SECTION BH UNIVERSITY OF CEBU ATTY.

ALIMANGOHAN

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I. CONTRACTS

#98 Molina v. DOCTRINE:

dela Riva, 6 CIVIL PROCEDURE; ACTION; COMPLAINT; RESIDENCE. — A personal action to
Phil. 12 (1906) recover a debt may be brought, under section 377 of the Code of Civil procedure,
either in the Court of First Instance of the province where the plaintiff resides or in
Topic: that where the defendant may reside, at the election of the plaintiff. The residence in
Contracts such a case should be that which the parties had at the time of the commencement
of the action and not prior thereto.
Digested by:
Cagampang, Emi JURISDICTION; STIPULATION; PARTIES TO ACTION. — The law does not
authorize parties litigant to submit themselves, by express stipulation, to the
jurisdiction of a particular court, to the exclusion of the court duly vested with such
jurisdiction. An express agreement tending to deprive a court of the jurisdiction
conferred on it by law is void and of no legal effect.

MEXICAN CURRENCY; EVIDENCE. — When the value of Mexican currency in

Philippine currency as stated in the complaint has been admitted by the defendant
through his failure to deny, dispute, or controvert the same, it shall not be necessary
for the court to hear evidence upon this point. The proof required by section 3 of Act
No. 1045 is only necessary when the parties disagree as to the actual value of either
currency.

FACTS:

Petitioner - Rafael Molina y Salvador

Respondent - Antonio dela Riva

This is an action to recover a debt due upon a contract, whereby plaintiff

transferred to the defendant the abaca and coprax business theretofore carried on
by him at various places in the Island of Catanduanes, with all the property and right
pertaining to the said business, payable in Mexican currency or its equivalent in
local currency. Defendant paid at the time of the execution of the contract, on
account of the purchase price, promising to pay the balance on three instalments
with interest at the rate of 5 per cent per annum from the date of the contract. The
first instalment became due July 27, 1904. It was for the recovery of this first
instalment that their action was brought in the CFI Manila.

Defendant demurred to the complaint on the ground that the court had no
jurisdiction of the subject of the action. The court overruled the demurrer and
defendant refused to and did not answer plaintiff’s complaint.

Judgment having been rendered in favor of the plaintiff for the sum of 33,659 pesos
and 3 cents, Mexican currency, equal to 30,052 pesos and 70 centavos, Philippine
currency, an interest thereon at the rate of 5 per cent per annum from July 27, 1903
and costs, the defendant duly excepted.

ISSUES:
1. WON the court had no jurisdiction of the subject of the action. YES.
2. WON the court erred in fixing in Philippine currency the sum which the
appellee should recover, without hearing evidence as to the relative value of
Mexican and Philippine currency. NO.
3. WON the court erred in taking into consideration as the basis of its judgment
the contract in question, the same being null and void because it did not bear
the internal-revenue stamp. NO - contract valid

RULING:
1. Yes, the court had jurisdiction over the subject of the action.

A personal action like this for the record of a debt may be brought, under section
377 of the Code of the Civil Procedure, in the CFI of the province where the
plaintiff resides or in the province where the defendant may reside, at the election of
the plaintiff. Both parties to this case being residents the city of Manila, it is apparent
that the CFI Manila had jurisdiction to try and determine this action.

It is alleged in support of this contention that plaintiff and defendant were residents of
the Island of Catanduanes, as would appear, as the plaintiff is concerned, from a
power of attorney, executed by him to Antonio Vallejo Valencia and introduced in
evidence during the trial. The instrument in fact contains the statement that plaintiff
was a resident of Catanduanes. Nothing is said however, either in the power of
attorney or in the contract upon which this action is based, as to the residence of the
defendant.

The complaint was filed March 10, 1905, and it alleges that both plaintiff and
defendant were residents of the city of Manila. This allegation was not either
generally or specifically denied by the defendant, who refused and failed to give an
answer to the complaint, having merely demurred thereto. This allegation, therefore,
must be demurred admitted. The power of attorney above referred to having been
executed in August, 1901, does not and can not by itself prove that the parties were
not residents of the city of Manila in March, 1905, when the complaint was filed. The
actual residence, and not that which the parties had four years, prior to the filing of
the complaint, is the one that should govern the question as to the jurisdiction of the
court.

It is further urged in support of the alleged want of jurisdiction on the part of the court
below, that the parties had mutually designated in the contract in question the
town of Bato, Islands of Catanduanes, as the place where all judicial and extrajudicial
acts necessary under the terms thereof should take place. Paragraph 9 of the
contract contains in fact a stipulation to that effect. This, the appellant claims,
amounted to an express submission by the contracting parties to jurisdiction of the
CFI of the Province of Albay, in which the town of Bato was located, all other courts
being thereby inhibited from exercising jurisdiction over actions arising under the
contract.

Articles 1255 and 1278 of the Civil Code relied upon by the appellant in his brief
are not applicable to cases relating to the jurisdiction of courts. The Law of
Procedure and not the Civil Code Case and defines the jurisdiction of courts. It is not
true as contended by the appellant that the right which litigants had under the
Spanish law to submit themselves to the jurisdiction of a particular court was
governed by the provisions of the Civil Code. Such right was recognized and
governed by the provisions of the Law of Procedure and not by the substantive law.
The right to contract, recognized in the Civil Code and referred to by appellant,
has nothing to do with the right to establish and fix the jurisdiction of a court.
This right can only be exercised by the legislative branch of the Government, the only
one vested with the necessary power to make rules governing the subject. In this
connection it may be said that the jurisdiction of a court can not be the subject-matter
of a contract.

We are of the opinion that the designation of the town of Bato made by the parties
had no legal force and could not have the effect of depriving the CFI Manila of the
jurisdiction conferred on it by law. This would be true even though it may be granted
that the parties actually intended to waive the rights of domicile and expressly submit
themselves to the exclusive jurisdiction of the CFI Albay, contended the appellant, all
of which it may be said seems to be very doubtful, judging from the vague and
uncertain manner in which the designation was made. The jurisdiction of a court is
filed by law and not by the will of the parties. As a matter of public policy, parties can
only stipulate in regard to that which is expressly authorized by law. Section 377 of
the Code of Civil Procedure provides a plain and definite rule for the purpose of
determining the jurisdiction of courts according to the nature of the action. Neither
that section nor any other provision of law, of which we have any knowledge,
authorizes the parties to submit themselves by an express stipulation to the
jurisdiction of a particular court to the exclusion of the court duly vested with such
jurisdiction.

2. No, the court was correct in fixing in Philippine currency the sum which
the appellee should recover.

The proof required by section 3 of Act No. 1045, cited by the appellant, should be
received only when the parties disagree as to the relative value of the currency.
The court below did not err in not hearing evidence upon this point, even under the
assumption that no such evidence as heard in regard thereto, as claimed by the
Appellant.

In paragraph 4 of the complaint it is alleged that —

"Under the terms of the contract the actual amount due from defendant to
plaintiff, converted into Philippine currency is 28,049 pesos and 19 centavos
. . ."

This contention was not denied by the defendant, who, as has been said before,
simply demurred to the complaint. Plaintiff’s allegation must therefore be deemed
admitted. Consequently it was not necessary for the court to hear evidence as to
the relative value of Mexican and Philippine currency. There is no dispute
between the parties as to the fact that the 33,659 pesos and 3 Cents, Mexican
currency, referred to in the contract, were equal to 28,049 pesos and 19 centavos,
Philippine currency, at the time of the filing of the complaint.

3. No, the court was correct in taking into consideration as the basis of its
judgment the contract in question because the same is valid.

