AUGUSTO BENEDICTO SANTOS III, represented by his litigation of any claim that may arise between the airline
een the airline and
father and legal guardian, Augusto Benedicto Santos vs.
NORTHWEST ORIENT AIRLINES and CA
FACTS: The petitioner is a minor and a resident of the
Philippines. Private respondent Northwest Orient Airlines
(NOA) is a foreign corporation with principal office in
Minnesota, U.S.A. and licensed to do business and maintain a
branch office in the Philippines.
On October 21, 1986, the petitioner purchased from NOA a
round-trip ticket in San Francisco. U.S.A., for his flight from
San Francisco to Manila via Tokyo and back. The scheduled
departure date from Tokyo was December 20, 1986. No date
was specified for his return to San Francisco.
On December 19, 1986, the petitioner checked in at the NOA
counter in the San Francisco airport for his scheduled
departure to Manila. Despite a previous confirmation and re-
confirmation, he was informed that he had no reservation for
his flight from Tokyo to Manila. He therefore had to be wait-
listed.
On March 12, 1987, the petitioner sued NOA for damages in
the RTC of Makati. On April 13, 1987, NOA moved to dismiss
the complaint on the ground of lack of jurisdiction, citing
Article 28(1) of the Warsaw Convention, reading as follows:
Art. 28. (1) An action for damage must be brought at the
option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court of the domicile of
the carrier or of his principal place of business, or where he
has a place of business through which the contract has been
made, or before the court at the place of destination.
The private respondent contended that the Philippines was
not its domicile nor was this its principal place of business.
Neither was the petitioner’s ticket issued in this country nor
was his destination Manila but San Francisco in the United
States.
Lower court granted the dismissal, CA affirmed.
ISSUE: WON the Philippines has jurisdiction over the case.
(Issue raised by the party is WON the provision of the Warsaw
convention was constitutional)
HELD: No jurisdiction (the provision is constitutional)
The Convention is a treaty commitment voluntarily assumed
by the Philippine government and, as such, has the force and
effect of law in this country. The petitioner’s allegations are
not convincing enough to overcome this presumption.
Apparently, the Convention considered the four places
designated in Article 28 the most convenient forums for the
its passenger, as distinguished from all other places.
NOTES:
WON Warsaw convention applies.
Convention applies to all international transportation of
persons performed by aircraft for hire. Whether the
transportation is “international” is determined by the contract
of the parties, which in the case of passengers is the ticket.
When the contract of carriage provides for the transportation
of the passenger between certain designated terminals
“within the territories of two High Contracting Parties,” the
provisions of the Convention automatically apply and
exclusively govern the rights and liabilities of the airline and
its passenger.
WON MNL or SFO was the destination.
The place of destination, within the meaning of the Warsaw
Convention, is determined by the terms of the contract of
carriage or, specifically in this case, the ticket between the
passenger and the carrier. Examination of the petitioner’s
ticket shows that his ultimate destination is San Francisco.
Although the date of the return flight was left open, the
contract of carriage between the parties indicates that NOA
was bound to transport the petitioner to San Francisco from
Manila. Manila should therefore be considered merely an
agreed stopping place and not the destination.
WON Northwest has domicile in the Philippines
Notably, the domicile of the carrier is only one of the places
where the complaint is allowed to be filed under Article 28(1).
By specifying the three other places, to wit, the principal place
of business of the carrier, its place of business where the
contract was made, and the place of destination, the article
clearly meant that these three other places were not
comprehended in the term “domicile.”
COMMUNICATION MATERIALS AND DESIGN, INC et al
vs.CA et al.
FACTS: Petitioners COMMUNICATION MATERIALS AND
DESIGN, INC., (CMDI) and ASPAC MULTI-TRADE INC., (ASPAC)
are both domestic corporations.. Private Respondents ITEC,
INC. and/or ITEC, INTERNATIONAL, INC. (ITEC) are
corporations duly organized and existing under the laws of
the State of Alabama, USA. There is no dispute that ITEC is a
foreign corporation not licensed to do business in the
Philippines.
ITEC entered into a contract with ASPAC referred to as
“Representative Agreement”. Pursuant to the contract, ITEC
engaged ASPAC as its “exclusive representative” in the
Philippines for the sale of ITEC’s products, in consideration of
which, ASPAC was paid a stipulated commission. Through a
“License Agreement” entered into by the same parties later
on, ASPAC was able to incorporate and use the name “ITEC”
in its own name. Thus , ASPAC Multi-Trade, Inc. became
legally and publicly known as ASPAC-ITEC (Philippines).
