullivan, as evidenced in part by the cashing of his personal checks.
(d) Avelina A. Magno illegally refuses to execute checks prepared by the PCIB drawn to pay expenses of the estate of C. N. Hodges as
evidenced in part by the check drawn to reimburse the PCIB's advance of P48,445.50 to pay the 1964 income taxes reported due and
payable by the estate of C.N. Hodges.
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7. Under and pursuant to the orders of this Honorable Court, particularly those of January 24 and February 1, 1964, and the mandate
contained in its Letters of Administration issued on January 24, 1964 to the PCIB, it has
"full authority to take possession of all the property of the deceased C. N. Hodges
"and to perform all other acts necessary for the preservation of said property." (p. 914, CFI Rec., S.P. No. 1672.)
8. As administrator of the estate of C. N. Hodges, the PCIB claims the right to the immediate exclusive possession and control of all of
the properties, accounts receivables, court cases, bank accounts and other assets, including the documentary records evidencing
same, which existed in the Philippines on the date of C. N. Hodges' death, December 25, 1962, and were in his possession and
registered in his name alone. The PCIB knows of no assets in the Philippines registered in the name of Linnie Jane Hodges, the estate of
Linnie Jane Hodges, or, C. N. Hodges, Executor of the Estate of Linnie Jane Hodges on December 25, 1962. All of the assets of which
the PCIB has knowledge are either registered in the name of C. N. Hodges, alone or were derived therefrom since his death on
December 25, 1962.
9. The PCIB as the current administrator of the estate of C. N. Hodges, deceased, succeeded to all of the rights of the previously duly
appointed administrators of the estate of C. N. Hodges, to wit:
(a) On December 25, 1962, date of C. N. Hodges' death, this Honorable Court appointed Miss Avelina A. Magno simultaneously as:
(i) Administratrix of the estate of Linnie Jane Hodges (p. 102, CFI Rec., S.P. No. 1307) to replace the deceased C. N. Hodges who on
May 28, 1957 was appointed Special Administrator (p. 13. CFI Rec. S.P. No. 1307) and on July 1, 1957 Executor of the estate of Linnie
Jane Hodges (p. 30, CFI Rec., S. P. No. 1307).
(ii) Special Administratrix of the estate of C. N. Hodges (p. 102, CFI Rec., S.P. No. 1307).
(b) On December 29, 1962 this Honorable Court appointed Harold K. Davies as co-special administrator of the estate of C.N. Hodges
along with Avelina A. Magno (pp. 108-111, CFI Rec., S. P. No. 1307).
(c) On January 22, 1963, with the conformity of Avelina A. Magno, Harold K. Davies resigned in favor of Joe Hodges (pp. 35-36, CFI
Rec., S.P. No. 1672) who thereupon was appointed on January 22, 1963 by this Honorable Court as special co-administrator of the
estate of C.N. Hodges (pp. 38-40 & 43, CFI Rec. S.P. No. 1672) along with Miss Magno who at that time was still acting as special co-
administratrix of the estate of C. N. Hodges.
(d) On February 22, 1963, without objection on the part of Avelina A. Magno, this Honorable Court appointed Joe Hodges and
Fernando P. Mirasol as co-administrators of the estate of C.N. Hodges (pp. 76-78, 81 & 85, CFI Rec., S.P. No. 1672).
10. Miss Avelina A. Magno, pursuant to the orders of this Honorable Court of December 25, 1962, took possession of all Philippine Assets
now claimed by the two estates. Legally, Miss Magno could take possession of the assets registered in the name of C. N. Hodges alone
only in her capacity as Special Administratrix of the Estate of C.N. Hodges. With the appointment by this Honorable Court on February
22, 1963 of Joe Hodges and Fernando P. Mirasol as the co-administrators of the estate of C.N. Hodges, they legally were entitled to
take over from Miss Magno the full and exclusive possession of all of the assets of the estate of C.N. Hodges. With the appointment on
January 24, 1964 of the PCIB as the sole administrator of the estate of C.N. Hodges in substitution of Joe Hodges and Fernando P.
Mirasol, the PCIB legally became the only party entitled to the sole and exclusive possession of all of the assets of the estate of C. N.
Hodges.
11. The PCIB's predecessors submitted their accounting and this Honorable Court approved same, to wit:
(a) The accounting of Harold K. Davies dated January 18, 1963 (pp. 16-33, CFI Rec. S.P. No. 1672); which shows or its face the:
(i) Conformity of Avelina A. Magno acting as "Administratrix of the Estate of Linnie Jane Hodges and Special Administratrix of the Estate
of C. N. Hodges";
(ii) Conformity of Leslie Echols, a Texas lawyer acting for the heirs of C.N. Hodges; and
(iii) Conformity of William Brown, a Texas lawyer acting for the Higdon family who claim to be the only heirs of Linnie Jane Hodges (pp.
18, 25-33, CFI Rec., S. P. No. 1672).
Note: This accounting was approved by this Honorable Court on January 22, 1963 (p. 34, CFI Rec., S. P. No. 1672).
(b) The accounting of Joe Hodges and Fernando P. Mirasol as of January 23, 1964, filed February 24, 1964 (pp. 990-1000, CFI Rec. S.P.
No. 1672 and pp. 1806-1848, CFI Rec. S.P. No. 1307).
Note: This accounting was approved by this Honorable Court on March 3, 1964.
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(c) The PCIB and its undersigned lawyers are aware of no report or accounting submitted by Avelina A. Magno of her acts as
administratrix of the estate of Linnie Jane Hodges or special administratrix of the estate of C.N. Hodges, unless it is the accounting of
Harold K. Davies as special co-administrator of the estate of C.N. Hodges dated January 18, 1963 to which Miss Magno manifested her
conformity (supra).
12. In the aforesaid agreement of January 24, 1964, Miss Avelina A. Magno agreed to receive P10,000.00
"for her services as administratrix of the estate of Linnie Jane Hodges"
and in addition she agreed to be employed, starting February 1, 1964, at
"a monthly salary of P500.00 for her services as an employee of both estates."
24 ems.
13. Under the aforesaid agreement of January 24, 1964 and the orders of this Honorable Court of same date, the PCIB as administrator
of the estate of C. N. Hodges is entitled to the exclusive possession of all records, properties and assets in the name of C. N. Hodges as
of the date of his death on December 25, 1962 which were in the possession of the deceased C. N. Hodges on that date and which
then passed to the possession of Miss Magno in her capacity as Special Co-Administratrix of the estate of C. N. Hodges or the
possession of Joe Hodges or Fernando P. Mirasol as co-administrators of the estate of C. N. Hodges.
14. Because of Miss Magno's refusal to comply with the reasonable request of PCIB concerning the assets of the estate of C. N. Hodges,
the PCIB dismissed Miss Magno as an employee of the estate of C. N. Hodges effective August 31, 1964. On September 1, 1964 Miss
Magno locked the premises at 206-208 Guanco Street and denied the PCIB access thereto. Upon the Urgent Motion of the PCIB dated
September 3, 1964, this Honorable Court on September 7, 1964 ordered Miss Magno to reopen the aforesaid premises at 206-208
Guanco Street and permit the PCIB access thereto no later than September 8, 1964.
15. The PCIB pursuant to the aforesaid orders of this Honorable Court is again in physical possession of all of the assets of the estate of
C. N. Hodges. However, the PCIB is not in exclusive control of the aforesaid records, properties and assets because Miss Magno
continues to assert the claims hereinabove outlined in paragraph 6, continues to use her own locks to the doors of the aforesaid
premises at 206-208 Guanco Street, Iloilo City and continues to deny the PCIB its right to know the combinations to the doors of the
vault and safes situated within the premises at 206-208 Guanco Street despite the fact that said combinations were known to only C. N.
Hodges during his lifetime.
16. The Philippine estate and inheritance taxes assessed the estate of Linnie Jane Hodges were assessed and paid on the basis that C.
N. Hodges is the sole beneficiary of the assets of the estate of Linnie Jane Hodges situated in the Philippines. Avelina A. Magno and her
legal counsel at no time have questioned the validity of the aforesaid assessment and the payment of the corresponding Philippine
death taxes.
17. Nothing further remains to be done in the estate of Linnie Jane Hodges except to resolve the aforesaid Motion of October 5, 1963
and grant the PCIB the exclusive possession and control of all of the records, properties and assets of the estate of C. N. Hodges.
18. Such assets as may have existed of the estate of Linnie Jane Hodges were ordered by this Honorable Court in special Proceedings
No. 1307 to be turned over and delivered to C. N. Hodges alone. He in fact took possession of them before his death and asserted and
exercised the right of exclusive ownership over the said assets as the sole beneficiary of the estate of Linnie Jane Hodges.
WHEREFORE, premises considered, the PCIB respectfully petitions that this Honorable court:
(1) Set the Motion of October 5, 1963 for hearing at the earliest possible date with notice to all interested parties;
(2) Order Avelina A. Magno to submit an inventory and accounting as Administratrix of the Estate of Linnie Jane Hodges and Co-
Administratrix of the Estate of C. N. Hodges of all of the funds, properties and assets of any character belonging to the deceased Linnie
Jane Hodges and C. N. Hodges which have come into her possession, with full details of what she has done with them;
(3) Order Avelina A. Magno to turn over and deliver to the PCIB as administrator of the estate of C. N. Hodges all of the funds,
properties and assets of any character remaining in her possession;
(4) Pending this Honorable Court's adjudication of the aforesaid issues, order Avelina A. Magno and her representatives to stop
interferring with the administration of the estate of C. N. Hodges by the PCIB and its duly authorized representatives;
(5) Enjoin Avelina A. Magno from working in the premises at 206-208 Guanco Street, Iloilo City as an employee of the estate of C. N.
Hodges and approve her dismissal as such by the PCIB effective August 31, 1964;
(6) Enjoin James L. Sullivan, Attorneys Manglapus and Quimpo and others allegedly representing Miss Magno from entering the
premises at 206-208 Guanco Street, Iloilo City or any other properties of C. N. Hodges without the express permission of the PCIB;
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(7) Order such other relief as this Honorable Court finds just and equitable in the premises. (Annex "U" Petition.)
On January 8, 1965, petitioner also filed a motion for "Official Declaration of Heirs of Linnie Jane Hodges Estate" alleging:
COMES NOW Philippine Commercial and Industrial Bank (hereinafter referred to as PCIB), as administrator of the estate of the late C. N.
Hodges, through the undersigned counsel, and to this Honorable Court respectfully alleges that:
1. During their marriage, spouses Charles Newton Hodges and Linnie Jane Hodges, American citizens originally from the State of Texas,
U.S.A., acquired and accumulated considerable assets and properties in the Philippines and in the States of Texas and Oklahoma,
United States of America. All said properties constituted their conjugal estate.
2. Although Texas was the domicile of origin of the Hodges spouses, this Honorable Court, in its orders dated March 31 and December
12, 1964 (CFI Record, Sp. Proc. No. 1307, pp. ----; Sp. Proc. No. 1672, p. ----), conclusively found and categorically ruled that said spouses
had lived and worked for more than 50 years in Iloilo City and had, therefore, acquired a domicile of choice in said city, which they
retained until the time of their respective deaths.
3. On November 22, 1952, Linnie Jane Hodges executed in the City of Iloilo her Last Will and Testament, a copy of which is hereto
attached as Annex "A". The bequests in said will pertinent to the present issue are the second, third, and fourth provisions, which we
quote in full hereunder.
SECOND: I give, devise and bequeath all of the rest, residue and remainder of my estate, both personal and real, wherever situated, or
located, to my husband, Charles Newton Hodges, to have and to hold unto him, my said husband during his natural lifetime.
said estate during his lifetime, and he is hereby given the right to make any changes in the physical properties of said estate by sale of
any part thereof which he think best, and the purchase of any other or additional property as he may think best; to execute
desire. It is provided herein, however, that he shall not sell or otherwise dispose of any of the improved property now owned by us
located at, in or near the City of Lubbock, Texas, but he shall have the full right to lease, manage and enjoy the same during his
lifetime, as above provided. He shall have the right to sub-divide any farmland and sell lots therein, and may sell unimproved town lots.
of my estate both real and personal, wherever situated or located, to be equally divided among my brothers and sisters, share and
"Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie Rascoe, Era Boman and Nimray Higdon."
4. On November 14, 1953, C. N. Hodges executed in the City of Iloilo his Last Will and Testament, a copy of which is hereto attached as
Annex "B ". In said Will, C. N. Hodges designated his wife, Linnie Jane Hodges, as his beneficiary using the identical language she used
in the second and third provisos of her Will, supra.
5. On May 23, 1957 Linnie Jane Hodges died in Iloilo City, predeceasing her husband by more than five (5) years. At the time of her
death, she had no forced or compulsory heir, except her husband, C. N. Hodges. She was survived also by various brothers and sisters
mentioned in her Will (supra), which, for convenience, we shall refer to as the HIGDONS.
6. On June 28, 1957, this Honorable Court admitted to probate the Last Will and Testament of the deceased Linnie Jane Hodges
(Annex "A"), and appointed C. N. Hodges as executor of her estate without bond. (CFI Record, Sp. Proc. No. 1307, pp. 24-25). On July 1,
1957, this Honorable Court issued letters testamentary to C. N. Hodges in the estate of Linnie Jane Hodges. (CFI Record, Sp. Proc. No.
1307, p. 30.)
7. The Will of Linnie Jane Hodges, with respect to the order of succession, the amount of successional rights, and the intrinsic of its
testamentary provisions, should be governed by Philippine laws because:
(a) The testatrix, Linnie Jane Hodges, intended Philippine laws to govern her Will;
(b) Article 16 of the Civil Code provides that "the national law of the person whose succession is under consideration, whatever may be
the nature of the property and regardless of the country wherein said property may be found", shall prevail. However, the Conflict of
Law of Texas, which is the "national law" of the testatrix, Linnie Jane Hodges, provide that the domiciliary law (Philippine law — see
paragraph 2, supra) should govern the testamentary dispositions and successional rights over movables (personal properties), and the
law of the situs of the property (also Philippine law as to properties located in the Philippines) with regards immovable (real properties).
Thus applying the "Renvoi Doctrine", as approved and applied by our Supreme Court in the case of "In The Matter Of The Testate Estate
of Eduard E. Christensen", G.R. No.
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L-16749, promulgated January 31, 1963, Philippine law should apply to the Will of Linnie Jane Hodges and to the successional rights to
her estate insofar as her movable and immovable assets in the Philippines are concerned. We shall not, at this stage, discuss what law
should govern the assets of Linnie Jane Hodges located in Oklahoma and Texas, because the only assets in issue in this motion are
those within the jurisdiction of this motion Court in the two above-captioned Special Proceedings.
8. Under Philippine and Texas law, the conjugal or community estate of spouses shall, upon dissolution, be divided equally between
them. Thus, upon the death of Linnie Jane Hodges on May 23, 1957, one-half (1/2) of the entirety of the assets of the Hodges spouses
constituting their conjugal estate pertained automatically to Charles Newton Hodges, not by way of inheritance, but in his own right as
partner in the conjugal partnership. The other one-half (1/2) portion of the conjugal estate constituted the estate of Linnie Jane
Hodges. This is the only portion of the conjugal estate capable of inheritance by her heirs.
9. This one-half (1/2) portion of the conjugal assets pertaining to Linnie Jane Hodges cannot, under a clear and specific provision of her
Will, be enhanced or increased by income, earnings, rents, or emoluments accruing after her death on May 23, 1957. Linnie Jane
Hodges' Will provides that "all rents, emoluments and income from said estate shall belong to him (C. N. Hodges) and he is further
authorized to use any part of the principal of said estate as he may need or desire ." (Paragraph 3, Annex "A".) Thus, by specific
provision of Linnie Jane Hodges' Will, "all rents, emoluments and income" must be credited to the one-half (1/2) portion of the conjugal
estate pertaining to C. N. Hodges. Clearly, therefore, the estate of Linnie Jane Hodges, capable of inheritance by her heirs, consisted
exclusively of no more than one-half (1/2) of the conjugal estate, computed as of the time of her death on May 23, 1957 .
10. Articles 900, 995 and 1001 of the New Civil Code provide that the surviving spouse of a deceased leaving no ascendants or
descendants is entitled, as a matter of right and by way of irrevocable legitime, to at least one-half (1/2) of the estate of the
deceased, and no testamentary disposition by the deceased can legally and validly affect this right of the surviving spouse. In fact, her
husband is entitled to said one-half (1/2) portion of her estate by way of legitime. (Article 886, Civil Code.) Clearly, therefore,
immediately upon the death of Linnie Jane Hodges, C. N. Hodges was the owner of at least three-fourths (3/4) or seventy-five (75%)
percent of all of the conjugal assets of the spouses, (1/2 or 50% by way of conjugal partnership share and 1/4 or 25% by way of
inheritance and legitime) plus all "rents, emoluments and income" accruing to said conjugal estate from the moment of Linnie Jane
Hodges' death (see paragraph 9, supra).
11. The late Linnie Jane Hodges designated her husband C.N. Hodges as her sole and exclusive heir with full authority to do what he
pleased, as exclusive heir and owner of all the assets constituting her estate, except only with regards certain properties "owned by us,
located at, in or near the City of Lubbock, Texas". Thus, even without relying on our laws of succession and legitime, which we have
cited above, C. N. Hodges, by specific testamentary designation of his wife, was entitled to the entirely to his wife's estate in the
Philippines.
12. Article 777 of the New Civil Code provides that "the rights of the successor are transmitted from the death of the decedent". Thus,
title to the estate of Linnie Jane Hodges was transmitted to C. N. Hodges immediately upon her death on May 23, 1957. For the
convenience of this Honorable Court, we attached hereto as Annex "C" a graph of how the conjugal estate of the spouses Hodges
should be divided in accordance with Philippine law and the Will of Linnie Jane Hodges.
13. In his capacity as sole heir and successor to the estate of Linnie Jane Hodges as above-stated, C. N. Hodges, shortly after the death
of Linnie Jane Hodges, appropriated to himself the entirety of her estate. He operated all the assets, engaged in business and
performed all acts in connection with the entirety of the conjugal estate, in his own name alone, just as he had been operating,
engaging and doing while the late Linnie Jane Hodges was still alive. Upon his death on December 25, 1962, therefore, all said
conjugal assets were in his sole possession and control, and registered in his name alone, not as executor, but as exclusive owner of all
said assets.
14. All these acts of C. N. Hodges were authorized and sanctioned expressly and impliedly by various orders of this Honorable Court, as
follows:
(a) In an Order dated May 27, 1957, this Honorable Court ruled that C. N. Hodges "is allowed or authorized to continue the business in
which he was engaged, and to perform acts which he had been doing while the deceased was living." (CFI Record, Sp. Proc. No.
1307, p. 11.)
(b) On December 14, 1957, this Honorable Court, on the basis of the following fact, alleged in the verified Motion dated December 11,
1957 filed by Leon P. Gellada as attorney for the executor C. N. Hodges:
That herein Executor, (is) not only part owner of the properties left as conjugal, but also, the successor to all the properties left by the
deceased Linnie Jane Hodges.' (CFI Record, Sp. Proc. No. 1307, p. 44; emphasis supplied.)
issued the following order:
"As prayed for by Attorney Gellada, counsel for the Executor, for the reasons stated in his motion dated December 11, 1957, which the
Court considers well taken, all the sales, conveyances, leases and mortgages of all the properties left by the deceased Linnie Jane
Hodges executed by the Executor, Charles Newton Hodges are hereby APPROVED. The said Executor is further authorized to execute
subsequent sales, conveyances, leases and mortgages of the properties left by the said deceased Linnie Jane Hodges in consonance
with the wishes contained in the last will and testament of the latter." (CFI Record. Sp. Proc. No. 1307, p. 46; emphasis supplied.)
127
24 ems
(c) On April 21, 1959, this Honorable Court approved the verified inventory and accounting submitted by C. N. Hodges through his
counsel Leon P. Gellada on April 14, 1959 wherein he alleged among other things,
"That no person interested in the Philippines of the time and place of examining the herein account, be given notice, as herein
Honorable Court." (CFI Record, Sp. Proc. No. 1307, pp. 77-78; emphasis supplied.)
(d) On July 20, 1960, this Honorable Court approved the verified "Annual Statement of Account" submitted by C. N. Hodges through his
counsel Leon P. Gellada on July 21, 1960 wherein he alleged, among other things.
"That no person interested in the Philippines of the time and place of examining the herein account, be given notice as herein
executor is the only devisee or legatee of the deceased Linnie Jane Hodges , in accordance with the last will and testament ofthe
deceased, already probated by this Honorable Court." (CFI Record, Sp. Proc. No. 1307, pp. 81-82; emphasis supplied.)
(e) On May 2, 1961, this Honorable Court approved the verified "Annual Statement of Account By The Executor For the Year 1960"
submitted through Leon P. Gellada on April 20, 1961 wherein he alleged:
"That no person interested in the Philippines be given notice, ofthe time and place of examining the herein account, as herein
executor is the only devisee or legatee of the deceased Linnie Jane Hodges, in accordance with the last will and testament ofthe
deceased, already probated by this Honorable Court." (CFI Record, Sp. Proc. No. 1307, pp. 90-91; emphasis supplied.)
15. Since C. N. Hodges was the sole and exclusive heir of Linnie Jane Hodges, not only by law, but in accordance with the dispositions
of her will, there was, in fact, no need to liquidate the conjugal estate of the spouses. The entirely of said conjugal estate pertained to
him exclusively, therefore this Honorable Court sanctioned and authorized, as above-stated, C. N. Hodges to manage, operate and
control all the conjugal assets as owner.
16. By expressly authorizing C. N. Hodges to act as he did in connection with the estate of his wife, this Honorable Court has (1)
declared C. N. Hodges as the sole heir of the estate of Linnie Jane Hodges, and (2) delivered and distributed her estate to C. N.
Hodges as sole heir in accordance with the terms and conditions of her Will. Thus, although the "estate of Linnie Jane Hodges" still exists
as a legal and juridical personality, it had no assets or properties located in the Philippines registered in its name whatsoever at the time
of the death of C. N. Hodges on December 25, 1962.
17. The Will of Linnie Jane Hodges (Annex "A"), fourth paragraph, provides as follows:
"At the death of my said husband, Charles Newton Hodges, I give, devise and bequeath all of the rest, residue and remainder of my
estate both real and personal, wherever situated or located, to be equally divided among my brothers and sisters, share and share
alike, namely:
"Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie Rascoe, Era Boman and Nimray Higdon."
Because of the facts hereinabove set out there is no "rest, residue and remainder", at least to the extent of the Philippine assets, which
remains to vest in the HIGDONS, assuming this proviso in Linnie Jane Hodges' Will is valid and binding against the estate of C. N.
Hodges.
18. Any claims by the HIGDONS under the above-quoted provision of Linnie Jane Hodges' Will is without merit because said provision is
void and invalid at least as to the Philippine assets. It should not, in anyway, affect the rights of the estate of C. N. Hodges or his heirs to
the properties, which C. N. Hodges acquired by way of inheritance from his wife Linnie Jane Hodges upon her death.
(a) In spite of the above-mentioned provision in the Will of Linnie Jane Hodges, C. N. Hodges acquired, not merely a usufructuary right,
but absolute title and ownership to her estate. In a recent case involving a very similar testamentary provision, the Supreme Court held
that the heir first designated acquired full ownership of the property bequeathed by the will, not mere usufructuary rights. (Consolacion
Florentino de Crisologo, et al., vs. Manuel Singson, G. R. No. L-13876, February 28, 1962.)
(b) Article 864, 872 and 886 of the New Civil Code clearly provide that no charge, condition or substitution whatsoever upon the
legitime can be imposed by a testator. Thus, under the provisions of Articles 900, 995 and 1001 of the New Civil Code, the legitime of a
surviving spouse is 1/2 of the estate of the deceased spouse. Consequently, the above-mentioned provision in the Will of Linnie Jane
Hodges is clearly invalid insofar as the legitime of C. N. Hodges was concerned, which consisted of 1/2 of the 1/2 portion of the
conjugal estate, or 1/4 of the entire conjugal estate of the deceased.
(c) There are generally only two kinds of substitution provided for and authorized by our Civil Code (Articles 857-870), namely, (1) simple
or common substitution, sometimes referred to as vulgar substitution (Article 859), and (2) fideicommissary substitution (Article 863). All
other substitutions are merely variations of these. The substitution provided for by paragraph four of the Will of Linnie Jane Hodges is not
fideicommissary substitution, because there is clearly no obligation on the part of C. N. Hodges as the first heir designated, to preserve
the properties for the substitute heirs. (Consolacion Florentino de Crisologo et al. vs. Manuel Singson, G. R. No.
128
L-13876.) At most, it is a vulgar or simple substitution. However, in order that a vulgar or simple substitution can be valid, three alternative
conditions must be present, namely, that the first designated heir (1) should die before the testator; or (2) should not wish to accept the
inheritance; or (3) should be incapacitated to do so. None of these conditions apply to C. N. Hodges, and, therefore, the substitution
provided for by the above-quoted provision of the Will is not authorized by the Code, and, therefore, it is void. Manresa, commenting
on these kisses of substitution, meaningfully stated that: "... cuando el testador instituyeun primer heredero, y por fallecimiento de este
nombra otro u otros, ha de entenderse que estas segundas designaciones solo han de llegar a tener efectividad en el caso de que el
primer instituido muera antes que el testador, fuera o no esta su verdadera intencion. ...". (6 Manresa, 7 a ed., pag. 175.) In other
words, when another heir is designated to inherit upon the death of a first heir, the second designation can have effect only in case
the first instituted heir dies before the testator, whether or not that was the true intention of said testator . Since C. N. Hodges did not die
before Linnie Jane Hodges, the provision for substitution contained in Linnie Jane Hodges' Willis void.
(d) In view of the invalidity of the provision for substitution in the Will, C. N. Hodges' inheritance to the entirety of the Linnie Jane Hodges
estate is irrevocable and final.
19. Be that as it may, at the time of C. N. Hodges' death, the entirety of the conjugal estate appeared and was registered in him
exclusively as owner. Thus, the presumption is that all said assets constituted his estate. Therefore —
(a) If the HIGDONS wish to enforce their dubious rights as substituted heirs to 1/4 of the conjugal estate (the other 1/4 is covered by the
legitime of C. N. Hodges which can not be affected by any testamentary disposition), their remedy, if any, is to file their claim against
the estate of C. N. Hodges, which should be entitled at the present time to full custody and control of all the conjugal estate of the
spouses.
(b) The present proceedings, in which two estates exist under separate administration, where the administratrix of the Linnie Jane
Hodges estate exercises an officious right to object and intervene in matters affecting exclusively the C. N. Hodges estate, is
anomalous.
WHEREFORE, it is most respectfully prayed that after trial and reception of evidence, this Honorable Court declare:
1. That the estate of Linnie Jane Hodges was and is composed exclusively of one-half (1/2) share in the conjugal estate of the spouses
Hodges, computed as of the date of her death on May 23, 1957;
2. That the other half of the conjugal estate pertained exclusively to C. N. Hodges as his share as partner in the conjugal partnership;
3. That all "rents, emoluments and income" of the conjugal estate accruing after Linnie Jane Hodges' death pertains to C. N. Hodges;
4. That C. N. Hodges was the sole and exclusive heir of the estate of Linnie Jane Hodges;
5. That, therefore, the entire conjugal estate of the spouses located in the Philippines, plus all the "rents, emoluments and income"
above-mentioned, now constitutes the estate of C. N. Hodges, capable of distribution to his heirs upon termination of Special
Proceedings No. 1672;
6. That PCIB, as administrator of the estate of C. N. Hodges, is entitled to full and exclusive custody, control and management of all said
properties; and
7. That Avelina A. Magno, as administratrix of the estate of Linnie Jane Hodges, as well as the HIGDONS, has no right to intervene or
participate in the administration of the C. N. Hodges estate.
PCIB further prays for such and other relief as may be deemed just and equitable in the premises."
(Record, pp. 265-277)
Before all of these motions of petitioner could be resolved, however, on December 21, 1965, private respondent Magno filed her own
"Motion for the Official Declaration of Heirs of the Estate of Linnie Jane Hodges" as follows:
COMES NOW the Administratrix of the Estate of Linnie Jane Hodges and, through undersigned counsel, unto this Honorable Court most
respectfully states and manifests:
1. That the spouses Charles Newton Hodges and Linnie Jane Hodges were American citizens who died at the City of Iloilo after having
amassed and accumulated extensive properties in the Philippines;
2. That on November 22, 1952, Linnie Jane Hodges executed a last will and testament (the original of this will now forms part of the
records of these proceedings as Exhibit "C" and appears as Sp. Proc. No. 1307, Folio I, pp. 17-18);
3. That on May 23, 1957, Linnie Jane Hodges died at the City of Iloilo at the time survived by her husband, Charles Newton Hodges, and
several relatives named in her last will and testament;
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4. That on June 28, 1957, a petition therefor having been priorly filed and duly heard, this Honorable Court issued an order admitting to
probate the last will and testament of Linnie Jane Hodges (Sp. Proc. No. 1307, Folio I, pp. 24-25, 26-28);
5. That the required notice to creditors and to all others who may have any claims against the decedent, Linnie Jane Hodges has
already been printed, published and posted (Sp. Proc. No. 1307, Folio I. pp. 34-40) and the reglamentary period for filing such claims
has long ago lapsed and expired without any claims having been asserted against the estate of Linnie Jane Hodges, approved by the
Administrator/Administratrix of the said estate, nor ratified by this Honorable Court;
6. That the last will and testament of Linnie Jane Hodges already admitted to probate contains an institution of heirs in the following
words:
"SECOND: I give, devise and bequeath all of the rest, residue and remainder of my estate, both personal and real, wherever situated or
located, to my beloved husband, Charles Newton Hodges to have and to hold unto him, my said husband, during his natural lifetime.
said estate during his lifetime, and, he is hereby given the right to make any changes in the physical properties of said estate, by sale of
pass the absolute fee simple title to the interest so conveyed in such property as he elect to sell. All rents, emoluments and income from
said estate shall belong to him, and he is further authorized to use any part of the principal of said estate as he may need or desire. It is
provided herein, however, that he shall not sell or otherwise dispose of any of the improved property now owned by us located at, in or
near the City of Lubbock Texas, but he shall have the full right to lease, manage and enjoy the same during his lifetime, above
provided. He shall have the right to subdivide any farm land and sell lots therein, and may sell unimproved town lots.
of my estate, both real and personal, wherever situated or located, to be equally divided among my brothers and sisters, share and
Esta Higdon, Emma Howell, Leonard Higdon, Roy Higdon, Sadie Rascoe, Era Boman and Nimroy Higdon.
FIFTH: In case of the death of any of my brothers and/or sisters named in item Fourth, above, prior to the death of my husband, Charles
Newton Hodges, then it is my will and bequest that the heirs of such deceased brother or sister shall take jointly the share which would
have gone to such brother or sister had she or he survived."
7. That under the provisions of the last will and testament already above-quoted, Linnie Jane Hodges gave a life-estate or a usufruct
over all her estate to her husband, Charles Newton Hodges, and a vested remainder-estate or the naked title over the same estate to
her relatives named therein;
8. That after the death of Linnie Jane Hodges and after the admission to probate of her last will and testament, but during the lifetime
of Charles Newton Hodges, the said Charles Newton Hodges with full and complete knowledge of the life-estate or usufruct conferred
upon him by the will since he was then acting as Administrator of the estate and later as Executor of the will of Linnie Jane Hodges,
unequivocably and clearly through oral and written declarations and sworn public statements, renounced, disclaimed and repudiated
his life-estate and usufruct over the estate of Linnie Jane Hodges;
9. That, accordingly, the only heirs left to receive the estate of Linnie Jane Hodges pursuant to her last will and testament, are her
named brothers and sisters, or their heirs, to wit: Esta Higdon, Emma Howell, Leonard Higdon, Aline Higdon and David Higdon, the latter
two being the wife and son respectively of the deceased Roy Higdon, Sadie Rascoe Era Boman and Nimroy Higdon, all of legal ages,
American citizens, with residence at the State of Texas, United States of America;
10. That at the time of the death of Linnie Jane Hodges on May 23, 1957, she was the co-owner (together with her husband Charles
Newton Hodges) of an undivided one-half interest in their conjugal properties existing as of that date, May 23, 1957, which properties
are now being administered sometimes jointly and sometimes separately by the Administratrix of the estate of Linnie Jane Hodges
and/or the Administrator of the estate of C. N. Hodges but all of which are under the control and supervision of this Honorable Court;
11. That because there was no separation or segregation of the interests of husband and wife in the combined conjugal estate, as
there has been no such separation or segregation up to the present, both interests have continually earned exactly the same amount
of "rents, emoluments and income", the entire estate having been continually devoted to the business of the spouses as if they were
alive;
12. That the one-half interest of Linnie Jane Hodges in the combined conjugal estate was earning "rents, emoluments and income" until
her death on May 23, 1957, when it ceased to be saddled with any more charges or expenditures which are purely personal to her in
nature, and her estate kept on earning such "rents, emoluments and income" by virtue of their having been expressly renounced,
disclaimed and repudiated by Charles Newton Hodges to whom they were bequeathed for life under the last will and testament of
Linnie Jane Hodges;
130
13. That, on the other hand, the one-half interest of Charles Newton Hodges in the combined conjugal estate existing as of May 23,
1957, while it may have earned exactly the same amount of "rents, emoluments and income" as that of the share pertaining to Linnie
Jane Hodges, continued to be burdened by charges, expenditures, and other dispositions which are purely personal to him in nature,
until the death of Charles Newton Hodges himself on December 25, 1962;
14. That of all the assets of the combined conjugal estate of Linnie Jane Hodges and Charles Newton Hodges as they exist today, the
estate of Linnie Jane Hodges is clearly entitled to a portion more than fifty percent (50%) as compared to the portion to which the
estate of Charles Newton Hodges may be entitled, which portions can be exactly determined by the following manner:
a. An inventory must be made of the assets of the combined conjugal estate as they existed on the death of Linnie Jane Hodges on
May 23, 1957 — one-half of these assets belong to the estate of Linnie Jane Hodges;
b. An accounting must be made of the "rents, emoluments and income" of all these assets — again one-half of these belong to the
estate of Linnie Jane Hodges;
c. Adjustments must be made, after making a deduction of charges, disbursements and other dispositions made by Charles Newton
Hodges personally and for his own personal account from May 23, 1957 up to December 25, 1962, as well as other charges,
disbursements and other dispositions made for him and in his behalf since December 25, 1962 up to the present;
15. That there remains no other matter for disposition now insofar as the estate of Linnie Jane Hodges is concerned but to complete the
liquidation of her estate, segregate them from the conjugal estate, and distribute them to her heirs pursuant to her last will and
testament.
WHEREFORE, premises considered, it is most respectfully moved and prayed that this Honorable Court, after a hearing on the factual
matters raised by this motion, issue an order:
a. Declaring the following persons, to wit: Esta Higdon, Emma Howell, Leonard Higdon, Aline Higdon, David Higdon, Sadie Rascoe, Era
Boman and Nimroy Higdon, as the sole heirs under the last will and testament of Linnie Jane Hodges and as the only persons entitled to
her estate;
b. Determining the exact value of the estate of Linnie Jane Hodges in accordance with the system enunciated in paragraph 14 of this
motion;
c. After such determination ordering its segregation from the combined conjugal estate and its delivery to the Administratrix of the
estate of Linnie Jane Hodges for distribution to the heirs to whom they properly belong and appertain.
(Green Record on Appeal, pp. 382-391)
whereupon, instead of further pressing on its motion of January 8, 1965 aforequoted, as it had been doing before, petitioner withdrew
the said motion and in addition to opposing the above motion of respondent Magno, filed a motion on April 22, 1966 alleging in part
that:
1. That it has received from the counsel for the administratrix of the supposed estate of Linnie Jane Hodges a notice to set her "Motion
for Official Declaration of Heirs of the Estate of Linnie Jane Hodges";
2. That before the aforesaid motion could be heard, there are matters pending before this Honorable Court, such as:
a. The examination already ordered by this Honorable Court of documents relating to the allegation of Avelina Magno that Charles
Newton Hodges "through ... written declarations and sworn public statements, renounced, disclaimed and repudiated life-estate and
usufruct over the estate of Linnie Jane Hodges';
b. That "Urgent Motion for An Accounting and Delivery to the Estate of C. N. Hodges of All the Assets of the Conjugal Partnership of the
Deceased Linnie Jane Hodges and C. N. Hodges Existing as of May 23, 1957 Plus All the Rents, Emoluments and Income Therefrom";
c. Various motions to resolve the aforesaid motion;
d. Manifestation of September 14, 1964, detailing acts of interference of Avelina Magno under color of title as administratrix of the
Estate of Linnie Jane Hodges;
which are all prejudicial, and which involve no issues of fact, all facts involved therein being matters of record, and therefore require
only the resolution of questions of law;
3. That whatever claims any alleged heirs or other persons may have could be very easily threshed out in the Testate Estate of Charles
Newton Hodges;
131
4. That the maintenance of two separate estate proceedings and two administrators only results in confusion and is unduly
burdensome upon the Testate Estate of Charles Newton Hodges, particularly because the bond filed by Avelina Magno is grossly
insufficient to answer for the funds and property which she has inofficiously collected and held, as well as those which she continues to
inofficiously collect and hold;
5. That it is a matter of record that such state of affairs affects and inconveniences not only the estate but also third-parties dealing
with it;" (Annex "V", Petition.)
and then, after further reminding the court, by quoting them, of the relevant allegations of its earlier motion of September 14, 1964,
Annex U, prayed that:
1. Immediately order Avelina Magno to account for and deliver to the administrator of the Estate of C. N. Hodges all the assets of the
conjugal partnership of the deceased Linnie Jane Hodges and C. N. Hodges, plus all the rents, emoluments and income therefrom;
2. Pending the consideration of this motion, immediately order Avelina Magno to turn over all her collections to the administrator
Philippine Commercial & Industrial Bank;
3. Declare the Testate Estate of Linnie Jane Hodges (Sp. Proc. No. 1307) closed;
4. Defer the hearing and consideration of the motion for declaration of heirs in the Testate Estate of Linnie Jane Hodges until the
matters hereinabove set forth are resolved.
(Prayer, Annex "V" of Petition.)
On October 12, 1966, as already indicated at the outset of this opinion, the respondent court denied the foregoing motion, holding
thus:
ORDER
On record is a motion (Vol. X, Sp. 1672, pp. 4379-4390) dated April 22, 1966 of administrator PCIB praying that (1) Immediately order
Avelina Magno to account for and deliver to the administrator of the estate of C. N. Hodges all assets of the conjugal partnership of
the deceased Linnie Jane Hodges and C. N. Hodges, plus all the rents, emoluments and income therefrom; (2) Pending the
consideration of this motion, immediately order Avelina Magno to turn over all her collections to the administrator PCIB; (3) Declare the
Testate Estate of Linnie Jane Hodges (Sp. Proc. No. 1307) closed; and (4) Defer the hearing and consideration of the motion for
declaration of heirs in the Testate Estate of Linnie Jane Hodges until the matters hereinabove set forth are resolved.
This motion is predicated on the fact that there are matters pending before this court such as (a) the examination already ordered by
this Honorable Court of documents relating to the allegation of Avelina Magno that Charles Newton Hodges thru written declaration
and sworn public statements renounced, disclaimed and repudiated his life-estate and usufruct over the estate of Linnie Jane Hodges
(b) the urgent motion for accounting and delivery to the estate of C. N. Hodges of all the assets of the conjugal partnership of the
deceased Linnie Jane Hodges and C. N. Hodges existing as of May 23, 1957 plus all the rents, emoluments and income therefrom; (c)
various motions to resolve the aforesaid motion; and (d) manifestation of September 14, 1964, detailing acts of interference of Avelina
Magno under color of title as administratrix of the estate of Linnie Jane Hodges.
These matters, according to the instant motion, are all pre-judicial involving no issues of facts and only require the resolution of question
of law; that in the motion of October 5, 1963 it is alleged that in a motion dated December 11, 1957 filed by Atty. Leon Gellada as
attorney for the executor C. N. Hodges, the said executor C. N. Hodges is not only part owner of the properties left as conjugal but also
the successor to all the properties left by the deceased Linnie Jane Hodges.
Said motion of December 11, 1957 was approved by the Court in consonance with the wishes contained in the last will and testament
of Linnie Jane Hodges.
That on April 21, 1959 this Court approved the inventory and accounting submitted by C. N. Hodges thru counsel Atty. Leon Gellada in
a motion filed on April 14, 1959 stating therein that executor C. N. Hodges is the only devisee or legatee of Linnie Jane Hodges in
accordance with the last will and testament already probated by the Court.
That on July 13, 1960 the Court approved the annual statement of accounts submitted by the executor C. N. Hodges thru his counsel
Atty. Gellada on July 21, 1960 wherein it is stated that the executor, C. N. Hodges is the only devisee or legatee of the deceased Linnie
Jane Hodges; that on May 2, 1961 the Court approved the annual statement of accounts submitted by executor, C. N. Hodges for the
year 1960 which was submitted by Atty. Gellada on April 20, 1961 wherein it is stated that executor Hodges is the only devisee or
legatee of the deceased Linnie Jane Hodges;
That during the hearing on September 5 and 6, 1963 the estate of C. N. Hodges claimed all the assets belonging to the deceased
spouses Linnie Jane Hodges and C. N. Hodges situated in the Philippines; that administratrix Magno has executed illegal acts to the
prejudice of the testate estate of C. N. Hodges.
132
An opposition (Sp. 1672, Vol. X, pp. 4415-4421) dated April 27, 1966 of administratrix Magno has been filed asking that the motion be
denied for lack of merit and that the motion for the official declaration of heirs of the estate of Linnie Jane Hodges be set for
presentation and reception of evidence.
It is alleged in the aforesaid opposition that the examination of documents which are in the possession of administratrix Magno can be
made prior to the hearing of the motion for the official declaration of heirs of the estate of Linnie Jane Hodges, during said hearing.
That the matters raised in the PCIB's motion of October 5, 1963 (as well as the other motion) dated September 14, 1964 have been
consolidated for the purpose of presentation and reception of evidence with the hearing on the determination of the heirs of the
estate of Linnie Jane Hodges. It is further alleged in the opposition that the motion for the official declaration of heirs of the estate of
Linnie Jane Hodges is the one that constitutes a prejudicial question to the motions dated October 5 and September 14, 1964 because
if said motion is found meritorious and granted by the Court, the PCIB's motions of October 5, 1963 and September 14, 1964 will
become moot and academic since they are premised on the assumption and claim that the only heir of Linnie Jane Hodges was C. N.
Hodges.
That the PCIB and counsel are estopped from further questioning the determination of heirs in the estate of Linnie Jane Hodges at this
stage since it was PCIB as early as January 8, 1965 which filed a motion for official declaration of heirs of Linnie Jane Hodges that the
claim of any heirs of Linnie Jane Hodges can be determined only in the administration proceedings over the estate of Linnie Jane
Hodges and not that of C. N. Hodges, since the heirs of Linnie Jane Hodges are claiming her estate and not the estate of C. N. Hodges.
A reply (Sp. 1672, Vol. X, pp. 4436-4444) dated May 11, 1966 of the PCIB has been filed alleging that the motion dated April 22, 1966 of
the PCIB is not to seek deferment of the hearing and consideration of the motion for official declaration of heirs of Linnie Jane Hodges
but to declare the testate estate of Linnie Jane Hodges closed and for administratrix Magno to account for and deliver to the PCIB all
assets of the conjugal partnership of the deceased spouses which has come to her possession plus all rents and income.
A rejoinder (Sp. 1672, Vol. X, pp. 4458-4462) of administratrix Magno dated May 19, 1966 has been filed alleging that the motion dated
December 11, 1957 only sought the approval of all conveyances made by C. N. Hodges and requested the Court authority for all
subsequent conveyances that will be executed by C. N. Hodges; that the order dated December 14, 1957 only approved the
conveyances made by C. N. Hodges; that C. N. Hodges represented by counsel never made any claim in the estate of Linnie Jane
Hodges and never filed a motion to declare himself as the heir of the said Linnie Jane Hodges despite the lapse of more than five (5)
years after the death of Linnie Jane Hodges; that it is further alleged in the rejoinder that there can be no order of adjudication of the
estate unless there has been a prior express declaration of heirs and so far no declaration of heirs in the estate of Linnie Jane Hodges
(Sp. 1307) has been made.
Considering the allegations and arguments in the motion and of the PCIB as well as those in the opposition and rejoinder of
administratrix Magno, the Court finds the opposition and rejoinder to be well taken for the reason that so far there has been no official
declaration of heirs in the testate estate of Linnie Jane Hodges and therefore no disposition of her estate.
WHEREFORE, the motion of the PCIB dated April 22, 1966 is hereby DENIED.
(Annex "W", Petition)
In its motion dated November 24, 1966 for the reconsideration of this order, petitioner alleged inter alia that:
It cannot be over-stressed that the motion of December 11, 1957 was based on the fact that:
a. Under the last will and testament of the deceased, Linnie Jane Hodges, the late Charles Newton Hodges was the sole heir instituted
insofar as her properties in the Philippines are concerned;
b. Said last will and testament vested upon the said late Charles Newton Hodges rights over said properties which, in sum, spell
ownership, absolute and in fee simple;
c. Said late Charles Newton Hodges was, therefore, "not only part owner of the properties left as conjugal, but also, the successor to all
the properties left by the deceased Linnie Jane Hodges.
Likewise, it cannot be over-stressed that the aforesaid motion was granted by this Honorable Court "for the reasons stated" therein.
Again, the motion of December 11, 1957 prayed that not only "all the sales, conveyances, leases, and mortgages executed by" the
late Charles Newton Hodges, but also all "the subsequent sales, conveyances, leases, and mortgages ..." be approved and authorized.
This Honorable Court, in its order of December 14, 1957, "for the reasons stated" in the aforesaid motion, granted the same, and not
only approved all the sales, conveyances, leases and mortgages of all properties left by the deceased Linnie Jane Hodges executed
by the late Charles Newton Hodges, but also authorized "all subsequent sales, conveyances, leases and mortgages of the properties
left by the said deceased Linnie Jane Hodges. (Annex "X", Petition)
and reiterated its fundamental pose that the Testate Estate of Linnie Jane Hodges had already been factually, although not legally,
closed with the virtual declaration of Hodges and adjudication to him, as sole universal heir of all the properties of the estate of his wife,
133
in the order of December 14, 1957, Annex G. Still unpersuaded, on July 18, 1967, respondent court denied said motion for
reconsideration and held that "the court believes that there is no justification why the order of October 12, 1966 should be considered
or modified", and, on July 19, 1967, the motion of respondent Magno "for official declaration of heirs of the estate of Linnie Jane
Hodges", already referred to above, was set for hearing.
In consequence of all these developments, the present petition was filed on August 1, 1967 (albeit petitioner had to pay another
docketing fee on August 9, 1967, since the orders in question were issued in two separate testate estate proceedings, Nos. 1307 and
1672, in the court below).
Together with such petition, there are now pending before Us for resolution herein, appeals from the following:
1. The order of December 19, 1964 authorizing payment by respondent Magno of overtime pay, (pp. 221, Green Record on Appeal)
together with the subsequent orders of January 9, 1965, (pp. 231-232, id.) October 27, 1965, (pp. 227, id.) and February 15, 1966 (pp.
455-456, id.) repeatedly denying motions for reconsideration thereof.
2. The order of August 6, 1965 (pp. 248, id.) requiring that deeds executed by petitioner to be co-signed by respondent Magno, as well
as the order of October 27, 1965 (pp. 276-277) denying reconsideration.
3. The order of October 27, 1965 (pp. 292-295, id.) enjoining the deposit of all collections in a joint account and the same order of
February 15, 1966 mentioned in No. 1 above which included the denial of the reconsideration of this order of October 27, 1965.
4. The order of November 3, 1965 (pp. 313-320, id.) directing the payment of attorney's fees, fees of the respondent administratrix, etc.
and the order of February 16, 1966 denying reconsideration thereof.
5. The order of November 23, 1965 (pp. 334-335, id.) allowing appellee Western Institute of Technology to make payments to either one
or both of the administrators of the two estates as well as the order of March 7, 1966 (p. 462, id.) denying reconsideration.
6. The various orders hereinabove earlier enumerated approving deeds of sale executed by respondent Magno in favor of appellees
Carles, Catedral, Pablito, Guzman, Coronado, Barrido, Causing, Javier, Lucero and Batisanan, (see pp. 35 to 37 of this opinion),
together with the two separate orders both dated December 2, 1966 (pp. 306-308, and pp. 308-309, Yellow Record on Appeal)
denying reconsideration of said approval.
7. The order of January 3, 1967, on pp. 335-336, Yellow Record on Appeal, approving similar deeds of sale executed by respondent
Magno, as those in No. 6, in favor of appellees Pacaonsis and Premaylon, as to which no motion for reconsideration was filed.
8. Lastly, the order of December 2, 1966, on pp. 305-306, Yellow Record on Appeal, directing petitioner to surrender to appellees
Lucero, Batisanan, Javier, Pablito, Barrido, Catedral, Causing, Guzman, and Coronado, the certificates of title covering the lands
involved in the approved sales, as to which no motion for reconsideration was filed either.
Strictly speaking, and considering that the above orders deal with different matters, just as they affect distinctly different individuals or
persons, as outlined by petitioner in its brief as appellant on pp. 12-20 thereof, there are, therefore, thirty-three (33) appeals before Us,
for which reason, petitioner has to pay also thirty-one (31) more docket fees.
It is as well perhaps to state here as elsewhere in this opinion that in connection with these appeals, petitioner has assigned a total of
seventy-eight (LXXVIII) alleged errors, the respective discussions and arguments under all of them covering also the fundamental issues
raised in respect to the petition for certiorari and prohibition, thus making it feasible and more practical for the Court to dispose of all
these cases together.4
The assignments of error read thus:
I to IV
THE ORDER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEES, PEPITO G. IYULORES, ESPIRIDION
PARTISALA, WINIFREDO C. ESPADA AND ROSARIO ALINGASA, EXECUTED BY THE APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF
LAND OWNED BY THE DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM
DURING HIS LIFETIME.
V to VIII
THE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR OF THE APPELLEES, PEPITO G. IYULORES, ESPIRIDION PARTISALA,
WINIFREDO C. ESPADA AND ROSARIO ALINGASA, COVERING PARCELS OF LAND FOR WHICH THEY HAVE NEVER PAID IN FULL IN
ACCORDANCE WITH THE ORIGINAL CONTRACTS TO SELL.
IX to XII
134
THE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF OWNERSHIP OVER REAL PROPERTY OF THE APPELLEES, PEPITO G. IYULORES,
ESPIRIDION PARTISALA, WINIFREDO C. ESPADA AND ROSARIO ALINGASA, WHILE ACTING AS A PROBATE COURT.
XIII to XV
THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEES ADELFA PREMAYLON (LOT NO. 102),
SANTIAGO PACAONSIS, AND ADELFA PREMAYLON (LOT NO. 104), EXECUTED BY THE APPELLEE, AVELINA A. MAGNO, COVERING
PARCELS OF LAND OWNED BY THE DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE
EXECUTED BY HIM DURING HIS LIFETIME.
XVI to XVIII
THE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR OF THE APPELLEES ADELFA PREMAYLON (LOT NO. 102),
SANTIAGO PACAONSIS, AND ADELFA PREMAYLON (LOT NO. 104) COVERING PARCELS OF LAND FOR WHICH THEY HAVE NEVER PAID IN
FULL IN ACCORDANCE WITH THE ORIGINAL CONTRACTS TO SELL.
XIX to XXI
THE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF OWNERSHIP OVER REAL PROPERTY OF THE APPELLEES ADELFA PREMAYLON
(LOT NO. 102), SANTIAGO PACAONSIS, AND ADELFA PREMAYLON (LOT NO. 104) WHILE ACTING AS A PROBATE COURT.
XXII to XXV
THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEES LORENZO CARLES, JOSE PABLICO,
ALFREDO CATEDRAL AND SALVADOR S. GUZMAN, EXECUTED BY THE APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND
OWNED BY THE DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM
DURING HIS LIFETIME.
XXVI to XXIX
THE LOWER COURT ERRED IN APPROVING THE FINAL DEED OF SALE EXECUTED IN FAVOR OF THE APPELLEES, LORENZO CARLES, JOSE
PABLICO, ALFREDO CATEDRAL AND SALVADOR S. GUZMAN PURSUANT TO CONTRACTS TO SPELL WHICH WERE CANCELLED AND
RESCINDED.
XXX to XXXIV
THE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF OWNERSHIP OVER REAL PROPERTY OF THE LORENZO CARLES, JOSE PABLICO,
ALFREDO CATEDRAL AND SALVADOR S. GUZMAN, WHILE ACTING AS A PROBATE COURT.
XXXV to XXXVI
THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEES, FLORENIA BARRIDO AND
PURIFICACION CORONADO, EXECUTED BY THE APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY THE
DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.
XXXVII to XXXVIII
THE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR OF THE APPELLEES, FLORENIA BARRIDO AND PURIFICACION
CORONADO, ALTHOUGH THEY WERE IN ARREARS IN THE PAYMENTS AGREED UPON IN THE ORIGINAL CONTRACT TO SELL WHICH THEY
EXECUTED WITH THE DECEASED, CHARLES NEWTON HODGES, IN THE AMOUNT OF P10,680.00 and P4,428.90, RESPECTIVELY.
XXXIX to XL
THE LOWER COURT ERRED IN DEPRIVING THE DECEASED, CHARLES NEWTON HODGES, OF THE CONTRACTUAL RIGHT, EXERCISED
THROUGH HIS ADMINISTRATOR, THE INSTANT APPELLANT, TO CANCEL THE CONTRACTS TO SELL OF THE APPELLEES, FLORENIA BARRIDO
AND PURIFICACION CORONADO.
XLI to XLIII
THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEES, GRACIANO LUCERO, ARITEO THOMAS
JAMIR AND MELQUIADES BATISANAN, EXECUTED BY THE APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY THE
DECEASED, CHARLES NEWTON HODGES, AND THE CONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.
XLIV to XLVI
135
THE LOWER COURT ERRED IN APPROVING THE FINAL DEED OF SALE IN FAVOR OF THE APPELLEES, GRACIANO LUCERO, ARITEO THOMAS
JAMIR AND MELQUIADES BATISANAN, PURSUANT TO CONTRACTS TO SELL EXECUTED BY THEM WITH THE DECEASED, CHARLES NEWTON
HODGES, THE TERMS AND CONDITIONS OF WHICH THEY HAVE NEVER COMPLIED WITH.
XLVII to XLIX
THE LOWER COURT ERRED IN DEPRIVING THE DECEASED, CHARLES NEWTON HODGES, OF HIS RIGHT, EXERCISED THROUGH HIS
ADMINISTRATION, THE INSTANT APPELLANT, TO CANCEL THE CONTRACTS TO SELL OF THE APPELLEES, GRACIANO LUCERO, ARITEO
THOMAS JAMIR AND MELQUIADES BATISANAN, AND IN DETERMINING THE RIGHTS OF THE SAID APPELLEES OVER REAL PROPERTY WHILE
ACTING AS A PROBATE COURT.
THE LOWER COURT ERRED IN APPROVING THE FINAL DEEDS OF SALE IN FAVOR OF THE APPELLEE, BELCESAR CAUSING, EXECUTED BY THE
APPELLEE, AVELINA A. MAGNO, COVERING PARCELS OF LAND OWNED BY THE DECEASED, CHARLES NEWTON HODGES, AND THE
CONTRACTS TO SELL COVERING WHICH WERE EXECUTED BY HIM DURING HIS LIFETIME.
LI
THE LOWER COURT ERRED IN APPROVING THE DEEDS OF SALE IN FAVOR OF THE APPELLEE, BELCESAR CAUSING, ALTHOUGH HE WAS IN
ARREARS IN THE PAYMENTS AGREED UPON IN THE ORIGINAL CONTRACT TO SELL WHICH HE EXECUTED WITH THE DECEASED, CHARLES
NEWTON HODGES, IN THE AMOUNT OF P2,337.50.
LII
THE LOWER COURT ERRED IN APPROVING THE DEED OF SALE IN FAVOR OF THE APPELLEE, BELCESAR CAUSING, ALTHOUGH THE SAME WAS
NOT EXECUTED IN ACCORDANCE WITH THE RULES OF COURT.
LIII to LXI
THE LOWER COURT ERRED IN ORDERING THE APPELLANT, PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK TO SURRENDER THE OWNER'S
DUPLICATE CERTIFICATES OF TITLE OVER THE RESPECTIVE LOTS COVERED BY THE DEEDS OF SALE EXECUTED BY THE APPELLEE, AVELINA A.
MAGNO, IN FAVOR OF THE OTHER APPELLEES, JOSE PABLICO, ALFREDO CATEDRAL, SALVADOR S. GUZMAN, FLRENIA BARRIDO,
PURIFICACION CORONADO, BELCESAR CAUSING, ARITEO THOMAS JAMIR, MAXIMA BATISANAN AND GRACIANO L. LUCERO.
LXII
THE LOWER COURT ERRED IN RESOLVING THE MOTION OF THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY, DATED NOVEMBER 3, 1965,
WITHOUT ANY COPY THEREOF HAVING BEEN SERVED UPON THE APPELLANT, PHILIPPINE COMMERCIAL & INDUSTRIAL BANK.
LXIII
THE LOWER COURT ERRED IN HEARING AND CONSIDERING THE MOTION OF THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY, DATED
NOVEMBER 3rd, 1965, ON NOVEMBER 23, 1965, WHEN THE NOTICE FOR THE HEARING THEREOF WAS FOR NOVEMBER 20, 1965.
LXIV
THE LOWER COURT ERRED IN GRANTING THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY A RELIEF OTHER THAN THAT PRAYED FOR IN
ITS MOTION, DATED NOVEMBER 3, 1965, IN THE ABSENCE OF A PRAYER FOR GENERAL RELIEF CONTAINED THEREIN.
LXV
THE LOWER COURT ERRED IN ALLOWING THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY, TO CONTINUE PAYMENTS UPON A
CONTRACT TO SELL THE TERMS AND CONDITIONS OF WHICH IT HAS FAILED TO FULFILL.
LXVI
THE LOWER COURT ERRED IN DETERMINING THE RIGHTS OF THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY OVER THE REAL PROPERTY
SUBJECT MATTER OF THE CONTRACT TO SELL IT EXECUTED WITH THE DECEASED, CHARLES NEWTON HODGES, WHILE ACTING AS A
PROBATE COURT.
LXVII
LOWER COURT ERRED IN ALLOWING THE CONTINUATION OF PAYMENTS BY THE APPELLEE, WESTERN INSTITUTE OF TECHNOLOGY, UPON A
CONTRACT TO SELL EXECUTED BY IT AND THE DECEASED, CHARLES NEWTON HODGES, TO A PERSON OTHER THAN HIS LAWFULLY
APPOINTED ADMINISTRATOR.
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LXVIII
THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF RETAINER'S FEES FROM THE SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE
HODGES, WHEN THERE IS NEITHER SUCH ESTATE NOR ASSETS THEREOF.
LXIX
THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF RETAINER'S FEES OF LAWYERS OF ALLEGED HEIRS TO THE SUPPOSED ESTATE OF
THE DECEASED, LINNIE JANE HODGES.
LXX
THE LOWER COURT ERRED IN IMPLEMENTING THE ALLEGED AGREEMENT BETWEEN THE HEIRS OF THE SUPPOSED ESTATE OF THE DECEASED,
LINNIE JANE HODGES, AND THEIR LAWYERS.
LXXI
THE LOWER COURT ERRED IN ORDERING THE PREMATURE DISTRIBUTION OF ESTATE ASSETS TO ALLEGED HEIRS OR BENEFICIARIES THEREOF,
BY WAY OF RETAINER'S FEES.
LXXII
THE LOWER COURT ERRED IN ORDERING THAT ALL FINAL DEEDS OF SALE EXECUTED PURSUANT TO CONTRACTS TO SELL ENTERED INTO BY
THE DECEASED, CHARLES NEWTON HODGES, DURING HIS LIFETIME, BE SIGNED JOINTLY BY THE APPELLEE, AVELINA A. MAGNO, AND THE
APPELLANT, PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, AND NOT BY THE LATTER ONLY AS THE LAWFULLY APPOINTED
ADMINISTRATOR OF HIS ESTATE.
LXXIII
THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF LEGAL EXPENSES FROM THE SUPPOSED ESTATE OF THE DECEASED, LINNIE JANE
HODGES, WHEN THERE IS NEITHER SUCH ESTATE NOR ASSETS THEREOF.
LXXIV
THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF LEGAL EXPENSES OF LAWYERS OF ALLEGED HEIRS TO THE SUPPOSED ESTATE OF
THE DECEASED, LINNIE JANE HODGES.
LXXV
THE LOWER COURT ERRED IN ORDERING THE PREMATURE DISTRIBUTION OF ESTATE ASSETS TO ALLEGED HEIRS OR BENEFICIARIES THEREOF,
BY WAY OF LEGAL EXPENSES.
LXXVI
THE LOWER COURT ERRED IN ORDERING THE PAYMENT OF COMPENSATION TO THE PURPORTED ADMINISTRATRIX OF THE SUPPOSED ESTATE
OF THE DECEASED, LINNIE JANE HODGES, THE INSTANT APPELLEE, AVELINA A. MAGNO, WHEN THERE IS NEITHER SUCH ESTATE NOR ASSETS
THEREOF.
LXXVII
THE LOWER COURT ERRED IN ORDERING THAT THE FUNDS OF THE TESTATE ESTATE OF THE DECEASED, CHARLES NEWTON HODGES, BE
PLACED IN A JOINT ACCOUNT OF THE APPELLANT, PHILIPPINE COMMERCIAL AND INDUSTRIAL BANK, AND THE APPELLEE, AVELINA A.
MAGNO, WHO IS A COMPLETE STRANGER TO THE AFORESAID ESTATE.
LXXVIII
THE LOWER COURT ERRED IN ORDERING THAT THE APPELLEE, AVELINA A. MAGNO, BE GIVEN EQUAL ACCESS TO THE RECORDS OF THE
TESTATE ESTATE OF THE DECEASED, CHARLES NEWTON HODGES, WHEN SHE IS A COMPLETE STRANGER TO THE AFORESAID ESTATE. (Pp. 73-
83, Appellant's Brief.)
To complete this rather elaborate, and unavoidably extended narration of the factual setting of these cases, it may also be mentioned
that an attempt was made by the heirs of Mrs. Hodges to have respondent Magno removed as administratrix, with the proposed
appointment of Benito J. Lopez in her place, and that respondent court did actually order such proposed replacement, but the Court
declared the said order of respondent court violative of its injunction of August 8, 1967, hence without force and effect (see Resolution
of September 8, 1972 and February 1, 1973). Subsequently, Atty. Efrain B. Trenas, one of the lawyers of said heirs, appeared no longer
for the proposed administrator Lopez but for the heirs themselves, and in a motion dated October 26, 1972 informed the Court that a
motion had been filed with respondent court for the removal of petitioner PCIB as administrator of the estate of C. N. Hodges in Special
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Proceedings 1672, which removal motion alleged that 22.968149% of the share of C. N. Hodges had already been acquired by the
heirs of Mrs. Hodges from certain heirs of her husband. Further, in this connection, in the answer of PCIB to the motion of respondent
Magno to have it declared in contempt for disregarding the Court's resolution of September 8, 1972 modifying the injunction of August
8, 1967, said petitioner annexed thereto a joint manifestation and motion, appearing to have been filed with respondent court,
informing said court that in addition to the fact that 22% of the share of C. N. Hodges had already been bought by the heirs of Mrs.
Hodges, as already stated, certain other heirs of Hodges representing 17.343750% of his estate were joining cause with the heirs of Mrs.
Hodges as against PCIB, thereby making somewhat precarious, if not possibly untenable, petitioners' continuation as administrator of
the Hodges estate.
RESOLUTION OF ISSUES IN THE CERTIORARI AND
PROHIBITION CASES
As to the Alleged Tardiness
of the Present Appeals
The priority question raised by respondent Magno relates to the alleged tardiness of all the aforementioned thirty-three appeals of
PCIB. Considering, however, that these appeals revolve around practically the same main issues and that it is admitted that some of
them have been timely taken, and, moreover, their final results hereinbelow to be stated and explained make it of no consequence
whether or not the orders concerned have become final by the lapsing of the respective periods to appeal them, We do not deem it
necessary to pass upon the timeliness of any of said appeals.
II
The Propriety Here of Certiorari and
Prohibition instead of Appeal
The other preliminary point of the same respondent is alleged impropriety of the special civil action of certiorari and prohibition in view
of the existence of the remedy of appeal which it claims is proven by the very appeals now before Us. Such contention fails to take
into account that there is a common thread among the basic issues involved in all these thirty-three appeals which, unless resolved in
one single proceeding, will inevitably cause the proliferation of more or less similar or closely related incidents and consequent
eventual appeals. If for this consideration alone, and without taking account anymore of the unnecessary additional effort, expense
and time which would be involved in as many individual appeals as the number of such incidents, it is logical and proper to hold, as
We do hold, that the remedy of appeal is not adequate in the present cases. In determining whether or not a special civil action of
certiorari or prohibition may be resorted to in lieu of appeal, in instances wherein lack or excess of jurisdiction or grave abuse of
discretion is alleged, it is not enough that the remedy of appeal exists or is possible. It is indispensable that taking all the relevant
circumstances of the given case, appeal would better serve the interests of justice. Obviously, the longer delay, augmented expense
and trouble and unnecessary repetition of the same work attendant to the present multiple appeals, which, after all, deal with
practically the same basic issues that can be more expeditiously resolved or determined in a single special civil action, make the
remedies of certiorari and prohibition, pursued by petitioner, preferable, for purposes of resolving the common basic issues raised in all
of them, despite the conceded availability of appeal. Besides, the settling of such common fundamental issues would naturally
minimize the areas of conflict between the parties and render more simple the determination of the secondary issues in each of them.
Accordingly, respondent Magno's objection to the present remedy of certiorari and prohibition must be overruled.
We come now to the errors assigned by petitioner-appellant, Philippine Commercial & Industrial Bank, (PCIB, for short) in the petition as
well as in its main brief as appellant.
III
On Whether or Not There is Still Any Part of the Testate
Estate Mrs. Hodges that may be Adjudicated to her brothers
and sisters as her estate, of which respondent Magno is the
unquestioned Administratrix in special Proceedings 1307.
In the petition, it is the position of PCIB that the respondent court exceeded its jurisdiction or gravely abused its discretion in further
recognizing after December 14, 1957 the existence of the Testate Estate of Linnie Jane Hodges and in sanctioning purported acts of
administration therein of respondent Magno. Main ground for such posture is that by the aforequoted order of respondent court of said
date, Hodges was already allowed to assert and exercise all his rights as universal heir of his wife pursuant to the provisions of her will,
quoted earlier, hence, nothing else remains to be done in Special Proceedings 1307 except to formally close it. In other words, the
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contention of PCIB is that in view of said order, nothing more than a formal declaration of Hodges as sole and exclusive heir of his wife
and the consequent formal unqualified adjudication to him of all her estate remain to be done to completely close Special
Proceedings 1307, hence respondent Magno should be considered as having ceased to be Administratrix of the Testate Estate of Mrs.
Hodges since then.
After carefully going over the record, We feel constrained to hold that such pose is patently untenable from whatever angle it is
examined.
To start with, We cannot find anywhere in respondent Order of December 14, 1957 the sense being read into it by PCIB. The tenor of
said order bears no suggestion at all to such effect. The declaration of heirs and distribution by the probate court of the estate of a
decedent is its most important function, and this Court is not disposed to encourage judges of probate proceedings to be less than
definite, plain and specific in making orders in such regard, if for no other reason than that all parties concerned, like the heirs, the
creditors, and most of all the government, the devisees and legatees, should know with certainty what are and when their respective
rights and obligations ensuing from the inheritance or in relation thereto would begin or cease, as the case may be, thereby avoiding
precisely the legal complications and consequent litigations similar to those that have developed unnecessarily in the present cases.
While it is true that in instances wherein all the parties interested in the estate of a deceased person have already actually distributed
among themselves their respective shares therein to the satisfaction of everyone concerned and no rights of creditors or third parties
are adversely affected, it would naturally be almost ministerial for the court to issue the final order of declaration and distribution, still it
is inconceivable that the special proceeding instituted for the purpose may be considered terminated, the respective rights of all the
parties concerned be deemed definitely settled, and the executor or administrator thereof be regarded as automatically discharged
and relieved already of all functions and responsibilities without the corresponding definite orders of the probate court to such effect.
Indeed, the law on the matter is specific, categorical and unequivocal. Section 1 of Rule 90 provides:
SECTION 1. When order for distribution of residue made . — When the debts, funeral charges, and expenses of administration, the
allowance to the widow and inheritance tax, if any, chargeable to the estate in accordance with law have been paid, the court, on
the application of the executor or administrator, or of a person interested in the estate, and after hearing upon notice, shall assign the
residue of the estate to the persons entitled to the same, naming them and the proportions, or parts, to which each is entitled, and
such persons may demand and recover their respective shares from the executor or administrator, or any other person having the
same in his possession. If there is a controversy before the court as to who are the lawful heirs of the deceased person or as to the
distributive shares to which each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.
No distribution shall be allowed until the payment of the obligations above mentioned has been made or provided for, unless the
distributees, or any of them give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such
time as the court directs.
These provisions cannot mean anything less than that in order that a proceeding for the settlement of the estate of a deceased may
be deemed ready for final closure, (1) there should have been issued already an order of distribution or assignment of the estate of the
decedent among or to those entitled thereto by will or by law, but (2) such order shall not be issued until after it is shown that the
"debts, funeral expenses, expenses of administration, allowances, taxes, etc. chargeable to the estate" have been paid, which is but
logical and proper. (3) Besides, such an order is usually issued upon proper and specific application for the purpose of the interested
party or parties, and not of the court.
... it is only after, and not before, the payment of all debts, funeral charges, expenses of administration, allowance to the widow, and
inheritance tax shall have been effected that the court should make a declaration of heirs or of such persons as are entitled by law to
the residue. (Moran, Comments on the Rules of Court, 2nd ed., Vol. II, p. 397, citing Capistrano vs. Nadurata, 49 Phil., 726; Lopez vs.
Lopez, 37 Off. Gaz., 3091.) (JIMOGA-ON v. BELMONTE, 84 Phil. 545, 548) (p. 86, Appellee's Brief)
xxx xxx xxx
Under Section 753 of the Code of Civil Procedure, (corresponding to Section 1, Rule 90) what brings an intestate (or testate)
proceeding to a close is the order of distribution directing delivery of the residue to the persons entitled thereto after paying the
indebtedness, if any, left by the deceased. (Santiesteban vs. Santiesteban, 68 Phil. 367, 370.)
In the cases at bar, We cannot discern from the voluminous and varied facts, pleadings and orders before Us that the above
indispensable prerequisites for the declaration of heirs and the adjudication of the estate of Mrs. Hodges had already been complied
with when the order of December 14, 1957 was issued. As already stated, We are not persuaded that the proceedings leading to the
issuance of said order, constituting barely of the motion of May 27, 1957, Annex D of the petition, the order of even date, Annex E, and
the motion of December 11, 1957, Annex H, all aforequoted, are what the law contemplates. We cannot see in the order of December
14, 1957, so much relied upon by the petitioner, anything more than an explicit approval of "all the sales, conveyances, leases and
mortgages of all the properties left by the deceased Linnie Jane Hodges executed by the Executor Charles N. Hodges" (after the
death of his wife and prior to the date of the motion), plus a general advance authorization to enable said "Executor — to execute
subsequent sales, conveyances, leases and mortgages of the properties left the said deceased Linnie Jane Hodges in consonance
with wishes conveyed in the last will and testament of the latter", which, certainly, cannot amount to the order of adjudication of the
estate of the decedent to Hodges contemplated in the law. In fact, the motion of December 11, 1957 on which the court predicated
the order in question did not pray for any such adjudication at all. What is more, although said motion did allege that "herein Executor
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(Hodges) is not only part owner of the properties left as conjugal, but also, the successor to all the properties left by the deceased
Linnie Jane Hodges", it significantly added that "herein Executor, as Legatee (sic), has the right to sell, convey, lease or dispose of the
properties in the Philippines — during his lifetime", thereby indicating that what said motion contemplated was nothing more than
either the enjoyment by Hodges of his rights under the particular portion of the dispositions of his wife's will which were to be operative
only during his lifetime or the use of his own share of the conjugal estate, pending the termination of the proceedings. In other words,
the authority referred to in said motions and orders is in the nature of that contemplated either in Section 2 of Rule 109 which permits, in
appropriate cases, advance or partial implementation of the terms of a duly probated will before final adjudication or distribution
when the rights of third parties would not be adversely affected thereby or in the established practice of allowing the surviving spouse
to dispose of his own share of he conjugal estate, pending its final liquidation, when it appears that no creditors of the conjugal
partnership would be prejudiced thereby, (see the Revised Rules of Court by Francisco, Vol. V-B, 1970 ed. p. 887) albeit, from the tenor
of said motions, We are more inclined to believe that Hodges meant to refer to the former. In any event, We are fully persuaded that
the quoted allegations of said motions read together cannot be construed as a repudiation of the rights unequivocally established in
the will in favor of Mrs. Hodges' brothers and sisters to whatever have not been disposed of by him up to his death.
Indeed, nowhere in the record does it appear that the trial court subsequently acted upon the premise suggested by petitioner. On
the contrary, on November 23, 1965, when the court resolved the motion of appellee Western Institute of Technology by its order We
have quoted earlier, it categorically held that as of said date, November 23, 1965, "in both cases (Special Proceedings 1307 and 1672)
there is as yet no judicial declaration of heirs nor distribution of properties to whomsoever are entitled thereto." In this connection, it
may be stated further against petitioner, by way of some kind of estoppel, that in its own motion of January 8, 1965, already quoted in
full on pages 54-67 of this decision, it prayed inter alia that the court declare that "C. N. Hodges was the sole and exclusive heir of the
estate of Linnie Jane Hodges", which it would not have done if it were really convinced that the order of December 14, 1957 was
already the order of adjudication and distribution of her estate. That said motion was later withdrawn when Magno filed her own
motion for determination and adjudication of what should correspond to the brothers and sisters of Mrs. Hodges does not alter the
indubitable implication of the prayer of the withdrawn motion.
It must be borne in mind that while it is true that Mrs. Hodges bequeathed her whole estate to her husband and gave him what
amounts to full powers of dominion over the same during his lifetime, she imposed at the same time the condition that whatever should
remain thereof upon his death should go to her brothers and sisters. In effect, therefore, what was absolutely given to Hodges was only
so much of his wife's estate as he might possibly dispose of during his lifetime; hence, even assuming that by the allegations in his
motion, he did intend to adjudicate the whole estate to himself, as suggested by petitioner, such unilateral act could not have
affected or diminished in any degree or manner the right of his brothers and sisters-in-law over what would remain thereof upon his
death, for surely, no one can rightly contend that the testamentary provision in question allowed him to so adjudicate any part of the
estate to himself as to prejudice them. In other words, irrespective of whatever might have been Hodges' intention in his motions, as
Executor, of May 27, 1957 and December 11, 1957, the trial court's orders granting said motions, even in the terms in which they have
been worded, could not have had the effect of an absolute and unconditional adjudication unto Hodges of the whole estate of his
wife. None of them could have deprived his brothers and sisters-in-law of their rights under said will. And it may be added here that the
fact that no one appeared to oppose the motions in question may only be attributed, firstly, to the failure of Hodges to send notices to
any of them, as admitted in the motion itself, and, secondly, to the fact that even if they had been notified, they could not have taken
said motions to be for the final distribution and adjudication of the estate, but merely for him to be able, pending such final distribution
and adjudication, to either exercise during his lifetime rights of dominion over his wife's estate in accordance with the bequest in his
favor, which, as already observed, may be allowed under the broad terms of Section 2 of Rule 109, or make use of his own share of the
conjugal estate. In any event, We do not believe that the trial court could have acted in the sense pretended by petitioner, not only
because of the clear language of the will but also because none of the interested parties had been duly notified of the motion and
hearing thereof. Stated differently, if the orders of May 27, 1957 and December 4, 1957 were really intended to be read in the sense
contended by petitioner, We would have no hesitancy in declaring them null and void.
Petitioner cites the case of Austria vs. Ventenilla, G. R. No. L-10018, September 19, 1956, (unreported but a partial digest thereof
appears in 99 Phil. 1069) in support of its insistence that with the orders of May 27 and December 14, 1957, the closure of Mrs. Hodges'
estate has become a mere formality, inasmuch as said orders amounted to the order of adjudication and distribution ordained by
Section 1 of Rule 90. But the parallel attempted to be drawn between that case and the present one does not hold. There the trial
court had in fact issued a clear, distinct and express order of adjudication and distribution more than twenty years before the other
heirs of the deceased filed their motion asking that the administratrix be removed, etc. As quoted in that decision, the order of the
lower court in that respect read as follows:
En orden a la mocion de la administradora, el juzgado la encuentra procedente bajo la condicion de que no se hara entrega ni
adjudicacion de los bienes a los herederos antes de que estos presten la fianza correspondiente y de acuerdo con lo prescrito en el
Art. 754 del Codigo de Procedimientos: pues, en autos no aparece que hayan sido nombrados comisionados de avaluo y
reclamaciones. Dicha fianza podra ser por un valor igual al de los bienes que correspondan a cada heredero segun el testamento.
Creo que no es obice para la terminacion del expediente el hecho de que la administradora no ha presentado hasta ahora el
inventario de los bienes; pues, segun la ley, estan exentos de esta formalidad os administradores que son legatarios del residuo o
remanente de los bienes y hayan prestado fianza para responder de las gestiones de su cargo, y aparece en el testamento que la
administradora Alejandra Austria reune dicha condicion.
POR TODO LO EXPUESTO, el juzgado declara, 1.o: no haber lugar a la mocion de Ramon Ventenilla y otros; 2.o, declara asimismo que
los unicos herederos del finado Antonio Ventenilla son su esposa Alejandra Austria, Maria Ventenilla, hermana del testador, y Ramon
Ventenilla, Maria Ventenilla, Ramon Soriano, Eulalio Soriano, Jose Soriano, Gabriela Ventenilla, Lorenzo Ventenilla, Felicitas Ventenilla,
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Eugenio Ventenilla y Alejandra Ventenilla, en representacion de los difuntos Juan, Tomas, Catalino y Froilan, hermanos del testador,
declarando, ademas que la heredera Alejandra Austria tiene derecho al remanente de todos los bienes dejados por el finado,
despues de deducir de ellos la porcion que corresponde a cada uno de sus coherederos, conforme esta mandado en las clausulas
8.a, 9.a, 10.a, 11.a, 12.a y 13.a del testamento; 3.o, se aprueba el pago hecho por la administradora de los gastos de la ultima
enfermedad y funerales del testador, de la donacion hecha por el testador a favor de la Escuela a Publica del Municipio de
Mangatarem, y de las misas en sufragio del alma del finado; 4.o, que una vez prestada la fianza mencionada al principio de este
auto, se haga la entrega y adjudicacion de los bienes, conforme se dispone en el testamento y se acaba de declarar en este auto;
5.o, y, finalmente, que verificada la adjudicacion, se dara por terminada la administracion, revelandole toda responsabilidad a la
administradora, y cancelando su fianza.
ASI SE ORDENA.
Undoubtedly, after the issuance of an order of such tenor, the closure of any proceedings for the settlement of the estate of a
deceased person cannot be but perfunctory.
In the case at bar, as already pointed out above, the two orders relied upon by petitioner do not appear ex-facie to be of the same
tenor and nature as the order just quoted, and, what is more, the circumstances attendant to its issuance do not suggest that such was
the intention of the court, for nothing could have been more violative of the will of Mrs. Hodges.
Indeed, to infer from Hodges' said motions and from his statements of accounts for the years 1958, 1959 and 1960, A Annexes I, K and
M, respectively, wherein he repeatedly claimed that "herein executor (being) the only devisee or legatee of the deceased, in
accordance with the last will and testament already probated," there is "no (other) person interested in the Philippines of the time and
place of examining herein account to be given notice", an intent to adjudicate unto himself the whole of his wife's estate in an
absolute manner and without regard to the contingent interests of her brothers and sisters, is to impute bad faith to him, an imputation
which is not legally permissible, much less warranted by the facts of record herein. Hodges knew or ought to have known that, legally
speaking, the terms of his wife's will did not give him such a right. Factually, there are enough circumstances extant in the records of
these cases indicating that he had no such intention to ignore the rights of his co-heirs. In his very motions in question, Hodges alleged,
thru counsel, that the "deceased Linnie Jane Hodges died leaving no descendants and ascendants, except brothers and sisters and
herein petitioner, as surviving spouse, to inherit the properties of the decedent ", and even promised that "proper accounting will be
had — in all these transactions" which he had submitted for approval and authorization by the court, thereby implying that he was
aware of his responsibilities vis-a-vis his co-heirs. As alleged by respondent Magno in her brief as appellee:
Under date of April 14, 1959, C. N. Hodges filed his first "Account by the Executor" of the estate of Linnie Jane Hodges. In the "Statement
of Networth of Mr. C. N. Hodges and the Estate of Linnie Jane Hodges" as of December 31, 1958 annexed thereto, C. N. Hodges
reported that the combined conjugal estate earned a net income of P328,402.62, divided evenly between him and the estate of
Linnie Jane Hodges. Pursuant to this, he filed an "individual income tax return" for calendar year 1958 on the estate of Linnie Jane
Hodges reporting, under oath, the said estate as having earned income of P164,201.31, exactly one-half of the net income of his
combined personal assets and that of the estate of Linnie Jane Hodges. (p. 91, Appellee's Brief.)
Under date of July 21, 1960, C. N. Hodges filed his second "Annual Statement of Account by the Executor" of the estate of Linnie Jane
Hodges. In the "Statement of Networth of Mr. C. N. Hodges and the Estate of Linnie Jane Hodges" as of December 31, 1959 annexed
thereto, C. N. Hodges reported that the combined conjugal estate earned a net income of P270,623.32, divided evenly between him
and the estate of Linnie Jane Hodges. Pursuant to this, he filed an "individual income tax return" for calendar year 1959 on the estate of
Linnie Jane Hodges reporting, under oath, the said estate as having earned income of P135,311.66, exactly one-half of the net income
of his combined personal assets and that of the estate of Linnie Jane Hodges. (pp. 91-92, id.)
Under date of April 20, 1961, C. N. Hodges filed his third "Annual Statement of Account by the Executor for the year 1960" of the estate
of Linnie Jane Hodges. In the "Statement of Net Worth of Mr. C. N. Hodges and the Estate of Linnie Jane Hodges" as of December 31,
1960 annexed thereto, C. N. Hodges reported that the combined conjugal estate earned a net income of P314,857.94, divided of
Linnie Jane Hodges. Pursuant to this, he filed an "individual evenly between him and the estate income tax return" for calendar year
1960 on the estate of Linnie Jane Hodges reporting, under oath, the said estate as having earned income of P157,428.97, exactly one-
half of the net income of his combined personal assets and that of the estate of Linnie Jane Hodges. (pp. 92-93, id.)
In the petition for probate that he (Hodges) filed, he listed the seven brothers and sisters of Linnie Jane as her "heirs" (see p. 2, Green
ROA). The order of the court admitting the will to probate unfortunately omitted one of the heirs, Roy Higdon (see p. 14, Green ROA).
Immediately, C. N. Hodges filed a verified motion to have Roy Higdon's name included as an heir, stating that he wanted to straighten
the records "in order (that) the heirs of deceased Roy Higdon may not think or believe they were omitted, and that they were really
and are interested in the estate of deceased Linnie Jane Hodges".
Thus, he recognized, if in his own way, the separate identity of his wife's estate from his own share of the conjugal partnership up to the
time of his death, more than five years after that of his wife. He never considered the whole estate as a single one belonging
exclusively to himself. The only conclusion one can gather from this is that he could have been preparing the basis for the eventual
transmission of his wife's estate, or, at least, so much thereof as he would not have been able to dispose of during his lifetime, to her
brothers and sisters in accordance with her expressed desire, as intimated in his tax return in the United States to be more extensively
referred to anon. And assuming that he did pay the corresponding estate and inheritance taxes in the Philippines on the basis of his
being sole heir, such payment is not necessarily inconsistent with his recognition of the rights of his co-heirs. Without purporting to rule
141
definitely on the matter in these proceedings, We might say here that We are inclined to the view that under the peculiar provisions of
his wife's will, and for purposes of the applicable inheritance tax laws, Hodges had to be considered as her sole heir, pending the
actual transmission of the remaining portion of her estate to her other heirs, upon the eventuality of his death, and whatever
adjustment might be warranted should there be any such remainder then is a matter that could well be taken care of by the internal
revenue authorities in due time.
It is to be noted that the lawyer, Atty. Leon P. Gellada, who signed the motions of May 27, 1957 and December 11, 1957 and the
aforementioned statements of account was the very same one who also subsequently signed and filed the motion of December 26,
1962 for the appointment of respondent Magno as "Administratrix of the Estate of Mrs. Linnie Jane Hodges" wherein it was alleged that
"in accordance with the provisions of the last will and testament of Linnie Jane Hodges, whatever real properties that may remain at
the death of her husband, Charles Newton Hodges, the said properties shall be equally divided among their heirs." And it appearing
that said attorney was Hodges' lawyer as Executor of the estate of his wife, it stands to reason that his understanding of the situation,
implicit in his allegations just quoted, could somehow be reflective of Hodges' own understanding thereof.
As a matter of fact, the allegations in the motion of the same Atty. Gellada dated July 1, 1957, a "Request for Inclusion of the Name of
Roy Higdon in the Order of the Court dated July 19, 1957, etc.", reference to which is made in the above quotation from respondent
Magno's brief, are over the oath of Hodges himself, who verified the motion. Said allegations read:
1. — That the Hon. Court issued orders dated June 29, 1957, ordering the probate of the will.
2. — That in said order of the Hon. Court, the relatives of the deceased Linnie Jane Hodges were enumerated. However, in the petition
as well as in the testimony of Executor during the hearing, the name Roy Higdon was mentioned, but deceased. It was unintentionally
omitted the heirs of said Roy Higdon who are his wife Aline Higdon and son David Higdon, all of age, and residents of Quinlan, Texas,
U.S.A.
3. — That to straighten the records, and in order the heirs of deceased Roy Higdon may not think or believe they were omitted, and
that they were really and are interested in the estate of deceased Linnie Jane Hodges , it is requested of the Hon. Court to insert the
names of Aline Higdon and David Higdon, wife and son of deceased Roy Higdon in the said order of the Hon. Court dated June 29,
1957. (pars. 1 to 3, Annex 2 of Magno's Answer — Record, p. 260)
As can be seen, these italicized allegations indicate, more or less, the real attitude of Hodges in regard to the testamentary dispositions
of his wife.
In connection with this point of Hodges' intent, We note that there are documents, copies of which are annexed to respondent
Magno's answer, which purportedly contain Hodges' own solemn declarations recognizing the right of his co-heirs, such as the alleged
tax return he filed with the United States Taxation authorities, identified as Schedule M, (Annex 4 of her answer) and his supposed
affidavit of renunciation, Annex 5. In said Schedule M, Hodges appears to have answered the pertinent question thus:
2a. Had the surviving spouse the right to declare an election between (1) the provisions made in his or her favor by the will and (11)
dower, curtesy or a statutory interest? (X) Yes ( ) No
2d. Does the surviving spouse contemplate renouncing the will and electing to take dower, curtesy, or a statutory interest? (X) Yes ( )
No
3. According to the information and belief of the person or persons filing the return, is any action described under question 1 designed
or contemplated? ( ) Yes (X) No (Annex 4, Answer — Record, p. 263)
and to have further stated under the item, "Description of property interests passing to surviving spouse" the following:
None, except for purposes of administering the Estate, paying debts, taxes and other legal charges. It is the intention of the surviving
husband of deceased to distribute the remaining property and interests of the deceased in their Community Estate to the devisees
and legatees named in the will when the debts, liabilities, taxes and expenses of administration are finally determined and paid .
(Annex 4, Answer — Record, p. 263)
In addition, in the supposed affidavit of Hodges, Annex 5, it is stated:
I, C. N. Hodges, being duly sworn, on oath affirm that at the time the United States Estate Tax Return was filed in the Estate of Linnie
Jane Hodges on August 8, 1958, I renounced and disclaimed any and all right to receive the rents, emoluments and income from said
estate, as shown by the statement contained in Schedule M at page 29 of said return, a copy of which schedule is attached to this
affidavit and made a part hereof.
The purpose of this affidavit is to ratify and confirm, and I do hereby ratify and confirm, the declaration made in Schedule M of said
return and hereby formally disclaim and renounce any right on my part to receive any of the said rents, emoluments and income from
the estate of my deceased wife, Linnie Jane Hodges. This affidavit is made to absolve me or my estate from any liability for the
payment of income taxes on income which has accrued to the estate of Linnie Jane Hodges since the death of the said Linnie Jane
Hodges on May 23, 1957. (Annex 5, Answer — Record, p. 264)
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Although it appears that said documents were not duly presented as evidence in the court below, and We cannot, therefore, rely on
them for the purpose of the present proceedings, still, We cannot close our eyes to their existence in the record nor fail to note that
their tenor jibes with Our conclusion discussed above from the circumstances related to the orders of May 27 and December 14, 1957.
5 Somehow, these documents, considering they are supposed to be copies of their originals found in the official files of the
governments of the United States and of the Philippines, serve to lessen any possible apprehension that Our conclusion from the other
evidence of Hodges' manifest intent vis-a-vis the rights of his co-heirs is without basis in fact.
Verily, with such eloquent manifestations of his good intentions towards the other heirs of his wife, We find it very hard to believe that
Hodges did ask the court and that the latter agreed that he be declared her sole heir and that her whole estate be adjudicated to
him without so much as just annotating the contingent interest of her brothers and sisters in what would remain thereof upon his
demise. On the contrary, it seems to us more factual and fairer to assume that Hodges was well aware of his position as executor of the
will of his wife and, as such, had in mind the following admonition made by the Court in Pamittan vs. Lasam, et al., 60 Phil., 908, at pp.
913-914:
Upon the death of Bernarda in September, 1908, said lands continued to be conjugal property in the hands of the defendant Lasam. It
is provided in article 1418 of the Civil Code that upon the dissolution of the conjugal partnership, an inventory shall immediately be
made and this court in construing this provision in connection with section 685 of the Code of Civil Procedure (prior to its amendment
by Act No. 3176 of November 24, 1924) has repeatedly held that in the event of the death of the wife, the law imposes upon the
husband the duty of liquidating the affairs of the partnership without delay (desde luego) (Alfonso vs. Natividad, 6 Phil., 240; Prado vs.
Lagera, 7 Phil., 395; De la Rama vs. De la Rama, 7 Phil., 745; Enriquez vs. Victoria, 10 Phil., 10; Amancio vs. Pardo, 13 Phil., 297; Rojas vs.
Singson Tongson, 17 Phil., 476; Sochayseng vs. Trujillo, 31 Phil., 153; Molera vs. Molera, 40 Phil., 566; Nable Jose vs. Nable Jose, 41 Phil.,
713.)
In the last mentioned case this court quoted with approval the case of Leatherwood vs. Arnold (66 Texas, 414, 416, 417), in which that
court discussed the powers of the surviving spouse in the administration of the community property. Attention was called to the fact
that the surviving husband, in the management of the conjugal property after the death of the wife, was a trustee of unique character
who is liable for any fraud committed by him with relation to the property while he is charged with its administration. In the liquidation
of the conjugal partnership, he had wide powers (as the law stood prior to Act No. 3176) and the high degree of trust reposed in him
stands out more clearly in view of the fact that he was the owner of a half interest in his own right of the conjugal estate which he was
charged to administer. He could therefore no more acquire a title by prescription against those for whom he was administering the
conjugal estate than could a guardian against his ward or a judicial administrator against the heirs of estate. Section 38 of Chapter III
of the Code of Civil Procedure, with relation to prescription, provides that "this chapter shall not apply ... in the case of a continuing
and subsisting trust." The surviving husband in the administration and liquidation of the conjugal estate occupies the position of a
trustee of the highest order and is not permitted by the law to hold that estate or any portion thereof adversely to those for whose
benefit the law imposes upon him the duty of administration and liquidation. No liquidation was ever made by Lasam — hence, the
conjugal property which came into his possession on the death of his wife in September, 1908, still remains conjugal property, a
continuing and subsisting trust. He should have made a liquidation immediately (desde luego). He cannot now be permitted to take
advantage of his own wrong. One of the conditions of title by prescription (section 41, Code of Civil Procedure) is possession "under a
claim of title exclusive of any other right". For a trustee to make such a claim would be a manifest fraud.
And knowing thus his responsibilities in the premises, We are not convinced that Hodges arrogated everything unto himself leaving
nothing at all to be inherited by his wife's brothers and sisters.
PCIB insists, however, that to read the orders of May 27 and December 14, 1957, not as adjudicatory, but merely as approving past and
authorizing future dispositions made by Hodges in a wholesale and general manner, would necessarily render the said orders void for
being violative of the provisions of Rule 89 governing the manner in which such dispositions may be made and how the authority
therefor and approval thereof by the probate court may be secured. If We sustained such a view, the result would only be that the
said orders should be declared ineffective either way they are understood, considering We have already seen it is legally impossible to
consider them as adjudicatory. As a matter of fact, however, what surges immediately to the surface, relative to PCIB's observations
based on Rule 89, is that from such point of view, the supposed irregularity would involve no more than some non-jurisdictional
technicalities of procedure, which have for their evident fundamental purpose the protection of parties interested in the estate, such
as the heirs, its creditors, particularly the government on account of the taxes due it; and since it is apparent here that none of such
parties are objecting to said orders or would be prejudiced by the unobservance by the trial court of the procedure pointed out by
PCIB, We find no legal inconvenience in nor impediment to Our giving sanction to the blanket approval and authority contained in
said orders. This solution is definitely preferable in law and in equity, for to view said orders in the sense suggested by PCIB would result in
the deprivation of substantive rights to the brothers and sisters of Mrs. Hodges, whereas reading them the other way will not cause any
prejudice to anyone, and, withal, will give peace of mind and stability of rights to the innocent parties who relied on them in good
faith, in the light of the peculiar pertinent provisions of the will of said decedent.
Now, the inventory submitted by Hodges on May 12, 1958 referred to the estate of his wife as consisting of "One-half of all the items
designated in the balance sheet, copy of which is hereto attached and marked as "Annex A"." Although, regrettably, no copy of said
Annex A appears in the records before Us, We take judicial notice, on the basis of the undisputed facts in these cases, that the same
consists of considerable real and other personal kinds of properties. And since, according to her will, her husband was to be the sole
owner thereof during his lifetime, with full power and authority to dispose of any of them, provided that should there be any remainder
upon his death, such remainder would go to her brothers and sisters, and furthermore, there is no pretension, much less any proof that
Hodges had in fact disposed of all of them, and, on the contrary, the indications are rather to the effect that he had kept them more
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or less intact, it cannot truthfully be said that, upon the death of Hodges, there was no more estate of Mrs. Hodges to speak of. It is Our
conclusion, therefore, that properties do exist which constitute such estate, hence Special Proceedings 1307 should not yet be closed.
Neither is there basis for holding that respondent Magno has ceased to be the Administratrix in said proceeding. There is no showing
that she has ever been legally removed as such, the attempt to replace her with Mr. Benito Lopez without authority from the Court
having been expressly held ineffective by Our resolution of September 8, 1972. Parenthetically, on this last point, PCIB itself is very
emphatic in stressing that it is not questioning said respondent's status as such administratrix. Indeed, it is not clear that PCIB has any
standing to raise any objection thereto, considering it is a complete stranger insofar as the estate of Mrs. Hodges is concerned.
It is the contention of PCIB, however, that as things actually stood at the time of Hodges' death, their conjugal partnership had not yet
been liquidated and, inasmuch as the properties composing the same were thus commingled pro indiviso and, consequently, the
properties pertaining to the estate of each of the spouses are not yet identifiable, it is PCIB alone, as administrator of the estate of
Hodges, who should administer everything, and all that respondent Magno can do for the time being is to wait until the properties
constituting the remaining estate of Mrs. Hodges have been duly segregated and delivered to her for her own administration.
Seemingly, PCIB would liken the Testate Estate of Linnie Jane Hodges to a party having a claim of ownership to some properties
included in the inventory of an administrator of the estate of a decedent, (here that of Hodges) and who normally has no right to take
part in the proceedings pending the establishment of his right or title; for which as a rule it is required that an ordinary action should be
filed, since the probate court is without jurisdiction to pass with finality on questions of title between the estate of the deceased, on the
one hand, and a third party or even an heir claiming adversely against the estate, on the other.
We do not find such contention sufficiently persuasive. As We see it, the situation obtaining herein cannot be compared with the claim
of a third party the basis of which is alien to the pending probate proceedings. In the present cases what gave rise to the claim of PCIB
of exclusive ownership by the estate of Hodges over all the properties of the Hodges spouses, including the share of Mrs. Hodges in the
community properties, were the orders of the trial court issued in the course of the very settlement proceedings themselves, more
specifically, the orders of May 27 and December 14, 1957 so often mentioned above. In other words, the root of the issue of title
between the parties is something that the court itself has done in the exercise of its probate jurisdiction. And since in the ultimate
analysis, the question of whether or not all the properties herein involved pertain exclusively to the estate of Hodges depends on the
legal meaning and effect of said orders, the claim that respondent court has no jurisdiction to take cognizance of and decide the said
issue is incorrect. If it was within the competence of the court to issue the root orders, why should it not be within its authority to declare
their true significance and intent, to the end that the parties may know whether or not the estate of Mrs. Hodges had already been
adjudicated by the court, upon the initiative of Hodges, in his favor, to the exclusion of the other heirs of his wife instituted in her will?
At this point, it bears emphasis again that the main cause of all the present problems confronting the courts and the parties in these
cases was the failure of Hodges to secure, as executor of his wife's estate, from May, 1957 up to the time of his death in December,
1962, a period of more than five years, the final adjudication of her estate and the closure of the proceedings. The record is bare of
any showing that he ever exerted any effort towards the early settlement of said estate. While, on the one hand, there are enough
indications, as already discuss that he had intentions of leaving intact her share of the conjugal properties so that it may pass wholly to
his co-heirs upon his death, pursuant to her will, on the other hand, by not terminating the proceedings, his interests in his own half of
the conjugal properties remained commingled pro-indiviso with those of his co-heirs in the other half. Obviously, such a situation could
not be conducive to ready ascertainment of the portion of the inheritance that should appertain to his co-heirs upon his death. Having
these considerations in mind, it would be giving a premium for such procrastination and rather unfair to his co-heirs, if the administrator
of his estate were to be given exclusive administration of all the properties in question, which would necessarily include the function of
promptly liquidating the conjugal partnership, thereby identifying and segregating without unnecessary loss of time which properties
should be considered as constituting the estate of Mrs. Hodges, the remainder of which her brothers and sisters are supposed to inherit
equally among themselves.
To be sure, an administrator is not supposed to represent the interests of any particular party and his acts are deemed to be objectively
for the protection of the rights of everybody concerned with the estate of the decedent, and from this point of view, it maybe said that
even if PCIB were to act alone, there should be no fear of undue disadvantage to anyone. On the other hand, however, it is evidently
implicit in section 6 of Rule 78 fixing the priority among those to whom letters of administration should be granted that the criterion in
the selection of the administrator is not his impartiality alone but, more importantly, the extent of his interest in the estate, so much so
that the one assumed to have greater interest is preferred to another who has less. Taking both of these considerations into account,
inasmuch as, according to Hodges' own inventory submitted by him as Executor of the estate of his wife, practically all their properties
were conjugal which means that the spouses have equal shares therein, it is but logical that both estates should be administered jointly
by representatives of both, pending their segregation from each other. Particularly is such an arrangement warranted because the
actuations so far of PCIB evince a determined, albeit groundless, intent to exclude the other heirs of Mrs. Hodges from their inheritance.
Besides, to allow PCIB, the administrator of his estate, to perform now what Hodges was duty bound to do as executor is to violate the
spirit, if not the letter, of Section 2 of Rule 78 which expressly provides that "The executor of an executor shall not, as such, administer the
estate of the first testator." It goes without saying that this provision refers also to the administrator of an executor like PCIB here.
We are not unmindful of the fact that under Section 2 of Rule 73, "When the marriage is dissolved by the death of the husband or wife,
the community property shall be inventoried, administered, and liquidated, and the debts thereof paid, in the testate or intestate
proceedings of the deceased spouse. If both spouses have died, the conjugal partnership shall be liquidated in the testate or intestate
proceedings of either." Indeed, it is true that the last sentence of this provision allows or permits the conjugal partnership of spouses who
are both deceased to be settled or liquidated in the testate or intestate proceedings of either, but precisely because said sentence
allows or permits that the liquidation be made in either proceeding, it is a matter of sound judicial discretion in which one it should be
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made. After all, the former rule referring to the administrator of the husband's estate in respect to such liquidation was done away with
by Act 3176, the pertinent provisions of which are now embodied in the rule just cited.
Thus, it can be seen that at the time of the death of Hodges, there was already the pending judicial settlement proceeding of the
estate of Mrs. Hodges, and, more importantly, that the former was the executor of the latter's will who had, as such, failed for more
than five years to see to it that the same was terminated earliest, which was not difficult to do, since from ought that appears in the
record, there were no serious obstacles on the way, the estate not being indebted and there being no immediate heirs other than
Hodges himself. Such dilatory or indifferent attitude could only spell possible prejudice of his co-heirs, whose rights to inheritance
depend entirely on the existence of any remainder of Mrs. Hodges' share in the community properties, and who are now faced with
the pose of PCIB that there is no such remainder. Had Hodges secured as early as possible the settlement of his wife's estate, this
problem would not arisen. All things considered, We are fully convinced that the interests of justice will be better served by not
permitting or allowing PCIB or any administrator of the estate of Hodges exclusive administration of all the properties in question. We
are of the considered opinion and so hold that what would be just and proper is for both administrators of the two estates to act
conjointly until after said estates have been segregated from each other.
At this juncture, it may be stated that we are not overlooking the fact that it is PCIB's contention that, viewed as a substitution, the
testamentary disposition in favor of Mrs. Hodges' brothers and sisters may not be given effect. To a certain extent, this contention is
correct. Indeed, legally speaking, Mrs. Hodges' will provides neither for a simple or vulgar substitution under Article 859 of the Civil Code
nor for a fideicommissary substitution under Article 863 thereof. There is no vulgar substitution therein because there is no provision for
either (1) predecease of the testator by the designated heir or (2) refusal or (3) incapacity of the latter to accept the inheritance, as
required by Article 859; and neither is there a fideicommissary substitution therein because no obligation is imposed thereby upon
Hodges to preserve the estate or any part thereof for anyone else. But from these premises, it is not correct to jump to the conclusion,
as PCIB does, that the testamentary dispositions in question are therefore inoperative and invalid.
The error in PCIB's position lies simply in the fact that it views the said disposition exclusively in the light of substitutions covered by the
Civil Code section on that subject, (Section 3, Chapter 2, Title IV, Book III) when it is obvious that substitution occurs only when another
heir is appointed in a will "so that he may enter into inheritance in default of the heir originally instituted," (Article 857, id.) and, in the
present case, no such possible default is contemplated. The brothers and sisters of Mrs. Hodges are not substitutes for Hodges because,
under her will, they are not to inherit what Hodges cannot, would not or may not inherit, but what he would not dispose of from his
inheritance; rather, therefore, they are also heirs instituted simultaneously with Hodges, subject, however, to certain conditions, partially
resolutory insofar as Hodges was concerned and correspondingly suspensive with reference to his brothers and sisters-in-law. It is
partially resolutory, since it bequeaths unto Hodges the whole of her estate to be owned and enjoyed by him as universal and sole heir
with absolute dominion over them6 only during his lifetime, which means that while he could completely and absolutely dispose of any
portion thereof inter vivos to anyone other than himself, he was not free to do so mortis causa, and all his rights to what might remain
upon his death would cease entirely upon the occurrence of that contingency, inasmuch as the right of his brothers and sisters-in-law
to the inheritance, although vested already upon the death of Mrs. Hodges, would automatically become operative upon the
occurrence of the death of Hodges in the event of actual existence of any remainder of her estate then.
Contrary to the view of respondent Magno, however, it was not the usufruct alone of her estate, as contemplated in Article 869 of the
Civil Code, that she bequeathed to Hodges during his lifetime, but the full ownership thereof, although the same was to last also during
his lifetime only, even as there was no restriction whatsoever against his disposing or conveying the whole or any portion thereof to
anybody other than himself. The Court sees no legal impediment to this kind of institution, in this jurisdiction or under Philippine law,
except that it cannot apply to the legitime of Hodges as the surviving spouse, consisting of one-half of the estate, considering that Mrs.
Hodges had no surviving ascendants nor descendants. (Arts. 872, 900, and 904, New Civil Code.)
But relative precisely to the question of how much of Mrs. Hodges' share of the conjugal partnership properties may be considered as
her estate, the parties are in disagreement as to how Article 16 of the Civil Code 7 should be applied. On the one hand, petitioner
claims that inasmuch as Mrs. Hodges was a resident of the Philippines at the time of her death, under said Article 16, construed in
relation to the pertinent laws of Texas and the principle of renvoi, what should be applied here should be the rules of succession under
the Civil Code of the Philippines, and, therefore, her estate could consist of no more than one-fourth of the said conjugal properties,
the other fourth being, as already explained, the legitime of her husband (Art. 900, Civil Code) which she could not have disposed of
nor burdened with any condition (Art. 872, Civil Code). On the other hand, respondent Magno denies that Mrs. Hodges died a resident
of the Philippines, since allegedly she never changed nor intended to change her original residence of birth in Texas, United States of
America, and contends that, anyway, regardless of the question of her residence, she being indisputably a citizen of Texas, under said
Article 16 of the Civil Code, the distribution of her estate is subject to the laws of said State which, according to her, do not provide for
any legitime, hence, the brothers and sisters of Mrs. Hodges are entitled to the remainder of the whole of her share of the conjugal
partnership properties consisting of one-half thereof. Respondent Magno further maintains that, in any event, Hodges had renounced
his rights under the will in favor of his co-heirs, as allegedly proven by the documents touching on the point already mentioned earlier,
the genuineness and legal significance of which petitioner seemingly questions. Besides, the parties are disagreed as to what the
pertinent laws of Texas provide. In the interest of settling the estates herein involved soonest, it would be best, indeed, if these
conflicting claims of the parties were determined in these proceedings. The Court regrets, however, that it cannot do so, for the simple
reason that neither the evidence submitted by the parties in the court below nor their discussion, in their respective briefs and
memoranda before Us, of their respective contentions on the pertinent legal issues, of grave importance as they are, appear to Us to
be adequate enough to enable Us to render an intelligent comprehensive and just resolution. For one thing, there is no clear and
reliable proof of what in fact the possibly applicable laws of Texas are. 7* Then also, the genuineness of documents relied upon by
respondent Magno is disputed. And there are a number of still other conceivable related issues which the parties may wish to raise but
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which it is not proper to mention here. In Justice, therefore, to all the parties concerned, these and all other relevant matters should first
be threshed out fully in the trial court in the proceedings hereafter to be held therein for the purpose of ascertaining and adjudicating
and/or distributing the estate of Mrs. Hodges to her heirs in accordance with her duly probated will.
To be more explicit, all that We can and do decide in connection with the petition for certiorari and prohibition are: (1) that regardless
of which corresponding laws are applied, whether of the Philippines or of Texas, and taking for granted either of the respective
contentions of the parties as to provisions of the latter, 8 and regardless also of whether or not it can be proven by competent evidence
that Hodges renounced his inheritance in any degree, it is easily and definitely discernible from the inventory submitted by Hodges
himself, as Executor of his wife's estate, that there are properties which should constitute the estate of Mrs. Hodges and ought to be
disposed of or distributed among her heirs pursuant to her will in said Special Proceedings 1307; (2) that, more specifically, inasmuch as
the question of what are the pertinent laws of Texas applicable to the situation herein is basically one of fact, and, considering that the
sole difference in the positions of the parties as to the effect of said laws has reference to the supposed legitime of Hodges — it being
the stand of PCIB that Hodges had such a legitime whereas Magno claims the negative - it is now beyond controversy for all future
purposes of these proceedings that whatever be the provisions actually of the laws of Texas applicable hereto, the estate of Mrs.
Hodges is at least, one-fourth of the conjugal estate of the spouses; the existence and effects of foreign laws being questions of fact,
and it being the position now of PCIB that the estate of Mrs. Hodges, pursuant to the laws of Texas, should only be one-fourth of the
conjugal estate, such contention constitutes an admission of fact, and consequently, it would be in estoppel in any further
proceedings in these cases to claim that said estate could be less, irrespective of what might be proven later to be actually the
provisions of the applicable laws of Texas; (3) that Special Proceedings 1307 for the settlement of the testate estate of Mrs. Hodges
cannot be closed at this stage and should proceed to its logical conclusion, there having been no proper and legal adjudication or
distribution yet of the estate therein involved; and (4) that respondent Magno remains and continues to be the Administratrix therein.
Hence, nothing in the foregoing opinion is intended to resolve the issues which, as already stated, are not properly before the Court
now, namely, (1) whether or not Hodges had in fact and in law waived or renounced his inheritance from Mrs. Hodges, in whole or in
part, and (2) assuming there had been no such waiver, whether or not, by the application of Article 16 of the Civil Code, and in the
light of what might be the applicable laws of Texas on the matter, the estate of Mrs. Hodges is more than the one-fourth declared
above. As a matter of fact, even our finding above about the existence of properties constituting the estate of Mrs. Hodges rests
largely on a general appraisal of the size and extent of the conjugal partnership gathered from reference made thereto by both
parties in their briefs as well as in their pleadings included in the records on appeal, and it should accordingly yield, as to which exactly
those properties are, to the more concrete and specific evidence which the parties are supposed to present in support of their
respective positions in regard to the foregoing main legal and factual issues. In the interest of justice, the parties should be allowed to
present such further evidence in relation to all these issues in a joint hearing of the two probate proceedings herein involved. After all,
the court a quo has not yet passed squarely on these issues, and it is best for all concerned that it should do so in the first instance.
Relative to Our holding above that the estate of Mrs. Hodges cannot be less than the remainder of one-fourth of the conjugal
partnership properties, it may be mentioned here that during the deliberations, the point was raised as to whether or not said holding
might be inconsistent with Our other ruling here also that, since there is no reliable evidence as to what are the applicable laws of
Texas, U.S.A. "with respect to the order of succession and to the amount of successional rights" that may be willed by a testator which,
under Article 16 of the Civil Code, are controlling in the instant cases, in view of the undisputed Texan nationality of the deceased Mrs.
Hodges, these cases should be returned to the court a quo, so that the parties may prove what said law provides, it is premature for Us
to make any specific ruling now on either the validity of the testamentary dispositions herein involved or the amount of inheritance to
which the brothers and sisters of Mrs. Hodges are entitled. After nature reflection, We are of the considered view that, at this stage and
in the state of the records before Us, the feared inconsistency is more apparent than real. Withal, it no longer lies in the lips of petitioner
PCIB to make any claim that under the laws of Texas, the estate of Mrs. Hodges could in any event be less than that We have fixed
above.
It should be borne in mind that as above-indicated, the question of what are the laws of Texas governing the matters herein issue is, in
the first instance, one of fact, not of law. Elementary is the rule that foreign laws may not be taken judicial notice of and have to be
proven like any other fact in dispute between the parties in any proceeding, with the rare exception in instances when the said laws
are already within the actual knowledge of the court, such as when they are well and generally known or they have been actually
ruled upon in other cases before it and none of the parties concerned do not claim otherwise. (5 Moran, Comments on the Rules of
Court, p. 41, 1970 ed.) In Fluemer vs. Hix, 54 Phil. 610, it was held:
It is the theory of the petitioner that the alleged will was executed in Elkins West Virginia, on November 3, 1925, by Hix who had his
residence in that jurisdiction, and that the laws of West Virginia govern. To this end, there was submitted a copy of section 3868 of Acts
1882, c. 84 as found in West Virginia Code, Annotated, by Hogg Charles E., vol. 2, 1914, p. 1960, and as certified to by the Director of
the National Library. But this was far from a compliance with the law. The laws of a foreign jurisdiction do not prove themselves in our
courts. The courts of the Philippine Islands are not authorized to take judicial notice of the laws of the various States of the American
Union. Such laws must be proved as facts. (In re Estate of Johnson [1918], 39 Phil., 156.) Here the requirements of the law were not met.
There was no showing that the book from which an extract was taken was printed or published under the authority of the State of West
Virginia, as provided in section 300 of the Code of Civil Procedure. Nor was the extract from the law attested by the certificate of the
officer having charge of the original, under the seal of the State of West Virginia, as provided in section 301 of the Code of Civil
Procedure. No evidence was introduced to show that the extract from the laws of West Virginia was in force at the time the alleged will
was executed."
No evidence of the nature thus suggested by the Court may be found in the records of the cases at bar. Quite to the contrary, the
parties herein have presented opposing versions in their respective pleadings and memoranda regarding the matter. And even if We
146
took into account that in Aznar vs. Garcia, the Court did make reference to certain provisions regarding succession in the laws of
Texas, the disparity in the material dates of that case and the present ones would not permit Us to indulge in the hazardous conjecture
that said provisions have not been amended or changed in the meantime.
On the other hand, in In re Estate of Johnson, 39 Phil. 156, We held:
Upon the other point — as to whether the will was executed in conformity with the statutes of the State of Illinois — we note that it does
not affirmatively appear from the transcription of the testimony adduced in the trial court that any witness was examined with
reference to the law of Illinois on the subject of the execution of will. The trial judge no doubt was satisfied that the will was properly
executed by examining section 1874 of the Revised Statutes of Illinois, as exhibited in volume 3 of Starr & Curtis's Annotated Illinois
Statutes, 2nd ed., p. 426; and he may have assumed that he could take judicial notice of the laws of Illinois under section 275 of the
Code of Civil Procedure. If so, he was in our opinion mistaken. That section authorizes the courts here to take judicial notice, among
other things, of the acts of the legislative department of the United States. These words clearly have reference to Acts of the Congress
of the United States; and we would hesitate to hold that our courts can, under this provision, take judicial notice of the multifarious laws
of the various American States. Nor do we think that any such authority can be derived from the broader language, used in the same
section, where it is said that our courts may take judicial notice of matters of public knowledge "similar" to those therein enumerated.
The proper rule we think is to require proof of the statutes of the States of the American Union whenever their provisions are
determinative of the issues in any action litigated in the Philippine courts.
Nevertheless, even supposing that the trial court may have erred in taking judicial notice of the law of Illinois on the point in question,
such error is not now available to the petitioner, first, because the petition does not state any fact from which it would appear that the
law of Illinois is different from what the court found, and, secondly, because the assignment of error and argument for the appellant in
this court raises no question based on such supposed error. Though the trial court may have acted upon pure conjecture as to the law
prevailing in the State of Illinois, its judgment could not be set aside, even upon application made within six months under section 113
of the Code of Civil Procedure, unless it should be made to appear affirmatively that the conjecture was wrong. The petitioner, it is
true, states in general terms that the will in question is invalid and inadequate to pass real and personal property in the State of Illinois,
but this is merely a conclusion of law. The affidavits by which the petition is accompanied contain no reference to the subject, and we
are cited to no authority in the appellant's brief which might tend to raise a doubt as to the correctness of the conclusion of the trial
court. It is very clear, therefore, that this point cannot be urged as of serious moment.
It is implicit in the above ruling that when, with respect to certain aspects of the foreign laws concerned, the parties in a given case do
not have any controversy or are more or less in agreement, the Court may take it for granted for the purposes of the particular case
before it that the said laws are as such virtual agreement indicates, without the need of requiring the presentation of what otherwise
would be the competent evidence on the point. Thus, in the instant cases wherein it results from the respective contentions of both
parties that even if the pertinent laws of Texas were known and to be applied, the amount of the inheritance pertaining to the heirs of
Mrs. Hodges is as We have fixed above, the absence of evidence to the effect that, actually and in fact, under said laws, it could be
otherwise is of no longer of any consequence, unless the purpose is to show that it could be more. In other words, since PCIB, the
petitioner-appellant, concedes that upon application of Article 16 of the Civil Code and the pertinent laws of Texas, the amount of the
estate in controversy is just as We have determined it to be, and respondent-appellee is only claiming, on her part, that it could be
more, PCIB may not now or later pretend differently.
To be more concrete, on pages 20-21 of its petition herein, dated July 31, 1967, PCIB states categorically:
Inasmuch as Article 16 of the Civil Code provides that "intestate and testamentary successions both with respect to the order of
succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the
national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the
country wherein said property may be found", while the law of Texas (the Hodges spouses being nationals of U.S.A., State of Texas), in
its conflicts of law rules, provides that the domiciliary law (in this case Philippine law) governs the testamentary dispositions and
successional rights over movables or personal properties, while the law of the situs (in this case also Philippine law with respect to all
Hodges properties located in the Philippines), governs with respect to immovable properties, and applying therefore the 'renvoi
doctrine' as enunciated and applied by this Honorable Court in the case of In re Estate of Christensen (G.R. No. L-16749, Jan. 31, 1963),
there can be no question that Philippine law governs the testamentary dispositions contained in the Last Will and Testament of the
deceased Linnie Jane Hodges, as well as the successional rights to her estate, both with respect to movables, as well as to immovables
situated in the Philippines.
In its main brief dated February 26, 1968, PCIB asserts:
The law governing successional rights.
As recited above, there is no question that the deceased, Linnie Jane Hodges, was an American citizen. There is also no question that
she was a national of the State of Texas, U.S.A. Again, there is likewise no question that she had her domicile of choice in the City of
Iloilo, Philippines, as this has already been pronounced by the above-cited orders of the lower court, pronouncements which are by
now res adjudicata (par. [a], See. 49, Rule 39, Rules of Court; In re Estate of Johnson, 39 Phil. 156).
Article 16 of the Civil Code provides:

147
"Real property as well as personal property is subject to the law of the country where it is situated.
However, intestate and testamentary successions, both with respect to the order of succession and to the amount of successional
rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is
under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found."
Thus the aforecited provision of the Civil Code points towards the national law of the deceased, Linnie Jane Hodges, which is the law
of Texas, as governing succession "both with respect to the order of succession and to the amount of successional rights and to the
intrinsic validity of testamentary provisions ...". But the law of Texas, in its conflicts of law rules, provides that the domiciliary law governs
the testamentary dispositions and successional rights over movables or personal property, while the law of the situs governs with
respect to immovable property. Such that with respect to both movable property, as well as immovable property situated in the
Philippines, the law of Texas points to the law of the Philippines.
Applying, therefore, the so-called "renvoi doctrine", as enunciated and applied by this Honorable Court in the case of "In re
Christensen" (G.R. No. L-16749, Jan. 31, 1963), there can be no question that Philippine law governs the testamentary provisions in the
Last Will and Testament of the deceased Linnie Jane Hodges, as well as the successional rights to her estate, both with respect to
movables, as well as immovables situated in the Philippines.
The subject of successional rights.
Under Philippine law, as it is under the law of Texas, the conjugal or community property of the spouses, Charles Newton Hodges and
Linnie Jane Hodges, upon the death of the latter, is to be divided into two, one-half pertaining to each of the spouses, as his or her own
property. Thus, upon the death of Linnie Jane Hodges, one-half of the conjugal partnership property immediately pertained to Charles
Newton Hodges as his own share, and not by virtue of any successional rights. There can be no question about this.
Again, Philippine law, or more specifically, Article 900 of the Civil Code provides:
If the only survivor is the widow or widower, she or he shall be entitled to one-half of the hereditary estate of the deceased spouse, and
the testator may freely dispose of the other half.
If the marriage between the surviving spouse and the testator was solemnized in articulo mortis, and the testator died within three
months from the time of the marriage, the legitime of the surviving spouse as the sole heir shall be one-third of the hereditary estate,
except when they have been living as husband and wife for more than five years. In the latter case, the legitime of the surviving
spouse shall be that specified in the preceding paragraph.
This legitime of the surviving spouse cannot be burdened by a fideicommisary substitution (Art. 864, Civil code), nor by any charge,
condition, or substitution (Art, 872, Civil code). It is clear, therefore, that in addition to one-half of the conjugal partnership property as
his own conjugal share, Charles Newton Hodges was also immediately entitled to one-half of the half conjugal share of the deceased,
Linnie Jane Hodges, or one-fourth of the entire conjugal property, as his legitime.
One-fourth of the conjugal property therefore remains at issue.
In the summary of its arguments in its memorandum dated April 30, 1968, the following appears:
Briefly, the position advanced by the petitioner is:
a. That the Hodges spouses were domiciled legally in the Philippines (pp. 19-20, petition). This is now a matter of res adjudicata (p. 20,
petition).
b. That under Philippine law, Texas law, and the renvoi doctrine, Philippine law governs the successional rights over the properties left
by the deceased, Linnie Jane Hodges (pp. 20-21, petition).
c. That under Philippine as well as Texas law, one-half of the Hodges properties pertains to the deceased, Charles Newton Hodges (p.
21, petition). This is not questioned by the respondents.
d. That under Philippine law, the deceased, Charles Newton Hodges, automatically inherited one-half of the remaining one-half of the
Hodges properties as his legitime (p. 21, petition).
e. That the remaining 25% of the Hodges properties was inherited by the deceased, Charles Newton Hodges, under the will of his
deceased spouse (pp. 22-23, petition). Upon the death of Charles Newton Hodges, the substitution 'provision of the will of the
deceased, Linnie Jane Hodges, did not operate because the same is void (pp. 23-25, petition).
f. That the deceased, Charles Newton Hodges, asserted his sole ownership of the Hodges properties and the probate court sanctioned
such assertion (pp. 25-29, petition). He in fact assumed such ownership and such was the status of the properties as of the time of his
death (pp. 29-34, petition).
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Of similar tenor are the allegations of PCIB in some of its pleadings quoted in the earlier part of this option.
On her part, it is respondent-appellee Magno's posture that under the laws of Texas, there is no system of legitime, hence the estate of
Mrs. Hodges should be one-half of all the conjugal properties.
It is thus unquestionable that as far as PCIB is concerned, the application to these cases of Article 16 of the Civil Code in relation to the
corresponding laws of Texas would result in that the Philippine laws on succession should control. On that basis, as We have already
explained above, the estate of Mrs. Hodges is the remainder of one-fourth of the conjugal partnership properties, considering that We
have found that there is no legal impediment to the kind of disposition ordered by Mrs. Hodges in her will in favor of her brothers and
sisters and, further, that the contention of PCIB that the same constitutes an inoperative testamentary substitution is untenable. As will
be recalled, PCIB's position that there is no such estate of Mrs. Hodges is predicated exclusively on two propositions, namely: (1) that
the provision in question in Mrs. Hodges' testament violates the rules on substitution of heirs under the Civil Code and (2) that, in any
event, by the orders of the trial court of May 27, and December 14, 1957, the trial court had already finally and irrevocably
adjudicated to her husband the whole free portion of her estate to the exclusion of her brothers and sisters, both of which poses, We
have overruled. Nowhere in its pleadings, briefs and memoranda does PCIB maintain that the application of the laws of Texas would
result in the other heirs of Mrs. Hodges not inheriting anything under her will. And since PCIB's representations in regard to the laws of
Texas virtually constitute admissions of fact which the other parties and the Court are being made to rely and act upon, PCIB is "not
permitted to contradict them or subsequently take a position contradictory to or inconsistent with them." (5 Moran, id, p. 65, citing
Cunanan vs. Amparo, 80 Phil. 227; Sta. Ana vs. Maliwat, L-23023, Aug. 31, 1968, 24 SCRA 1018).
Accordingly, the only question that remains to be settled in the further proceedings hereby ordered to be held in the court below is
how much more than as fixed above is the estate of Mrs. Hodges, and this would depend on (1) whether or not the applicable laws of
Texas do provide in effect for more, such as, when there is no legitime provided therein, and (2) whether or not Hodges has validly
waived his whole inheritance from Mrs. Hodges.
In the course of the deliberations, it was brought out by some members of the Court that to avoid or, at least, minimize further
protracted legal controversies between the respective heirs of the Hodges spouses, it is imperative to elucidate on the possible
consequences of dispositions made by Hodges after the death of his wife from the mass of the unpartitioned estates without any
express indication in the pertinent documents as to whether his intention is to dispose of part of his inheritance from his wife or part of
his own share of the conjugal estate as well as of those made by PCIB after the death of Hodges. After a long discussion, the consensus
arrived at was as follows: (1) any such dispositions made gratuitously in favor of third parties, whether these be individuals, corporations
or foundations, shall be considered as intended to be of properties constituting part of Hodges' inheritance from his wife, it appearing
from the tenor of his motions of May 27 and December 11, 1957 that in asking for general authority to make sales or other disposals of
properties under the jurisdiction of the court, which include his own share of the conjugal estate, he was not invoking particularly his
right over his own share, but rather his right to dispose of any part of his inheritance pursuant to the will of his wife; (2) as regards sales,
exchanges or other remunerative transfers, the proceeds of such sales or the properties taken in by virtue of such exchanges, shall be
considered as merely the products of "physical changes" of the properties of her estate which the will expressly authorizes Hodges to
make, provided that whatever of said products should remain with the estate at the time of the death of Hodges should go to her
brothers and sisters; (3) the dispositions made by PCIB after the death of Hodges must naturally be deemed as covering only the
properties belonging to his estate considering that being only the administrator of the estate of Hodges, PCIB could not have disposed
of properties belonging to the estate of his wife. Neither could such dispositions be considered as involving conjugal properties, for the
simple reason that the conjugal partnership automatically ceased when Mrs. Hodges died, and by the peculiar provision of her will,
under discussion, the remainder of her share descended also automatically upon the death of Hodges to her brothers and sisters, thus
outside of the scope of PCIB's administration. Accordingly, these construction of the will of Mrs. Hodges should be adhered to by the
trial court in its final order of adjudication and distribution and/or partition of the two estates in question.
THE APPEALS
A cursory examination of the seventy-eight assignments of error in appellant PCIB's brief would readily reveal that all of them are
predicated mainly on the contention that inasmuch as Hodges had already adjudicated unto himself all the properties constituting his
wife's share of the conjugal partnership, allegedly with the sanction of the trial court per its order of December 14, 1957, there has
been, since said date, no longer any estate of Mrs. Hodges of which appellee Magno could be administratrix, hence the various
assailed orders sanctioning her actuations as such are not in accordance with law. Such being the case, with the foregoing resolution
holding such posture to be untenable in fact and in law and that it is in the best interest of justice that for the time being the two
estates should be administered conjointly by the respective administrators of the two estates, it should follow that said assignments of
error have lost their fundamental reasons for being. There are certain matters, however, relating peculiarly to the respective orders in
question, if commonly among some of them, which need further clarification. For instance, some of them authorized respondent
Magno to act alone or without concurrence of PCIB. And with respect to many of said orders, PCIB further claims that either the
matters involved were not properly within the probate jurisdiction of the trial court or that the procedure followed was not in
accordance with the rules. Hence, the necessity of dealing separately with the merits of each of the appeals.
Indeed, inasmuch as the said two estates have until now remained commingled pro-indiviso, due to the failure of Hodges and the
lower court to liquidate the conjugal partnership, to recognize appellee Magno as Administratrix of the Testate Estate of Mrs. Hodges
which is still unsegregated from that of Hodges is not to say, without any qualification, that she was therefore authorized to do and
perform all her acts complained of in these appeals, sanctioned though they might have been by the trial court. As a matter of fact, it
is such commingling pro-indiviso of the two estates that should deprive appellee of freedom to act independently from PCIB, as
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administrator of the estate of Hodges, just as, for the same reason, the latter should not have authority to act independently from her.
And considering that the lower court failed to adhere consistently to this basic point of view, by allowing the two administrators to act
independently of each other, in the various instances already noted in the narration of facts above, the Court has to look into the
attendant circumstances of each of the appealed orders to be able to determine whether any of them has to be set aside or they
may all be legally maintained notwithstanding the failure of the court a quo to observe the pertinent procedural technicalities, to the
end only that graver injury to the substantive rights of the parties concerned and unnecessary and undesirable proliferation of incidents
in the subject proceedings may be forestalled. In other words, We have to determine, whether or not, in the light of the unusual
circumstances extant in the record, there is need to be more pragmatic and to adopt a rather unorthodox approach, so as to cause
the least disturbance in rights already being exercised by numerous innocent third parties, even if to do so may not appear to be
strictly in accordance with the letter of the applicable purely adjective rules.
Incidentally, it may be mentioned, at this point, that it was principally on account of the confusion that might result later from PCIB's
continuing to administer all the community properties, notwithstanding the certainty of the existence of the separate estate of Mrs.
Hodges, and to enable both estates to function in the meantime with a relative degree of regularity, that the Court ordered in the
resolution of September 8, 1972 the modification of the injunction issued pursuant to the resolutions of August 8, October 4 and
December 6, 1967, by virtue of which respondent Magno was completely barred from any participation in the administration of the
properties herein involved. In the September 8 resolution, We ordered that, pending this decision, Special Proceedings 1307 and 1672
should proceed jointly and that the respective administrators therein "act conjointly — none of them to act singly and independently of
each other for any purpose." Upon mature deliberation, We felt that to allow PCIB to continue managing or administering all the said
properties to the exclusion of the administratrix of Mrs. Hodges' estate might place the heirs of Hodges at an unduly advantageous
position which could result in considerable, if not irreparable, damage or injury to the other parties concerned. It is indeed to be
regretted that apparently, up to this date, more than a year after said resolution, the same has not been given due regard, as may be
gleaned from the fact that recently, respondent Magno has filed in these proceedings a motion to declare PCIB in contempt for
alleged failure to abide therewith, notwithstanding that its repeated motions for reconsideration thereof have all been denied soon
after they were filed.9
Going back to the appeals, it is perhaps best to begin first with what appears to Our mind to be the simplest, and then proceed to the
more complicated ones in that order, without regard to the numerical sequence of the assignments of error in appellant's brief or to
the order of the discussion thereof by counsel.
Assignments of error numbers
LXXII, LXXVII and LXXVIII.
These assignments of error relate to (1) the order of the trial court of August 6, 1965 providing that "the deeds of sale (therein referred to
involving properties in the name of Hodges) should be signed jointly by the PCIB, as Administrator of Testate Estate of C.N. Hodges, and
Avelina A. Magno, as Administratrix of the Testate Estate of Linnie Jane Hodges, and to this effect, the PCIB should take the necessary
steps so that Administratrix Avelina A. Magno could sign the deeds of sale," (p. 248, Green Rec. on Appeal) (2) the order of October 27,
1965 denying the motion for reconsideration of the foregoing order, (pp. 276-277, id.) (3) the other order also dated October 27, 1965
enjoining inter alia, that "(a) all cash collections should be deposited in the joint account of the estate of Linnie Jane Hodges and
estate of C. N. Hodges, (b) that whatever cash collections (that) had been deposited in the account of either of the estates should be
withdrawn and since then (sic) deposited in the joint account of the estate of Linnie Jane Hodges and the estate of C. N. Hodges; ...
(d) (that) Administratrix Magno — allow the PCIB to inspect whatever records, documents and papers she may have in her possession,
in the same manner that Administrator PCIB is also directed to allow Administratrix Magno to inspect whatever records, documents and
papers it may have in its possession" and "(e) that the accountant of the estate of Linnie Jane Hodges shall have access to all records
of the transactions of both estates for the protection of the estate of Linnie Jane Hodges; and in like manner, the accountant or any
authorized representative of the estate of C. N. Hodges shall have access to the records of transactions of the Linnie Jane Hodges
estate for the protection of the estate of C. N. Hodges", (pp. 292-295, id.) and (4) the order of February 15, 1966, denying, among
others, the motion for reconsideration of the order of October 27, 1965 last referred to. (pp. 455-456, id.)
As may be readily seen, the thrust of all these four impugned orders is in line with the Court's above-mentioned resolution of September
8, 1972 modifying the injunction previously issued on August 8, 1967, and, more importantly, with what We have said the trial court
should have always done pending the liquidation of the conjugal partnership of the Hodges spouses. In fact, as already stated, that is
the arrangement We are ordering, by this decision, to be followed. Stated differently, since the questioned orders provide for joint
action by the two administrators, and that is precisely what We are holding out to have been done and should be done until the two
estates are separated from each other, the said orders must be affirmed. Accordingly the foregoing assignments of error must be, as
they are hereby overruled.
Assignments of error Numbers LXVIII
to LXXI and LXXIII to LXXVI.
The orders complained of under these assignments of error commonly deal with expenditures made by appellee Magno, as
Administratrix of the Estate of Mrs. Hodges, in connection with her administration thereof, albeit additionally, assignments of error
Numbers LXIX to LXXI put into question the payment of attorneys fees provided for in the contract for the purpose, as constituting, in
effect, premature advances to the heirs of Mrs. Hodges.
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More specifically, assignment Number LXXIII refers to reimbursement of overtime pay paid to six employees of the court and three other
persons for services in copying the court records to enable the lawyers of the administration to be fully informed of all the incidents in
the proceedings. The reimbursement was approved as proper legal expenses of administration per the order of December 19, 1964,
(pp. 221-222, id.) and repeated motions for reconsideration thereof were denied by the orders of January 9, 1965, (pp. 231-232, id.)
October 27, 1965, (p. 277, id.) and February 15, 1966. (pp. 455-456, id.) On the other hand, Assignments Numbers LXVIII to LXXI, LXXIV
and LXXV question the trial court's order of November 3, 1965 approving the agreement of June 6, 1964 between Administratrix Magno
and James L. Sullivan, attorney-in-fact of the heirs of Mrs. Hodges, as Parties of the First Part, and Attorneys Raul Manglapus and Rizal R.
Quimpo, as Parties of the Second Part, regarding attorneys fees for said counsel who had agreed "to prosecute and defend their
interests (of the Parties of the First Part) in certain cases now pending litigation in the Court of First Instance of Iloilo —, more specifically
in Special Proceedings 1307 and 1672 —" (pp. 126-129, id.) and directing Administratrix Magno "to issue and sign whatever check or
checks maybe needed to implement the approval of the agreement annexed to the motion" as well as the "administrator of the
estate of C. N. Hodges — to countersign the said check or checks as the case maybe." (pp. 313-320, id.), reconsideration of which
order of approval was denied in the order of February 16, 1966, (p. 456, id.) Assignment Number LXXVI imputes error to the lower court's
order of October 27, 1965, already referred to above, insofar as it orders that "PCIB should counter sign the check in the amount of
P250 in favor of Administratrix Avelina A. Magno as her compensation as administratrix of Linnie Jane Hodges estate chargeable to the
Testate Estate of Linnie Jane Hodges only." (p. 294, id.)
Main contention again of appellant PCIB in regard to these eight assigned errors is that there is no such estate as the estate of Mrs.
Hodges for which the questioned expenditures were made, hence what were authorized were in effect expenditures from the estate
of Hodges. As We have already demonstrated in Our resolution above of the petition for certiorari and prohibition, this posture is
incorrect. Indeed, in whichever way the remaining issues between the parties in these cases are ultimately resolved, 10 the final result
will surely be that there are properties constituting the estate of Mrs. Hodges of which Magno is the current administratrix. It follows,
therefore, that said appellee had the right, as such administratrix, to hire the persons whom she paid overtime pay and to be paid for
her own services as administratrix. That she has not yet collected and is not collecting amounts as substantial as that paid to or due
appellant PCIB is to her credit.
Of course, she is also entitled to the services of counsel and to that end had the authority to enter into contracts for attorney's fees in
the manner she had done in the agreement of June 6, 1964. And as regards to the reasonableness of the amount therein stipulated,
We see no reason to disturb the discretion exercised by the probate court in determining the same. We have gone over the
agreement, and considering the obvious size of the estate in question and the nature of the issues between the parties as well as the
professional standing of counsel, We cannot say that the fees agreed upon require the exercise by the Court of its inherent power to
reduce it.
PCIB insists, however, that said agreement of June 6, 1964 is not for legal services to the estate but to the heirs of Mrs. Hodges, or, at
most, to both of them, and such being the case, any payment under it, insofar as counsels' services would redound to the benefit of
the heirs, would be in the nature of advances to such heirs and a premature distribution of the estate. Again, We hold that such
posture cannot prevail.
Upon the premise We have found plausible that there is an existing estate of Mrs. Hodges, it results that juridically and factually the
interests involved in her estate are distinct and different from those involved in her estate of Hodges and vice versa. Insofar as the
matters related exclusively to the estate of Mrs. Hodges, PCIB, as administrator of the estate of Hodges, is a complete stranger and it is
without personality to question the actuations of the administratrix thereof regarding matters not affecting the estate of Hodges.
Actually, considering the obviously considerable size of the estate of Mrs. Hodges, We see no possible cause for apprehension that
when the two estates are segregated from each other, the amount of attorney's fees stipulated in the agreement in question will
prejudice any portion that would correspond to Hodges' estate.
And as regards the other heirs of Mrs. Hodges who ought to be the ones who should have a say on the attorney's fees and other
expenses of administration assailed by PCIB, suffice it to say that they appear to have been duly represented in the agreement itself by
their attorney-in-fact, James L. Sullivan and have not otherwise interposed any objection to any of the expenses incurred by Magno
questioned by PCIB in these appeals. As a matter of fact, as ordered by the trial court, all the expenses in question, including the
attorney's fees, may be paid without awaiting the determination and segregation of the estate of Mrs. Hodges.
Withal, the weightiest consideration in connection with the point under discussion is that at this stage of the controversy among the
parties herein, the vital issue refers to the existence or non-existence of the estate of Mrs. Hodges. In this respect, the interest of
respondent Magno, as the appointed administratrix of the said estate, is to maintain that it exists, which is naturally common and
identical with and inseparable from the interest of the brothers and sisters of Mrs. Hodges. Thus, it should not be wondered why both
Magno and these heirs have seemingly agreed to retain but one counsel. In fact, such an arrangement should be more convenient
and economical to both. The possibility of conflict of interest between Magno and the heirs of Mrs. Hodges would be, at this stage,
quite remote and, in any event, rather insubstantial. Besides, should any substantial conflict of interest between them arise in the future,
the same would be a matter that the probate court can very well take care of in the course of the independent proceedings in Case
No. 1307 after the corresponding segregation of the two subject estates. We cannot perceive any cogent reason why, at this stage,
the estate and the heirs of Mrs. Hodges cannot be represented by a common counsel.
Now, as to whether or not the portion of the fees in question that should correspond to the heirs constitutes premature partial
distribution of the estate of Mrs. Hodges is also a matter in which neither PCIB nor the heirs of Hodges have any interest. In any event,
since, as far as the records show, the estate has no creditors and the corresponding estate and inheritance taxes, except those of the
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brothers and sisters of Mrs. Hodges, have already been paid, 11 no prejudice can caused to anyone by the comparatively small
amount of attorney's fees in question. And in this connection, it may be added that, although strictly speaking, the attorney's fees of
the counsel of an administrator is in the first instance his personal responsibility, reimbursable later on by the estate, in the final analysis,
when, as in the situation on hand, the attorney-in-fact of the heirs has given his conformity thereto, it would be idle effort to inquire
whether or not the sanction given to said fees by the probate court is proper.
For the foregoing reasons, Assignments of Error LXVIII to LXXI and LXXIII to LXXVI should be as they are hereby overruled.
Assignments of error I to IV,
XIII to XV, XXII to XXV, XXXV
to XXX VI, XLI to XLIII and L.
These assignments of error deal with the approval by the trial court of various deeds of sale of real properties registered in the name of
Hodges but executed by appellee Magno, as Administratrix of the Estate of Mrs. Hodges, purportedly in implementation of
corresponding supposed written "Contracts to Sell" previously executed by Hodges during the interim between May 23, 1957, when his
wife died, and December 25, 1962, the day he died. As stated on pp. 118-120 of appellant's main brief, "These are: the, contract to sell
between the deceased, Charles Newton Hodges, and the appellee, Pepito G. Iyulores executed on February 5, 1961; the contract to
sell between the deceased, Charles Newton Hodges, and the appellant Esperidion Partisala, executed on April 20, 1960; the contract
to sell between the deceased, Charles Newton Hodges, and the appellee, Winifredo C. Espada, executed on April 18, 1960; the
contract to sell between the deceased, Charles Newton Hodges, and the appellee, Rosario Alingasa, executed on August 25, 1958;
the contract to sell between the deceased, Charles Newton Hodges, and the appellee, Lorenzo Carles, executed on June 17, 1958;
the contract to sell between the deceased, Charles Newton Hodges, and the appellee, Salvador S. Guzman, executed on September
13, 1960; the contract to sell between the deceased, Charles Newton Hodges, and the appellee, Florenia Barrido, executed on
February 21, 1958; the contract to sell between the deceased, Charles Newton Hodges, and the appellee, Purificacion Coronado,
executed on August 14, 1961; the contract to sell between the deceased, Charles Newton Hodges, and the appellee, Graciano
Lucero, executed on November 27, 1961; the contract to sell between the deceased, Charles Newton Hodges, and the appellee,
Ariteo Thomas Jamir, executed on May 26, 1961; the contract to sell between the deceased, Charles Newton Hodges, and the
appellee, Melquiades Batisanan, executed on June 9, 1959; the contract to sell between the deceased, Charles Newton Hodges, and
the appellee, Belcezar Causing, executed on February 10, 1959 and the contract to sell between the deceased, Charles Newton
Hodges, and the appellee, Adelfa Premaylon, executed on October 31, 1959, re Title No. 13815."
Relative to these sales, it is the position of appellant PCIB that, inasmuch as pursuant to the will of Mrs. Hodges, her husband was to
have dominion over all her estate during his lifetime, it was as absolute owner of the properties respectively covered by said sales that
he executed the aforementioned contracts to sell, and consequently, upon his death, the implementation of said contracts may be
undertaken only by the administrator of his estate and not by the administratrix of the estate of Mrs. Hodges. Basically, the same theory
is invoked with particular reference to five other sales, in which the respective "contracts to sell" in favor of these appellees were
executed by Hodges before the death of his wife, namely, those in favor of appellee Santiago Pacaonsis, Alfredo Catedral, Jose
Pablico, Western Institute of Technology and Adelfa Premaylon.
Anent those deeds of sale based on promises or contracts to sell executed by Hodges after the death of his wife, those enumerated in
the quotation in the immediately preceding paragraph, it is quite obvious that PCIB's contention cannot be sustained. As already
explained earlier, 11* all proceeds of remunerative transfers or dispositions made by Hodges after the death of his wife should be
deemed as continuing to be parts of her estate and, therefore, subject to the terms of her will in favor of her brothers and sisters, in the
sense that should there be no showing that such proceeds, whether in cash or property have been subsequently conveyed or
assigned subsequently by Hodges to any third party by acts inter vivos with the result that they could not thereby belong to him
anymore at the time of his death, they automatically became part of the inheritance of said brothers and sisters. The deeds here in
question involve transactions which are exactly of this nature. Consequently, the payments made by the appellees should be
considered as payments to the estate of Mrs. Hodges which is to be distributed and partitioned among her heirs specified in the will.
The five deeds of sale predicated on contracts to sell executed Hodges during the lifetime of his wife, present a different situation. At
first blush, it would appear that as to them, PCIB's position has some degree of plausibility. Considering, however, that the adoption of
PCIB's theory would necessarily have tremendous repercussions and would bring about considerable disturbance of property rights
that have somehow accrued already in favor of innocent third parties, the five purchasers aforenamed, the Court is inclined to take a
pragmatic and practical view of the legal situation involving them by overlooking the possible technicalities in the way, the non-
observance of which would not, after all, detract materially from what should substantially correspond to each and all of the parties
concerned.
To start with, these contracts can hardly be ignored. Bona fide third parties are involved; as much as possible, they should not be made
to suffer any prejudice on account of judicial controversies not of their own making. What is more, the transactions they rely on were
submitted by them to the probate court for approval, and from already known and recorded actuations of said court then, they had
reason to believe that it had authority to act on their motions, since appellee Magno had, from time to time prior to their transactions
with her, been allowed to act in her capacity as administratrix of one of the subject estates either alone or conjointly with PCIB. All the
sales in question were executed by Magno in 1966 already, but before that, the court had previously authorized or otherwise
sanctioned expressly many of her act as administratrix involving expenditures from the estate made by her either conjointly with or
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independently from PCIB, as Administrator of the Estate of Hodges. Thus, it may be said that said buyers-appellees merely followed
precedents in previous orders of the court. Accordingly, unless the impugned orders approving those sales indubitably suffer from some
clearly fatal infirmity the Court would rather affirm them.
It is quite apparent from the record that the properties covered by said sales are equivalent only to a fraction of what should constitute
the estate of Mrs. Hodges, even if it is assumed that the same would finally be held to be only one-fourth of the conjugal properties of
the spouses as of the time of her death or, to be more exact, one-half of her estate as per the inventory submitted by Hodges as
executor, on May 12, 1958. In none of its numerous, varied and voluminous pleadings, motions and manifestations has PCIB claimed
any possibility otherwise. Such being the case, to avoid any conflict with the heirs of Hodges, the said properties covered by the
questioned deeds of sale executed by appellee Magno may be treated as among those corresponding to the estate of Mrs. Hodges,
which would have been actually under her control and administration had Hodges complied with his duty to liquidate the conjugal
partnership. Viewing the situation in that manner, the only ones who could stand to be prejudiced by the appealed orders referred to
in the assignment of errors under discussion and who could, therefore, have the requisite interest to question them would be only the
heirs of Mrs. Hodges, definitely not PCIB.
It is of no moment in what capacity Hodges made the "contracts to sell' after the death of his wife. Even if he had acted as executor of
the will of his wife, he did not have to submit those contracts to the court nor follow the provisions of the rules, (Sections 2, 4, 5, 6, 8 and
9 of Rule 89 quoted by appellant on pp. 125 to 127 of its brief) for the simple reason that by the very orders, much relied upon by
appellant for other purposes, of May 27, 1957 and December 14, 1957, Hodges was "allowed or authorized" by the trial court "to
continue the business in which he was engaged and to perform acts which he had been doing while the deceased was living", (Order
of May 27) which according to the motion on which the court acted was "of buying and selling personal and real properties", and "to
execute subsequent sales, conveyances, leases and mortgages of the properties left by the said deceased Linnie Jane Hodges in
consonance with the wishes conveyed in the last will and testament of the latter." (Order of December 14) In other words, if Hodges
acted then as executor, it can be said that he had authority to do so by virtue of these blanket orders, and PCIB does not question the
legality of such grant of authority; on the contrary, it is relying on the terms of the order itself for its main contention in these cases. On
the other hand, if, as PCIB contends, he acted as heir-adjudicatee, the authority given to him by the aforementioned orders would still
suffice.
As can be seen, therefore, it is of no moment whether the "contracts to sell" upon which the deeds in question were based were
executed by Hodges before or after the death of his wife. In a word, We hold, for the reasons already stated, that the properties
covered by the deeds being assailed pertain or should be deemed as pertaining to the estate of Mrs. Hodges; hence, any supposed
irregularity attending the actuations of the trial court may be invoked only by her heirs, not by PCIB, and since the said heirs are not
objecting, and the defects pointed out not being strictly jurisdictional in nature, all things considered, particularly the unnecessary
disturbance of rights already created in favor of innocent third parties, it is best that the impugned orders are not disturbed.
In view of these considerations, We do not find sufficient merit in the assignments of error under discussion.
Assignments of error V to VIII,
XVI to XVIII, XXVI to XXIX, XXXVII
to XXXVIII, XLIV to XLVI and LI.
All these assignments of error commonly deal with alleged non-fulfillment by the respective vendees, appellees herein, of the terms
and conditions embodied in the deeds of sale referred to in the assignments of error just discussed. It is claimed that some of them
never made full payments in accordance with the respective contracts to sell, while in the cases of the others, like Lorenzo Carles, Jose
Pablico, Alfredo Catedral and Salvador S. Guzman, the contracts with them had already been unilaterally cancelled by PCIB pursuant
to automatic rescission clauses contained in them, in view of the failure of said buyers to pay arrearages long overdue. But PCIB's
posture is again premised on its assumption that the properties covered by the deeds in question could not pertain to the estate of Mrs.
Hodges. We have already held above that, it being evident that a considerable portion of the conjugal properties, much more than
the properties covered by said deeds, would inevitably constitute the estate of Mrs. Hodges, to avoid unnecessary legal complications,
it can be assumed that said properties form part of such estate. From this point of view, it is apparent again that the questions, whether
or not it was proper for appellee Magno to have disregarded the cancellations made by PCIB, thereby reviving the rights of the
respective buyers-appellees, and, whether or not the rules governing new dispositions of properties of the estate were strictly followed,
may not be raised by PCIB but only by the heirs of Mrs. Hodges as the persons designated to inherit the same, or perhaps the
government because of the still unpaid inheritance taxes. But, again, since there is no pretense that any objections were raised by said
parties or that they would necessarily be prejudiced, the contentions of PCIB under the instant assignments of error hardly merit any
consideration.
Assignments of error IX to XII, XIX
to XXI, XXX to XXIV, XXXIX to XL,
XLVII to XLIX, LII and LIII to LXI.