Act No. 1045 of the Philippine Commission, particularly the provisions of sections
9 and 10 of the act provides:

Section 9. “Every check, draft, note, bond, bill of exchange, and every
contract whatsoever payable in local currency . . . shall be presumably
subject to the taxes levied in accordance with the provisions of this act, and
 the obligation shall rest upon the drawer or maker, or holder or
beneficiary . . . who claims exemption, to prove that he is entitled to any
of the exemptions provided in this act. No check, draft, note, bond, bill of
exchange, or any contract whatsoever payable in local currency shall be
exempted from the payment of the stamp tax provided for in sections six and
seven of this act unless the contract for which exemption is claimed shall be
registered with the Collector of Internal Revenue or his deputy before
October 1, 1904, and a certificate be attached thereto by the Collector of
Internal Revenue, or his deputy, certifying to the exemption.”

Section 10. “Every check, draft, note, bond, bill of exchange, and every
contract whatsoever which is not properly stamped in accordance with the
provisions of this act, shall be void. . . .”

Section 9 refers expressly to sections 6 and 7. Section 9, as well as section 10,

refers to documents which should be stamped in accordance with the provisions of
the same act. These provisions are contained in sections 6 and 7 above referred to,
the documents subject to the stamp tax being therein enumerated.

Section 6. “Every check, note, draft, bond, bill of exchange, and every
contract whatsoever payable wholly or in part in local currency, and drawn
or made upon or subsequent to October 1, 1904, shall bear upon its face
an internal-revenue stamp or stamps of the face value in Philippine currency
to the amount hereinafter provided.”

Section 7. “Every transfer of ownership, by indorsement or otherwise, after

September 30, 1904, of a check, draft, note, bond, bill of exchange, or any
contract whatsoever payable wholly or in part in local currency in the
Philippine Islands after September 30, 1904, . . . shall be considered a
separate and distinct contract, and as such shall require a stamp or stamps.”

It seems clear from the language of these two latter sections that only such contracts
payable in local currency as were made on or after October 1, 1904, are subject to
the stamp tax. The provisions of the section in question are very clear and leave no
room for doubt. Sections 9 and 10 are merely supplementary to sections 6 and 7.
They provide a method for proving the exemption from the stamp tax and penalty in
case of failure to comply with the provisions of sections 6 and 7. These latter
sections are the ones which require a stamp tax upon all contracts payable in local
currency and declare what documents shall be subject to such tax. It is therefore
necessary to construe these sections together with sections 9 and 10 in order to
arrive at the proper conclusion. A full and correct interpretation of the act in question
would not be possible if we only consider the two latter sections. They are, as has
been said before, merely supplementary to the preceding sections.

The contract under consideration was executed July 27, 1903. Such contract was
not subject to the stamp tax provided in Act No. 1045. The penalty of nullity
prescribed in section 10 of the act is not applicable to that contract. The court,
therefore, committed no error in finding that the absence of revenue stamp did not
render the contract void.

#99 Insular DOCTRINE:

Government v.
Frank, 13 Phil. FACTS:
236 (1909) ● April 17, 1903 - in the city of Chicago, in the state of Illinois, in the United
States, the defendant, through a respective of the Insular Government of the
Topic: Philippine Islands, entered into a contract for a period of two years with the
Contracts plaintiff, by which the defendant was to receive a salary of 1,200 dollars per
year as a stenographer in the service of the said plaintiff, and in addition
Digested by: thereto was to be paid in advance the expenses incurred in traveling from the
Cagampang, Emi said city of Chicago to Manila, and one-half salary during said period of
travel.
● Said contract contained a provision that in case of a violation of its terms on
the part of the defendant, he should become liable to the plaintiff for the
amount expended by the Government by way of expenses incurred in
traveling from Chicago to Manila and one-half salary paid during such period.
● April 30, 1903 - defendant entered upon the performance of his contract and
he was paid half-salary from that date until June 4, 1903, the date of his
arrival in the Philippine Islands.
● February 11, 1904 - defendant left the service of the plaintiff and refused to
make further compliance with the terms of the contract.
● December 3, 1904 - the plaintiff commenced an action in the CFI Manila to
recover from the defendant the sum of 269.23 dollars, which amount the
plaintiff claimed had been paid to the defendant as expenses incurred in
traveling from Chicago to Manila, and as half salary for the period consumed
in travel.
● It was expressly agreed between the parties to said contract that Laws No.
80 and No. 224 should constitute a part of said contract.
● Defendant filed a general denial and a special defense, alleging in his
special defense that the Government of the Philippine Islands had amended
Laws No. 80 and No. 224 and had thereby materially altered the said
contract, and also that he was a minor at the time the contract was
entered into and was therefore not responsible under the law.
● Plaintiff filed a demurrer which was sustained.

CFI: decided in favor of the plaintiff for the sum of 265.90 dollars; that at the time
the defendant quit the service of the plaintiff there was due him from the said plaintiff
the sum of 3.33 dollars, leaving a balance due the plaintiff in the sum of 265.90
dollars.

ISSUE: WON the amendment to Acts No. 80 and No. 224 by the Acts No. 643 and
No. 1040 did not have the effect of changing the terms of the contract made between
the plaintiff and the defendant.

RULING: Yes, the amendments to Acts No. 80 and No. 224 did not have the
effect of changing the terms of the contract.

The legislative department of the Government is expressly prohibited by

section 5 of the Act of Congress of 1902 from altering or changing the terms of
the contract. The right which the defendant had acquired by virtue of Acts No. 80
and No. 224 had not been changed in any respect by the fact that said laws had
been amended. These acts, constituting the terms of the contract, still constituted a
part of said contract and were enforceable in favor of the defendant.

The defendant alleged in his special defense that he was a minor and therefore
the contract could not be enforced against him. The record discloses that, at the
time the contract was entered into in the State of Illinois, he was an adult under
the laws of that State and had full authority to contract. The plaintiff [the
defendant] claims that, by reason of the fact that, under the laws of the Philippine
Islands at the time the contract was made, male persons in said Islands did not reach
their majority until they had attained the age of 23 years, he was not liable under said
contract, contending that the laws of the Philippine Islands governed.

It is not disputed — upon the contrary the fact is admitted — that at the time and
place of the making of the contract in question the defendant had full capacity
to make the same. No rule is better settled in law than that matters bearing upon
the execution, interpretation and validity of a contract are determined by the law
of the place where the contract is made. Matters connected with its performance
are regulated by the law prevailing at the place of performance. Matters respecting
 a remedy, such as the bringing of suit, admissibility of evidence, and statutes of
limitations, depend upon the law of the place where the suit is brought.

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

#100 Ibanez v. DOCTRINE:

Hongkong &
Shanghai Bank,
30 Phil. 228
(1915) FACTS:
● January 31, 1911 - this action was brought by the plaintiff bank against the
Topic:
above-named defendants for the purpose of recovering from the
Contracts
principal defendant, Aldecoa & Co., an amount due from the latter as
the balance to its debit in an account current with the plaintiff, and to enforce
Digested by:
the subsidiary liability of the other defendants for the payment of this
Cagampang, Emi
indebtedness, as partners of Aldecoa & Co., and to foreclose certain
mortgages executed by the defendants to secure the indebtedness sued
upon.
● August 10, 1912 - judgment was entered in favor of the plaintiff for the sum
of P344,924.23, together with interest, and for the foreclosure of the
mortgages.
○ that in the event of there being a deficiency, after the foreclosure of
the mortgages, the plaintiff must resort to and exhaust the property
of the principal defendant before taking out execution against the
individual defendants held to be liable in solidum with the principal
defendant, but subsidiarily.
○ Judgment was also entered denying the relief sought by the
intervener.
● The defendants the legitimate children of Zoilo Ibañez de Alcoa and the
defendant, Isabel Palet.
○ Both parents were native of Spain.
○ The father's domicile was in Manila, and he died here. T
○ he widow, still retaining her Manila domicile, left the Philippine
Islands and went to Spain in 1897 because of her health, and did not
return until the latter part of 1902.
○ The firm of Aldecoa & Co., of which Zoilo Ibañez de Aldecoa,
deceased, had been a member and managing director, was
reorganized in December, 1896, and the widow became one of the
general or "capitalistic" partners of the firm.
○ The three children, above mentioned, appear in the articles of
agreement as industrial partners.
● July 31, 1903 - Isabel Palet went before a notary public and executed two
instruments wherein and whereby she emancipated her two sons (both over
18), with their consent and acceptance.
○ No guardian of the person or property of these two sons had ever
been applied for or appointed under or by virtue of the provisions of
 the Code of Civil Procedure since the promulgation of the Code in
1901.
○ After the execution of the 2 instruments, both sons (Joaquin &
Zoilo) participated in the management of Aldecoa and Co, as
partners by being present and voting at meetings of the partners of
the company upon matters connected with its affairs.
● February 23, 1906 - the defendant firm of Aldecoa and Co. obtained from
the bank a credit in account current up to the sum of P450,000 upon the
terms and conditions set forth in the instrument executed on that date.
○ Later it was agreed that the defendants, Isabel Palet and her two
sons, Joaquin and Zoilo, should mortgage, in addition to certain
securities of Aldecoa and Co., certain real properties as additional
security for the obligations.
○ The mortgage was executed wherein certain corrections in the
description of some of the real property mortgaged were made
and the amount for which each of the mortgaged properties should
be liable was set forth. These two mortgages were duly recorded in
the registry of property of the city of Manila.
● December 31, 1906 - the firm of Aldecoa and Co. went into liquidation on
account of the expiration of the term for which it had been organized, and the
intervener, Urquhart, was duly elected by the parties as liquidator, and was
granted the authority by the court.
● Aldeco and Co., for the purposes of certain litigation about to be commenced
in its behalf, required an injunction bond in the sum of P50,000, which was
furnished by the bank upon the condition that any liability incurred on the part
of the bank upon this injunction bond would be covered by the mortgage of
February 23, 1906.
○ An agreement to this effect was executed by Aldecoa and Co. in
liquidation, by Isabel Palet, by Joaquin, who had then attained his full
majority, and by Zoilo, who was not yet twenty-three years of age.
● 1908 - Joaquin, Zoilo, and Cecilia commenced an action against their
mother, Isabel Palet, and Aldecoa and Co., in which the bank was not a
party.
○ in September of that year procured a judgment annulling the
articles of copartnership of Aldecoa and Co., in so far as they
were concerned, and decreeing that they were creditors and not
partners of that firm.
● The real property of the defendant Isabel Palet, mortgaged to the bank,
was registered under the provisions of the Land Registration Act, subject to
the mortgage thereon in favor of the plaintiff, by decree, of the land court.
● Defendants, Isabel Palet and her three children (Joaquin, Zoilo, Cecilia)
applied to the land court for the registration of their title to the real property
described in paragraph 4 of the instrument in which application they stated
that the undivided three-fourths of said properties belonging to the
defendants were subject to the mortgage in favor of the bank.
○ Court of Land Registration, by decree, registered the title to the
undivided three-fourths interest therein pertaining to the defendants,
Isabel Palet and her two sons, Joaquin and Zoilo, to the mortgage in
favor of the plaintiff to secure the sum.
● December 22, 1906 - Aldecoa and Co., by a public instrument executed
 before a notary public, as additional security for the performance of the
obligations in favor of the plaintiff under the terms of the contracts Exhibits A
and B, mortgaged to the bank the right of mortgage pertaining to Aldecoa
and Co. upon certain real property in the Province of Albay, mortgaged to
said company by one Zubeldia to secure an indebtedness to that firm.
○ Subsequent to the execution of this instrument, Zubeldia caused his
title to the mortgaged property to be registered under the provisions
of the Land Registration Act, subject to a mortgage of Aldecoa and
Co. to secure the sum of P103,943.84 and to the mortgage of the
mortgage right of Aldecoa and Co. to the plaintiff.
● As the result of the litigation Aldecoa and Co. and A. S. Macleod, wherein the
injunction bond for P50,000 was made by the bank in the manner and for the
purpose above set forth, Aldecoa and Co. became the owner, through a
compromise agreement of the shares of the Pasay Estate Company
Limited (referred to in the contract of March 13, 1907, Exhibit V), and on the
30th day of August of that year Urquhart, as liquidator, under the authority
vested in him as such, and in compliance with the terms of the contract of
June 13, 1907, mortgaged to the plaintiff, by way of additional security
for the performance of the obligations set forth in Exhibits A and B, the
312 shares of the Pasay Estate Company, Limited, acquired by Aldecoa
and Co.
● Aldecoa and Co. mortgaged, as additional security for the performance of
those obligations, to the plaintiff the right of mortgage, pertaining to the firm
of Aldecoa and Co., upon certain real estate in that Province of Ambos
Camarines, mortgaged to Aldecoa and Co. by one Andres Garchitorena to
secure a balance of indebtedness to that firm. The mortgage thus created in
favor of the bank was duly recorded in the registry of deeds f that province.
● Aldecoa and Co. duly authorized the bank to collect from certain persons
and firms, named in the instrument granting this authority, any and all debts
owing by them to Aldecoa and Co. and to apply all amounts so collected to
the satisfaction, pro tanto, of any indebtedness of Aldecoa and Co. to the
bank.
● By a public instrument, Aldecoa and Co. acknowledged as indebtedness to
Joaquin and Zoilo. Joaquin, Zoilo, and Cecilia recovered a judgment in the
CFI Manila for the payment of the balance due them upon the indebtedness
acknowledged in the public instrument dated February 18, 1907.
● The court held valid the contract whereby Aldecoa and Co. mortgaged to the
bank the shares of the Pasay Estate Company recovered from Alejandro S.
Macleod.
● Joaquin and Zoilo instituted an action against the plaintiff bank for the
purpose of obtaining a judgment annulling the mortgages created by
them upon their interest in the properties described in Exhibits A and
B, upon the ground that the emancipation buy their mother was void and of
no effect, and that, therefore, they were minors incapable of creating a valid
mortgage upon their real property.
● CFI dismissed the complaint as to Joaquin upon the ground that he had
ratified those mortgages after becoming of age, but entered a judgment
annulling said mortgages with respect to Zoilo. Both parties appealed from
this decision in the Supreme Court.

ISSUES:
 1. WON the court erred in overruling the defendant's demurrer based upon the
alleged ambiguity and vagueness of the complaint. NO.
2. WON the court erred in ruling that there was no competent evidence that the
plaintiff had induced Aldecoa and Co.'s provincial debtors to cease making
consignments to that firm. NO.
3. WON the court erred in rendering a judgment in a special proceeding for the
foreclosure of a mortgage, Aldecoa and Co. not having mortgaged any real
estate of any kind within the jurisdiction of the trial court, and the obligation of
the persons who had signed the contract of suretyship in favor of the bank
having been extinguished by operation of law. NO.
RULINGS:
1. No, the court was correct in overruling the defendant's demurrer based
upon the alleged ambiguity and vagueness of the complaint.
Upon this point it is sufficient to say that the complaint alleges that a certain specific
amount was due from the defendant firm as a balance of its indebtedness to the
plaintiff, and this necessarily implies that there were no credits in favor of the
defendant firm of any kind whatsoever which had not already been deducted from
the original obligation.