One year into the second term of the parties’ Representative
Agreement, ITEC decided to terminate the same, because
petitioner ASPAC allegedly violated its contractual
commitment as stipulated in their agreements. ITEC charges
the petitioners and another Philippine Corporation, DIGITAL
BASE COMMUNICATIONS, INC. (DIGITAL), the President of
which is likewise petitioner Aguirre, of using knowledge and
information of ITEC’s products specifications to develop their
own line of equipment and product support, which are
similar, if not identical to ITEC’s own, and offering them to
ITEC’s former customer.
The complaint was filed with the RTC-Makati by ITEC, INC.
Defendants filed a MTD the complaint on the following
grounds: (1) That plaintiff has no legal capacity to sue as it is
a foreign corporation doing business in the Philippines
without the required BOI authority and SEC license, and (2)
that plaintiff is simply engaged in forum shopping which
justifies the application against it of the principle of “forum
non conveniens”. The MTD was denied.
Petitioners elevated the case to the respondent CA on a
Petition for Certiorari and Prohibition under Rule 65 of the
Revised ROC. It was dismissed as well. MR denied, hence this
Petition for Review on Certiorari under Rule 45.
ISSUE:
1. Did the Philippine court acquire jurisdiction over the
person of the petitioner corp, despite allegations of lack of
capacity to sue because of non-registration?
2. Can the Philippine court give due course to the suit or
dismiss it, on the principle of forum non convenience?
HELD: petition dismissed.
1. YES; We are persuaded to conclude that ITEC had been
“engaged in” or “doing business” in the Philippines for some
time now. This is the inevitable result after a scrutiny of the
different contracts and agreements entered into by ITEC with
its various business contacts in the country. Its arrangements,
with these entities indicate convincingly that ITEC is actively
engaging in business in the country.
A foreign corporation doing business in the Philippines may
sue in Philippine Courts although not authorized to do
business here against a Philippine citizen or entity who had
contracted with and benefited by said corporation. To put it
in another way, a party is estopped to challenge the
personality of a corporation after having acknowledged the
same by entering into a contract with it. And the doctrine of
estoppel to deny corporate existence applies to a foreign as
well as to domestic corporations. One who has dealt with a
corporation of foreign origin as a corporate entity is
estopped to deny its corporate existence and capacity.
In Antam Consolidated Inc. vs. CA et al. we expressed our
chagrin over this commonly used scheme of defaulting local
companies which are being sued by unlicensed foreign
companies not engaged in business in the Philippines to
invoke the lack of capacity to sue of such foreign companies.
Obviously, the same ploy is resorted to by ASPAC to prevent
the injunctive action filed by ITEC to enjoin petitioner from
using knowledge possibly acquired in violation of fiduciary
arrangements between the parties.
2. YES; Petitioner’s insistence on the dismissal of this action
due to the application, or non application, of the private
international law rule of forum non conveniens defies well-
settled rules of fair play. According to petitioner, the
Philippine Court has no venue to apply its discretion whether
to give cognizance or not to the present action, because it
has not acquired jurisdiction over the person of the plaintiff in
the case, the latter allegedly having no personality to sue
before Philippine Courts. This argument is misplaced because
the court has already acquired jurisdiction over the plaintiff in
the suit, by virtue of his filing the original complaint. And as
we have already observed, petitioner is not at liberty to
question plaintiff’s standing to sue, having already acceded to
the same by virtue of its entry into the Representative
Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine
Court, based on the facts of the case, whether to give due
course to the suit or dismiss it, on the principle of forum non
convenience. Hence, the Philippine Court may refuse to
assume jurisdiction in spite of its having acquired jurisdiction.
Conversely, the court may assume jurisdiction over the case if
it chooses to do so; provided, that the following requisites are
met:
1) That the Philippine Court is one to which the parties may
conveniently resort to;
2) That the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and,
3) That the Philippine Court has or is likely to have power to
enforce its decision.
The aforesaid requirements having been met, and in view of
the court’s disposition to give due course to the questioned
action, the matter of the present forum not being the “most
convenient” as a ground for the suit’s dismissal, deserves
scant consideration.