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PCIB raises under these assignments of error two issues which according to it are fundamental, namely: (1) that in approving the deeds
executed by Magno pursuant to contracts to sell already cancelled by it in the performance of its functions as administrator of the
estate of Hodges, the trial court deprived the said estate of the right to invoke such cancellations it (PCIB) had made and (2) that in so
acting, the court "arrogated unto itself, while acting as a probate court, the power to determine the contending claims of third parties
against the estate of Hodges over real property," since it has in effect determined whether or not all the terms and conditions of the
respective contracts to sell executed by Hodges in favor of the buyers-appellees concerned were complied with by the latter. What is
worse, in the view of PCIB, is that the court has taken the word of the appellee Magno, "a total stranger to his estate as determinative
of the issue".
Actually, contrary to the stand of PCIB, it is this last point regarding appellee Magno's having agreed to ignore the cancellations made
by PCIB and allowed the buyers-appellees to consummate the sales in their favor that is decisive. Since We have already held that the
properties covered by the contracts in question should be deemed to be portions of the estate of Mrs. Hodges and not that of Hodges,
it is PCIB that is a complete stranger in these incidents. Considering, therefore, that the estate of Mrs. Hodges and her heirs who are the
real parties in interest having the right to oppose the consummation of the impugned sales are not objecting, and that they are the
ones who are precisely urging that said sales be sanctioned, the assignments of error under discussion have no basis and must
accordingly be as they are hereby overruled.
With particular reference to assignments LIII to LXI, assailing the orders of the trial court requiring PCIB to surrender the respective
owner's duplicate certificates of title over the properties covered by the sales in question and otherwise directing the Register of Deeds
of Iloilo to cancel said certificates and to issue new transfer certificates of title in favor of the buyers-appellees, suffice it to say that in
the light of the above discussion, the trial court was within its rights to so require and direct, PCIB having refused to give way, by
withholding said owners' duplicate certificates, of the corresponding registration of the transfers duly and legally approved by the
court.
Assignments of error LXII to LXVII
All these assignments of error commonly deal with the appeal against orders favoring appellee Western Institute of Technology. As will
be recalled, said institute is one of the buyers of real property covered by a contract to sell executed by Hodges prior to the death of
his wife. As of October, 1965, it was in arrears in the total amount of P92,691.00 in the payment of its installments on account of its
purchase, hence it received under date of October 4, 1965 and October 20, 1965, letters of collection, separately and respectively,
from PCIB and appellee Magno, in their respective capacities as administrators of the distinct estates of the Hodges spouses, albeit,
while in the case of PCIB it made known that "no other arrangement can be accepted except by paying all your past due account",
on the other hand, Magno merely said she would "appreciate very much if you can make some remittance to bring this account up-
to-date and to reduce the amount of the obligation." (See pp. 295-311, Green R. on A.) On November 3, 1965, the Institute filed a
motion which, after alleging that it was ready and willing to pay P20,000 on account of its overdue installments but uncertain whether it
should pay PCIB or Magno, it prayed that it be "allowed to deposit the aforesaid amount with the court pending resolution of the
conflicting claims of the administrators." Acting on this motion, on November 23, 1965, the trial court issued an order, already quoted in
the narration of facts in this opinion, holding that payment to both or either of the two administrators is "proper and legal", and so
"movant — can pay to both estates or either of them", considering that "in both cases (Special Proceedings 1307 and 1672) there is as
yet no judicial declaration of heirs nor distribution of properties to whomsoever are entitled thereto."
The arguments under the instant assignments of error revolve around said order. From the procedural standpoint, it is claimed that PCIB
was not served with a copy of the Institute's motion, that said motion was heard, considered and resolved on November 23, 1965,
whereas the date set for its hearing was November 20, 1965, and that what the order grants is different from what is prayed for in the
motion. As to the substantive aspect, it is contended that the matter treated in the motion is beyond the jurisdiction of the probate
court and that the order authorized payment to a person other than the administrator of the estate of Hodges with whom the Institute
had contracted.
The procedural points urged by appellant deserve scant consideration. We must assume, absent any clear proof to the contrary, that
the lower court had acted regularly by seeing to it that appellant was duly notified. On the other hand, there is nothing irregular in the
court's having resolved the motion three days after the date set for hearing the same. Moreover, the record reveals that appellants'
motion for reconsideration wherein it raised the same points was denied by the trial court on March 7, 1966 (p. 462, Green R. on A.)
Withal, We are not convinced that the relief granted is not within the general intent of the Institute's motion.
Insofar as the substantive issues are concerned, all that need be said at this point is that they are mere reiterations of contentions We
have already resolved above adversely to appellants' position. Incidentally, We may add, perhaps, to erase all doubts as to the
propriety of not disturbing the lower court's orders sanctioning the sales questioned in all these appeal s by PCIB, that it is only when
one of the parties to a contract to convey property executed by a deceased person raises substantial objections to its being
implemented by the executor or administrator of the decedent's estate that Section 8 of Rule 89 may not apply and, consequently,
the matter has, to be taken up in a separate action outside of the probate court; but where, as in the cases of the sales herein
involved, the interested parties are in agreement that the conveyance be made, it is properly within the jurisdiction of the probate
court to give its sanction thereto pursuant to the provisions of the rule just mentioned. And with respect to the supposed automatic
rescission clauses contained in the contracts to sell executed by Hodges in favor of herein appellees, the effect of said clauses depend
on the true nature of the said contracts, despite the nomenclature appearing therein, which is not controlling, for if they amount to
actual contracts of sale instead of being mere unilateral accepted "promises to sell", (Art. 1479, Civil Code of the Philippines, 2nd
paragraph) the pactum commissorium or the automatic rescission provision would not operate, as a matter of public policy, unless
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there has been a previous notarial or judicial demand by the seller (10 Manresa 263, 2nd ed.) neither of which have been shown to
have been made in connection with the transactions herein involved.
Consequently, We find no merit in the assignments of error
Number LXII to LXVII.
SUMMARY
Considering the fact that this decision is unusually extensive and that the issues herein taken up and resolved are rather numerous and
varied, what with appellant making seventy-eight assignments of error affecting no less than thirty separate orders of the court a quo, if
only to facilitate proper understanding of the import and extent of our rulings herein contained, it is perhaps desirable that a brief
restatement of the whole situation be made together with our conclusions in regard to its various factual and legal aspects. .
The instant cases refer to the estate left by the late Charles Newton Hodges as well as that of his wife, Linnie Jane Hodges, who
predeceased him by about five years and a half. In their respective wills which were executed on different occasions, each one of
them provided mutually as follows: "I give, devise and bequeath all of the rest, residue and remainder (after funeral and administration
expenses, taxes and debts) of my estate, both real and personal, wherever situated or located, to my beloved (spouse) to have and
to hold unto (him/her) — during (his/her) natural lifetime", subject to the condition that upon the death of whoever of them survived
the other, the remainder of what he or she would inherit from the other is "give(n), devise(d) and bequeath(ed)" to the brothers and
sisters of the latter.
Mrs. Hodges died first, on May 23, 1957. Four days later, on May 27, Hodges was appointed special administrator of her estate, and in a
separate order of the same date, he was "allowed or authorized to continue the business in which he was engaged, (buying and
selling personal and real properties) and to perform acts which he had been doing while the deceased was living." Subsequently, on
December 14, 1957, after Mrs. Hodges' will had been probated and Hodges had been appointed and had qualified as Executor
thereof, upon his motion in which he asserted that he was "not only part owner of the properties left as conjugal, but also, the successor
to all the properties left by the deceased Linnie Jane Hodges", the trial court ordered that "for the reasons stated in his motion dated
December 11, 1957, which the Court considers well taken, ... all the sales, conveyances, leases and mortgages of all properties left by
the deceased Linnie Jane Hodges executed by the Executor, Charles Newton Hodges are hereby APPROVED. The said Executor is
further authorized to execute subsequent sales, conveyances, leases and mortgages of the properties left by the said deceased Linnie
Jane Hodges in consonance with the wishes contained in the last will and testament of the latter."
Annually thereafter, Hodges submitted to the court the corresponding statements of account of his administration, with the
particularity that in all his motions, he always made it point to urge the that "no person interested in the Philippines of the time and
place of examining the herein accounts be given notice as herein executor is the only devisee or legatee of the deceased in
accordance with the last will and testament already probated by the Honorable Court." All said accounts approved as prayed for.
Nothing else appears to have been done either by the court a quo or Hodges until December 25, 1962. Importantly to be the provision
in the will of Mrs. Hodges that her share of the conjugal partnership was to be inherited by her husband "to have and to hold unto him,
my said husband, during his natural lifetime" and that "at the death of my said husband, I give, devise and bequeath all the rest,
residue and remainder of my estate, both real and personal, wherever situated or located, to be equally divided among my brothers
and sisters, share and share alike", which provision naturally made it imperative that the conjugal partnership be promptly liquidated, in
order that the "rest, residue and remainder" of his wife's share thereof, as of the time of Hodges' own death, may be readily known and
identified, no such liquidation was ever undertaken. The record gives no indication of the reason for such omission, although relatedly,
it appears therein:
1. That in his annual statement submitted to the court of the net worth of C. N. Hodges and the Estate of Linnie Jane Hodges, Hodges
repeatedly and consistently reported the combined income of the conjugal partnership and then merely divided the same equally
between himself and the estate of the deceased wife, and, more importantly, he also, as consistently, filed corresponding separate
income tax returns for each calendar year for each resulting half of such combined income, thus reporting that the estate of Mrs.
Hodges had its own income distinct from his own.
2. That when the court a quo happened to inadvertently omit in its order probating the will of Mrs. Hodges, the name of one of her
brothers, Roy Higdon then already deceased, Hodges lost no time in asking for the proper correction "in order that the heirs of
deceased Roy Higdon may not think or believe they were omitted, and that they were really interested in the estate of the deceased
Linnie Jane Hodges".
3. That in his aforementioned motion of December 11, 1957, he expressly stated that "deceased Linnie Jane Hodges died leaving no
descendants or ascendants except brothers and sisters and herein petitioner as the surviving spouse, to inherit the properties of the
decedent", thereby indicating that he was not excluding his wife's brothers and sisters from the inheritance.
4. That Hodges allegedly made statements and manifestations to the United States inheritance tax authorities indicating that he had
renounced his inheritance from his wife in favor of her other heirs, which attitude he is supposed to have reiterated or ratified in an
alleged affidavit subscribed and sworn to here in the Philippines and in which he even purportedly stated that his reason for so
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disclaiming and renouncing his rights under his wife's will was to "absolve (him) or (his) estate from any liability for the payment of
income taxes on income which has accrued to the estate of Linnie Jane Hodges", his wife, since her death.
On said date, December 25, 1962, Hodges died. The very next day, upon motion of herein respondent and appellee, Avelina A.
Magno, she was appointed by the trial court as Administratrix of the Testate Estate of Linnie Jane Hodges, in Special Proceedings No.
1307 and as Special Administratrix of the estate of Charles Newton Hodges, "in the latter case, because the last will of said Charles
Newton Hodges is still kept in his vault or iron safe and that the real and personal properties of both spouses may be lost, damaged or
go to waste, unless Special Administratrix is appointed," (Order of December 26, 1962, p. 27, Yellow R. on A.) although, soon enough, on
December 29, 1962, a certain Harold K. Davies was appointed as her Co-Special Administrator, and when Special Proceedings No.
1672, Testate Estate of Charles Newton Hodges, was opened, Joe Hodges, as next of kin of the deceased, was in due time appointed
as Co-Administrator of said estate together with Atty. Fernando P. Mirasol, to replace Magno and Davies, only to be in turn replaced
eventually by petitioner PCIB alone.
At the outset, the two probate proceedings appear to have been proceeding jointly, with each administrator acting together with the
other, under a sort of modus operandi. PCIB used to secure at the beginning the conformity to and signature of Magno in transactions
it wanted to enter into and submitted the same to the court for approval as their joint acts. So did Magno do likewise. Somehow,
however, differences seem to have arisen, for which reason, each of them began acting later on separately and independently of
each other, with apparent sanction of the trial court. Thus, PCIB had its own lawyers whom it contracted and paid handsomely,
conducted the business of the estate independently of Magno and otherwise acted as if all the properties appearing in the name of
Charles Newton Hodges belonged solely and only to his estate, to the exclusion of the brothers and sisters of Mrs. Hodges, without
considering whether or not in fact any of said properties corresponded to the portion of the conjugal partnership pertaining to the
estate of Mrs. Hodges. On the other hand, Magno made her own expenditures, hired her own lawyers, on the premise that there is
such an estate of Mrs. Hodges, and dealth with some of the properties, appearing in the name of Hodges, on the assumption that they
actually correspond to the estate of Mrs. Hodges. All of these independent and separate actuations of the two administrators were
invariably approved by the trial court upon submission. Eventually, the differences reached a point wherein Magno, who was more
cognizant than anyone else about the ins and outs of the businesses and properties of the deceased spouses because of her long and
intimate association with them, made it difficult for PCIB to perform normally its functions as administrator separately from her. Thus,
legal complications arose and the present judicial controversies came about.
Predicating its position on the tenor of the orders of May 27 and December 14, 1957 as well as the approval by the court a quo of the
annual statements of account of Hodges, PCIB holds to the view that the estate of Mrs. Hodges has already been in effect closed with
the virtual adjudication in the mentioned orders of her whole estate to Hodges, and that, therefore, Magno had already ceased since
then to have any estate to administer and the brothers and sisters of Mrs. Hodges have no interests whatsoever in the estate left by
Hodges. Mainly upon such theory, PCIB has come to this Court with a petition for certiorari and prohibition praying that the lower
court's orders allowing respondent Magno to continue acting as administratrix of the estate of Mrs. Hodges in Special Proceedings 1307
in the manner she has been doing, as detailed earlier above, be set aside. Additionally, PCIB maintains that the provision in Mrs.
Hodges' will instituting her brothers and sisters in the manner therein specified is in the nature of a testamentary substitution, but
inasmuch as the purported substitution is not, in its view, in accordance with the pertinent provisions of the Civil Code, it is ineffective
and may not be enforced. It is further contended that, in any event, inasmuch as the Hodges spouses were both residents of the
Philippines, following the decision of this Court in Aznar vs. Garcia, or the case of Christensen, 7 SCRA 95, the estate left by Mrs. Hodges
could not be more than one-half of her share of the conjugal partnership, notwithstanding the fact that she was citizen of Texas, U.S.A.,
in accordance with Article 16 in relation to Articles 900 and 872 of the Civil Code. Initially, We issued a preliminary injunction against
Magno and allowed PCIB to act alone.
At the same time PCIB has appealed several separate orders of the trial court approving individual acts of appellee Magno in her
capacity as administratrix of the estate of Mrs. Hodges, such as, hiring of lawyers for specified fees and incurring expenses of
administration for different purposes and executing deeds of sale in favor of her co-appellees covering properties which are still
registered in the name of Hodges, purportedly pursuant to corresponding "contracts to sell" executed by Hodges. The said orders are
being questioned on jurisdictional and procedural grounds directly or indirectly predicated on the principal theory of appellant that all
the properties of the two estates belong already to the estate of Hodges exclusively.
On the other hand, respondent-appellee Magno denies that the trial court's orders of May 27 and December 14, 1957 were meant to
be finally adjudicatory of the hereditary rights of Hodges and contends that they were no more than the court's general sanction of
past and future acts of Hodges as executor of the will of his wife in due course of administration. As to the point regarding substitution,
her position is that what was given by Mrs. Hodges to her husband under the provision in question was a lifetime usufruct of her share of
the conjugal partnership, with the naked ownership passing directly to her brothers and sisters. Anent the application of Article 16 of
the Civil Code, she claims that the applicable law to the will of Mrs. Hodges is that of Texas under which, she alleges, there is no system
of legitime, hence, the estate of Mrs. Hodges cannot be less than her share or one-half of the conjugal partnership properties. She
further maintains that, in any event, Hodges had as a matter of fact and of law renounced his inheritance from his wife and, therefore,
her whole estate passed directly to her brothers and sisters effective at the latest upon the death of Hodges.
In this decision, for the reasons discussed above, and upon the issues just summarized, We overrule PCIB's contention that the orders of
May 27, 1957 and December 14, 1957 amount to an adjudication to Hodges of the estate of his wife, and We recognize the present
existence of the estate of Mrs. Hodges, as consisting of properties, which, while registered in that name of Hodges, do actually
correspond to the remainder of the share of Mrs. Hodges in the conjugal partnership, it appearing that pursuant to the pertinent
provisions of her will, any portion of said share still existing and undisposed of by her husband at the time of his death should go to her
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brothers and sisters share and share alike. Factually, We find that the proven circumstances relevant to the said orders do not warrant
the conclusion that the court intended to make thereby such alleged final adjudication. Legally, We hold that the tenor of said orders
furnish no basis for such a conclusion, and what is more, at the time said orders were issued, the proceedings had not yet reached the
point when a final distribution and adjudication could be made. Moreover, the interested parties were not duly notified that such
disposition of the estate would be done. At best, therefore, said orders merely allowed Hodges to dispose of portions of his inheritance
in advance of final adjudication, which is implicitly permitted under Section 2 of Rule 109, there being no possible prejudice to third
parties, inasmuch as Mrs. Hodges had no creditors and all pertinent taxes have been paid.
More specifically, We hold that, on the basis of circumstances presently extant in the record, and on the assumption that Hodges'
purported renunciation should not be upheld, the estate of Mrs. Hodges inherited by her brothers and sisters consists of one-fourth of
the community estate of the spouses at the time of her death, minus whatever Hodges had gratuitously disposed of therefrom during
the period from, May 23, 1957, when she died, to December 25, 1962, when he died provided, that with regard to remunerative
dispositions made by him during the same period, the proceeds thereof, whether in cash or property, should be deemed as continuing
to be part of his wife's estate, unless it can be shown that he had subsequently disposed of them gratuitously.
At this juncture, it may be reiterated that the question of what are the pertinent laws of Texas and what would be the estate of Mrs.
Hodges under them is basically one of fact, and considering the respective positions of the parties in regard to said factual issue, it can
already be deemed as settled for the purposes of these cases that, indeed, the free portion of said estate that could possibly descend
to her brothers and sisters by virtue of her will may not be less than one-fourth of the conjugal estate, it appearing that the difference in
the stands of the parties has reference solely to the legitime of Hodges, PCIB being of the view that under the laws of Texas, there is
such a legitime of one-fourth of said conjugal estate and Magno contending, on the other hand, that there is none. In other words,
hereafter, whatever might ultimately appear, at the subsequent proceedings, to be actually the laws of Texas on the matter would no
longer be of any consequence, since PCIB would anyway be in estoppel already to claim that the estate of Mrs. Hodges should be less
than as contended by it now, for admissions by a party related to the effects of foreign laws, which have to be proven in our courts like
any other controverted fact, create estoppel.
In the process, We overrule PCIB's contention that the provision in Mrs. Hodges' will in favor of her brothers and sisters constitutes
ineffective hereditary substitutions. But neither are We sustaining, on the other hand, Magno's pose that it gave Hodges only a lifetime
usufruct. We hold that by said provision, Mrs. Hodges simultaneously instituted her brothers and sisters as co-heirs with her husband, with
the condition, however, that the latter would have complete rights of dominion over the whole estate during his lifetime and what
would go to the former would be only the remainder thereof at the time of Hodges' death. In other words, whereas they are not to
inherit only in case of default of Hodges, on the other hand, Hodges was not obliged to preserve anything for them. Clearly then, the
essential elements of testamentary substitution are absent; the provision in question is a simple case of conditional simultaneous
institution of heirs, whereby the institution of Hodges is subject to a partial resolutory condition the operative contingency of which is
coincidental with that of the suspensive condition of the institution of his brothers and sisters-in-law, which manner of institution is not
prohibited by law.
We also hold, however, that the estate of Mrs. Hodges inherited by her brothers and sisters could be more than just stated, but this
would depend on (1) whether upon the proper application of the principle of renvoi in relation to Article 16 of the Civil Code and the
pertinent laws of Texas, it will appear that Hodges had no legitime as contended by Magno, and (2) whether or not it can be held that
Hodges had legally and effectively renounced his inheritance from his wife. Under the circumstances presently obtaining and in the
state of the record of these cases, as of now, the Court is not in a position to make a final ruling, whether of fact or of law, on any of
these two issues, and We, therefore, reserve said issues for further proceedings and resolution in the first instance by the court a quo, as
hereinabove indicated. We reiterate, however, that pending such further proceedings, as matters stand at this stage, Our considered
opinion is that it is beyond cavil that since, under the terms of the will of Mrs. Hodges, her husband could not have anyway legally
adjudicated or caused to be adjudicated to himself her whole share of their conjugal partnership, albeit he could have disposed any
part thereof during his lifetime, the resulting estate of Mrs. Hodges, of which Magno is the uncontested administratrix, cannot be less
than one-fourth of the conjugal partnership properties, as of the time of her death, minus what, as explained earlier, have been
gratuitously disposed of therefrom, by Hodges in favor of third persons since then, for even if it were assumed that, as contended by
PCIB, under Article 16 of the Civil Code and applying renvoi the laws of the Philippines are the ones ultimately applicable, such one-
fourth share would be her free disposable portion, taking into account already the legitime of her husband under Article 900 of the Civil
Code.
The foregoing considerations leave the Court with no alternative than to conclude that in predicating its orders on the assumption,
albeit unexpressed therein, that there is an estate of Mrs. Hodges to be distributed among her brothers and sisters and that respondent
Magno is the legal administratrix thereof, the trial court acted correctly and within its jurisdiction. Accordingly, the petition for certiorari
and prohibition has to be denied. The Court feels however, that pending the liquidation of the conjugal partnership and the
determination of the specific properties constituting her estate, the two administrators should act conjointly as ordered in the Court's
resolution of September 8, 1972 and as further clarified in the dispositive portion of its decision.
Anent the appeals from the orders of the lower court sanctioning payment by appellee Magno, as administratrix, of expenses of
administration and attorney's fees, it is obvious that, with Our holding that there is such an estate of Mrs. Hodges, and for the reasons
stated in the body of this opinion, the said orders should be affirmed. This We do on the assumption We find justified by the evidence of
record, and seemingly agreed to by appellant PCIB, that the size and value of the properties that should correspond to the estate of
Mrs. Hodges far exceed the total of the attorney's fees and administration expenses in question.
157
With respect to the appeals from the orders approving transactions made by appellee Magno, as administratrix, covering properties
registered in the name of Hodges, the details of which are related earlier above, a distinction must be made between those
predicated on contracts to sell executed by Hodges before the death of his wife, on the one hand, and those premised on contracts
to sell entered into by him after her death. As regards the latter, We hold that inasmuch as the payments made by appellees constitute
proceeds of sales of properties belonging to the estate of Mrs. Hodges, as may be implied from the tenor of the motions of May 27 and
December 14, 1957, said payments continue to pertain to said estate, pursuant to her intent obviously reflected in the relevant
provisions of her will, on the assumption that the size and value of the properties to correspond to the estate of Mrs. Hodges would
exceed the total value of all the properties covered by the impugned deeds of sale, for which reason, said properties may be deemed
as pertaining to the estate of Mrs. Hodges. And there being no showing that thus viewing the situation, there would be prejudice to
anyone, including the government, the Court also holds that, disregarding procedural technicalities in favor of a pragmatic and
practical approach as discussed above, the assailed orders should be affirmed. Being a stranger to the estate of Mrs. Hodges, PCIB has
no personality to raise the procedural and jurisdictional issues raised by it. And inasmuch as it does not appear that any of the other
heirs of Mrs. Hodges or the government has objected to any of the orders under appeal, even as to these parties, there exists no
reason for said orders to be set aside.
DISPOSITIVE PART
IN VIEW OF ALL THE FOREGOING PREMISES, judgment is hereby rendered DISMISSING the petition in G. R. Nos. L-27860 and L-27896, and
AFFIRMING, in G. R. Nos. L-27936-37 and the other thirty-one numbers hereunder ordered to be added after payment of the
corresponding docket fees, all the orders of the trial court under appeal enumerated in detail on pages 35 to 37 and 80 to 82 of this
decision; the existence of the Testate Estate of Linnie Jane Hodges, with respondent-appellee Avelina A. Magno, as administratrix
thereof is recognized, and it is declared that, until final judgment is ultimately rendered regarding (1) the manner of applying Article 16
of the Civil Code of the Philippines to the situation obtaining in these cases and (2) the factual and legal issue of whether or not
Charles Newton Hodges had effectively and legally renounced his inheritance under the will of Linnie Jane Hodges, the said estate
consists of one-fourth of the community properties of the said spouses, as of the time of the death of the wife on May 23, 1957, minus
whatever the husband had already gratuitously disposed of in favor of third persons from said date until his death, provided, first, that
with respect to remunerative dispositions, the proceeds thereof shall continue to be part of the wife's estate, unless subsequently
disposed of gratuitously to third parties by the husband, and second, that should the purported renunciation be declared legally
effective, no deductions whatsoever are to be made from said estate; in consequence, the preliminary injunction of August 8, 1967, as
amended on October 4 and December 6, 1967, is lifted, and the resolution of September 8, 1972, directing that petitioner-appellant
PCIB, as Administrator of the Testate Estate of Charles Newton Hodges, in Special Proceedings 1672, and respondent-appellee Avelina
A. Magno, as Administratrix of the Testate Estate of Linnie Jane Hodges, in Special Proceedings 1307, should act thenceforth always
conjointly, never independently from each other, as such administrators, is reiterated, and the same is made part of this judgment and
shall continue in force, pending the liquidation of the conjugal partnership of the deceased spouses and the determination and
segregation from each other of their respective estates, provided, that upon the finality of this judgment, the trial court should
immediately proceed to the partition of the presently combined estates of the spouses, to the end that the one-half share thereof of
Mrs. Hodges may be properly and clearly identified; thereafter, the trial court should forthwith segregate the remainder of the one-
fourth herein adjudged to be her estate and cause the same to be turned over or delivered to respondent for her exclusive
administration in Special Proceedings 1307, while the other one-fourth shall remain under the joint administration of said respondent
and petitioner under a joint proceedings in Special Proceedings 1307 and 1672, whereas the half unquestionably pertaining to Hodges
shall be administered by petitioner exclusively in Special Proceedings 1672, without prejudice to the resolution by the trial court of the
pending motions for its removal as administrator 12; and this arrangement shall be maintained until the final resolution of the two issues of
renvoi and renunciation hereby reserved for further hearing and determination, and the corresponding complete segregation and
partition of the two estates in the proportions that may result from the said resolution.
Generally and in all other respects, the parties and the court a quo are directed to adhere henceforth, in all their actuations in Special
Proceedings 1307 and 1672, to the views passed and ruled upon by the Court in the foregoing opinion.
Appellant PCIB is ordered to pay, within five (5) days from notice hereof, thirty-one additional appeal docket fees, but this decision
shall nevertheless become final as to each of the parties herein after fifteen (15) days from the respective notices to them hereof in
accordance with the rules.
Costs against petitioner-appellant PCIB.
25. Suntay v. Suntay, G.R. Nos. L-3087 & L-3088, [July 31, 1954], 95 PHIL 500-553 Eliab
G.R. Nos. L-3087 and L-3088 July 31, 1954
In re: Testate Estate of the deceased JOSE B. SUNTAY. SILVINO SUNTAY, petitioner-appellant, vs. In re: Intestate Estate of the deceased
JOSE B. SUNTAY,
FEDERICO C. SUNTAY, administrator-appellee.
PADILLA, J.:
158
This is an appeal from a decree of the Court of First Instance of Bulacan disallowing the alleged will and testament executed in Manila
on November 1929, and the alleged last will and testament executed in Kulangsu, Amoy, China, on 4 January 1931, by Jose B. Suntay.
The value of the estate left by the deceased is more than P50,000.
On 14 May 1934 Jose B. Suntay, a Filipino citizen and resident of the Philippines, died in the city of Amoy, Fookien province, Republic of
China, leaving real and personal properties in the Philippines and a house in Amoy, Fookien province, China, and children by the first
marriage had with the late Manuela T. Cruz namely, Apolonio, Concepcion, Angel, Manuel, Federico, Ana, Aurora, Emiliano, and Jose,
Jr. and a child named Silvino by the second marriage had with Maria Natividad Lim Billian who survived him. Intestate proceedings
were instituted in the Court of First Instance of Bulacan (special proceedings No. 4892) and after hearing letters of administration were
issued to Apolonio Suntay. After the latter's death Federico C. Suntay was appointed administrator of the estate. On 15 October 1934
the surviving widow filed a petition in the Court of First Instance of Bulacan for the probate of a last will and testament claimed to have
been executed and signed in the Philippines on November 1929 by the late Jose B. Suntay. This petition was denied because of the loss
of said will after the filing of the petition and before the hearing thereof and of the insufficiency of the evidence to establish the loss of
the said will. An appeal was taken from said order denying the probate of the will and this Court held the evidence before the probate
court sufficient to prove the loss of the will and remanded the case to the Court of First Instance of Bulacan for the further proceedings
(63 Phil., 793). In spite of the fact that a commission from the probate court was issued on 24 April 1937 for the taking of the deposition
of Go Toh, an attesting witness to the will, on 7 February 1938 the probate court denied a motion for continuance of the hearing sent
by cablegram from China by the surviving widow and dismissed the petition. In the meantime the Pacific War supervened. After
liberation, claiming that he had found among the files, records and documents of his late father a will and testament in Chinese
characters executed and signed by the deceased on 4 January 1931 and that the same was filed, recorded and probated in the
Amoy district court, Province of Fookien, China, Silvino Suntay filed a petition in the intestate proceedings praying for the probate of
the will executed in the Philippines on November 1929 (Exhibit B) or of the will executed in Amoy, Fookien, China, on 4 January 1931
(Exhibit N).
There is no merit in the contention that the petitioner Silvino Suntay and his mother Maria Natividad Lim Billian are estopped from asking
for the probate of the lost will or of the foreign will because of the transfer or assignment of their share right, title and interest in the
estate of the late Jose B. Suntay to Jose G. Gutierrez and the spouses Ricardo Gutierrez and Victoria Goño and the subsequent
assignment thereof by the assignees to Francisco Pascual and by the latter to Federico C. Suntay, for the validity and legality of such
assignments cannot be threshed out in this proceedings which is concerned only with the probate of the will and testament executed
in the Philippines on November 1929 or of the foreign will allegedly executed in Amoy on 4 January 1931 and claimed to have been
probated in the municipal district court of Amoy, Fookien province, Republic of China.
As to prescription, the dismissal of the petition for probate of the will on 7 February 1938 was no bar to the filing of this petition on 18
June 1947, or before the expiration of ten years.
As to the lost will, section 6, Rule 77, provides:
No will shall be proved as a lost or destroyed will unless the execution and validity of the same be established, and the will is proved to
have been in existence at the time of the death of the testator, or is shown to have been fraudulently or accidentally destroyed in the
lifetime of the testator without his knowledge, nor unless its provisions are clearly and distinctly proved by at least two credible
witnesses. When a lost will is proved, the provisions thereof must be distinctly stated and certified by the judge, under the seal of the
court, and the certificate must be filed and recorded as other wills are filed and recorded.
The witnesses who testified to the provisions of the lost will are Go Toh, an attesting witness, Anastacio Teodoro and Ana Suntay.
Manuel Lopez, who was an attesting witness to the lost will, was dead at the time of the hearing of this alternative petition. In his
deposition Go Toh testifies that he was one of the witnesses to the lost will consisting of twenty-three sheets signed by Jose B. Suntay at
the bottom of the will and each and every page thereof in the presence of Alberto Barretto, Manuel Lopez and himself and
underneath the testator's signature the attesting witnesses signed and each of them signed the attestation clause and each and every
page of the will in the presence of the testator and of the other witnesses (answers to the 31st, 41st, 42nd, 49th, 50th, 55th and 63rd
interrogatories, Exhibit D-1), but did not take part in the drafting thereof (answer to the 11th interrogatory, Id.); that he knew the
contents of the will written in Spanish although he knew very little of that language (answers to the 22nd and 23rd interrogatories and
to X-2 cross-interrogatory, Id.) and all he knows about the contends of the lost will was revealed to him by Jose B. Suntay at the time it
was executed (answers to the 25th interrogatory and to X-4 and X-8 cross-interrogatories, Id.); that Jose B. Suntay told him that the
contents thereof are the same as those of the draft (Exhibit B) (answers to the 33rd interrogatory and to X-8 cross-interrogatory, Id.)
which he saw in the office of Alberto Barretto in November 1929 when the will was signed (answers to the 69th, 72nd, and 74th
interrogatories, Id); that Alberto Barretto handed the draft and said to Jose B. Suntay: "You had better see if you want any correction"
(answers to the 81st, 82nd and 83rd interrogatories, Id.); that "after checking Jose B. Suntay put the "Exhibit B" in his pocket and had the
original signed and executed" (answers to the 91st interrogatory, and to X-18 cross-interrogatory, Id.); that Mrs. Suntay had the draft of
the will (Exhibit B) translated into Chinese and he read the translation (answers to the 67th interrogatory, Id.); that he did not read the
will and did not compare it (check it up) with the draft (Exhibit B) (answers to X-6 and X-20 cross-interrogatories, Id.).
Ana Suntay testifies that sometime in September 1934 in the house of her brother Apolonio Suntay she learned that her father left a will
"because of the arrival of my brother Manuel Suntay, who was bringing along with him certain document and he told us or he was
telling us that it was the will of our father Jose B. Suntay which was taken from Go Toh. ..." (p. 524, t. s. n., hearing of 24 February 1948);
that she saw her brother Apolonio Suntay read the document in her presence and of Manuel and learned of the adjudication made in
the will by her father of his estate, to wit: one-third to his children, one-third to Silvino and his mother and the other third to Silvino,
159
Apolonio, Concepcion and Jose, Jr. (pp. 526-8, 530-1, 542, t. s. n. Id.); that "after Apolonio read that portion, then he turned over the
document to Manuel, and he went away," (p. 528, t. s. n., Id.). On cross-examination, she testifies that she read the part of the will on
adjudication to know what was the share of each heir (pp. 530, 544, t. s. n., Id.) and on redirect she testifies that she saw the signature
of her father, Go Toh, Manuel Lopez and Alberto Barretto (p. 546, t. s. n., Id.).
Anastacio Teodoro testifies that one day in November 1934 (p. 273, t. s. n., hearing of 19 January 1948), before the last postponement
of the hearing granted by the Court, Go Toh arrived at his law office in the De los Reyes Building and left an envelope wrapped in red
handkerchief [Exhibit C] (p. 32, t. s. n., hearing of 13 October 1947); that he checked up the signatures on the envelope Exhibit A with
those on the will placed in the envelope (p. 33, t. s. n., Id.); that the will was exactly the same as the draft Exhibit B (pp. 32, 47, 50, t. s. n.,
Id.).
If the will was snatched after the delivery thereof by Go Toh to Anastacio Teodoro And returned by the latter to the former because
they could not agree on the amount of fees, the former coming to the latter's office straight from the boat (p. 315, t. s. n., hearing of 19
January 1948) that brought him to the Philippines from Amoy, and that delivery took place in November 1934 (p. 273, t. s. n., Id.), then
the testimony of Ana Suntay that she saw and heard her brother Apolonio Suntay read the will sometime in September 1934 (p. 524, t.
s. n., hearing of 24 February 1948), must not be true.
Although Ana Suntay would be a good witness because she was testifying against her own interest, still the fact remains that she did
not read the whole will but only the adjudication (pp. 526-8, 530-1, 542, t. s. n., Id.) and saw only the signature, of her father and of the
witnesses Go Toh, Manuel Lopez and Alberto Barretto (p. 546, t. s. n., Id.). But her testimony on cross-examination that she read the part
of the will on adjudication is inconsistent with her testimony in chief that after Apolonio had read that part of the will he turned over or
handed the document to Manuel who went away (p. 528, t. s. n., Id.).
If it is true that Go Toh saw the draft Exhibit B in the office of Alberto Barretto in November 1929 when the will was signed, then the part
of his testimony that Alberto Barretto handed the draft to Jose B. Suntay to whom he said: "You had better see if you want any
correction" and that "after checking Jose B. Suntay put the "Exhibit B" in his pocket and had the original signed and executed" cannot
be true, for it was not the time for correcting the draft of the will, because it must have been corrected before and all corrections and
additions written in lead pencil must have been inserted and copied in the final draft of the will which was signed on that occasion.
The bringing in for the draft (Exhibit B) on that occasion is just to fit it within the framework of the appellant's theory. At any rate, all of
Go Toh's testimony by deposition on the provisions of the alleged lost will is hearsay, because he came to know or he learned to them
from information given him by Jose B. Suntay and from reading the translation of the draft (Exhibit B) into Chinese.
Much stress is laid upon the testimony of Federico C. Suntay who testifies that he read the supposed will or the alleged will of his father
and that the share of the surviving widow, according to the will, is two-thirds of the estate (p. 229, t. s. n., hearing of 24 October 1947).
But this witness testified to oppose the appointment of a co-administrator of the estate, for the reason that he had acquired the interest
of the surviving widow not only in the estate of her deceased husband but also in the conjugal property (pp. 148, 205, 228, 229, 231, t. s.
n., Id.) Whether he read the original will or just the copy thereof (Exhibit B) is not clear. For him the important point was that he had
acquired all the share, participation and interest of the surviving widow and of the only child by the second marriage in the estate of
his deceased father. Be that as it may, his testimony that under the will the surviving widow would take two-thirds of the estate of the
late Jose B. Suntay is at variance with Exhibit B and the testimony of Anastacio Teodoro. According to the latter, the third for strict
legitime is for the ten children; the third for betterment is for Silvino, Apolonio, Concepcion and Jose Jr.; and the third for free disposal is
for the surviving widow and her child Silvino.
Hence, granting that there was a will duly executed by Jose B. Suntay placed in the envelope (Exhibit A) and that it was in existence at
the time of, and not revoked before, his death, still the testimony of Anastacio Teodoro alone falls short of the legal requirement that
the provisions of the lost will must be "clearly and distinctly proved by at least two credible witnesses." Credible witnesses mean
competent witnesses and those who testify to facts from or upon hearsay are neither competent nor credible witnesses.
On the other hand, Alberto Barretto testifies that in the early part of 1929 he prepared or drew up two mills for Jose B. Suntay at the
latter's request, the rough draft of the first will was in his own handwriting, given to Manuel Lopez for the final draft or typing and
returned to him; that after checking up the final with the rough draft he tore it and returned the final draft to Manuel Lopez; that this
draft was in favor of all the children and the widow (pp. 392-4, 449, t. s. n., hearing of 21 February 1948); that two months later Jose B.
Suntay and Manuel Lopez called on him and the former asked him to draw up another will favoring more his wife and child Silvino; that
he had the rough draft of the second will typed (pp. 395, 449 t. s. n., Id.) and gave it to Manuel Lopez (p. 396, t. s. n., Id.); that he did
not sign as witness the second will of Jose B. Suntay copied from the typewritten draft [Exhibit B] (p. 420, t. s. n., Id.); that the
handwritten insertions or additions in lead pencil to Exhibit B are not his (pp. 415-7 435-6, 457, t. s. n., Id.); that the final draft of the first
will made up of four or five pages (p. 400, t. s. n., Id.) was signed and executed, two or three months after Suntay and Lopez had
called on him (pp. 397-8, 403, 449, t. s. n., Id.) in his office at the Cebu Portland Cement in the China Banking Building on Dasmariñas
street by Jose B. Suntay, Manuel Lopez and a Chinaman who had all come from Hagonoy (p. 398, t. s. n., Id.); that on that occasion
they brought an envelope (Exhibit A) where the following words were written: "Testamento de Jose B. Suntay" (pp. 399, 404, t. s. n., Id.);
that after the signing of the will it was placed inside the envelope (Exhibit A) together with an inventory of the properties of Jose B.
Suntay and the envelope was sealed by the signatures of the testator and the attesting witnesses (pp. 398, 401, 441, 443, 461, t. s. n.,
Id.); that he again saw the envelope (Exhibit A) in his house one Saturday in the later part of August 1934, brought by Go Toh and it was
then in perfect condition (pp. 405-6, 411, 440-2, t. s. n., Id.); that on the following Monday Go Toh went to his law office bringing along
with him the envelope (Exhibit A) in the same condition; that he told Go Toh that he would charge P25,000 as fee for probating the will
160
(pp. 406, 440-2, Id.); that Go Toh did not leave the envelope (Exhibit A) either in his house or in his law office (p. 407, t. s. n., Id.); that Go
Toh said he wanted to keep it and on no occasion did Go Toh leave it to him (pp. 409, 410, t. s. n., Id.).
The testimony of Go Toh taken and heard by Assistant Fiscal F. B. Albert in connection with the complaint for estafa filed against
Manuel Suntay for the alleged snatching of the envelope (Exhibit A), corroborates the testimony of Alberto Barretto to the effect that
only one will was signed by Jose B. Suntay at his office in which he (Alberto Barretto), Manuel Lopez and Go Toh took part as attesting
witnesses (p. 15, t. s. n., Exhibit 6). Go Toh testified before the same assistant fiscal that he did not leave the will in the hands of
Anastacio Teodoro (p. 26, t. s. n., Exhibit 6). He said, quoting his own words, "Because I can not give him this envelope even though the
contract (on fees) was signed. I have to bring that document to court or to anywhere else myself." (p. 27, t. s. n., Exhibit 6).
As to the will claimed to have been executed on 4 January 1931 in Amoy, China, the law on the point in Rule 78. Section 1 of the rule
provides:
Wills proved and allowed in a foreign country, according to the laws of such country, may be allowed, filed, and recorded by the
proper Court of First Instance in the Philippines.
Section 2 provides:
When a copy of such will and the allowance thereof, duly authenticated, is filed with a petition for allowance in the Philippines, by the
executor or other person interested, in the court having jurisdiction, such court shall fix a time and place for the hearing, and cause
notice thereof to be given as in case of an original will presented for allowance.
Section 3 provides:
If it appears at the hearing that the will should be allowed in the Philippines, the court shall so allow it, and a certificate of its allowance,
signed by the Judge, and attested by the seal of the courts, to which shall be attached a copy of the will, shall be filed and recorded
by the clerk, and the will shall have the same effect as if originally proved and allowed in such court.
The fact that the municipal district court of Amoy, China, is a probate court must be proved. The law of China on procedure in the
probate or allowance of wills must also be proved. The legal requirements for the execution of a valid will in China in 1931 should also
be established by competent evidence. There is no proof on these points. The unverified answers to the questions propounded by
counsel for the appellant to the Consul General of the Republic of China set forth in Exhibits R-1 and R-2, objected to by counsel for the
appellee, are inadmissible, because apart from the fact that the office of Consul General does not qualify and make the person who
holds it an expert on the Chinese law on procedure in probate matters, if the same be admitted, the adverse party would be deprived
of his right to confront and cross-examine the witness. Consuls are appointed to attend to trade matters. Moreover, it appears that all
the proceedings had in the municipal district court of Amoy were for the purpose of taking the testimony of two attesting witnesses to
the will and that the order of the municipal district court of Amoy does not purport to probate the will. In the absence of proof that the
municipal district court of Amoy is a probate court and on the Chinese law of procedure in probate matters, it may be presumed that
the proceedings in the matter of probating or allowing a will in the Chinese courts are the a deposition or to a perpetuation of
testimony, and even if it were so it does not measure same as those provided for in our laws on the subject. It is a proceedings in rem
and for the validity of such proceedings personal notice or by publication or both to all interested parties must be made. The interested
parties in the case were known to reside in the Philippines. The evidence shows that no such notice was received by the interested
parties residing in the Philippines (pp. 474, 476, 481, 503-4, t. s. n., hearing of 24 February 1948). The proceedings had in the municipal
district court of Amoy, China, may be likened toe or come up to the standard of such proceedings in the Philippines for lack of notice
to all interested parties and the proceedings were held at the back of such interested parties.
The order of the municipal district court of Amoy, China, which reads as follows:
ORDER:
SEE BELOW
The above minutes were satisfactorily confirmed by the interrogated parties, who declare that there are no errors, after said minutes
were loudly read and announced actually in the court.
Done and subscribed on the Nineteenth day of the English month of the 35th year of the Republic of China in the Civil Section of the
Municipal District Court of Amoy, China.
HUANG KUANG CHENG
Clerk of Court
CHIANG TENG HWA

161
Judge
(Exhibit N-13, p. 89 Folder of Exhibits.).
does not purport to probate or allow the will which was the subject of the proceedings. In view thereof, the will and the alleged
probate thereof cannot be said to have been done in accordance with the accepted basic and fundamental concepts and
principles followed in the probate and allowance of wills. Consequently, the authenticated transcript of proceedings held in the
municipal district court of Amoy, China, cannot be deemed and accepted as proceedings leading to the probate or allowance of a
will and, therefore, the will referred to therein cannot be allowed, filed and recorded by a competent court of this country.
The decree appealed from is affirmed, without pronouncement as to costs.
Pablo, Bengzon, A. Reyes, Labrador and Concepcion, JJ., concur.
26. Yao Kee v. Sy-Gonzales, G.R. No. L-55960, November 24, 1988, 167 SCRA 737 Gonzales, Cyril
26. G.R. No. L-55960 November 24, 1988
YAO KEE, SZE SOOK WAH, SZE LAI CHO, and SY CHUN YEN, petitioners,
vs. AIDA SY-GONZALES, MANUEL SY, TERESITA SY-BERNABE, RODOLFO SY, and HONORABLE COURT OF APPEALS, respondents.
Montesa, Albon, & Associates for petitioners.
De Lapa, Salonga, Fulgencio & De Lunas for respondents.
CORTES, J.:
Sy Kiat, a Chinese national. died on January 17, 1977 in Caloocan City where he was then residing, leaving behind real and personal
properties here in the Philippines worth P300,000.00 more or less.
Thereafter, Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy filed a petition for the grant of letters of administration
docketed as Special Proceedings Case No. C-699 of the then Court of First Instance of Rizal Branch XXXIII, Caloocan City. In said
petition they alleged among others that (a) they are the children of the deceased with Asuncion Gillego; (b) to their knowledge Sy
Mat died intestate; (c) they do not recognize Sy Kiat's marriage to Yao Kee nor the filiation of her children to him; and, (d) they
nominate Aida Sy-Gonzales for appointment as administratrix of the intestate estate of the deceased [Record on Appeal, pp. 4-9;
Rollo, p. 107.]
The petition was opposed by Yao Kee, Sze Sook Wah, Sze Lai Cho and Sy Yun Chen who alleged that: (a) Yao Kee is the lawful wife of
Sy Kiat whom he married on January 19, 1931 in China; (b) the other oppositors are the legitimate children of the deceased with Yao
Kee; and, (c) Sze Sook Wah is the eldest among them and is competent, willing and desirous to become the administratrix of the estate
of Sy Kiat [Record on Appeal, pp. 12-13; Rollo, p. 107.] After hearing, the probate court, finding among others that:
(1) Sy Kiat was legally married to Yao Kee [CFI decision, pp. 12-27; Rollo, pp. 49-64;]
(2) Sze Sook Wah, Sze Lai Cho and Sze Chun Yen are the legitimate children of Yao Kee with Sy Mat [CFI decision, pp. 28-31; Rollo. pp.
65-68;] and,
(3) Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy are the acknowledged illegitimate offsprings of Sy Kiat with
Asuncion Gillego [CFI decision, pp. 27-28; Rollo, pp. 64- 65.]
held if favor of the oppositors (petitioners herein) and appointed Sze Sook Wah as the administratrix of the intestate estate of the
deceased [CFI decision, pp. 68-69; Rollo, pp. 105-106.]
On appeal the Court of Appeals rendered a decision modifying that of the probate court, the dispositive portion of which reads:
162
IN VIEW OF THE FOREGOING, the decision of the lower Court is hereby MODIFIED and SET ASIDE and a new judgment rendered as
follows:
(1) Declaring petitioners Aida Sy-Gonzales, Manuel Sy, Teresita Sy- Bernabe and Rodolfo Sy acknowledged natural children of the
deceased Sy Kiat with Asuncion Gillego, an unmarried woman with whom he lived as husband and wife without benefit of marriage
for many years:
(2) Declaring oppositors Sze Sook Wah, Sze Lai Chu and Sze Chun Yen, the acknowledged natural children of the deceased Sy Kiat
with his Chinese wife Yao Kee, also known as Yui Yip, since the legality of the alleged marriage of Sy Mat to Yao Kee in China had not
been proven to be valid to the laws of the Chinese People's Republic of China (sic);
(3) Declaring the deed of sale executed by Sy Kiat on December 7, 1976 in favor of Tomas Sy (Exhibit "G-1", English translation of Exhibit
"G") of the Avenue Tractor and Diesel Parts Supply to be valid and accordingly, said property should be excluded from the estate of
the deceased Sy Kiat; and
(4) Affirming the appointment by the lower court of Sze Sook Wah as judicial administratrix of the estate of the deceased. [CA decision,
pp. 11-12; Rollo, pp. 36- 37.]
From said decision both parties moved for partial reconsideration, which was however denied by respondent court. They thus
interposed their respective appeals to this Court.
Private respondents filed a petition with this Court docketed as G.R. No. 56045 entitled "Aida Sy-Gonzales, Manuel Sy, Teresita Sy-
Bernabe and Rodolfo Sy v. Court of Appeals, Yao Kee, Sze Sook Wah, Sze Lai Cho and Sy Chun Yen" questioning paragraphs (3) and
(4) of the dispositive portion of the Court of Appeals' decision. The Supreme Court however resolved to deny the petition and the
motion for reconsideration. Thus on March 8, 1982 entry of judgment was made in G.R. No. 56045. **
The instant petition, on the other hand, questions paragraphs (1) and (2) of the dispositive portion of the decision of the Court of
Appeals. This petition was initially denied by the Supreme Court on June 22, 1981. Upon motion of the petitioners the Court in a
resolution dated September 16, 1981 reconsidered the denial and decided to give due course to this petition. Herein petitioners assign
the following as errors:
I. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THE MARRIAGE OF SY KIAT TO YAO YEE AS NOT HAVE (sic) BEEN
PROVEN VALID IN ACCORDANCE WITH LAWS OF THE PEOPLE'S REPUBLIC OF CHINA.
II. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING AIDA SY-GONZALES, MANUEL SY, TERESITA SY-BERNABE AND
RODOLFO SY AS NATURAL CHILDREN OF SY KIAT WITH ASUNCION GILLEGO. [Petition, p. 2; Rollo, p. 6.]
I. Petitioners argue that the marriage of Sy Kiat to Yao Kee in accordance with Chinese law and custom was conclusively proven. To
buttress this argument they rely on the following testimonial and documentary evidence.
First, the testimony of Yao Kee summarized by the trial court as follows:
Yao Kee testified that she was married to Sy Kiat on January 19, 1931 in Fookien, China; that she does not have a marriage certificate
because the practice during that time was for elders to agree upon the betrothal of their children, and in her case, her elder brother
was the one who contracted or entered into [an] agreement with the parents of her husband; that the agreement was that she and
Sy Mat would be married, the wedding date was set, and invitations were sent out; that the said agreement was complied with; that
she has five children with Sy Kiat, but two of them died; that those who are alive are Sze Sook Wah, Sze Lai Cho, and Sze Chun Yen, the
eldest being Sze Sook Wah who is already 38 years old; that Sze Sook Wah was born on November 7, 1939; that she and her husband,
Sy Mat, have been living in FooKien, China before he went to the Philippines on several occasions; that the practice during the time of
her marriage was a written document [is exchanged] just between the parents of the bride and the parents of the groom, or any elder
for that matter; that in China, the custom is that there is a go- between, a sort of marriage broker who is known to both parties who
would talk to the parents of the bride-to-be; that if the parents of the bride-to-be agree to have the groom-to-be their son in-law, then
they agree on a date as an engagement day; that on engagement day, the parents of the groom would bring some pieces of jewelry
to the parents of the bride-to-be, and then one month after that, a date would be set for the wedding, which in her case, the wedding
date to Sy Kiat was set on January 19, 1931; that during the wedding the bridegroom brings with him a couch (sic) where the bride
would ride and on that same day, the parents of the bride would give the dowry for her daughter and then the document would be
163
signed by the parties but there is no solemnizing officer as is known in the Philippines; that during the wedding day, the document is
signed only by the parents of the bridegroom as well as by the parents of the bride; that the parties themselves do not sign the
document; that the bride would then be placed in a carriage where she would be brought to the town of the bridegroom and before
departure the bride would be covered with a sort of a veil; that upon reaching the town of the bridegroom, the bridegroom takes
away the veil; that during her wedding to Sy Kiat (according to said Chinese custom), there were many persons present; that after Sy
Kiat opened the door of the carriage, two old ladies helped her go down the carriage and brought her inside the house of Sy Mat;
that during her wedding, Sy Chick, the eldest brother of Sy Kiat, signed the document with her mother; that as to the whereabouts of
that document, she and Sy Mat were married for 46 years already and the document was left in China and she doubt if that
document can still be found now; that it was left in the possession of Sy Kiat's family; that right now, she does not know the
whereabouts of that document because of the lapse of many years and because they left it in a certain place and it was already
eaten by the termites; that after her wedding with Sy Kiat, they lived immediately together as husband and wife, and from then on,
they lived together; that Sy Kiat went to the Philippines sometime in March or April in the same year they were married; that she went to
the Philippines in 1970, and then came back to China; that again she went back to the Philippines and lived with Sy Mat as husband
and wife; that she begot her children with Sy Kiat during the several trips by Sy Kiat made back to China. [CFI decision, pp. 13-15; Rollo,
pp. 50-52.]
Second, the testimony of Gan Ching, a younger brother of Yao Kee who stated that he was among the many people who attended
the wedding of his sister with Sy Kiat and that no marriage certificate is issued by the Chinese government, a document signed by the
parents or elders of the parties being sufficient [CFI decision, pp. 15-16; Rollo, pp.
52-53.]
Third, the statements made by Asuncion Gillego when she testified before the trial court to the effect that (a) Sy Mat was married to
Yao Kee according to Chinese custom; and, (b) Sy Kiat's admission to her that he has a Chinese wife whom he married according to
Chinese custom [CFI decision, p. 17; Rollo, p. 54.]
Fourth, Sy Kiat's Master Card of Registered Alien issued in Caloocan City on October 3, 1972 where the following entries are found:
"Marital status—Married"; "If married give name of spouses—Yao Kee"; "Address-China; "Date of marriage—1931"; and "Place of
marriage—China" [Exhibit "SS-1".]
Fifth, Sy Kiat's Alien Certificate of Registration issued in Manila on January 12, 1968 where the following entries are likewise found: "Civil
status—Married"; and, 'If married, state name and address of spouse—Yao Kee Chingkang, China" [Exhibit "4".]
And lastly, the certification issued in Manila on October 28, 1977 by the Embassy of the People's Republic of China to the effect that
"according to the information available at the Embassy Mr. Sy Kiat a Chinese national and Mrs. Yao Kee alias Yui Yip also Chinese were
married on January 19, 1931 in Fukien, the People's Republic of China" [Exhibit "5".]
These evidence may very well prove the fact of marriage between Yao Kee and Sy Kiat. However, the same do not suffice to establish
the validity of said marriage in accordance with Chinese law or custom.
Custom is defined as "a rule of conduct formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding
and obligatory" [In the Matter of the Petition for Authority to Continue Use of the Firm Name "Ozaeta, Romulo, de Leon, Mabanta and
Reyes", July 30, 1979, SCRA 3, 12 citing JBL Reyes & RC Puno, Outline of Phil. Civil Law, Fourth Ed., Vol. 1, p. 7.] The law requires that "a
custom must be proved as a fact, according to the rules of evidence" [Article 12, Civil Code.] On this score the Court had occasion to
state that "a local custom as a source of right can not be considered by a court of justice unless such custom is properly established by
competent evidence like any other fact" [Patriarca v. Orate, 7 Phil. 390, 395 (1907).] The same evidence, if not one of a higher degree,
should be required of a foreign custom.
The law on foreign marriages is provided by Article 71 of the Civil Code which states that:
Art. 71. All marriages performed outside the Philippines in accordance with the laws in force in the country where they were performed
and valid there as such, shall also be valid in this country, except bigamous, Polygamous, or incestuous marriages, as determined by
Philippine law. (Emphasis supplied.) ***
Construing this provision of law the Court has held that to establish a valid foreign marriage two things must be proven, namely: (1) the
existence of the foreign law as a question of fact; and (2) the alleged foreign marriage by convincing evidence [Adong v. Cheong
Seng Gee, 43 Phil. 43, 49 (1922).]
164
In proving a foreign law the procedure is provided in the Rules of Court. With respect to an unwritten foreign law, Rule 130 section 45
states that:
SEC. 45. Unwritten law.—The oral testimony of witnesses, skilled therein, is admissible as evidence of the unwritten law of a foreign
country, as are also printed and published books of reports of decisions of the courts of the foreign country, if proved to be commonly
admitted in such courts.
Proof of a written foreign law, on the other hand, is provided for under Rule 132 section 25, thus:
SEC. 25. Proof of public or official record.—An official record or an entry therein, when admissible for any purpose, may be evidenced
by an official publication thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and
accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in which the
record is kept is in a foreign country, the certificate may be made by a secretary of embassy or legation, consul general, consul, vice
consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is
kept and authenticated by the seal of his office.
The Court has interpreted section 25 to include competent evidence like the testimony of a witness to prove the existence of a written
foreign law [Collector of Internal Revenue v. Fisher 110 Phil. 686, 700-701 (1961) citing Willamette Iron and Steel Works v. Muzzal, 61 Phil.
471 (1935).]
In the case at bar petitioners did not present any competent evidence relative to the law and custom of China on marriage. The
testimonies of Yao and Gan Ching cannot be considered as proof of China's law or custom on marriage not only because they are
self-serving evidence, but more importantly, there is no showing that they are competent to testify on the subject matter. For failure to
prove the foreign law or custom, and consequently, the validity of the marriage in accordance with said law or custom, the marriage
between Yao Kee and Sy Kiat cannot be recognized in this jurisdiction.
Petitioners contend that contrary to the Court of Appeals' ruling they are not duty bound to prove the Chinese law on marriage as
judicial notice thereof had been taken by this Court in the case of Sy Joc Lieng v. Sy Quia [16 Phil. 137 (1910).]
This contention is erroneous. Well-established in this jurisdiction is the principle that Philippine courts cannot take judicial notice of
foreign laws. They must be alleged and proved as any other fact [Yam Ka Lim v. Collector of Customs, 30 Phil. 46, 48 (1915); Fluemer v.
Hix, 54 Phil. 610 (1930).]
Moreover a reading of said case would show that the party alleging the foreign marriage presented a witness, one Li Ung Bieng, to
prove that matrimonial letters mutually exchanged by the contracting parties constitute the essential requisite for a marriage to be
considered duly solemnized in China. Based on his testimony, which as found by the Court is uniformly corroborated by authors on the
subject of Chinese marriage, what was left to be decided was the issue of whether or not the fact of marriage in accordance with
Chinese law was duly proven [Sy Joc Lieng v. Sy Quia, supra., at p. 160.]
Further, even assuming for the sake of argument that the Court has indeed taken judicial notice of the law of China on marriage in the
aforecited case, petitioners however have not shown any proof that the Chinese law or custom obtaining at the time the Sy Joc Lieng
marriage was celebrated in 1847 was still the law when the alleged marriage of Sy Kiat to Yao Kee took place in 1931 or eighty-four
(84) years later.
Petitioners moreover cite the case of U.S. v. Memoracion [34 Phil. 633 (1916)] as being applicable to the instant case. They aver that
the judicial pronouncement in the Memoracion case, that the testimony of one of the contracting parties is competent evidence to
show the fact of marriage, holds true in this case.
The Memoracion case however is not applicable to the case at bar as said case did not concern a foreign marriage and the issue
posed was whether or not the oral testimony of a spouse is competent evidence to prove the fact of marriage in a complaint for
adultery.
Accordingly, in the absence of proof of the Chinese law on marriage, it should be presumed that it is the same as ours *** [Wong Woo
Yiu v. Vivo, G.R. No. L-21076, March 31, 1965, 13 SCRA 552, 555.] Since Yao Kee admitted in her testimony that there was no solemnizing
officer as is known here in the Philippines [See Article 56, Civil Code] when her alleged marriage to Sy Mat was celebrated [CFI
165
decision, p. 14; Rollo, p. 51], it therefore follows that her marriage to Sy Kiat, even if true, cannot be recognized in this jurisdiction [Wong
Woo Yiu v. Vivo, supra., pp. 555-556.]
II. The second issue raised by petitioners concerns the status of private respondents.
Respondent court found the following evidence of petitioners' filiation:
(1) Sy Kiat's Master Card of Registered Alien where the following are entered: "Children if any: give number of children—Four"; and,
"Name—All living in China" [Exhibit "SS-1";]
(2) the testimony of their mother Yao Kee who stated that she had five children with Sy Kiat, only three of whom are alive namely, Sze
Sook Wah, Sze Lai Chu and Sze Chin Yan [TSN, December 12, 1977, pp. 9-11;] and,
(3) an affidavit executed on March 22,1961 by Sy Kiat for presentation to the Local Civil Registrar of Manila to support Sze Sook Wah's
application for a marriage license, wherein Sy Kiat expressly stated that she is his daughter [Exhibit "3".]
Likewise on the record is the testimony of Asuncion Gillego that Sy Kiat told her he has three daughters with his Chinese wife, two of
whom—Sook Wah and Sze Kai Cho—she knows, and one adopted son [TSN, December 6,1977, pp. 87-88.]
However, as petitioners failed to establish the marriage of Yao Kee with Sy Mat according to the laws of China, they cannot be
accorded the status of legitimate children but only that of acknowledged natural children. Petitioners are natural children, it
appearing that at the time of their conception Yao Kee and Sy Kiat were not disqualified by any impediment to marry one another
[See Art. 269, Civil Code.] And they are acknowledged children of the deceased because of Sy Kiat's recognition of Sze Sook Wah
[Exhibit "3"] and its extension to Sze Lai Cho and Sy Chun Yen who are her sisters of the full blood [See Art. 271, Civil Code.]
Private respondents on the other hand are also the deceased's acknowledged natural children with Asuncion Gillego, a Filipina with
whom he lived for twenty-five (25) years without the benefit of marriage. They have in their favor their father's acknowledgment,
evidenced by a compromise agreement entered into by and between their parents and approved by the Court of First Instance on
February 12, 1974 wherein Sy Kiat not only acknowleged them as his children by Asuncion Gillego but likewise made provisions for their
support and future inheritance, thus:
xxx xxx xxx
2. The parties also acknowledge that they are common-law husband and wife and that out of such relationship, which they have
likewise decided to definitely and finally terminate effective immediately, they begot five children, namely: Aida Sy, born on May 30,
1950; Manuel Sy, born on July 1, 1953; Teresita Sy, born on January 28, 1955; Ricardo Sy now deceased, born on December 14, 1956;
and Rodolfo Sy, born on May 7, 1958.
3. With respect to the AVENUE TRACTOR AND DIESEL PARTS SUPPLY ... , the parties mutually agree and covenant that—
(a) The stocks and merchandize and the furniture and equipments ..., shall be divided into two equal shares between, and distributed
to, Sy Kiat who shall own
one-half of the total and the other half to Asuncion Gillego who shall transfer the same to their children, namely, Aida Sy, Manuel Sy,
Teresita Sy, and Rodolfo Sy.
(b) the business name and premises ... shall be retained by Sy Kiat. However, it shall be his obligation to give to the aforenamed
children an amount of One Thousand Pesos ( Pl,000.00 ) monthly out of the rental of the two doors of the same building now occupied
by Everett Construction.
xxx xxx xxx
(5) With respect to the acquisition, during the existence of the

common-law husband-and-wife relationship between the parties, of the real estates and properties registered and/or appearing in the
name of Asuncion Gillego ... , the parties mutually agree and covenant that the said real estates and properties shall be transferred in
equal shares to their children, namely, Aida Sy, Manuel Sy, Teresita Sy, and Rodolfo Sy, but to be administered by Asuncion Gillego
during her lifetime ... [Exhibit "D".] (Emphasis supplied.)
166
xxx xxx xxx
This compromise agreement constitutes a statement before a court of record by which a child may be voluntarily acknowledged [See
Art. 278, Civil Code.]
Petitioners further argue that the questions on the validity of Sy Mat's marriage to Yao Kee and the paternity and filiation of the parties
should have been ventilated in the Juvenile and Domestic Relations Court.
Specifically, petitioners rely on the following provision of Republic Act No. 5502, entitled "An Act Revising Rep. Act No. 3278, otherwise
known as the Charter of the City of Caloocan', with regard to the Juvenile and Domestic Relations Court:
SEC. 91-A. Creation and Jurisdiction of the Court.—
xxx xxx xxx
The provisions of the Judiciary Act to the contrary notwithstanding, the court shall have exclusive original jurisdiction to hear and
decide the following cases:
xxx xxx xxx
(2) Cases involving custody, guardianship, adoption, revocation of adoption, paternity and acknowledgment;
(3) Annulment of marriages, relief from marital obligations, legal separation of spouses, and actions for support;
(4) Proceedings brought under the provisions of title six and title seven, chapters one to three of the civil code;
xxx xxx xxx
and the ruling in the case of Bartolome v. Bartolome [G.R. No. L-23661, 21 SCRA 1324] reiterated in Divinagracia v. Rovira [G.R. No. L-
42615, 72 SCRA 307.]
With the enactment of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act of 1980, the Juvenile and
Domestic Relations Courts were abolished. Their functions and jurisdiction are now vested with the Regional Trial Courts [See Section 19
(7), B.P. Blg. 129 and Divinagracia v. Belosillo, G.R. No. L-47407, August 12, 1986, 143 SCRA 356, 360] hence it is no longer necessary to
pass upon the issue of jurisdiction raised by petitioners.
Moreover, even without the exactment of Batas Pambansa Blg. 129 we find in Rep. Act No. 5502 sec. 91-A last paragraph that:
xxx xxx xxx
If any question involving any of the above matters should arise as an incident in any case pending in the ordinary court, said incident
shall be determined in the main case.
xxx xxx xxx
As held in the case of Divinagracia v. Rovira [G.R. No. L42615. August 10, 1976, 72 SCRA 307]:
xxx xxx xxx
It is true that under the aforequoted section 1 of Republic Act No. 4834 **** a case involving paternity and acknowledgment may be
ventilated as an incident in the intestate or testate proceeding (See Baluyot vs. Ines Luciano, L-42215, July 13, 1976). But that legal
provision presupposes that such an administration proceeding is pending or existing and has not been terminated. [at pp. 313-314.]
(Emphasis supplied.)
167
xxx xxx xxx
The reason for ths rule is not only "to obviate the rendition of conflicting rulings on the same issue by the Court of First Instance and the
Juvenile and Domestic Relations Court" [Vda. de Baluyut v. Luciano, G.R. No. L-42215, July 13, 1976, 72 SCRA 52, 63] but more
importantly to prevent multiplicity of suits. Accordingly, this Court finds no reversible error committed by respondent court.
WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
27. Willamette Iron & Steel Works v. A.H. Muzzal, G.R. No. L-42538, May 21, 1935 Gonzales, Jashera
G.R. No. L-42538 May 21, 1935
WILLAMETTE IRON & STEEL WORKS, plaintiff-appellee,
vs.
A.H. MUZZAL, defendant-appellant.
Sidney C. Schwarzkopf and Eduardo D. Enriquez for appellant.
John R. McFie, Jr., for appellee.
GODDARD, J.:
This is an appeal from a decision of the Court of First Instance of Zamboanga, the dispositive part of which reads:
In view of the considerations above stated, judgment is hereby entered in favor of the plaintiff, ordering the defendant, for
the first cause of action, to pay to plaintiff the sum of P2,837.34, with interest thereon at the rate of 6 per cent per annum from
March 11, 1929, until paid, and to pay also the amount of P1,590.63, for the second cause of action, with interest thereon at 7
per cent per annum from April 8, 1929, until paid. The defendant is further ordered to pay the amount of P500 as reasonable
attorney's fees in prosecuting this action, and to pay the costs of these proceedings.
This case involves the liability of the defendant, a former resident of the State of California, now residing in the Philippine Islands, for
obligations contracted by a California corporation of which he was a stockholder at the time said obligations were contracted with
the plaintiff-appellee in this case.
The section of the Civil Code of California under which the plaintiff seeks to recover reads:
SEC. 322. Each stockholder of a corporation is individually and personally liable for such proportion of all its debts and liabilities
contracted or incurred during the time he was a stockholder as the amount of stock or shares owned by him bears to the
whole of the subscribed capital stock or shares of the corporation. Any creditor of the corporation may institute joint or
several actions against any of its stockholders, for the proportion of his claim payable by each, and in such action the court
must (1) ascertain the proportion of the claim or debt for which each defendant is liable, and (2) a several judgment must be
rendered against each, in conformity therewith. If any stockholder pays his proportion of any debt due from the corporation,
incurred while he was such stockholder, he is relieved from any further personal liability for such debt, and if an action has
been brought against him upon such debt, it must be dismissed, as to him, upon his paying the costs, or such proportion
thereof as may be properly chargeable against him. The liability of each stockholder is determined by the amount of stock or
shares owned by him at the time the debt or liability was incurred; and such liability is not released by any subsequent transfer
of stock.
The defendant-appellant makes the following assignments of error:
I. The lower court erred in holding that the defendant was the holder of 1,432 shares of the capital stock of the Meyer-Muzzal
Company.
II. The lower court erred in finding that plaintiff has proven the existence of the foreign law involved in this action.
168
III. The lower court erred in enforcing the law of California.
IV. The lower court erred in rendering judgment against the defendant.
As to the first assignment of error the witness Stanley H. Hermann, a certified public accountant, testified that he knows that the Meyer-
Muzzal Company is a corporation and further testified as follows:
I became acquainted with the corporation by reason of being employed by it in October, November and December of 1929
as a certified public accountant and auditor to personally examine the company's books of account, stock and other
records of the company for the purpose of certifying, if possible, to the correctness of a statement of the financial condition
of the company on March 31, 1929.
xxx xxx xxx
8. Please state, if you know, whether or not one A.H. Muzzal was a stockholder of Meyer-Muzzal Company on November 5,
1928 and December 22, 1928, and if he was, please state the number and value of the shares of capital stock of Meyer-
Muzzal Company subscribed and owned by said A.H. Muzzal on November 5, 1928 and December 22, 1928?
A. Yes, Mr. A.H. Muzzal was a stockholder of the Meyer-Muzzal Company on the dates specified. Fourteen hundred thirty-
three shares of the capital stock of Meyer-Muzzal Company of the par value of $10 each were subscribed and owned by said
A.H. Muzzal on November 5th, 1928 and on December 22nd, 1928, and said shares were issued to and standing in the name
of A. H. Muzzal on the books of said company at said times.
9. If, by reason of the loss, destruction and/or disappearance of the stock and other corporate records of the Meyer-Muzzal
Company since the time you had occasion to examine them, you have been unable to make reference thereto in answering
the questions asked of you in this deposition, please answer each and all of said questions by reference to any documents or
working sheets which you may be prepared upon the occasion of your examining and/or auditing the books of account,
stock and other records of the Meyer-Muzzal Company.
A. By reference to my working papers which I made at the time I examined the books of account and stock records of
Meyer-Muzzal Company in October, November, December, 1929, and which working papers are in my possession, I find and
can state accordingly that these working papers show what the stock and other records of said Meyer-Muzzal Company
recorded in regard to the matters contained in questions No. 6, No. 7 and No. 8 and I can state accordingly from my
examination of said records and by reference to my working papers that I know who the stockholders of Meyer-Muzzal
company were; that the amount of the subscribed capital stock of said Meyer-Muzzal Company on said dates was 5,000
shares of the par value of $10 each, and that A.H. Muzzal was a stockholder of the Meyer-Muzzal Company on the dates
specified and that fourteen hundred thirty-three shares of the capital stock of Meyer-Muzzal Company of the par value of $10
each were subscribed and owned by A.H. Muzzal on November 5, 1928 and on December 22nd, 1928 and said shares were
issued to and standing in the name of A.H. Muzzal on the books of said company at said times.
The above sufficiently establishes the fact that the defendant was the owner of 1,433 shares of stock of the corporation Meyer-Muzzal
Company when it contracted the obligations alleged in the complaint.
As to the second assignment of error Mr. Arthur W. Bolton, an attorney-at-law of San Francisco, California, since the year 1918, under
oath, quoted verbatim section 322 of the California Civil Code and stated that said section was in force at the time the obligations of
the defendant to the plaintiff were incurred, i. e., on November 5, 1928 and December 22, 1928. This evidence sufficiently established
the fact that the section in question was the law of the State of California on the above dates. A reading of sections 300 and 301 of our
Code of Civil Procedure will convince one that these sections do not exclude the presentation of other competent evidence to prove
the existence of a foreign law.
"The foreign law is a matter of fact ... You ask the witness what the law is; he may from his recollection, or on producing and referring to
books, say what it is." (Lord Campbell concurring in an opinion of Lord Chief Justice Denman in a well known English case where a
witness was called upon to prove the Roman laws of marriage and was permitted to testify, though he referred to a book containing
the decrees of the Council of Trent as controlling, Jones on Evidence, Second Edition, Volume 4, pages 3148-3152.) Aside from the
testimony of Attorney Bolton Ragland's Annotated Civil Code of California was presented as evidence. This book contains that State's
Civil Code as adopted March 21, 1872, with the subsequent official statute amendments to and including the year 1929.
In the third and fourth assignments of error the appellant argues that since the law of California, as to the liability of stockholders of a
corporation, is different from and inconsistent with the Philippine Corporation Law the courts here should not impose liability provided in
that law upon a resident of these Islands who is a stockholder of a California corporation. The herein defendant is chargeable with
notice of the law of California as to the liability of stockholders for debt of a corporation proportionate to their stock holdings, in view of
the fact that he was one of the incorporators of the Meyer-Muzzal Company in the year 1924 and was still a stockholder in that
company in the year 1928. Exhibit 10 of the plaintiff is a certified company of the articles of incorporation of Meyer-Muzzal Company in
which it appears that that company was incorporated on August 22, 1924, and that the incorporators were A.H. Muzzal, Leo W. Meyer
169
and James Rolph, Jr., "all of whom are residents and citizens of the State of California." The defendant cannot now escape liability by
alleging that the California law is unjust and different from the inconsistent with the Philippine Corporation Law.
The judgment of the trial court is affirmed with costs in both instances against the defendant-appellant.
Malcolm, Abad Santos, Hull, Vickers, and Diaz, JJ., concur.
28. Collector of Internal Revenue v. Fisher, G.R. No. L-11622, L-11668, [January 28, 1961], 110 PHIL 686-711 Guinto
G.R. No. L-11622 January 28, 1961
THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
DOUGLAS FISHER AND BETTINA FISHER, and the COURT OF TAX APPEALS, respondents.
x---------------------------------------------------------x
G.R. No. L-11668 January 28, 1961.
DOUGLAS FISHER AND BETTINA FISHER, petitioner,
vs.
THE COLLECTOR OF INTERNAL REVENUE, and the COURT OF TAX APPEALS, respondents.
BARRERA, J.:
This case relates to the determination and settlement of the hereditary estate left by the deceased Walter G. Stevenson, and the laws
applicable thereto. Walter G. Stevenson (born in the Philippines on August 9, 1874 of British parents and married in the City of Manila on
January 23, 1909 to Beatrice Mauricia Stevenson another British subject) died on February 22, 1951 in San Francisco, California, U.S.A.
whereto he and his wife moved and established their permanent residence since May 10, 1945. In his will executed in San Francisco on
May 22, 1947, and which was duly probated in the Superior Court of California on April 11, 1951, Stevenson instituted his wife Beatrice as
his sole heiress to the following real and personal properties acquired by the spouses while residing in the Philippines, described and
preliminary assessed as follows:
Gross Estate
Real Property — 2 parcels of land in Baguio,

covered by T.C.T. Nos. 378 and 379 P43,500.00
Personal Property
(1) 177 shares of stock of Canacao Estate at P10.00

each 1,770.00
(2) 210,000 shares of stock of Mindanao Mother

Lode Mines, Inc. at P0.38 per share 79,800.00
(3) Cash credit with Canacao Estate Inc. 4,870.88
(4) Cash, with the Chartered Bank of India, Australia