2. No, the court is correct in ruling that there was no competent evidence
that the plaintiff had induced Aldecoa and Co.'s provincial debtors to
cease making consignments to that firm.
With respect to the contention set forth in the second assignment of error to the effect
that the bank has prejudiced Aldecoa and Co. by having induced customers of the
latter to cease their commercial relations with this defendant, the ruling of the court
that there is no evidence to show that there was any such inducement is fully
supported by the record.
It may be possible that some of Aldecoa and Co.'s customers ceased doing business
with that firm after it went into liquidation. This is the ordinary effect of a commercial
firm going consideration, for the reason that it was a well known fact that Aldecoa
and Co. was insolvent. It is hardly probable that the bank, with so large a claim
against Aldecoa and Co. and with unsatisfactory security for the payment of its claim,
would have taken any action whatever which might have had the effect of diminishing
Aldecoa and Co.'s ability to discharge their claim.
The contention that the customers of Aldecoa and Co. included in the list of debtors
ceased to make consignments to the firm because they had been advised by the
bank that Aldecoa and Co. had authorized the bank to collect these credits from the
defendant's provincial customers and apply the amounts so collected to the partial
discharge of the indebtedness of the defendant to the bank.
Furthermore, the bank was expressly empowered to take any steps which might
be necessary, judicially or extrajudicially, for the collection of these credits.
The real reason which caused the defendant's provincial customers to cease making
shipments was due to the fact that the defendant, being out of funds, could not give
its customers any further credit.
It is therefore clear that the bank, having exercised the authority conferred upon it by
the company in a legal manner, is not responsible for any damages which might
have resulted from the failure of the defendant's provincial customers to continue
doing business with that firm.
 3. No, the court was correct in rendering a judgment in a special
proceeding for the foreclosure of a mortgage, Aldecoa and Co. not
having mortgaged any real estate of any kind within the jurisdiction of
the trial court, and the obligation of the persons who had signed the
contract of suretyship in favor of the bank having been extinguished by
operation of law.
If two or more persons are in solidum the debtors mortgage any of their real property
situate in the jurisdiction of the court, the creditor, in case of the solidary debtors in
the same suit and secure a joint and several judgment against them, as well as
judgments of foreclosure upon the respective mortgages.
In this case, the bank is not seeking to exercise its mortgages rights upon the
mortgages which the defendant firm holds upon certain real properties in the
Provinces of Albay and Ambros Camarines and to sell these properties at public
auction in these proceedings. Nor does the judgment of the trial courts directs that
this be done. Before that property can be sold, the original mortgagors will have
to be made parties. The banks is not trying to foreclose any mortgages on real
property executed by Aldecoa and Co. It is true that the bank sought and obtained a
money judgment against that firm, and at the same time and in the same action
obtained a foreclosure judgment against the other defendants.
The contention that the extensions granted to Aldecoa and Co.'s debtors, with the
consent and authority of that firm itself, has resulted in extinguishment of the
mortgages created by Aldecoa and Co. or of the mortgages created by partners of
that company to secure its liabilities to the bank, is not tenable. The record shows
that all the sureties were represented by Urquhart, the person elected by them as
liquidator of the firm, when he agreed with the bank upon the extensions granted to
those debtors. The authority to grant these extensions was conferred upon the bank
by the liquidator, and he was given authority by all the sureties to authorized the bank
to proceed in this manner.
The bank has properly accounted for all amounts collected from the
defendant's debtors, and has applied all such amounts to the partial liquidation
of the defendant's debt due to the bank. It is true that the sum for which judgment
was rendered against Aldecoa and Co. is less than the amount originally demanded
in the complaint, but this difference is due to the fact that certain amounts which had
been collected from Aldecoa and Co.'s provincial debtors by the bank were credited
to the latter between the date on which the complaint was filed and the date when
the case came on for trial, and the further fact that it was necessary to correct an
entry concerning one of the claims inasmuch as it appears that this claim had been
assigned to the bank absolutely, and not merely for the purposes of collection, as the
bookkeeper of the bank supposed, the result being that instead of crediting Aldecoa
and Co. with the full face value of this claim, the bookkeeper had merely credited
from time to time the amounts collected from this debtor.
As to Doña Palet
The trial court directed that the mortgaged properties, including the properties
mortgaged in the event that Aldecoa and Co. should fail to pay into court the amount
of the judgment within the time designated for that purpose. the court recognized the
subsidiary character of the personal liability of Doña Isabel Palet as a member of the
firm of Aldecoa and Co. and decreed that as to any deficiency which might result
after the sale of the mortgaged properties, execution should not issue against the
properties of Doña Isabel Palet until all the property of Aldecoa and Co. shall have
been exhausted. The properties mortgaged by Doña Isabel Palet were so mortgaged
not merely as security for the performance of her own solidary subsidiary obligation
as a partner bound for all the debts of Aldecoa and Co., but for the purpose of
securing the direct obligation of the firm itself to the bank.
The extension of the term which, in accordance with the provisions of article 1851 of
the Civil Code produces the extinction of the liability of the surety must of necessity
be based on some new agreement between the creditor and principal debtor, by
virtue of which the creditor deprives himself of his right to immediately bring an action
for the enforcement of his claim. The mere failure to bring an action upon a credit, as
soon as the same or any part of its matures, does not constitute an extension of the
term of the obligation.
Doña Isabel Palet is a personal debtor jointly and severally with Aldecoa and Co. for
the whole indebtedness of the latter firm to the bank, and not a mere surety of the
performance of the obligations of Aldecoa and Co. without any solidary liability. It is
true that certain additional deeds of mortgage and pledge were executed by Aldecoa
and Co. in favor of the bank as additional security after Aldecoa and Co. had failed to
meet its obligation to pay the first installment due under the agreement of February
23, 1906, but there is no stipulation whatever in any of these documents or deeds
which can in any way be interpreted in the sense of constituting an extension which
would bind the bank to waiter for the expiration of any new term before suing upon its
claim against Aldecoa and Co.
We find nothing in the record showing either directly or indirectly that the bank at any
time has granted any extension in favor of Aldecoa and Co. for the performance of its
obligations. The liquidator of Aldecoa and Co. authorized the bank to grant certain
extensions to some of the provincial debtors of Aldecoa and Co. whose debts were
to be paid to the bank under the authority conferred upon the bank by Aldecoa and
Co.
There is a marked difference between the extension of time within which Aldecoa
and Co.'s debtors might pay their respective debts, and the extension of time for the
payment of Aldecoa and Co.'s own obligations to the bank. If the bank was had
brought suit on its credit against Aldecoa and Co., for the amount then due, on the
day following the extension of the time of Aldecoa and Co.'s debtors for the
payments of their debts, it is evident that the fact of such extension having been
granted could not served in any sense as a defense in favor of Aldecoa and Co.
against the bank's action, although this extension would have been available to
Aldecoa and Co.'s debtors if suit had been brought to enforce their liabilities to
Aldecoa and Co. We must, therefore, conclude that the judgment appealed from, in
so far as it relates to Doña Isabel Palet, must likewise be affirmed.
As to William Urquhart
The trial court found, as we have said, that Urquhart had failed to show that he had
any legal interest in the matter in litigation between the plaintiffs and the defendants,
or in the success of any of the parties, or any interest against both.
Section 121 of the Code of civil Procedure provides that:
A person may, at any period of a trial, upon motion, be permitted by the court
to intervene in an action or proceeding, if he has legal interest in the matter
in litigation, or in the success of either of the parties, or an interest against
both.
The intervener is seeking to have himself declared a preferred creditor over the bank.
The bank insists that, as the intervener had been in the employ of Aldecoa and Co.
for several years prior to the time that the latter went into liquidation, it cannot be
determined what part of the P14,000 is for salary as such employee and what part is
for salary as liquidator.
We find no trouble in reaching the conclusion that all of the P14,000 represents
Urquhart's salary as liquidator of the firm of Aldecoa and Co. The agreed statement
of facts clearly supports this view. It is there stated that Aldecoa and Co. in liquidation
owed the liquidator P14,000 as salary. The agreement does not say, nor can it be
even inferred from the same, that Aldecoa and Co. owed Urquhart P14,000, or any
other sum for salary as an employee of that firm before it went into liquidation.
The judgment appealed from, in so far as it relates to Urquhart, being in accordance
with the law and the merits of the case, is hereby affirmed.
As to Joaquin and Zoilo
The basis of the first alleged error is the pendency of an action instituted by the
appellants, Joaquin and Zoilo, in 1908, to have the mortgages which the bank seeks
to foreclose in the present action annulled in so far as their liability thereon is
concerned.
The principle upon which plea of another action pending is sustained is that the latter
action is deemed unnecessary and vexatious. A statement of the rule to which the
litigant to its benefits, and which has often met with approval, is found in Watson vs.
Jones:
But when the pendency of such a suit is set up to defeat another, the case
must be the same. There must be the same parties, or at least such as
represent the same interest, there must be the same rights asserted, and the
same relief prayed for. This relief must be founded on the same facts, and
the title or essential basis of the relief sought must be the same. The identity
in these particulars should be such that if the pending case has already been
disposed of, it could be pleaded in bar as a former adjudication of the same
matter between the same parties.
The test of identity in these respects is thus stated in 1 Cyc., 28:
A plea of the pendency of a prior action is not available unless the prior
action is of such a character that, had a judgment been rendered therein on
the merits, such a judgment would be conclusive between the parties and
could be pleaded in bar of the second action.
This test has been approved, citing the quotation, in Williams vs. Gaston; Van Vleck
vs. Anderson; Wetzstein vs. Mining Co. It seems to us that unless the pending action,
which the appellants refer to, can be shown to approach the action at bar to this
extent, the plea ought to fail.
The former suit is one to annul the mortgages. The present suit is one for the
foreclosure of the mortgages. It may be conceded that if the final judgment in the
former action is that the mortgages be annulled, such an adjudication will deny the
right of the bank to foreclose the mortgages. But will a decree holding them valid
prevent the bank from foreclosing them? Most certainly not. In such an event, the
judgment would not be a bar to the prosecution of the present action. The rule is not
predicated upon such a contingency. It is applicable, between the same parties, only
when the judgment to be rendered in the action first instituted will be such that,
regardless of which party is successful, it will amount to res adjudicata against the
second action. It has often been held that a pending action upon an insurance policy
to recover its value is not a bar to the commencement of an action to have the policy
reformed. The effect is quite different after final judgment has been rendered in an
action upon the policy. Such a judgment may be pleaded in bar to an action seeking
to reform the policy. The case are collected in the note to National Fire Insurance Co.
vs. Hughes (12 L. R. A., [N. S.], 907). So, it was held in the famous case of Sharon
vs. Hill (26 Fed., 337), that the action brought by Miss hill for the purpose of
establishing the genuineness of a writing purporting to be a declaration of marriage
and thereby establishing the relation of husband and wife between the parties could
not be pleaded in abatement of Senator Sharon's action seeking to have the writing
declared false and forged.
With reference to the second alleged error, it appears that a certified copy of the
judgment entered in the former case, wherein it was declared that these two
appellants, together with their sister Cecilia, were creditors and partners of Aldecoa
 and Co., was offered in evidence and marked Exhibit 5. This evidence was objected
to by the plaintiff on the ground that it was res inter alios acta and not competent
evidence against the plaintiff or binding upon it in any way because it was not a party
to that action. This objection was sustained and the proffered evidence excluded. If
the evidence had been admitted, what would be its legal effect? That was an action
in personam and the bank was not a party. The judgment is, therefore, binding only
upon the parties to the suit and their successors in interest.