FIRST PHILIPPINE INTERNATIONAL BANK VS COURT OF
APPEALS
FACTS: The Bank has been under conservatorship since 1984.
It is the owner of 6 parcels of land. The Bank had an
agreement with Demetria to purchase the parcels of land. The
said agreement was made by Demetria with the Bank’s
manager, Rivera. Thereafter, they had a series of letters
consisting of offers, counter-offers and acceptance of the
counter- offer by Demetria. Later however, the Bank, through
its conservator, Encarnacion, sought the repudiation of the
agreement as it alleged that Rivera was not authorized to
enter into such an agreement. Hence there was no valid
contract of sale. Subsequently, Demetria sued the Bank. The
RTC ruled in favor of Demetria. The Bank filed an appeal with
the Court of Appeals.
Meanwhile, Henry Co, who holds 80% shares of stocks with
the said Bank, filed a motion for intervention with the trial
court which was denied since the trial has been concluded
already and the case is now pending appeal. Subsequently,
Henry Co, filed a separate civil case against Ejercito as
successor-in-interest (assignee) of Demetria seeking to have
the purported contract of sale be declared unenforceable
against the Bank. Ejercito argued that the second case
constitutes forum shopping since it was barred by litis
pendentia by virtue of the case then pending in the Court of
Appeals. But petitioners explain that there is no forum-
shopping because in the “First Case” from which this
proceeding arose, the Bank was impleaded as a defendant,
whereas in the “Second Case” it was the plaintiff.
The Bank also argued the following: (1) that there contract of
sale was not yet perfected since it lacks cosent since the Bank
did not make a counter-offer; (2) that the contract is
unenforceable since there is no note, memorandum or
writing subscribed by the Bank to evidence such contract; (3)
that the conservator has the power to revoke or overrule
actions of the management or the board of directors of a
bank under Section 28-A of Republic Act No. 265 hence the
conservator can revoke the said contract between the Bank
and Demetria; and (4) that respondent Court's Decision as
"fraught with findings and conclusions which were not only
contrary to the evidence on record but have no bases at all"
hence questions of fact must be reviewed by SC.
Issue: WON there is forum shopping.
Held: To begin with, forum-shopping originated as a concept
in private international law. where non-resident litigants are
given the option to choose the forum or place wherein to
bring their suit for various reasons or excuses, including to
secure procedural advantages, to annoy and harass the
defendant, to avoid overcrowded dockets, or to select a more
friendly venue. To combat these less than honorable excuses,
the principle of forum non conveniens was developed
whereby a court, in conflicts of law cases, may refuse
impositions on its jurisdiction where it is not the most
"convenient" or available forum and the parties are not
precluded from seeking remedies elsewhere.
In this light, Black's Law Dictionary 13 says that forum
shopping "occurs when a party attempts to have his action
tried in a particular court or jurisdiction where he feels he will
receive the most favorable judgment or verdict." Hence,
according to Words and Phrases14 , "a litigant is open to the
charge of "forum shopping" whenever he chooses a forum
with slight connection to factual circumstances surrounding
his suit, and litigants should be encouraged to attempt to
settle their differences without imposing undue expenses and
vexatious situations on the courts".
In the Philippines, forum shopping has acquired a
connotation encompassing not only a choice of venues, as it
was originally understood in conflicts of laws, but also to a
choice of remedies. As to the first (choice of venues), the
Rules of Court, for example, allow a plaintiff to commence
personal actions "where the defendant or any of the
defendants resides or may be found, or where the plaintiff or
any of the plaintiffs resides, at the election of the plaintiff"
(Rule 4, Sec, 2 [b]). As to remedies, aggrieved parties, for
example, are given a choice of pursuing civil liabilities
independently of the criminal, arising from the same set of
facts. A passenger of a public utility vehicle involved in a
vehicular accident may sue on culpa contractual, culpa
aquiliana or culpa criminal — each remedy being available
independently of the others — although he cannot recover
more than once.
In either of these situations (choice of venue or choice of
remedy), the litigant actually shops for a forum of his action,
This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of
the forum of their actions, litigants, through the
encouragement of their lawyers, file their actions in all
available courts, or invoke all relevant remedies
simultaneously. This practice had not only resulted to (sic)
conflicting adjudications among different courts and
consequent confusion enimical (sic) to an orderly
administration of justice. It had created extreme
inconvenience to some of the parties to the action.