& China 851.97
Total Gross Assets P130,792.85
On May 22, 1951, ancillary administration proceedings were instituted in the Court of First Instance of Manila for the settlement of the
estate in the Philippines. In due time Stevenson's will was duly admitted to probate by our court and Ian Murray Statt was appointed
ancillary administrator of the estate, who on July 11, 1951, filed a preliminary estate and inheritance tax return with the reservation of
170
having the properties declared therein finally appraised at their values six months after the death of Stevenson. Preliminary return was
made by the ancillary administrator in order to secure the waiver of the Collector of Internal Revenue on the inheritance tax due on
the 210,000 shares of stock in the Mindanao Mother Lode Mines Inc. which the estate then desired to dispose in the United States.
Acting upon said return, the Collector of Internal Revenue accepted the valuation of the personal properties declared therein, but
increased the appraisal of the two parcels of land located in Baguio City by fixing their fair market value in the amount of P52.200.00,
instead of P43,500.00. After allowing the deductions claimed by the ancillary administrator for funeral expenses in the amount of
P2,000.00 and for judicial and administration expenses in the sum of P5,500.00, the Collector assessed the state the amount of P5,147.98
for estate tax and P10,875,26 or inheritance tax, or a total of P16,023.23. Both of these assessments were paid by the estate on June 6,
1952.
On September 27, 1952, the ancillary administrator filed in amended estate and inheritance tax return in pursuance f his reservation
made at the time of filing of the preliminary return and for the purpose of availing of the right granted by section 91 of the National
Internal Revenue Code.
In this amended return the valuation of the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. was reduced from 0.38 per
share, as originally declared, to P0.20 per share, or from a total valuation of P79,800.00 to P42,000.00. This change in price per share of
stock was based by the ancillary administrator on the market notation of the stock obtaining at the San Francisco California) Stock
Exchange six months from the death of Stevenson, that is, As of August 22, 1931. In addition, the ancillary administrator made claim for
the following deductions:
Funeral expenses ($1,04326) P2,086.52
Judicial Expenses:
(a) Administrator's Fee P1,204.34
(b) Attorney's Fee 6.000.00
(c) Judicial and Administration expenses as

of August 9, 1952 1,400.05
8,604.39
Real Estate Tax for 1951 on Baguio real

properties (O.R. No. B-1 686836) 652.50
Claims against the estate:
($5,000.00) P10,000.00 P10,000.00
Plus: 4% int. p.a. from Feb. 2 to 22, 1951 22.47 10,022.47
Sub-Total P21,365.88
In the meantime, on December 1, 1952, Beatrice Mauricia Stevenson assigned all her rights and interests in the estate to the spouses,
Douglas and Bettina Fisher, respondents herein.
On September 7, 1953, the ancillary administrator filed a second amended estate and inheritance tax return (Exh. "M-N"). This return
declared the same assets of the estate stated in the amended return of September 22, 1952, except that it contained new claims for
additional exemption and deduction to wit: (1) deduction in the amount of P4,000.00 from the gross estate of the decedent as
provided for in Section 861 (4) of the U.S. Federal Internal Revenue Code which the ancillary administrator averred was allowable by
way of the reciprocity granted by Section 122 of the National Internal Revenue Code, as then held by the Board of Tax Appeals in
case No. 71 entitled "Housman vs. Collector," August 14, 1952; and (2) exemption from the imposition of estate and inheritance taxes
on the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. also pursuant to the reciprocity proviso of Section 122 of the
National Internal Revenue Code. In this last return, the estate claimed that it was liable only for the amount of P525.34 for estate tax
and P238.06 for inheritance tax and that, as a consequence, it had overpaid the government. The refund of the amount of P15,259.83,
allegedly overpaid, was accordingly requested by the estate. The Collector denied the claim. For this reason, action was commenced
in the Court of First Instance of Manila by respondents, as assignees of Beatrice Mauricia Stevenson, for the recovery of said amount.
Pursuant to Republic Act No. 1125, the case was forwarded to the Court of Tax Appeals which court, after hearing, rendered decision
the dispositive portion of which reads as follows:
171
In fine, we are of the opinion and so hold that: (a) the one-half (½) share of the surviving spouse in the conjugal partnership
property as diminished by the obligations properly chargeable to such property should be deducted from the net estate of
the deceased Walter G. Stevenson, pursuant to Section 89-C of the National Internal Revenue Code; (b) the intangible
personal property belonging to the estate of said Stevenson is exempt from inheritance tax, pursuant to the provision of
section 122 of the National Internal Revenue Code in relation to the California Inheritance Tax Law but decedent's estate is
not entitled to an exemption of P4,000.00 in the computation of the estate tax; (c) for purposes of estate and inheritance
taxation the Baguio real estate of the spouses should be valued at P52,200.00, and 210,000 shares of stock in the Mindanao
Mother Lode Mines, Inc. should be appraised at P0.38 per share; and (d) the estate shall be entitled to a deduction of
P2,000.00 for funeral expenses and judicial expenses of P8,604.39.
From this decision, both parties appealed.
The Collector of Internal Revenue, hereinafter called petitioner assigned four errors allegedly committed by the trial court, while the
assignees, Douglas and Bettina Fisher hereinafter called respondents, made six assignments of error. Together, the assigned errors raise
the following main issues for resolution by this Court:
(1) Whether or not, in determining the taxable net estate of the decedent, one-half (½) of the net estate should be deducted
therefrom as the share of tile surviving spouse in accordance with our law on conjugal partnership and in relation to section 89 (c) of
the National Internal revenue Code;
(2) Whether or not the estate can avail itself of the reciprocity proviso embodied in Section 122 of the National Internal Revenue Code
granting exemption from the payment of estate and inheritance taxes on the 210,000 shares of stock in the Mindanao Mother Lode
Mines Inc.;
(3) Whether or not the estate is entitled to the deduction of P4,000.00 allowed by Section 861, U.S. Internal Revenue Code in relation to
section 122 of the National Internal Revenue Code;
(4) Whether or not the real estate properties of the decedent located in Baguio City and the 210,000 shares of stock in the Mindanao
Mother Lode Mines, Inc., were correctly appraised by the lower court;
(5) Whether or not the estate is entitled to the following deductions: P8,604.39 for judicial and administration expenses; P2,086.52 for
funeral expenses; P652.50 for real estate taxes; and P10,0,22.47 representing the amount of indebtedness allegedly incurred by the
decedent during his lifetime; and
(6) Whether or not the estate is entitled to the payment of interest on the amount it claims to have overpaid the government and to be
refundable to it.
In deciding the first issue, the lower court applied a well-known doctrine in our civil law that in the absence of any ante-nuptial
agreement, the contracting parties are presumed to have adopted the system of conjugal partnership as to the properties acquired
during their marriage. The application of this doctrine to the instant case is being disputed, however, by petitioner Collector of Internal
Revenue, who contends that pursuant to Article 124 of the New Civil Code, the property relation of the spouses Stevensons ought not
to be determined by the Philippine law, but by the national law of the decedent husband, in this case, the law of England. It is alleged
by petitioner that English laws do not recognize legal partnership between spouses, and that what obtains in that jurisdiction is another
regime of property relation, wherein all properties acquired during the marriage pertain and belong Exclusively to the husband. In
further support of his stand, petitioner cites Article 16 of the New Civil Code (Art. 10 of the old) to the effect that in testate and intestate
proceedings, the amount of successional rights, among others, is to be determined by the national law of the decedent.
In this connection, let it be noted that since the mariage of the Stevensons in the Philippines took place in 1909, the applicable law is
Article 1325 of the old Civil Code and not Article 124 of the New Civil Code which became effective only in 1950. It is true that both
articles adhere to the so-called nationality theory of determining the property relation of spouses where one of them is a foreigner and
they have made no prior agreement as to the administration disposition, and ownership of their conjugal properties. In such a case,
the national law of the husband becomes the dominant law in determining the property relation of the spouses. There is, however, a
difference between the two articles in that Article 124 1 of the new Civil Code expressly provides that it shall be applicable regardless of
whether the marriage was celebrated in the Philippines or abroad while Article 1325 2 of the old Civil Code is limited to marriages
contracted in a foreign land.
It must be noted, however, that what has just been said refers to mixed marriages between a Filipino citizen and a foreigner. In the
instant case, both spouses are foreigners who married in the Philippines. Manresa,3 in his Commentaries, has this to say on this point:
La regla establecida en el art. 1.315, se refiere a las capitulaciones otorgadas en Espana y entre espanoles. El 1.325, a las
celebradas en el extranjero cuando alguno de los conyuges es espanol. En cuanto a la regla procedente cuando dos
extranjeros se casan en Espana, o dos espanoles en el extranjero hay que atender en el primer caso a la legislacion de pais
a que aquellos pertenezean, y en el segundo, a las reglas generales consignadas en los articulos 9 y 10 de nuestro Codigo.
(Emphasis supplied.)
172
If we adopt the view of Manresa, the law determinative of the property relation of the Stevensons, married in 1909, would be the
English law even if the marriage was celebrated in the Philippines, both of them being foreigners. But, as correctly observed by the Tax
Court, the pertinent English law that allegedly vests in the decedent husband full ownership of the properties acquired during the
marriage has not been proven by petitioner. Except for a mere allegation in his answer, which is not sufficient, the record is bereft of
any evidence as to what English law says on the matter. In the absence of proof, the Court is justified, therefore, in indulging in what
Wharton calls "processual presumption," in presuming that the law of England on this matter is the same as our law. 4
Nor do we believe petitioner can make use of Article 16 of the New Civil Code (art. 10, old Civil Code) to bolster his stand. A reading of
Article 10 of the old Civil Code, which incidentally is the one applicable, shows that it does not encompass or contemplate to govern
the question of property relation between spouses. Said article distinctly speaks of amount of successional rights and this term, in
speaks in our opinion, properly refers to the extent or amount of property that each heir is legally entitled to inherit from the estate
available for distribution. It needs to be pointed out that the property relation of spouses, as distinguished from their successional rights,
is governed differently by the specific and express provisions of Title VI, Chapter I of our new Civil Code (Title III, Chapter I of the old Civil
Code.) We, therefore, find that the lower court correctly deducted the half of the conjugal property in determining the hereditary
estate left by the deceased Stevenson.
On the second issue, petitioner disputes the action of the Tax Court in the exempting the respondents from paying inheritance tax on
the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. in virtue of the reciprocity proviso of Section 122 of the National
Internal Revenue Code, in relation to Section 13851 of the California Revenue and Taxation Code, on the ground that: (1) the said
proviso of the California Revenue and Taxation Code has not been duly proven by the respondents; (2) the reciprocity exemptions
granted by section 122 of the National Internal Revenue Code can only be availed of by residents of foreign countries and not of
residents of a state in the United States; and (3) there is no "total" reciprocity between the Philippines and the state of California in that
while the former exempts payment of both estate and inheritance taxes on intangible personal properties, the latter only exempts the
payment of inheritance tax..
To prove the pertinent California law, Attorney Allison Gibbs, counsel for herein respondents, testified that as an active member of the
California Bar since 1931, he is familiar with the revenue and taxation laws of the State of California. When asked by the lower court to
state the pertinent California law as regards exemption of intangible personal properties, the witness cited article 4, section 13851 (a)
and (b) of the California Internal and Revenue Code as published in Derring's California Code, a publication of the Bancroft-Whitney
Company inc. And as part of his testimony, a full quotation of the cited section was offered in evidence as Exhibits "V-2" by the
respondents.
It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of
them.5 Like any other fact, they must be alleged and proved. 6
Section 41, Rule 123 of our Rules of Court prescribes the manner of proving foreign laws before our tribunals. However, although we
believe it desirable that these laws be proved in accordance with said rule, we held in the case of Willamette Iron and Steel Works v.
Muzzal, 61 Phil. 471, that "a reading of sections 300 and 301 of our Code of Civil Procedure (now section 41, Rule 123) will convince one
that these sections do not exclude the presentation of other competent evidence to prove the existence of a foreign law." In that
case, we considered the testimony of an attorney-at-law of San Francisco, California who quoted verbatim a section of California Civil
Code and who stated that the same was in force at the time the obligations were contracted, as sufficient evidence to establish the
existence of said law. In line with this view, we find no error, therefore, on the part of the Tax Court in considering the pertinent
California law as proved by respondents' witness.
We now take up the question of reciprocity in exemption from transfer or death taxes, between the State of California and the
Philippines.F
Section 122 of our National Internal Revenue Code, in pertinent part, provides:
... And, provided, further, That no tax shall be collected under this Title in respect of intangible personal property (a) if the
decedent at the time of his death was a resident of a foreign country which at the time of his death did not impose a transfer
of tax or death tax of any character in respect of intangible personal property of citizens of the Philippines not residing in that
foreign country, or (b) if the laws of the foreign country of which the decedent was a resident at the time of his death allow a
similar exemption from transfer taxes or death taxes of every character in respect of intangible personal property owned by
citizens of the Philippines not residing in that foreign country." (Emphasis supplied).
On the other hand, Section 13851 of the California Inheritance Tax Law, insofar as pertinent, reads:.
"SEC. 13851, Intangibles of nonresident: Conditions. Intangible personal property is exempt from the tax imposed by this part if
the decedent at the time of his death was a resident of a territory or another State of the United States or of a foreign state or
country which then imposed a legacy, succession, or death tax in respect to intangible personal property of its own residents,
but either:.
(a) Did not impose a legacy, succession, or death tax of any character in respect to intangible personal property of residents
of this State, or
173
(b) Had in its laws a reciprocal provision under which intangible personal property of a non-resident was exempt from legacy,
succession, or death taxes of every character if the Territory or other State of the United States or foreign state or country in
which the nonresident resided allowed a similar exemption in respect to intangible personal property of residents of the
Territory or State of the United States or foreign state or country of residence of the decedent." (Id.)
It is clear from both these quoted provisions that the reciprocity must be total, that is, with respect to transfer or death taxes of any and
every character, in the case of the Philippine law, and to legacy, succession, or death taxes of any and every character, in the case of
the California law. Therefore, if any of the two states collects or imposes and does not exempt any transfer, death, legacy, or
succession tax of any character, the reciprocity does not work. This is the underlying principle of the reciprocity clauses in both laws.
In the Philippines, upon the death of any citizen or resident, or non-resident with properties therein, there are imposed upon his estate
and its settlement, both an estate and an inheritance tax. Under the laws of California, only inheritance tax is imposed. On the other
hand, the Federal Internal Revenue Code imposes an estate tax on non-residents not citizens of the United States, 7 but does not
provide for any exemption on the basis of reciprocity. Applying these laws in the manner the Court of Tax Appeals did in the instant
case, we will have a situation where a Californian, who is non-resident in the Philippines but has intangible personal properties here, will
the subject to the payment of an estate tax, although exempt from the payment of the inheritance tax. This being the case, will a
Filipino, non-resident of California, but with intangible personal properties there, be entitled to the exemption clause of the California
law, since the Californian has not been exempted from every character of legacy, succession, or death tax because he is, under our
law, under obligation to pay an estate tax? Upon the other hand, if we exempt the Californian from paying the estate tax, we do not
thereby entitle a Filipino to be exempt from a similar estate tax in California because under the Federal Law, which is equally
enforceable in California he is bound to pay the same, there being no reciprocity recognized in respect thereto. In both instances, the
Filipino citizen is always at a disadvantage. We do not believe that our legislature has intended such an unfair situation to the detriment
of our own government and people. We, therefore, find and declare that the lower court erred in exempting the estate in question
from payment of the inheritance tax.
We are not unaware of our ruling in the case of Collector of Internal Revenue vs. Lara (G.R. Nos. L-9456 & L-9481, prom. January 6, 1958,
54 O.G. 2881) exempting the estate of the deceased Hugo H. Miller from payment of the inheritance tax imposed by the Collector of
Internal Revenue. It will be noted, however, that the issue of reciprocity between the pertinent provisions of our tax law and that of the
State of California was not there squarely raised, and the ruling therein cannot control the determination of the case at bar. Be that as
it may, we now declare that in view of the express provisions of both the Philippine and California laws that the exemption would apply
only if the law of the other grants an exemption from legacy, succession, or death taxes of every character, there could not be partial
reciprocity. It would have to be total or none at all.
With respect to the question of deduction or reduction in the amount of P4,000.00 based on the U.S. Federal Estate Tax Law which is
also being claimed by respondents, we uphold and adhere to our ruling in the Lara case (supra) that the amount of $2,000.00 allowed
under the Federal Estate Tax Law is in the nature of a deduction and not of an exemption regarding which reciprocity cannot be
claimed under the provision of Section 122 of our National Internal Revenue Code. Nor is reciprocity authorized under the Federal
Law. .
On the issue of the correctness of the appraisal of the two parcels of land situated in Baguio City, it is contended that their assessed
values, as appearing in the tax rolls 6 months after the death of Stevenson, ought to have been considered by petitioner as their fair
market value, pursuant to section 91 of the National Internal Revenue Code. It should be pointed out, however, that in accordance
with said proviso the properties are required to be appraised at their fair market value and the assessed value thereof shall be
considered as the fair market value only when evidence to the contrary has not been shown. After all review of the record, we are
satisfied that such evidence exists to justify the valuation made by petitioner which was sustained by the tax court, for as the tax court
aptly observed:
"The two parcels of land containing 36,264 square meters were valued by the administrator of the estate in the Estate and
Inheritance tax returns filed by him at P43,500.00 which is the assessed value of said properties. On the other hand, defendant
appraised the same at P52,200.00. It is of common knowledge, and this Court can take judicial notice of it, that assessments
for real estate taxation purposes are very much lower than the true and fair market value of the properties at a given time
and place. In fact one year after decedent's death or in 1952 the said properties were sold for a price of P72,000.00 and there
is no showing that special or extraordinary circumstances caused the sudden increase from the price of P43,500.00, if we
were to accept this value as a fair and reasonable one as of 1951. Even more, the counsel for plaintiffs himself admitted in
open court that he was willing to purchase the said properties at P2.00 per square meter. In the light of these facts we believe
and therefore hold that the valuation of P52,200.00 of the real estate in Baguio made by defendant is fair, reasonable and
justified in the premises." (Decision, p. 19).
In respect to the valuation of the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc., (a domestic corporation),
respondents contend that their value should be fixed on the basis of the market quotation obtaining at the San Francisco (California)
Stock Exchange, on the theory that the certificates of stocks were then held in that place and registered with the said stock exchange.
We cannot agree with respondents' argument. The situs of the shares of stock, for purposes of taxation, being located here in the
Philippines, as respondents themselves concede and considering that they are sought to be taxed in this jurisdiction, consistent with the
exercise of our government's taxing authority, their fair market value should be taxed on the basis of the price prevailing in our country.
174
Upon the other hand, we find merit in respondents' other contention that the said shares of stock commanded a lesser value at the
Manila Stock Exchange six months after the death of Stevenson. Through Atty. Allison Gibbs, respondents have shown that at that time
a share of said stock was bid for at only P.325 (p. 103, t.s.n.). Significantly, the testimony of Atty. Gibbs in this respect has never been
questioned nor refuted by petitioner either before this court or in the court below. In the absence of evidence to the contrary, we are,
therefore, constrained to reverse the Tax Court on this point and to hold that the value of a share in the said mining company on
August 22, 1951 in the Philippine market was P.325 as claimed by respondents..
It should be noted that the petitioner and the Tax Court valued each share of stock of P.38 on the basis of the declaration made by
the estate in its preliminary return. Patently, this should not have been the case, in view of the fact that the ancillary administrator had
reserved and availed of his legal right to have the properties of the estate declared at their fair market value as of six months from the
time the decedent died..
On the fifth issue, we shall consider the various deductions, from the allowance or disallowance of which by the Tax Court, both
petitioner and respondents have appealed..
Petitioner, in this regard, contends that no evidence of record exists to support the allowance of the sum of P8,604.39 for the following
expenses:.
1) Administrator's fee P1,204.34
2) Attorney's fee 6,000.00
3) Judicial and Administrative expenses 2,052.55
Total Deductions P8,604.39
An examination of the record discloses, however, that the foregoing items were considered deductible by the Tax Court on the basis of
their approval by the probate court to which said expenses, we may presume, had also been presented for consideration. It is to be
supposed that the probate court would not have approved said items were they not supported by evidence presented by the estate.
In allowing the items in question, the Tax Court had before it the pertinent order of the probate court which was submitted in evidence
by respondents. (Exh. "AA-2", p. 100, record). As the Tax Court said, it found no basis for departing from the findings of the probate
court, as it must have been satisfied that those expenses were actually incurred. Under the circumstances, we see no ground to
reverse this finding of fact which, under Republic Act of California National Association, which it would appear, that while still living,
Walter G. Stevenson obtained we are not inclined to pass upon the claim of respondents in respect to the additional amount of P86.52
for funeral expenses which was disapproved by the court a quo for lack of evidence.
In connection with the deduction of P652.50 representing the amount of realty taxes paid in 1951 on the decedent's two parcels of
land in Baguio City, which respondents claim was disallowed by the Tax Court, we find that this claim has in fact been allowed. What
happened here, which a careful review of the record will reveal, was that the Tax Court, in itemizing the liabilities of the estate, viz:
1) Administrator's fee P1,204.34
2) Attorney's fee 6,000.00
3) Judicial and Administration expenses as of August 9, 1952 2,052.55
Total P9,256.89
added the P652.50 for realty taxes as a liability of the estate, to the P1,400.05 for judicial and administration expenses approved by the
court, making a total of P2,052.55, exactly the same figure which was arrived at by the Tax Court for judicial and administration
expenses. Hence, the difference between the total of P9,256.98 allowed by the Tax Court as deductions, and the P8,604.39 as found
by the probate court, which is P652.50, the same amount allowed for realty taxes. An evident oversight has involuntarily been made in
omitting the P2,000.00 for funeral expenses in the final computation. This amount has been expressly allowed by the lower court and
there is no reason why it should not be. .
We come now to the other claim of respondents that pursuant to section 89(b) (1) in relation to section 89(a) (1) (E) and section 89(d),
National Internal Revenue Code, the amount of P10,022.47 should have been allowed the estate as a deduction, because it
represented an indebtedness of the decedent incurred during his lifetime. In support thereof, they offered in evidence a duly certified
claim, presented to the probate court in California by the Bank of California National Association, which it would appear, that while still
living, Walter G. Stevenson obtained a loan of $5,000.00 secured by pledge on 140,000 of his shares of stock in the Mindanao Mother
Lode Mines, Inc. (Exhs. "Q-Q4", pp. 53-59, record). The Tax Court disallowed this item on the ground that the local probate court had
175
not approved the same as a valid claim against the estate and because it constituted an indebtedness in respect to intangible
personal property which the Tax Court held to be exempt from inheritance tax.
For two reasons, we uphold the action of the lower court in disallowing the deduction.
Firstly, we believe that the approval of the Philippine probate court of this particular indebtedness of the decedent is necessary. This is
so although the same, it is averred has been already admitted and approved by the corresponding probate court in California, situs of
the principal or domiciliary administration. It is true that we have here in the Philippines only an ancillary administration in this case, but,
it has been held, the distinction between domiciliary or principal administration and ancillary administration serves only to distinguish
one administration from the other, for the two proceedings are separate and independent. 8 The reason for the ancillary administration
is that, a grant of administration does not ex proprio vigore, have any effect beyond the limits of the country in which it was granted.
Hence, we have the requirement that before a will duly probated outside of the Philippines can have effect here, it must first be
proved and allowed before our courts, in much the same manner as wills originally presented for allowance therein. 9 And the estate
shall be administered under letters testamentary, or letters of administration granted by the court, and disposed of according to the will
as probated, after payment of just debts and expenses of administration. 10 In other words, there is a regular administration under the
control of the court, where claims must be presented and approved, and expenses of administration allowed before deductions from
the estate can be authorized. Otherwise, we would have the actuations of our own probate court, in the settlement and distribution of
the estate situated here, subject to the proceedings before the foreign court over which our courts have no control. We do not believe
such a procedure is countenanced or contemplated in the Rules of Court.
Another reason for the disallowance of this indebtedness as a deduction, springs from the provisions of Section 89, letter (d), number
(1), of the National Internal Revenue Code which reads:
(d) Miscellaneous provisions — (1) No deductions shall be allowed in the case of a non-resident not a citizen of the Philippines
unless the executor, administrator or anyone of the heirs, as the case may be, includes in the return required to be filed under
section ninety-three the value at the time of his death of that part of the gross estate of the non-resident not situated in the
Philippines."
In the case at bar, no such statement of the gross estate of the non-resident Stevenson not situated in the Philippines appears in the
three returns submitted to the court or to the office of the petitioner Collector of Internal Revenue. The purpose of this requirement is to
enable the revenue officer to determine how much of the indebtedness may be allowed to be deducted, pursuant to (b), number (1)
of the same section 89 of the Internal Revenue Code which provides:
(b) Deductions allowed to non-resident estates. — In the case of a non-resident not a citizen of the Philippines, by deducting
from the value of that part of his gross estate which at the time of his death is situated in the Philippines —
(1) Expenses, losses, indebtedness, and taxes. — That proportion of the deductions specified in paragraph (1) of subjection (a)
of this section11 which the value of such part bears the value of his entire gross estate wherever situated;"
In other words, the allowable deduction is only to the extent of the portion of the indebtedness which is equivalent to the proportion
that the estate in the Philippines bears to the total estate wherever situated. Stated differently, if the properties in the Philippines
constitute but 1/5 of the entire assets wherever situated, then only 1/5 of the indebtedness may be deducted. But since, as heretofore
adverted to, there is no statement of the value of the estate situated outside the Philippines, no part of the indebtedness can be
allowed to be deducted, pursuant to Section 89, letter (d), number (1) of the Internal Revenue Code.
For the reasons thus stated, we affirm the ruling of the lower court disallowing the deduction of the alleged indebtedness in the sum of
P10,022.47.
In recapitulation, we hold and declare that:

(a) only the one-half (1/2) share of the decedent Stevenson in the conjugal partnership property constitutes his hereditary
estate subject to the estate and inheritance taxes;
(b) the intangible personal property is not exempt from inheritance tax, there existing no complete total reciprocity as
required in section 122 of the National Internal Revenue Code, nor is the decedent's estate entitled to an exemption of
P4,000.00 in the computation of the estate tax;
(c) for the purpose of the estate and inheritance taxes, the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc.
are to be appraised at P0.325 per share; and
(d) the P2,000.00 for funeral expenses should be deducted in the determination of the net asset of the deceased Stevenson.
In all other respects, the decision of the Court of Tax Appeals is affirmed.
Respondent's claim for interest on the amount allegedly overpaid, if any actually results after a recomputation on the basis of this
decision is hereby denied in line with our recent decision in Collector of Internal Revenue v. St. Paul's Hospital (G.R. No. L-12127, May 29,
1959) wherein we held that, "in the absence of a statutory provision clearly or expressly directing or authorizing such payment, and
none has been cited by respondents, the National Government cannot be required to pay interest."
176
WHEREFORE, as modified in the manner heretofore indicated, the judgment of the lower court is hereby affirmed in all other respects
not inconsistent herewith. No costs. So ordered.
Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Gutierrez David, Paredes and Dizon, JJ., concur.
29. Yap v. Solicitor General, G.R. No. L-1602, [September 9, 1948], 81 PHIL 468-470 Josol
EN BANC
G.R. No. L-1602 September 9, 1948
BIENVENIDO YAP, petitioner-appellee,
vs.
THE SOLICITOR GENERAL, oppositor-appellant.
First Assistant Solicitor General Roberto A. Gianzon and Solicitor Florencio Villamor for the appellant.
R. D. Salcedo for appellee.
PERFECTO, J.:
Bienvenido Yap was born of Chinese parentage on May 27, 1918, in Capiz, where he has been continuously residing ever since. He
speaks and writes English and Hiligaynon, the Visayan language in the locality. He started his studies in the Capiz Chinese Elementary
School and continued in the Capiz High School where he was in fourth year at the outbreak of the last war. He is married to Gloria Lim,
a native, born of a Chinese father and by this union he had two children born in Capiz, Wilfred Yap on May 26, 1944 and Roubin Yap
on April 12, 1946. He is engaged in business with an invested capital of P10,000. During the occupation he rendered services to the
guerrillas.
The lower court granted his application for Philippine citizenship.
The Solicitor General raises two questions in this appeal.
He contends, in the first place, that the lower court erred in not finding that the applicant has failed to establish satisfactorily that he
had previously filed his declaration of intention to become a citizen of the Philippines and that he is not exempted from the prerequisite
of filing said declaration.
Applicant alleged under oath in his petition that he had filed his declaration of intention to become a Filipino citizen with the Office of
the Solicitor General in 1941, although all the records have been lost by reason of the war. This allegation is not disputed in any answer
or objection and is supported by the unrebutted testimony of the applicant, who was duly cross-examined in the trial court. This is
enough evidence. Appellant's contention that applicant's testimony should be supported by documentary proof is not well taken.
There is nothing in the law in support of such requirement.
The second and last question raised by the Solicitor General is that the lower court erred in not finding that applicant has failed to
establish that the laws of China grant Filipinos the right to become naturalized citizens thereof.
We find on record of Exhibit E, a document supposed to be a copy of the Chinese law of citizenship, where it appears that a Filipino
can acquire Chinese citizenship by naturalization. Although we do not see any certification attached to the exhibit, the lower court's
decision states that applicant presented a copy of the Chinese law certified by a clerk of court of Cebu. The pronouncement is in a
way supported by the fact that Exhibit E carries the dry seal of the Court of First Instance of Cebu. The pronouncement of the lower
court has not been disputed, and it can be assumed that when the copy was submitted to the lower court, the latter must have seen
a certification attached to it which might have been misplaced. At any rate, the controversy appears to be academic, considering
the fact that at the hearing of this case, counsel for appellant stated that in another case there is such certified copy of the Chinese
law where it appears that Filipinos are given the right to acquire Chinese citizenship.
There being no error in the appealed decision, the same is affirmed.
30. Benedicto v. Court of Appeals, G.R. No. L-22733, [September 25, 1968], 134 PHIL 122-131 Jueves
31. Wildvalley Shipping Co., Ltd. v. Court of Appeals, G.R. No. 119602, [October 6, 2000], 396 PHIL 383-405 Jungco
177
32. Northwest Orient Airlines, Inc. v. Court of Appeals, G.R. No. 112573, [February 9, 1995], 311 PHIL 203-227 Maturan
CASE No. 32
G.R. No. 112573. February 9, 1995.*
NORTHWEST ORIENT AIRLINES, INC., petitioner, vs. COURT OF APPEALS and C.F. SHARP & COMPANY, INC., respondents.
Courts; Judgments; Jurisdiction; A foreign judgment is presumed to be valid and binding in the country from which it comes, until
the contrary is shown. —A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is
shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein.
Same; Same; Same; A court, whether of the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful
exercise of jurisdiction and has regularly performed its official duty.—Under Section 50, Rule 39 of the Rules of Court, a judgment in an
action in personam of a tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as
between the parties and their successors-in-interest by a subsequent title. The judgment may, however, be assailed by evidence of
want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a
court, whether of the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has
regularly performed its official duty.
Same; Same; Same; The party attacking a foreign judgment has the burden of overcoming the presumption of its validity. —
Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity. Being the party
challenging the judgment rendered by the Japanese court, SHARP had the duty to demonstrate the invalidity of such judgment. In an
attempt to discharge that burden, it contends that the extraterritorial service of summons effected at its home office in the Philippines
was not only ineffectual but also void, and the Japanese Court did not, therefore, acquire jurisdiction over it.
Same; Same; Same; It is settled that matters of remedy and procedure such as those relating to the service of process upon a
defendant are governed by the lex fori or the internal law of the forum. —It is settled that matters of remedy and procedure such as
those relating to the service of process upon a defendant are governed by the lex fori or the internal law of the forum. In this case, it is
the procedural law of Japan where the judgment was rendered that determines the validity of the extraterritorial service of process on
SHARP.
Same; Same; Same; It was then incumbent upon SHARP to present evidence as to what that Japanese procedural law is and to
show that under it, the assailed extraterritorial service is invalid. —As to what this law is is a question of fact, not of law. It may not be
taken judicial notice of and must be pleaded and proved like any other fact. Sections 24 and 25, Rule 132 of the Rules of Court provide
that it may be evidenced by an official publication or by a duly attested or authenticated copy thereof. It was then incumbent upon
SHARP to present evidence as to what that Japanese procedural law is and to show that under it, the assailed extraterritorial service is
invalid. It did not. Accordingly, the presumption of validity and regularity of the service of summons and the decision thereafter
rendered by the Japanese court must stand.
Same; Same; Same; In the light of the absence of proof regarding Japanese law, the presumption of identity or similarity or the
so-called processual presumption may be invoked.— Alternatively, in the light of the absence of proof regarding Japanese law, the
presumption of identity or similarity or the so-called processual presumption may be invoked. Applying it, the Japanese law on the
matter is presumed to be similar with the Philippine law on service of summons on a private foreign corporation doing business in the
Philippines.
Same; Same; Same; The extraterritorial service of summons on it by the Japanese Court was valid not only under the processual
presumption but also because of the presumption of regularity of performance of official duty. —Inasmuch as SHARP was admittedly
doing business in Japan through its four duly registered branches at the time the collection suit against it was filed, then in the light of
the processual presumption, SHARP may be deemed a resident of Japan, and, as such, was amenable to the jurisdiction of the courts
therein and may be deemed to have assented to the said courts' lawful methods of serving process. Accordingly, the extraterritorial
service of summons on it by the Japanese Court was valid not only under the processual presumption but also because of the
presumption of regularity of performance of official duty.
DAVIDE, JR., J.:
This petition for review on certiorari seeks to set aside the decision of the Court of Appeals affirming the dismissal of the petitioner's
complaint to enforce the judgment of a Japanese court. The principal issue here is whether a Japanese court can acquire jurisdiction
178
over a Philippine corporation doing business in Japan by serving summons through diplomatic channels on the Philippine corporation
at its principal office in Manila after prior attempts to serve summons in Japan had failed.
Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a corporation organized under the laws of the State of
Minnesota, U.S.A., sought to enforce in Civil Case No. 83-17637 of the Regional Trial Court (RTC), Branch 54, Manila, a judgment
rendered in its favor by a Japanese court against private respondent C.F. Sharp & Company, Inc., (hereinafter SHARP), a corporation
incorporated under Philippine laws.
As found by the Court of Appeals in the challenged decision of 10 November 1993, 1 the following are the factual and procedural
antecedents of this controversy:
On May 9, 1974, plaintiff Northwest Airlines and defendant C.F. Sharp & Company, through its Japan branch, entered into an
International Passenger Sales Agency Agreement, whereby the former authorized the latter to sell its air transportation tickets. Unable
to remit the proceeds of the ticket sales made by defendant on behalf of the plaintiff under the said agreement, plaintiff on March 25,
1980 sued defendant in Tokyo, Japan, for collection of the unremitted proceeds of the ticket sales, with claim for damages.
On April 11,1980, a writ of summons was issued by the 36th Civil Department, Tokyo District Court of Japan against defendant at its
office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho, Nakaku, Yokohama, Kanagawa Prefecture. The attempt to serve the
summons was unsuccessful because the bailiff was advised by a person in the office that Mr. Dinozo, the person believed to be
authorized to receive court processes was in Manila and would be back on April 24, 1980.
On April 24, 1980, bailiff returned to the defendant's office to serve the summons. Mr. Dinozo refused to accept the same claiming
that he was no longer an employee of the defendant.
After the two attempts of service were unsuccessful, the judge of the Tokyo District Court decided to have the complaint and the
writs of summons served at the head office of the defendant in Manila. On July 11, 1980, the Director of the Tokyo District Court
requested the Supreme Court of Japan to serve the summons through diplomatic channels upon the defendant's head office in
Manila.
On August 28, 1980, defendant received from Deputy Sheriff Rolando Balingit the writ of summons (p. 276, Records). Despite
receipt of the same, defendant failed to appear at the scheduled hearing. Thus, the Tokyo Court proceeded to hear the plaintiffs
complaint and on [January 29, 1981], rendered judgment ordering the defendant to pay the plaintiff the sum of 83,158,195 Yen and
damages for delay at the rate of 6% per annum from August 28, 1980 up to and until payment is completed (pp. 12-14, Records).
On March 24, 1981, defendant received from Deputy Sheriff Balingit copy of the judgment. Defendant not having appealed the
judgment, the same became final and executory.
Plaintiff was unable to execute the decision in Japan, hence, on May 20, 1983, a suit for enforcement of the judgment was filed by
plaintiff before the Regional Trial Court of Manila, Branch 54.
On July 16, 1983, defendant filed its answer averring that the judgment of the Japanese Court sought to be enforced is null and
void and unenforceable in this jurisdiction having been rendered without due and proper notice to the defendant and/or with
collusion or fraud and/or upon a clear mistake of law and fact (pp. 41-45, Rec.).
Unable to settle the case amicably, the case was tried on the merits. After the plaintiff rested its case, defendant on April 21, 1989,
filed a Motion for Judgment on a Demurrer to Evidence based on two grounds: (1) the foreign judgment sought to be enforced is null
and void for want of jurisdiction and (2) the said judgment is contrary to Philippine law and public policy and rendered without due
process of law. Plaintiff filed its opposition after which the court a quo rendered the now assailed decision dated June 21, 1989
granting the demurrer motion and dismissing the complaint (Decision, pp. 376-378, Records). In granting the demurrer motion, the trial
court held that:
"The foreign judgment in the Japanese Court sought in this action is null and void for want of jurisdiction over the person of the
defendant considering that this is an action in personam; the Japanese Court did not acquire jurisdiction over the person of the
defendant because jurisprudence requires that the defendant be served with summons in Japan in order for the Japanese Court to
acquire jurisdiction over it, the process of the Court in Japan sent to the Philippines which is outside Japanese jurisdiction cannot confer
jurisdiction over the defendant in the case before the Japanese Court of the case at bar. Boudard versus Tait, 67 Phil. 170.
179
The plaintiff contends that the Japanese Court acquired jurisdiction because the defendant is a resident of Japan, having four (4)
branches doing business therein and in fact had a permit from the Japanese government to conduct business in Japan (citing the
exhibits presented by the plaintiff); if this is so then service of summons should have been made upon the defendant in Japan in any of
these alleged four branches; as admitted by the plaintiff the service of the summons issued by the Japanese Court was made in the
Philippines thru a Philippine Sheriff.
This Court agrees that if the defendant in a foreign court is a resident in the court of that foreign court such court could acquire
jurisdiction over the person of the defendant but it must be served upon the defendant in the territorial jurisdiction of the foreign court.
Such is not the case here because the defendant was served with summons in the Philippines and not in Japan."
Unable to accept the said decision, plaintiff on July 11, 1989 moved for reconsideration of the decision, filing at the same time a
conditional Notice of Appeal, asking the court to treat the said notice of appeal "as in effect after and upon issuance of the court's
denial of the motion for reconsideration."
Defendant opposed the motion for reconsideration to which a Reply dated August 28, 1989 was filed by the plaintiff.
On October 16, 1989, the lower court disregarded the Motion for Reconsideration and gave due course to the plaintiffs Notice of
Appeal.3
In its decision, the Court of Appeals sustained the trial court. It agreed with the latter in its reliance upon Boudard us. Tait4 wherein it was
held that "the process of the court has no extraterritorial effect and no jurisdiction is acquired over the person of the defendant by
serving him beyond the boundaries of the state." To support its position, the Court of Appeals further stated:
In an action strictly in personam, such as the instant case, personal service of summons within the forum is required for the court to
acquire jurisdiction over the defendant (Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer jurisdiction on the court, personal or
substituted service of summons on the defendant not extraterritorial service is necessary (Dial Corp. vs. Soriano, 161 SCRA 739).
But while plaintiff-appellant concedes that the collection suit filed is an action in personam, it is its theory that a distinction must be
made between an action in personam against a resident defendant and an action in personam against a non-resident defendant.
Jurisdiction is acquired over a non-resident defendant only if he is served personally within the jurisdiction of the court, and over a
resident defendant if by personal, substituted or constructive service conformably to statutory authorization. Plaintiff-appellant argues
that since the defendantappellee maintains branches in Japan, it is considered a resident defendant. Corollarily, personal, substituted
or constructive service of summons when made in compliance with the procedural rules is sufficient to give the court jurisdiction to
render judgment in personam.
Such an argument does not persuade.
It is a general rule that processes of the court cannot lawfully be served outside the territorial limits of the jurisdiction of the court
from which it issues (Carter vs. Carter, 41 S.E. 2d 532, 201) and this is regardless of the residence or citizenship of the party thus served
(lowaRahr vs. Rahr, 129 NW 494, 150 lowa 511, 35 LRC, NS, 292, Am. Case 1912 D680). There must be actual service within the proper
territorial limits on defendant or someone authorized to accept service for him. Thus, a defendant, whether a resident or not in the
forum where the action is filed, must be served with summons within that forum.
But even assuming a distinction between a resident defendant and non-resident defendant were to be adopted, such distinction
applies only to natural persons and not to corporations. This finds support in the concept that "a corporation has no home or residence
in the sense in which those terms are applied to natural persons" (Claude Neon Lights vs. Phil. Advertising Corp., 57 Phil. 607). Thus, as
cited by the defendant-appellee in its brief:
"Residence is said to be an attribute of a natural person, and can be predicated on an artificial being only by more or less imperfect
analogy. Strictly speaking, therefore, a corporation can have no local residence or habitation. It has been said that a corporation is a
mere ideal existence, subsisting only in contemplation of law—an invisible being which can have, in fact, no locality and can occupy
no space, and therefore cannot have a dwelling place. (18 Am. Jur. 2d, p. 693 citing Kimmerle vs. Topeka, 88 370, 128 p. 367; Wood v.
Hartfold F. Ins. Co., 13 Conn 202)"
180
Jurisprudence so holds that the foreign or domestic character of a corporation is to be determined by the place of its origin, where
its charter was granted and not by the location of its business activities (Jennings v. Idaho Rail Light & P. Co., 26 Idaho 703, 146 p. 101).
A corporation is a "resident" and an inhabitant of the state in which it is incorporated and no other (36 Am. Jur. 2d, p. 49).
Defendant-appellee is a Philippine Corporation duly organized under the Philippine laws. Clearly, its residence is the Philippines, the
place of its incorporation, and not Japan. While defendant-appellee maintains branches in Japan, this will not make it a resident of
Japan. A corporation does not become a resident of another by engaging in business there even though licensed by that state and in
terms given all the rights and privileges of a domestic corporation (Galveston H. & S.A.R. Co. vs. Gonzales, 151 US 496, 38 L ed. 248, 4 S
Ct. 401).
On this premise, defendant appellee is a non-resident corporation. As such, court processes must be served upon it at a place
within the state in which the action is brought and not elsewhere (St. Clair vs. Cox, 106 US 350, 27 L ed. 222, 1 S. Ct. 354).
It then concluded that the service of summons effected in Manila or beyond the territorial boundaries of Japan was null and did not
confer jurisdiction upon the Tokyo District Court over the person of SHARP; hence, its decision was void.
Unable to obtain a reconsideration of the decision, NORTHWEST elevated the case to this Court contending that the respondent
court erred in holding that SHARP was not a resident of Japan and that summons on SHARP could only be validly served within that
country.
A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is shown. It is also
proper to presume the regularity of the proceedings and the giving of due notice therein.
Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of a foreign country having
jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors-in-interest by a
subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere, enjoys the
presumption that it was acting in the lawful exercise of jurisdiction and has regularly performed its official duty.
Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity. 7 Being the
party challenging the judgment rendered by the Japanese court, SHARP had the duty to demonstrate the invalidity of such judgment.
In an attempt to discharge that burden, it contends that the extraterritorial service of summons effected at its home office in the
Philippines was not only ineffectual but also void, and the Japanese Court did not, therefore, acquire jurisdiction over it.
It is settled that matters of remedy and procedure such as those relating to the service of process upon a defendant are governed
by the lex fori or the internal law of the forum. 8 In this case, it is the procedural law of Japan where the judgment was rendered that
determines the validity of the extraterritorial service of process on SHARP. As to what this law is is a question of fact, not of law.
It may not be taken judicial notice of and must be pleaded and proved like any other fact. 9 Sections 24 and 25, Rule 132 of the
Rules of Court provide that it may be evidenced by an official publication or by a duly attested or authenticated copy thereof. It was
then incumbent upon SHARP to present evidence as to what that Japanese procedural law is and to show that under it, the assailed
extraterritorial service is invalid. It did not. Accordingly, the presumption of validity and regularity of the service of summons and the
decision thereafter rendered by the Japanese court must stand.
Alternatively, in the light of the absence of proof regarding Japanese law, the presumption of identity or similarity or the socalled
processual presumption10 may be invoked. Applying it, the Japanese law on the matter is presumed to be similar with the Philippine law
on service of summons on a private foreign corporation doing business in the Philippines. Section 14, Rule 14 of the Rules of Court
provides that if the defendant is a foreign corporation doing business in the Philippines, service may be made: (1) on its resident agent
designated in accordance with law for that purpose, or, (2) if there is no such resident agent, on the government official designated
by law to that effect, or (3) on any of its officers or agents within the Philippines.
If the foreign corporation has designated an agent to receive summons, the designation is exclusive, and service of summons is
without force and gives the court no jurisdiction unless made upon him.11
Where the corporation has no such agent, service shall be made on the government official designated by law, to wit:
(a) the Insurance Commissioner, in the case of a foreign insurance company;
(b) the Superintendent of Banks, in the case of a foreign banking corporation; and
181
(c) the Securities and Exchange Commission, in the case of other foreign corporations duly licensed to do business in the
Philippines.
Whenever service of process is so made, the government office or official served shall transmit by mail a copy of the summons or
other legal process to the corporation at its home or principal office. The sending of such copy is a necessary part of the service.
SHARP contends that the laws authorizing service of process upon the Securities and Exchange Commission, the Superintendent of
Banks, and the Insurance Commissioner, as the case may be, presuppose a situation wherein the foreign corporation doing business in
the country no longer has any branches or offices within the Philippines. Such contention is belied by the pertinent provisions of the said
laws. Thus, Section 128 of the Corporation Code13 and Section 190 of the Insurance Code14 clearly contemplate two situations:
(1) if the corporation had left the Philippines or had ceased to transact business therein, and
(2) if the corporation has no designated agent. Section 17 of the General Banking Act 15 does not even speak of a corporation
which had ceased to transact business in the Philippines.
Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive court processes in Japan. This
silence could only mean, or at least create an impression, that it had none. Hence, service on the designated government official or
on any of SHARP's officers or agents in Japan could be availed of. The respondent, however, insists that only service on any of its
officers or employees in its branches in Japan could be resorted to. We do not agree. As found by the respondent court, two attempts
at service were made at SHARP's Yokohama branch. Both were unsuccessful. On the first attempt, Mr. Dinozo, who was believed to be
the person authorized to accept court process, was in Manila. On the second, Mr. Dinozo was present, but he refused to accept the
summons because, according to him, he was no longer an employee of SHARP. While it may be true that service could have been
made upon any of the officers or agents of SHARP at its three other branches in Japan, the availability of such a recourse would not
preclude service upon the proper government official, as stated above.
As found by the Court of Appeals, it was the Tokyo District Court which ordered that summons for SHARP be served at its head
office in the Philippines after the two attempts of service had failed. 16 The Tokyo District Court requested the Supreme Court of Japan to
cause the delivery of the summons and other legal documents to the Philippines. Acting on that request, the Supreme Court of Japan
sent the summons together with the other legal documents to the Ministry of Foreign Affairs of Japan which, in turn, forwarded the
same to the Japanese Embassy in Manila. Thereafter, the court processes were delivered to the Ministry (now Department) of Foreign
Affairs of the Philippines, then to the Executive Judge of the Court of First Instance (now Regional Trial Court) of Manila, who forthwith
ordered Deputy Sheriff Rolando Balingit to serve the same on SHARP at its principal office in Manila. This service is equivalent to service
on the proper government official under Section 14, Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation Code.
Hence, SHARP's contention that such manner of service is not valid under Philippine laws holds no water. 17
In deciding against the petitioner, the respondent court sustained the trial court's reliance on Boudard vs. Tait18 where this Court
held:
"The fundamental rule is that jurisdiction in personam over nonresidents, so as to sustain a money judgment, must be based upon
personal service within the state which renders the judgment."
"The process of a court has no extraterritorial effect, and no jurisdiction is acquired over the person of the defendant by serving him
beyond the boundaries of the state. Nor has a judgment of a court of a foreign country against a resident of this country having no
property in such foreign country based on process served here, any effect here against either the defendant personally or his property
situated here."
"Process issuing from the courts of one state or country cannot run into another, and although a nonresident defendant may have
been personally served with such process in the state or country of his domicile, it will not give such jurisdiction as to authorize a
personal judgment against him."
It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto 19 and Dial Corp. vs. Soriano,20 as well as the principle laid down by the
lowa Supreme Court in the 1911 case of Raher vs. Raher.21
The first three cases are, however, inapplicable. Boudard involved the enforcement of a judgment of the civil division of the Court
of First Instance of Hanoi, French Indo-China. The trial court dismissed the case because the Hanoi court never acquired jurisdiction
over the person of the defendant considering that "[t]he evidence adduced at the trial conclusively proves that neither the appellee
182
[the defendant] nor his agent or employees were ever in Hanoi, French Indo-China; and that the deceased Marie Theodore Jerome
Boudard had never, at any time, been his employee."
In Magdalena Estate, what was declared invalid resulting in the failure of the court to acquire jurisdiction over the person of the
defendants in an action in personam was the service of summons through publication against non-appearing resident defendants. It
was claimed that the latter concealed themselves to avoid personal service of summons upon them. In Dial, the defendants were
foreign corporations which were not domiciled and licensed to engage in business in the Philippines and which did not have officers or
agents, places of business, or properties here. On the other hand, in the instant case, SHARP was doing business in Japan and was
maintaining four branches therein.
Insofar as the Philippines is concerned, Raher is a thing of the past. In that case, a divided Supreme Court of lowa declared that
the principle that there can be no jurisdiction in a court of a territory to render a personal judgment against anyone upon service
made outside its limits was applicable alike to cases of residents and non-residents. The principle was put at rest by the United States
Supreme Court when it ruled in the 1940 case of Milliken vs. Meyer22 that domicile in the state is alone sufficient to bring an absent
defendant within the reach of the state's jurisdiction for purposes of a personal judgment by means of appropriate substituted service
or personal service without the state.
This principle is embodied in Section 18, Rule 14 of the Rules of Court which allows service of summons on residents temporarily out
of the Philippines to be made out of the country. The rationale for this rule was explained in Milliken as follows:
[T]he authority of a state over one of its citizens is not terminated by the mere fact of his absence from the state. The state which
accords him privileges and affords protection to him and his property by virtue of his domicile may also exact reciprocal duties.
"Enjoyment of the privileges of residence within the state, and the attendant right to invoke the protection of its laws, are inseparable"
from the various incidences of state citizenship. The responsibilities of that citizenship arise out of the relationship to the state which
domicile creates. That relationship is not dissolved by mere absence from the state. The attendant duties, like the rights and privileges
incident to domicile, are not dependent on continuous presence in the state. One such incident of domicile is amenability to suit within
the state even during sojourns without the state, where the state has provided and employed a reasonable method for apprising such
an absent party of the proceedings against him.
The domicile of a corporation belongs to the state where it was incorporated. 24 In a strict technical sense, such domicile as a
corporation may have is single in its essence and a corporation can have only one domicile which is the state of its creation.
Nonetheless, a corporation formed in one state may, for certain purposes, be regarded a resident in another state in which it has
offices and transacts business. This is the rule in our jurisdiction and apropos thereto, it may be necessary to quote what we stated in
State Investment House, Inc. vs. Citibank, N.A.,26 to wit:
The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as that term is used in
Section 20 of the Insolvency Law . . . or residents of the state under the laws of which they were respectively incorporated. The answer
cannot be found in the Insolvency Law itself, which contains no definition of the term, resident, or any clear indication of its meaning.
There are however other statutes, albeit of subsequent enactment and effectivity, from which enlightening notions of the term may be
derived.
The National Internal Revenue Code declares that the term " 'resident foreign corporation ' applies to a foreign corporation
engaged in trade or business within the Philippines," as distinguished from a " 'non-resident foreign corporation' x x x (which is one) not
engaged in trade or business within the Philippines." [Sec. 20, pars. (h) and (i)].
The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation, extension offices or any other
units of corporation or juridical person organized under the laws of any foreign country operating in the Philippines shall be considered
residents of the Philippines." [Sec. 1(e)].
The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of foreign banks x x x (which are)
called Philippine branches," in the same category as "commercial banks, savings associations, mortgage banks, development banks,
rural banks, stock savings and loan associations" (which have been formed and organized under Philippine laws), making no distinction
between the former and the latter in so far as the terms "banking institutions" and "bank" are used in the Act [Sec. 2], declaring on the
contrary that in "all matters not specifically covered by special provisions applicable only to foreign banks, or their branches and
183
agencies in the Philippines, said foreign banks or their branches and agencies lawfully doing business in the Philippines "shall be bound
by all laws, rules, and regulations applicable to domestic banking corporations of the same class, except such laws, rules and
regulations as provided for the creation, formation, organization, or dissolution of corporations or as fix the relation, liabilities,
responsibilities, or duties of members, stockholders or officers of corporation." [Sec. 18].
This Court itself has already had occasion to hold [Claude Neon Lights, Fed. Inc. vs. Philippine Advertising Corp., 57 Phil. 607] that a
foreign corporation licitly doing business in the Philippines, which is a defendant in a civil suit, may not be considered a non-resident
within the scope of the legal provision authorizing attachment against a defendant not residing in the Philippine Islands; [Sec. 424, in
relation to Sec. 412 of Act No. 190, the Code of Civil Procedure; Sec. 1(f), Rule 59 of the Rules of 1940; Sec. 1(0, Rule 57, Rules of 1964] in
other words, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign
corporation authorized to do business in the Philippines—and is consequently and necessarily, "a party who resides out of the
Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who resides out of the
country, then, logically, it must be considered a party who does reside in the Philippines, who is a resident of the country. Be this as it
may, this Court pointed out that:
"x x Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of
domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu Cong Eng vs.
Trinidad, 47 Phil. 385, 411) We think it would be entirely out of line with this policy should we make a discrimination against a foreign
corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only with
every requirement of law made specially of foreign corporations, but in addition with every requirement of law made of domestic
corporations. x x."
Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status of domestic
corporations," subsumes their being found and operating as corporations, hence, residing, in the country.
The same principle is recognized in American law: that the "residence of a corporation, if it can be said to have a residence, is
necessarily where it exercises corporate functions x x;" that it is considered as dwelling "in the place where its business is done x x," as
being "located where its franchises are exercised x x," and as being "present where it is engaged in the prosecution of the corporate
enterprise;" that a "foreign corporation licensed to do business in a state is a resident of any country where it maintains an office or
agent for transaction of its usual and customary business for venue purposes;" and that the "necessary element in its signification is
locality of existence." [Words and Phrases, Permanent Ed., vol. 37, pp. 394, 412, 403].
Inasmuch as SHARP was admittedly doing business in Japan through its four duly registered branches at the time the collection suit
against it was filed, then in the light of the processual presumption, SHARP may be deemed a resident of Japan, and, as such, was
amenable to the jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful methods of serving
process.
Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only under the processual
presumption but also because of the presumption of regularity of performance of official duty.
We find NORTHWEST's claim for attorney's fees, litigation expenses, and exemplary damages to be without merit. We find no
evidence that would justify an award for attorney's fees and litigation expenses under Article 2208 of the Civil Code of the Philippines.
Nor is an award for exemplary damages warranted. Under Article 2234 of the Civil Code, before the court may consider the question
of whether or not exemplary damages should be awarded, the plaintiff must show that he is entitled to moral, temperate, or
compensatory damages. There being no such proof presented by NORTHWEST, no exemplary damages may be adjudged in its favor.
WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied NORTHWEST's
claims for attorney's fees, litigation expenses, and exemplary damages but REVERSED insofar as it sustained the trial court's dismissal of
NORTHWEST's complaint in Civil Case No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and another in its stead is hereby
rendered ORDERING private respondent C.F. SHARP & COMPANY, INC. to pay to NORTHWEST the amounts adjudged in the foreign
judgment subject of said case, with interest thereon at the legal rate from the filing of the complaint therein until the said foreign
judgment is fully satisfied.
Costs against the private respondent.
SO ORDERED.
184
Padilla (Chairman), Bellosillo, Quiason and Kapunan, JJ., concur.
Petition partly granted.
Note.—Service of summons on a non-resident defendant who is not found in the country is required not for purpose of physically
acquiring jurisdiction over his person but simply in pursuance of the requirements of fair play. (Sahagun vs. Court of Appeals, 198 SCRA
44 [1991])
33. Philippine Export and Foreign Loan Guarantee Corp. v. V.P. Eusebio Construction Inc., G.R. No. 140047, [July 13, 2004], 478 PHIL
269-297 Miranda
DAVIDE, JR., C.J.:
This case is an offshoot of a service contract entered into by a Filipino construction firm with the Iraqi Government for the construction
of the Institute of Physical Therapy-Medical Center, Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq war was ongoing.
In a complaint filed with the Regional Trial Court of Makati City, docketed as Civil Case No. 91-1906 and assigned to Branch 58,
petitioner Philippine Export and Foreign Loan Guarantee Corporation 1 (hereinafter Philguarantee) sought reimbursement from the
respondents of the sum of money it paid to Al Ahli Bank of Kuwait pursuant to a guarantee it issued for respondent V.P. Eusebio
Construction, Inc. (VPECI).
The factual and procedural antecedents in this case are as follows:
On 8 November 1980, the State Organization of Buildings (SOB), Ministry of Housing and Construction, Baghdad, Iraq, awarded the
construction of the Institute of Physical Therapy–Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, (hereinafter the Project) to
Ajyal Trading and Contracting Company (hereinafter Ajyal), a firm duly licensed with the Kuwait Chamber of Commerce for a total
contract price of ID5,416,089/046 (or about US$18,739,668).2
On 7 March 1981, respondent spouses Eduardo and Iluminada Santos, in behalf of respondent 3-Plex International, Inc. (hereinafter 3-
Plex), a local contractor engaged in construction business, entered into a joint venture agreement with Ajyal wherein the former
undertook the execution of the entire Project, while the latter would be entitled to a commission of 4% of the contract price. 3 Later, or
on 8 April 1981, respondent 3-Plex, not being accredited by or registered with the Philippine Overseas Construction Board (POCB),
assigned and transferred all its rights and interests under the joint venture agreement to VPECI, a construction and engineering firm
duly registered with the POCB.4 However, on 2 May 1981, 3-Plex and VPECI entered into an agreement that the execution of the Project
would be under their joint management.5
The SOB required the contractors to submit (1) a performance bond of ID271,808/610 representing 5% of the total contract price and
(2) an advance payment bond of ID541,608/901 representing 10% of the advance payment to be released upon signing of the
contract.6 To comply with these requirements, respondents 3-Plex and VPECI applied for the issuance of a guarantee with petitioner
Philguarantee, a government financial institution empowered to issue guarantees for qualified Filipino contractors to secure the
performance of approved service contracts abroad.7
Petitioner Philguarantee approved respondents' application. Subsequently, letters of guarantee 8 were issued by Philguarantee to the
Rafidain Bank of Baghdad covering 100% of the performance and advance payment bonds, but they were not accepted by SOB.
What SOB required was a letter-guarantee from Rafidain Bank, the government bank of Iraq. Rafidain Bank then issued a performance
bond in favor of SOB on the condition that another foreign bank, not Philguarantee, would issue a counter-guarantee to cover its
exposure. Al Ahli Bank of Kuwait was, therefore, engaged to provide a counter-guarantee to Rafidain Bank, but it required a similar
counter-guarantee in its favor from the petitioner. Thus, three layers of guarantees had to be arranged. 9
Upon the application of respondents 3-Plex and VPECI, petitioner Philguarantee issued in favor of Al Ahli Bank of Kuwait Letter of
Guarantee No. 81-194-F 10 (Performance Bond Guarantee) in the amount of ID271,808/610 and Letter of Guarantee No. 81-195-F 11
(Advance Payment Guarantee) in the amount of ID541,608/901, both for a term of eighteen months from 25 May 1981. These letters of
guarantee were secured by (1) a Deed of Undertaking 12 executed by respondents VPECI, Spouses Vicente P. Eusebio and Soledad C.
Eusebio, 3-Plex, and Spouses Eduardo E. Santos and Iluminada Santos; and (2) a surety bond 13 issued by respondent First Integrated
Bonding and Insurance Company, Inc. (FIBICI). The Surety Bond was later amended on 23 June 1981 to increase the amount of
coverage from P6.4 million to P6.967 million and to change the bank in whose favor the petitioner's guarantee was issued, from
Rafidain Bank to Al Ahli Bank of Kuwait.14
On 11 June 1981, SOB and the joint venture VPECI and Ajyal executed the service contract 15 for the construction of the Institute of
Physical Therapy – Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, wherein the joint venture contractor undertook to
complete the Project within a period of 547 days or 18 months. Under the Contract, the Joint Venture would supply manpower and
materials, and SOB would refund to the former 25% of the project cost in Iraqi Dinar and the 75% in US dollars at the exchange rate of 1
Dinar to 3.37777 US Dollars.16
185
The construction, which was supposed to start on 2 June 1981, commenced only on the last week of August 1981. Because of this delay
and the slow progress of the construction work due to some setbacks and difficulties, the Project was not completed on 15 November
1982 as scheduled. But in October 1982, upon foreseeing the impossibility of meeting the deadline and upon the request of Al Ahli
Bank, the joint venture contractor worked for the renewal or extension of the Performance Bond and Advance Payment Guarantee.
Petitioner's Letters of Guarantee Nos. 81-194-F (Performance Bond) and 81-195-F (Advance Payment Bond) with expiry date of 25
November 1982 were then renewed or extended to 9 February 1983 and 9 March 1983, respectively. 17 The surety bond was also
extended for another period of one year, from 12 May 1982 to 12 May 1983. 18 The Performance Bond was further extended twelve
times with validity of up to 8 December 1986, 19 while the Advance Payment Guarantee was extended three times more up to 24 May
1984 when the latter was cancelled after full refund or reimbursement by the joint venture contractor. 20 The surety bond was likewise
extended to 8 May 1987.21
As of March 1986, the status of the Project was 51% accomplished, meaning the structures were already finished. The remaining 47%
consisted in electro-mechanical works and the 2%, sanitary works, which both required importation of equipment and materials. 22
On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the petitioner demanding full payment of its performance bond counter-
guarantee.
Upon receiving a copy of that telex message on 27 October 1986, respondent VPECI requested Iraq Trade and Economic
Development Minister Mohammad Fadhi Hussein to recall the telex call on the performance guarantee for being a drastic action in
contravention of its mutual agreement with the latter that (1) the imposition of penalty would be held in abeyance until the
completion of the project; and (2) the time extension would be open, depending on the developments on the negotiations for a
foreign loan to finance the completion of the project. 23 It also wrote SOB protesting the call for lack of factual or legal basis, since the
failure to complete the Project was due to (1) the Iraqi government's lack of foreign exchange with which to pay its (VPECI's)
accomplishments and (2) SOB's noncompliance for the past several years with the provision in the contract that 75% of the billings
would be paid in US dollars.24 Subsequently, or on 19 November 1986, respondent VPECI advised the petitioner not to pay yet Al Ahli
Bank because efforts were being exerted for the amicable settlement of the Project. 25
On 14 April 1987, the petitioner received another telex message from Al Ahli Bank stating that it had already paid to Rafidain Bank the
sum of US$876,564 under its letter of guarantee, and demanding reimbursement by the petitioner of what it paid to the latter bank plus
interest thereon and related expenses.26
Both petitioner Philguarantee and respondent VPECI sought the assistance of some government agencies of the Philippines. On 10
August 1987, VPECI requested the Central Bank to hold in abeyance the payment by the petitioner "to allow the diplomatic machinery
to take its course, for otherwise, the Philippine government , through the Philguarantee and the Central Bank, would become
instruments of the Iraqi Government in consummating a clear act of injustice and inequity committed against a Filipino contractor." 27
On 27 August 1987, the Central Bank authorized the remittance for its account of the amount of US$876,564 (equivalent to ID271,
808/610) to Al Ahli Bank representing full payment of the performance counter-guarantee for VPECI's project in Iraq. 28
On 6 November 1987, Philguarantee informed VPECI that it would remit US$876,564 to Al Ahli Bank, and reiterated the joint and solidary
obligation of the respondents to reimburse the petitioner for the advances made on its counter-guarantee. 29
The petitioner thus paid the amount of US$876,564 to Al Ahli Bank of Kuwait on 21 January 1988. 30 Then, on 6 May 1988, the petitioner
paid to Al Ahli Bank of Kuwait US$59,129.83 representing interest and penalty charges demanded by the latter bank. 31
On 19 June 1991, the petitioner sent to the respondents separate letters demanding full payment of the amount of P47,872,373.98 plus
accruing interest, penalty charges, and 10% attorney's fees pursuant to their joint and solidary obligations under the deed of
undertaking and surety bond.32 When the respondents failed to pay, the petitioner filed on 9 July 1991 a civil case for collection of a
sum of money against the respondents before the RTC of Makati City.
After due trial, the trial court ruled against Philguarantee and held that the latter had no valid cause of action against the respondents.
It opined that at the time the call was made on the guarantee which was executed for a specific period, the guarantee had already
lapsed or expired. There was no valid renewal or extension of the guarantee for failure of the petitioner to secure respondents' express
consent thereto. The trial court also found that the joint venture contractor incurred no delay in the execution of the Project.
Considering the Project owner's violations of the contract which rendered impossible the joint venture contractor's performance of its
undertaking, no valid call on the guarantee could be made. Furthermore, the trial court held that no valid notice was first made by the
Project owner SOB to the joint venture contractor before the call on the guarantee. Accordingly, it dismissed the complaint, as well as
the counterclaims and cross-claim, and ordered the petitioner to pay attorney's fees of P100,000 to respondents VPECI and Eusebio
Spouses and P100,000 to 3-Plex and the Santos Spouses, plus costs. 33
In its 14 June 1999 Decision,34 the Court of Appeals affirmed the trial court's decision, ratiocinating as follows:
First, appellant cannot deny the fact that it was fully aware of the status of project implementation as well as the problems
besetting the contractors, between 1982 to 1985, having sent some of its people to Baghdad during that period. The
successive renewals/extensions of the guarantees in fact, was prompted by delays, not solely attributable to the contractors,
186
and such extension understandably allowed by the SOB (project owner) which had not anyway complied with its contractual
commitment to tender 75% of payment in US Dollars, and which still retained overdue amounts collectible by VPECI.
Second, appellant was very much aware of the violations committed by the SOB of its contractual undertakings with VPECI,
principally, the payment of foreign currency (US$) for 75% of the total contract price, as well as of the complications and
injustice that will result from its payment of the full amount of the performance guarantee, as evident in PHILGUARANTEE's
letter dated 13 May 1987 ….
Third, appellant was fully aware that SOB was in fact still obligated to the Joint Venture and there was still an amount
collectible from and still being retained by the project owner, which amount can be set-off with the sum covered by the
performance guarantee.
Fourth, well-apprised of the above conditions obtaining at the Project site and cognizant of the war situation at the time in
Iraq, appellant, though earlier has made representations with the SOB regarding a possible amicable termination of the
Project as suggested by VPECI, made a complete turn-around and insisted on acting in favor of the unjustified "call" by the
foreign banks.35
The petitioner then came to this Court via Rule 45 of the Rules of Court claiming that the Court of Appeals erred in affirming the trial
court's ruling that
…RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF UNDERTAKING THEY EXECUTED IN FAVOR OF PETITIONER IN
CONSIDERATION FOR THE ISSUANCE OF ITS COUNTER-GUARANTEE AND THAT PETITIONER CANNOT PASS ON TO RESPONDENTS
WHAT IT HAD PAID UNDER THE SAID COUNTER-GUARANTEE.
II
…PETITIONER CANNOT CLAIM SUBROGATION.
III
…IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO HOLD RESPONDENTS LIABLE UNDER THEIR DEED OF UNDERTAKING. 36
The main issue in this case is whether the petitioner is entitled to reimbursement of what it paid under Letter of Guarantee No. 81-194-F it
issued to Al Ahli Bank of Kuwait based on the deed of undertaking and surety bond from the respondents.
The petitioner asserts that since the guarantee it issued was absolute, unconditional, and irrevocable the nature and extent of its
liability are analogous to those of suretyship. Its liability accrued upon the failure of the respondents to finish the construction of the
Institute of Physical Therapy Buildings in Baghdad.
By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter
should fail to do so. If a person binds himself solidarily with the principal debtor, the contract is called suretyship. 37
Strictly speaking, guaranty and surety are nearly related, and many of the principles are common to both. In both contracts, there is a
promise to answer for the debt or default of another. However, in this jurisdiction, they may be distinguished thus:
1. A surety is usually bound with his principal by the same instrument executed at the same time and on the same
consideration. On the other hand, the contract of guaranty is the guarantor's own separate undertaking often supported by
a consideration separate from that supporting the contract of the principal; the original contract of his principal is not his
contract.
2. A surety assumes liability as a regular party to the undertaking; while the liability of a guarantor is conditional depending on
the failure of the primary debtor to pay the obligation.
3. The obligation of a surety is primary, while that of a guarantor is secondary.
4. A surety is an original promissor and debtor from the beginning, while a guarantor is charged on his own undertaking.
187
5. A surety is, ordinarily, held to know every default of his principal; whereas a guarantor is not bound to take notice of the
non-performance of his principal.
6. Usually, a surety will not be discharged either by the mere indulgence of the creditor to the principal or by want of notice of
the default of the principal, no matter how much he may be injured thereby. A guarantor is often discharged by the mere
indulgence of the creditor to the principal, and is usually not liable unless notified of the default of the principal. 38
In determining petitioner's status, it is necessary to read Letter of Guarantee No. 81-194-F, which provides in part as follows:
In consideration of your issuing the above performance guarantee/counter-guarantee, we hereby unconditionally and
irrevocably guarantee, under our Ref. No. LG-81-194 F to pay you on your first written or telex demand Iraq Dinars Two
Hundred Seventy One Thousand Eight Hundred Eight and fils six hundred ten (ID271,808/610) representing 100% of the
performance bond required of V.P. EUSEBIO for the construction of the Physical Therapy Institute, Phase II, Baghdad, Iraq, plus
interest and other incidental expenses related thereto.
In the event of default by V.P. EUSEBIO, we shall pay you 100% of the obligation unpaid but in no case shall such amount
exceed Iraq Dinars (ID) 271,808/610 plus interest and other incidental expenses…. (Emphasis supplied) 39
Guided by the abovementioned distinctions between a surety and a guaranty, as well as the factual milieu of this case, we find that
the Court of Appeals and the trial court were correct in ruling that the petitioner is a guarantor and not a surety. That the guarantee
issued by the petitioner is unconditional and irrevocable does not make the petitioner a surety. As a guaranty, it is still characterized by
its subsidiary and conditional quality because it does not take effect until the fulfillment of the condition, namely, that the principal
obligor should fail in his obligation at the time and in the form he bound himself. 40 In other words, an unconditional guarantee is still
subject to the condition that the principal debtor should default in his obligation first before resort to the guarantor could be had. A
conditional guaranty, as opposed to an unconditional guaranty, is one which depends upon some extraneous event, beyond the
mere default of the principal, and generally upon notice of the principal's default and reasonable diligence in exhausting proper
remedies against the principal.41
It appearing that Letter of Guarantee No. 81-194-F merely stated that in the event of default by respondent VPECI the petitioner shall
pay, the obligation assumed by the petitioner was simply that of an unconditional guaranty, not conditional guaranty. But as earlier
ruled the fact that petitioner's guaranty is unconditional does not make it a surety. Besides, surety is never presumed. A party should not
be considered a surety where the contract itself stipulates that he is acting only as a guarantor. It is only when the guarantor binds
himself solidarily with the principal debtor that the contract becomes one of suretyship. 42
Having determined petitioner's liability as guarantor, the next question we have to grapple with is whether the respondent contractor
has defaulted in its obligations that would justify resort to the guaranty. This is a mixed question of fact and law that is better addressed
by the lower courts, since this Court is not a trier of facts.
It is a fundamental and settled rule that the findings of fact of the trial court and the Court of Appeals are binding or conclusive upon
this Court unless they are not supported by the evidence or unless strong and cogent reasons dictate otherwise. 43 The factual findings
of the Court of Appeals are normally not reviewable by us under Rule 45 of the Rules of Court except when they are at variance with
those of the trial court. 44 The trial court and the Court of Appeals were in unison that the respondent contractor cannot be considered
to have defaulted in its obligations because the cause of the delay was not primarily attributable to it.
A corollary issue is what law should be applied in determining whether the respondent contractor has defaulted in the performance of
its obligations under the service contract. The question of whether there is a breach of an agreement, which includes default or mora,45
pertains to the essential or intrinsic validity of a contract. 46
No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed by most legal systems, however,
is that the intrinsic validity of a contract must be governed by the lex contractus or "proper law of the contract." This is the law
voluntarily agreed upon by the parties (the lex loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci
intentionis). The law selected may be implied from such factors as substantial connection with the transaction, or the nationality or
domicile of the parties.47 Philippine courts would do well to adopt the first and most basic rule in most legal systems, namely, to allow
the parties to select the law applicable to their contract, subject to the limitation that it is not against the law, morals, or public policy
of the forum and that the chosen law must bear a substantive relationship to the transaction . 48
It must be noted that the service contract between SOB and VPECI contains no express choice of the law that would govern it. In the
United States and Europe, the two rules that now seem to have emerged as "kings of the hill" are (1) the parties may choose the
governing law; and (2) in the absence of such a choice, the applicable law is that of the State that "has the most significant
relationship to the transaction and the parties." 49 Another authority proposed that all matters relating to the time, place, and manner of
performance and valid excuses for non-performance are determined by the law of the place of performance or lex loci solutionis,
which is useful because it is undoubtedly always connected to the contract in a significant way. 50
In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi Government and the
place of performance is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its obligations may be determined by the
188
laws of Iraq. However, since that foreign law was not properly pleaded or proved, the presumption of identity or similarity, otherwise
known as the processual presumption, comes into play. Where foreign law is not pleaded or, even if pleaded, is not proved, the
presumption is that foreign law is the same as ours.51
Our law, specifically Article 1169, last paragraph, of the Civil Code, provides: "In reciprocal obligations, neither party incurs in delay if
the other party does not comply or is not ready to comply in a proper manner with what is incumbent upon him."
Default or mora on the part of the debtor is the delay in the fulfillment of the prestation by reason of a cause imputable to the former. 52
It is the non-fulfillment of an obligation with respect to time. 53
It is undisputed that only 51.7% of the total work had been accomplished. The 48.3% unfinished portion consisted in the purchase and
installation of electro-mechanical equipment and materials, which were available from foreign suppliers, thus requiring US Dollars for
their importation. The monthly billings and payments made by SOB 54 reveal that the agreement between the parties was a periodic
payment by the Project owner to the contractor depending on the percentage of accomplishment within the period. 55 The payments
were, in turn, to be used by the contractor to finance the subsequent phase of the work. 56 However, as explained by VPECI in its letter
to the Department of Foreign Affairs (DFA), the payment by SOB purely in Dinars adversely affected the completion of the project; thus:
4. Despite protests from the plaintiff, SOB continued paying the accomplishment billings of the Contractor purely in Iraqi Dinars
and which payment came only after some delays.
5. SOB is fully aware of the following:
5.2 That Plaintiff is a foreign contractor in Iraq and as such, would need foreign currency (US$), to finance the purchase of
various equipment, materials, supplies, tools and to pay for the cost of project management, supervision and skilled labor not
available in Iraq and therefore have to be imported and or obtained from the Philippines and other sources outside Iraq.
5.3 That the Ministry of Labor and Employment of the Philippines requires the remittance into the Philippines of 70% of the
salaries of Filipino workers working abroad in US Dollars;
5.5 That the Iraqi Dinar is not a freely convertible currency such that the same cannot be used to purchase equipment,
materials, supplies, etc. outside of Iraq;
5.6 That most of the materials specified by SOB in the CONTRACT are not available in Iraq and therefore have to be imported;
5.7 That the government of Iraq prohibits the bringing of local currency (Iraqui Dinars) out of Iraq and hence, imported
materials, equipment, etc., cannot be purchased or obtained using Iraqui Dinars as medium of acquisition.
8. Following the approved construction program of the CONTRACT, upon completion of the civil works portion of the
installation of equipment for the building, should immediately follow, however, the CONTRACT specified that these equipment
which are to be installed and to form part of the PROJECT have to be procured outside Iraq since these are not being locally
manufactured. Copy f the relevant portion of the Technical Specification is hereto attached as Annex "C" and made an
integral part hereof;
10. Due to the lack of Foreign currency in Iraq for this purpose, and if only to assist the Iraqi government in completing the
PROJECT, the Contractor without any obligation on its part to do so but with the knowledge and consent of SOB and the
Ministry of Housing & Construction of Iraq, offered to arrange on behalf of SOB, a foreign currency loan, through the facilities
of Circle International S.A., the Contractor's Sub-contractor and SACE MEDIO CREDITO which will act as the guarantor for this
foreign currency loan.
Arrangements were first made with Banco di Roma. Negotiation started in June 1985. SOB is informed of the developments of
this negotiation, attached is a copy of the draft of the loan Agreement between SOB as the Borrower and Agent. The Several
Banks, as Lender, and counter-guaranteed by Istituto Centrale Per II Credito A Medio Termine (Mediocredito) Sezione
Speciale Per L'Assicurazione Del Credito All'Exportazione (Sace). Negotiations went on and continued until it suddenly
collapsed due to the reported default by Iraq in the payment of its obligations with Italian government, copy of the news
clipping dated June 18, 1986 is hereto attached as Annex "D" to form an integral part hereof;
189
15. On September 15, 1986, Contractor received information from Circle International S.A. that because of the news report
that Iraq defaulted in its obligations with European banks, the approval by Banco di Roma of the loan to SOB shall be
deferred indefinitely, a copy of the letter of Circle International together with the news clippings are hereto attached as
Annexes "F" and "F-1", respectively.57
As found by both the Court of Appeals and the trial court, the delay or the non-completion of the Project was caused by factors not
imputable to the respondent contractor. It was rather due mainly to the persistent violations by SOB of the terms and conditions of the
contract, particularly its failure to pay 75% of the accomplished work in US Dollars. Indeed, where one of the parties to a contract does
not perform in a proper manner the prestation which he is bound to perform under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay if the other party fails to perform the obligation incumbent upon him.
The petitioner, however, maintains that the payments by SOB of the monthly billings in purely Iraqi Dinars did not render impossible the
performance of the Project by VPECI. Such posture is quite contrary to its previous representations. In his 26 March 1987 letter to the
Office of the Middle Eastern and African Affairs (OMEAA), DFA, Manila, petitioner's Executive Vice-President Jesus M. Tañedo stated
that while VPECI had taken every possible measure to complete the Project, the war situation in Iraq, particularly the lack of foreign
exchange, was proving to be a great obstacle; thus:
VPECI has taken every possible measure for the completion of the project but the war situation in Iraq particularly the lack of
foreign exchange is proving to be a great obstacle. Our performance counterguarantee was called last 26 October 1986
when the negotiations for a foreign currency loan with the Italian government through Banco de Roma bogged down
following news report that Iraq has defaulted in its obligation with major European banks. Unless the situation in Iraq is
improved as to allay the bank's apprehension, there is no assurance that the project will ever be completed. 58
In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be
demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance
because it must appear that the tolerance or benevolence of the creditor must have ended. 59
As stated earlier, SOB cannot yet demand complete performance from VPECI because it has not yet itself performed its obligation in a
proper manner, particularly the payment of the 75% of the cost of the Project in US Dollars. The VPECI cannot yet be said to have
incurred in delay. Even assuming that there was delay and that the delay was attributable to VPECI, still the effects of that delay
ceased upon the renunciation by the creditor, SOB, which could be implied when the latter granted several extensions of time to the
former. 60 Besides, no demand has yet been made by SOB against the respondent contractor. Demand is generally necessary even if a
period has been fixed in the obligation. And default generally begins from the moment the creditor demands judicially or extra-
judicially the performance of the obligation. Without such demand, the effects of default will not arise. 61
Moreover, the petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be compelled to pay the creditor SOB
unless the property of the debtor VPECI has been exhausted and all legal remedies against the said debtor have been resorted to by
the creditor.62 It could also set up compensation as regards what the creditor SOB may owe the principal debtor VPECI. 63 In this case,
however, the petitioner has clearly waived these rights and remedies by making the payment of an obligation that was yet to be
shown to be rightfully due the creditor and demandable of the principal debtor.
As found by the Court of Appeals, the petitioner fully knew that the joint venture contractor had collectibles from SOB which could be
set off with the amount covered by the performance guarantee. In February 1987, the OMEAA transmitted to the petitioner a copy of
a telex dated 10 February 1987 of the Philippine Ambassador in Baghdad, Iraq, informing it of the note verbale sent by the Iraqi Ministry
of Foreign Affairs stating that the past due obligations of the joint venture contractor from the petitioner would "be deducted from the
dues of the two contractors."64
Also, in the project situationer attached to the letter to the OMEAA dated 26 March 1987, the petitioner raised as among the
arguments to be presented in support of the cancellation of the counter-guarantee the fact that the amount of ID281,414/066
retained by SOB from the Project was more than enough to cover the counter-guarantee of ID271,808/610; thus:
6.1 Present the following arguments in cancelling the counterguarantee:
· The Iraqi Government does not have the foreign exchange to fulfill its contractual obligations of paying 75% of
progress billings in US dollars.
· It could also be argued that the amount of ID281,414/066 retained by SOB from the proposed project is more than
the amount of the outstanding counterguarantee. 65
In a nutshell, since the petitioner was aware of the contractor's outstanding receivables from SOB, it should have set up compensation
as was proposed in its project situationer.
190
Moreover, the petitioner was very much aware of the predicament of the respondents. In fact, in its 13 May 1987 letter to the OMEAA,
DFA, Manila, it stated:
VPECI also maintains that the delay in the completion of the project was mainly due to SOB's violation of contract terms and
as such, call on the guarantee has no basis.
While PHILGUARANTEE is prepared to honor its commitment under the guarantee, PHILGUARANTEE does not want to be an
instrument in any case of inequity committed against a Filipino contractor. It is for this reason that we are constrained to seek
your assistance not only in ascertaining the veracity of Al Ahli Bank's claim that it has paid Rafidain Bank but possibly averting
such an event. As any payment effected by the banks will complicate matters, we cannot help underscore the urgency of
VPECI's bid for government intervention for the amicable termination of the contract and release of the performance
guarantee. 66
But surprisingly, though fully cognizant of SOB's violations of the service contract and VPECI's outstanding receivables from SOB, as well
as the situation obtaining in the Project site compounded by the Iran-Iraq war, the petitioner opted to pay the second layer guarantor
not only the full amount of the performance bond counter-guarantee but also interests and penalty charges.
This brings us to the next question: May the petitioner as a guarantor secure reimbursement from the respondents for what it has paid
under Letter of Guarantee No. 81-194-F?
As a rule, a guarantor who pays for a debtor should be indemnified by the latter 67 and would be legally subrogated to the rights which
the creditor has against the debtor. 68 However, a person who makes payment without the knowledge or against the will of the debtor
has the right to recover only insofar as the payment has been beneficial to the debtor. 69 If the obligation was subject to defenses on
the part of the debtor, the same defenses which could have been set up against the creditor can be set up against the paying
guarantor.70
From the findings of the Court of Appeals and the trial court, it is clear that the payment made by the petitioner guarantor did not in
any way benefit the principal debtor, given the project status and the conditions obtaining at the Project site at that time. Moreover,
the respondent contractor was found to have valid defenses against SOB, which are fully supported by evidence and which have
been meritoriously set up against the paying guarantor, the petitioner in this case. And even if the deed of undertaking and the surety
bond secured petitioner's guaranty, the petitioner is precluded from enforcing the same by reason of the petitioner's undue payment
on the guaranty. Rights under the deed of undertaking and the surety bond do not arise because these contracts depend on the
validity of the enforcement of the guaranty.
The petitioner guarantor should have waited for the natural course of guaranty: the debtor VPECI should have, in the first place,
defaulted in its obligation and that the creditor SOB should have first made a demand from the principal debtor. It is only when the
debtor does not or cannot pay, in whole or in part, that the guarantor should pay. 71 When the petitioner guarantor in this case paid
against the will of the debtor VPECI, the debtor VPECI may set up against it defenses available against the creditor SOB at the time of
payment. This is the hard lesson that the petitioner must learn.
As the government arm in pursuing its objective of providing "the necessary support and assistance in order to enable … [Filipino
exporters and contractors to operate viably under the prevailing economic and business conditions," 72 the petitioner should have
exercised prudence and caution under the circumstances. As aptly put by the Court of Appeals, it would be the height of inequity to
allow the petitioner to pass on its losses to the Filipino contractor VPECI which had sternly warned against paying the Al Ahli Bank and
constantly apprised it of the developments in the Project implementation.
WHEREFORE, the petition for review on certiorari is hereby DENIED for lack of merit, and the decision of the Court of appeals in CA-G.R.
CV No. 39302 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
34. EDI-Staffbuilders International, Inc. v. National Labor Relations Commission, G.R. No. 145587, [October 26, 2007], 563 PHIL 1-36
Muana
35. Crescent Petroleum Ltd. v. M/V "Lok Maheshwari", G.R. No. 155014, [November 11, 2005], 511 PHIL 248-268 Santiago
G.R. No. 155014. November 11, 2005.*
CRESCENT PETROLEUM, LTD., petitioner, vs. M/V “LOK MAHESHWARI,” THE SHIPPING CORPORATION OF INDIA, and PORTSERV LIMITED
and/or TRANSMAR SHIPPING, INC., respondents.
191
Courts; Jurisdictions; Admiralty and Maritime Law; Two (2) tests have been used to determine whether a case involving contracts
comes within the admiralty and maritime jurisdiction of a court—the locational test and the subject matter test; The English rule follows
the locational test wherein maritime and admiralty jurisdiction, within a few exceptions, is exercised only on contracts made upon the
sea and to be executed thereon; Under the American rule, the criterion in determining whether a contract is maritime depends on the
nature and subject matter of the contract, which rule has been adopted by the Philippine Supreme Court; A contract for furnishing
supplies is maritime and within the jurisdiction of admiralty.— Under Batas Pambansa Bilang 129, as amended by Republic Act No.
7691, RTCs exercise exclusive original jurisdiction “(i)n all actions in admiralty and maritime where the demand or claim exceeds two
hundred thousand pesos (P200,000) or in Metro Manila, where such demand or claim exceeds four hundred thousand pesos
(P400,000).” Two (2) tests have been used to determine whether a case involving a contract comes within the admiralty and maritime
jurisdiction of a court—the locational test and the subject matter test. The English rule follows the locational test wherein maritime and
admiralty jurisdiction, with a few exceptions, is exercised only on contracts made upon the sea and to be executed thereon. This is
totally rejected under the American rule where the criterion in determining whether a contract is maritime depends on the nature and
subject matter of the contract, having reference to maritime service and transactions. In International Harvester Company of the
Philippines v. Aragon, we adopted the American rule and held that “(w)hether or not a contract is maritime depends not on the place
where the contract is made and is to be executed, making the locality the test, but on the subject matter of the contract, making the
true criterion a maritime service or a maritime transaction.” A contract for furnishing supplies like the one involved in this case is
maritime and within the jurisdiction of admiralty. It may be invoked before our courts through an action in rem or quasi in rem or an
action in personam.
Same; Same; Same; Ship Mortgage Decree of 1978 (P.D. No. 1521); Statutory Construction; Legal Research; The Ship Mortgage Decree
of 1978, which was patterned closely from the U.S. Ship Mortgage Act of 1920 and the Liberian Maritime Law relating to preferred
mortgages, was enacted “to accelerate the growth and development of the shipping industry” and to extend the benefits accorded
to overseas shipping under PD 214 to domestic shipping; U.S. jurisprudence finds relevance to determining whether P.D. No. 1521
applies in the present case.—P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted “to accelerate the growth and
development of the shipping industry” and “to extend the benefits accorded to overseas shipping under Presidential Decree No. 214
to domestic shipping.” It is patterned closely from the U.S. Ship Mortgage Act of 1920 and the Liberian Maritime Law relating to
preferred mortgages. Notably, Sections 21, 22 and 23 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 are identical to Subsections
P, Q, and R, respectively, of the U.S. Ship Mortgage Act of 1920, which is part of the Federal Maritime Lien Act. Hence, U.S.
jurisprudence finds relevance to determining whether P.D. No. 1521 or the Ship Mortgage Decree of 1978 applies in the present case.
Same; Same; Same; Same; Maritime Lien; Conflict of Laws; Balancing basic interests—Canada is the place of the wrongful act, of the
allegiance or domicile of the injured and the place of contract, while India is the law of the flag and the allegiance of the defendant
shipowner—it is inconceivable that the Philippine court has any interest in the case that outweighs the interests of Canada or India for
that matter.—Out of the seven basic factors listed in the case of Lauritzen, Philippine law only falls under one—the law of the forum. All
other elements are foreign—Canada is the place of the wrongful act, of the allegiance or domicile of the injured and the place of
contract; India is the law of the flag and the allegiance of the defendant shipowner. Balancing these basic interests, it is inconceivable
that the Philippine court has any interest in the case that outweighs the interests of Canada or India for that matter.
Same; Same; Same; Same; Same; PD 1521 was enacted primarily to protect Filipino suppliers and was not intended to create a lien
from a contract for supplies between foreign entities delivered in a foreign port.— P.D. No. 1521 or the Ship Mortgage Decree of 1978 is
inapplicable following the factors under Restatement (Second) of Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D.
No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily to protect Filipino suppliers and was not intended to create a lien
from a contract for supplies between foreign entities delivered in a foreign port.
Same; Same; Same; Same; Same; Opening up our courts to foreign supplies by granting them a maritime lien under our laws even if
they are not entitled to a maritime lien under their laws will encourage forum shopping.—Applying P.D. No. 1521 or the Ship Mortgage
Decree of 1978 and rule that a maritime lien exists would not promote the public policy behind the enactment of the law to develop
the domestic shipping industry. Opening up our courts to foreign suppliers by granting them a maritime lien under our laws even if they
are not entitled to a maritime lien under their laws will encourage forum shopping.
Same; Same; Same; Same; Same; When the parties entered into a contract for supplies in Canada, they could not have intended the
laws of a remote country like the Philippines to determine the creation of a lien by a mere accident of the vessel’s being in Philippine
territory.—The submission of petitioner is not in keeping with the reasonable expectation of the parties to the contract. Indeed, when
the parties entered into a contract for supplies in Canada, they could not have intended the laws of a remote country like the
Philippines to determine the creation of a lien by the mere accident of the Vessel’s being in Philippine territory.
192
Same; Same; Same; Same; Same; In light of the various foreign interest involved, it is clear that Canada has the most significant interest
in this dispute.—In light of the interests of the various foreign elements involved, it is clear that Canada has the most significant interest
in this dispute. The injured party is a Canadian corporation, the sub-charterer which placed the orders for the supplies is also Canadian,
the entity which physically delivered the bunker fuels is in Canada, the place of contracting and negotiation is in Canada, and the
supplies were delivered in Canada. The arbitration clause contained in the Bunker Fuel Agreement which states that New York law
governs the “construction, validity and performance” of the contract is only a factor that may be considered in the choice-of-law
analysis but is not conclusive. As in the cases of Gulf Trading and Swedish Telecom, the lien that is the subject matter of this case arose
by operation of law and not by contract because the shipowner was not a party to the contract under which the goods were
supplied.
Same; Same; Same; Same; Same; The supplier’s insistence on enforcing a maritime lien before Philippine courts depends on the
existence of maritime lien under the proper law, and by erroneously claiming a maritime lien under Philippine law instead of proving
that a maritime lien exists under Canadian law, such supplier failed to establish a cause of action.—It is well-settled that a party whose
cause of action or defense depends upon a foreign law has the burden of proving the foreign law. Such foreign law is treated as a
question of fact to be properly pleaded and proved. Petitioner Crescent’s insistence on enforcing a maritime lien before our courts
depended on the existence of a maritime lien under the proper law. By erroneously claiming a maritime lien under Philippine law
instead of proving that a maritime lien exists under Canadian law, petitioner Crescent failed to establish a cause of action.
Same; Same; Same; Same; Same; Doctrine of Processual Presumption; Requisites for Maritime Liens on Necessaries to Exist.—Even if we
apply the doctrine of processual presumption, the result will still be the same. Under P.D. No. 1521 or the Ship Mortgage Decree of 1978,
the following are the requisites for maritime liens on necessaries to exist: (1) the “necessaries” must have been furnished to and for the
benefit of the vessel; (2) the “necessaries” must have been necessary for the continuation of the voyage of the vessel; (3) the credit
must have been extended to the vessel; (4) there must be necessity for the extension of the credit; and (5) the necessaries must be
ordered by persons authorized to contract on behalf of the vessel. These do not avail in the instant case.
Same; Same; Same; Same; Same; While it is presumed when the master of the ship is the one who placed the order, it is not disputed
that in this case it was the sub-charterer which placed the orders to the supplier, hence, it is incumbent for the supplier to prove that
the benefit was extended to the vessel.—It was not established that benefit was extended to the vessel. While this is presumed when
the master of the ship is the one who placed the order, it is not disputed that in this case it was the sub-charterer Portserv which placed
the orders to petitioner Crescent. Hence, the presumption does not arise and it is incumbent upon petitioner Crescent to prove that
benefit was extended to the vessel. Petitioner did not.
Same; Same; Same; Same; Same; Where it was the sub-charterer which requested for the delivery of bunker fuels, the same does not
establish that credit was extended to the vessel.—It was not established that credit was extended to the vessel. It is presumed that “in
the absence of fraud or collusion, where advances are made to a captain in a foreign port, upon his request, to pay for necessary
repairs or supplies to enable his vessel to prosecute her voyage, or to pay harbor dues, or for pilotage, towage and like services
rendered to the vessel, that they are made upon the credit of the vessel as well as upon that of her owners.” In this case, it was the
subcharterer Portserv which requested for the delivery of the bunker fuels. The issuance of two checks amounting to US$300,000 in favor
of petitioner Crescent prior to the delivery of the bunkers as security for the payment of the obligation weakens petitioner Crescent’s
contention that credit was extended to the Vessel.
Same; Same; Same; Same; Same; A necessity of credit will be presumed where it appears that the repairs and supplies were necessary
for the ship and that they were ordered by the master.—There was no proof of necessity of credit. A necessity of credit will be
presumed where it appears that the repairs and supplies were necessary for the ship and that they were ordered by the master. This
presumption does not arise in this case since the fuels were not ordered by the master and there was no proof of necessity for the
supplies.
Same; Same; Same; Same; Same; Words and Phrases; Clearly, a sub-charterer under a time charter, is not someone to whom the
management of the vessel has been entrusted; A time charter is a contract for the use of a vessel for a specified period of time or for
the duration of one or more specified voyages wherein the owner of the time-chartered vessel retains possession and control through
the master and crew who remains his employees.—The necessaries were not ordered by persons authorized to contract in behalf of
the vessel as provided under Section 22 of P.D. No. 1521 or the Ship Mortgage Decree of 1978—the managing owner, the ship’s
husband, master or any person with whom the management of the vessel at the port of supply is entrusted. Clearly, Portserv, a sub-
charterer under a time charter, is not someone to whom the management of the vessel has been entrusted. A time charter is a
contract for the use of a vessel for a specified period of time or for the duration of one or more specified voyages wherein the owner of
the time-chartered vessel retains possession and control through the master and crew who remain his employees. Not enjoying the
193
presumption of authority, petitioner Crescent should have proved that Portserv was authorized by the shipowner to contract for
supplies. Petitioner failed.
PUNO, J.:
This petition for review on certiorari under Rule 45 seeks the (a) reversal of the November 28, 2001 Decision of the Court of Appeals in
CA-G.R. No. CV-54920,1 which dismissed for "want of jurisdiction" the instant case, and the September 3, 2002 Resolution of the same
appellate court,2 which denied petitioner’s motion for reconsideration, and (b) reinstatement of the July 25, 1996 Decision3 of the
Regional Trial Court (RTC) in Civil Case No. CEB-18679, which held that respondents were solidarily liable to pay petitioner the sum
prayed for in the complaint.
The facts are as follows: Respondent M/V "Lok Maheshwari" (Vessel) is an oceangoing vessel of Indian registry that is owned by
respondent Shipping Corporation of India (SCI), a corporation organized and existing under the laws of India and principally owned by
the Government of India. It was time-chartered by respondent SCI to Halla Merchant Marine Co. Ltd. (Halla), a South Korean
company. Halla, in turn, sub-chartered the Vessel through a time charter to Transmar Shipping, Inc. (Transmar). Transmar further sub-
chartered the Vessel to Portserv Limited (Portserv). Both Transmar and Portserv are corporations organized and existing under the laws
of Canada.
On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum, Ltd. (Crescent), a corporation organized and
existing under the laws of Canada that is engaged in the business of selling petroleum and oil products for the use and operation of
oceangoing vessels, to deliver marine fuel oils (bunker fuels) to the Vessel. Petitioner Crescent granted and confirmed the request
through an advice via facsimile dated November 2, 1995. As security for the payment of the bunker fuels and related services,
petitioner Crescent received two (2) checks in the amounts of US$100,000.00 and US$200,000.00. Thus, petitioner Crescent contracted
with its supplier, Marine Petrobulk Limited (Marine Petrobulk), another Canadian corporation, for the physical delivery of the bunker
fuels to the Vessel.
On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels amounting to US$103,544 inclusive of barging and
demurrage charges to the Vessel at the port of Pioneer Grain, Vancouver, Canada. The Chief Engineer Officer of the Vessel duly
acknowledged and received the delivery receipt. Marine Petrobulk issued an invoice to petitioner Crescent for the US$101,400.00
worth of the bunker fuels. Petitioner Crescent issued a check for the same amount in favor of Marine Petrobulk, which check was duly
encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated November 21, 1995 to "Portserv Limited, and/or the
Master, and/or Owners, and/or Operators, and/or Charterers of M/V ‘Lok Maheshwari’" in the amount of US$103,544.00 with instruction
to remit the amount on or before December 1, 1995. The period lapsed and several demands were made but no payment was
received. Also, the checks issued to petitioner Crescent as security for the payment of the bunker fuels were dishonored for
insufficiency of funds. As a consequence, petitioner Crescent incurred additional expenses of US$8,572.61 for interest, tracking fees,
and legal fees.
On May 2, 1996, while the Vessel was docked at the port of Cebu City, petitioner Crescent instituted before the RTC of Cebu City an
action "for a sum of money with prayer for temporary restraining order and writ of preliminary attachment" against respondents Vessel
and SCI, Portserv and/or Transmar. The case was raffled to Branch 10 and docketed as Civil Case No. CEB-18679.
On May 3, 1996, the trial court issued a writ of attachment against the Vessel with bond at ₱2,710,000.00. Petitioner Crescent withdrew
its prayer for a temporary restraining order and posted the required bond.
On May 18, 1996, summonses were served to respondents Vessel and SCI, and Portserv and/or Transmar through the Master of the
Vessel. On May 28, 1996, respondents Vessel and SCI, through Pioneer Insurance and Surety Corporation (Pioneer), filed an urgent ex-
parte motion to approve Pioneer’s letter of undertaking, to consider it as counter-bond and to discharge the attachment. On May 29,
1996, the trial court granted the motion; thus, the letter of undertaking was approved as counter-bond to discharge the attachment.
For failing to file their respective answers and upon motion of petitioner Crescent, the trial court declared respondents Vessel and SCI,
Portserv and/or Transmar in default. Petitioner Crescent was allowed to present its evidence ex-parte.
On July 25, 1996, the trial court rendered its decision in favor of petitioner Crescent, thus:
194
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff [Crescent] and against the defendants [Vessel, SCI,
Portserv and/or Transmar].
Consequently, the latter are hereby ordered to pay plaintiff jointly and solidarily, the following:
(a) the sum of US$103,544.00, representing the outstanding obligation;
(b) interest of US$10,978.50 as of July 3, 1996, plus additional interest at 18% per annum for the period thereafter, until the principal
account is fully paid;
(c) attorney’s fees of ₱300,000.00; and
(d) ₱200,000.00 as litigation expenses.
SO ORDERED.
On August 19, 1996, respondents Vessel and SCI appealed to the Court of Appeals. They attached copies of the charter parties
between respondent SCI and Halla, between Halla and Transmar, and between Transmar and Portserv. They pointed out that Portserv
was a time charterer and that there is a clause in the time charters between respondent SCI and Halla, and between Halla and
Transmar, which states that "the Charterers shall provide and pay for all the fuel except as otherwise agreed." They submitted a copy of
Part II of the Bunker Fuel Agreement between petitioner Crescent and Portserv containing a stipulation that New York law governs the
"construction, validity and performance" of the contract. They likewise submitted certified copies of the Commercial Instruments and
Maritime Lien Act of the United States (U.S.), some U.S. cases, and some Canadian cases to support their defense.
On November 28, 2001, the Court of Appeals issued its assailed Decision, which reversed that of the trial court, viz:
WHEREFORE, premises considered, the Decision dated July 25, 1996, issued by the Regional Trial Court of Cebu City, Branch 10, is
hereby REVERSED and SET ASIDE, and a new one is entered DISMISSING the instant case for want of jurisdiction.
The appellate court denied petitioner Crescent’s motion for reconsideration explaining that it "dismissed the instant action primarily on
the ground of forum non conveniens considering that the parties are foreign corporations which are not doing business in the
Philippines."
Hence, this petition submitting the following issues for resolution, viz:
1. Philippine courts have jurisdiction over a foreign vessel found inside Philippine waters for the enforcement of a maritime lien against
said vessel and/or its owners and operators;
2. The principle of forum non conveniens is inapplicable to the instant case;
3. The trial court acquired jurisdiction over the subject matter of the instant case, as well as over the res and over the persons of the
parties;
4. The enforcement of a maritime lien on the subject vessel is expressly granted by law. The Ship Mortgage Acts as well as the Code of
Commerce provides for relief to petitioner for its unpaid claim;
5. The arbitration clause in the contract was not rigid or inflexible but expressly allowed petitioner to enforce its maritime lien in
Philippine courts provided the vessel was in the Philippines;
6. The law of the state of New York is inapplicable to the present controversy as the same has not been properly pleaded and proved;
7. Petitioner has legal capacity to sue before Philippine courts as it is suing upon an isolated business transaction;
8. Respondents were duly served summons although service of summons upon respondents is not a jurisdictional requirement, the
action being a suit quasi in rem;
9. The trial court’s decision has factual and legal bases; and,
195
10. The respondents should be held jointly and solidarily liable.
In a nutshell, this case is for the satisfaction of unpaid supplies furnished by a foreign supplier in a foreign port to a vessel of foreign
registry that is owned, chartered and sub-chartered by foreign entities.
Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, RTCs exercise exclusive original jurisdiction "(i)n all actions in
admiralty and maritime where the demand or claim exceeds two hundred thousand pesos ( ₱200,000) or in Metro Manila, where such
demand or claim exceeds four hundred thousand pesos ( ₱400,000)." Two (2) tests have been used to determine whether a case
involving a contract comes within the admiralty and maritime jurisdiction of a court - the locational test and the subject matter test.
The English rule follows the locational test wherein maritime and admiralty jurisdiction, with a few exceptions, is exercised only on
contracts made upon the sea and to be executed thereon. This is totally rejected under the American rule where the criterion in
determining whether a contract is maritime depends on the nature and subject matter of the contract, having reference to maritime
service and transactions.4 In International Harvester Company of the Philippines v. Aragon,5 we adopted the American rule and held
that "(w)hether or not a contract is maritime depends not on the place where the contract is made and is to be executed, making the
locality the test, but on the subject matter of the contract, making the true criterion a maritime service or a maritime transaction."
A contract for furnishing supplies like the one involved in this case is maritime and within the jurisdiction of admiralty.6 It may be invoked
before our courts through an action in rem or quasi in rem or an action in personam. Thus: 7
xxx
"Articles 579 and 584 [of the Code of Commerce] provide a method of collecting or enforcing not only the liens created under Section
580 but also for the collection of any kind of lien whatsoever."8 In the Philippines, we have a complete legislation, both substantive and
adjective, under which to bring an action in rem against a vessel for the purpose of enforcing liens. The substantive law is found in
Article 580 of the Code of Commerce. The procedural law is to be found in Article 584 of the same Code. The result is, therefore, that in
the Philippines any vessel – even though it be a foreign vessel – found in any port of this Archipelago may be attached and sold under
the substantive law which defines the right, and the procedural law contained in the Code of Commerce by which this right is to be
enforced.9 x x x. But where neither the law nor the contract between the parties creates any lien or charge upon the vessel, the only
way in which it can be seized before judgment is by pursuing the remedy relating to attachment under Rule 59 [now Rule 57] of the
Rules of Court.10
But, is petitioner Crescent entitled to a maritime lien under our laws? Petitioner Crescent bases its claim of a maritime lien on Sections
21, 22 and 23 of Presidential Decree No. 1521 (P.D. No. 1521), also known as the Ship Mortgage Decree of 1978, viz:
Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. - Any person furnishing repairs, supplies, towage, use of dry dock or
maritime railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a
person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be
necessary to allege or prove that credit was given to the vessel.
Sec. 22. Persons Authorized to Procure Repairs, Supplies and Necessaries. - The following persons shall be presumed to have authority
from the owner to procure repairs, supplies, towage, use of dry dock or marine railway, and other necessaries for the vessel: The
managing owner, ship’s husband, master or any person to whom the management of the vessel at the port of supply is entrusted. No
person tortuously or unlawfully in possession or charge of a vessel shall have authority to bind the vessel.
Sec. 23. Notice to Person Furnishing Repairs, Supplies and Necessaries. - The officers and agents of a vessel specified in Section 22 of this
Decree shall be taken to include such officers and agents when appointed by a charterer, by an owner pro hac vice, or by an agreed
purchaser in possession of the vessel; but nothing in this Decree shall be construed to confer a lien when the furnisher knew, or by
exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for sale of the
vessel, or for any other reason, the person ordering the repairs, supplies, or other necessaries was without authority to bind the vessel
therefor.
Petitioner Crescent submits that these provisions apply to both domestic and foreign vessels, as well as domestic and foreign suppliers
of necessaries. It contends that the use of the term "any person" in Section 21 implies that the law is not restricted to domestic suppliers
but also includes all persons who supply provisions and necessaries to a vessel, whether foreign or domestic. It points out further that the
law does not indicate that the supplies or necessaries must be furnished in the Philippines in order to give petitioner the right to seek
enforcement of the lien with a Philippine court.11
196
Respondents Vessel and SCI, on the other hand, maintain that Section 21 of the P.D. No. 1521 or the Ship Mortgage Decree of 1978
does not apply to a foreign supplier like petitioner Crescent as the provision refers only to a situation where the person furnishing the
supplies is situated inside the territory of the Philippines and not where the necessaries were furnished in a foreign jurisdiction like
Canada.12
We find against petitioner Crescent.
I.
P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted "to accelerate the growth and development of the shipping industry"
and "to extend the benefits accorded to overseas shipping under Presidential Decree No. 214 to domestic shipping."13 It is patterned
closely from the U.S. Ship Mortgage Act of 1920 and the Liberian Maritime Law relating to preferred mortgages.14 Notably, Sections 21,
22 and 23 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 are identical to Subsections P, Q, and R, respectively, of the U.S. Ship
Mortgage Act of 1920, which is part of the Federal Maritime Lien Act. Hence, U.S. jurisprudence finds relevance to determining whether
P.D. No. 1521 or the Ship Mortgage Decree of 1978 applies in the present case.
The various tests used in the U.S. to determine whether a maritime lien exists are the following:
One. "In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in a foreign port, whether such lien exists, or
whether the court has or will exercise jurisdiction, depends on the law of the country where the supplies were furnished, which must be
pleaded and proved."15 This principle was laid down in the 1888 case of The Scotia,16 reiterated in The Kaiser Wilhelm II17 (1916), in The
Woudrichem18 (1921) and in The City of Atlanta19 (1924).
Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor methodologies as the law of the place of
supply.20
In Lauritzen v. Larsen,21 a Danish seaman, while temporarily in New York, joined the crew of a ship of Danish flag and registry that is
owned by a Danish citizen. He signed the ship’s articles providing that the rights of the crew members would be governed by Danish
law and by the employer’s contract with the Danish Seamen’s Union, of which he was a member. While in Havana and in the course of
his employment, he was negligently injured. He sued the shipowner in a federal district court in New York for damages under the Jones
Act. In holding that Danish law and not the Jones Act was applicable, the Supreme Court adopted a multiple-contact test to
determine, in the absence of a specific Congressional directive as to the statute’s reach, which jurisdiction’s law should be applied.
The following factors were considered: (1) place of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the injured; (4)
allegiance of the defendant shipowner; (5) place of contract; (6) inaccessibility of foreign forum; and (7) law of the forum.
Several years after Lauritzen, the U.S. Supreme Court in the case of Romero v. International Terminal Operating Co.22 again considered
a foreign seaman’s personal injury claim under both the Jones Act and the general maritime law. The Court held that the factors first
announced in the case of Lauritzen were applicable not only to personal injury claims arising under the Jones Act but to all matters
arising under maritime law in general.23
Hellenic Lines, Ltd. v. Rhoditis24 was also a suit under the Jones Act by a Greek seaman injured aboard a ship of Greek registry while in
American waters. The ship was operated by a Greek corporation which has its largest office in New York and another office in New
Orleans and whose stock is more than 95% owned by a U.S. domiciliary who is also a Greek citizen. The ship was engaged in regularly
scheduled runs between various ports of the U.S. and the Middle East, Pakistan, and India, with its entire income coming from either
originating or terminating in the U.S. The contract of employment provided that Greek law and a Greek collective bargaining
agreement would apply between the employer and the seaman and that all claims arising out of the employment contract were to
be adjudicated by a Greek court. The U.S. Supreme Court observed that of the seven factors listed in the Lauritzen test, four were in
favor of the shipowner and against jurisdiction. In arriving at the conclusion that the Jones Act applies, it ruled that the application of
the Lauritzen test is not a mechanical one. It stated thus: "[t]he significance of one or more factors must be considered in light of the
national interest served by the assertion of Jones Act jurisdiction. (footnote omitted) Moreover, the list of seven factors in Lauritzen was
not intended to be exhaustive. x x x [T]he shipowner’s base of operations is another factor of importance in determining whether the
Jones Act is applicable; and there well may be others."
The principles enunciated in these maritime tort cases have been extended to cases involving unpaid supplies and necessaries such as
the
cases of Forsythe International U.K., Ltd. v. M/V Ruth Venture,25 and Comoco Marine Services v. M/V El Centroamericano.26
197
Three. The factors provided in Restatement (Second) of Conflicts of Law have also been applied, especially in resolving cases brought
under the Federal Maritime Lien Act. Their application suggests that in the absence of an effective choice of law by the parties, the
forum contacts to be considered include: (a) the place of contracting; (b) the place of negotiation of the contract; (c) the place of
performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of
incorporation and place of business of the parties.27
In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield,28 an admiralty action in rem was brought by an American supplier
against a vessel of Norwegian flag owned by a Norwegian Company and chartered by a London time charterer for unpaid fuel oil
and marine diesel oil delivered while the vessel was in U.S. territory. The contract was executed in London. It was held that because the
bunker fuel was delivered to a foreign flag vessel within the jurisdiction of the U.S., and because the invoice specified payment in the
U.S., the admiralty and maritime law of the U.S. applied. The U.S. Court of Appeals recognized the modern approach to maritime
conflict of law problems introduced in the Lauritzen case. However, it observed that Lauritzen involved a torts claim under the Jones
Act while the present claim involves an alleged maritime lien arising from unpaid supplies. It made a disclaimer that its conclusion is
limited to the unique circumstances surrounding a maritime lien as well as the statutory directives found in the Maritime Lien Statute
and that the initial choice of law determination is significantly affected by the statutory policies surrounding a maritime lien. It ruled that
the facts in the case call for the application of the Restatement (Second) of Conflicts of Law. The U.S. Court gave much significance to
the congressional intent in enacting the Maritime Lien Statute to protect the interests of American supplier of goods, services or
necessaries by making maritime liens available where traditional services are routinely rendered. It concluded that the Maritime Lien
Statute represents a relevant policy of the forum that serves the needs of the international legal system as well as the basic policies
underlying maritime law. The court also gave equal importance to the predictability of result and protection of justified expectations in
a particular field of law. In the maritime realm, it is expected that when necessaries are furnished to a vessel in an American port by an
American supplier, the American Lien Statute will apply to protect that supplier regardless of the place where the contract was formed
or the nationality of the vessel.
The same principle was applied in the case of Swedish Telecom Radio v. M/V Discovery I29 where the American court refused to apply
the Federal Maritime Lien Act to create a maritime lien for goods and services supplied by foreign companies in foreign ports. In this
case, a Swedish company supplied radio equipment in a Spanish port to refurbish a Panamanian vessel damaged by fire. Some of the
contract negotiations occurred in Spain and the agreement for supplies between the parties indicated Swedish company’s willingness
to submit to Swedish law. The ship was later sold under a contract of purchase providing for the application of New York law and was
arrested in the U.S. The U.S. Court of Appeals also held that while the contacts-based framework set forth in Lauritzen was useful in the
analysis of all maritime choice of law situations, the factors were geared towards a seaman’s injury claim. As in Gulf Trading, the lien
arose by operation of law because the ship’s owner was not a party to the contract under which the goods were supplied. As a result,
the court found it more appropriate to consider the factors contained in Section 6 of the Restatement (Second) of Conflicts of Law.
The U.S. Court held that the primary concern of the Federal Maritime Lien Act is the protection of American suppliers of goods and
services.
The same factors were applied in the case of Ocean Ship Supply, Ltd. v. M/V Leah.30
II.
Finding guidance from the foregoing decisions, the Court cannot sustain petitioner Crescent’s insistence on the application of P.D. No.
1521 or the Ship Mortgage Decree of 1978 and hold that a maritime lien exists.
First. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only falls under one – the law of the forum. All other
elements are foreign – Canada is the place of the wrongful act, of the allegiance or domicile of the injured and the place of contract;
India is the law of the flag and the allegiance of the defendant shipowner. Balancing these basic interests, it is inconceivable that the
Philippine court has any interest in the case that outweighs the interests of Canada or India for that matter.
Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable following the factors under Restatement (Second) of
Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted
primarily to protect Filipino suppliers and was not intended to create a lien from a contract for supplies between foreign entities
delivered in a foreign port.
Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and rule that a maritime lien exists would not promote the public
policy behind the enactment of the law to develop the domestic shipping industry. Opening up our courts to foreign suppliers by
198
granting them a maritime lien under our laws even if they are not entitled to a maritime lien under their laws will encourage forum
shopping.
Finally. The submission of petitioner is not in keeping with the reasonable expectation of the parties to the contract. Indeed, when the
parties entered into a contract for supplies in Canada, they could not have intended the laws of a remote country like the Philippines
to determine the creation of a lien by the mere accident of the Vessel’s being in Philippine territory.
III.
But under which law should petitioner Crescent prove the existence of its maritime lien?
In light of the interests of the various foreign elements involved, it is clear that Canada has the most significant interest in this dispute.
The injured party is a Canadian corporation, the sub-charterer which placed the orders for the supplies is also Canadian, the entity
which physically delivered the bunker fuels is in Canada, the place of contracting and negotiation is in Canada, and the supplies were
delivered in Canada.
The arbitration clause contained in the Bunker Fuel Agreement which states that New York law governs the "construction, validity and
performance" of the contract is only a factor that may be considered in the choice-of-law analysis but is not conclusive. As in the
cases of Gulf Trading and Swedish Telecom, the lien that is the subject matter of this case arose by operation of law and not by
contract because the shipowner was not a party to the contract under which the goods were supplied.
It is worthy to note that petitioner Crescent never alleged and proved Canadian law as basis for the existence of a maritime lien. To
the end, it insisted on its theory that Philippine law applies. Petitioner contends that even if foreign law applies, since the same was not
properly pleaded and proved, such foreign law must be presumed to be the same as Philippine law pursuant to the doctrine of
processual presumption.
Thus, we are left with two choices: (1) dismiss the case for petitioner’s failure to establish a cause of action31 or (2) presume that
Canadian law is the same as Philippine law. In either case, the case has to be dismissed.
It is well-settled that a party whose cause of action or defense depends upon a foreign law has the burden of proving the foreign law.
Such foreign law is treated as a question of fact to be properly pleaded and proved.32 Petitioner Crescent’s insistence on enforcing a
maritime lien before our courts depended on the existence of a maritime lien under the proper law. By erroneously claiming a maritime
lien under Philippine law instead of proving that a maritime lien exists under Canadian law, petitioner Crescent failed to establish a
cause of action.33
Even if we apply the doctrine of processual presumption, the result will still be the same. Under P.D. No. 1521 or the Ship Mortgage
Decree of 1978, the following are the requisites for maritime liens on necessaries to exist: (1) the "necessaries" must have been furnished
to and for the benefit of the vessel; (2) the "necessaries" must have been necessary for the continuation of the voyage of the vessel; (3)
the credit must have been extended to the vessel; (4) there must be necessity for the extension of the credit; and (5) the necessaries
must be ordered by persons authorized to contract on behalf of the vessel.34 These do not avail in the instant case.
First. It was not established that benefit was extended to the vessel. While this is presumed when the master of the ship is the one who
placed the order, it is not disputed that in this case it was the sub-charterer Portserv which placed the orders to petitioner Crescent.35
Hence, the presumption does not arise and it is incumbent upon petitioner Crescent to prove that benefit was extended to the vessel.
Petitioner did not.
Second. Petitioner Crescent did not show any proof that the marine products were necessary for the continuation of the vessel.
Third. It was not established that credit was extended to the vessel. It is presumed that "in the absence of fraud or collusion, where
advances are made to a captain in a foreign port, upon his request, to pay for necessary repairs or supplies to enable his vessel to
prosecute her voyage, or to pay harbor dues, or for pilotage, towage and like services rendered to the vessel, that they are made
upon the credit of the vessel as well as upon that of her owners."36 In this case, it was the sub-charterer Portserv which requested for
the delivery of the bunker fuels. The issuance of two checks amounting to US$300,000 in favor of petitioner Crescent prior to the delivery
of the bunkers as security for the payment of the obligation weakens petitioner Crescent’s contention that credit was extended to the
Vessel.
199
We also note that when copies of the charter parties were submitted by respondents in the Court of Appeals, the time charters
between respondent SCI and Halla and between Halla and Transmar were shown to contain a clause which states that "the Charterers
shall provide and pay for all the fuel except as otherwise agreed." This militates against petitioner Crescent’s position that Portserv is
authorized by the shipowner to contract for supplies upon the credit of the vessel.
Fourth. There was no proof of necessity of credit. A necessity of credit will be presumed where it appears that the repairs and supplies
were necessary for the ship and that they were ordered by the master. This presumption does not arise in this case since the fuels were
not ordered by the master and there was no proof of necessity for the supplies.
Finally. The necessaries were not ordered by persons authorized to contract in behalf of the vessel as provided under Section 22 of P.D.
No. 1521 or the Ship Mortgage Decree of 1978 - the managing owner, the ship’s husband, master or any person with whom the
management of the vessel at the port of supply is entrusted. Clearly, Portserv, a sub-charterer under a time charter, is not someone to
whom the management of the vessel has been entrusted. A time charter is a contract for the use of a vessel for a specified period of
time or for the duration of one or more specified voyages wherein the owner of the time-chartered vessel retains possession and
control through the master and crew who remain his employees.37 Not enjoying the presumption of authority, petitioner Crescent
should have proved that Portserv was authorized by the shipowner to contract for supplies. Petitioner failed.
A discussion on the principle of forum non conveniens is unnecessary.
IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. No. CV 54920, dated November 28, 2001, and its subsequent
Resolution of September 3, 2002 are AFFIRMED. The instant petition for review on certiorari is DENIED for lack of merit. Cost against
petitioner.
SO ORDERED.
36. Cadalin v. POEA ,G.R. No. L-104776, December 5, 1994 Said
G.R. No. L-104776 December 5, 1994
BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest of 1,767 NAMED-COMPLAINANTS, thru and by
their Attorney-in-fact, Atty. GERARDO A. DEL MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR, NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT
INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS CORPORATION, respondents.
G.R. Nos. 104911-14 December 5, 1994
BIENVENIDO M. CADALIN, ET AL., petitioners,
vs.
HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL, INC. and/or ASIA INTERNATIONAL BUILDERS
CORPORATION, respondents.
G.R. Nos. 105029-32 December 5, 1994
ASIA INTERNATIONAL BUILDER CORPORATION and BROWN & ROOT INTERNATIONAL, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, ROMEO PATAG,
RIZALINO REYES, IGNACIO DE VERA, SOLOMON B. REYES, JOSE M. ABAN, EMIGDIO N. ABARQUEZ, ANTONIO ACUPAN, ROMEO ACUPAN,
BENJAMIN ALEJANDRE, WILFREDO D. ALIGADO, MARTIN AMISTAD, JR., ROLANDO B. AMUL, AMORSOLO ANADING, ANTONIO T. ANGLO,
VICENTE ARLITA, HERBERT AYO, SILVERIO BALATAZO, ALFREDO BALOBO, FALCONERO BANAAG, RAMON BARBOSA, FELIX BARCENA,
FERNANDO BAS, MARIO BATACLAN, ROBERTO S. BATICA, ENRICO BELEN, ARISTEO BICOL, LARRY C. BICOL, PETRONILLO BISCOCHO, FELIX
M. BOBIER, DIONISIO BOBONGO, BAYANI S. BRACAMANTE, PABLITO BUSTILLO, GUILLERMO CABEZAS, BIENVENIDO CADALIN, RODOLFO
CAGATAN, AMANTE CAILAO, IRENEO CANDOR, JOSE CASTILLO, MANUEL CASTILLO, REMAR CASTROJERES, REYNALDO CAYAS, ROMEO
CECILIO, TEODULO CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO T. DELA CRUZ, FRANCISCO DE GUZMAN, ONOFRE DE RAMA,
200
IGNACIO DE VERA, MODESTO DIZON, REYNALDO DIZON, ANTONIO S. DOMINGUEZ, GILBERT EBRADA, RICARDO EBRADA, ANTONIO
EJERCITO, JR., EDUARTE ERIDAO, ELADIO ESCOTOTO, JOHN ESGUERRA, EDUARDO ESPIRITU, ERNESTO ESPIRITU, RODOLFO ESPIRITU, NESTOR
M. ESTEVA, BENJAMIN ESTRADA, VALERIO EVANGELISTA, OLIGARIO FRANCISCO, JESUS GABAWAN, ROLANDO GARCIA, ANGEL GUDA,
PACITO HERNANDEZ, ANTONIO HILARIO, HENRY L. JACOB, HONESTO JARDINIANO, ANTONIO JOCSON, GERARDO LACSAMANA, EFREN U.
LIRIO LORETO LONTOC, ISRAEL LORENZO, ALEJANDRO LORINO, JOSE MABALAY, HERMIE MARANAN, LEOVIGILDO MARCIAL, NOEL
MARTINEZ, DANTE MATREO, LUCIANO MELENDEZ, RENATO MELO, FRANCIS MEDIODIA, JOSE C. MILANES, RAYMUNDO C. MILAY,
CRESENCIANO MIRANDA, ILDEFONSO C. MOLINA, ARMANDO B. MONDEJAR RESURRECCION D. NAZARENO, JUAN OLINDO, FRANCISCO
R. OLIVARES, PEDRO ORBISTA, JR., RICARDO ORDONEZ, ERNIE PANCHO, JOSE PANCHO, GORGONIO P. PARALA, MODESTO PINPIN,
JUANITO PAREA, ROMEO I. PATAG, FRANCISCO PINPIN, LEONARDO POBLETE, JAIME POLLOS, DOMINGO PONDALIS, EUGENIO RAMIREZ,
LUCIEN M. RESPALL, GAUDENCIO RETANAN, JR., TOMAS B. RETENER, ALVIN C. REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO G.
RICAZA, RODELIO RIETA, JR., BENITO RIVERA, JR., BERNARDO J. ROBILLOS, PABLO A. ROBLES, JOSE ROBLEZA, QUIRINO RONQUILLO,
AVELINO M. ROQUE, MENANDRO L. SABINO, PEDRO SALGATAR, EDGARDO SALONGA, NUMERIANO SAN MATEO, FELIZARDO DE LOS
SANTOS, JR., GABRIEL SANTOS, JUANITO SANTOS, PAQUITO SOLANTE, CONRADO A. SOLIS, JR., RODOLFO SULTAN, ISAIAS TALACTAC,
WILLIAM TARUC, MENANDRO TEMPROSA, BIENVENIDO S. TOLENTINO, BENEDICTO TORRES, MAXIMIANO TORRES, FRANCISCO G. TRIAS,
SERGIO A. URSOLINO, ROGELIO VALDEZ, LEGORIO E. VERGARA, DELFIN VICTORIA, GILBERT VICTORIA, HERNANE VICTORIANO, FRANCISCO
VILLAFLORES, DOMINGO VILLAHERMOSA, ROLANDO VILLALOBOS, ANTONIO VILLAUZ, DANILO VILLANUEVA, ROGELIO VILLANUEVA,
ANGEL VILLARBA, JUANITO VILLARINO, FRANCISCO ZARA, ROGELIO AALAGOS, NICANOR B. ABAD, ANDRES ABANES, REYNALDO ABANES,
EDUARDO ABANTE, JOSE ABARRO, JOSEFINO ABARRO, CELSO S. ABELANIO, HERMINIO ABELLA, MIGUEL ABESTANO, RODRIGO G. ABUBO,
JOSE B. ABUSTAN, DANTE ACERES, REYNALDO S. ACOJIDO, LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO ACUPAN, REYNALDO
ACUPAN, SOLANO ACUPAN, MANUEL P. ADANA, FLORENTINO R. AGNE, QUITERIO R. AGUDO, MANUEL P. AGUINALDO, DANTE AGUIRRE,
HERMINIO AGUIRRE, GONZALO ALBERTO, JR., CONRADO ALCANTARA, LAMBERTO Q. ALCANTARA, MARIANITO J. ALCANTARA, BENCIO
ALDOVER, EULALIO V. ALEJANDRO, BENJAMIN ALEJANDRO, EDUARDO L. ALEJANDRO, MAXIMINO ALEJANDRO, ALBERTO ALMENAR,
ARNALDO ALONZO, AMADO ALORIA, CAMILO ALVAREZ, MANUEL C. ALVAREZ, BENJAMIN R. AMBROCIO, CARLOS AMORES, BERNARD P.
ANCHETA, TIMOTEO O. ANCHETA, JEOFREY ANI, ELINO P. ANTILLON, ARMANDRO B. ANTIPONO, LARRY T. ANTONIO, ANTONIO APILADO,
ARTURO P. APILADO, FRANCISCO APOLINARIO, BARTOLOME M. AQUINO, ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M. AQUINO,
ROBERTO ARANGORIN, BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIO ARAULLO, ALEXANDER ARCAIRA, FRANCISCO ARCIAGA,
JOSE AREVALO, JUANTO AREVALO, RAMON AREVALO, RODOLFO AREVALO, EULALIO ARGUELLES, WILFREDO P. ARICA, JOSE M. ADESILLO,
ANTONIO ASUNCION, ARTEMIO M. ASUNCION, EDGARDO ASUNCION, REXY M. ASUNCION, VICENTE AURELIO, ANGEL AUSTRIA, RICARDO
P. AVERILLA, JR., VIRGILIO AVILA, BARTOLOME AXALAN, ALFREDO BABILONIA, FELIMON BACAL, JOSE L. BACANI, ROMULO R. BALBIERAN,
VICENTE BALBIERAN, RODOLFO BALITBIT, TEODORO Y. BALOBO, DANILO O. BARBA, BERNARDO BARRO, JUAN A. BASILAN, CEFERINO
BATITIS, VIVENCIO C. BAUAN, GAUDENCIO S. BAUTISTA, LEONARDO BAUTISTA, JOSE D. BAUTISTA, ROSTICO BAUTISTA, RUPERTO B.
BAUTISTA, TEODORO S. BAUTISTA, VIRGILIO BAUTISTA, JESUS R. BAYA, WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G. BELIR, ERIC B.
BELTRAN, EMELIANO BENALES, JR., RAUL BENITEZ, PERFECTO BENSAN, IRENEO BERGONIO, ISABELO BERMUDEZ, ROLANDO I. BERMUDEZ,
DANILO BERON, BENJAMIN BERSAMIN, ANGELITO BICOL, ANSELMO BICOL, CELESTINO BICOL, JR., FRANCISCO BICOL, ROGELIO BICOL,
ROMULO L. BICOL, ROGELIO BILLIONES, TEOFILO N. BITO, FERNANDO BLANCO, AUGUSTO BONDOC, DOMINGO BONDOC, PEPE S. BOOC,
JAMES R. BORJA, WILFREDO BRACEROS, ANGELES C. BRECINO, EURECLYDON G. BRIONES, AMADO BRUGE, PABLITO BUDILLO, ARCHIMEDES
BUENAVENTURA, BASILIO BUENAVENTURA, GUILLERMO BUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO BUTIONG, JR., HONESTO P.
CABALLA, DELFIN CABALLERO, BENEDICTO CABANIGAN, MOISES CABATAY, HERMANELI CABRERA, PEDRO CAGATAN, JOVEN C.
CAGAYAT, ROGELIO L. CALAGOS, REYNALDO V. CALDEJON, OSCAR C. CALDERON, NESTOR D. CALLEJA, RENATO R. CALMA, NELSON T.
CAMACHO, SANTOS T. CAMACHO, ROBERTO CAMANA, FLORANTE C. CAMANAG EDGARDO M. CANDA, SEVERINO CANTOS, EPIFANIO A.
CAPONPON, ELIAS D. CARILLO, JR., ARMANDO CARREON, MENANDRO M. CASTAÑEDA, BENIGNO A. CASTILLO, CORNELIO L. CASTILLO,
JOSEPH B. CASTILLO, ANSELMO CASTILLO, JOAQUIN CASTILLO, PABLO L. CASTILLO, ROMEO P. CASTILLO, SESINANDO CATIBOG, DANILO
CASTRO, PRUDENCIO A. CASTRO, RAMO CASTRO, JR., ROMEO A. DE CASTRO, JAIME B. CATLI, DURANA D. CEFERINO, RODOLFO B. CELIS,
HERMINIGILDO CEREZO, VICTORIANO CELESTINO, BENJAMIN CHAN, ANTONIO C. CHUA, VIVENCIO B. CIABAL, RODRIGO CLARETE,
AUGUSTO COLOMA, TURIANO CONCEPCION, TERESITO CONSTANTINO, ARMANDO CORALES, RENATO C. CORCUERA, APOLINAR
CORONADO, ABELARDO CORONEL, FELIX CORONEL, JR., LEONARDO CORPUZ, JESUS M. CORRALES, CESAR CORTEMPRATO, FRANCISCO
O. CORVERA, FRANCISCO COSTALES, SR., CELEDONIO CREDITO, ALBERTO A. CREUS, ANACLETO V. CRUZ, DOMINGO DELA CRUZ,
AMELIANO DELA CRUZ, JR., PANCHITO CRUZ, REYNALDO B. DELA CRUZ, ROBERTO P. CRUZ, TEODORO S. CRUZ, ZOSIMO DELA CRUZ,
DIONISIO A. CUARESMA, FELIMON CUIZON, FERMIN DAGONDON, RICHARD DAGUINSIN, CRISANTO A. DATAY, NICASIO DANTINGUINOO,
JOSE DATOON, EDUARDO DAVID, ENRICO T. DAVID, FAVIO DAVID, VICTORIANO S. DAVID, EDGARDO N. DAYACAP, JOSELITO T. DELOSO,
CELERINO DE GUZMAN, ROMULO DE GUZMAN, LIBERATO DE GUZMAN, JOSE DE LEON, JOSELITO L. DE LUMBAN, NAPOLEON S. DE LUNA,
RICARDO DE RAMA, GENEROSO DEL ROSARIO, ALBERTO DELA CRUZ, JOSE DELA CRUZ, LEONARDO DELOS REYES, ERNESTO F. DIATA,
EDUARDO A. DIAZ, FELIX DIAZ, MELCHOR DIAZ, NICANOR S. DIAZ, GERARDO C. DIGA, CLEMENTE DIMATULAC, ROLANDO DIONISIO,
PHILIPP G. DISMAYA, BENJAMIN DOCTOLERO, ALBERTO STO. DOMINGO, BENJAMIN E. DOZA, BENJAMIN DUPA, DANILO C. DURAN,
GREGORIO D. DURAN, RENATO A. EDUARTE, GODOFREDO E. EISMA, ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO, REYNALDO
ENCARNACION, EDGARDO ENGUANCIO, ELIAS EQUIPANO, FELIZARDO ESCARMOSA, MIGUEL ESCARMOSA, ARMANDO ESCOBAR, ROMEO
T. ESCUYOS, ANGELITO ESPIRITU, EDUARDO S. ESPIRITU, REYNALDO ESPIRITU, ROLANDO ESPIRITU, JULIAN ESPREGANTE, IGMIDIO
ESTANISLAO, ERNESTO M. ESTEBAN, MELANIO R. ESTRO, ERNESTO M. ESTEVA, CONRADO ESTUAR, CLYDE ESTUYE, ELISEO FAJARDO,
PORFIRIO FALQUEZA, WILFREDO P. FAUSTINO, EMILIO E. FERNANDEZ, ARTEMIO FERRER, MISAEL M. FIGURACION, ARMANDO F. FLORES,
BENJAMIN FLORES, EDGARDO C. FLORES, BUENAVENTURA FRANCISCO, MANUEL S. FRANCISCO, ROLANDO FRANCISCO, VALERIANO
FRANCISCO, RODOLFO GABAWAN, ESMERALDO GAHUTAN, CESAR C. GALANG, SANTIAGO N. GALOSO, GABRIEL GAMBOA, BERNARDO
GANDAMON, JUAN GANZON, ANDRES GARCIA, JR., ARMANDO M. GARCIA, EUGENIO GARCIA, MARCELO L. GARCIA, PATRICIO L.
GARCIA, JR., PONCIANO G. GARCIA, PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA, ROBERTO S. GARCIA, OSIAS G. GAROFIL,
RAYMUNDO C. GARON, ROLANDO G. GATELA, AVELINO GAYETA, RAYMUNDO GERON, PLACIDO GONZALES, RUPERTO H. GONZALES,
ROGELIO D. GUANIO, MARTIN V. GUERRERO, JR., ALEXIS GUNO, RICARDO L. GUNO, FRANCISCO GUPIT, DENNIS J. GUTIERREZ, IGNACIO B.
GUTIERREZ, ANGELITO DE GUZMAN, JR., CESAR H. HABANA, RAUL G. HERNANDEZ, REYNALDO HERNANDEZ, JOVENIANO D. HILADO, JUSTO
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HILAPO, ROSTITO HINAHON, FELICISIMO HINGADA, EDUARDO HIPOLITO, RAUL L. IGNACIO, MANUEL L. ILAGAN, RENATO L. ILAGAN,
CONRADO A. INSIONG, GRACIANO G. ISLA, ARNEL L. JACOB, OSCAR J. JAPITENGA, CIRILO HICBAN, MAXIMIANO HONRADES,
GENEROSO IGNACIO, FELIPE ILAGAN, EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO JAVIER, ROMEO M. JAVIER, PRIMO DE JESUS,
REYNALDO DE JESUS, CARLOS A. JIMENEZ, DANILO E. JIMENEZ, PEDRO C. JOAQUIN, FELIPE W. JOCSON, FELINO M. JOCSON, PEDRO N.
JOCSON, VALENTINO S. JOCSON, PEDRO B. JOLOYA, ESTEBAN P. JOSE, JR., RAUL JOSE, RICARDO SAN JOSE, GERTRUDO KABIGTING,
EDUARDO S. KOLIMLIM, SR., LAURO J. LABAY, EMMANUEL C. LABELLA, EDGARDO B. LACERONA, JOSE B. LACSON, MARIO J. LADINES,
RUFINO LAGAC, RODRIGO LAGANAPAN, EFREN M. LAMADRID, GUADENCIO LATANAN, VIRGILIO LATAYAN, EMILIANO LATOJA,
WENCESLAO LAUREL, ALFREDO LAXAMANA, DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S. LEGASPI, BENITO DE LEMOS, JR., PEDRO G.
DE LEON, MANOLITO C. LILOC, GERARDO LIMUACO, ERNESTO S. LISING, RENATO LISING, WILFREDO S. LISING, CRISPULO LONTOC, PEDRO
M. LOPERA, ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY LOPEZ, GARLITO LOPEZ, GEORGE F. LOPEZ, VIRGILIO M. LOPEZ, BERNARDITO G.
LOREJA, DOMINGO B. LORICO, DOMINGO LOYOLA, DANTE LUAGE, ANTONIO M. LUALHATI, EMMANUEL LUALHATI, JR., LEONIDEZ C.
LUALHATI, SEBASTIAN LUALHATI, FRANCISCO LUBAT, ARMANDO LUCERO, JOSELITO L. DE LUMBAN, THOMAS VICENTE O. LUNA, NOLI
MACALADLAD, ALFREDO MACALINO, RICARDO MACALINO, ARTURO V. MACARAIG, ERNESTO V. MACARAIG, RODOLFO V. MACARAIG,
BENJAMIN MACATANGAY, HERMOGENES MACATANGAY, RODEL MACATANGAY, ROMULO MACATANGAY, OSIAS Q. MADLANGBAYAN,
NICOLAS P. MADRID, EDELBERTO G. MAGAT, EFREN C. MAGBANUA, BENJAMIN MAGBUHAT, ALFREDO C. MAGCALENG, ANTONIO
MAGNAYE, ALFONSO MAGPANTAY, RICARDO C. MAGPANTAY, SIMEON M. MAGPANTAY, ARMANDO M. MAGSINO, MACARIO S.
MAGSINO, ANTONIO MAGTIBAY, VICTOR V. MAGTIBAY, GERONIMO MAHILUM, MANUEL MALONZO, RICARDO MAMADIS, RODOLFO
MANA, BERNARDO A. MANALILI, MANUEL MANALILI, ANGELO MANALO, AGUILES L. MANALO, LEOPOLDO MANGAHAS, BAYANI
MANIGBAS, ROLANDO C. MANIMTIM, DANIEL MANONSON, ERNESTO F. MANUEL, EDUARDO MANZANO, RICARDO N. MAPA, RAMON
MAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN, WENCESLAO MARASIGAN, LEONARDO MARCELO, HENRY F. MARIANO, JOEL
MARIDABLE, SANTOS E. MARINO, NARCISO A. MARQUEZ, RICARDO MARTINEZ, DIEGO MASICAMPO, AURELIO MATABERDE, RENATO
MATILLA, VICTORIANO MATILLA, VIRGILIO MEDEL, LOLITO M. MELECIO, BENIGNO MELENDEZ, RENER J. MEMIJE, REYNALDO F. MEMIJE,
RODEL MEMIJE, AVELINO MENDOZA, JR., CLARO MENDOZA, TIMOTEO MENDOZA, GREGORIO MERCADO, ERNANI DELA MERCED,
RICARDO MERCENA, NEMESIO METRELLO, RODEL MEMIJE, GASPAR MINIMO, BENJAMIN MIRANDA, FELIXBERTO D. MISA, CLAUDIO A.
MODESTO, JR., OSCAR MONDEDO, GENEROSO MONTON, RENATO MORADA, RICARDO MORADA, RODOLFO MORADA, ROLANDO M.
MORALES, FEDERICO M. MORENO, VICTORINO A. MORTEL, JR., ESPIRITU A. MUNOZ, IGNACIO MUNOZ, ILDEFONSO MUNOZ, ROGELIO
MUNOZ, ERNESTO NAPALAN, MARCELO A. NARCIZO, REYNALDO NATALIA, FERNANDO C. NAVARETTE, PACIFICO D. NAVARRO, FLORANTE
NAZARENO, RIZAL B. NAZARIO, JOSUE NEGRITE, ALFREDO NEPUMUCENO, HERBERT G. NG, FLORENCIO NICOLAS, ERNESTO C. NINON,
AVELINO NUQUI, NEMESIO D. OBA, DANILO OCAMPO, EDGARDO OCAMPO, RODRIGO E. OCAMPO, ANTONIO B. OCCIANO, REYNALDO
P. OCSON, BENJAMIN ODESA, ANGEL OLASO, FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN V. ORALLO, ROMEO S. ORIGINES,
DANILO R. ORTANEZ, WILFREDO OSIAS, VIRGILIO PA-A, DAVID PAALAN, JESUS N. PACHECO, ALFONSO L. PADILLA, DANILO PAGSANJAN,
NUMERIANO PAGSISIHAN, RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDRO PALABRICA, QUINCIANO PALO, JOSE PAMATIAN,
GONZALO PAN, PORFIRIO PAN, BIENVENIDO PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA, EDILBERTO PASIMIO, JR., JOSE V.
PASION, ANGELITO M. PENA, DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDO M. PERALTA, ANTONIO PEREZ, ANTOLIANO E. PEREZ,
JUAN PEREZ, LEON PEREZ, ROMEO E. PEREZ, ROMULO PEREZ, WILLIAM PEREZ, FERNANDO G. PERINO, FLORENTINO DEL PILAR, DELMAR F.
PINEDA, SALVADOR PINEDA, ELIZALDE PINPIN, WILFREDO PINPIN, ARTURO POBLETE, DOMINADOR R. PRIELA, BUENAVENTURA PRUDENTE,
CARMELITO PRUDENTE, DANTE PUEYO, REYNALDO Q. PUEYO, RODOLFO O. PULIDO, ALEJANDRO PUNIO, FEDERICO QUIMAN, ALFREDO L.
QUINTO, ROMEO QUINTOS, EDUARDO W. RACABO, RICARDO C. DE RAMA, RICARDO L. DE RAMA, ROLANDO DE RAMA, FERNANDO A.
RAMIREZ, LITO S. RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V. RAMIREZ, ALBERTO RAMOS, ANSELMO C. RAMOS, TOBIAS RAMOS,
WILLARFREDO RAYMUNDO, REYNALDO RAQUEDAN, MANUEL F. RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E. RECOLASO, ALBERTO
REDAZA, ARTHUR REJUSO, TORIBIO M. RELLAMA, JAIME RELLOSA, EUGENIO A. REMOQUILLO, GERARDO RENTOZA, REDENTOR C. REY,
ALFREDO S. REYES, AMABLE S. REYES, BENEDICTO R. REYES, GREGORIO B. REYES, JOSE A. REYES, JOSE C. REYES, ROMULO M. REYES, SERGIO
REYES, ERNESTO F. RICO, FERNANDO M. RICO, EMMANUEL RIETA, RICARDO RIETA, LEO B. ROBLES, RUBEN ROBLES, RODOLFO ROBLEZA,
RODRIGO ROBLEZA, EDUARDO ROCABO, ANTONIO R. RODRIGUEZ, BERNARDO RODRIGUEZ, ELIGIO RODRIGUEZ, ALMONTE ROMEO, ELIAS
RONQUILLO, ELISE RONQUILLO, LUIS VAL B. RONQUILLO, REYNOSO P. RONQUILLO, RODOLFO RONQUILLO, ANGEL ROSALES, RAMON
ROSALES, ALBERTO DEL ROSARIO, GENEROSO DEL ROSARIO, TEODORICO DEL ROSARIO, VIRGILIO L. ROSARIO, CARLITO SALVADOR, JOSE
SAMPARADA, ERNESTO SAN PEDRO, ADRIANO V. SANCHA, GERONIMO M. SANCHA, ARTEMIO B. SANCHEZ, NICASIO SANCHEZ,
APOLONIO P. SANTIAGO, JOSELITO S. SANTIAGO, SERGIO SANTIAGO, EDILBERTO C. SANTOS, EFREN S. SANTOS, RENATO D. SANTOS,
MIGUEL SAPUYOT, ALEX S. SERQUINA, DOMINADOR P. SERRA, ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D. SILANG, RODOLFO B. DE
SILOS, ANICETO G. SILVA, EDGARDO M. SILVA, ROLANDO C. SILVERTO, ARTHUR B. SIMBAHON, DOMINGO SOLANO, JOSELITO C. SOLANTE,
CARLITO SOLIS, CONRADO SOLIS, III, EDGARDO SOLIS, ERNESTO SOLIS, ISAGANI M. SOLIS, EDUARDO L. SOTTO, ERNESTO G. STA. MARIA,
VICENTE G. STELLA, FELIMON SUPANG, PETER TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P. TALUSIK, FERMIN TARUC, JR., LEVY S.
TEMPLO, RODOLFO S. TIAMSON, LEONILO TIPOSO, ARNEL TOLENTINO, MARIO M. TOLENTINO, FELIPE TORRALBA, JOVITO V. TORRES,
LEONARDO DE TORRES, GAVINO U. TUAZON, AUGUSTO B. TUNGUIA, FRANCISCO UMALI, SIMPLICIO UNIDA, WILFREDO V. UNTALAN,
ANTONIO VALDERAMA, RAMON VALDERAMA, NILO VALENCIANO, EDGARDO C. VASQUEZ, ELPIDIO VELASQUEZ, NESTOR DE VERA,
WILFREDO D. VERA, BIENVENIDO VERGARA, ALFREDO VERGARA, RAMON R. VERZOSA, FELICITO P. VICMUNDO, ALFREDO VICTORIANO,
TEOFILO P. VIDALLO, SABINO N. VIERNEZ, JESUS J. VILLA, JOVEN VILLABLANCO, EDGARDO G. VILLAFLORES, CEFERINO VILLAGERA, ALEX
VILLAHERMOZA, DANILO A. VILLANUEVA, ELITO VILLANUEVA, LEONARDO M. VILLANUEVA, MANUEL R. VILLANUEVA, NEPTHALI VILLAR, JOSE
V. VILLAREAL, FELICISIMO VILLARINO, RAFAEL VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO, ROBERTO YABUT, VICENTE YNGENTE,
AND ORO C. ZUNIGA, respondents.
Gerardo A. Del Mundo and Associates for petitioners.
Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for BRII/AIBC.
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Florante M. De Castro for private respondents in 105029-32.
QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine Overseas Employment Administration's
Administrator, et. al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to modify the Resolution dated September 2, 1991 of the National Labor Relations Commission (NLRC) in POEA
Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to render a new decision: (i) declaring private respondents
as in default; (ii) declaring the said labor cases as a class suit; (iii) ordering Asia International Builders Corporation
(AIBC) and Brown and Root International Inc. (BRII) to pay the claims of the 1,767 claimants in said labor cases; (iv)
declaring Atty. Florante M. de Castro guilty of forum-shopping; and (v) dismissing POEA Case No. L-86-05-460; and
(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its Resolution
dated September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon. National Labor Relations Commission, et. al.," was
filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-
799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive period under the Labor Code of the Philippines instead
of the ten-year prescriptive period under the Civil Code of the Philippines; and (ii) denied the
"three-hour daily average" formula in the computation of petitioners' overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its Resolution
dated September 2, 1991 (Rollo, pp. 8-25; 26-220).
The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation, et. al., v. National Labor Relations Commission, et.
al." was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-
779 and
L-86-05-460, insofar as it granted the claims of 149 claimants; and
(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied the motions for reconsideration of
AIBC and BRII (Rollo, pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of NLRC, which modified the decision of POEA in four labor cases: (1) awarded monetary
benefits only to 149 claimants and (2) directed Labor Arbiter Fatima J. Franco to conduct hearings and to receive evidence on the
claims dismissed by the POEA for lack of substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R. Nos. 104911-14 were raffled to the Second Division.
In the Resolution dated July 26, 1993, the Second Division referred G.R. Nos. 104911-14 to the Third Division (G.R. Nos. 104911-14, Rollo, p.
895).
In the Resolution dated September 29, 1993, the Third Division granted the motion filed in G.R. Nos. 104911-14 for the consolidation of
said cases with G.R. Nos. 104776 and 105029-32, which were assigned to the First Division (G.R. Nos. 104911-14, Rollo, pp. 986-1,107; G.R.
Nos. 105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated October 27, 1993, the First Division granted the motion to
consolidate G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos. 104911-14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p. 1562).
On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B. Evangelista, in their own behalf and on behalf of 728 other
overseas contract workers (OCWs) instituted a class suit by filing an "Amended Complaint" with the Philippine Overseas Employment
203
Administration (POEA) for money claims arising from their recruitment by AIBC and employment by BRII (POEA Case No. L-84-06-555).
The claimants were represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in construction; while AIBC is a domestic corporation
licensed as a service contractor to recruit, mobilize and deploy Filipino workers for overseas employment on behalf of its foreign
principals.
The amended complaint principally sought the payment of the unexpired portion of the employment contracts, which was terminated
prematurely, and secondarily, the payment of the interest of the earnings of the Travel and Reserved Fund, interest on all the unpaid
benefits; area wage and salary differential pay; fringe benefits; refund of SSS and premium not remitted to the SSS; refund of
withholding tax not remitted to the BIR; penalties for committing prohibited practices; as well as the suspension of the license of AIBC
and the accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was given, together with BRII, up to July 5, 1984 to file
its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants to file a bill of particulars within ten days from
receipt of the order and the movants to file their answers within ten days from receipt of the bill of particulars. The POEA Administrator
also scheduled a pre-trial conference on July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23, 1984, AIBC filed a "Motion to Strike Out of
the Records", the "Complaint" and the "Compliance and Manifestation." On July 25, 1984, the claimants filed their "Rejoinder and
Comments," averring, among other matters, the failure of AIBC and BRII to file their answers and to attend the pre-trial conference on
July 25, 1984. The claimants alleged that AIBC and BRII had waived their right to present evidence and had defaulted by failing to file
their answers and to attend the pre-trial conference.
On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the Records" filed by AIBC but required the claimants
to correct the deficiencies in the complaint pointed out in the order.
On October 10, 1984, claimants asked for time within which to comply with the Order of October 2, 1984 and filed an "Urgent
Manifestation," praying that the POEA Administrator direct the parties to submit simultaneously their position papers, after which the
case should be deemed submitted for decision. On the same day, Atty. Florante de Castro filed another complaint for the same
money claims and benefits in behalf of several claimants, some of whom were also claimants in POEA Case No. L-84-06-555 (POEA
Case No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2, 1984 and an "Urgent Manifestation," praying
that the POEA direct the parties to submit simultaneously their position papers after which the case would be deemed submitted for
decision. On the same day, AIBC asked for time to file its comment on the "Compliance" and "Urgent Manifestation" of claimants. On
November 6, 1984, it filed a second motion for extension of time to file the comment.
On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension of time was granted.
On November 14, 1984, claimants filed an opposition to the motions for extension of time and asked that AIBC and BRII be declared in
default for failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, that claimants should be ordered to amend their
complaint.
On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file their answers within ten days from receipt
of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said order of the POEA Administrator. Claimants
opposed the appeal, claiming that it was dilatory and praying that AIBC and BRII be declared in default.
On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper" dated March 24, 1985, adding new
demands: namely, the payment of overtime pay, extra night work pay, annual leave differential pay, leave indemnity pay, retirement
and savings benefits and their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15, 1985, the POEA Administrator directed
AIBC to file its answer to the amended complaint (G.R. No. 104776, Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the same day, the POEA issued an order directing
AIBC and BRII to file their answers to the "Amended Complaint," otherwise, they would be deemed to have waived their right to
present evidence and the case would be resolved on the basis of complainant's evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and Motion for Bill of Particulars Re: Amended
Complaint dated March 24, 1985." Claimants opposed the motions.
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On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to file their answers in POEA Case No. L-84-06-
555.
On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition for the issuance of a writ of injunction. On
September 19, 1985, NLRC enjoined the POEA Administrator from hearing the labor cases and suspended the period for the filing of the
answers of AIBC and BRII.
On September 19, 1985, claimants asked the POEA Administrator to include additional claimants in the case and to investigate alleged
wrongdoings of BRII, AIBC and their respective lawyers.
On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case No. L-85-10-777) against AIBC and BRII with
the POEA, demanding monetary claims similar to those subject of POEA Case No. L-84-06-555. In the same month, Solomon Reyes also
filed his own complaint (POEA Case No. L-85-10-779) against AIBC and BRII.
On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the substitution of the original counsel of record and
the cancellation of the special powers of attorney given the original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No. 86-05-460) in behalf of 11 claimants including
Bienvenido Cadalin, a claimant in POEA Case No. 84-06-555.
On December 12, 1986, the NLRC dismissed the two appeals filed on February 27, 1985 and September 18, 1985 by AIBC and BRII.
In narrating the proceedings of the labor cases before the POEA Administrator, it is not amiss to mention that two cases were filed in
the Supreme Court by the claimants, namely — G.R. No. 72132 on September 26, 1985 and Administrative Case No. 2858 on March 18,
1986. On May 13, 1987, the Supreme Court issued a resolution in Administrative Case No. 2858 directing the POEA Administrator to
resolve the issues raised in the motions and oppositions filed in POEA Cases Nos. L-84-06-555 and L-86-05-460 and to decide the labor
cases with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order dated September 4, 1985 of the POEA
Administrator. Said order required BRII and AIBC to answer the amended complaint in POEA Case No. L-84-06-555. In a resolution dated
November 9, 1987, we dismissed the petition by informing AIBC that all its technical objections may properly be resolved in the hearings
before the POEA.
Complaints were also filed before the Ombudsman. The first was filed on September 22, 1988 by claimant Hermie Arguelles and 18 co-
claimants against the POEA Administrator and several NLRC Commissioners. The Ombudsman merely referred the complaint to the
Secretary of Labor and Employment with a request for the early disposition of POEA Case No. L-84-06-555. The second was filed on April
28, 1989 by claimants Emigdio P. Bautista and Rolando R. Lobeta charging AIBC and BRII for violation of labor and social legislations.
The third was filed by Jose R. Santos, Maximino N. Talibsao and Amado B. Bruce denouncing AIBC and BRII of violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated December 12, 1986.
On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for suspension of the period for filing an answer or
motion for extension of time to file the same until the resolution of its motion for reconsideration of the order of the NLRC dismissing the
two appeals. On April 28, 1987, NLRC en banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the same hearing, the parties were given a period of
15 days from said date within which to submit their respective position papers. On June 24, 1987 claimants filed their "Urgent Motion to
Strike Out Answer," alleging that the answer was filed out of time. On June 29, 1987, claimants filed their "Supplement to Urgent
Manifestational Motion" to comply with the POEA Order of June 19, 1987. On February 24, 1988, AIBC and BRII submitted their position
paper. On March 4, 1988, claimants filed their " Ex-Parte Motion to Expunge from the Records" the position paper of AIBC and BRII,
claiming that it was filed out of time.
On September 1, 1988, the claimants represented by Atty. De Castro filed their memorandum in POEA Case No. L-86-05-460. On
September 6, 1988, AIBC and BRII submitted their Supplemental Memorandum. On September 12, 1988, BRII filed its "Reply to
Complainant's Memorandum." On October 26, 1988, claimants submitted their " Ex-Parte Manifestational Motion and Counter-
Supplemental Motion," together with 446 individual contracts of employments and service records. On October 27, 1988, AIBC and BRII
filed a "Consolidated Reply."
On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No. L-84-06-555 and the other consolidated cases,
which awarded the amount of $824,652.44 in favor of only 324 complainants.
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On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial Appeal" from the decision of the POEA. On the same
day, AIBC also filed its motion for reconsideration and/or appeal in addition to the "Notice of Appeal" filed earlier on February 6, 1989
by another counsel for AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of the appeal of AIBC and BRII.
On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal Memorandum," together with their "newly discovered
evidence" consisting of payroll records.
On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among other matters that there were only 728 named
claimants. On April 20, 1989, the claimants filed their "Counter-Manifestation," alleging that there were 1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision dated January 30, 1989 on the grounds that BRII had
failed to appeal on time and AIBC had not posted the supersedeas bond in the amount of $824,652.44.
On December 23, 1989, claimants filed another motion to resolve the labor cases.
On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767 claimants be awarded their monetary
claims for failure of private respondents to file their answers within the reglamentary period required by law.
On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:
WHEREFORE, premises considered, the Decision of the POEA in these consolidated cases is modified to the extent
and in accordance with the following dispositions:
1. The claims of the 94 complainants identified and listed in Annex "A" hereof are dismissed for
having prescribed;
2. Respondents AIBC and Brown & Root are hereby ordered, jointly and severally, to pay the 149
complainants, identified and listed in Annex "B" hereof, the peso equivalent, at the time of
payment, of the total amount in US dollars indicated opposite their respective names;
3. The awards given by the POEA to the 19 complainants classified and listed in Annex "C" hereof,
who appear to have worked elsewhere than in Bahrain are hereby set aside.
4. All claims other than those indicated in Annex "B", including those for overtime work and
favorably granted by the POEA, are hereby dismissed for lack of substantial evidence in support
thereof or are beyond the competence of this Commission to pass upon.
In addition, this Commission, in the exercise of its powers and authority under Article 218(c) of the Labor Code, as
amended by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this Commission to summon parties,
conduct hearings and receive evidence, as expeditiously as possible, and thereafter submit a written report to this
Commission (First Division) of the proceedings taken, regarding the claims of the following:
(a) complainants identified and listed in Annex "D" attached and made an integral part of this
Resolution, whose claims were dismissed by the POEA for lack of proof of employment in Bahrain
(these complainants numbering 683, are listed in pages 13 to 23 of the decision of POEA, subject
of the appeals) and,
(b) complainants identified and listed in Annex "E" attached and made an integral part of this
Resolution, whose awards decreed by the POEA, to Our mind, are not supported by substantial
evidence" (G.R. No. 104776; Rollo, pp. 113-115; G.R. Nos. 104911-14, pp. 85-87; G.R. Nos. 105029-
31, pp. 120-122).
On November 27, 1991, claimant Amado S. Tolentino and 12
co-claimants, who were former clients of Atty. Del Mundo, filed a petition for certiorari with the Supreme Court (G.R. Nos. 120741-44).
The petition was dismissed in a resolution dated January 27, 1992.
Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC were filed. The first, by the claimants represented by
Atty. Del Mundo; the second, by the claimants represented by Atty. De Castro; and the third, by AIBC and BRII.
In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration.
206
Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No. 104776), the claimants represented by Atty. De
Castro (G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos. 105029-32).
II
Compromise Agreements
Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII have submitted, from time to time, compromise
agreements for our approval and jointly moved for the dismissal of their respective petitions insofar as the claimants-parties to the
compromise agreements were concerned (See Annex A for list of claimants who signed quitclaims).
Thus the following manifestations that the parties had arrived at a compromise agreement and the corresponding motions for the
approval of the agreements were filed by the parties and approved by the Court:
1) Joint Manifestation and Motion involving claimant Emigdio Abarquez and 47 co-claimants dated September 2,
1992 (G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-32, Rollo, pp.
470-615);
2) Joint Manifestation and Motion involving petitioner Bienvenido Cadalin and 82 co-petitioners dated September 3,
1992 (G.R. No. 104776, Rollo, pp. 364-507);
3) Joint Manifestation and Motion involving claimant Jose
M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos. 105029-32, Rollo, pp. 613-722; G.R. No. 104776,
Rollo, pp. 518-626; G.R. Nos. 104911-14, Rollo, pp. 407-516);
4) Joint Manifestation and Motion involving claimant Antonio T. Anglo and 17 co-claimants dated October 14, 1992
(G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713; G.R. Nos. 104911-14, Rollo, pp. 530-590);
5) Joint Manifestation and Motion involving claimant Dionisio Bobongo and 6 co-claimants dated January 15, 1993
(G.R. No. 104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo, pp. 629-652);
6) Joint Manifestation and Motion involving claimant Valerio A. Evangelista and 4 co-claimants dated March 10,
1993 (G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No. 104776, Rollo, pp. 1815-1829);
7) Joint Manifestation and Motion involving claimants Palconeri Banaag and 5 co-claimants dated March 17, 1993
(G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo, pp. 655-675);
8) Joint Manifestation and Motion involving claimant Benjamin Ambrosio and 15 other co-claimants dated May 4,
1993 (G.R. Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-
1814);
9) Joint Manifestation and Motion involving Valerio Evangelista and 3 co-claimants dated May 10, 1993 (G.R. No.
104776, Rollo, pp. 1815-1829);
10) Joint Manifestation and Motion involving petitioner Quiterio R. Agudo and 36 co-claimants dated June 14, 1993
(G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp. 1066-
1183);
11) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19 co-claimants dated July 22, 1993
(G.R. No. 104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp. 1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-
959);
12) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 co-claimants dated September 7,
1993 (G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254; G.R. Nos. 104911-14, Rollo, pp. 972-984);
13) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37 co-claimants dated September 8,
1993 (G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp.
1280-1397);
207
14) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-claimants dated January 10, 1994 (G.R.
Nos. 105029-32, Rollo, Vol. II);
15) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimants dated August 25, 1994 (G.R.
Nos. 105029-32; G.R. No. 104776; G.R. Nos. 104911-14).
III
The facts as found by the NLRC are as follows:
We have taken painstaking efforts to sift over the more than fifty volumes now comprising the records of these
cases. From the records, it appears that the complainants-appellants allege that they were recruited by
respondent-appellant AIBC for its accredited foreign principal, Brown & Root, on various dates from 1975 to 1983.
They were all deployed at various projects undertaken by Brown & Root in several countries in the Middle East, such
as Saudi Arabia, Libya, United Arab Emirates and Bahrain, as well as in Southeast Asia, in Indonesia and Malaysia.
Having been officially processed as overseas contract workers by the Philippine Government, all the individual
complainants signed standard overseas employment contracts (Records, Vols. 25-32. Hereafter, reference to the
records would be sparingly made, considering their chaotic arrangement) with AIBC before their departure from the
Philippines. These overseas employment contracts invariably contained the following relevant terms and conditions.
PART B —
(1) Employment Position Classification :—————————
(Code) :—————————
(2) Company Employment Status :—————————
(3) Date of Employment to Commence on :—————————
(4) Basic Working Hours Per Week :—————————
(5) Basic Working Hours Per Month :—————————
(6) Basic Hourly Rate :—————————
(7) Overtime Rate Per Hour :—————————
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :—————————
Months and/or
Job Completion
xxx xxx xxx
3. HOURS OF WORK AND COMPENSATION
a) The Employee is employed at the hourly rate and overtime rate as set out in Part B of this Document.
b) The hours of work shall be those set forth by the Employer, and Employer may, at his sole option, change or adjust
such hours as maybe deemed necessary from time to time.
4. TERMINATION
a) Notwithstanding any other terms and conditions of this agreement, the Employer may, at his sole discretion,
terminate employee's service with cause, under this agreement at any time. If the Employer terminates the services
of the Employee under this Agreement because of the completion or termination, or suspension of the work on
which the Employee's services were being utilized, or because of a reduction in force due to a decrease in scope of
such work, or by change in the type of construction of such work. The Employer will be responsible for his return
transportation to his country of origin. Normally on the most expeditious air route, economy class accommodation.
208
xxx xxx xxx
10. VACATION/SICK LEAVE BENEFITS
a) After one (1) year of continuous service and/or satisfactory completion of contract, employee shall be entitled to
12-days vacation leave with pay. This shall be computed at the basic wage rate. Fractions of a year's service will be
computed on a pro-rata basis.
b) Sick leave of 15-days shall be granted to the employee for every year of service for non-work connected injuries
or illness. If the employee failed to avail of such leave benefits, the same shall be forfeited at the end of the year in
which said sick leave is granted.
11. BONUS
A bonus of 20% (for offshore work) of gross income will be accrued and payable only upon satisfactory completion
of this contract.
12. OFFDAY PAY
The seventh day of the week shall be observed as a day of rest with 8 hours regular pay. If work is performed on this
day, all hours work shall be paid at the premium rate. However, this offday pay provision is applicable only when the
laws of the Host Country require payments for rest day.
In the State of Bahrain, where some of the individual complainants were deployed, His Majesty Isa Bin Salman Al
Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1976, otherwise known as the Labour Law for the
Private Sector (Records, Vol. 18). This decree took effect on August 16, 1976. Some of the provisions of Amiri Decree
No. 23 that are relevant to the claims of the complainants-appellants are as follows (italics supplied only for
emphasis):
Art. 79: . . . A worker shall receive payment for each extra hour equivalent to his wage entitlement
increased by a minimum of twenty-five per centum thereof for hours worked during the day; and
by a minimum of fifty per centum thereof for hours worked during the night which shall be
deemed to being from seven o'clock in the evening until seven o'clock in the morning. . . .
Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.
. . . an employer may require a worker, with his consent, to work on his weekly day of rest if
circumstances so require and in respect of which an additional sum equivalent to 150% of his
normal wage shall be paid to him. . . .
Art. 81: . . . When conditions of work require the worker to work on any official holiday, he shall be
paid an additional sum equivalent to 150% of his normal wage.
Art. 84: Every worker who has completed one year's continuous service with his employer shall be
entitled to leave on full pay for a period of not less than 21 days for each year increased to a
period not less than 28 days after five continuous years of service.
A worker shall be entitled to such leave upon a quantum meruit in respect of the proportion of his
service in that year.
Art. 107: A contract of employment made for a period of indefinite duration may be terminated
by either party thereto after giving the other party thirty days' prior notice before such
termination, in writing, in respect of monthly paid workers and fifteen days' notice in respect of
other workers. The party terminating a contract without giving the required notice shall pay to the
other party compensation equivalent to the amount of wages payable to the worker for the
period of such notice or the unexpired portion thereof.
Art. 111: . . . the employer concerned shall pay to such worker, upon termination of employment,
a leaving indemnity for the period of his employment calculated on the basis of fifteen days'
wages for each year of the first three years of service and of one month's wages for each year of
service thereafter. Such worker shall be entitled to payment of leaving indemnity upon a
quantum meruit in proportion to the period of his service completed within a year.
All the individual complainants-appellants have already been repatriated to the Philippines at the
time of the filing of these cases (R.R. No. 104776, Rollo, pp. 59-65).
209
IV
The issues raised before and resolved by the NLRC were:
First: — Whether or not complainants are entitled to the benefits provided by Amiri Decree No. 23 of Bahrain;
(a) Whether or not the complainants who have worked in Bahrain are entitled to the above-
mentioned benefits.
(b) Whether or not Art. 44 of the same Decree (allegedly prescribing a more favorable treatment
of alien employees) bars complainants from enjoying its benefits.
Second: — Assuming that Amiri Decree No. 23 of Bahrain is applicable in these cases, whether or not complainants'
claim for the benefits provided therein have prescribed.
Third: — Whether or not the instant cases qualify as a class suit.
Fourth: — Whether or not the proceedings conducted by the POEA, as well as the decision that is the subject of
these appeals, conformed with the requirements of due process;
(a) Whether or not the respondent-appellant was denied its right to due process;
(b) Whether or not the admission of evidence by the POEA after these cases were submitted for
decision was valid;
(c) Whether or not the POEA acquired jurisdiction over Brown & Root International, Inc.;
(d) Whether or not the judgment awards are supported by substantial evidence;
(e) Whether or not the awards based on the averages and formula presented by the
complainants-appellants are supported by substantial evidence;
(f) Whether or not the POEA awarded sums beyond what the complainants-appellants prayed
for; and, if so, whether or not these awards are valid.
Fifth: — Whether or not the POEA erred in holding respondents AIBC and Brown & Root jointly are severally liable for
the judgment awards despite the alleged finding that the former was the employer of the complainants;
(a) Whether or not the POEA has acquired jurisdiction over Brown & Root;
(b) Whether or not the undisputed fact that AIBC was a licensed construction contractor
precludes a finding that Brown & Root is liable for complainants claims.
Sixth: — Whether or not the POEA Administrator's failure to hold respondents in default constitutes a reversible error.
Seventh: — Whether or not the POEA Administrator erred in dismissing the following claims:
a. Unexpired portion of contract;
b. Interest earnings of Travel and Reserve Fund;
c. Retirement and Savings Plan benefits;
d. War Zone bonus or premium pay of at least 100% of basic pay;
e. Area Differential Pay;
f. Accrued interests on all the unpaid benefits;
g. Salary differential pay;
h. Wage differential pay;
i. Refund of SSS premiums not remitted to SSS;