#101 Companie DOCTRINE:

de Commerce v.
Hamburg-Ameri FACTS:
ka, 36 Phil. 590
(1917) This is an action by the Compagnie de Commerce et de Navigation D'Extreme Orient,
a corporation duly organized and existing under and by virtue of the laws of the Republic of
Topic: France, with its principal office in the city of Paris, France, and a branch office in the city of
Saigon,Vietnam against the Hamburg Amerika Packetfacht Actien Gesellschaft, a corporation
Contracts
duly organized under and by virtue of the laws of the Empire of Germany, with its principal
office in the city of Humburg, Germany, and represented in the city of Manila by Behn, Meyer &
Digested by: Company (Limited), a corporation.
Aquino, Zaira
This is essentially a suit for damages growing out of the "failure, refusal and neglect
of the defendant to safely carry the said merchandise and cargo as in said charter party and
bills of lading.

On June 17, 1914, the defendant, in a contract of affreightment, chartered and

hired unto the plaintiff the steamship or vessel called the Sambia for the purpose of carrying a
full cargo of rice, rice bran and cargo meal from the port of Saigon to the port of Dunkirk and
Hamburg. The plaintiff loaded and shipped on board the Sambia at the said port of Saigon ,
destined for said ports of Dunkirk and Hamburg.

There were rumors of impending war between Germany and France and other nations
of Europe. The master of the steamship was told to take refuge at a neutral port (because
Saigon was a French port). On August 12, 1914, the said steamship Sambia sailed from the
port of Saigon, but without the consent or approval of plaintiff as the character of said vessel
and the owner of said cargo, and against the protest of the plaintiff, the said vessel wholly
failed, omitted and refused to sail unto said destinations, but wilfully abandoned the said
stipulated voyage and has remained and took a refuge in Manila until the present day.

On September 10, 1914, the defendant and in the absence of plaintiff, sought and
obtained by means of petition filed the authority of this court to discharge the said cargo of the
plaintiff from the said vessel and to sell the same at private sale, which they did. Under and by
virtue of said failure, refusal, and neglect of the defendant to safely carry the said merchandise
and cargo as in said charter party and bills of lading provided, the plaintiff instituted a
complaint .

The trial court ruled in favor of the plaintiffs. On appeal, the defendants made the
following assignments on appeal (that the court had no jurisdiction, that the fear of capture was
not force majeure, that the court erred in concluding that defendant is liable for damages for
non-delivery of cargo, and the value of the award of damages).

On appeal, the plaintiffs also contended that the court erred in not giving the full value
of damages.

ISSUES:

1) WON a contractual stipulation for a general arbitration can be invoked to oust the
courts of its jurisdiction.

2) WON the master of the steamship was justified in taking refuge in Manila (therefore
being the cause of the non-delivery of the cargo belonging to the plaintiffs.
 RULING:

1) No. In the court below defendant not only appeared and answered without objecting to the
court's jurisdiction, but sought affirmative relief; and it is very clear that defendant cannot be
permitted to submit the issues raised by the pleadings for adjudication, without objection, and
then, when unsuccessful, assail the court's jurisdiction in reliance upon a stipulation in the
charter party which the parties were at entire liberty to waive if they so desired.

We do not stop therefore to rule upon the contention of opposing counsel, that a
contractual stipulation, for a general arbitration cannot be invoked to oust our courts of their
jurisdiction, under the doctrine announced in the cases of Wahl and Wahl vs. Donaldson, Sims
& Co., and Cordoba vs. Conde; and that this doctrine should be applied in the case at bar,
notwithstanding the fact that the contract was executed in England, in the absence of
averment and proof that under the law of England compliance with, or an offer to comply with
such a stipulation constitutes a condition precedent to the institution of judicial proceeding for
the enforcement of the contract.

The claim advanced on behalf of the shipowner for freights is wholly without merit.
Under the terms of the contract of affreightment, the amount of the freight was made payable
on delivery of the cargo at the designated port of destination. It is clear then, that under the
terms of that instrument freight never became payable. Carrying the cargo from Saigon to
Manila was not even a partial performance of a contract to carry it from Saigon to Europe; and
even it if could be treated as such, the shipowner would have no claim for freight, in the
absence of any agreement, express or implied, to make payment for a partial performance of
the contract.

2) A shipmaster must be allowed a reasonable time in which to decide what course he will
adopt as to the disposition of his cargo, after entering a port of refuge; and though he must act
promptly thereafter, when the cargo is a perishable one, neither he nor the shipowner is
responsible for loss or damage suffered by the cargo as a result of its detention aboard the
vessel during such time as may reasonably necessary to come to a decision in this regard.

Under the circumstances set out in the opinion, the master of the Sambia
proceeded with all reasonable dispatch and did all that could be required of a prudent
man to protect the interests of the owner of the cargo aboard is vessel; so that any losses
which resulted from the detention of the cargo aboard the Sambia must be attributed to
the act of the “Enemy of the King” which compelled the Sambia to flee to a port of
refuge, and made necessary the retention of the cargo aboard the vessel at anchor under
a tropical sun and without proper ventilation until it could be ascertained that the interests
of the absent owner would be consulted by the sale of this perishable cargo in the local
market.