Thus, "forum shopping" had acquired a different concept —
which is unethical professional legal practice. And this
necessitated or had given rise to the formulation of rules and
canons discouraging or altogether prohibiting the practice.
15
What therefore originally started both in conflicts of laws and
in our domestic law as a legitimate device for solving
problems has been abused and mis-used to assure scheming
litigants of dubious reliefs.
YES. Forum-shopping is whenever, as a result of an adverse
opinion in one forum, a party seeks a favorable opinion (other
than by appeal or certiorari) in another. Forum shopping
exists where the elements of litis pendentia are present
namely: (1) identity of parties, or at least such parties as
represent the same interests in both actions, as well as (2)
identity of rights asserted and relief prayed for, (3) the relief
being founded on the same facts, and the (4) identity on the
two preceding particulars is such that any judgment rendered
in the other action, will, regardless of which party is
successful, amount to res adjudicata in the action under
consideration.
In the instant case, there is forum shopping because there
exist identity of parties or interests represented, identity of
rights or causes and identity of reliefs sought between the
first case and the second case. There is identity of parties
even though the first case is in the name of the bank as
defendant, and the second case is in the name of Henry Co as
plaintiff since the rule applies even if the the defendant in the
first case becomes the plaintiff in the second case.
Furthermore, allegations of the complaint in the Second Case
show that the stockholders are bringing a "derivative suit".
Being a derivative suit would mean that Henry Co in filing the
case is really representing the Bank. So, whether they sued
"derivatively" or directly, there is undeniably an identity of
interests/entity represented. There is also identity of relief
being sought since both cases seeks to enable the petitioner
Bank to escape from the obligation to sell the property to
respondent.
MHC AND MHICL vs. NLRC et al
FACTS: private respondent Santos was an overseas worker
employed as a printer at the Mazoon Printing Press, Sultanate
of Oman. Subsequently 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 (“MHC”) and the
Manila Hotel International Company, Limited (“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. MHC is an “incorporator” of MHICL,
owning 50% of its capital stock.
By virtue of a “management agreement” with the Palace
Hotel, MHICL trained the personnel and staff of the Palace
Hotel at Beijing, China.
Now the facts.
During his employment with the Mazoon Printing Press,
respondent Santos received a letter from Mr. Shmidt, General
Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed
respondent Santos that he was recommended by one Buenio,
a friend of his. Mr. Shmidt offered respondent Santos the
same position as printer, but with a higher monthly salary and
increased benefits. Respondent Santos wrote to Mr. Shmidt
and signified his acceptance of the offer.
The Palace Hotel Manager, Mr. Henk mailed a ready to sign
employment contract to respondent Santos. Santos resigned
from the Mazoon Printing Press. Santos wrote the Palace
Hotel and acknowledged Mr. Henk’s letter. The employment
contract stated that his employment would be for a period of
two years. He then started to work at the Palace Hotel.
Subsequently, respondent Santos signed an amended
“employment agreement” with the Palace Hotel. In the
contract, Mr. Shmidt represented the Palace Hotel. The Vice
President (Operations and Development) of petitioner MHICL
Cergueda signed the employment agreement under the word
“noted”.
After working in the Palace hotel for less than 1 year, 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. The Palace Hotel
terminated the employment of Santos and paid all benefits
due him, including his plane fare back to the Philippines.
Santos was repatriated to the Philippines.
Santos filed a complaint for illegal dismissal with the
Arbitration Branch, NCR, NLRC. He prayed for an award of AD,
ED and AF 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 LA.
The LA decided the case against petitioners. Petitioners
appealed to the NLRC, arguing that the POEA, not the NLRC
had jurisdiction over the case. The NLRC promulgated a
resolution, stating that the appealed Decision be declared
null and void for want of jurisdiction
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. The NLRC
granted the motion and reversed itself. The NLRC directed
another LA to hear the case on the question of whether
private respondent was retrenched or dismissed. The La
found that 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. The NLRC ruled in favor of private respondent.
Petitioners filed an MR arguing that the LA’s recommendation
had no basis in law and in fact, however it was denied. Hence,
this petition.
ISSUE: Is the NLRC a proper forum to decide this case?
HELD: petition granted; the orders and resolutions of the
NLRC are annulled.
NO
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 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.
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.
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).
The employment contract was not perfected in the
Philippines. 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
Santos’ retrenchment.