210
j. Refund of withholding tax not remitted to BIR;
k. Fringe benefits under B & R's "A Summary of Employee Benefits" (Annex "Q" of Amended
Complaint);
l. Moral and exemplary damages;
m. Attorney's fees of at least ten percent of the judgment award;
n. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and the
accreditation of B & R issued by POEA;
o. Penalty for violations of Article 34 (prohibited practices), not excluding reportorial requirements
thereof.
Eighth: — Whether or not the POEA Administrator erred in not dismissing POEA Case No. (L) 86-65-460 on the ground
of multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55).
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence governing the pleading and proof of a
foreign law and admitted in evidence a simple copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector).
NLRC invoked Article 221 of the Labor Code of the Philippines, vesting on the Commission ample discretion to use every and all
reasonable means to ascertain the facts in each case without regard to the technicalities of law or procedure. NLRC agreed with the
POEA Administrator that the Amiri Decree No. 23, being more favorable and beneficial to the workers, should form part of the overseas
employment contract of the complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked in Bahrain, and set aside awards of the
POEA Administrator in favor of the claimants, who worked elsewhere.
On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of the complainants was three years, as
provided in Article 291 of the Labor Code of the Philippines, and not ten years as provided in Article 1144 of the Civil Code of the
Philippines nor one year as provided in the Amiri Decree No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot be treated as a class suit for the simple
reason that not all the complainants worked in Bahrain and therefore, the subject matter of the action, the claims arising from the
Bahrain law, is not of common or general interest to all the complainants.
On the fourth issue, NLRC found at least three infractions of the cardinal rules of administrative due process: namely, (1) the failure of
the POEA Administrator to consider the evidence presented by AIBC and BRII; (2) some findings of fact were not supported by
substantial evidence; and (3) some of the evidence upon which the decision was based were not disclosed to AIBC and BRII during
the hearing.
On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC are solidarily liable for the claims of the
complainants and held that BRII was the actual employer of the complainants, or at the very least, the indirect employer, with AIBC as
the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through the summons served on AIBC, its local agent.
On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motion to Declare AIBC in default.
On the seventh issue, which involved other money claims not based on the Amiri Decree No. 23, NLRC ruled:
(1) that the POEA Administrator has no jurisdiction over the claims for refund of the SSS premiums and refund of
withholding taxes and the claimants should file their claims for said refund with the appropriate government
agencies;
(2) the claimants failed to establish that they are entitled to the claims which are not based on the overseas
employment contracts nor the Amiri Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over claims for moral and exemplary damages and nonetheless,
the basis for granting said damages was not established;
(4) that the claims for salaries corresponding to the unexpired portion of their contract may be allowed if filed within
the three-year prescriptive period;
211
(5) that the allegation that complainants were prematurely repatriated prior to the expiration of their overseas
contract was not established; and
(6) that the POEA Administrator has no jurisdiction over the complaint for the suspension or cancellation of the AIBC's
recruitment license and the cancellation of the accreditation of BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 should have been dismissed on the ground that the
claimants in said case were also claimants in POEA Case No. (L) 84-06-555. Instead of dismissing POEA Case No. (L) 86-65-460, the POEA
just resolved the corresponding claims in POEA Case No. (L) 84-06-555. In other words, the POEA did not pass upon the same claims
twice.
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds:
(1) that they were deprived by NLRC and the POEA of their right to a speedy disposition of their cases as
guaranteed by Section 16, Article III of the 1987 Constitution. The POEA Administrator allowed private respondents to
file their answers in two years (on June 19, 1987) after the filing of the original complaint (on April 2, 1985) and NLRC,
in total disregard of its own rules, affirmed the action of the POEA Administrator;
(2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default and should have rendered
summary judgment on the basis of the pleadings and evidence submitted by claimants;
(3) the NLRC and POEA Administrator erred in not holding that the labor cases filed by AIBC and BRII cannot be
considered a class suit;
(4) that the prescriptive period for the filing of the claims is ten years; and
(5) that NLRC and the POEA Administrator should have dismissed POEA Case No. L-86-05-460, the case filed by Atty.
Florante de Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:
(1) that they were not responsible for the delay in the disposition of the labor cases, considering the great difficulty of
getting all the records of the more than 1,500 claimants, the piece-meal filing of the complaints and the addition of
hundreds of new claimants by petitioners;
(2) that considering the number of complaints and claimants, it was impossible to prepare the answers within the
ten-day period provided in the NLRC Rules, that when the motion to declare AIBC in default was filed on July 19,
1987, said party had already filed its answer, and that considering the staggering amount of the claims (more than
US$50,000,000.00) and the complicated issues raised by the parties, the ten-day rule to answer was not fair and
reasonable;
(3) that the claimants failed to refute NLRC's finding that
there was no common or general interest in the subject matter of the controversy — which was the applicability of
the Amiri Decree No. 23. Likewise, the nature of the claims varied, some being based on salaries pertaining to the
unexpired portion of the contracts while others being for pure money claims. Each claimant demanded separate
claims peculiar only to himself and depending upon the particular circumstances obtaining in his case;
(4) that the prescriptive period for filing the claims is that prescribed by Article 291 of the Labor Code of the
Philippines (three years) and not the one prescribed by Article 1144 of the Civil Code of the Philippines (ten years);
and
(5) that they are not concerned with the issue of whether POEA Case No. L-86-05-460 should be dismissed, this being
a private quarrel between the two labor lawyers (Rollo, pp. 292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint manifestations and motions of AIBC and BRII dated
September 2 and 11, 1992, claiming that all the claimants who entered into the compromise agreements subject of said manifestations
and motions were his clients and that Atty. Florante M. de Castro had no right to represent them in said agreements. He also claimed
that the claimants were paid less than the award given them by NLRC; that Atty. De Castro collected additional attorney's fees on top
212
of the 25% which he was entitled to receive; and that the consent of the claimants to the compromise agreements and quitclaims
were procured by fraud (G.R. No. 104776, Rollo, pp. 838-810). In the Resolution dated November 23, 1992, the Court denied the motion
to strike out the Joint Manifestations and Motions dated September 2 and 11, 1992 (G.R. Nos. 104911-14, Rollo, pp. 608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's Lien," alleging that the claimants who entered
into compromise agreements with AIBC and BRII with the assistance of Atty. De Castro, had all signed a retainer agreement with his
law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535).
Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castro and Atty. Katz Tierra for contempt of
court and for violation of Canons 1, 15 and 16 of the Code of Professional Responsibility. The said lawyers allegedly misled this Court, by
making it appear that the claimants who entered into the compromise agreements were represented by Atty. De Castro, when in fact
they were represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp. 1560-1614).
On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro for unethical practices and moved for the
voiding of the quitclaims submitted by some of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that NLRC gravely abused its discretion when it:
(1) applied the three-year prescriptive period under the Labor Code of the Philippines; and (2) it denied the claimant's formula based
on an average overtime pay of three hours a day (Rollo, pp. 18-22).
The claimants argue that said method was proposed by BRII itself during the negotiation for an amicable settlement of their money
claims in Bahrain as shown in the Memorandum dated April 16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22).
BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the prescriptive period in the Labor Code of the
Philippines, a special law, prevails over that provided in the Civil Code of the Philippines, a general law.
As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the overtime pay, BRII and AIBC claimed that
they were not bound by what appeared therein, because such memorandum was proposed by a subordinate Bahrain official and
there was no showing that it was approved by the Bahrain Minister of Labor. Likewise, they claimed that the averaging method was
discussed in the course of the negotiation for the amicable settlement of the dispute and any offer made by a party therein could not
be used as an admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it: (1) enforced the provisions of the Amiri
Decree No. 23 of 1976 and not the terms of the employment contracts; (2) granted claims for holiday, overtime and leave indemnity
pay and other benefits, on evidence admitted in contravention of petitioner's constitutional right to due process; and (3) ordered the
POEA Administrator to hold new hearings for the 683 claimants whose claims had been dismissed for lack of proof by the POEA
Administrator or NLRC itself. Lastly, they allege that assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRC erred when it
did not apply the one-year prescription provided in said law (Rollo, pp. 29-30).
VI
G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32
All the petitions raise the common issue of prescription although they disagreed as to the time that should be embraced within the
prescriptive period.
To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of the Civil Code of the Philippines. NLRC
believed otherwise, fixing the prescriptive period at three years as provided in Article 291 of the Labor Code of the Philippines.
The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds, insisted that NLRC erred in ruling that the
prescriptive period applicable to the claims was three years, instead of ten years, as found by the POEA Administrator.
The Solicitor General expressed his personal view that the prescriptive period was one year as prescribed by the Amiri Decree No. 23 of
1976 but he deferred to the ruling of NLRC that Article 291 of the Labor Code of the Philippines was the operative law.
The POEA Administrator held the view that:
These money claims (under Article 291 of the Labor Code) refer to those arising from the employer's violation of the
employee's right as provided by the Labor Code.
213
In the instant case, what the respondents violated are not the rights of the workers as provided by the Labor Code,
but the provisions of the Amiri Decree No. 23 issued in Bahrain, which ipso facto amended the worker's contracts of
employment. Respondents consciously failed to conform to these provisions which specifically provide for the
increase of the worker's rate. It was only after June 30, 1983, four months after the brown builders brought a suit
against B & R in Bahrain for this same claim, when respondent AIBC's contracts have undergone amendments in
Bahrain for the new hires/renewals (Respondent's Exhibit 7).
Hence, premises considered, the applicable law of prescription to this instant case is Article 1144 of the Civil Code of
the Philippines, which provides:
Art. 1144. The following actions may be brought within ten years from the time the cause of action
accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
Thus, herein money claims of the complainants against the respondents shall prescribe in ten years from August 16,
1976. Inasmuch as all claims were filed within the ten-year prescriptive period, no claim suffered the infirmity of being
prescribed (G.R. No. 104776, Rollo, 89-90).
In overruling the POEA Administrator, and holding that the prescriptive period is three years as provided in Article 291 of the Labor
Code of the Philippines, the NLRC argued as follows:
The Labor Code provides that "all money claims arising from employer-employee relations . . . shall be filed within
three years from the time the cause of action accrued; otherwise they shall be forever barred" (Art. 291, Labor
Code, as amended). This three-year prescriptive period shall be the one applied here and which should be
reckoned from the date of repatriation of each individual complainant, considering the fact that the case is having
(sic) filed in this country. We do not agree with the POEA Administrator that this three-year prescriptive period applies
only to money claims specifically recoverable under the Philippine Labor Code. Article 291 gives no such indication.
Likewise, We can not consider complainants' cause/s of action to have accrued from a violation of their
employment contracts. There was no violation; the claims arise from the benefits of the law of the country where
they worked. (G.R. No. 104776, Rollo, pp.
90-91).
Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree No. 23 of 1976, NLRC opined that the
applicability of said law was one of characterization, i.e., whether to characterize the foreign law on prescription or statute of limitation
as "substantive" or "procedural." NLRC cited the decision in Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955], where
the issue was the applicability of the Panama Labor Code in a case filed in the State of New York for claims arising from said Code. In
said case, the claims would have prescribed under the Panamanian Law but not under the Statute of Limitations of New York. The U.S.
Circuit Court of Appeals held that the Panamanian Law was procedural as it was not "specifically intended to be substantive," hence,
the prescriptive period provided in the law of the forum should apply. The Court observed:
. . . And where, as here, we are dealing with a statute of limitations of a foreign country, and it is not clear on the
face of the statute that its purpose was to limit the enforceability, outside as well as within the foreign country
concerned, of the substantive rights to which the statute pertains, we think that as a yardstick for determining
whether that was the purpose this test is the most satisfactory one. It does not lead American courts into the
necessity of examining into the unfamiliar peculiarities and refinements of different foreign legal systems. . .
The court further noted:
xxx xxx xxx
Applying that test here it appears to us that the libelant is entitled to succeed, for the respondents have failed to
satisfy us that the Panamanian period of limitation in question was specifically aimed against the particular rights
which the libelant seeks to enforce. The Panama Labor Code is a statute having broad objectives, viz: "The present
Code regulates the relations between capital and labor, placing them on a basis of social justice, so that, without
injuring any of the parties, there may be guaranteed for labor the necessary conditions for a normal life and to
capital an equitable return to its investment." In pursuance of these objectives the Code gives laborers various rights
against their employers. Article 623 establishes the period of limitation for all such rights, except certain ones which
are enumerated in Article 621. And there is nothing in the record to indicate that the Panamanian legislature gave
special consideration to the impact of Article 623 upon the particular rights sought to be enforced here, as
distinguished from the other rights to which that Article is also applicable. Were we confronted with the question of
whether the limitation period of Article 621 (which carves out particular rights to be governed by a shorter limitation
214
period) is to be regarded as "substantive" or "procedural" under the rule of "specifity" we might have a different case;
but here on the surface of things we appear to be dealing with a "broad," and not a "specific," statute of limitations
(G.R. No. 104776, Rollo, pp.
92-94).
Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of the Philippines, which was applied by NLRC,
refers only to claims "arising from the employer's violation of the employee's right as provided by the Labor Code." They assert that their
claims are based on the violation of their employment contracts, as amended by the Amiri Decree No. 23 of 1976 and therefore the
claims may be brought within ten years as provided by Article 1144 of the Civil Code of the Philippines ( Rollo, G.R. Nos. 104911-14, pp.
18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA 244 (1976).
AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri Decree No. 23 of 1976, argue that there is in
force in the Philippines a "borrowing law," which is Section 48 of the Code of Civil Procedure and that where such kind of law exists, it
takes precedence over the common-law conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).
First to be determined is whether it is the Bahrain law on prescription of action based on the Amiri Decree No. 23 of 1976 or a Philippine
law on prescription that shall be the governing law.
Article 156 of the Amiri Decree No. 23 of 1976 provides:
A claim arising out of a contract of employment shall not be actionable after the lapse of one year from the date of
the expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226).
As a general rule, a foreign procedural law will not be applied in the forum. Procedural matters, such as service of process, joinder of
actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This is true even if the action is based
upon a foreign substantive law (Restatement of the Conflict of Laws, Sec. 685; Salonga, Private International Law, 131 [1979]).
A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as procedural or substantive,
depending on the characterization given such a law.
Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the statute of limitations of New York, instead of the
Panamanian law, after finding that there was no showing that the Panamanian law on prescription was intended to be substantive.
Being considered merely a procedural law even in Panama, it has to give way to the law of the forum on prescription of actions.
However, the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of the forum has
a "borrowing statute." Said statute has the practical effect of treating the foreign statute of limitation as one of substance (Goodrich,
Conflict of Laws 152-153 [1938]). A "borrowing statute" directs the state of the forum to apply the foreign statute of limitations to the
pending claims based on a foreign law (Siegel, Conflicts, 183 [1975]). While there are several kinds of "borrowing statutes," one form
provides that an action barred by the laws of the place where it accrued, will not be enforced in the forum even though the local
statute has not run against it (Goodrich and Scoles, Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this
kind. Said Section provides:
If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the
Philippines Islands.
Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article 2270 of said Code repealed only those
provisions of the Code of Civil Procedures as to which were inconsistent with it. There is no provision in the Civil Code of the Philippines,
which is inconsistent with or contradictory to Section 48 of the Code of Civil Procedure (Paras, Philippine Conflict of Laws 104 [7th ed.]).
In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar as it ordains the application in
this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.
The courts of the forum will not enforce any foreign claim obnoxious to the forum's public policy (Canadian Northern Railway Co. v.
Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713 [1920]). To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976
as regards the claims in question would contravene the public policy on the protection to labor.
In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:
The state shall promote social justice in all phases of national development. (Sec. 10).
The state affirms labor as a primary social economic force. It shall protect the rights of workers and promote their
welfare (Sec. 18).
215
In article XIII on Social Justice and Human Rights, the 1987 Constitution provides:
Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote
full employment and equality of employment opportunities for all.
Having determined that the applicable law on prescription is the Philippine law, the next question is whether the prescriptive period
governing the filing of the claims is three years, as provided by the Labor Code or ten years, as provided by the Civil Code of the
Philippines.
The claimants are of the view that the applicable provision is Article 1144 of the Civil Code of the Philippines, which provides:
The following actions must be brought within ten years from the time the right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment.
NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor Code of the Philippines, which in pertinent
part provides:
Money claims-all money claims arising from employer-employee relations accruing during the effectivity of this
Code shall be filed within three (3) years from the time the cause of action accrued, otherwise they shall be forever
barred.
xxx xxx xxx
The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc. , 70 SCRA 244 (1976) invoked by the claimants in G.R.
Nos. 104911-14 is inapplicable to the cases at bench (Rollo, p. 21). The said case involved the correct computation of overtime pay as
provided in the collective bargaining agreements and not the Eight-Hour Labor Law.
As noted by the Court: "That is precisely why petitioners did not make any reference as to the computation for overtime work under the
Eight-Hour Labor Law (Secs. 3 and 4, CA No. 494) and instead insisted that work computation provided in the collective bargaining
agreements between the parties be observed. Since the claim for pay differentials is primarily anchored on the written contracts
between the litigants, the ten-year prescriptive period provided by Art. 1144(1) of the New Civil Code should govern."
Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933) provides:
Any action to enforce any cause of action under this Act shall be commenced within three years after the cause of
action accrued otherwise such action shall be forever barred, . . . .
The court further explained:
The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as amended) will apply, if the claim
for differentials for overtime work is solely based on said law, and not on a collective bargaining agreement or any
other contract. In the instant case, the claim for overtime compensation is not so much because of Commonwealth
Act No. 444, as amended but because the claim is demandable right of the employees, by reason of the above-
mentioned collective bargaining agreement.
Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to enforce any cause of action under said
law." On the other hand, Article 291 of the Labor Code of the Philippines provides the prescriptive period for filing "money claims arising
from employer-employee relations." The claims in the cases at bench all arose from the employer-employee relations, which is broader
in scope than claims arising from a specific law or from the collective bargaining agreement.
The contention of the POEA Administrator, that the three-year prescriptive period under Article 291 of the Labor Code of the Philippines
applies only to money claims specifically recoverable under said Code, does not find support in the plain language of the provision.
Neither is the contention of the claimants in G.R. Nos. 104911-14 that said Article refers only to claims "arising from the employer's
violation of the employee's right," as provided by the Labor Code supported by the facial reading of the provision.
VII
G.R. No. 104776

216
A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) that while their complaints were filed on June 6, 1984
with POEA, the case was decided only on January 30, 1989, a clear denial of their right to a speedy disposition of the case; and (2)
that NLRC and the POEA Administrator should have declared AIBC and BRII in default (Rollo, pp.
31-35).
Claimants invoke a new provision incorporated in the 1987 Constitution, which provides:
Sec. 16. All persons shall have the right to a speedy disposition of their cases before all judicial, quasi-judicial, or
administrative bodies.
It is true that the constitutional right to "a speedy disposition of cases" is not limited to the accused in criminal proceedings but extends
to all parties in all cases, including civil and administrative cases, and in all proceedings, including judicial and quasi-judicial hearings.
Hence, under the Constitution, any party to a case may demand expeditious action on all officials who are tasked with the
administration of justice.
However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition of cases" is a relative term. Just like the
constitutional guarantee of "speedy trial" accorded to the accused in all criminal proceedings, "speedy disposition of cases" is a flexible
concept. It is consistent with delays and depends upon the circumstances of each case. What the Constitution prohibits are
unreasonable, arbitrary and oppressive delays which render rights nugatory.
Caballero laid down the factors that may be taken into consideration in determining whether or not the right to a "speedy disposition
of cases" has been violated, thus:
In the determination of whether or not the right to a "speedy trial" has been violated, certain factors may be
considered and balanced against each other. These are length of delay, reason for the delay, assertion of the right
or failure to assert it, and prejudice caused by the delay. The same factors may also be considered in answering
judicial inquiry whether or not a person officially charged with the administration of justice has violated the speedy
disposition of cases.
Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:
It must be here emphasized that the right to a speedy disposition of a case, like the right to speedy trial, is deemed
violated only when the proceeding is attended by vexatious, capricious, and oppressive delays; or when unjustified
postponements of the trial are asked for and secured, or when without cause or justified motive a long period of
time is allowed to elapse without the party having his case tried.
Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the amended complaint, claimants had been asking
that AIBC and BRII be declared in default for failure to file their answers within the ten-day period provided in Section 1, Rule III of Book
VI of the Rules and Regulations of the POEA. At that time, there was a pending motion of AIBC and BRII to strike out of the records the
amended complaint and the "Compliance" of claimants to the order of the POEA, requiring them to submit a bill of particulars.
The cases at bench are not of the run-of-the-mill variety, such that their final disposition in the administrative level after seven years from
their inception, cannot be said to be attended by unreasonable, arbitrary and oppressive delays as to violate the constitutional rights
to a speedy disposition of the cases of complainants.
The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said complaint had undergone several
amendments, the first being on April 3, 1985.
The claimants were hired on various dates from 1975 to 1983. They were deployed in different areas, one group in and the other groups
outside of, Bahrain. The monetary claims totalling more than US$65 million according to Atty. Del Mundo, included:
1. Unexpired portion of contract;
2. Interest earnings of Travel and Fund;
3. Retirement and Savings Plan benefit;
4. War Zone bonus or premium pay of at least 100% of basic pay;
5. Area Differential pay;
6. Accrued Interest of all the unpaid benefits;
7. Salary differential pay;

217
8. Wage Differential pay;
9. Refund of SSS premiums not remitted to Social Security System;
10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue (B.I.R.);
11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits consisting of 43 pages (Annex "Q" of
Amended Complaint);
12. Moral and Exemplary Damages;
13. Attorney's fees of at least ten percent of amounts;
14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and issued by the POEA; and
15. Penalty for violation of Article 34 (Prohibited practices) not excluding reportorial requirements thereof (NLRC
Resolution, September 2, 1991, pp. 18-19; G.R. No. 104776, Rollo, pp. 73-74).
Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some facts, the claimants were ordered to comply
with the motion of AIBC for a bill of particulars. When claimants filed their "Compliance and Manifestation," AIBC moved to strike out
the complaint from the records for failure of claimants to submit a proper bill of particulars. While the POEA Administrator denied the
motion to strike out the complaint, he ordered the claimants "to correct the deficiencies" pointed out by AIBC.
Before an intelligent answer could be filed in response to the complaint, the records of employment of the more than 1,700 claimants
had to be retrieved from various countries in the Middle East. Some of the records dated as far back as 1975.
The hearings on the merits of the claims before the POEA Administrator were interrupted several times by the various appeals, first to
NLRC and then to the Supreme Court.
Aside from the inclusion of additional claimants, two new cases were filed against AIBC and BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA Case No. L-86-05-460). NLRC, in exasperation, noted
that the exact number of claimants had never been completely established (Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p. 57). All
the three new cases were consolidated with POEA Case No. L-84-06-555.
NLRC blamed the parties and their lawyers for the delay in terminating the proceedings, thus:
These cases could have been spared the long and arduous route towards resolution had the parties and their
counsel been more interested in pursuing the truth and the merits of the claims rather than exhibiting a fanatical
reliance on technicalities. Parties and counsel have made these cases a litigation of emotion. The intransigence of
parties and counsel is remarkable. As late as last month, this Commission made a last and final attempt to bring the
counsel of all the parties (this Commission issued a special order directing respondent Brown & Root's resident
agent/s to appear) to come to a more conciliatory stance. Even this failed (Rollo,
p. 58).
The squabble between the lawyers of claimants added to the delay in the disposition of the cases, to the lament of NLRC, which
complained:
It is very evident from the records that the protagonists in these consolidated cases appear to be not only the
individual complainants, on the one hand, and AIBC and Brown & Root, on the other hand. The two lawyers for the
complainants, Atty. Gerardo Del Mundo and Atty. Florante De Castro, have yet to settle the right of representation,
each one persistently claiming to appear in behalf of most of the complainants. As a result, there are two appeals
by the complainants. Attempts by this Commission to resolve counsels' conflicting claims of their respective authority
to represent the complainants prove futile. The bickerings by these two counsels are reflected in their pleadings. In
the charges and countercharges of falsification of documents and signatures, and in the disbarment proceedings
by one against the other. All these have, to a large extent, abetted in confounding the issues raised in these cases,
jumble the presentation of evidence, and even derailed the prospects of an amicable settlement. It would not be
far-fetched to imagine that both counsel, unwittingly, perhaps, painted a rainbow for the complainants, with the
proverbial pot of gold at its end containing more than US$100 million, the aggregate of the claims in these cases. It
is, likewise, not improbable that their misplaced zeal and exuberance caused them to throw all caution to the wind
in the matter of elementary rules of procedure and evidence ( Rollo, pp. 58-59).
218
Adding to the confusion in the proceedings before NLRC, is the listing of some of the complainants in both petitions filed by the two
lawyers. As noted by NLRC, "the problem created by this situation is that if one of the two petitions is dismissed, then the parties and the
public respondents would not know which claim of which petitioner was dismissed and which was not."
B. Claimants insist that all their claims could properly be consolidated in a "class suit" because "all the named complainants have similar
money claims and similar rights sought irrespective of whether they worked in Bahrain, United Arab Emirates or in Abu Dhabi, Libya or in
any part of the Middle East" (Rollo, pp. 35-38).
A class suit is proper where the subject matter of the controversy is one of common or general interest to many and the parties are so
numerous that it is impracticable to bring them all before the court (Revised Rules of Court, Rule 3, Sec. 12).
While all the claims are for benefits granted under the Bahrain Law, many of the claimants worked outside Bahrain. Some of the
claimants were deployed in Indonesia and Malaysia under different terms and conditions of employment.
NLRC and the POEA Administrator are correct in their stance that inasmuch as the first requirement of a class suit is not present
(common or general interest based on the Amiri Decree of the State of Bahrain), it is only logical that only those who worked in Bahrain
shall be entitled to file their claims in a class suit.
While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for employee's benefits), there is no
common question of law or fact. While some claims are based on the Amiri Law of Bahrain, many of the claimants never worked in
that country, but were deployed elsewhere. Thus, each claimant is interested only in his own demand and not in the claims of the
other employees of defendants. The named claimants have a special or particular interest in specific benefits completely different
from the benefits in which the other named claimants and those included as members of a "class" are claiming (Berses v. Villanueva, 25
Phil. 473 [1913]). It appears that each claimant is only interested in collecting his own claims. A claimants has no concern in protecting
the interests of the other claimants as shown by the fact, that hundreds of them have abandoned their co-claimants and have
entered into separate compromise settlements of their respective claims. A principle basic to the concept of "class suit" is that plaintiffs
brought on the record must fairly represent and protect the interests of the others (Dimayuga v. Court of Industrial Relations, 101 Phil.
590 [1957]). For this matter, the claimants who worked in Bahrain can not be allowed to sue in a class suit in a judicial proceeding. The
most that can be accorded to them under the Rules of Court is to be allowed to join as plaintiffs in one complaint (Revised Rules of
Court, Rule 3, Sec. 6).
The Court is extra-cautious in allowing class suits because they are the exceptions to the condition sine qua non, requiring the joinder of
all indispensable parties.
In an improperly instituted class suit, there would be no problem if the decision secured is favorable to the plaintiffs. The problem arises
when the decision is adverse to them, in which case the others who were impleaded by their self-appointed representatives, would
surely claim denial of due process.
C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC should have declared Atty. Florante De Castro
guilty of "forum shopping, ambulance chasing activities, falsification, duplicity and other unprofessional activities" and his appearances
as counsel for some of the claimants as illegal (Rollo, pp. 38-40).
The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop to the practice of some parties of filing multiple
petitions and complaints involving the same issues, with the result that the courts or agencies have to resolve the same issues. Said Rule,
however, applies only to petitions filed with the Supreme Court and the Court of Appeals. It is entitled "Additional Requirements For
Petitions Filed with the Supreme Court and the Court of Appeals To Prevent Forum Shopping or Multiple Filing of Petitioners and
Complainants." The first sentence of the circular expressly states that said circular applies to an governs the filing of petitions in the
Supreme Court and the Court of Appeals.
While Administrative Circular No. 04-94 extended the application of the anti-forum shopping rule to the lower courts and administrative
agencies, said circular took effect only on April 1, 1994.
POEA and NLRC could not have entertained the complaint for unethical conduct against Atty. De Castro because NLRC and POEA
have no jurisdiction to investigate charges of unethical conduct of lawyers.
Attorney's Lien
The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by Atty. Gerardo A. Del Mundo to protect his
claim for attorney's fees for legal services rendered in favor of the claimants (G.R. No. 104776, Rollo, pp. 841-844).
A statement of a claim for a charging lien shall be filed with the court or administrative agency which renders and executes the money
judgment secured by the lawyer for his clients. The lawyer shall cause written notice thereof to be delivered to his clients and to the
adverse party (Revised Rules of Court, Rule 138, Sec. 37). The statement of the claim for the charging lien of Atty. Del Mundo should
have been filed with the administrative agency that rendered and executed the judgment.
219
Contempt of Court
The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. Katz Tierra for violation of the Code of
Professional Responsibility should be filed in a separate and appropriate proceeding.
G.R. No. 104911-14
Claimants charge NLRC with grave abuse of discretion in not accepting their formula of "Three Hours Average Daily Overtime" in
computing the overtime payments. They claim that it was BRII itself which proposed the formula during the negotiations for the
settlement of their claims in Bahrain and therefore it is in estoppel to disclaim said offer ( Rollo, pp. 21-22).
Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16, 1983, which in pertinent part states:
After the perusal of the memorandum of the Vice President and the Area Manager, Middle East, of Brown & Root
Co. and the Summary of the compensation offered by the Company to the employees in respect of the difference
of pay of the wages of the overtime and the difference of vacation leave and the perusal of the documents
attached thereto i.e., minutes of the meetings between the Representative of the employees and the management
of the Company, the complaint filed by the employees on 14/2/83 where they have claimed as hereinabove
stated, sample of the Service Contract executed between one of the employees and the company through its
agent in (sic) Philippines, Asia International Builders Corporation where it has been provided for 48 hours of work per
week and an annual leave of 12 days and an overtime wage of 1 & 1/4 of the normal hourly wage.
xxx xxx xxx
The Company in its computation reached the following averages:
A. 1. The average duration of the actual service of the employee is 35 months for the Philippino (sic) employees . . . .
2. The average wage per hour for the Philippino (sic) employee is US$2.69 . . . .
3. The average hours for the overtime is 3 hours plus in all public holidays and weekends.
4. Payment of US$8.72 per months (sic) of service as compensation for the difference of the wages of the overtime
done for each Philippino (sic) employee . . . (Rollo, p.22).
BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by a subordinate official in the Bahrain
Department of Labor; (2) that there was no showing that the Bahrain Minister of Labor had approved said memorandum; and (3) that
the offer was made in the course of the negotiation for an amicable settlement of the claims and therefore it was not admissible in
evidence to prove that anything is due to the claimants.
While said document was presented to the POEA without observing the rule on presenting official documents of a foreign government
as provided in Section 24, Rule 132 of the 1989 Revised Rules on Evidence, it can be admitted in evidence in proceedings before an
administrative body. The opposing parties have a copy of the said memorandum, and they could easily verify its authenticity and
accuracy.
The admissibility of the offer of compromise made by BRII as contained in the memorandum is another matter. Under Section 27, Rule
130 of the 1989 Revised Rules on Evidence, an offer to settle a claim is not an admission that anything is due.
Said Rule provides:
Offer of compromise not admissible. — In civil cases, an offer of compromise is not an admission of any liability, and
is not admissible in evidence against the offeror.
This Rule is not only a rule of procedure to avoid the cluttering of the record with unwanted evidence but a statement of public policy.
There is great public interest in having the protagonists settle their differences amicable before these ripen into litigation. Every effort
must be taken to encourage them to arrive at a settlement. The submission of offers and counter-offers in the negotiation table is a
step in the right direction. But to bind a party to his offers, as what claimants would make this Court do, would defeat the salutary
purpose of the Rule.
G.R. Nos. 105029-32
A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits than those stipulated in the overseas-employment
contracts of the claimants. It was of the belief that "where the laws of the host country are more favorable and beneficial to the
workers, then the laws of the host country shall form part of the overseas employment contract." It quoted with approval the
220
observation of the POEA Administrator that ". . . in labor proceedings, all doubts in the implementation of the provisions of the Labor
Code and its implementing regulations shall be resolved in favor of labor" (Rollo, pp. 90-94).
AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to enforce the overseas-employment contracts,
which became the law of the parties. They contend that the principle that a law is deemed to be a part of a contract applies only to
provisions of Philippine law in relation to contracts executed in the Philippines.
The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided that the laws of the host country
became applicable to said contracts if they offer terms and conditions more favorable that those stipulated therein. It was stipulated
in said contracts that:
The Employee agrees that while in the employ of the Employer, he will not engage in any other business or
occupation, nor seek employment with anyone other than the Employer; that he shall devote his entire time and
attention and his best energies, and abilities to the performance of such duties as may be assigned to him by the
Employer; that he shall at all times be subject to the direction and control of the Employer; and that the benefits
provided to Employee hereunder are substituted for and in lieu of all other benefits provided by any applicable law,
provided of course, that total remuneration and benefits do not fall below that of the host country regulation or
custom, it being understood that should applicable laws establish that fringe benefits, or other such benefits
additional to the compensation herein agreed cannot be waived , Employee agrees that such compensation will be
adjusted downward so that the total compensation hereunder, plus the non-waivable benefits shall be equivalent
to the compensation herein agreed (Rollo, pp. 352-353).
The overseas-employment contracts could have been drafted more felicitously. While a part thereof provides that the compensation
to the employee may be "adjusted downward so that the total computation (thereunder) plus the non-waivable benefits shall be
equivalent to the compensation" therein agreed, another part of the same provision categorically states "that total remuneration and
benefits do not fall below that of the host country regulation and custom."
Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII, the parties that drafted it (Eastern
Shipping Lines, Inc. v. Margarine-Verkaufs-Union, 93 SCRA 257 [1979]).
Article 1377 of the Civil Code of the Philippines provides:
The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.
Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared form containing the stipulations of
the employment contract and the employees merely "take it or leave it." The presumption is that there was an imposition by one party
against the other and that the employees signed the contracts out of necessity that reduced their bargaining power (Fieldmen's
Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]).
Applying the said legal precepts, we read the overseas-employment contracts in question as adopting the provisions of the Amiri
Decree No. 23 of 1976 as part and parcel thereof.
The parties to a contract may select the law by which it is to be governed (Cheshire, Private International Law, 187 [7th ed.]). In such a
case, the foreign law is adopted as a "system" to regulate the relations of the parties, including questions of their capacity to enter into
the contract, the formalities to be observed by them, matters of performance, and so forth (16 Am Jur 2d,
150-161).
Instead of adopting the entire mass of the foreign law, the parties may just agree that specific provisions of a foreign statute shall be
deemed incorporated into their contract "as a set of terms." By such reference to the provisions of the foreign law, the contract does
not become a foreign contract to be governed by the foreign law. The said law does not operate as a statute but as a set of
contractual terms deemed written in the contract (Anton, Private International Law, 197 [1967]; Dicey and Morris, The Conflict of Laws,
702-703, [8th ed.]).
A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law in Torts and Contracts, 16 Columbia
Journal of Transnational Law 1, 21 [1977]). Such party expectation is protected by giving effect to the parties' own choice of the
applicable law (Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must, however, bear some relationship to
the parties or their transaction (Scoles and Hayes, Conflict of Law 644-647 [1982]). There is no question that the contracts sought to be
enforced by claimants have a direct connection with the Bahrain law because the services were rendered in that country.
In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the "Employment Agreement," between Norse
Management Co. and the late husband of the private respondent, expressly provided that in the event of illness or injury to the
employee arising out of and in the course of his employment and not due to his own misconduct, "compensation shall be paid to
employee in accordance with and subject to the limitation of the Workmen's Compensation Act of the Republic of the Philippines or
the Worker's Insurance Act of registry of the vessel, whichever is greater." Since the laws of Singapore, the place of registry of the vessel
221
in which the late husband of private respondent served at the time of his death, granted a better compensation package, we applied
said foreign law in preference to the terms of the contract.
The case of Bagong Filipinas Overseas Corporation v. National Labor Relations Commission , 135 SCRA 278 (1985), relied upon by AIBC
and BRII is inapposite to the facts of the cases at bench. The issue in that case was whether the amount of the death compensation of
a Filipino seaman should be determined under the shipboard employment contract executed in the Philippines or the Hongkong law.
Holding that the shipboard employment contract was controlling, the court differentiated said case from Norse Management Co. in
that in the latter case there was an express stipulation in the employment contract that the foreign law would be applicable if it
afforded greater compensation.
B. AIBC and BRII claim that they were denied by NLRC of their right to due process when said administrative agency granted Friday-
pay differential, holiday-pay differential, annual-leave differential and leave indemnity pay to the claimants listed in Annex B of the
Resolution. At first, NLRC reversed the resolution of the POEA Administrator granting these benefits on a finding that the POEA
Administrator failed to consider the evidence presented by AIBC and BRII, that some findings of fact of the POEA Administrator were
not supported by the evidence, and that some of the evidence were not disclosed to AIBC and BRII ( Rollo, pp. 35-36; 106-107). But
instead of remanding the case to the POEA Administrator for a new hearing, which means further delay in the termination of the case,
NLRC decided to pass upon the validity of the claims itself. It is this procedure that AIBC and BRII complain of as being irregular and a
"reversible error."
They pointed out that NLRC took into consideration evidence submitted on appeal, the same evidence which NLRC found to have
been "unilaterally submitted by the claimants and not disclosed to the adverse parties" ( Rollo, pp. 37-39).
NLRC noted that so many pieces of evidentiary matters were submitted to the POEA administrator by the claimants after the cases
were deemed submitted for resolution and which were taken cognizance of by the POEA Administrator in resolving the cases. While
AIBC and BRII had no opportunity to refute said evidence of the claimants before the POEA Administrator, they had all the opportunity
to rebut said evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were able to present before NLRC additional evidence
which they failed to present before the POEA Administrator.
Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and all reasonable means to ascertain the facts
in each case speedily and objectively and without regard to technicalities of law or procedure, all in the interest of due process."
In deciding to resolve the validity of certain claims on the basis of the evidence of both parties submitted before the POEA
Administrator and NLRC, the latter considered that it was not expedient to remand the cases to the POEA Administrator for that would
only prolong the already protracted legal controversies.
Even the Supreme Court has decided appealed cases on the merits instead of remanding them to the trial court for the reception of
evidence, where the same can be readily determined from the uncontroverted facts on record (Development Bank of the Philippines
v. Intermediate Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor Relations Commission, 127 SCRA 463 [1984]).
C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the POEA Administrator to hold new hearings for 683
claimants listed in Annex D of the Resolution dated September 2, 1991 whose claims had been denied by the POEA Administrator "for
lack of proof" and for 69 claimants listed in Annex E of the same Resolution, whose claims had been found by NLRC itself as not
"supported by evidence" (Rollo, pp. 41-45).
NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which empowers it "[to] conduct investigation for the
determination of a question, matter or controversy, within its jurisdiction, . . . ."
It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to remand a case involving claims which had already
been dismissed because such provision contemplates only situations where there is still a question or controversy to be resolved ( Rollo,
pp. 41-42).
A principle well embedded in Administrative Law is that the technical rules of procedure and evidence do not apply to the
proceedings conducted by administrative agencies (First Asian Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986];
Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined in Article 221 of the Labor Code of the
Philippines and is now the bedrock of proceedings before NLRC.
Notwithstanding the non-applicability of technical rules of procedure and evidence in administrative proceedings, there are cardinal
rules which must be observed by the hearing officers in order to comply with the due process requirements of the Constitution. These
cardinal rules are collated in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).
VIII
222
The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds that NLRC had committed grave abuse of
discretion amounting to lack of jurisdiction in issuing the questioned orders. We find no such abuse of discretion.
WHEREFORE, all the three petitions are DISMISSED.
SO ORDERED
37. Pakistani Airlines v. Ople, G.R. No. 61594, September 28, 1990 Atup
G.R. No. 61594 September 28, 1990
PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner,
vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister; ETHELYNNE B.
FARRALES and MARIA MOONYEEN MAMASIG, respondents.
Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.
Ledesma, Saludo & Associates for private respondents.
FELICIANO, J.:
On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign corporation licensed to do business in the
Philippines, executed in Manila two (2) separate contracts of employment, one with private respondent Ethelynne B. Farrales and the
other with private respondent Ma. M.C. Mamasig. 1 The contracts, which became effective on 9 January 1979, provided in pertinent
portion as follows:
5. DURATION OF EMPLOYMENT AND PENALTY
This agreement is for a period of three (3) years, but can be extended by the mutual consent of the parties.
xxx xxx xxx
6. TERMINATION
xxx xxx xxx
Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate this agreement at any time by giving the
EMPLOYEE notice in writing in advance one month before the intended termination or in lieu thereof, by paying the EMPLOYEE wages
equivalent to one month's salary.
xxx xxx xxx
10. APPLICABLE LAW:
This agreement shall be construed and governed under and by the laws of Pakistan, and only the Courts of Karachi, Pakistan shall
have the jurisdiction to consider any matter arising out of or under this agreement.
Respondents then commenced training in Pakistan. After their training period, they began discharging their job functions as flight
attendants, with base station in Manila and flying assignments to different parts of the Middle East and Europe.
On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the contracts of employment, PIA through Mr.
Oscar Benares, counsel for and official of the local branch of PIA, sent separate letters both dated 1 August 1980 to private
respondents Farrales and Mamasig advising both that their services as flight stewardesses would be terminated "effective 1 September
1980, conformably to clause 6 (b) of the employment agreement [they had) executed with [PIA]." 2
On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a complaint, docketed as NCR-STF-95151-80, for
illegal dismissal and non-payment of company benefits and bonuses, against PIA with the then Ministry of Labor and Employment
("MOLE"). After several unfruitful attempts at conciliation, the MOLE hearing officer Atty. Jose M. Pascual ordered the parties to submit
223
their position papers and evidence supporting their respective positions. The PIA submitted its position paper, 3 but no evidence, and
there claimed that both private respondents were habitual absentees; that both were in the habit of bringing in from abroad sizeable
quantities of "personal effects"; and that PIA personnel at the Manila International Airport had been discreetly warned by customs
officials to advise private respondents to discontinue that practice. PIA further claimed that the services of both private respondents
were terminated pursuant to the provisions of the employment contract.
In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the reinstatement of private respondents with full
backwages or, in the alternative, the payment to them of the amounts equivalent to their salaries for the remainder of the fixed three-
year period of their employment contracts; the payment to private respondent Mamasig of an amount equivalent to the value of a
round trip ticket Manila-USA Manila; and payment of a bonus to each of the private respondents equivalent to their one-month salary.
4
The Order stated that private respondents had attained the status of regular employees after they had rendered more than a year of
continued service; that the stipulation limiting the period of the employment contract to three (3) years was null and void as violative
of the provisions of the Labor Code and its implementing rules and regulations on regular and casual employment; and that the
dismissal, having been carried out without the requisite clearance from the MOLE, was illegal and entitled private respondents to
reinstatement with full backwages.
On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister, MOLE, adopted the findings of fact and
conclusions of the Regional Director and affirmed the latter's award save for the portion thereof giving PIA the option, in lieu of
reinstatement, "to pay each of the complainants [private respondents] their salaries corresponding to the unexpired portion of the
contract[s] [of employment] . . .". 5
In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director and the Order of the Deputy Minister as
having been rendered without jurisdiction; for having been rendered without support in the evidence of record since, allegedly, no
hearing was conducted by the hearing officer, Atty. Jose M. Pascual; and for having been issued in disregard and in violation of
petitioner's rights under the employment contracts with private respondents.
1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over the subject matter of the complaint initiated
by private respondents for illegal dismissal, jurisdiction over the same being lodged in the Arbitration Branch of the National Labor
Relations Commission ("NLRC") It appears to us beyond dispute, however, that both at the time the complaint was initiated in
September 1980 and at the time the Orders assailed were rendered on January 1981 (by Regional Director Francisco L. Estrella) and
August 1982 (by Deputy Minister Vicente Leogardo, Jr.), the Regional Director had jurisdiction over termination cases.
Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of employees with at least one (1) year of service
without prior clearance from the Department of Labor and Employment:
Art. 278. Miscellaneous Provisions — . . .
(b) With or without a collective agreement, no employer may shut down his establishment or dismiss or terminate the employment of
employees with at least one year of service during the last two (2) years, whether such service is continuous or broken, without prior
written authority issued in accordance with such rules and regulations as the Secretary may promulgate . . . (emphasis supplied)
Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made clear that in case of a termination without the
necessary clearance, the Regional Director was authorized to order the reinstatement of the employee concerned and the payment
of backwages; necessarily, therefore, the Regional Director must have been given jurisdiction over such termination cases:
Sec. 2. Shutdown or dismissal without clearance . — Any shutdown or dismissal without prior clearance shall be conclusively presumed
to be termination of employment without a just cause. The Regional Director shall, in such case order the immediate reinstatement of
the employee and the payment of his wages from the time of the shutdown or dismissal until the time of reinstatement. (emphasis
supplied)
Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly very explicit about the jurisdiction of the
Regional Director over termination of employment cases:
Under PD 850, termination cases — with or without CBA — are now placed under the original jurisdiction of the Regional Director.
Preventive suspension cases, now made cognizable for the first time, are also placed under the Regional Director. Before PD 850,
termination cases where there was a CBA were under the jurisdiction of the grievance machinery and voluntary arbitration, while
termination cases where there was no CBA were under the jurisdiction of the Conciliation Section.
In more details, the major innovations introduced by PD 850 and its implementing rules and regulations with respect to termination and
preventive suspension cases are:
1. The Regional Director is now required to rule on every application for clearance, whether there is opposition or not, within ten days
from receipt thereof.
xxx xxx xxx

224
(Emphasis supplied)
2. The second contention of petitioner PIA is that, even if the Regional Director had jurisdiction, still his order was null and void because
it had been issued in violation of petitioner's right to procedural due process . 6 This claim, however, cannot be given serious
consideration. Petitioner was ordered by the Regional Director to submit not only its position paper but also such evidence in its favor
as it might have. Petitioner opted to rely solely upon its position paper; we must assume it had no evidence to sustain its assertions. Thus,
even if no formal or oral hearing was conducted, petitioner had ample opportunity to explain its side. Moreover, petitioner PIA was
able to appeal his case to the Ministry of Labor and Employment. 7
There is another reason why petitioner's claim of denial of due process must be rejected. At the time the complaint was filed by private
respondents on 21 September 1980 and at the time the Regional Director issued his questioned order on 22 January 1981, applicable
regulation, as noted above, specified that a "dismissal without prior clearance shall be conclusively presumed to be termination of
employment without a cause", and the Regional Director was required in such case to" order the immediate reinstatement of the
employee and the payment of his wages from the time of the shutdown or dismiss until . . . reinstatement." In other words, under the
then applicable rule, the Regional Director did not even have to require submission of position papers by the parties in view of the
conclusive (juris et de jure) character of the presumption created by such applicable law and regulation. In Cebu Institute of
Technology v. Minister of Labor and Employment , 8 the Court pointed out that "under Rule 14, Section 2, of the Implementing Rules and
Regulations, the termination of [an employee] which was without previous clearance from the Ministry of Labor is conclusively
presumed to be without [just] cause . . . [a presumption which] cannot be overturned by any contrary proof however strong."
3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of employment with private respondents Farrales and
Mamasig, arguing that its relationship with them was governed by the provisions of its contract rather than by the general provisions of
the Labor Code. 9
Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by agreement between the parties; while
paragraph 6 provided that, notwithstanding any other provision in the Contract, PIA had the right to terminate the employment
agreement at any time by giving one-month's notice to the employee or, in lieu of such notice, one-months salary.
A contract freely entered into should, of course, be respected, as PIA argues, since a contract is the law between the parties. 10 The
principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306, of our Civil Code is that the
contracting parties may establish such stipulations as they may deem convenient, "provided they are not contrary to law, morals, good
customs, public order or public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the equally general
rule that provisions of applicable law, especially provisions relating to matters affected with public policy, are deemed written into the
contract. 11 Put a little differently, the governing principle is that parties may not contract away applicable provisions of law especially
peremptory provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is clearly
such an area and parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations
by simply contracting with each other. It is thus necessary to appraise the contractual provisions invoked by petitioner PIA in terms of
their consistency with applicable Philippine law and regulations.
As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that paragraph 5 of that employment contract
was inconsistent with Articles 280 and 281 of the Labor Code as they existed at the time the contract of employment was entered into,
and hence refused to give effect to said paragraph 5. These Articles read as follows:
Art. 280. Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an employee except for
a just cause or when authorized by this Title An employee who is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time his
reinstatement.
Art. 281. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the
oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has
been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the
duration of the season.
An employment shall be deemed to be casual if it is not covered by the preceding paragraph: provided, that, any employee who has
rendered at least one year of service, whether such service is continuous or broken, shall be considered as regular employee with
respect to the activity in which he is employed and his employment shall continue while such actually exists. (Emphasis supplied)
In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al., 12 the Court had occasion to examine in detail the question of whether
employment for a fixed term has been outlawed under the above quoted provisions of the Labor Code. After an extensive
examination of the history and development of Articles 280 and 281, the Court reached the conclusion that a contract providing for
employment with a fixed period was not necessarily unlawful:
There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been
imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public
225
policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not
exist e.g. where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that,
without being seasonal or for a specific project, a definite date of termination is a sine qua non would an agreement fixing a period be
essentially evil or illicit, therefore anathema Would such an agreement come within the scope of Article 280 which admittedly was
enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?"
As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal
interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly,
but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the
duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided . The law must be given
reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting
to boot the principle of freedom of contract to remedy the evil of employers" using it as a means to prevent their employees from
obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head.
xxx xxx xxx
Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor
Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure,
the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of
regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out:
agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of
employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought
to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the
employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by
the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly
stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended
consequences. (emphasis supplied)
It is apparent from Brent School that the critical consideration is the presence or absence of a substantial indication that the period
specified in an employment agreement was designed to circumvent the security of tenure of regular employees which is provided for
in Articles 280 and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the agreement other than the mere
specification of a fixed term of the ernployment agreement, or upon evidence aliunde of the intent to evade.
Examining the provisions of paragraphs 5 and 6 of the employment agreement between petitioner PIA and private respondents, we
consider that those provisions must be read together and when so read, the fixed period of three (3) years specified in paragraph 5 will
be seen to have been effectively neutralized by the provisions of paragraph 6 of that agreement. Paragraph 6 in effect took back
from the employee the fixed three (3)-year period ostensibly granted by paragraph 5 by rendering such period in effect a facultative
one at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that term, at any time and for any cause
satisfactory to itself, to a one-month period, or even less by simply paying the employee a month's salary. Because the net effect of
paragraphs 5 and 6 of the agreement here involved is to render the employment of private respondents Farrales and Mamasig
basically employment at the pleasure of petitioner PIA, the Court considers that paragraphs 5 and 6 were intended to prevent any
security of tenure from accruing in favor of private respondents even during the limited period of three (3) years ,13 and thus to escape
completely the thrust of Articles 280 and 281 of the Labor Code.
Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which specifies, firstly, the law of Pakistan as the
applicable law of the agreement and, secondly, lays the venue for settlement of any dispute arising out of or in connection with the
agreement "only [in] courts of Karachi Pakistan". The first clause of paragraph 10 cannot be invoked to prevent the application of
Philippine labor laws and regulations to the subject matter of this case, i.e., the employer-employee relationship between petitioner PIA
and private respondents. We have already pointed out that the relationship is much affected with public interest and that the
otherwise applicable Philippine laws and regulations cannot be rendered illusory by the parties agreeing upon some other law to
govern their relationship. Neither may petitioner invoke the second clause of paragraph 10, specifying the Karachi courts as the sole
venue for the settlement of dispute; between the contracting parties. Even a cursory scrutiny of the relevant circumstances of this case
will show the multiple and substantive contacts between Philippine law and Philippine courts, on the one hand, and the relationship
between the parties, upon the other: the contract was not only executed in the Philippines, it was also performed here, at least
partially; private respondents are Philippine citizens and respondents, while petitioner, although a foreign corporation, is licensed to do
business (and actually doing business) and hence resident in the Philippines; lastly, private respondents were based in the Philippines in
between their assigned flights to the Middle East and Europe. All the above contacts point to the Philippine courts and administrative
agencies as a proper forum for the resolution of contractual disputes between the parties. Under these circumstances, paragraph 10
of the employment agreement cannot be given effect so as to oust Philippine agencies and courts of the jurisdiction vested upon
them by Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and prove the contents of Pakistan law
on the matter; it must therefore be presumed that the applicable provisions of the law of Pakistan are the same as the applicable
provisions of Philippine law.14
We conclude that private respondents Farrales and Mamasig were illegally dismissed and that public respondent Deputy Minister,
MOLE, had not committed any grave abuse of discretion nor any act without or in excess of jurisdiction in ordering their reinstatement
with backwages. Private respondents are entitled to three (3) years backwages without qualification or deduction. Should their
226
reinstatement to their former or other substantially equivalent positions not be feasible in view of the length of time which has gone by
since their services were unlawfully terminated, petitioner should be required to pay separation pay to private respondents amounting
to one (1) month's salary for every year of service rendered by them, including the three (3) years service putatively rendered.
ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the Order dated 12 August 1982 of public
respondent is hereby AFFIRMED, except that (1) private respondents are entitled to three (3) years backwages, without deduction or
qualification; and (2) should reinstatement of private respondents to their former positions or to substantially equivalent positions not be
feasible, then petitioner shall, in lieu thereof, pay to private respondents separation pay amounting to one (1)-month's salary for every
year of service actually rendered by them and for the three (3) years putative service by private respondents. The Temporary
Restraining Order issued on 13 September 1982 is hereby LIFTED. Costs against petitioner.
38. Bank of America v. American Realty Corp., G.R. No. 133876, [December 29, 1999], 378 PHIL 1279-1304 Banggat
[G.R. No. 133876.