In fleeing from the port of Saigon, and taking refuge in Manila Bay the master of the
Sambia was not acting for the common safety of the vessel and her cargo. The French cargo
was absolutely secure from danger of seizure or confiscation so long as it remained in the port
in Saigon, and the flight of the vessel was a measure of precaution adopted solely and
exclusively for the preservation of the vessel from the danger of seizure or capture

#102 King Mau DOCTRINE:

Wu v. SyCip, 94
INTERNATIONAL LAW; CONFLICT OF LAWS; CONTRACTS EXECUTED IN
Phil. 784 (1954)
FOREIGN COUNTRY, COGNIZABLE BY LOCAL COURTS; NO CONFLICT OF
Topic: LAWS WHEN QUESTION INVOLVED IS TO ENFORCE OBLIGATION ARISING
Contracts FROM CONTRACT. — Although the contract of agency was executed in New
York, the Court of First Instance of Manila has jurisdiction to try a personal action
Digested by: for the collection of a sum of money arising from such contract, because a
Ceballos, Pia non-resident may sue a resident in the courts of this country where the defendant
 may be summoned and his property leviable upon execution in case of a
favourable, final and executory judgement. There is no conflict of laws involved in
this case because it is only a question of enforcing an obligation created by or
arising from contract; and unless the enforcement of the contract is against
public policy of the forum, it must be enforced.
FACTS: collection of a sum of money
1. This is an action to collect P59,082.92, together with lawful interests from
14 October 1947, the date of the written demand for payment, and costs.
The claim arises out of a shipment of 1,000 tons of coconut oil emulsion
sold by the plaintiff, as agent of the defendant, to Jas. Maxwell Fassett,
who in turn assigned it to Fortrade Corporation.
2. Under an agency agreement set forth in a letter dated 7 November 1946 in
New York addressed. to the defendant and accepted by the latter on the
22nd day of the same month, the plaintiff was made the exclusive agent of
the defendant 'in the sale of Philippine coconut oil and its derivatives
outside the Philippines and was to be paid 2 1/2 per cent on the total
actual sale price of sales obtained through his efforts and in addition
thereto 50 per cent of the difference between the authorized sale price and
the actual sale price.
3. After trial where the depositions of the plaintiff and of Jas Maxwell Fassett
and several letters in connection therewith were introduced and the
testimony of the defendant was heard, the Court rendered judgement as
prayed for in the complaint.
4. A motion for reconsideration was denied. A motion for new trial was filed,
supported by the defendant's affidavit, based on newly discovered
evidence which consists of a duplicate original of a letter dated 16 October
1946 covering the sale of 1,000 tons of coconut oil soap emulsion signed
by Jas. Maxwell Fassett to the defendant; the letter of credit No. 20122 of
the Chemical Bank & Trust Company in favor of Jas. Maxwell Fassett
assigned the latter to the defendant; and a letter dated 16 December 1946
by the Fortrade Corporation to Jas. Maxwell Fassett whereby the
corporation placed a firm order of 1,000 metric tons of coconut oil soap
emulsion and Jas. Maxwell Fassett accepted it on 24 December 1946, all
of which documents, according to the defendant, could not be produced at
the trial, despite the use of reasonable diligence, and if produced they
would alter the result of the controversy. The motion for a new trial was
denied. The defendant is appealing from said judgement.
5. Both parties are agreed that the only transaction or sale made by the
plaintiff, as agent of the defendant, was that of 1,000 metric tons of
coconut oil emulsion f.o.b. in Manila, Philippines, to Jas. Maxwell Fassett,
in whose favor letter of credit No. 20112 of the Chemical Bank & Trust
Company for a sum not to exceed $400,000 was established and who
assigned to Fortrade Corporation his fight to the 1,000 metric tons of
coconut oil emulsion and in the defendant the letter of credit referred to for
a sum not to exceed $400,000.
6. The plaintiff claims that for that sale he is entitled under the agency
contract dated 7 November 1946 and accepted by the defendant on 22
November of the same year to a commission of 21 1/2 per cent on the total
actual sale price of 1,000 tons of coconut oil emulsion, part of which has
already been paid by the defendant, there being only a balance of
$3,794.94 for commission due and unpaid on the last shipment of 379.494
 tons and 50 per cent of the difference between the authorized sale price of
$350 per ton and the actual selling price of $400 per ton, which amounts to
$25,000 due and unpaid, and $746.52 for interest from 14 October 1947,
the date of the written demand.
7. The defendant, on the other hand, contends that the transaction for the
sale of 1,000 metric tons of coconut oil emulsion was not covered by the
agency contract of 22 November 1946 because it was agreed upon on 16
October 1946; that it was an independent and separate transaction for
which the plaintiff has been duly compensated. The contention is not borne
out by the evidence. The plaintiff and his witness depose that there were
several drafts of documents or letters prepared by Jas. Maxwell Fassett
preparatory or leading to the execution of the agency agreement of 7
November 1946, which was accepted by the defendant on 22 November
1946, and that the letter, on which the defendant bases his contention that
the transaction on the 1,000 metric tons of coconut oil emulsion was not
covered by the agency agreement, was one of those letters.

ISSUE:

Whether or not contracts executed in a foreign country are cognizable by local

courts.

RULING:

The letter upon which defendant relies for his defense does not stipulate on the
commission to be paid to the plaintiff as agent, and yet if he paid the plaintiff a 2
1/2 percent commission on the first three coconut oil emulsion shipments, there is
no reason why he should not pay him the same commission on the last shipment
amounting to $3,794.94. There can be no doubt that the sale of 1,000 metric tons
of coconut oil emulsion was not a separate and independent contract from that of
the agency agreement of 7 November and accepted on 22 November 1946 by the
defendant, because in a letter dated 2 January 1947 addressed to the plaintiff,
referring to the transaction of 1,000 metric tons of coconut oil emulsion.

The contention that as the contract was executed in New York, the Court of First
Instance of Manila has no jurisdiction over this case, is without merit, because a
non-resident may sue a resident in the courts of this country where the
defendant may be summoned and his property leviable upon execution in
case of a favorable, final, and executory judgment. It is a personal action for
the collection of a sum of money which the Courts of First Instance have
jurisdiction to try and decide. There is no conflict of laws involved in the case
because it is only a question of enforcing an obligation created by or arising from
contract; and unless the enforcement of the contract is against public policy of the
forum, it must be enforced.
The plaintiff is entitled to collect P7,589.88 for commission and P50,000 for
one-half of the overprice, or a total of P57,589.88, lawful interests thereon from the
date of the filing of the complaint, and costs in both instances.
As thus modified the judgment appealed from is affirmed, with costs against the
appellant.
#103 Shewaram DOCTRINE:
v. Philippine
Airlines, 17 FACTS:
SCRA 606 Parmanand Shewaram, a Hindu from Davao, boarded a PAL plane bound for Manila
(1966) from Zamboanga. He checked in 3 baggages: a suitcase and 2 other bags. PAL’s
personnel mistagged his baggage to “Iligan” instead of “Manila.”
Topic:
Contracts The baggage was said to be tampered when it was found.

Digested by: Among his baggage was a camera with P800.00 and it was lost. PAL offered to pay
Dobrea, Errol P100.00. Shewaram wanted full payment of P800.00.

A PAL ticket, on the reverse side, stated in fine print: “The liability, if any, for loss or
damage to checked baggage or for delay in the delivery thereof is limited to its value
and, unless the passenger declares in advance a higher valuation and pay an
additional charge therefor, the value shall be conclusively deemed not to exceed
P100.00 for each ticket.”

PAL maintains that in view of the failure of the Shewaram to declare a higher value
for his luggage, and pay the freight on the basis of said declared value when he
checked such luggage at the Zamboanga City airport, pursuant to the above quoted
condition, appellee can not demand payment from the appellant of an amount in
excess of P100.00.

ISSUE:
WON limited liability rule applies in the present case.

RULING:
NO. The limited liability rule shall not apply. Since this is a stipulation on qualified
liability, which operates to reduce the liability of the carrier, the carrier and the shipper
must agree thereupon. Otherwise, the carrier will be liable for full.