Principle of effectiveness, no power to execute decision. —
Even assuming that a proper decision could be reached by
the NLRC, such would not have any binding effect against the
employer, the Palace Hotel. The Palace Hotel is a corporation
incorporated under the laws of China and was not even
served with summons. Jurisdiction over its person was not
acquired.
This is not to say that Philippine courts and agencies have no
power to solve controversies involving foreign employers.
Neither are we saying that we do not have power over an
employment contract executed in a foreign country. If Santos
were an “overseas contract worker”, a Philippine forum,
specifically the POEA, not the NLRC, would protect him. He is
not an “overseas contract worker” a fact which he admits with
conviction.
__
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 50% of its
capital stock. However, this is not enough to pierce the veil of
corporate fiction between MHICL and MHC. In Traders Royal
Bank v. CA, 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.”
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.
III. MHICL not Liable
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, 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. 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.
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:
“(1) the selection and engagement of the employee;
“(2) the payment of wages;
“(3) the power to dismiss; and
“(4) the power to control employee’s conduct.”
MHICL did not have and did not exercise any of the
aforementioned powers. It did not select respondent Santos
as an employee for the Palace Hotel. He was referred to the
Palace Hotel by his friend, Buenio. MHICL did not engage
respondent Santos to work. The terms of employment were
negotiated and finalized through correspondence between
Santos, Mr. Schmidt and Mr. Henk, who were officers and
representatives of the Palace Hotel and not MHICL. Neither
did 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.
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.
Considering that the NLRC was forum non-conveniens and
considering further that no employer-employee relationship
existed between MHICL, MHC and Santos, the LA clearly had
no jurisdiction over respondent’s claim in the NLRC case. In
all the cases under the exclusive and original jurisdiction of
the LA, an employer-employee relationship is an
indispensable jurisdictional requirement.
ISLAMIC REPUBLIC OF IRAN V. PAHLAVI (1984)
The lawsuit in the present action, filed June 30, 1981,
apparently came in the wake of a great social upheaval in the
country of Iran during which the Shah of Iran fled around
January 16, 1979. The complaint filed on behalf of the present
government of Iran, alleges a series of rather conclusionary
malefactions and conspiracies, and modestly asks for
damages in the amount of $3 billion together with exemplary
damages in the amount of $10 million. Interestingly enough,
one of the codefendants, Ierspex Finance N.V., admitting the
complaint allegation that it is a Netherlands Antilles
Corporation but denying that it does business in Los Angeles
County, California, filed an answer to the complaint on
August 27, 1982. Apparently, no further proceedings have
taken place with respect to the parties plaintiff and defendant
Ierspex Finance N.V., and its status is not part of the present
appeal.
After unsuccessfully attempting personal service of summons
and complaint upon the defendant Shams Pahlavi, aka H.I.H.
Princess Shams Pahlavi, as designated in the complaint (and
hereinafter referred to as Pahlavi), the plaintiff obtained an ex
parte order in the superior court for substituted service of
process by publication. On April 22, 1982, on behalf of the
defendant Pahlavi was filed a document in the proceedings
indicating a special appearance was being made "to quash
service of summons for lack of personal jurisdiction, " and at
the same time notice was given of a motion "for limited
discovery re jurisdiction," reciting in the heading of the
document "Special Appearance Only." A series of legal
maneuvers commenced at this stage by counsel on behalf of
the respective parties, not only at the trial court level but by
writ petition to the Court of Appeal and the California
Supreme Court; which adroit proceedings have little except
historic significance at this stage. Defendant Pahlavi posed a
motion to dismiss the plaintiff's complaint on January 14,
1983, which was heard in conjunction with the previously filed
motion to quash service of summons by the [160 Cal. App. 3d
624] trial court on May 20, 1983. The matter having been
submitted, was determined by the trial court on May 24,
1983, with the issuance of the following terse order: "Motion
of Defendant Pahlavi to quash summons and motion for [sic]
dismissing the action with prejudice is granted on all grounds
stated therein. Sanctions and costs are granted as prayed."