December 29, 1999.]
BANK OF AMERICA, NT and SA, Petitioner, v. AMERICAN REALTY CORPORATION and COURT OF APPEALS, Respondents.
DECISION
BUENA, J.:
Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted over a third party mortgagor’s property
situated in the Philippines by filing an action for the collection of the principal loan before foreign courts?chanrobles virtual lawlibrary
Sought to be reversed in the instant petition for review on certiorari under Rule 45 of the Rules of Court are the decision 1 of public
respondent Court of Appeals in CA G. R. CV No. 51094, promulgated on 30 September 1997 and its resolution, 2 dated 22 May 1998,
denying petitioner’s motion for reconsideration.
Petitioner Bank of America NT & SA (BANTSA) is an international banking and financing institution duly licensed to do business in the
Philippines, organized and existing under and by virtue of the laws of the State of California, United States of America while private
respondent American Realty Corporation (ARC) is a domestic corporation.
Bank of America International Limited (BAIL), on the other hand, is a limited liability company organized and existing under the laws of
England.
As borne by the records, BANTSA and BAIL on several occasions granted three major multi-million United States (US) Dollar loans to the
following corporate borrowers: (1) Liberian Transport Navigation, S.A.; (2) El Challenger S.A. and (3) Eshley Compania Naviera S.A.
(hereinafter collectively referred to as "borrowers"), all of which are existing under and by virtue of the laws of the Republic of Panama
and are foreign affiliates of private Respondent. 3
Due to the default in the payment of the loan amortizations, BANTSA and the corporate borrowers signed and entered into
restructuring agreements. As additional security for the restructured loans, private respondent ARC as third party mortgagor executed
two real estate mortgages, 4 dated 17 February 1983 and 20 July 1984, over its parcels of land including improvements thereon,
located at Barrio Sto. Cristo, San Jose Del Monte, Bulacan, and which are covered by Transfer Certificate of Title Nos. T-78759, T-78760,
T-78761, T-78762 and T-78763.chanrobles virtual lawlibrary
Eventually, the corporate borrowers defaulted in the payment of the restructured loans prompting petitioner BANTSA to file civil actions
5 before foreign courts for the collection of the principal loan, to wit:jgc:chanrobles.com.ph
"a) In England, in its High Court of Justice, Queen’s Bench Division, Commercial Court (1992-Folio No. 2098) against Liberian Transport
Navigation S.A, Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company S.A., Eddie Navigation Corp., S.A.,
Eduardo Katipunan Litonjua and Aurelio Katipunan Litonjua on June 17, 1992.
b) In England, in its High Court of Justice, Queen’s Bench Division, Commercial Court (1992-Folio No. 2245) against El Challenger S.A.,
Espriona Shipping Company S.A., Eduardo Katipunan Litonjua & Aurelio Katipunan Litonjua on July 2, 1992;chanrobles virtual lawlibrary
227
c) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992) against Eshley Compania Naviera S.A., El
Challenger S.A., Espriona Shipping Company S.A. Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua
Chartering (Edyship) Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo Katipunan Litonjua on November 19, 1992; and
d) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4040 of 1992) against Eshley Compania Naviera S.A., El
Challenger S.A., Espriona Shipping Company, S.A., Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua
Chartering (Edyship) Co., Jr. and Eduardo Katipunan Litonjua on November 21, 1992."cralaw virtua1aw library
In the civil suits instituted before the foreign courts, private respondent ARC, being a third party mortgagor, was not impleaded as
party-defendant.
On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of Bulacan, Philippines, an application for
extrajudicial foreclosure 6 of real estate mortgage.chanroblesvirtuallawlibrary
On 22 January 1993, after due publication and notice, the mortgaged real properties were sold at public auction in an extrajudicial
foreclosure sale, with Integrated Credit and Corporation Services Co. (ICCS) as the highest bidder for the sum of Twenty Four Million
Pesos (P24,000,000.00). 7
On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch 159, an action for damages 8 against the
petitioner, for the latter’s act of foreclosing extrajudicially the real estate mortgages despite the pendency of civil suits before foreign
courts for the collection of the principal loan.
In its answer 9 petitioner alleged that the rule prohibiting the mortgagee from foreclosing the mortgage after an ordinary suit for
collection has been filed, is not applicable in the present case, claiming that:jgc:chanrobles.com.ph
"a) The plaintiff, being a mere third party mortgagor and not a party to the principal restructuring agreements, was never made a
party defendant in the civil cases filed in Hongkong and England;
"b) There is actually no civil suit for sum of money filed in the Philippines since the civil actions were filed in Hongkong and England. As
such, any decisions (sic) which may be rendered in the abovementioned courts are not (sic) enforceable in the Philippines unless a
separate action to enforce the foreign judgments is first filed in the Philippines, pursuant to Rule 39, Section 50 of the Revised Rules of
Court.chanrobles.com.ph : virtual law library
"c) Under English Law, which is the governing law under the principal agreements, the mortgagee does not lose its security interest by
filing civil actions for sums of money."cralaw virtua1aw library
On 14 December 1993, private respondent filed a motion for suspension 10 of the redemption period on the ground that "it cannot
exercise said right of redemption without at the same time waiving or contradicting its contentions in the case that the foreclosure of
the mortgage on its properties is legally improper and therefore invalid."cralaw virtua1aw library
In an order 11 dated 28 January 1994, the trial court granted the private respondent’s motion for suspension after which a copy of said
order was duly received by the Register of Deeds of Meycauayan, Bulacan.
On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure sale, consolidated its ownership over the real
properties, resulting to the issuance of Transfer Certificate of Title Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in its name.
On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real properties to Stateland Investment Corporation
for the amount of Thirty Nine Million Pesos (P39,000,000.00). 12 Accordingly, Transfer Certificate of Title Nos. T-187781(m), T-187782(m), T-
187783(m), T-16653P(m) and T-16652P(m) were issued in the latter’s name.chanrobles.com.ph : virtual law library
After trial, the lower court rendered a decision 13 in favor of private respondent ARC dated 12 May 1993, the decretal portion of which
reads:jgc:chanrobles.com.ph
"WHEREFORE, judgment is hereby rendered declaring that the filing in foreign courts by the defendant of collection suits against the
principal debtors operated as a waiver of the security of the mortgages. Consequently, the plaintiff’s rights as owner and possessor of
the properties then covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78763, T-78760 and T-78761, all of the Register of
228
Deeds of Meycauayan, Bulacan, Philippines, were violated when the defendant caused the extrajudicial foreclosure of the mortgages
constituted thereon.
"Accordingly, the defendant is hereby ordered to pay the plaintiff the following sums, all with legal interest thereon from the date of the
filing of the complaint up to the date of actual payment:jgc:chanrobles.com.ph
"1) Actual or compensatory damages in the amount of Ninety Nine Million Pesos (P99,000,000.00);chanroblesvirtual|awlibrary
"2) Exemplary damages in the amount of Five Million Pesos (P5,000,000.00); and
"3) Costs of suit.
"SO ORDERED."cralaw virtua1aw library
On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting petitioner to file a motion for
reconsideration which the appellate court denied.
Hence, the instant petition for review 14 on certiorari where herein petitioner BANTSA ascribes to the Court of Appeals the following
assignment of errors:chanrob1es virtual 1aw library
1. The Honorable Court of Appeals disregarded the doctrines laid down by this Hon. Supreme Court in the cases of Caltex Philippines,
Inc. v. Intermediate Appellate Court docketed as G.R. No. 74730 promulgated on August 25, 1989 and Philippine Commercial
International Bank v. IAC, 196 SCRA 29 (1991 case), although said cases were duly cited, extensively discussed and specifically
mentioned, as one of the issues in the assignment of errors found on page 5 of the decision dated September 30, 1997.chanrobles
virtual lawlibrary
2. The Hon. Court of Appeals acted with grave abuse of discretion when it awarded the private respondent actual and exemplary
damages totalling P171,600,000.00, as of July 12, 1998 although such huge amount was not asked nor prayed for in private
respondent’s complaint, is contrary to law and is totally unsupported by evidence (sic).
In fine, this Court is called upon to resolve two main issues:chanrob1es virtual 1aw library
1. Whether or not the petitioner’s act of filing a collection suit against the principal debtors for the recovery of the loan before foreign
courts constituted a waiver of the remedy of foreclosure.
2. Whether or not the award by the lower court of actual and exemplary damages in favor of private respondent ARC, as third-party
mortgagor, is proper.
The petition is bereft of merit.
First, as to the issue of availability of remedies, petitioner submits that a waiver of the remedy of foreclosure requires the concurrence of
two requisites: an ordinary civil action for collection should be filed and subsequently a final judgment be correspondingly rendered
therein.chanrobles virtual lawlibrary
According to petitioner, the mere filing of a personal action to collect the principal loan does not suffice; a final judgment must be
secured and obtained in the personal action so that waiver of the remedy of foreclosure may be appreciated. To put it differently,
absent any of the two requisites, the mortgagee-creditor is deemed not to have waived the remedy of foreclosure.
We do not agree.
Certainly, this Court finds petitioner’s arguments untenable and upholds the jurisprudence laid down in Bachrach 15 and similar cases
adjudicated thereafter, thus:jgc:chanrobles.com.ph
"In the absence of express statutory provisions, a mortgage creditor may institute against the mortgage debtor either a personal action
for debt or a real action to foreclose the mortgage. In other words, he may pursue either of the two remedies, but not both. By such
election, his cause of action can by no means be impaired, for each of the two remedies is complete in itself. Thus, an election to bring
a personal action will leave open to him all the properties of the debtor for attachment and execution, even including the mortgaged
229
property itself. And, if he waives such personal action and pursues his remedy against the mortgaged property, an unsatisfied
judgment thereon would still give him the right to sue for a deficiency judgment, in which case, all the properties of the defendant,
other than the mortgaged property, are again open to him for the satisfaction of the deficiency. In either case, his remedy is
complete, his cause of action undiminished, and any advantages attendant to the pursuit of one or the other remedy are purely
accidental and are all under his right of election. On the other hand, a rule that would authorize the plaintiff to bring a personal action
against the debtor and simultaneously or successively another action against the mortgaged property, would result not only in
multiplicity of suits so offensive to justice (Soriano v. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio v. San Agustin, 25
Phil., 404), but also in subjecting the defendant to the vexation of being sued in the place of his residence or of the residence of the
plaintiff, and then again in the place where the property lies." cralawnad
In Danao v. Court of Appeals, 16 this Court, reiterating jurisprudence enunciated in Manila Trading and Supply Co. v. Co Kim 17 and
Movido v. RFC, 18 invariably held:jgc:chanrobles.com.ph
". . . The rule is now settled that a mortgage creditor may elect to waive his security and bring, instead, an ordinary action to recover
the indebtedness with the right to execute a judgment thereon on all the properties of the debtor, including the subject matter of the
mortgage . . ., subject to the qualification that if he fails in the remedy by him elected, he cannot pursue further the remedy he has
waived. (Emphasis ours)
Anent real properties in particular, the Court has laid down the rule that a mortgage creditor may institute against the mortgage
debtor either a personal action for debt or a real action to foreclose the mortgage. 19
In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative and not cumulative. Notably, an election
of one remedy operates as a waiver of the other. For this purpose, a remedy is deemed chosen upon the filing of the suit for collection
or upon the filing of the complaint in an action for foreclosure of mortgage, pursuant to the provision of Rule 68 of the 1997 Rules of
Civil Procedure. As to extrajudicial foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the petition not
with any court of justice but with the Office of the Sheriff of the province where the sale is to be made, in accordance with the
provisions of Act No. 3135, as amended by Act No. 4118.chanrobles virtual lawlibrary
In the case at bench, private respondent ARC constituted real estate mortgages over its properties as security for the debt of the
principal debtors. By doing so, private respondent subjected itself to the liabilities of a third party mortgagor. Under the law, third
persons who are not parties to a loan may secure the latter by pledging or mortgaging their own property. 20
Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes a third person who secures the fulfillment of
another’s obligation by mortgaging his own property, to be solidarily bound with the principal obligor. The signatory to the principal
contract — loan — remains to be primarily bound. It is only upon default of the latter that the creditor may have recourse on the
mortgagors by foreclosing the mortgaged properties in lieu of an action for the recovery of the amount of the loan. 21
In the instant case, petitioner’s contention that the requisites of filing the action for collection and rendition of final judgment therein
should concur, is untenable.chanroblesvirtuallawlibrary:red
Thus, in Cerna v. Court of Appeals, 22 we agreed with the petitioner in said case, that the filing of a collection suit barred the
foreclosure of the mortgage:jgc:chanrobles.com.ph
"A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel mortgage constituted over the personal
property as security for the debt or value of the promissory note when he seeks to recover in the said collection suit."cralaw virtua1aw
library
". . . When the mortgagee elects to file a suit for collection, not foreclosure, thereby abandoning the chattel mortgage as basis for
relief, he clearly manifests his lack of desire and interest to go after the mortgaged property as security for the promissory
note . . . ."cralaw virtua1aw library
Contrary to petitioner’s arguments, we therefore reiterate the rule, for clarity and emphasis, that the mere act of filing of an ordinary
action for collection operates as a waiver of the mortgage-creditor’s remedy to foreclose the mortgage. By the mere filing of the
ordinary action for collection against the principal debtors, the petitioner in the present case is deemed to have elected a remedy, as
a result of which a waiver of the other necessarily must arise. Corollarily, no final judgment in the collection suit is required for the rule on
waiver to apply.chanroblesvirtualawlibrary
230
Hence, in Caltex Philippines, Inc. v. Intermediate Appellate Court, 23 a case relied upon by petitioner, supposedly to buttress its
contention, this Court had occasion to rule that the mere act of filing a collection suit for the recovery of a debt secured by a
mortgage constitutes waiver of the other remedy of foreclosure.
In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of the debt. Nevertheless, alternative
remedies are available for its enjoyment and exercise. Petitioner then may opt to exercise only one of two remedies so as not to violate
the rule against splitting a cause of action.
As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc. v. Icarangal. 24
"For non-payment of a note secured by mortgage, the creditor has a single cause of action against the debtor. This single cause of
action consists in the recovery of the credit with execution of the security. In other words, the creditor in his action may make two
demands, the payment of the debt and the foreclosure of his mortgage. But both demands arise from the same cause, the non-
payment of the debt, and for that reason, they constitute a single cause of action. Though the debt and the mortgage constitute
separate agreements, the latter is subsidiary to the former, and both refer to one and the same obligation. Consequently, there exists
only one cause of action for a single breach of that obligation. Plaintiff, then, by applying the rules above stated, cannot split up his
single cause of action by filing a complaint for payment of the debt, and thereafter another complaint for foreclosure of the
mortgage. If he does so, the filing of the first complaint will bar the subsequent complaint. By allowing the creditor to file two separate
complaints simultaneously or successively, one to recover his credit and another to foreclose his mortgage, we will, in effect, be
authorizing him plural redress for a single breach of contract at so much cost to the courts and with so much vexation and oppression
to the debtor." chanrobles.com : virtual law library
Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine enunciated in Caltex, wherein this High Court
relaxed the application of the general rules to wit:jgc:chanrobles.com.ph
"In the present case, however, we shall not follow this rule to the letter but declare that it is the collection suit which was waived and/or
abandoned. This ruling is more in harmony with the principles underlying our judicial system. It is of no moment that the collection suit
was filed ahead, what is determinative is the fact that the foreclosure proceedings ended even before the decision in the collection
suit was rendered. . . ."cralaw virtua1aw library
Notably, though, petitioner took the Caltex ruling out of context. We must stress that the Caltex case was never intended to overrule
the well-entrenched doctrine enunciated in Bachrach, which to our mind still finds applicability in cases of this sort. To reiterate,
Bachrach is still good law.
We then quote the decision 25 of the trial court, in the present case, thus:jgc:chanrobles.com.ph
"The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the peculiar circumstances obtaining therein. In the
said case, the Supreme Court chastised Caltex for making." . . a mockery of our judicial system when it initially filed a collection suit
then, during the pendency thereof, foreclosed extrajudicially the mortgaged property which secured the indebtedness, and still
pursued the collection suit to the end." Thus, to prevent a mockery of our judicial system", the collection suit had to be nullified because
the foreclosure proceedings have already been pursued to their end and can no longer be undone.
x x x
"In the case at bar, it has not been shown whether the defendant pursued to the end or are still pursuing the collection suits filed in
foreign courts. There is no occasion, therefore, for this court to apply the exception laid down by the Supreme Court in Caltex, by
nullifying the collection suits. Quite obviously, too, the aforesaid collection suits are beyond the reach of this Court. Thus the only way
the court may prevent the spector of a creditor having "plural redress for a single breach of contract" is by holding, as the Court hereby
holds, that the defendant has waived the right to foreclose the mortgages constituted by the plaintiff on its properties originally
covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78760 and T-78761." (RTC Decision pp., 10-11)
In this light, the actuations of Caltex are deserving of severe criticism, to say the least. 26
Moreover, petitioner attempts to mislead this Court by citing the case of PCIB v. IAC. 27 Again, petitioner tried to fit a square peg in a
round hole. It must be stressed that far from overturning the doctrine laid down in Bachrach, this Court in PCIB buttressed its firm stand
on this issue by declaring:jgc:chanrobles.com.ph
231
"While the law allows a mortgage creditor to either institute a personal action for the debt or a real action to foreclosure the mortgage,
he cannot pursue both remedies simultaneously or successively as was done by PCIB in this case." chanrobles.com:cralaw:red
x x x
"Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million promissory note secured by real estate mortgages
and subsequently filed a petition for extrajudicial foreclosure, it violates the rule against splitting a cause of action."cralaw virtua1aw
library
Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing four civil suits before foreign courts,
necessarily abandoned the remedy to foreclose the real estate mortgages constituted over the properties of third-party mortgagor
and herein private respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing extrajudicially the
mortgages, petitioner in effect transgressed the rules against splitting a cause of action well-enshrined in jurisprudence and our statute
books.chanrobles.com:cralaw:red
In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the collection suit was filed, considering that the
creditor should not be afforded "plural redress for a single breach of contract." For cause of action should not be confused with the
remedy created for its enforcement. 28
Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy chosen in addressing the creditor’s cause.
Hence, a suit brought before a foreign court having competence and jurisdiction to entertain the action is deemed, for this purpose, to
be within the contemplation of the remedy available to the mortgagee-creditor. This pronouncement would best serve the interest of
justice and fair play and further discourage the noxious practice of splitting up a lone cause of action.
Incidentally, BANTSA alleges that under English Law, which according to petitioner is the governing law with regard to the principal
agreements, the mortgagee does not lose its security interest by simply filing civil actions for sums of money. 29
We rule in the negative.chanrobles law library
This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the case at bench, Philippine law shall apply
notwithstanding the evidence presented by petitioner to prove the English law on the matter.
In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction that there is no judicial notice of any
foreign law. A foreign law must be properly pleaded and proved as a fact. 30 Thus, if the foreign law involved is not properly pleaded
and proved, our courts will presume that the foreign law is the same as our local or domestic or internal law. 31 This is what we refer to
as the doctrine of processual presumption.
In the instant case, assuming arguendo that the English Law on the matter were properly pleaded and proved in accordance with
Section 24, Rule 132 of the Rules of Court and the jurisprudence laid down in Yao Kee, Et. Al. v. Sy-Gonzales, 32 said foreign law would
still not find applicability.
Thus, when the foreign law, judgment or contract is contrary to a sound and established public policy of the forum, the said foreign
law, judgment or order shall not be applied. 33
Additionally, prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public
policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions
agreed upon in a foreign country. 34
The public policy sought to be protected in the instant case is the principle imbedded in our jurisdiction proscribing the splitting up of a
single cause of action.chanrobles.com:cralaw:red
Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent —
"If two or more suits are instituted on the basis of the same cause of action, the filing of one or a judgment upon the merits in any one is
available as a ground for the dismissal of the others."cralaw virtua1aw library
232
Moreover, foreign law should not be applied when its application would work undeniable injustice to the citizens or residents of the
forum. To give justice is the most important function of law; hence, a law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws. 35
Clearly then, English Law is not applicable.chanrobles virtual lawlibrary
As to the second pivotal issue, we hold that the private respondent is entitled to the award of actual or compensatory damages
inasmuch as the act of petitioner BANTSA in extrajudicially foreclosing the real estate mortgages constituted a clear violation of the
rights of herein private respondent ARC, as third-party mortgagor.
Actual or compensatory damages are those recoverable because of pecuniary loss in business, trade, property, profession, job or
occupation and the same must be proved, otherwise if the proof is flimsy and non-substantial, no damages will be given. 36 Indeed,
the question of the value of property is always a difficult one to settle as valuation of real property is an imprecise process since real
estate has no inherent value readily ascertainable by an appraiser or by the court. 37 The opinions of men vary so much concerning
the real value of property that the best the courts can do is hear all of the witnesses which the respective parties desire to present, and
then, by carefully weighing that testimony, arrive at a conclusion which is just and equitable. 38
In the instant case, petitioner assails the Court of Appeals for relying heavily on the valuation made by Philippine Appraisal Company.
In effect, BANTSA questions the act of the appellate court in giving due weight to the appraisal report composed of twenty three
pages, signed by Mr. Lauro Marquez and submitted as evidence by private Respondent. The appraisal report, as the records would
readily show, was corroborated by the testimony of Mr. Reynaldo Flores, witness for Private Respondent.
On this matter, the trial court observed:jgc:chanrobles.com.ph
"The record herein reveals that plaintiff-appellee formally offered as evidence the appraisal report dated March 29, 1993 (Exhibit J,
Records, p. 409), consisting of twenty three (23) pages which set out in detail the valuation of the property to determine its fair market
value (TSN, April 22, 1994, p. 4), in the amount of P99,986,592.00 (TSN, ibid., p. 5), together with the corroborative testimony of one Mr.
Reynaldo F. Flores, an appraiser and director of Philippine Appraisal Company, Inc. (TSN, ibid., p. 3). The latter’s testimony was
subjected to extensive cross-examination by counsel for defendant-appellant (TSN, April 22, 1994, pp. 6-22)." 39
In the matter of credibility of witnesses, the Court reiterates the familiar and well-entrenched rule that the factual findings of the trial
court should be respected. 40 The time-tested jurisprudence is that the findings and conclusions of the trial court on the credibility of
witnesses enjoy a badge of respect for the reason that trial courts have the advantage of observing the demeanor of witnesses as they
testify. 41
This Court will not alter the findings of the trial court on the credibility of witnesses, principally because they are in a better position to
assess the same than the appellate court. 42 Besides, trial courts are in a better position to examine real evidence as well as observe
the demeanor of witnesses. 43
Similarly, the appreciation of evidence and the assessment of the credibility of witnesses rest primarily with the trial court. 44 In the case
at bar, we see no reason that would justify this Court to disturb the factual findings of the trial court, as affirmed by the Court of
Appeals, with regard to the award of actual damages.
In arriving at the amount of actual damages, the trial courts justified the award by presenting the following ratiocination in its assailed
decision 45 , to wit:jgc:chanrobles.com.ph
"Indeed, the Court has its own mind in the matter of valuation. The size of the subject real properties are (sic) set forth in their individual
titles, and the Court itself has seen the character and nature of said properties during the ocular inspection it conducted. Based
principally on the foregoing, the Court makes the following observations:jgc:chanrobles.com.ph
"1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del Monte, Bulacan, which is (sic) not distant from Metro
Manila — the biggest urban center in the Philippines — and are easily accessible through well-paved roads;
"2. The properties are suitable for development into a subdivision for low cost housing, as admitted by defendant’s own appraiser (TSN,
May 30, 1994, p. 31);
233
"3. The pigpens which used to exist in the property have already been demolished. Houses of strong materials are found in the vicinity
of the property (Exhs. 2, 2-1 to 2-7), and the vicinity is a growing community. It has even been shown that the house of the Barangay
Chairman is located adjacent to the property in question (Exh. 27), and the only remaining piggery (named Cherry Farm) in the vicinity
is about 2 kilometers away from the western boundary of the property in question (TSN, November 19, p. 3);chanrobles.com : virtual law
library
"4. It will not be hard to find interested buyers of the property, as indubitably shown by the fact that on March 18, 1994, ICCS (the buyer
during the foreclosure sale) sold the consolidated real estate properties to Stateland Investment Corporation, in whose favor new titles
were issued, i.e., TCT Nos. T-187781(m); T-187782(m), T-187783(m); T-16653P(m) and T-166521(m) by the Register of Deeds of
Meycauayan (sic), Bulacan;
"5. The fact that ICCS was able to sell the subject properties to Stateland Investment Corporation for Thirty Nine Million (P39,000,000.00)
Pesos, which is more than triple defendant’s appraisal (Exh. 2) clearly shows that the Court cannot rely on defendant’s aforesaid
estimate (Decision, Records, p. 603)."cralaw virtua1aw library
It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of witnesses command great respect and
consideration especially when the conclusions are supported by the evidence on record. 46 Applying the foregoing principle, we
therefore hold that the trial court committed no palpable error in giving credence to the testimony of Reynaldo Flores, who according
to the records, is a licensed real estate broker, appraiser and director of Philippine Appraisal Company, Inc. since 1990. 47 As the
records show, Flores had been with the company for 26 years at the time of his testimony.chanrobles.com : virtual law library
Of equal importance is the fact that the trial court did not confine itself to the appraisal report dated 29 March 1993, and the testimony
given by Mr. Reynaldo Flores, in determining the fair market value of the real property. Above all these, the record would likewise show
that the trial judge in order to appraise himself of the characteristics and condition of the property, conducted an ocular inspection
where the opposing parties appeared and were duly represented.
Based on these considerations and the evidence submitted, we affirm the ruling of the trial court as regards the valuation of the
property —
". . . a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare properties (sic) translates to just about Two Hundred Fifty
Four Pesos (P254.00) per square meter. This appears to be, as the court so holds, a better approximation of the fair market value of the
subject properties. This is the amount which should be restituted by the defendant to the plaintiff by way of actual or compensatory
damages . . ." 48
Further, petitioner ascribes error to the lower court for awarding an amount allegedly not asked nor prayed for in private respondent’s
complaint.
Notwithstanding the fact that the award of actual and compensatory damages by the lower court exceeded that prayed for in the
complaint, the same is nonetheless valid, subject to certain qualifications.chanroblesvirtuallawlibrary:red
On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:jgc:chanrobles.com.ph
"SECTION 5. Amendment to conform to or authorize presentation of evidence. — When issues not raised by the pleadings are tried with
the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such
amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made
upon motion of any party at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If
evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the
pleadings to be amended and shall do so with liberality if the presentation of the merits of the action and the ends of substantial justice
will be subserved thereby. The court may grant a continuance to enable the amendment to be made."cralaw virtua1aw library
The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. v. Asociacion de Agricultures de Talisay-Silay, Inc. 49 citing Northern
Cement Corporation v. Intermediate Appellate Court 50 is enlightening:jgc:chanrobles.com.ph
"There have been instances where the Court has held that even without the necessary amendment, the amount proved at the trial
may be validly awarded, as in Tuazon v. Bolanos (95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief other than
that asked for, no amendment to the complaint was necessary, especially where defendant had himself raised the point on which
recovery was based. The appellate court could treat the pleading as amended to conform to the evidence although the pleadings
234
were actually not amended. Amendment is also unnecessary when only clerical error or non substantial matters are involved, as we
held in Bank of the Philippine Islands v. Laguna (48 Phil. 5). In Co Tiamco v. Diaz (75 Phil. 672), we stressed that the rule on amendment
need not be applied rigidly, particularly where no surprise or prejudice is caused the objecting party. And in the recent case of
National Power Corporation v. Court of Appeals (113 SCRA 556), we held that where there is a variance in the defendant’s pleadings
and the evidence adduced by it at the trial, the Court may treat the pleading as amended to conform with the
evidence.chanrobles.com.ph : virtual law library
"It is the view of the Court that pursuant to the above-mentioned rule and in light of the decisions cited, the trial court should not be
precluded from awarding an amount higher than that claimed in the pleading notwithstanding the absence of the required
amendment. But it is upon the condition that the evidence of such higher amount has been presented properly, with full opportunity
on the part of the opposing parties to support their respective contentions and to refute each other’s evidence.
"The failure of a party to amend a pleading to conform to the evidence adduced during trial does not preclude an adjudication by
the court on the basis of such evidence which may embody new issues not raised in the pleadings, or serve as a basis for a higher
award of damages. Although the pleading may not have been amended to conform to the evidence submitted during trial,
judgment may nonetheless be rendered, not simply on the basis of the issues alleged but also on the basis of issues discussed and the
assertions of fact proved in the course of trial. The court may treat the pleading as if it had been amended to conform to the
evidence, although it had not been actually so amended. Former Chief Justice Moran put the matter in this way:chanrob1es virtual
1aw library
‘When evidence is presented by one party, with the expressed or implied consent of the adverse party, as to issues not alleged in the
pleadings, judgment may be rendered validly as regards those issues, which shall be considered as if they have been raised in the
pleadings. There is implied consent to the evidence thus presented when the adverse party fails to object thereto.’
"Clearly, a court may rule and render judgment on the basis of the evidence before it even though the relevant pleading had not
been previously amended, so long as no surprise or prejudice is thereby caused to the adverse party. Put a little differently, so long as
the basic requirements of fair play had been met, as where litigants were given full opportunity to support their respective contentions
and to object to or refute each other’s evidence, the court may validly treat the pleadings as if they had been amended to conform
to the evidence and proceed to adjudicate on the basis of all the evidence before it."cralaw virtua1aw library
In the instant case, in as much as the petitioner was afforded the opportunity to refute and object to the evidence, both documentary
and testimonial, formally offered by private respondent, the rudiments of fair play are deemed satisfied. In fact, the testimony of
Reynaldo Flores was put under scrutiny during the course of the cross-examination. Under these circumstances, the court acted within
the bounds of its jurisdiction and committed no reversible error in awarding actual damages the amount of which is higher than that
prayed for. Verily, the lower court’s actuations are sanctioned by the Rules and supported by jurisprudence.chanrobles.com : virtual
law library
Similarly, we affirm the grant of exemplary damages although the amount of Five Million Pesos (P5,000,000.00) awarded, being
excessive, is subject to reduction. Exemplary or corrective damages are imposed, by way of example or correction for the public
good, in addition to the moral, temperate, liquidated or compensatory damages. 51 Considering its purpose, it must be fair and
reasonable in every case and should not be awarded to unjustly enrich a prevailing party. 52 In our view, an award of P50,000.00 as
exemplary damages in the present case qualifies the test of reasonableness.
WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals is hereby
AFFIRMED with MODIFICATION of the amount awarded as exemplary damages. Accordingly, petitioner is hereby ordered to pay
private respondent the sum of P99,000,000.00 as actual or compensatory damages; P50,000.00 as exemplary damage and the costs of
suit.cralawnad
SO ORDERED.
39. C.F. Sharp & Co., Inc. v. Northwest Airlines, Inc., G.R. No. 133498, [April 18, 2002], 431 PHIL 11-22 Cambe
G.R. No. 133498 April 18, 2002
C.F. SHARP & CO., INC., petitioner,