PAL is fully liable (for full) because Shewaram did not agree to the stipulation on the
ticket, as manifested by the fact that Shewaram did not sign the ticket.

Ticket should have been signed. Article 1750 of the New Civil Code which provides
as follows: A contract fixing the sum that may be recovered by the owner or shipper
for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and
just under the circumstances, and has been fairly and freely agreed upon. In
accordance with the above-quoted provision of Article 1750 of the New Civil Code,
the pecuniary liability of a common carrier may, by contract, be limited to a fixed
amount. It is required, however, that the contract must be "reasonable and just under
the circumstances and has been fairly and freely agreed upon."

#104 Ong Yiu v. DOCTRINE: Such provisions have been held to be a part of the contract of carriage,
CA, 91 SCRA and valid and binding upon the passenger regardless of the latter's lack of knowledge
223 (1979) or assent to the regulation". It is what is known as a contract of "adhesion", in
regards which it has been said that contracts of adhesion wherein one party imposes
Topic: a ready made form of contract on the other, as the plane ticket in the case at bar, are
Contracts contracts not entirely prohibited.

Digested by: SUMMARY: Ong Yiu’s boarded PAL Cebu bound for Butuan. Upon reaching Butuan,
Eso, Jun his checked-in luggage cannot be located. PAL Butuan reported the loss to PAL
Cebu within one hour from discovery. It was then communicated to PAL Manila which
discovered that the said baggage was overcarried to Manila. The luggage was
delivered to Ong Yiu the next day, however it was already opened and some
documents were missing. He filed a complaint for damages. CA did not award
moral nor exemplary damages. CA however awarded Ong Yiu P100 which was the
limited liability indicated in the claim ticket. THE SC affirmed CA and ruled that the
provision in a ticket providing limited liability is a contract of adhesion which Ong Yiu
consented to by adhering to it.

FACTS:

On August 26, 1967, Petitioner took a PAL flight (1:00PM) from Mactan Cebu bound
for Butuan City. He was scheduled to attend trials on August 28-31, 1967 in the said
City. Ong Yiu checked in one piece of luggage, a blue “maleta” for which he was
issued a claim check. However, when the plane arrived at Bancasi Airport, Butuan
City at past 2:00 PM, his luggage could not be found. At 3:00 PM, PAL Butuan sent a
message to PAL Cebu inquiring about the missing baggage, then PAL Cebu
Transmitted the message to PAL Manila. PAL Manila advised PAL Cebu that the
luggage had been overcarried to Manila and that it would be forwarded to Cebu on
the same day. PAL Cebu then sent a message to PAL Butuan that the luggage will be
forwarded the following day.

On August 27, 1967, Ong Yiu went to Bancasi Airport to inquire about the missing
baggage. However, he did not wait and so when the flight carrying the missing
luggage arrived, Ong Yiu had already left. A certain Dagorro, a colorum car driver
who used to drive for Ong Yiu, volunteered to take the luggage to Ong Yiu. When the
porter clerk gave the luggage to him, Dagorro then examined the lock, pressed it and
it opened. When Dagorro delivered the “maleta” to the petitioner, he informed the
latter that the lock was open. Petitioner found that a folder containing certain exhibits,
transcripts, and private documents for his case were missing, aside from two gift
items for his parents-in-law. Meanwhile, petitioner asked for postponement of the
hearing of the civil case due to the said loss of his documents.

On August 28, 1967, Petitioner returned to Cebu. He demanded that his luggage be
produced intact, and that he be compensated P250k for actual and moral damages.

Petitioner filed a complaint against PAL for damages of breach of contract of

carriage.

CFI – found PAL to have acted in bad faith and with malice; petitioner is entitiled to
P80k moral damages and P30k exemplary damages.

CA – found PAL guilty of SIMPLE NEGLIGENCE ONLY, reversed CFI; ordered PAL
to pay Ong Yiu P100, the baggage liability assumed by it under the condition of
carriage printed at the back of the ticket.

Hence this petition.

ISSUE:
1. WON the CA erred in granting P100 only as the baggage liability of PAL
to Ong Yiu. NO
2. WON there was bad faith on the part of PAL. NO
3. WON Ong Yi is entitle to moral and exemplary damages. NO

RULING:

1. (T) CA did not err in granting P100 only as the baggage liability of PAL to
Ong Yiu. Petitioner contends that respondent Court committed grave error
 when it limited PAL’s carriage liability to the amount of P100.00 as stipulated
at the back of the ticket.

(R) “As a general proposition, the plaintiff’s maleta having been pilfered while
in the custody of the defendant, it is presumed that the defendant had been
negligent. The liability, however, of PAL for the loss, in accordance with
the stipulation written on the back of the ticket, is limited to P100.00 per
baggage plaintiff not having declared a greater value, and not having called
the attention of the defendant on its true value and paid the tariff therefor.
The validity of this stipulation is not questioned by the plaintiff. They are
printed in reasonably and fairly big letters, and are easily readable.
Moreover, plaintiff had been a frequent passenger of PAL from Cebu to
Butuan City and back, and he, being a lawyer and businessman, must be
fully aware of these conditions.”

It is a contract of “adhesion”. Contracts of adhesion where one party

imposes a ready made form of contract on the other, as the plane ticket
in the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent. A contract limiting liability upon an
agreed valuation does not offend against the policy of the law
forbidding one from contracting against his own negligence.”

(A) The pertinent Condition of Carriage printed at the back of the plane ticket
reads:

BAGGAGE LIABILITY . . . The total liability of the Carrier for lost or damaged
baggage of the passenger is LIMITED TO P100.00 for each ticket unless a
passenger declares a higher valuation in excess of P100.00, but not in
excess, however, of a total valuation of P 1,000.00 and additional charges
are paid pursuant to Carrier’s tariffs.”

Petitioner did not declare any higher value for his luggage, much less did he
pay any additional transportation charge.

While it may be true that petitioner had not signed the plane ticket, he
is nevertheless bound by the provisions thereof. The provision is valid
and binding regardless of Ong Yiu’s lack of knowledge or assent.

Considering, therefore, that petitioner had failed to declare a higher

value for his baggage, he cannot be permitted a recovery in excess of
P100.00.

(C) WHEREFORE, for lack of merit, the instant Petition is hereby denied,
and the judgment sought to be reviewed hereby affirmed in toto.

2. (T) No, there was no gross negligence on the part of PAL.

(R) Bad faith means a breach of a known duty through some motive of
interest or ill will.

(A) It was PAL’s duty to look for petitioner’s luggage which had been done.
PAL exerted due diligence in complying with such duty.

SC agreed with CA’s finding that no bad faith on PAL’s part because:

§PAL Butuan communicated the loss to PAL Cebu in less than an hour
after Ong Yiu’s luggage cannot be located.
§ Cebu also immediately relayed the information to PAL Manila.
 § Upon discovery that the luggage was overcarried to Manila, it was sent
bag to Cebu in the afternoon of the same day.

3. (T) No, petitioner is not entitled to moral and exemplary damages, but is
entitled to P100.

(R) In absence of a wrongful act or ommission or of fraud or bad faith,

petitioner is not entitled to moral damages.

(A) Petitioner is neither entitiled to exemplary damages. In contracts, as

provided for in Article 2232 of the Civil Code, exemplary damages can be
granted if the defendant acted in a wanton, fraudulent, reckless, oppressive,
or malevolent manner, which has not been proven in this case.

#105 Pan DOCTRINE:

American World
Airways v. IAC, FACTS:
164 SCRA 268 Rene Pangan, president and general manager of Sotang Bastos and Archer
(1988) Production, entered into two agreements:

Topic: The first agreement, signed on April 25, 1978, with Primo Quesada of Prime Films,
Contracts was for the exhibition of three films in San Francisco, CA at US$2,500 per picture.
The three movies were: "Ang Mabait, Masungit at ang Pangit," "Big Happening with
Digested by:
Chikiting and Iking," and "Kambal Dragon." Part of the agreement was that Sotang
Facundo,
Ardiane Bastos and Archer Production (through Pangan) would be providing the necessary
promotional and advertising materials for said films on or before May 30, 1978.