On June 7, 1983, the trial court signed and filed a judgment in
sequel to the May 24, 1983, decision including the following
language: "It Is Hereby Ordered, Adjudged and Decreed that:
"1. The Order for Publication of Summons or Citation issued
herein on December 3, 1981, is hereby vacated;
"2. The attempted service of process pursuant to said Order,
being void and invalid ab initio, is hereby quashed;
"3. The complaint on file herein shall be, and is hereby,
dismissed with prejudice as to defendant Shams Pahlavi; and
"4. Defendant Shams Pahlavi shall have and recover from
plaintiff, the Islamic Republic of Iran, her costs of suit
herein ...." Interestingly enough, plaintiff filed a notice of
appeal on June 30, 1983, not from the judgment of June 7,
1983, but from the trial court's minute order of May 24, 1983.
Issues
The briefs on behalf of the two parties here leave us
somewhat perplexed as to what are thought to be the issues
to be resolved. After a careful review of the record and the
presentations made from time to time in the trial court (the
clerk's transcript consists of 1, 975 pages), it would seem that
the points in controversy should be as follows:
A. Do the Algerian Accords between the United States and
the Islamic Republic of Iran place the present lawsuit in a
special category of litigation, exempted from the usual
jurisdictional requirements?
B. Were the requirements of the California law fulfilled in this
case with respect to substituted service of process?
C. Was the trial court justified in vacating the order for
publication made by Commissioner John R. Alexander on
December 3, 1981?
D. Was the appearance of the defendant and respondent
Pahlavi in this cause of a general significance, precluding a
quashing by the trial court of service of summons? [160 Cal.
App. 3d 625]
E. Was the trial court justified in dismissing with prejudice the
plaintiff's action against the defendant Pahlavi?
F. Was the pattern of sanctions and costs levied against the
plaintiff by the trial court justified?
Discussion
There is initially a technical problem: The plaintiff's appeal
purports to have been taken from the trial court's minute
order of May 24, 1983. A judgment was signed and filed, in
conformity with the May 24, 1983, minute order on June 7,
1983. We shall assume that plaintiff's appellate designation
inadvertently omitted the latter document and shall treat the
appeal as involving both documents.
The evidentiary posture of the Algerian Accords, which were
developed between the United States and the Islamic
Republic of Iran is somewhat obscure. Nevertheless, the
provisions of the Algerian Accords are carried in the appendix
to appellant's brief and are, as such, fully commented upon in
respondent Pahlavi's brief.
[1] The Algerian Accords carry no language with respect to
the affirmative duties of American state courts as to litigation
about Iranian assets. So, we are not concerned with the
impact of federal treaty power on the jurisdiction of a state
court or the operation of local legislation or rules as to status.
We can assume without deciding that the language of
paragraph 14 in the General Declaration of the Algerian
Accords, where it speaks of "United States courts, " includes
state courts as well as federal courts. The provision simply
states that the "claims of Iran should not be barred either by
sovereign immunity principles or by the act of state doctrine."
The situation of this lawsuit involving the present two parties
has never reached the state where affirmative defenses of the
defendant Pahlavi are even a factor of consideration. A rather
telling summary of the legal situation in the light of the
Algerian Accords is contained at page 25 of appellant's
opening brief: "The return of the assets of the former royal
family was from the very beginning a fundamental demand of
the Iranian government. The position of the United States
government was equally clear: it would not, indeed could not,
commit itself to a summary seizure of property in the United
States from any member of the former royal family. The only
way such assets could be returned was pursuant to an
adjudication by a U. S. court in accordance with due process
of law." Presumably, we could also add that any parties
before an American court are constitutionally entitled to the
equal protection of our laws. Succinctly put, each litigant
before our courts may be expected to comply with the same
standards required of [160 Cal. App. 3d 626] any other
litigant. The basic question here, then, is not one of exclusion
of a litigant, but whether or not the plaintiff and appellant
placed itself under our legislation and rules in a position of
having accomplished service of process on the defendant and
respondent Pahlavi. We hold that there is no special category
of Iranian litigant. In this connection, we can only hope that
an American judge assigned to a matter such as the present
may fare better than a Swedish judge. fn. 1
[2a] The plaintiff urges that summons was properly served on
the defendant Pahlavi in this action by the substituted
method of publication. The requirements for this form of
service are set out in section 415.50 of the Code of Civil
Procedure. fn. 2 From the evidence and showings made
before [160 Cal. App. 3d 627] the trial court, as well as the
inference from contentions made here, it is obvious that we
are not concerned with subdivisions (b), (c), (d) and (a)(2). Did
the plaintiff fulfill the requirements of subdivision (a) and
subdivision (a)(1)? Although there could be some challenge
considered with respect to the "reasonable diligence"
exercised in attempted service under subdivision (a), (Donel,
Inc. v. Badalian (1978) 87 Cal. App. 3d 327 [150 Cal.Rptr. 855]),
on the whole it appears that the trial court commissioner
acted in this regard within his discretion in signing the order
for publication dated December 3, 1981. The remaining
fundamental question, under subdivision (a)(1), is whether
"upon affidavit it appears to the satisfaction of the court ...
that .... A cause of action exists against the party upon whom
service is to be made ...."