235
vs.
NORTHWEST AIRLINES, INC., respondent.
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court assailing the February 17, 1997 Decision 1 and the April 2, 1998 Resolution2
of the Court of Appeals3 in CA-G.R. SP No. 40996.
The undisputed facts are as follows:
On May 9, 1974, respondent, through its Japan Branch, entered into an International Passenger Sales Agency Agreement with
petitioner, authorizing the latter to sell its air transport tickets. Petitioner failed to remit the proceeds of the ticket sales, for which reason,
respondent filed a collection suit against petitioner before the Tokyo District Court which rendered judgment on January 29, 1981,
ordering petitioner to pay respondent the amount of "83,158,195 Yen and damages for the delay at the rate of 6% per annum from
August 28, 1980 up to and until payment is completed." 4 Unable to execute the decision in Japan, respondent filed a case to enforce
said foreign judgment with the Regional Trial Court of Manila, Branch 54. 5 However, the case was dismissed on the ground of failure of
the Japanese Court to acquire jurisdiction over the person of the petitioner. Respondent appealed to the Court of Appeals, which
affirmed the decision of the trial court.1âwphi1.nêt
Respondent filed a petition for review with this Court, docketed as G.R. No. 112573. On February 9, 1995, a decision was rendered, the
dispositive portion of which reads:
WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied NORTHWEST’s claims
for attorney’s fees, litigation expenses, and exemplary damages but REVERSED insofar as it sustained the trial court’s dismissal of
NORTHWEST’s complaint in Civil Case No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and another in its stead is hereby
rendered ORDERING private respondent C.F. SHARP & COMPANY, INC. to pay to NORTHWEST the amounts adjudged in the foreign
judgment subject of said case, with interest thereon at the legal rate from the filing of the complaint therein until the said foreign
judgment is fully satisfied.
Costs against the private respondent.
SO ORDERED.6
Accordingly, the Regional Trial Court of Manila, Branch 54, issued a writ of execution of the foregoing decision.7 On November 22, 1995,
the trial court modified its order for the execution of the decision, viz:
WHEREFORE, in view of the foregoing, this Court hereby issues another order, as follows: the writ of execution is issued against
defendant C.F. Sharp ordering said defendant to pay the plaintiff the sum of 83,158,195 Yen at the exchange rate prevailing on the
date of the foreign judgment on January 29, 1981, plus 6% per annum until May 19, 1983; and from said date until full payment, 12% per
annum (6% by way of damages and 6% interest) until the entire obligation is fully satisfied.
SO ORDERED.8
On December 18, 1995, petitioner filed a petition for certiorari under Rule 65, docketed as G.R. No. 122890, assailing the aforequoted
order. On May 29, 1996, the case was referred to the Court of Appeals. Petitioner contended that it had already made partial
payments; hence, it was liable only for the amount of 61,734,633 Yen. Moreover, it argued that it was not liable to pay additional
interest on top of the 6% interest imposed in the foreign judgment.
The Court of Appeals rendered the assailed decision on February 17, 1997. It sustained the imposition of additional interest on the
liability of petitioner as adjudged in the foreign judgment. The appellate court likewise corrected the reckoning date of the imposition
of the interests in accordance with the February 9, 1995 decision to be executed, but lowered the additional interest from 12% to 6%
per annum. Further, it ruled that the basis of the conversion of petitioner’s liability in its peso equivalent should be the prevailing rate at
the time of payment and not the rate on the date of the foreign judgment. The dispositive portion of the said decision reads:
WHEREFORE, the petition is GRANTED. The assailed Orders dated October 13, 1995 and November 22, 1995 are annulled and set aside
on the ground that they varied the final judgment of the First Division of the Supreme Court in G.R. No. 112573, entitled, "NORTHWEST
ORIENT AIRLINES, INC., Petitioner, versus, COURT OF APPEALS and C. F. SHARP & COMPANY, INC., Respondents".
Respondent court is enjoined to execute the said final judgment with an unpaid principal balance of Y61,734,633 plus damages for
delay at the rate of 6% per annum from August 28, 1980, until fully paid, which may be paid in local currency based on the conversion
rate prevailing at the time of payment; plus 6% legal interest per annum from August 28, 1980, the date of the filing of the complaint in
the foreign judgment.
No costs.
236
SO ORDERED.9
On April 2, 1998, the Court of Appeals denied both the motion for reconsideration and the partial motion for reconsideration filed by
petitioner and respondent, respectively.
In the present recourse, petitioner questions the applicable conversion rate of its liability, and claims that a ruling thereon by the Court
of Appeals effectively deprived it of due process of law because said rate was not among the issues submitted for resolution.
The petition is without merit.
In ruling that the applicable conversion rate of petitioner’s liability is the rate at the time of payment, the Court of Appeals cited the
case of Zagala v. Jimenez,10 interpreting the provisions of Republic Act No. 529, as amended by R.A. No. 4100. Under this law,
stipulations on the satisfaction of obligations in foreign currency are void. Payments of monetary obligations, subject to certain
exceptions, shall be discharged in the currency which is the legal tender in the Philippines. But since R.A. No. 529 does not provide for
the rate of exchange for the payment of foreign currency obligations incurred after its enactment, the Court held in a number of
cases11 that the rate of exchange for the conversion in the peso equivalent should be the prevailing rate at the time of payment.
Petitioner, however, contends that with the repeal of R.A. No. 529 by R.A. No. 8183, 12 the jurisprudence relied upon by the Court of
Appeals is no longer applicable.
Republic Act No. 529, as amended by R.A. No. 4100, provides:
SECTION 1. Every provision contained in, or made with respect to, any domestic obligation to wit, any obligation contracted in the
Philippines which provision purports to give the obligee the right to require payment in gold or in a particular kind of coin or currency
other than Philippine currency or in an amount of money of the Philippines measured thereby, be as it is hereby declared against
public policy, and null, void, and of no effect, and no such provision shall be contained in, or made with respect to, any obligation
hereafter incurred. The above prohibition shall not apply to (a) transactions where the funds involved are the proceeds of loans or
investments made directly or indirectly, through bona fide intermediaries or agents, by foreign governments, their agencies and
instrumentalities, and international financial banking institutions so long as the funds are identifiable, as having emanated from the
sources enumerated above; b) transactions affecting high-priority economic projects for agricultural, industrial and power
development as may be determined by the National Economic Council which are financed by or through foreign funds; (c) forward
exchange transactions entered into between banks or between banks and individuals or juridical persons; (d) import-export and other
international banking, financial investment and industrial transactions. With the exception of the cases enumerated in items (a), (b), (c)
and (d) in the foregoing provision, in which cases the terms of the parties’ agreement shall apply, every other domestic obligation
heretofore or hereafter incurred, whether or not any such provision as to payment is contained therein or made with respect thereto,
shall be discharged upon payment in any coin or currency which at the time of payment is legal tender for public and private debts:
Provided, That if the obligation was incurred prior to the enactment of this Act and required payment in a particular kind of coin or
currency other than Philippine currency, it shall be discharged in Philippine currency, measured at the prevailing rates of exchange at
the time the obligation was incurred, except in case of a loan made in a foreign currency stipulated to be payable in the same
currency in which case the rate of exchange prevailing at the time of the stipulated date of payment shall prevail. All coin and
currency, including Central Bank notes, heretofore or hereafter issued and declared by the Government of the Philippines shall be
legal tender for all debts, public and private.
Pertinent portion of Republic Act No. 8183 states:
SECTION 1. All monetary obligations shall be settled in the Philippine currency which is legal tender in the Philippines. However, the
parties may agree that the obligation or transaction shall be settled in any other currency at the time of payment.
SEC. 2. Republic Act Numbered Five Hundred and Twenty-Nine (R.A. No. 529), as amended, entitled "An Act to Assure the Uniform
Value of Philippine Coin and Currency" is hereby repealed.
The repeal of R.A. No. 529 by R.A. No. 8183 has the effect of removing the prohibition on the stipulation of currency other than
Philippine currency, such that obligations or transactions may now be paid in the currency agreed upon by the parties. Just like R.A.
No. 529, however, the new law does not provide for the applicable rate of exchange for the conversion of foreign currency-incurred
obligations in their peso equivalent. It follows, therefore, that the jurisprudence established in R.A. No. 529 regarding the rate of
conversion remains applicable. Thus, in Asia World Recruitment, Inc. v. National Labor Relations Commission, 13 the Court, applying R.A.
No. 8183, sustained the ruling of the NLRC that obligations in foreign currency may be discharged in Philippine currency based on the
prevailing rate at the time of payment. The wisdom on which the jurisprudence interpreting R.A. No. 529 is based equally holds true with
R.A. No. 8183. Verily, it is just and fair to preserve the real value of the foreign exchange- incurred obligation to the date of its
payment.14
We find no denial of due process in the instant case. Contrary to the argument of petitioner, the matter of the applicable conversion
rate was one of the issues submitted for resolution before the Court of Appeals. Moreover, opportunity to be heard, which is the very
essence of due process, was afforded petitioner when it filed a motion for reconsideration of the Court of Appeals’ decision.
237
Petitioner’s contention that it is Article 1250 15 of the Civil Code that should be applied is untenable. The rule that the value of the
currency at the time of the establishment of the obligation shall be the basis of payment finds application only when there is an official
pronouncement or declaration of the existence of an extraordinary inflation or deflation. 16
For its part, respondent prays for the modification of the Court of Appeals’ award of interest. While as a general rule, a party who has
not appealed is not entitled to affirmative relief other than what was granted in the decision of the court below, law and jurisprudence
authorize a tribunal to consider errors, although unassigned, if they involve (1) errors affecting the lower court’s jurisdiction over the
subject matter, (2) plain errors not specified, and (3) clerical errors. 17
In the case at bar, the Court of Appeal’s failure to apply the correct legal rate of interest, to which respondent is lawfully entitled,
amounts to a "plain error." In Eastern Shipping Lines, Inc. v. Court of Appeals, 18 it was held that absent any stipulation, the legal rate of
interest in obligations which consists in the payment of a sum of money, as in the present case, is 12% per annum. As stated in the
decision of the Court in G.R. No. 112573, which is final and executory, petitioner is liable to pay respondent the amount adjudged in
the foreign judgment, with "interest thereon at the legal rate [12% per annum] from the filing of the complaint therein [on August 28,
1980] until the said foreign judgment is fully satisfied." Since petitioner already made partial payments, his obligation was reduced to
61,734,633 Yen. Thus, petitioner should pay respondent the amount of 61,734,633 Yen plus "damages for the delay at the rate of 6% per
annum from August 28, 1980 up to and until payment is completed," with interest thereon at the rate of 12% per annum from the filing
of the complaint on August 28, 1980, until fully satisfied.
The Court is clothed with ample authority to review matters, even if they are not assigned as errors on appeal, if it finds that their
consideration is necessary in arriving at a just decision of the case. Rules of procedure are mere tools designed to facilitate the
attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote
substantial justice, must be avoided. Hence, substantive rights, like the applicable legal rate of interest on petitioner’s long due and
demandable obligation, must not be prejudiced by a rigid and technical application of the rules. 19
WHEREFORE, in view of all the foregoing, the instant petition is DENIED. The February 17, 1997 decision and the April 2, 1998 resolution of
the Court of Appeals in CA-G.R. SP No. 40996 are AFFIRMED with MODIFICATION. Petitioner is directed to pay respondent 61,734,633
Yen plus damages for the delay at the rate of 6% per annum from August 28, 1980 up to and until payment is completed, with interest
at the rate of 12% per annum counted from the date of filing of the complaint on August 28, 1980, until fully satisfied. Petitioner’s liability
may be paid in Philippine currency, computed at the exchange rate prevailing at the time of payment.1âwphi1.nêt
SO ORDERED.
40. Nagarmull v. Binalbagan-Isabela Sugar Co., Inc., G.R. No. L-22470, [May 28, 1970], 144 PHIL 72-78 Castillo
G.R. No. L-22470 May 28, 1970
SOORAJMULL NAGARMULL, plaintiff-appellee,
vs.
BINALBAGAN-ISABELA SUGAR COMPANY, INC., defendant-appellant.
S. Emiliano Calma for plaintiff-appellee.
Salonga, Ordoñez & Associates for defendant-appellant.
DIZON, J.:
Appeal taken by Binalbagan-Isabela Sugar Company, Inc. from the decision of the Court of First Instance of Manila in Civil Case No.
41103 entitled Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Company, Inc." of the following tenor:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in favor of the plaintiff, Soorajmull Nagarmull, ordering the defendant,
Binalbagan-Isabela Sugar Co., Inc. to pay said plaintiff the sum of 18,562 rupees and 8 annas, with reservation for the plaintiff to prove
its equivalent in Philippine pesos on the date of the filing of the complaint, plus the costs of suit.
The parties submitted to the trial court the following, stipulation of facts:
238
1. Under Contract G/14370 dated May 6, 1949, plaintiff, a foreign corporation with offices at No. 8 Dalhousie Square (East) Calcutta,
India, agreed to sell to defendant, a domestic corporation with offices at the Chronicle Building, Aduana Street, Manila, 1,700,000
pieces of Hessian bags at $26.20 per 100 bags, C.I.F. Iloilo. Shipment of these bags was to be made in equal installments of 425,000 pcs.
or 425 bales (1,000 pcs. to a bale during each of the months of July, August, September and October, 1949. A copy of this contract
marked Annex 'A' and the Calcutta Jute Fabrics Shippers Association Form 1935 which was made a part of the contract and marked
as Annex 'A-l' are hereto attached.
2. This agreement was confirmed in a letter by the plaintiff to the defendant on May 7, 1949, copy of which is attached hereto and
made a part hereof as Annex 'B'; .
3. On September 8, 1949, plaintiff advised defendant that of the 850 bales scheduled for shipment in July and August, the former was
able to ship only 310 bales owing to the alleged failure of the Adamjee Jute Mills to supply the goods in due time. Copy of plaintiff's
letter is attached hereto as Annex 'C' and made an integral part hereof; "4. In a letter dated September 29, 1949, defendant requested
plaintiff to ship 100 bales of the 540 bales defaulted from the July and August shipments. A copy of this letter marked Annex 'D' is hereto
attached. In this connection, it may also be mentioned that of the 425 bales scheduled for shipment in September, 54 bales were
likewise defaulted resulting in a total of 154 bales which is now the object of the controversy.
5. Defendant requested plaintiff to pay 5% of the value of the 154 bales defaulted as penalty which plaintiff did.
6. Meanwhile, on October 1, 1949, the Government of India increased the export duty of jute bags from 80 to 350 rupees per ton, and
on October 5, 1949, plaintiff requested defendant to increase its letter of credit to cover the enhanced rate of export duty imposed
upon the goods that were to be shipped in October, reminding the latter that under their agreement, any alteration in export duty was
to be for the buyer's account. Copy of plaintiff's letter is attached hereto as Annex 'E';
7. On October 25, 1949, defendant, in compliance with plaintiff's request, increased the amount of its letter of credit by $10,986.25 to
cover the increase in export duty on 425 bales scheduled under the contract for the shipment in October, 1949. A copy of defendants
letter marked Annex 'F' is hereto attached;
8. On October 27, 1949, plaintiff wrote to defendant for a further increase of $4,000.00 in its letter of credit to cover the shipment of 154
bales which under the contract should have been included in the July, August and September shipments. A copy of said letter is
attached hereto as Annex 'G';
9. On November 17, 1949, plaintiff wrote defendant a letter reiterating its claim for $4,000.00 corresponding to the increased export
taxes on the 154 bales delivered to defendant from the defaulted shipments for the months of July, August and September, 1949. A
copy of said letter is attached hereto as Annex 'H';
10. On February 6, 1951, defendant received notification from the Bengal Chamber of Commerce Tribunal of Arbitration in Calcutta,
India, advising it that on December 28, 1950, Plaintiff applied to said Tribunal for arbitration regarding their claim. The Tribunal
requested the defendant to send them its version of the case. This, defendant did on March 1, 1951, thru the then Government
Corporate Counsel, former Justice Pompeyo Diaz. A copy of the letter of authority is attached as Annex 'I';
11. The case was heard by the Tribunal of Arbitration on July 5, 1951. Having previously requested the Secretary Foreign Affairs for
Assistance, defendant was represented at the hearing by the Philippine Consulate General in Calcutta, India, by Consul Jose Moreno.
A copy of the authority, consisting of the letter of Government Corporate Counsel Pompeyo Diaz, dated March 1, 1951, and 1st
Indorsement thereon, dated March 2, 1951, are attached hereto as Annexes 'J' and 'J-1';
12. As presented to the Tribunal of Arbitration, the whole case revolved on the question of whether or not defendant is liable to the
plaintiff for the payment of increased export taxes imposed by the Indian Government on the shipments of jute sacks. Defendant
contended that if the jute sacks in question were delivered by plaintiff in the months of July, August, and September, 1949, pursuant to
the terms of the contract, then there would have been no increased export taxes to pay because said increased taxes became
effective only on October 1, 1949, while on the other hand, plaintiff argued that the contract between the parties and all papers and
documents made parts thereto should prevail, including defendant's letter of September 29, 1949;
13. The Bengal Chamber of Commerce, Tribunal of Arbitration, refused to sustain defendant's contention and decided in favor of the
plaintiff, ordering the defendant to pay to the plaintiff the sum of 18,562 rupees and 8 annas. This award was thereafter referred to the
Calcutta High Court which issued a decree affirming the award;
14. For about two years, the plaintiff attempted to enforce the said award through the Philippine Charge de'Affaires in Calcutta, the
Indian Legation here in the Philippines, and the Department of Foreign Affairs. On September 22, 1952, plaintiff, thru the Department of
Foreign Affairs, sought to enforce its claim to which letter defendant replied on August 11, 1952, saying that they are not bound by the
decision of the Bengal Chamber of Commerce and consequently are not obligated to pay the claim in question. Copies of said letters
are attached hereto as Annexes 'K' and 'L', respectively;
15. For more than three years thereafter, no communication was received by defendant from the plaintiff regarding their claim until
January 26, 1956, when Atty. S. Emiliano Calma wrote the defendant a letter of demand, copy of which is attached hereto as Annex
'M';
239
16. On February 3, 1956, defendant's counsel replied informing Atty. S. Emiliano Calma that it refuses to pay plaintiff's claim because
the same has no foundation in law and in fact. A copy of this letter is attached hereto as Annex 'N';
17. Thereafter, no communication was received by defendant from plaintiff or its lawyers regarding their claim until June, 1959, when
the present complaint was filed.
FINALLY, parties thru their respective counsel, state that much as they have endeavored to agree on all matters of fact, they have
failed to do so on certain points. It is, therefore respectfully prayed of this Honorable Court that parties be allowed to present evidence
on the disputed facts.
Thereafter the parties submitted additional evidence pursuant to the reservation they made in the above stipulation.
The appeal was elevated to the Court of Appeals but the latter, by its resolution of January 27, 1964, elevated it to this Court because
the additional documents and oral evidence presented by the parties did not raise any factual issue, and said court further found that
"the three assigned errors quoted above all pose questions of law."
As may be gathered from the pleadings and the facts stipulated, the action below was for the enforcement of a foreign judgment: the
decision rendered by the Tribunal of Arbitration of the Bengal Chamber of Commerce in Calcutta, India, as affirmed by the High Court
of Judicature of Calcutta. The appealed decision provides for its enforcement subject to the right reserved to appellee to present
evidence on the equivalent in Philippine currency of the amount adjudged in Indian currency. The record does not disclose any
evidence presented for that purpose subsequent to the rendition of judgment.
To secure a reversal of the appealed decision appellant claims that the lower court committed the following errors:
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF-APPELLEE, A FOREIGN CORPORATION NOT LICENSED TO TRANSACT BUSINESS IN
THE PHILIPPINES, HAS THE RIGHT TO SUE IN PHILIPPINE COURTS.
II
THE LOWER COURT ERRED WHEN IT FAILED TO CONSIDER PLAINTIFF-APPELLEE'S DEFAULT, AND INSTEAD RELIED SOLELY ON THE AWARD OF
THE BENGAL CHAMBER OF COMMERCE TRIBUNAL OF ARBITRATION.
III
THE LOWER COURT ERRED WHEN IT HELD THAT PLAINTIFF-APPELLEE WAS NOT GUILTY OF LACHES.
The main issue to be resolved is whether or not the decision of the Tribunal of Arbitration of the Bengal Chamber of Commerce, as
affirmed by the High Court of Judicature of Calcutta, is enforceable in the Philippines.
For the purpose of this decision We shall assume that appellee — contrary to appellant's contention — has the right to sue in Philippine
courts and that, as far as the instant case is concerned, it is not guilty of laches. This notwithstanding, We are constrained to reverse the
appealed decision upon the ground that it is based upon a clear mistake of law and its enforcement will give rise to a patent injustice.
It is true that under the provisions of Section 50 of Rule 39, Rules of Court, a judgment for a sum of money rendered by a foreign court "is
presumptive evidence of a right as between the parties and their successors in interest by a subsequent title", but when suit for its
enforcement is brought in a Philippine court, said judgment "may be repelled by evidence of a want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact" (Emphasis supplied.)
Upon the facts of record, We are constrained to hold that the decision sought to be enforced was rendered upon a "clear mistake of
law" and because of that it makes appellant — an innocent party — suffer the consequences of the default or breach of contract
committed by appellee.
There is no question at all that appellee was guilty of a breach of contract when it failed to deliver one-hundred fifty-four Hessian bales
which, according to the contract entered into with appellant, should have been delivered to the latter in the months of July, August
and September, all of the year 1949. It is equally clear beyond doubt that had these one-hundred fifty-four bales been delivered in
accordance with the contract aforesaid, the increase in the export tax due upon them would not have been imposed because said
increased export tax became effective only on October 1, 1949.
To avoid its liability for the aforesaid increase in the export tax, appellee claims that appellant should be held liable therefor on the
strength of its letter of September 29, 1949 asking appellee to ship the shortage. This argument is unavailing because it is not only
illogical but contrary to known principles of fairness and justice. When appellant demanded that appellee deliver the shortage of 154
bales it did nothing more than to demand that to which it was entitled as a matter of right. The breach of contract committed by
appellee gave appellant, under the law and even under general principles of fairness, the right to rescind the contract or to ask for its
specific performance, in either case with right to demand damages. Part of the damages appellant was clearly entitled to recover
240
from appellee growing out of the latter's breach of the contract consists precisely of the amount of the increase decreed in the export
tax due on the shortage — which, because of appellee's fault, had to be delivered after the effectivity of the increased export tax.
To the extent, therefore, that the decisions of the Tribunal of Arbitration of the Bengal Chamber of Commerce and of the High Court of
Judicature of Calcutta fail to apply to the facts of this case fundamental principles of contract, the same may be impeached, as they
have been sufficiently impeached by appellant, on the ground of "clear mistake of law". We agree in this regard with the majority
opinion in Ingenohl vs. Walter E. Olsen & Co. (47 Phil. 189), although its view was reversed by the Supreme Court of the United States
(273 U.S. 541, 71 L. ed. 762) which at that time had jurisdiction to review by certiorari decisions of this Court. We can not sanction a
clear mistake of law that would work an obvious injustice upon appellant.
WHEREFORE, the appealed judgment is reversed and set aside, with costs.
41. Oil and Natural Gas Commission v. Court of Appeals, G.R. No. 114323, [July 23, 1998], 354 PHIL 830-851 De Gala
42. Corpuz v. Sto. Tomas, G.R. No. 186571, [August 11, 2010], 642 PHIL 420-438 Delute
G.R. No. 186571 August 11, 2010
GERBERT R. CORPUZ, Petitioner,
vs.
DAISYLYN TIROL STO. TOMAS and The SOLICITOR GENERAL, Respondents.
DECISION
BRION, J.:
Before the Court is a direct appeal from the decision 1 of the Regional Trial Court (RTC) of Laoag City, Branch 11, elevated via a petition
for review on certiorari2 under Rule 45 of the Rules of Court (present petition).
Petitioner Gerbert R. Corpuz was a former Filipino citizen who acquired Canadian citizenship through naturalization on November 29,
2000.3 On January 18, 2005, Gerbert married respondent Daisylyn T. Sto. Tomas, a Filipina, in Pasig City. 4 Due to work and other
professional commitments, Gerbert left for Canada soon after the wedding. He returned to the Philippines sometime in April 2005 to
surprise Daisylyn, but was shocked to discover that his wife was having an affair with another man. Hurt and disappointed, Gerbert
returned to Canada and filed a petition for divorce. The Superior Court of Justice, Windsor, Ontario, Canada granted Gerbert’s petition
for divorce on December 8, 2005. The divorce decree took effect a month later, on January 8, 2006. 5
Two years after the divorce, Gerbert has moved on and has found another Filipina to love. Desirous of marrying his new Filipina fiancée
in the Philippines, Gerbert went to the Pasig City Civil Registry Office and registered the Canadian divorce decree on his and Daisylyn’s
marriage certificate. Despite the registration of the divorce decree, an official of the National Statistics Office (NSO) informed Gerbert
that the marriage between him and Daisylyn still subsists under Philippine law; to be enforceable, the foreign divorce decree must first
be judicially recognized by a competent Philippine court, pursuant to NSO Circular No. 4, series of 1982. 6
Accordingly, Gerbert filed a petition for judicial recognition of foreign divorce and/or declaration of marriage as dissolved ( petition)
with the RTC. Although summoned, Daisylyn did not file any responsive pleading but submitted instead a notarized letter/manifestation
to the trial court. She offered no opposition to Gerbert’s petition and, in fact, alleged her desire to file a similar case herself but was
prevented by financial and personal circumstances. She, thus, requested that she be considered as a party-in-interest with a similar
prayer to Gerbert’s.
In its October 30, 2008 decision,7 the RTC denied Gerbert’s petition. The RTC concluded that Gerbert was not the proper party to
institute the action for judicial recognition of the foreign divorce decree as he is a naturalized Canadian citizen. It ruled that only the
Filipino spouse can avail of the remedy, under the second paragraph of Article 26 of the Family Code, 8 in order for him or her to be
able to remarry under Philippine law.9 Article 26 of the Family Code reads:
Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where they were
solemnized, and valid there as such, shall also be valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36,
37 and 38.
Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad
by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine law.
241
This conclusion, the RTC stated, is consistent with the legislative intent behind the enactment of the second paragraph of Article 26 of
the Family Code, as determined by the Court in Republic v. Orbecido III; 10 the provision was enacted to "avoid the absurd situation
where the Filipino spouse remains married to the alien spouse who, after obtaining a divorce, is no longer married to the Filipino
spouse."11
THE PETITION
From the RTC’s ruling,12 Gerbert filed the present petition.13
Gerbert asserts that his petition before the RTC is essentially for declaratory relief, similar to that filed in Orbecido; he, thus, similarly asks
for a determination of his rights under the second paragraph of Article 26 of the Family Code. Taking into account the rationale behind
the second paragraph of Article 26 of the Family Code, he contends that the provision applies as well to the benefit of the alien
spouse. He claims that the RTC ruling unduly stretched the doctrine in Orbecido by limiting the standing to file the petition only to the
Filipino spouse – an interpretation he claims to be contrary to the essence of the second paragraph of Article 26 of the Family Code.
He considers himself as a proper party, vested with sufficient legal interest, to institute the case, as there is a possibility that he might be
prosecuted for bigamy if he marries his Filipina fiancée in the Philippines since two marriage certificates, involving him, would be on file
with the Civil Registry Office. The Office of the Solicitor General and Daisylyn, in their respective Comments, 14 both support Gerbert’s
position.
Essentially, the petition raises the issue of whether the second paragraph of Article 26 of the Family Code extends to aliens the right to
petition a court of this jurisdiction for the recognition of a foreign divorce decree.
THE COURT’S RULING
The alien spouse can claim no right under the second paragraph of Article 26 of the Family Code as the substantive right it establishes
is in favor of the Filipino spouse
The resolution of the issue requires a review of the legislative history and intent behind the second paragraph of Article 26 of the Family
Code.
The Family Code recognizes only two types of defective marriages – void 15 and voidable16 marriages. In both cases, the basis for the
judicial declaration of absolute nullity or annulment of the marriage exists before or at the time of the marriage. Divorce, on the other
hand, contemplates the dissolution of the lawful union for cause arising after the marriage. 17 Our family laws do not recognize absolute
divorce between Filipino citizens.18
Recognizing the reality that divorce is a possibility in marriages between a Filipino and an alien, President Corazon C. Aquino, in the
exercise of her legislative powers under the Freedom Constitution, 19 enacted Executive Order No. (EO) 227, amending Article 26 of the
Family Code to its present wording, as follows:
Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in force in the country where they were
solemnized, and valid there as such, shall also be valid in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36,
37 and 38.
Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad
by the alien spouse capacitating him or her to remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine law.
Through the second paragraph of Article 26 of the Family Code, EO 227 effectively incorporated into the law this Court’s holding in
Van Dorn v. Romillo, Jr. 20 and Pilapil v. Ibay-Somera.21 In both cases, the Court refused to acknowledge the alien spouse’s assertion of
marital rights after a foreign court’s divorce decree between the alien and the Filipino. The Court, thus, recognized that the foreign
divorce had already severed the marital bond between the spouses. The Court reasoned in Van Dorn v. Romillo that:
To maintain x x x that, under our laws, [the Filipino spouse] has to be considered still married to [the alien spouse] and still subject to a
wife's obligations x x x cannot be just. [The Filipino spouse] should not be obliged to live together with, observe respect and fidelity, and
render support to [the alien spouse]. The latter should not continue to be one of her heirs with possible rights to conjugal property. She
should not be discriminated against in her own country if the ends of justice are to be served. 22
As the RTC correctly stated, the provision was included in the law "to avoid the absurd situation where the Filipino spouse remains
married to the alien spouse who, after obtaining a divorce, is no longer married to the Filipino spouse." 23 The legislative intent is for the
benefit of the Filipino spouse, by clarifying his or her marital status, settling the doubts created by the divorce decree. Essentially, the
second paragraph of Article 26 of the Family Code provided the Filipino spouse a substantive right to have his or her marriage to the
alien spouse considered as dissolved, capacitating him or her to remarry. 24 Without the second paragraph of Article 26 of the Family
Code, the judicial recognition of the foreign decree of divorce, whether in a proceeding instituted precisely for that purpose or as a
related issue in another proceeding, would be of no significance to the Filipino spouse since our laws do not recognize divorce as a
mode of severing the marital bond; 25 Article 17 of the Civil Code provides that the policy against absolute divorces cannot be
subverted by judgments promulgated in a foreign country. The inclusion of the second paragraph in Article 26 of the Family Code
242
provides the direct exception to this rule and serves as basis for recognizing the dissolution of the marriage between the Filipino spouse
and his or her alien spouse.
Additionally, an action based on the second paragraph of Article 26 of the Family Code is not limited to the recognition of the foreign
divorce decree. If the court finds that the decree capacitated the alien spouse to remarry, the courts can declare that the Filipino
spouse is likewise capacitated to contract another marriage. No court in this jurisdiction, however, can make a similar declaration for
the alien spouse (other than that already established by the decree), whose status and legal capacity are generally governed by his
national law.26
Given the rationale and intent behind the enactment, and the purpose of the second paragraph of Article 26 of the Family Code, the
RTC was correct in limiting the applicability of the provision for the benefit of the Filipino spouse. In other words, only the Filipino spouse
can invoke the second paragraph of Article 26 of the Family Code; the alien spouse can claim no right under this provision.
The foreign divorce decree is presumptive evidence of a right that clothes the party with legal interest to petition for its recognition in
this jurisdiction
We qualify our above conclusion – i.e., that the second paragraph of Article 26 of the Family Code bestows no rights in favor of aliens –
with the complementary statement that this conclusion is not sufficient basis to dismiss Gerbert’s petition before the RTC. In other words,
the unavailability of the second paragraph of Article 26 of the Family Code to aliens does not necessarily strip Gerbert of legal interest
to petition the RTC for the recognition of his foreign divorce decree. The foreign divorce decree itself, after its authenticity and
conformity with the alien’s national law have been duly proven according to our rules of evidence, serves as a presumptive evidence
of right in favor of Gerbert, pursuant to Section 48, Rule 39 of the Rules of Court which provides for the effect of foreign judgments. This
Section states:
SEC. 48. Effect of foreign judgments or final orders.—The effect of a judgment or final order of a tribunal of a foreign country, having
(a) In case of a judgment or final order upon a specific thing, the judgment or final order is conclusive upon the title of the thing; and
(b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the
parties and their successors in interest by a subsequent title.
In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact.
To our mind, direct involvement or being the subject of the foreign judgment is sufficient to clothe a party with the requisite interest to
institute an action before our courts for the recognition of the foreign judgment. In a divorce situation, we have declared, no less, that
the divorce obtained by an alien abroad may be recognized in the Philippines, provided the divorce is valid according to his or her
national law.27
The starting point in any recognition of a foreign divorce judgment is the acknowledgment that our courts do not take judicial notice of
foreign judgments and laws. Justice Herrera explained that, as a rule, "no sovereign is bound to give effect within its dominion to a
judgment rendered by a tribunal of another country." 28 This means that the foreign judgment and its authenticity must be proven as
facts under our rules on evidence, together with the alien’s applicable national law to show the effect of the judgment on the alien
himself or herself.29 The recognition may be made in an action instituted specifically for the purpose or in another action where a party
invokes the foreign decree as an integral aspect of his claim or defense.
In Gerbert’s case, since both the foreign divorce decree and the national law of the alien, recognizing his or her capacity to obtain a
divorce, purport to be official acts of a sovereign authority, Section 24, Rule 132 of the Rules of Court comes into play. This Section
requires proof, either by (1) official publications or (2) copies attested by the officer having legal custody of the documents. If the
copies of official records are not kept in the Philippines, these must be (a) accompanied by a certificate issued by the proper
diplomatic or consular officer in the Philippine foreign service stationed in the foreign country in which the record is kept and (b)
authenticated by the seal of his office.
The records show that Gerbert attached to his petition a copy of the divorce decree, as well as the required certificates proving its
authenticity,30 but failed to include a copy of the Canadian law on divorce. 31 Under this situation, we can, at this point, simply dismiss
the petition for insufficiency of supporting evidence, unless we deem it more appropriate to remand the case to the RTC to determine
whether the divorce decree is consistent with the Canadian divorce law.
We deem it more appropriate to take this latter course of action, given the Article 26 interests that will be served and the Filipina wife’s
(Daisylyn’s) obvious conformity with the petition. A remand, at the same time, will allow other interested parties to oppose the foreign
judgment and overcome a petitioner’s presumptive evidence of a right by proving want of jurisdiction, want of notice to a party,
collusion, fraud, or clear mistake of law or fact. Needless to state, every precaution must be taken to ensure conformity with our laws
before a recognition is made, as the foreign judgment, once recognized, shall have the effect of res judicata 32 between the parties, as
provided in Section 48, Rule 39 of the Rules of Court.33
243
In fact, more than the principle of comity that is served by the practice of reciprocal recognition of foreign judgments between
nations, the res judicata effect of the foreign judgments of divorce serves as the deeper basis for extending judicial recognition and for
considering the alien spouse bound by its terms. This same effect, as discussed above, will not obtain for the Filipino spouse were it not
for the substantive rule that the second paragraph of Article 26 of the Family Code provides.
Considerations beyond the recognition of the foreign divorce decree
As a matter of "housekeeping" concern, we note that the Pasig City Civil Registry Office has already recorded the divorce decree on
Gerbert and Daisylyn’s marriage certificate based on the mere presentation of the decree. 34 We consider the recording to be legally
improper; hence, the need to draw attention of the bench and the bar to what had been done.
Article 407 of the Civil Code states that "[a]cts, events and judicial decrees concerning the civil status of persons shall be recorded in
the civil register." The law requires the entry in the civil registry of judicial decrees that produce legal consequences touching upon a
person’s legal capacity and status, i.e., those affecting "all his personal qualities and relations, more or less permanent in nature, not
ordinarily terminable at his own will, such as his being legitimate or illegitimate, or his being married or not." 35
A judgment of divorce is a judicial decree, although a foreign one, affecting a person’s legal capacity and status that must be
recorded. In fact, Act No. 3753 or the Law on Registry of Civil Status specifically requires the registration of divorce decrees in the civil
registry:
Sec. 1. Civil Register. – A civil register is established for recording the civil status of persons, in which shall be entered:
(a) births;
(b) deaths;
(c) marriages;
(d) annulments of marriages;
(e) divorces;
(f) legitimations;
(g) adoptions;
(h) acknowledgment of natural children;
(i) naturalization; and
(j) changes of name.
xxxx
Sec. 4. Civil Register Books. — The local registrars shall keep and preserve in their offices the following books, in which they shall,
respectively make the proper entries concerning the civil status of persons:
(1) Birth and death register;
(2) Marriage register, in which shall be entered not only the marriages solemnized but also divorces and dissolved marriages.
(3) Legitimation, acknowledgment, adoption, change of name and naturalization register.
But while the law requires the entry of the divorce decree in the civil registry, the law and the submission of the decree by themselves
do not ipso facto authorize the decree’s registration. The law should be read in relation with the requirement of a judicial recognition of
the foreign judgment before it can be given res judicata effect. In the context of the present case, no judicial order as yet exists
recognizing the foreign divorce decree. Thus, the Pasig City Civil Registry Office acted totally out of turn and without authority of law
when it annotated the Canadian divorce decree on Gerbert and Daisylyn’s marriage certificate, on the strength alone of the foreign
decree presented by Gerbert.
Evidently, the Pasig City Civil Registry Office was aware of the requirement of a court recognition, as it cited NSO Circular No. 4, series
of 1982,36 and Department of Justice Opinion No. 181, series of 1982 37 – both of which required a final order from a competent
Philippine court before a foreign judgment, dissolving a marriage, can be registered in the civil registry, but it, nonetheless, allowed the
registration of the decree. For being contrary to law, the registration of the foreign divorce decree without the requisite judicial
recognition is patently void and cannot produce any legal effect.1avvphi1
244
Another point we wish to draw attention to is that the recognition that the RTC may extend to the Canadian divorce decree does not,
by itself, authorize the cancellation of the entry in the civil registry. A petition for recognition of a foreign judgment is not the proper
proceeding, contemplated under the Rules of Court, for the cancellation of entries in the civil registry.
Article 412 of the Civil Code declares that "no entry in a civil register shall be changed or corrected, without judicial order." The Rules of
Court supplements Article 412 of the Civil Code by specifically providing for a special remedial proceeding by which entries in the civil
registry may be judicially cancelled or corrected. Rule 108 of the Rules of Court sets in detail the jurisdictional and procedural
requirements that must be complied with before a judgment, authorizing the cancellation or correction, may be annotated in the civil
registry. It also requires, among others, that the verified petition must be filed with the RTC of the province where the corresponding civil
registry is located;38 that the civil registrar and all persons who have or claim any interest must be made parties to the proceedings; 39
and that the time and place for hearing must be published in a newspaper of general circulation. 40 As these basic jurisdictional
requirements have not been met in the present case, we cannot consider the petition Gerbert filed with the RTC as one filed under
Rule 108 of the Rules of Court.
We hasten to point out, however, that this ruling should not be construed as requiring two separate proceedings for the registration of
a foreign divorce decree in the civil registry – one for recognition of the foreign decree and another specifically for cancellation of the
entry under Rule 108 of the Rules of Court. The recognition of the foreign divorce decree may be made in a Rule 108 proceeding itself,
as the object of special proceedings (such as that in Rule 108 of the Rules of Court) is precisely to establish the status or right of a party
or a particular fact. Moreover, Rule 108 of the Rules of Court can serve as the appropriate adversarial proceeding 41 by which the
applicability of the foreign judgment can be measured and tested in terms of jurisdictional infirmities, want of notice to the party,
WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the October 30, 2008 decision of the Regional Trial Court of
Laoag City, Branch 11, as well as its February 17, 2009 order. We order the REMAND of the case to the trial court for further proceedings
in accordance with our ruling above. Let a copy of this Decision be furnished the Civil Registrar General. No costs.
SO ORDERED.
43. Boudard v. Tait, G.R. No. L-45193, April 5, 1939 Eliab
G.R. No. L-45193 April 5, 1939
EMILIE ELMIRA RENEE BOUDARD, RAYMOND ANTONIN BOUDARD,
GINETTE ROSE ADELAIDE BOUDARD and MONIQUE VICTOIRE BOUDARD, plaintiffs-appellants,
vs.
STEWART EDDIE TAIT, defendant-appellee.
Ramirez and Ortigas for appellants.
Gibbs, McDonough and Ozaeta for appellee.
DIAZ, J.:
Plaintiffs appeal from a judgment of the Court of First Instance of Manila dismissing the case instituted by them, thereby overruling their
complaint, and sentencing them to pay the costs. They now contend in their brief that:
I. The lower court erred in not admitting Exhibits D, E, F and H to M-1 of plaintiffs.
II. The lower court erred in declaring that it was indispensable for the defendant to be served with summons in Hanoi.
III. The lower court erred in declaring that service by publication, with personal notice by the French Consul in Manila, was not sufficient.
IV. The lower court erred in declaring that the Court of Hanoi had no jurisdiction over the person of the defendant.
V. The lower court erred in dismissing this case, instead of sentencing the defendant to pay to the plaintiffs the amounts claimed in the
complaint as adjudged by the Court of Hanoi; and
VI. The lower court erred in denying the motion for new trial on the ground that the decision is contrary to the law and the evidence.
Briefly stated, the pertinent facts of the case, that we glean from the records, are as follows: The appellant Emilie Elmira Renee
Boudard, in her capacity as widow of Marie Theodore Jerome Boudard and as guardian of her coappellants, her children born during
her marriage with the deceased, obtained a judgment in their favor from the civil division of the Court of First Instance of Hanoi, French
245
Indo-China, on June 27, 1934, for the sum of 40,000 piastras, equivalent, according to the rate of exchange at the time of the rendition
of the judgment, to P56,905.77, Philippine currency, plus interest the amount or rate of which is not given. The judgment was rendered
against Stewart Eddie Tait who had been declared in default for his failure to appear at the trial before said court.
Appellants' action, by virtue of which they obtained the foregoing judgment, was based on the fact that Marie Theodore Jerome
Boudard, who was an employee of Stewart Eddie Tait, was killed in Hanoi by other employees of said Tait, although "outside of the
fulfillment of a duty", according to the English translation of a certified copy of the decision in French, presented by the appellants. The
dismissal of appellants' complaint by the lower court was based principally on the lack of jurisdiction of the Court of Hanoi to render the
judgment in question, for the execution of which this action was instituted in this jurisdiction. The lack of jurisdiction was discovered in
the decision itself of the Court of Hanoi which states that the appellee was not a resident of, nor had a known domicile in, that country.
The evidence adduced at the trial conclusively proves that neither the appellee nor his agent or employees were ever in Hanoi,
French Indo-China; and that the deceased Marie Theodore Jerome Boudard had never, at any time, been his employee. The
appellee's first intimation of his having been sued and sentenced to pay a huge sum by the civil division of the Court of First Instance of
Hanoi was when he was served with summons in the present case.
Passing now to the consideration of the errors assigned by the appellants, we must say that it was really unnecessary for the lower court
to admit Exhibit D, E, F and H to M-1, nor can these exhibits be admitted as evidence, for, as to the first point, the appellants failed to
show that the proceedings against the appellee in the Court of Hanoi were in accordance with the laws of France then in force; and
as to the second point, it appears that said documents are not of the nature mentioned in sections 304 and 305 of Act No. 190. They
are not copies of the judicial record of the proceedings against the appellee in the Court of Hanoi, duly certified by the proper
authorities there, whose signatures should be authenticated by the Consul or some consular agent of the United States in said country.
The appellants argue that the papers are the original documents and that the Honorable French Consul in the Philippines had
confirmed this fact. Such argument is not sufficient to authorize a deviation from a rule established and sanctioned by law. To comply
with the rule, the best evidence of foreign judicial proceedings is a certified copy of the same with all the formalities required in said
sections 304 and 305 for only thus can one be absolutely sure of the authenticity of the record. On the other hand said exhibits or
documents, if admitted, would only corroborate and strengthen the evidence of the appellee which in itself is convincing, and the
conclusion of the lower court that the appellee is not liable for the amount to which he was sentenced, as alleged, for he was not duly
tried or even summoned in conformity with the law. It is said that the French law regarding summons, according to its English translation
presented by the appellants, is of the following tenor:
"SEC. 69 (par. 8). Those who have no known residence in France, in the place of their present residence: if the place is unknown, the
writ shall be posted at the main door of the hall of the court where the complaint has been filed; a second copy shall be given to the
Attorney-General of the Republic who shall visae the original." But then, Exhibits E, E-1, F and F-1 show that the summons alleged to
have been addressed to the appellee, was delivered in Manila on September 18, 1933, to J. M. Shotwell, a representative or agent of
Churchill & Tait Inc., which is an entity entirely different from the appellee.
Moreover, the evidence of record shows that the appellee was not in Hanoi during the time mentioned in the complaint of the
appellants, nor were his employees or representatives. The rule in matters of this nature is that judicial proceedings in a foreign country,
regarding payment of money, are only effective against a party if summons is duly served on him within such foreign country before
the proceedings.
The fundamental rule is that jurisdiction in personam over nonresidents, so as to sustain a money judgment, must be based upon
personal service within the state which renders the judgment. (Pennoyer vs. Neff, 95 U. S., 714; 24 Law. ed., 565; Twining vs. New Jersy,
211 U. S., 78; 29 S. Ct., 14; 53 Law. ed., 97; Continental National Bank of Boston vs. Thurber, 143 N. Y., 648; 37 N. E., 828.)
The process of a court of one state cannot run into another and summon a party there domiciled to respond to proceedings against
him. (Hess vs. Pawloski, 274 U. S., 352, 355; 47 S. Ct., 632, 633 [71 Law. ed., 109].) Notice sent outside the state to a nonresident is
unavailing to give jurisdiction in an action against him personally for money recovery. (Pennoyer vs. Neff, 95 U. S., 741 [24 Law. ed.,
565].) There must be actual service within the State of notice upon him or upon some one authorized to accept service for him.
(Goldey vs. Morning News, 156 U. S., 518 [15 S. Ct., 559; 39 Law. ed., 517].) A personal judgment rendered against a nonresident, who
has neither been served with process nor appeared in the suit, is without validity. (McDonald vs. Mabee, 243 U. S., 90 [37 S. Ct., 343; 61
Law, ed., 608; L. R. A. 1917F, 485].) The mere transaction of business in a state by nonresident natural persons does not imply consent to
be bound by the process of its courts. (Flexner vs. Farson, 248 U. S., 289 [39 S. Ct., 97; 63 Law. ed., 250].)" (Cited in Skandinaviska Granit
Aktiebolaget vs. Weiss, 234 N. Y. S., 202, 206, 207.)
The process of a court has no extraterritorial effect, and no jurisdiction is acquired over the person of the defendant by serving him
beyond the boundaries of the state. Nor has a judgment of a court of a foreign country against a resident of his country having no
property in such foreign country based on process served here, any effect here against either the defendant personally or his property
situated here. (5 R. C. L., 912.)
Process issuing from the courts of one state or country cannot run into another, and although a nonresident defendant may have been
personally served with such process in the state or country of his domicile, it will not give such jurisdiction as to authorize a personal
judgment against him. (23 Cyc., 688.)
246
It can not be said that the decision rendered by the Court of Hanoi should be conclusive to such an extent that it cannot be
contested, for it merely constitutes, from the viewpoint of our laws, prima facie evidence of the justness of appellants' claim, and, as
such, naturally admits proof to the contrary. This is precisely the provision of section 311 of Act No. 190, as interpreted in the case of
Ingenohl vs. Walter E. Olsen & Co. (47 Phil., 189):0
The effect of a judgment of any other tribunal of a foreign country, having jurisdiction to pronounce the judgment, is as follows:
1. In case of a judgment against a specific thing, the judgment is conclusive upon the title to the thing;
2. In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties and their successors
in interest by a subsequent title; but the judgment may be repelled by evidence of a want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. (Sec. 311 of Act No. 190.)
In view of the foregoing considerations, our conclusion is that we find no merit in the errors assigned to the lower court and the
appealed judgment is in accordance with the law.
Wherefore, the judgment is affirmed, with costs against the appellants. So ordered.
44. Buchanan v. Rucker, 9 East 192 (1808) Gonzales, Cyril
45. Philippine Aluminum v. FASGI, G.R. No. 137378, October 12, 2000 Gonzales, Jashera
G.R. No. 137378 October 12, 2000
PHILIPPINE ALUMINUM WHEELS, INC., petitioner,
vs.
FASGI ENTERPRISES, INC., respondent.
DECISION
VITUG, J.:
On 01 June 1978, FASGI Enterprises Incorporated ("FASGI"), a corporation organized and existing under and by virtue of the laws of the
State of California, United States of America, entered into a distributorship arrangement with Philippine Aluminum Wheels, Incorporated
("PAWI"), a Philippine corporation, and Fratelli Pedrini Sarezzo S.P.A. ("FPS"), an Italian corporation. The agreement provided for the
purchase, importation and distributorship in the United States of aluminum wheels manufactured by PAWI. Pursuant to the contract,
PAWI shipped to FASGI a total of eight thousand five hundred ninety four (8,594) wheels, with an FOB value of US$216,444.30 at the time
of shipment, the first batch arriving in two containers and the second in three containers. Thereabouts, FASGI paid PAWI the FOB value
of the wheels. Unfortunately, FASGI later found the shipment to be defective and in non-compliance with stated requirements, viz;
"A. contrary to the terms of the Distributorship Agreement and in violation of U.S. law, the country of origin (the Philippines) was
not stamped on the wheels;
"B. the wheels did not have weight load limits stamped on them as required to avoid mounting on excessively heavy vehicles,
resulting in risk of damage or bodily injury to consumers arising from possible shattering of the wheels;
"C. many of the wheels did not have an indication as to which models of automobile they would fit;
"D. many of the wheels did not fit the model automobiles for which they were purportedly designed;
"E. some of the wheels did not fit any model automobile in use in the United States;
"F. most of the boxes in which the wheels were packed indicated that the wheels were approved by the Specialty Equipment
Manufacturer's Association (hereafter, `SEMA'); in fact no SEMA approval has been obtained and this indication was
therefore false and could result in fraud upon retail customers purchasing the wheels." 1
On 21 September 1979, FASGI instituted an action against PAWI and FPS for breach of contract and recovery of damages in the
amount of US$2,316,591.00 before the United States District Court for the Central District of California. In January 1980, during the
pendency of the case, the parties entered into a settlement, entitled "Transaction" with the corresponding Italian translation
"Convenzione Transsativa," where it was stipulated that FPS and PAWI would accept the return of not less than 8,100 wheels after
restoring to FASGI the purchase price of US$268,750.00 via four (4) irrevocable letters of credit ("LC"). The rescission of the contract of
distributorship was to be effected within the period starting January up until April 1980. 2
247
In a telex message, dated 02 March 1980, PAWI president Romeo Rojas expressed the company's inability to comply with the foregoing
agreement and proposed a revised schedule of payment. The message, in part, read:
"We are most anxious in fulfilling all our obligations under compromise agreement executed by our Mr. Giancarlo Dallera and your Van
Curen. We have tried our best to comply with our commitments, however, because of the situation as mentioned in the foregoing and
currency regulations and restrictions imposed by our government on the outflow, of foreign currency from our country, we are
constrained to request for a revised schedule of shipment and opening of L/Cs.
"After consulting with our bank and government monetary agencies and on the assumption that we submit the required pro-forma
invoices we can open the letters of credit in your favor under the following schedule:
"A) First L/C - it will be issued in April 1980 payable 90 days thereafter
"B) Second L/C - it will be issued in June 1980 payable 90 days thereafter
"C) Third L/C - it will be issued in August 1980 payable 90 days thereafter
"D) Fourth L/C - it will be issued in November 1980 payable 90 days thereafter
"We understand your situation regarding the lease of your warehouse. For this reason, we are willing to defray the extra storage
charges resulting from this new schedule. If you cannot renew the lease [of] your present warehouse, perhaps you can arrange to
transfer to another warehouse and storage charges transfer thereon will be for our account. We hope you understand our position. The
delay and the revised schedules were caused by circumstances totally beyond our control." 3
On 21 April 1980, again through a telex message, PAWI informed FASGI that it was impossible to open a letter of credit on or before
April 1980 but assured that it would do its best to comply with the suggested schedule of payments. 4 In its telex reply of 29 April 1980,
FASGI insisted that PAWI should meet the terms of the proposed schedule of payments, specifically its undertaking to open the first LC
within April of 1980, and that "If the letter of credit is not opened by April 30, 1980, then x x x [it would] immediately take all necessary
legal action to protect [its] position."5
Despite its assurances, and FASGI's insistence, PAWI failed to open the first LC in April 1980 allegedly due to Central Bank "inquiries and
restrictions," prompting FASGI to pursue its complaint for damages against PAWI before the California district court. Pre-trial conference
was held on 24 November 1980. In the interim, the parties, realizing the protracted process of litigation, resolved to enter into another
arrangement, this time entitled "Supplemental Settlement Agreement," on 26 November 1980. In substance, the covenant provided
that FASGI would deliver to PAWI a container of wheels for every LC opened and paid by PAWI:
"3. Agreement
"3.1 Sellers agree to pay FASGI Two Hundred Sixty-Eight Thousand, Seven Hundred Fifty and 00/100 Dollars ($268,750.00), plus interest
and storage costs as described below. Sellers shall pay such amount by delivering to FASGI the following four (4) irrevocable letters of
credit, confirmed by Crocker Bank, Main Branch, Fresno, California, as set forth below:
"(i) on or before June 30, 1980, a documentary letter of credit in the amount of (a) Sixty-Five Thousand, Three Hundred Sixty-nine and
00/100 Dollars ($65,369.00), (b) plus interest on that amount at the annual rate of 16.25% from January 1, 1980 until July 31, 1980, (c) plus
Two Thousand Nine Hundred Forty Dollars and 00/100 ($2,940.00) and (d) with interest on that sum at the annual rate of 16.25% from
May 1, 1980 to July 31, 1980, payable on or after August 31, 1980;
"(ii) on or before September 1, 1980, a documentary letter of credit in the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-
Three Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars ($2,940.00), plus (c)
interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in effect from time to time, plus two percent on the
amount in (a) from January 1, 1980 until December 21, 1980, and on the amount set forth in (b) from May 1, 1980 until December 21,
1980, payable ninety days after the date of the bill of lading under the letter of credit;
"(iii) on or before November 1, 1980, a documentary letter of credit in the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-
Three Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars ($2,490.00), plus (c)
amount in (a) from January 1, 1980 until February 21, 1981, and on the amount set forth in (b) from May 1, 1980 until February 21, 1981,
payable ninety days after the date of the bill of lading under the latter of credit;
"(iv) on or before January 1, 1981, a documentary letter of credit in the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-
Three Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Five Thousand, Eight Hundred Eighty and 00/100 Dollars ($5,880.00), plus (c)
amount in (a) from January 1, 1980 until April 21, 1981, and on the amount set forth in (b) from May 1, 1980 until April 21, 1981, payable
ninety days after the date of the bill of lading under the latter of credit." 6
248
Anent the wheels still in the custody of FASGI, the supplemental settlement agreement provided that -
"3.4 (a) Upon execution of this Supplemental Settlement Agreement, the obligations of FASGI to store or maintain the Containers and
Wheels shall be limited to (i) storing the Wheels and Containers in their present warehouse location and (ii) maintaining in effect FASGI's
current insurance in favor of FASGI, insuring against usual commercial risks for such storage in the principal amount of the Letters of
Credit described in Paragraph 3.1. FASGI shall bear no liability, responsibility or risk for uninsurable risks or casualties to the Containers or
Wheels.
"x x x xxx xxx
"(e) From and after February 28, 1981, unless delivery of the Letters of Credit are delayed past such date pursuant to the penultimate
Paragraph 3.1, in which case from and after such later date, FASGI shall have no obligation to maintain, store or deliver any of the
Containers or Wheels."7
The deal allowed FASGI to enter before the California court the foregoing stipulations in the event of the failure of PAWI to make good
the scheduled payments; thus -
"3.5 Concurrently with execution and delivery hereof, the parties have executed and delivered a Mutual Release (the `Mutual
Release'), and a Stipulation for Judgment (the `Stipulation for Judgment') with respect to the Action. In the event of breach of this
Supplemental Settlement Agreement by Sellers, FASGI shall have the right to apply immediately to the Court for entry of Judgment
pursuant to the Stipulation for Judgment in the full amount thereof, less credit for any payments made by Sellers pursuant to this
Supplemental Settlement Agreement. FASGI shall have the right thereafter to enforce the Judgment against PAWI and FPS in the
United States and in any other country where assets of FPS or PAWI may be located, and FPS and PAWI hereby waive all defenses in
any such country to execution or enforcement of the Judgment by FASGI. Specifically, FPS and PAWI each consent to the jurisdiction
of the Italian and Philippine courts in any action brought by FASGI to seek a judgment in those countries based upon a judgment
against FPS or PAWI in the Action."8
In accordance with the aforementioned paragraph 3.5 of the agreement, the parties made the following stipulation before the
California court:
"The undersigned parties hereto, having entered into a Supplemental Settlement Agreement in this action,
"IT IS HEREBY STIPULATED by and between plaintiff FASGI Enterprises, Inc. (`FASGI') and defendants Philippine Aluminum Wheels, Inc.,
(`PAWI'), and each of them, that judgment may be entered in favor of plaintiff FASGI and against PAWI, in the amount of Two Hundred
Eighty Three Thousand Four Hundred Eighty And 01/100ths Dollars ($283,480.01).
"Plaintiff FASGI shall also be entitled to its costs of suit, and to reasonable attorneys' fees as determined by the Court added to the
above judgment amount."9
The foregoing supplemental settlement agreement, as well as the motion for the entry of judgment, was executed by FASGI president
Elena Buholzer and PAWI counsel Mr. Thomas Ready.
PAWI, again, proved to be remiss in its obligation under the supplemental settlement agreement. While it opened the first LC on 19
June 1980, it, however, only paid on it nine (9) months after, or on 20 March 1981, when the letters of credit by then were supposed to
have all been already posted. This lapse, notwithstanding, FASGI promptly shipped to PAWI the first container of wheels. Again, despite
the delay incurred by PAWI on the second LC, FASGI readily delivered the second container. Later, PAWI totally defaulted in opening
and paying the third and the fourth LCs, scheduled to be opened on or before, respectively, 01 September 1980 and 01 November
1980, and each to be paid ninety (90) days after the date of the bill of lading under the LC. As so expressed in their affidavits, FASGI
counsel Frank Ker and FASGI president Elena Buholzer were more inclined to believe that PAWI's failure to pay was due not to any
restriction by the Central Bank or any other cause than its inability to pay. These doubts were based on the telex message of PAWI
president Romeo Rojas who attached a copy of a communication from the Central Bank notifying PAWI of the bank's approval of
PAWI's request to open LCs to cover payment for the re-importation of the wheels. The communication having been sent to FASGI
before the supplemental settlement agreement was executed, FASGI speculated that at the time PAWI subsequently entered into the
supplemental settlement agreement, its request to open LCs had already been approved by the Central Bank. Irked by PAWI's
persistent default, FASGI filed with the US District Court of the Central District of California the following stipulation for judgment against
PAWI.
"PLEASE TAKE NOTICE that on May 17, 1982 at 10:00 A.M. in the Courtroom of the Honorable Laughlin E. Waters of the above Court,
plaintiff FASGI ENTERPRISES, INC. (hereinafter `FASGI') will move the Court for entry of Judgment against defendant PHILIPPINE
ALUMINUM WHEELS, INC. (hereinafter `PAWI'), pursuant to the Stipulation for Judgment filed concurrently herewith, executed on behalf
of FASGI and PAWI by their respective attorneys, acting as their authorized agents.
"Judgment will be sought in the total amount of P252,850.60, including principal and interest accrued through May 17, 1982, plus the
sum of $17,500.00 as reasonable attorneys' fees for plaintiff in prosecuting this action.
249
"The Motion will be made under Rule 54 of the Federal Rules of Civil Procedure, pursuant to and based upon the Stipulation for
Judgment, the Supplemental Settlement Agreement filed herein on or about November 21, 1980, the Memorandum of Points and
Authorities and Affidavits of Elena Buholzer, Franck G. Ker and Stan Cornwell all filed herewith, and upon all the records, files and
pleadings in this action.
"The Motion is made on the grounds that defendant PAWI has breached its obligations as set forth in the Supplemental Settlement
Agreement, and that the Supplemental Settlement Agreement expressly permits FASGI to enter the Stipulation for Judgment in the
event that PAWI has not performed under the Supplemental Settlement Agreement." 10
On 24 August 1982, FASGI filed a notice of entry of judgment. A certificate of finality of judgment was issued, on 07 September 1982, by
the US District Judge of the District Court for the Central District of California. PAWI, by this time, was approximately twenty (20) months
in arrears in its obligation under the supplemental settlement agreement.
Unable to obtain satisfaction of the final judgment within the United States, FASGI filed a complaint for "enforcement of foreign
judgment" in February 1983, before the Regional Trial Court, Branch 61, of Makati, Philippines. The Makati court, however, in an order of
11 September 1990, dismissed the case, thereby denying the enforcement of the foreign judgment within Philippine jurisdiction, on the
ground that the decree was tainted with collusion, fraud, and clear mistake of law and fact. 11 The lower court ruled that the foreign
judgment ignored the reciprocal obligations of the parties. While the assailed foreign judgment ordered the return by PAWI of the
purchase amount, no similar order was made requiring FASGI to return to PAWI the third and fourth containers of wheels. 12 This situation,
the trial court maintained, amounted to an unjust enrichment on the part of FASGI. Furthermore, the trial court said, the supplemental
settlement agreement and the subsequent motion for entry of judgment upon which the California court had based its judgment were
a nullity for having been entered into by Mr. Thomas Ready, counsel for PAWI, without the latter's authorization.
FASGI appealed the decision of the trial court to the Court of Appeals. In a decision, 13 dated 30 July 1997, the appellate court reversed
the decision of the trial court and ordered the full enforcement of the California judgment.
Hence this appeal.
Generally, in the absence of a special compact, no sovereign is bound to give effect within its dominion to a judgment rendered by a
tribunal of another country;14 however, the rules of comity, utility and convenience of nations have established a usage among civilized
states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under
certain conditions that may vary in different countries. 15
In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate parties and the
underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity for a full and fair
hearing before a court of competent jurisdiction; that trial upon regular proceedings has been conducted, following due citation or
voluntary appearance of the defendant and under a system of jurisprudence likely to secure an impartial administration of justice; and
that there is nothing to indicate either a prejudice in court and in the system of laws under which it is sitting or fraud in procuring the
judgment.16 A foreign judgment is presumed to be valid and binding in the country from which it comes, until a contrary showing, on
the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum. Rule 39, section 48 of the
Rules of Court of the Philippines provides:
Sec. 48. Effect of foreign judgments or final orders - The effect of a judgment or final order of a tribunal of a foreign country, having
xxxx
(b) In case of a judgment or final order against a person, the judgment or final order is presumptive evidence of a right as between the
parties and their successors-in-interest by a subsequent title.
In either case, the judgment or final order may be repelled by evidence a want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact.
In Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Co. Inc., 17 one of the early Philippine cases on the enforcement of foreign
judgments, this Court has ruled that a judgment for a sum of money rendered in a foreign court is presumptive evidence of a right
between the parties and their successors-in-interest by subsequent title, but when suit for its enforcement is brought in a Philippine
court, such judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake
of law or fact. In Northwest Orient Airlines, Inc., vs. Court of Appeals, 18 the Court has said that a party attacking a foreign judgment is
tasked with the burden of overcoming its presumptive validity.
PAWI claims that its counsel, Mr. Ready, has acted without its authority. Verily, in this jurisdiction, it is clear that an attorney cannot,
without a client's authorization, settle the action or subject matter of the litigation even when he honestly believes that such a
settlement will best serve his client's interest. 19
250
In the instant case, the supplemental settlement agreement was signed by the parties, including Mr. Thomas Ready, on 06 October
1980. The agreement was lodged in the California case on 26 November 1980 or two (2) days after the pre-trial conference held on 24
November 1980.1âwphi1 If Mr. Ready was indeed not authorized by PAWI to enter into the supplemental settlement agreement, PAWI
could have forthwith signified to FASGI a disclaimer of the settlement. Instead, more than a year after the execution of the
supplemental settlement agreement, particularly on 09 October 1981, PAWI President Romeo S. Rojas sent a communication to Elena
Buholzer of FASGI that failed to mention Mr. Ready's supposed lack of authority. On the contrary, the letter confirmed the terms of the
agreement when Mr. Rojas sought forbearance for the impending delay in the opening of the first letter of credit under the schedule
stipulated in the agreement.
It is an accepted rule that when a client, upon becoming aware of the compromise and the judgment thereon, fails to promptly
repudiate the action of his attorney, he will not afterwards be heard to complain about it. 20
Nor could PAWI claim any prejudice by the settlement. PAWI was spared from possibly paying FASGI substantial amounts of damages
and incurring heavy litigation expenses normally generated in a full-blown trial. PAWI, under the agreement was afforded time to
reimburse FASGI the price it had paid for the defective wheels. PAWI, should not, after its opportunity to enjoy the benefits of the
agreement, be allowed to later disown the arrangement when the terms thereof ultimately would prove to operate against its hopeful
expectations.
PAWI assailed not only Mr. Ready's authority to sign on its behalf the Supplemental Settlement Agreement but denounced likewise his
authority to enter into a stipulation for judgment before the California court on 06 August 1982 on the ground that it had by then
already terminated the former's services. For his part, Mr. Ready admitted that while he did receive a request from Manuel Singson of
PAWI to withdraw from the motion of judgment, the request unfortunately came too late. In an explanatory telex, Mr. Ready told Mr.
Singson that under American Judicial Procedures when a motion for judgment had already been filed a counsel would not be
permitted to withdraw unilaterally without a court order. From the time the stipulation for judgment was entered into on 26 April 1982
until the certificate of finality of judgment was issued by the California court on 07 September 1982, no notification was issued by PAWI
to FASGI regarding its termination of Mr. Ready's services. If PAWI were indeed hoodwinked by Mr. Ready who purportedly acted in
collusion with FASGI, it should have aptly raised the issue before the forum which issued the judgment in line with the principle of
international comity that a court of another jurisdiction should refrain, as a matter of propriety and fairness, from so assuming the power
of passing judgment on the correctness of the application of law and the evaluation of the facts of the judgment issued by another
tribunal.21
Fraud, to hinder the enforcement within this jurisdiction of a foreign judgment, must be extrinsic, i.e., fraud based on facts not
controverted or resolved in the case where judgment is rendered, 22 or that which would go to the jurisdiction of the court or would
deprive the party against whom judgment is rendered a chance to defend the action to which he has a meritorious case or defense.
In fine, intrinsic fraud, that is, fraud which goes to the very existence of the cause of action - such as fraud in obtaining the consent to a
contract - is deemed already adjudged, and it, therefore, cannot militate against the recognition or enforcement of the foreign
judgment.23
Even while the US judgment was against both FPS and PAWI, FASGI had every right to seek enforcement of the judgment solely against
PAWI or, for that matter, only against FPS. FASGI, in its complaint, explained:
"17. There exists, and at all times relevant herein there existed, a unity of interest and ownership between defendant PAWI and
defendant FPS, in that they are owned and controlled by the same shareholders and managers, such that any individuality and
separateness between these defendants has ceased, if it ever existed, and defendant FPS is the alter ego of defendant PAWI. The two
entities are used interchangeably by their shareholders and managers, and plaintiff has found it impossible to ascertain with which
entity it is dealing at any one time. Adherence to the fiction of separate existence of these defendant corporations would permit an
abuse of the corporate privilege and would promote injustice against this plaintiff because assets can easily be shifted between the
two companies thereby frustrating plaintiff's attempts to collect on any judgment rendered by this Court." 24
Paragraph 14 of the Supplemental Settlement Agreement fixed the liability of PAWI and FPS to be "joint and several" or solidary. The
enforcement of the judgment against PAWI alone would not, of course, preclude it from pursuing and recovering whatever
contributory liability FPS might have pursuant to their own agreement.
PAWI would argue that it was incumbent upon FASGI to first return the second and the third containers of defective wheels before it
could be required to return to FASGI the purchase price therefor, 25 relying on their original agreement (the "Transaction"). 26
Unfortunately, PAWI defaulted on its covenants thereunder that thereby occasioned the subsequent execution of the supplemental
settlement agreement. This time the parties agreed, under paragraph 3.4(e) 27 thereof, that any further default by PAWI would release
FASGI from any obligation to maintain, store or deliver the rejected wheels. The supplemental settlement agreement evidently
superseded, at the very least on this point, the previous arrangements made by the parties.
PAWI cannot, by this petition for review, seek refuge over a business dealing and decision gone awry. Neither do the courts function to
relieve a party from the effects of an unwise or unfavorable contract freely entered into. As has so aptly been explained by the
appellate court, the over-all picture might, indeed, appear to be onerous to PAWI but it should bear emphasis that the settlement
which has become the basis for the foreign judgment has not been the start of a business venture but the end of a failed one, and
251
each party, naturally, has had to negotiate from either position of strength or weakness depending on its own perception of who might
have to bear the blame for the failure and the consequence of loss. 28
Altogether, the Court finds no reversible error on the part of the appellate court in its appealed judgment.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED. No costs.
SO ORDERED.
46. Querubin v. Querubin, G.R. No. L-3693, July 29, 1950 Guinto
G.R. No. L-3693 July 29, 1950
MARGARET QUERUBIN, recurrente-apelante,
vs.
SILVESTRE QUERUBIN, recurrido-apelado.
Manuel A. Argel en representacion del recurrente y apelante.
Maximino V. Bello en representacion del recurrido y apelado.
PABLO, J.:
Silvestre Querubin es de Caoayan, Ilocos Sur, de padres filipinos. En 1926 se marcho a los Estados Unidos con el objeto de estudiar pero
con el proposito de volver despues a su pais natal. Obtuvo el titulo de "Master of Arts and Sciences" en la "University of Southern
California," institucion domiciliada en los Angeles, California, en donde el recurrido empezo a vivir desde 1934.
En 20 de octubre de 1943, Silvestre Querubin contrajo matrimonio con la recurrente, Margaret Querubin, en Albuquerque, New
Mexico. Como fruto de este matrimonio nacio Querubina Querubin, quien, al tiempo de la vista de la causa en el Juzgado de primera
instancia de Ilocos Sur, tenia cuatro años de edad poco mas o menos.
La recurrente entablo en 1948 una demanda de divorcio contra el recurrido, fundada en "crueldad mental." En 7 de febrero de 1948
el divorcio fue concedido al marido en virtud de una contrademanda presentada por el y fundada en la infidelidad de su esposa. En
5 de abril de 1949, y a peticion del demandado y contrademandante, (recurrido enesta actuacion de habeas corpus) el Juzgado
superior de Los Angeles dicto una orden interlocutoria disponiendo lo siguiente:
It is therefore ordered, adjudged and decreed that the interlocutory judgment of divorce hereinbefore entered on February
27, 1948, in Book 1891, page 319, be and the same is hereby modified in the following particulars in connection with the
custody of the minor child of the parties only:
(1) The care, custody and control of the minor child of the parties, Querubina Querubin, is hereby awarded to defendant and
cross-complainants;
(2) Said child is to be maintained in a neutral home, subject to the right of reasonable visitation on the part of both parties to
this action;
(3) Each party shall have the right to take said child away from said neutral home but plaintiff and cross-defendant is
restrained from taking said child to her place of residence;
(4) Each party is restrained from molesting the other, or in any way interfering with the other's right of reasonable visitation of
said child;
(5) Each party is restrained from removing the child from the State of California without first securing the permission of the
court; said parties are further restrained from keeping the child out of the County of Los Angeles for more than one day
without first securing the consent of the court.
El recurrido salio de San Francisco en 7 de noviembre de 1949, arribando a Manila en 25 del mismo mes. En 27 de susodicho mes llego
a Caoayan, Ilocos Sur, donde vive actualmente, llevandose consigo a la niña Querubina, a quien trajo a Filipinas porque, en su
calidad de padre, queria evitar que llegase a conocimiento de ella la conducta indecorosa de su propia madre. El recurrido queria
que su hija fuera educada en un ambiente de elevada moralidad.
252
A peticion de la recurrente Margaret, el Juzgado superior de los Angeles, California, en 30 de noviembre de 1949 modifico su orden
de 5 de abril de 1949, disponiendo lo siguiente:
Under interlocutory decree of March 7, 1949, the child, a girl now 3 1/2 years old, was granted to deft husband, but the child
was to be kept in a neutral home; both parties were given reasonable visitation and both were restrained from removing the
child out of the state. Deft has taken the child with him to the Philippine Islands. At time of trial custody was apparently
denied pft because she was then living with another man. She is now married to this man and they have a well equipped
home. Ptf appears to be a devoted mother. She has one child, the issue of her present marriage, and is also caring for a child
that was abandoned by certain friends of hers. Ptf's husband is regularly and permanently employed. Witnesses testified in
behalf of the ptf in reference to her motherly qualities and the condition of her home. She visited the child in question
sufficiently when the child was in the neutral home and brought her toys and other articles. Service of the order to show
cause was made on deft's attorneys of record.
The interlocutory decree is modified so as to provide that custody of the child shall be awarded to ptf and deft shall have the
right of reasonable visitation. Deft shall pay ptf for the support of the child $30 each month on the 1st day thereof,
commencing Jan. 1950.
En el dia de la vista de esta causa de habeas corpus en Ilocos Sur, el recurrido declaro que nunca intento cambiar su ciudadania;
que cuando vino al pais tenia unos P2,000 de ahorro; que tres semanas despues de su arribo recibio oferta para enseñar con sueldo
P250 mensual en el colegio establecido por el Dr. Sobrepeña en Villasis, Pangasinan; que nunca se le ha privado de patria potestad
por sentencia judicial, ni declarado ausente de Filipinas, ni sujeto a interdiccion civil. Segun el juzgado a quo, el recurrido es de
irreprochable conducta.
En 10 de febrero de 1950 la recurrente Margaret Querubin, por medio de su abogado, presento en el Juzgado de primera instancia
de Ilocos Sur una solicitud de habeas corpus reclamando la custodia de su hija Querubina, alegando como fundamento el decreto
interlocutorio del juzgado de California que concedio a ella dicha custodia. Despues de la vista correspondiente, el Juzgado a quo,
en 28 de febrero de 1950 denego la solicitud. La recurrente acude en apelacion ante este Tribunal.
La recurrente sostiene que bajo el articulo 48 de la Regla 39, el decreto Exhibit A-1 del Juzgado de los Angeles, California, debe
cumplirse en Filipinas. Su parte dispositiva dice textualmente:
The interlocutory decree is modified so as to the provide that custody of the child shall be awarded to ptf and deft shall have
the right to reasonable visitation. Deft shall pay ptf for the support of the child $30 each month on the 1st day thereof,
commencing Jan. 1950.
Un decreto interlocutorio sobre la custodia de un menor no es una decision final. Por su naturaleza no es firme. Esta sujeto a cambios
como cambian las circunstancias. En el primer decreto se dio al padre la custodia de la menor. A peticion del padre, se dicto el
decreto de 5 de abril prohibiendo a la madre que llavase a la menos a su casa porque estaba otra vez en relaciones adulterinas con
otro hombre. Cuando ya no estaba el recurrido en Los Angeles, porque ya habian venido a Filipinas, se enmendo la ultima orden y se
dispuso que la custodia estuviese encomendada a la recurrente, pagando a ella el recurrido $30 al mes para la manutencion de la
menor. La pension no es fija y se aumenta o disminuye como aumentan o disminuyen las necesidades del pensionista o como exijan
las condiciones economicasdel que la da.
Porque el decreto interlocutorio, Exhibit A-1, no constituye decision final, no cabe pedir su cumplimiento en Filipinas. En los mismos
Estados Unidos no puede pedirse el cumplimiento de una orden interlocutoria en el juzgado de otro estado.
The rule is of common knowledge that the definitive judgment of a court of another state between the same parties on the
same cause of action, on the merits of the case is conclusive, but it must be a definitive judgment on the merits only. Where
the judgment is merely interlocutory, the determination of the question by the court which rendered it did not settle and
adjudge finally the rights of the parties." (National Park Bank vs. Old Colony Trust Co., 186 N.Y.S., 717.)
As already stated the Minnesota decree, to the extent that it is final and not subject to modification, is entitled to the
protection of the full faith and credit clause of the federal Constitution and must be enforced in this state. If, however, a part
of the Minnesota decree in not final, but is subject to modification by the court which rendered it, then neither the United
States Constitution nor the principle of comity compels the courts of this state to enforce that part of the decree; for no court
other than the one granting the original decree could undertake to administer relief without bringing about a conflict of
authority. (Levine vs. Levine, 187 Pac., 609.)
A judgment rendered by a competent court, having jurisdiction in one state, is conclusive on the merits in the courts of every
other state, when made the basis of an action and the merits cannot be reinvestigated. Our own Supreme Court so holds.
Cook vs. Thornhill, 13 Tex. 293, 65 Am. Dec. 63. But before such a judgment rendered in one state is entitled to acceptance, in
the courts of another state, as conclusive on the merits, it must be a final judgment and not merely an interlocutory decree.
Freeman on Judgment, Sec. 575; Baugh vs. Baugh, 4 Bibb (7 Ky.) 556; Brinkley vs. Brinkley, 50 N.Y. 184, 10 Am. Rep. 460; Griggs,
vs. Becker, 87 Wis. 313, 58 N.W. 396. (Walker vs. Garland et al., 235 S.W., 1078.)
253
En general, un decreto de divorcio encomendando la custodia de un hijo del matrimonio a uno de los conyuges se respeta por los
juzgados de otros estados "at the time and under the circumstances of its rendition but that such a decree has no controlling effects in
another state as to facts or conditions arising subsequently to the date of the decree; and the courts of the latter state may, in proper
proceedings, award the custody otherwise upon proof of matters subsequent to the decree which justify the change in the interest of
the child." (20 A.L.R., 815.)
En el caso presente las circunstancias han cambiado. Querubina ya no esta en los Angeles sino en Caoayan, Ilocos Sur. Esta bajo el
cuidado de su padre. Hay una distancia enorme desde Los Angeles y el presente domicilio de la menor y el costo del pasaje hasta
aquella ciudad seria muy elevado, y aun es posible que este fuera del alcance de la recurrente. No hay pruebas de que ella esta en
condiciones de pagar los gastos de viaje de la menor y del que la acompañe. Ella no es un paquete de cigarrillos que se puede
enviar por correo a Los Angeles.
No consta que las circunstancias que se daban en noviembre de 1949 en Los Angeles, prevalecian en el mismo estado hasta el
momento en que se vio la causa en el Juzgado de primera instancia de Ilocos Sur. Tampoco hay pruebas de que la recurrente
dispone de suficientes fondos para costear el viaje de la niña Querubina desde Caoayan, Ilocos Sur, hasta Los Angeles, California, y
para responder de su alimentacion, cuidado y educacion, y constando en autos que el padre, mas que nadie, esta interesado en el
cuidado y educacion de su hija, y que tiene ahorros de mas de P2,000 depositados en un banco, creemos que el Juzgado a quo no
erro al denegar la solicitud.
El Juzgado no podia, sin prueba satisfactoria, disponer sin remordimiento de conciencia la entrega de la niña al abogado de la
recurrente: es su obligacion velar por la seguridad y bienestar de ella. No se trata solo de resolver el derecho preferente del padre y
de la madre en la custodia. La vital y trascendental cuestion del porvenir de la niña es superior a toda consideracion. El Estado vela
por sus ciudadanos. El articulo 171 del Codigo Civil dispone que "Los Tribunales podran privar a los padres de la patria potestad, o
suspender el ejercicio de esta, si trataren a sus hijos con dureza excesiva, o si les dieren ordenes, consejos o ejemplos corrutores." En
Cortes contra Castillo y otra (41 Jur. Fil., 495), este Tribunal declaro que no erro el Juzgado de primera instancia al nombrar a la
abuela, como tutora de dos menores, en vez de su madre que fue condenada por adulterio.
El articulo 154 del Codigo Civil dispone que "El padre, y en su defecto la madre, tienen potestad sobre sus hijos legitimos no
emancipados." Con todo, si se hace indebido ejercicio de esta facultad, los tribunales, como ya hemos dicho, pueden privarie de ella
y encomendar el cuidadano del menor a otras instituciones, como dispone el articulo 6 de la Regla 100, que es reproduccion del
articulo 771 de la Ley No. 190. En el asunto de Lozano contra Martinez y De Vega (36 Jur. Fil., 1040), en que el primero, en un recurso
de habeas corpus, reclamaba contra su esposa la custodia de su hijo menor de 10 años, este Tribunal, en apelacion, declaro que el
juzgado a quo no abuso de la discrecion conferida a el por el articulo 771 del Codigo de procedimiento civil al denegar la solicitud.
Esta interpretacion del articulo en cuanto al debido ejercicio de la discrecion de un Juzgado de primera instancia ha sido reafirmada
en el asunto de Pelayo contra Lavin (40 Jur. Fil., 529).
En la solicitud presentada, no hay siquiera alegacion de que el juzgado a quo haya abusado de su discrecion. Este Tribunal no debe
revocar su actuacion.
En la vista de la causa en el Juzgado de Primera Instancia de Ilocos Sur, el recurrido declaro que habia traido su hija a Filipinas porque
queria evitar que ella tuviera conocimiento de la conducta impropia y de la infidelidad cometida por la madre, impidiendo que la
viese convivir con el hombre que habia ofendido a su padre. El recurrido dijo que queria que su hija se criase en un ambiente de
elevada moral, y que no se sancionara indirectamente la infidelidad de la esposa. Bajo la Ley de Divorcio No. 2710, el conyuge
culpable no tiene derecho a la custodia de los hijos menores. La legislacion vigente, las buenas costumbres y los interesesdel orden
publico aconsejan que la niña debe estar fuera del cuidado de una madre que ha violado el juramento de fidelidad a su marido.
Creemos que este Tribunal no debe hacer cumplir un decreto dictado por un tribunal extranjero, que contraviene nuestras leyes y los
sanos principios de moralidad que informan nuestra estructura social sobre relaciones familiares.
En el asunto de Manuela Barretto Gonzales contra Augusto Gonzales (58 Jur. Fil., 72), se pidio por la demandante que el divorcio
obtenido por el demandado en Reno, Nevada, en 28 de noviembre de 1927, fuera confirmado y ratificado por el Juzgado de
primera instancia de Manila. Este juzgado dicto sentencia a tenor de la peticion. Teniendo en cuenta el articulo 9 del Codigo civil que
dispone que "Las leyes relativas a los derechos y deberes de familia, o al estado, condicion y capacidad legal de las personas,
obligan a los espanoles (filipinos) aunque residan en pais extranjero" y el articulo 11 del mismo codigo que dice en parte qye ". . . las
leyes prohibitivas concernientes a las personas, sus actos o sus bienes, y las que tienen por objeto el orden publico y las buenas
costumbres, no quedaran sin efecto por leyes o sentencias dictadas, ni por disposiciones o convenciones acordades en pais
extranjero," este Tribunal, en apelacion, declaro: "Los litigantes, mediante convenio mutuo, no pueden obligar a los tribunales a que
aprueben sus propios actos, ni que permitan que las relaciones personales de los ciudadanos de estas Islas queden afectadas por
decretos de paises extranjeros en una forma que nuestro Gobierno cree que es contraria al orden publico y a la recta moral," y
revoco la decision del juzgado inferior.
Las sentencias de tribunales extranjeros no pueden properse en vigor en Filipinas si son contrarias a la leyes, costumbres y orden
publico. Si dichas decisiones, por la simple teoria de reciprocidad, cortesia judicial y urbanidad internacional son base suficiente para
que nuestros tribunales decidan a tenor de las mismas, entonces nuestros juzgados estarian en la pobre tesitura de tener que dictar
sentencias contrarias a nuestras leyes, costumbres y orden publico. Esto es absurdo.
254
En Ingenohl contra Olsen & Co. (47 Jur. Fil., 199), se discutio el alcanse de la cortesia internacional. El articulo 311 del Codigo de
Procedimiento Civil que es hoy el articulo 48, Regla 39, fue la base de la accion presentada por Ingenohl. Pidio en su demanda que el
Juzgado de primera instancia de Manila dictase sentencia de acuerdo con la dictada por el Tribunal Supremo de Hongkong.
Despues de la vista correspondiente, el juzgado dicto sentencia a favor del demandante con intereses legales y costas. En apelacion,
se alego que el juzgado inferior erro al no declarar que la decision y sentencia del Tribunal Supremo de Hongkong se dicto y registro
como resultado de un error manifiesto de hecho y de derecho. Este Tribunal declaro que "Es principio bien sentado que, a falta de un
tratado o ley, y en virtud de la cortesia y del derecho internacional, una sentencia dictada por un tribunal de jurisdiccion competente
de un pais extranjero, en el que las partes han comparecido y discutido un asunto en el fondo, sera reconocido y puesta en vigor en
cualquier otro pais extranjero." Pero teniendo en cuenta el articulo 311 del Codigo de Procedimiento Civil que dispone que "la
sentencia puede ser rechazada mediante prueba de falta de competencia, o de haber sido dictada sin la previa notificacion a la
parte, o que hubo connivencia, fraude o error manifiesto de derecho o de hecho," concluyo: "En virtud de esa Ley cuando una
persona trata de hacer cumplir una sentencia extranjera, el demandado tiene derecho a ejercitar cualquier defensa de esas, y si se
llegara a demostrar que existe propiamente alguna de ellas, destruira los efectos de la sentencia." Revoco la decision del juzgado
inferior y declaro y fallo que "la sentencia dictada por el Tribunal de Hongkong, contra la demandada, constituyo un error manifesto
de hecho y de derecho, y, por tal razon, no debe exigirse su cumplimiento en las Islas Filipinas."
Si se concede la solicitud, la menor estaria bajo el cuidadode su madre que fued declarada judicialmente culpable de infidelidad
conyugal; viviria bajo un techo juntamente con el hombre que deshonro a su madre y ofendio a su padre; jugaria y creceria con el
fruto del amor adulterino de su madre; llegaria a la pubertad con la idea de que una mujer que fue infiel a su marido tiene derecho a
custodiar a su hija. En semejante medio ambiente no puede criarse a una niña de una manera adecuada: si llegara a saber durante
su adolescencia que su padre ha sido traicionado por su madre con el hombre con quien vive, esa niña viviria bajo una impresion de
inferioridad moral de incalculables consecuencias, y por ello nunca seria feliz; y si, bajo la influencia de su madre, llegara a creer que
la infidelidad de una esposa es solo un incidente tan pasajero como cambiar de tocado, la niña iria por el camino de la perdicion. Y
la educacion moral que puede darle su padrasto dificilmente puede ser mejor.
Si se deniega la solicitud, la niña viviria con su padre con el beneficio de un cuidado paternal exclusivo, y no con la dividida atencion
de una madre que tiene que atender a su esposo, a sus dos hijas y a una tercera niña, la protegida. Para el bienestar de la menor
Querubina, que es lo que mas importa en el caso presente, su custodia por el padre debe considerarse preferente.
En los mismos Estados Unidos, el punto cardinal que tienen en cuenta los juzgados, no es la reclamacion de las partes o la fuerza del
decreto interlocutorio, sino el bienestar del menor.
A consideration of all the facts and circumstances leads to the conclusion that comity does not require the courts of this
state, regardless of the well-being of the child, to lend their aid to the enforcement of the Iowa decree by returning Winifred
to the custody of her grandmother. A child is not a chattel to which title and the right of possession may be secured by the
decree of any court. If the decree had been rendered by a domestic court of competent jurisdiction, it would not have
conclusively established the right to the custody of the child. In a contest between rival claimants, this court would have been
free, notwithstanding the decree, to award the custody solely with an eye to the child's welfare. (State ex rel. Aldridge vs.
Aldridge, 204 N.W. 324.)
On habeas corpus by the mother to obtain possession from the father of two children aged four and six years, whose custody
she alleged had been awarded her in divorce proceedings in another state, it appeared that the mother was without
property, and had no means of support save her personal earnings of $15 per month, was in poor health, and lived with her
mother, in immoral surroundings, and that the father was an industrious and sober man, earnings $100 per month. Held, that
the welfare of the children was the only thing to be considered, and a judgment awarding their custody to the mother should
be reversed. (Kentzler vs. Kentzler, 28 Pac., 370.)
La recurrente, como ultimo recurso, invoca la comity of nations. La reciprocidad, la cortesia entre naciones no es absoluta. Rige
cuando hay tratado y hay igualdad de legislacion. Se adopta la doctrina de reciprocidad cuando el tribunal extranjero tiene
jurisdiccion para conocer de la causa, las partes han comparecido y discutido el asunto en el fondo. Algunas veces se concede
como privilegio pero no como estricto derecho. La cortesia pedida no ha sido reconocida por este Tribunal cuando declaro que los
derechos y deberes de familia, estado, condicion y capacidad legal de las personas se rigen por las leyes de Filipinas y no por las de
America (Gonzales contra Gonzales, supra) y no dio validez a la decision del Tribunal Supremo de Hongkong porque era erronea en
sus conclusiones de hecho y de derecho (Ingenohl contra Olsen y Co., supra).
La reciprocidad entre los estados de la Union Americana no es absoluta. No es regla inquebrantable. Los varios casos citados mas
arriba lo demuestran. He ahi otro caso:
On the question of comity, this court said in the habeas corpus case of In re Stockman, 71 Mich. 180, 38 N.W. 876:
"Comity cannot be considered in a case like this, when the future welfare of the child is the vital question in the case. The
good of the child is superior to all other considerations. It is the polar star to guide to the conclusion in all cases of infants,
whether the question is raised upon a writ of habeas corpus or in a court of chancery." (Ex parte Leu, 215 N.W., 384.)
255
Ya hemos visto que la orden interlocutoria cediendo la custodia de la menor a la recurrente esta en pugna con las disposiciones
expresas de la legislacion vigente en Filipinas. En el primer decreto y en el enmendatorio se encomendo la custodia de la menor al
padre y se prohibio, en la orden enmendada, a la madre llevar a la menor a su casa porque estaba otra vez en relaciones ilegales
con otro hombre. Pero el ultimo decreto enmendatorio, contrario al sentido de justicia, a la ley, y a las buenas costumbres,
encomendo la custodia de la menor a la que fue esposa infiel porque ya estaba casada con quien cometio adulterio. Y bajo la
doctrina de la comity of nations, la recurrente contiende que debe cumplirse en Filipinas ese decreto. Opinamos que por las varias
razones arriba expuestas, la pretension es insostenible.
Se confirma la sentencia apelada. La recurrente pagara las costas.
Ozaeta, Bengzon, Montemayor and Reyes, MM., estan conformes.
Tuason, J., concurs in the result.
47. Mijares v. Ranada, G.R. NO. 139325, April 12, 2005 Josol
SECOND DIVISION
G.R. No. 139325 April 12, 2005
PRISCILLA C. MIJARES, LORETTA ANN P. ROSALES, HILDA B. NARCISO, SR. MARIANI DIMARANAN, SFIC, and JOEL C. LAMANGAN in their
behalf and on behalf of the Class Plaintiffs in Class Action No. MDL 840, United States District Court of Hawaii, Petitioner,
vs.
HON. SANTIAGO JAVIER RANADA, in his capacity as Presiding Judge of Branch 137, Regional Trial Court, Makati City, and the ESTATE OF
FERDINAND E. MARCOS, through its court appointed legal representatives in Class Action MDL 840, United States District Court of Hawaii,
namely: Imelda R. Marcos and Ferdinand Marcos, Jr., Respondents.
DECISION
TINGA, J.:
Our martial law experience bore strange unwanted fruits, and we have yet to finish weeding out its bitter crop. While the restoration of
freedom and the fundamental structures and processes of democracy have been much lauded, according to a significant number,
the changes, however, have not sufficiently healed the colossal damage wrought under the oppressive conditions of the martial law
period. The cries of justice for the tortured, the murdered, and the desaparecidos arouse outrage and sympathy in the hearts of the
fair-minded, yet the dispensation of the appropriate relief due them cannot be extended through the same caprice or whim that
characterized the ill-wind of martial rule. The damage done was not merely personal but institutional, and the proper rebuke to the
iniquitous past has to involve the award of reparations due within the confines of the restored rule of law.
The petitioners in this case are prominent victims of human rights violations 1 who, deprived of the opportunity to directly confront the
man who once held absolute rule over this country, have chosen to do battle instead with the earthly representative, his estate. The
clash has been for now interrupted by a trial court ruling, seemingly comported to legal logic, that required the petitioners to pay a
whopping filing fee of over Four Hundred Seventy-Two Million Pesos (P472,000,000.00) in order that they be able to enforce a judgment
awarded them by a foreign court. There is an understandable temptation to cast the struggle within the simplistic confines of a
morality tale, and to employ short-cuts to arrive at what might seem the desirable solution. But easy, reflexive resort to the equity
principle all too often leads to a result that may be morally correct, but legally wrong.
Nonetheless, the application of the legal principles involved in this case will comfort those who maintain that our substantive and
procedural laws, for all their perceived ambiguity and susceptibility to myriad interpretations, are inherently fair and just. The relief
sought by the petitioners is expressly mandated by our laws and conforms to established legal principles. The granting of this petition for
certiorari is warranted in order to correct the legally infirm and unabashedly unjust ruling of the respondent judge.
The essential facts bear little elaboration. On 9 May 1991, a complaint was filed with the United States District Court (US District Court),
District of Hawaii, against the Estate of former Philippine President Ferdinand E. Marcos (Marcos Estate). The action was brought forth by
ten Filipino citizens2 who each alleged having suffered human rights abuses such as arbitrary detention, torture and rape in the hands
of police or military forces during the Marcos regime. 3 The Alien Tort Act was invoked as basis for the US District Court's jurisdiction over
the complaint, as it involved a suit by aliens for tortious violations of international law. 4 These plaintiffs brought the action on their own
behalf and on behalf of a class of similarly situated individuals, particularly consisting of all current civilian citizens of the Philippines, their
heirs and beneficiaries, who between 1972 and 1987 were tortured, summarily executed or had disappeared while in the custody of
military or paramilitary groups. Plaintiffs alleged that the class consisted of approximately ten thousand (10,000) members; hence,
joinder of all these persons was impracticable.
256
The institution of a class action suit was warranted under Rule 23(a) and (b)(1)(B) of the US Federal Rules of Civil Procedure, the
provisions of which were invoked by the plaintiffs. Subsequently, the US District Court certified the case as a class action and created
three (3) sub-classes of torture, summary execution and disappearance victims. 5 Trial ensued, and subsequently a jury rendered a
verdict and an award of compensatory and exemplary damages in favor of the plaintiff class. Then, on 3 February 1995, the US District
Court, presided by Judge Manuel L. Real, rendered a Final Judgment (Final Judgment) awarding the plaintiff class a total of One Billion
Nine Hundred Sixty Four Million Five Thousand Eight Hundred Fifty Nine Dollars and Ninety Cents ($1,964,005,859.90). The Final Judgment
was eventually affirmed by the US Court of Appeals for the Ninth Circuit, in a decision rendered on 17 December 1996. 6
On 20 May 1997, the present petitioners filed Complaint with the Regional Trial Court, City of Makati (Makati RTC) for the enforcement
of the Final Judgment. They alleged that they are members of the plaintiff class in whose favor the US District Court awarded
damages.7 They argued that since the Marcos Estate failed to file a petition for certiorari with the US Supreme Court after the Ninth
Circuit Court of Appeals had affirmed the Final Judgment, the decision of the US District Court had become final and executory, and
hence should be recognized and enforced in the Philippines, pursuant to Section 50, Rule 39 of the Rules of Court then in force. 8
On 5 February 1998, the Marcos Estate filed a motion to dismiss, raising, among others, the non-payment of the correct filing fees. It
alleged that petitioners had only paid Four Hundred Ten Pesos (P410.00) as docket and filing fees, notwithstanding the fact that they
sought to enforce a monetary amount of damages in the amount of over Two and a Quarter Billion US Dollars (US$2.25 Billion). The
Marcos Estate cited Supreme Court Circular No. 7, pertaining to the proper computation and payment of docket fees. In response,
the petitioners claimed that an action for the enforcement of a foreign judgment is not capable of pecuniary estimation; hence, a
filing fee of only Four Hundred Ten Pesos (P410.00) was proper, pursuant to Section 7(c) of Rule 141.9
On 9 September 1998, respondent Judge Santiago Javier Ranada 10 of the Makati RTC issued the subject Order dismissing the complaint
without prejudice. Respondent judge opined that contrary to the petitioners' submission, the subject matter of the complaint was
indeed capable of pecuniary estimation, as it involved a judgment rendered by a foreign court ordering the payment of definite sums
of money, allowing for easy determination of the value of the foreign judgment. On that score, Section 7(a) of Rule 141 of the Rules of
Civil Procedure would find application, and the RTC estimated the proper amount of filing fees was approximately Four Hundred
Seventy Two Million Pesos, which obviously had not been paid.
Not surprisingly, petitioners filed a Motion for Reconsideration, which Judge Ranada denied in an Order dated 28 July 1999. From this
denial, petitioners filed a Petition for Certiorari under Rule 65 assailing the twin orders of respondent judge.11 They prayed for the
annulment of the questioned orders, and an order directing the reinstatement of Civil Case No. 97-1052 and the conduct of
appropriate proceedings thereon.
Petitioners submit that their action is incapable of pecuniary estimation as the subject matter of the suit is the enforcement of a foreign
judgment, and not an action for the collection of a sum of money or recovery of damages. They also point out that to require the
class plaintiffs to pay Four Hundred Seventy Two Million Pesos (P472,000,000.00) in filing fees would negate and render inutile the liberal
construction ordained by the Rules of Court, as required by Section 6, Rule 1 of the Rules of Civil Procedure, particularly the inexpensive
disposition of every action.
Petitioners invoke Section 11, Article III of the Bill of Rights of the Constitution, which provides that "Free access to the courts and quasi-
judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty," a mandate which is essentially
defeated by the required exorbitant filing fee. The adjudicated amount of the filing fee, as arrived at by the RTC, was characterized as
indisputably unfair, inequitable, and unjust.
The Commission on Human Rights (CHR) was permitted to intervene in this case. 12 It urged that the petition be granted and a judgment
rendered, ordering the enforcement and execution of the District Court judgment in accordance with Section 48, Rule 39 of the 1997
Rules of Civil Procedure. For the CHR, the Makati RTC erred in interpreting the action for the execution of a foreign judgment as a new
case, in violation of the principle that once a case has been decided between the same parties in one country on the same issue with
finality, it can no longer be relitigated again in another country. 13 The CHR likewise invokes the principle of comity, and of vested rights.
The Court's disposition on the issue of filing fees will prove a useful jurisprudential guidepost for courts confronted with actions enforcing
foreign judgments, particularly those lodged against an estate. There is no basis for the issuance a limited pro hac vice ruling based on
the special circumstances of the petitioners as victims of martial law, or on the emotionally-charged allegation of human rights abuses.
An examination of Rule 141 of the Rules of Court readily evinces that the respondent judge ignored the clear letter of the law when he
concluded that the filing fee be computed based on the total sum claimed or the stated value of the property in litigation.
In dismissing the complaint, the respondent judge relied on Section 7(a), Rule 141 as basis for the computation of the filing fee of over
P472 Million. The provision states:
SEC. 7. Clerk of Regional Trial Court.-
(a) For filing an action or a permissive counterclaim or money claim against an estate not based on judgment, or for
filing with leave of court a third-party, fourth-party, etc., complaint, or a complaint in intervention, and for all clerical
257
services in the same time, if the total sum claimed, exclusive of interest, or the started value of the property in
litigation, is:
1. Less than P 100,00.00 – P 500.00
2. P 100,000.00 or more but less than P 150,000.00 – P 800.00
3. P 150,000.00 or more but less than P 200,000.00 – P 1,000.00
6. P 300,000.00 or more but not more than P 400,000.00 – P 2,000.00
7. P 350,000.00 or more but not more than P400,000.00 – P 2,250.00
8. For each P 1,000.00 in excess of P 400,000.00 – P 10.00
(Emphasis supplied)
Obviously, the above-quoted provision covers, on one hand, ordinary actions, permissive counterclaims, third-party, etc. complaints
and complaints-in-interventions, and on the other, money claims against estates which are not based on judgment. Thus, the relevant
question for purposes of the present petition is whether the action filed with the lower court is a "money claim against an estate not
based on judgment."
Petitioners' complaint may have been lodged against an estate, but it is clearly based on a judgment, the Final Judgment of the US
District Court. The provision does not make any distinction between a local judgment and a foreign judgment, and where the law does
not distinguish, we shall not distinguish.
A reading of Section 7 in its entirety reveals several instances wherein the filing fee is computed on the basis of the amount of the relief
sought, or on the value of the property in litigation. The filing fee for requests for extrajudicial foreclosure of mortgage is based on the
amount of indebtedness or the mortgagee's claim. 14 In special proceedings involving properties such as for the allowance of wills, the
filing fee is again based on the value of the property.15 The aforecited rules evidently have no application to petitioners' complaint.
Petitioners rely on Section 7(b), particularly the proviso on actions where the value of the subject matter cannot be estimated. The
provision reads in full:
SEC. 7. Clerk of Regional Trial Court.-
(b) For filing
1. Actions where the value
of the subject matter
cannot be estimated --- P 600.00

258
2. Special civil actions except
judicial foreclosure which
shall be governed by
paragraph (a) above --- P 600.00
3. All other actions not
involving property --- P 600.00
In a real action, the assessed value of the property, or if there is none, the estimated value, thereof shall be alleged by the claimant
and shall be the basis in computing the fees.
It is worth noting that the provision also provides that in real actions, the assessed value or estimated value of the property shall be
alleged by the claimant and shall be the basis in computing the fees. Yet again, this provision does not apply in the case at bar. A real
action is one where the plaintiff seeks the recovery of real property or an action affecting title to or recovery of possession of real
property.16 Neither the complaint nor the award of damages adjudicated by the US District Court involves any real property of the
Marcos Estate.
Thus, respondent judge was in clear and serious error when he concluded that the filing fees should be computed on the basis of the
schematic table of Section 7(a), as the action involved pertains to a claim against an estate based on judgment. What provision, if
any, then should apply in determining the filing fees for an action to enforce a foreign judgment?
To resolve this question, a proper understanding is required on the nature and effects of a foreign judgment in this jurisdiction.
The rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of
foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in
different countries.17 This principle was prominently affirmed in the leading American case of Hilton v. Guyot18 and expressly recognized
in our jurisprudence beginning with Ingenholl v. Walter E. Olsen & Co.19 The conditions required by the Philippines for recognition and
enforcement of a foreign judgment were originally contained in Section 311 of the Code of Civil Procedure, which was taken from the
California Code of Civil Procedure which, in turn, was derived from the California Act of March 11, 1872. 20 Remarkably, the procedural
rule now outlined in Section 48, Rule 39 of the Rules of Civil Procedure has remained unchanged down to the last word in nearly a
century. Section 48 states:
SEC. 48. Effect of foreign judgments. — The effect of a judgment of a tribunal of a foreign country, having jurisdiction to
pronounce the judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing;
(b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties
and their successors in interest by a subsequent title;
In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party,
There is an evident distinction between a foreign judgment in an action in rem and one in personam. For an action in rem, the foreign
judgment is deemed conclusive upon the title to the thing, while in an action in personam, the foreign judgment is presumptive, and
not conclusive, of a right as between the parties and their successors in interest by a subsequent title. 21 However, in both cases, the
foreign judgment is susceptible to impeachment in our local courts on the grounds of want of jurisdiction or notice to the party, 22
collusion, fraud,23 or clear mistake of law or fact. 24 Thus, the party aggrieved by the foreign judgment is entitled to defend against the
enforcement of such decision in the local forum. It is essential that there should be an opportunity to challenge the foreign judgment,
in order for the court in this jurisdiction to properly determine its efficacy.25
It is clear then that it is usually necessary for an action to be filed in order to enforce a foreign judgment 26 , even if such judgment has
conclusive effect as in the case of in rem actions, if only for the purpose of allowing the losing party an opportunity to challenge the
foreign judgment, and in order for the court to properly determine its efficacy. 27 Consequently, the party attacking a foreign judgment
has the burden of overcoming the presumption of its validity.28
The rules are silent as to what initiatory procedure must be undertaken in order to enforce a foreign judgment in the Philippines. But
there is no question that the filing of a civil complaint is an appropriate measure for such purpose. A civil action is one by which a party
sues another for the enforcement or protection of a right, 29 and clearly an action to enforce a foreign judgment is in essence a
vindication of a right prescinding either from a "conclusive judgment upon title" or the "presumptive evidence of a right." 30 Absent
259
perhaps a statutory grant of jurisdiction to a quasi-judicial body, the claim for enforcement of judgment must be brought before the
regular courts.31
There are distinctions, nuanced but discernible, between the cause of action arising from the enforcement of a foreign judgment, and
that arising from the facts or allegations that occasioned the foreign judgment. They may pertain to the same set of facts, but there is
an essential difference in the right-duty correlatives that are sought to be vindicated. For example, in a complaint for damages against
a tortfeasor, the cause of action emanates from the violation of the right of the complainant through the act or omission of the
respondent. On the other hand, in a complaint for the enforcement of a foreign judgment awarding damages from the same
tortfeasor, for the violation of the same right through the same manner of action, the cause of action derives not from the tortious act
but from the foreign judgment itself.
More importantly, the matters for proof are different. Using the above example, the complainant will have to establish before the court
the tortious act or omission committed by the tortfeasor, who in turn is allowed to rebut these factual allegations or prove extenuating
circumstances. Extensive litigation is thus conducted on the facts, and from there the right to and amount of damages are assessed.
On the other hand, in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself, and not the facts
from which it prescinds.
As stated in Section 48, Rule 39, the actionable issues are generally restricted to a review of jurisdiction of the foreign court, the service
of personal notice, collusion, fraud, or mistake of fact or law. The limitations on review is in consonance with a strong and pervasive
policy in all legal systems to limit repetitive litigation on claims and issues. 32 Otherwise known as the policy of preclusion, it seeks to
protect party expectations resulting from previous litigation, to safeguard against the harassment of defendants, to insure that the task
of courts not be increased by never-ending litigation of the same disputes, and – in a larger sense – to promote what Lord Coke in the
Ferrer's Case of 1599 stated to be the goal of all law: "rest and quietness." 33 If every judgment of a foreign court were reviewable on the
merits, the plaintiff would be forced back on his/her original cause of action, rendering immaterial the previously concluded litigation. 34
Petitioners appreciate this distinction, and rely upon it to support the proposition that the subject matter of the complaint¾the
enforcement of a foreign judgment¾is incapable of pecuniary estimation. Admittedly the proposition, as it applies in this case, is
counter-intuitive, and thus deserves strict scrutiny. For in all practical intents and purposes, the matter at hand is capable of pecuniary
estimation, down to the last cent. In the assailed Order, the respondent judge pounced upon this point without equivocation:
The Rules use the term "where the value of the subject matter cannot be estimated." The subject matter of the present case is
the judgment rendered by the foreign court ordering defendant to pay plaintiffs definite sums of money, as and for
compensatory damages. The Court finds that the value of the foreign judgment can be estimated; indeed, it can even be
easily determined. The Court is not minded to distinguish between the enforcement of a judgment and the amount of said
judgment, and separate the two, for purposes of determining the correct filing fees. Similarly, a plaintiff suing on promissory
note for P1 million cannot be allowed to pay only P400 filing fees (sic), on the reasoning that the subject matter of his suit is not
the P1 million, but the enforcement of the promissory note, and that the value of such "enforcement" cannot be estimated. 35
The jurisprudential standard in gauging whether the subject matter of an action is capable of pecuniary estimation is well-entrenched.
The Marcos Estate cites Singsong v. Isabela Sawmill and Raymundo v. Court of Appeals, which ruled:
[I]n determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has
adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery
of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal
courts or in the courts of first instance would depend on the amount of the claim. However, where the basic issue is
something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence
of, the principal relief sought, this Court has considered such actions as cases where the subject of the litigation may not be
estimated in terms of money, and are cognizable exclusively by courts of first instance (now Regional Trial Courts).
On the other hand, petitioners cite the ponencia of Justice JBL Reyes in Lapitan v. Scandia,36 from which the rule in Singsong and
Raymundo actually derives, but which incorporates this additional nuance omitted in the latter cases:
xxx However, where the basic issue is something other than the right to recover a sum of money, where the money claim is
purely incidental to, or a consequence of, the principal relief sought, like in suits to have the defendant perform his part of the
contract (specific performance) and in actions for support, or for annulment of judgment or to foreclose a mortgage, this
Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and
are cognizable exclusively by courts of first instance.37
Petitioners go on to add that among the actions the Court has recognized as being incapable of pecuniary estimation include legality
of conveyances and money deposits,38 validity of a mortgage,39 the right to support,40 validity of documents,41 rescission of contracts,42
specific performance,43 and validity or annulment of judgments. 44 It is urged that an action for enforcement of a foreign judgment
belongs to the same class.
This is an intriguing argument, but ultimately it is self-evident that while the subject matter of the action is undoubtedly the enforcement
of a foreign judgment, the effect of a providential award would be the adjudication of a sum of money. Perhaps in theory, such an
260
action is primarily for "the enforcement of the foreign judgment," but there is a certain obtuseness to that sort of argument since there is
no denying that the enforcement of the foreign judgment will necessarily result in the award of a definite sum of money.
But before we insist upon this conclusion past beyond the point of reckoning, we must examine its possible ramifications. Petitioners
raise the point that a declaration that an action for enforcement of foreign judgment may be capable of pecuniary estimation might
lead to an instance wherein a first level court such as the Municipal Trial Court would have jurisdiction to enforce a foreign judgment.
But under the statute defining the jurisdiction of first level courts, B.P. 129, such courts are not vested with jurisdiction over actions for the
enforcement of foreign judgments.
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in civil cases. —
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:
(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate, including the grant of
provisional remedies in proper cases, where the value of the personal property, estate, or amount of the demand does not
exceed One hundred thousand pesos (P100,000.00) or, in Metro Manila where such personal property, estate, or amount of
the demand does not exceed Two hundred thousand pesos (P200,000.00) exclusive of interest damages of whatever kind,
attorney's fees, litigation expenses, and costs, the amount of which must be specifically alleged: Provided, That where there
are several claims or causes of action between the same or different parties, embodied in the same complaint, the amount
of the demand shall be the totality of the claims in all the causes of action, irrespective of whether the causes of action arose
out of the same or different transactions;
(2) Exclusive original jurisdiction over cases of forcible entry and unlawful detainer: Provided, That when, in such cases, the
defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without
deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession.
(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein
where the assessed value of the property or interest therein does not exceed Twenty thousand pesos ( P20,000.00) or, in civil
actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive of interest,
damages of whatever kind, attorney's fees, litigation expenses and costs: Provided, That value of such property shall be
determined by the assessed value of the adjacent lots. 45
Section 33 of B.P. 129 refers to instances wherein the cause of action or subject matter pertains to an assertion of rights and interests
over property or a sum of money. But as earlier pointed out, the subject matter of an action to enforce a foreign judgment is the
foreign judgment itself, and the cause of action arising from the adjudication of such judgment.
An examination of Section 19(6), B.P. 129 reveals that the instant complaint for enforcement of a foreign judgment, even if capable of
pecuniary estimation, would fall under the jurisdiction of the Regional Trial Courts, thus negating the fears of the petitioners. Indeed, an
examination of the provision indicates that it can be relied upon as jurisdictional basis with respect to actions for enforcement of
foreign judgments, provided that no other court or office is vested jurisdiction over such complaint:
Sec. 19. Jurisdiction in civil cases. — Regional Trial Courts shall exercise exclusive original jurisdiction:
xxx
(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising jurisdiction or any court,
tribunal, person or body exercising judicial or quasi-judicial functions.
Thus, we are comfortable in asserting the obvious, that the complaint to enforce the US District Court judgment is one capable of
pecuniary estimation. But at the same time, it is also an action based on judgment against an estate, thus placing it beyond the ambit
of Section 7(a) of Rule 141. What provision then governs the proper computation of the filing fees over the instant complaint? For this
case and other similarly situated instances, we find that it is covered by Section 7(b)(3), involving as it does, "other actions not involving
property."
Notably, the amount paid as docket fees by the petitioners on the premise that it was an action incapable of pecuniary estimation
corresponds to the same amount required for "other actions not involving property." The petitioners thus paid the correct amount of
filing fees, and it was a grave abuse of discretion for respondent judge to have applied instead a clearly inapplicable rule and
dismissed the complaint.
There is another consideration of supreme relevance in this case, one which should disabuse the notion that the doctrine affirmed in
this decision is grounded solely on the letter of the procedural rule. We earlier adverted to the internationally recognized policy of
preclusion, as well as the principles of comity, utility and convenience of nations as the basis for the evolution of the rule calling for the
recognition and enforcement of foreign judgments. The US Supreme Court in Hilton v. Guyot relied heavily on the concept of comity,
as especially derived from the landmark treatise of Justice Story in his Commentaries on the Conflict of Laws of 1834. Yet the notion of
"comity" has since been criticized as one "of dim contours" or suffering from a number of fallacies. Other conceptual bases for the
recognition of foreign judgments have evolved such as the vested rights theory or the modern doctrine of obligation.
261
There have been attempts to codify through treaties or multilateral agreements the standards for the recognition and enforcement of
foreign judgments, but these have not borne fruition. The members of the European Common Market accede to the Judgments
Convention, signed in 1978, which eliminates as to participating countries all of such obstacles to recognition such as reciprocity and
révision au fond.53 The most ambitious of these attempts is the Convention on the Recognition and Enforcement of Foreign Judgments
in Civil and Commercial Matters, prepared in 1966 by the Hague Conference of International Law. 54 While it has not received the
ratifications needed to have it take effect, 55 it is recognized as representing current scholarly thought on the topic. 56 Neither the
Philippines nor the United States are signatories to the Convention.
Yet even if there is no unanimity as to the applicable theory behind the recognition and enforcement of foreign judgments or a
universal treaty rendering it obligatory force, there is consensus that the viability of such recognition and enforcement is essential.
Steiner and Vagts note:
. . . The notion of unconnected bodies of national law on private international law, each following a quite separate path, is
not one conducive to the growth of a transnational community encouraging travel and commerce among its members.
There is a contemporary resurgence of writing stressing the identity or similarity of the values that systems of public and private
international law seek to further – a community interest in common, or at least reasonable, rules on these matters in national
legal systems. And such generic principles as reciprocity play an important role in both fields. 57
Salonga, whose treatise on private international law is of worldwide renown, points out:
Whatever be the theory as to the basis for recognizing foreign judgments, there can be little dispute that the end is to protect
the reasonable expectations and demands of the parties. Where the parties have submitted a matter for adjudication in the
court of one state, and proceedings there are not tainted with irregularity, they may fairly be expected to submit, within the
state or elsewhere, to the enforcement of the judgment issued by the court. 58
There is also consensus as to the requisites for recognition of a foreign judgment and the defenses against the enforcement thereof. As
earlier discussed, the exceptions enumerated in Section 48, Rule 39 have remain unchanged since the time they were adapted in this
jurisdiction from long standing American rules. The requisites and exceptions as delineated under Section 48 are but a restatement of
generally accepted principles of international law. Section 98 of The Restatement, Second, Conflict of Laws, states that "a valid
judgment rendered in a foreign nation after a fair trial in a contested proceeding will be recognized in the United States," and on its
face, the term "valid" brings into play requirements such notions as valid jurisdiction over the subject matter and parties. 59 Similarly, the
notion that fraud or collusion may preclude the enforcement of a foreign judgment finds affirmation with foreign jurisprudence and
commentators,60 as well as the doctrine that the foreign judgment must not constitute "a clear mistake of law or fact." 61 And finally, it
has been recognized that "public policy" as a defense to the recognition of judgments serves as an umbrella for a variety of concerns
in international practice which may lead to a denial of recognition. 62
The viability of the public policy defense against the enforcement of a foreign judgment has been recognized in this jurisdiction. 63 This
defense allows for the application of local standards in reviewing the foreign judgment, especially when such judgment creates only a
presumptive right, as it does in cases wherein the judgment is against a person. 64 The defense is also recognized within the international
sphere, as many civil law nations adhere to a broad public policy exception which may result in a denial of recognition when the
foreign court, in the light of the choice-of-law rules of the recognizing court, applied the wrong law to the case. 65 The public policy
defense can safeguard against possible abuses to the easy resort to offshore litigation if it can be demonstrated that the original claim
is noxious to our constitutional values.
There is no obligatory rule derived from treaties or conventions that requires the Philippines to recognize foreign judgments, or allow a
procedure for the enforcement thereof. However, generally accepted principles of international law, by virtue of the incorporation
clause of the Constitution, form part of the laws of the land even if they do not derive from treaty obligations. 66 The classical formulation
in international law sees those customary rules accepted as binding result from the combination two elements: the established,
widespread, and consistent practice on the part of States; and a psychological element known as the opinion juris sive necessitates
(opinion as to law or necessity). Implicit in the latter element is a belief that the practice in question is rendered obligatory by the
existence of a rule of law requiring it.67
While the definite conceptual parameters of the recognition and enforcement of foreign judgments have not been authoritatively
established, the Court can assert with certainty that such an undertaking is among those generally accepted principles of international
law.68 As earlier demonstrated, there is a widespread practice among states accepting in principle the need for such recognition and
enforcement, albeit subject to limitations of varying degrees. The fact that there is no binding universal treaty governing the practice is
not indicative of a widespread rejection of the principle, but only a disagreement as to the imposable specific rules governing the
procedure for recognition and enforcement.
Aside from the widespread practice, it is indubitable that the procedure for recognition and enforcement is embodied in the rules of
law, whether statutory or jurisprudential, adopted in various foreign jurisdictions. In the Philippines, this is evidenced primarily by Section
48, Rule 39 of the Rules of Court which has existed in its current form since the early 1900s. Certainly, the Philippine legal system has long
ago accepted into its jurisprudence and procedural rules the viability of an action for enforcement of foreign judgment, as well as the
requisites for such valid enforcement, as derived from internationally accepted doctrines. Again, there may be distinctions as to the
rules adopted by each particular state, 69 but they all prescind from the premise that there is a rule of law obliging states to allow for,
262
however generally, the recognition and enforcement of a foreign judgment. The bare principle, to our mind, has attained the status of
opinio juris in international practice.
This is a significant proposition, as it acknowledges that the procedure and requisites outlined in Section 48, Rule 39 derive their efficacy
not merely from the procedural rule, but by virtue of the incorporation clause of the Constitution. Rules of procedure are promulgated
by the Supreme Court,70 and could very well be abrogated or revised by the high court itself. Yet the Supreme Court is obliged, as are
all State components, to obey the laws of the land, including generally accepted principles of international law which form part
thereof, such as those ensuring the qualified recognition and enforcement of foreign judgments. 71
Thus, relative to the enforcement of foreign judgments in the Philippines, it emerges that there is a general right recognized within our
body of laws, and affirmed by the Constitution, to seek recognition and enforcement of foreign judgments, as well as a right to defend
against such enforcement on the grounds of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or
fact.
The preclusion of an action for enforcement of a foreign judgment in this country merely due to an exhorbitant assessment of docket
fees is alien to generally accepted practices and principles in international law. Indeed, there are grave concerns in conditioning the
amount of the filing fee on the pecuniary award or the value of the property subject of the foreign decision. Such pecuniary award will
almost certainly be in foreign denomination, computed in accordance with the applicable laws and standards of the forum. 72 The
vagaries of inflation, as well as the relative low-income capacity of the Filipino, to date may very well translate into an award virtually
unenforceable in this country, despite its integral validity, if the docket fees for the enforcement thereof were predicated on the
amount of the award sought to be enforced. The theory adopted by respondent judge and the Marcos Estate may even lead to
absurdities, such as if applied to an award involving real property situated in places such as the United States or Scandinavia where
real property values are inexorably high. We cannot very well require that the filing fee be computed based on the value of the
foreign property as determined by the standards of the country where it is located.
As crafted, Rule 141 of the Rules of Civil Procedure avoids unreasonableness, as it recognizes that the subject matter of an action for
enforcement of a foreign judgment is the foreign judgment itself, and not the right-duty correlatives that resulted in the foreign
judgment. In this particular circumstance, given that the complaint is lodged against an estate and is based on the US District Court's
Final Judgment, this foreign judgment may, for purposes of classification under the governing procedural rule, be deemed as
subsumed under Section 7(b)(3) of Rule 141, i.e., within the class of "all other actions not involving property." Thus, only the blanket filing
fee of minimal amount is required.
Finally, petitioners also invoke Section 11, Article III of the Constitution, which states that "[F]ree access to the courts and quasi-judicial
bodies and adequate legal assistance shall not be denied to any person by reason of poverty." Since the provision is among the
guarantees ensured by the Bill of Rights, it certainly gives rise to a demandable right. However, now is not the occasion to elaborate on
the parameters of this constitutional right. Given our preceding discussion, it is not necessary to utilize this provision in order to grant the
relief sought by the petitioners. It is axiomatic that the constitutionality of an act will not be resolved by the courts if the controversy can
be settled on other grounds73 or unless the resolution thereof is indispensable for the determination of the case. 74
One more word. It bears noting that Section 48, Rule 39 acknowledges that the Final Judgment is not conclusive yet, but presumptive
evidence of a right of the petitioners against the Marcos Estate. Moreover, the Marcos Estate is not precluded to present evidence, if
any, of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. This ruling, decisive as it is on the
question of filing fees and no other, does not render verdict on the enforceability of the Final Judgment before the courts under the
jurisdiction of the Philippines, or for that matter any other issue which may legitimately be presented before the trial court. Such issues
are to be litigated before the trial court, but within the confines of the matters for proof as laid down in Section 48, Rule 39. On the
other hand, the speedy resolution of this claim by the trial court is encouraged, and contumacious delay of the decision on the merits
will not be brooked by this Court.
WHEREFORE, the petition is GRANTED. The assailed orders are NULLIFIED and SET ASIDE, and a new order REINSTATING Civil Case No. 97-
1052 is hereby issued. No costs.
SO ORDERED.

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1

G.R. No. 152154 July 15, 2003

REPUBLIC OF THE PHILIPPINES, petitioner,

BACKGROUND OF THE CASE

(1) Azio-Verso-Vibur Foundation accounts;

(2) Xandy-Wintrop: Charis-Scolari-Valamo-Spinus- Avertina Foundation accounts;

(3) Trinidad-Rayby-Palmy Foundation accounts;

(4) Rosalys-Aguamina Foundation accounts and

(5) Maler Foundation accounts.

There is no issue of fact which calls for the presentation of evidence.

The Motion for Summary Judgment is hereby granted.

Subsequently, petitioner filed its opposition thereto.

1. ADMISSIONS IN PRIVATE RESPONDENTS' ANSWER;

4. ADMISSION IN THE UNDERTAKING TO PAY THE HUMAN RIGHTS VICTIMS.

THE FOREIGN FOUNDATIONS NEED NOT BE IMPLEADED.

PETITIONER HAS A PLAIN, SPEEDY, AND ADEQUATE REMEDY AT THE SANDIGANBAYAN.

PROPRIETY OF PETITIONER'S ACTION FOR CERTIORARI

ISSUES BEFORE THIS COURT

(1) THE PROPRIETY OF SUMMARY JUDGMENT

xxx xxx xxx

ANALYSIS OF RESPONDENTS LEGITIMATE INCOME

Schedule of Income (Annex "T" hereof);

Schedule of Income Tax Paid (Annex "T-1" hereof);

Schedule of Net Disposable Income (Annex "T-2" hereof);

Schedule of Networth Analysis (Annex "T-3" hereof).

G. THE SECRET MARCOS DEPOSITS IN SWISS BANKS

H. THE AZIO-VERSO-VIBUR FOUNDATION ACCOUNTS

J. TRINIDAD-RAYBY-PALMY FOUNDATION ACCOUNTS

K. ROSALYS-AGUAMINA FOUNDATION ACCOUNTS

L. MALER FOUNDATION ACCOUNTS

xxx xxx xxx

4. Respondents ADMIT paragraphs 3 and 4 of the Petition.

xxx xxx xxx

10. Respondents ADMIT paragraph 11 of the Petition.

(a) Respondents' Answer dated October 18, 1993;

(g) Manifestation dated May 26, 1998; and

(h) General/Supplemental Agreement dated December 23, 1993.

An examination of the foregoing pleadings is in order.

• Respondents' Answer dated October 18, 1993.

Section 10, Rule 8 of the 1997 Rules of Civil Procedure, provides:

Respondents' lame denial of the aforesaid allegation was:

(1) the Swiss bank deposits existed and

• PRE-TRIAL BRIEF DATED OCTOBER 18, 1993

(d) the documents or exhibits to be presented, stating the purpose thereof;

• OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

• Demurrer to Evidence dated May 2, 2000;52

Yes, Your Honor.

You do not own anything?

Yes, Your Honor.

Counsel for Irene Araneta?

I join the position taken by my other compañeros here, Your Honor.

• Manifestation dated May 26, 1998 filed by MRS.

We therefore rule that, under the circumstances, summary judgment is proper.

Rule 35 of the 1997 Rules of Civil Procedure provides:

(2) The Propriety of Forfeiture

Ferdinand E. Marcos, as President

Imelda R. Marcos, as Minister

Yes. I have had very many meetings in fact with Chairman.

Would you recall when the first meeting occurred?

In connection with what?

xxx xxx xxx

xxx xxx xxx

So, we are talking about liquid assets here? Just Cash?

xxx xxx xxx