On December 3, 1981, it is recited in the order for publication
prepared by plaintiff's counsel and signed by the trial court
commissioner that the complaint has been read as well as the
declarations of Phyllis Bennis, Brian O'Dwyer and Robert
Kennedy, and that the defendant Pahlavi cannot be "served
with reasonable diligence." The order further recites that "it
also appearing from the Declaration of Mohammed T.
Sadeghi that a good cause of action exists in this action in
favor of the plaintiff ... and against the defendant" (Pahlavi)
and that service of summons may be made upon said
defendant by publication. Initially, it is obvious that the
complaint was asserted to have been read on the "reasonable
diligence" question alone. If for a wider purpose, the Sadeghi
verification of the complaint would seem clearly insufficient.
The notary public area is blank. There has been no
compliance with Code of Civil Procedure section 2015.5,
subdivision (b). The rubber stamp mark of the Embassy of
Algeria in Washington, purports to authenticate nothing in
particular. Probably because of the verification shortcomings,
the words in the order for publication, "verified complaint or
petition" have been lined out and a superscription
"Declaration of Mohammed T. Sadeghi" inserted, followed by
the initials T. W. K. (presumably one of plaintiff's counsel). The
"Affidavit" of Mohammed T. Sadeghi, probably qualifies as a
declaration under Code of Civil Procedure section 2015.5,
subdivision (b). However, its contents are a medley of
conclusions and political declamation and certainly fails to
formulate a comprehensible cause of action. It is dubious
whether it would qualify for its expressed purpose if the true
test of sufficiency "'"is whether it has been drawn in such a
manner that perjury could be charged thereon if any material
allegation [160 Cal. App. 3d 628] contained therein is false."'"
(Tri-- State Mfg. Co. v. Superior Court (1964) 224 Cal. App. 2d
442, 445 [36 Cal. Rptr. 750].)
In the present situation, the ruling of the trial judge on May
24, 1983, was based upon additional information not
disclosed at the time the publication order was obtained on
December 3, 1981. Apparently, from his later--taken
deposition, the declarant Sadeghi was in school in Texas
between 1973 and 1979, and after spending a few months in
1979 within Iran after the Shah's departure, returned to the
United States, remaining until April of 1982. There is no
indication that on May 24, 1983, or at any earlier date Mr.
Sadeghi could have been designated as a witness in this
cause for any purpose other than the formal identification of
documents, the contents of which so far presented are of
highly speculative admissibility. [3] "For the purpose of
service by publication, the existence of a cause of action is a
jurisdictional fact." (Harris v. Cavasso (1977) 68 Cal. App. 3d
723, 726 [137 Cal. Rptr. 410].) [2b] It is rather apparent that
jurisdictional facts were missing from this case on December
3, 1981, and by May 24, 1983, it was pellucidly clear that they
had been missing from the beginning. It is not enough that
the verifying and declaring witness' familiarity with the facts
in an application for a substituted service order be based up
on what is termed "common knowledge of the Iranian
people." Even the translated documents from Iran appear to
give no support to a cause of action. [4] California law has
long authorized the setting aside of a publication order
where fraud or lack of jurisdictional facts are apparent from
an examination of the affidavit for publication. (Narum v.
Cheatham (1932) 127 Cal. App. 505, 507 [15 P.2d 1106].)
[5] A contention is made that the defendant Pahlavi, in posing
the motion to quash in this case, in taking the deposition of
Mohammed T. Sadeghi, in posing interrogatories and in
examining certain of plaintiff's documents actually made a
general appearance. As noted in the case cited by plaintiff-
appellant, the determination of when a party has made a
special appearance depends on a number of circumstances
and is a judicial determination. (1880Corp. v. Superior Court
(1962) 57 Cal. 2d 840, 843 [22 Cal. Rptr. 209, 371 P.2d 985].) It
appears that there was adequate ground for the learned trial
judge in this case to implicitly determine that the appearance
of defendant Pahlavi was special.
[6a, 7a] The trial court may properly exercise its power of
sanctions and other forms of coercion to prevent an abuse of
process. (Code Civ. Proc., § 2034; Neal v. Bank of America
(1949) 93 Cal. App. 2d 678 [209 P.2d 825]; Taliaferro v.
Prettner (1955) 135 Cal. App. 2d 157 [286 P.2d 977].) [6b] We
feel that the costs and sanctions imposed were basically
reasonable and justified under the circumstances (Pritchard v.
Southern Pacific [160 Cal. App. 3d 629] Co. (1935) 9 Cal. App.
2d 704 [51 P.2d 428]; In re Marriage of Lemen (1980) 113 Cal.
App. 3d 769 [170 Cal. Rptr. 642].) [7b] Were the matter
completely at issue, failure to comply under Code of Civil
Procedure section 2034 might justify dismissal of the action.
In the present posture of the case, however, the parties have
cited us to no applicable case law on the point and we have
found none by independent research. Where the moving
defendant has specially appeared and achieved the essential
purpose of quashing the service of summons by publication,
can the ultimate sanction of dismissal of the action itself be
imposed? Logically, it would seem not because presently the
defendant Pahlavi (except for the collection of costs and
financial sanctions) is now completely removed from
plaintiff's action. The discovery actually obtained was
sufficient for the defendant's purpose and the fact that some
proper discovery has been frustrated is of little consequence.
In a general appearance situation on the contrary, dismissal
of an action may be the only adequate relief. Accordingly,
from the minute order of May 24, 1983, the superior court is
ordered to strike the phrase "and motion for [sic] dismissing
the action with prejudice;" from the judgment of June 7, 1983,
there will be stricken the phrase "The complaint on file herein
shall be, and is hereby, dismissed with prejudice as to
defendant Shams Pahlavi." The actions of the trial court in all
other particulars are affirmed.
PIPER AIRCRAFT CO. V. REYNO
Facts
In 1976, a small commercial aircraft crashed in Scotland,
killing the pilot and five passengers. The deceased were all
Scottish citizens and residents. The plane was manufactured
in Pennsylvania by Piper Aircraft Co. (defendant), and the
propellers were manufactured in Ohio by Hartzell Propeller,
Inc. (defendant). Gaynell Reyno (plaintiff), the administratrix of
the passengers' estates, filed wrongful-death actions against
Piper and Hartzell in California state court, alleging
negligence and strict liability. Reyno admitted to filing the
action in the United States because its laws were more
favorable to her case than those of Scotland. Piper and
Hartzell removed to federal district court in California and
then sought a transfer to the Middle District of Pennsylvania.
The California district court granted the motions. After both
cases were moved to federal district court in Pennsylvania,
Piper and Hartzell sought to dismiss the case on grounds of
forum non conveniens. The Pennsylvania district court
granted the motions, citing the discretion courts have to
dismiss a case if an alternative forum has jurisdiction to hear
the case and if trial in the chosen forum would be
burdensome to the defendant. The United States Court of
Appeals for the Third Circuit reversed on the ground that
dismissal for forum non conveniens is not appropriate if the
law of the alternative forum is less favorable to the plaintiff.
The United States Supreme Court granted certiorari.
ISSUE:
Does the possibility of an unfavorable change of the law in
plaintiff’s home forum bar dismissal under forum non
convenient (Transfer to a More Convenient Forum)?
ANSWER:
No, the possibility of an unfavorable change in the law should
not, by itself, bar dismissal.
CONCLUSION:
The possibility of an unfavorable change in the law in
Scotland should not, by itself, bar dismissal. The court held
that plaintiffs may not defeat a motion to dismiss on the
ground of forum non conveniens merely by showing that the
substantive law that would be applied in the alternative
forum is less favorable to the plaintiffs than that of the
chosen forum, since the possibility of a change in substantive
law should ordinarily not be given conclusive or even
substantial weight in the forum non conveniens inquiry. In
this case the proper forum was Scotland given that fewer
evidentiary problems would be posed if the trial were held in
Scotland; the inability to implead potential third party
defendants clearly supported holding the trial in Scotland;
and public interest favored trial in Scotland, the accident
having occurred in its air space, all the decedents being
Scottish, and apart from the manufacturers, all potential
plaintiffs and defendants being either Scottish or English.