The second agreement (verbal agreement) was made in Guam with Leo Slutchnick
of the Hafa Adai Organization. The agreement provided for the exhibition of two of
the three films in the previous contract at the Hafa Adai Theater in Guam on May
30, 1978 at P7,000 per picture. Pangan also undertook to provide the necessary
promotional and advertising materials for said films on or before the exhibition
date on May 30, 1978.

By virtue of the two agreements, Pangan caused the preparation of the required
promotional handbills and still pictures for which he paid the total sum of
P12,900.00. In preparation for his trip and to comply with his contracts, he also
bought fourteen clutch bags, four capiz lamps and four barong tagalog, with a total
value of P4,400.00.

On May 18, 1978, Pangan obtained from Pan Am's Manila Office, through a travel
agency called Your Travel Guide, an economy class airplane ticket for passage from
Manila to Guam.

On May 27, 1978, two hours before departure time, Pangan was at the Pan Am's
ticket counter at the Manila International Airport and presented his ticket and
checked in his two luggages, for which he was given baggage claim tickets. The two
luggages contained the promotional and advertising materials, the clutch bags,
barong tagalog and his personal belongings.

Subsequently, Pangan was informed that his name was not in the manifest and so
he could not take Flight No. 842 in the economy class. Since there was no space in
the economy class, he took the first class because he wanted to be on time in
Guam to comply with his commitment, paying an additional sum of $112.00.

Upon arrival in Guam on May 27, Pangan discovered that his luggages did not arrive
with his flight. Consequently, his agreements with Slutchnick and Quesada for the
exhibition of the films in Guam and in San Francisco were cancelled.

Upon his return to the Philippines, Pangan contacted his lawyer, who made the
necessary representations to protest as to the treatment which he received from
the employees Pan Am and the loss of his two luggages. After Pan Am's failure to
take action, Pangan filed an action for damages against the airline.

CFI: Ordered Pan Am to pay P83,000.00 with interest, for actual damages incurred
by Pangan's production companies; P10,000 for attorney's fees; P8,123.34, for
additional actual damages with interest, for damages incurred by Pangan; and costs
of the suit. Pan Am's counterclaim was likewise dismissed.

IAC: Affirmed CFI ruling.

Hence, the instant petition.

ISSUE:

1. Whether Pan Am is liable for the loss of profits sustained by Pangan as

a result of the cancelled agreements. – NO.
2. Whether Pan Am is liable for the value of Pangan's missing luggages
beyond the baggage liability limitation stipulated in the airline ticket.
– NO.

RULING:

1. The ruling in Mendoza v. PAL stands: "Under Art.1107 of the Civil Code, a
debtor in good faith may be held liable only for damages that were
foreseen or might have been foreseen at the time the contract of
transportation was entered into."

In the instant case, Pan Am was neither privy to Pangan's agreements nor was its
attention called to the condition requiring delivery of the promotional and
advertising materials contained in the luggage on or before May 30, 1978.

The US case of Chapman v. Fargo, L.R.A. (1918) is on all fours with the present
case: In Troy, New York, Chapman delivered motion picture films to the defendant
Fargo, an express company, consigned and to be delivered to him in Utica. At the
time of shipment the attention of the express company was called to the fact that
the shipment involved motion picture films to be exhibited in Utica, and that they
should be sent to their destination, rush. There was delay in their delivery and it
was found that Chapman, because of his failure to exhibit the film in Utica due to
the delay, suffered damages or loss of profits. But the highest court in the State of
New York refused to award him special damages. The Court held:

But before defendant could be held to special damages, such as the present
alleged loss of profits on account of delay or failure of delivery, it must have
appeared that he had notice at the time of delivery to him of the particular
circumstances attending the shipment, and which probably would lead to such
special loss if he defaulted. Or, as the rule has been stated in another form, in
order to purpose on the defaulting party further liability than for damages
naturally and directly, i.e., in the ordinary course of things, arising from a breach
of contract, such unusual or extraordinary damages must have been brought
within the contemplation of the parties as the probable result of breach at the
time of or prior to contracting. Generally, notice then of any special circumstances
which will show that the damages to be anticipated from a breach would be
enhanced has been held sufficient for this effect.

As applied in the instant case, in the absence of a showing that Pan Am's attention
was called to the special circumstances requiring prompt delivery of Pangan's
luggages, Pan Am cannot be held liable for the cancellation of Pangan's contracts as
it could not have foreseen such an eventuality when it accepted the luggages for
transit. In fact, the evidence reveals that the proximate cause of the cancellation
of the contracts was Pangan's failure to deliver the promotional and advertising
materials on the dates agreed upon. For this Pan Am cannot be held liable.

2. The back of the ticket provides a baggage liability limitation clause, which
states that:

Liability for loss, delay, or damage to baggage is limited as follows unless

a higher value is declared in advance and additional charges are paid:
(1)for most international travel (including domestic portions of
international journeys) to approximately $9.07 per pound ($20.00 per kilo)
for checked baggage and $400 per passenger for unchecked baggage: (2)
for travel wholly between U.S. points, to $750 per passenger on most
carriers (a few have lower limits). Excess valuation may not be declared
on certain types of valuable articles. Carriers assume no liability for
fragile or perishable articles. Further information may be obtained from
the carrier.

On the basis of such stipulation, Pan Am's liability for the lost baggage of
Pangan is limited to $600.00 ($20.00 x 30 kilos) as the latter did not
declare a higher value for his baggage and pay the corresponding additional
charges.

Court's ruling in Ong Yiu v. CA is applicable in the present case.

"Considering that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of [the limited
liability of PAL]."

Court's ruling in Shewaram v. PAL is not applicable in the present case: "The
ruling in [Shewaram] was premised on the finding that the conditions
printed at the back of the ticket were so small and hard to read that they
would not warrant the presumption that the passenger was aware of the
conditions and that he had freely and fairly agreed thereto. In the instant
case, similar facts that would make the case fall under the exception have
not been alleged, much less shown to exist."

The IAC also misread SC's ruling in Northwest Airlines, Inc. v. Cuenca: " the
Court never intended to, and in fact never did, rule against the validity of
provisions of the Warsaw Convention. Consequently, by no stretch of the
imagination may said quotation (re: the limited liability of Northwest
Airlines for lost baggage is against public policy) from the case be
considered as supportive of the appellate court's statement that the
provisions of the Warsaw Convention limited a carrier's liability are against
 public policy."

#106 Pakistan FACTS:

International On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a
Airlines v. Ople, foreign corporation licensed to do business in the Philippines, executed in Manila two
190 SCRA 90
(2) separate contracts of employment, one with private respondent Ethelynne B.
(1990)
Farrales and the other with private respondent Ma. M.C. Mamasig.
Topic:
Contracts After training, and after they began discharging their job functions as flight
attendants, with base station in Manila and flying assignments to different parts of the
Digested by: Middle East and Europe, roughly one (1) year and four (4) months prior to the
Falcone, Jon expiration of the contracts of employment, PIA through Mr. Oscar Benares, counsel
for and official of the local branch of PIA, sent separate letters 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].

Thereafter, private respondents Farrales and Mamasig jointly instituted a complaint

for illegal dismissal and non-payment of company benefits and bonuses against PIA
with the then Ministry of Labor and Employment ("MOLE").

The PIA 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.

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. 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, 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] . . .".

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.

ISSUES:
1. Whether or not the Regional Director, MOLE has jurisdiction over the subject
matter of the complaint initiated by private respondents for illegal dismissal.
2. Whether or not petitioner’s right to procedural due process was violated.
3. Whether or not the relationship between the petitioner and private
respondents is governed by the provisions of its contract (rather than by the
general provisions of the Labor Code).

RULING:
1. YES. 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.

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.

2. NO. 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 . 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.

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, 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. NO. The relationship should be governed by the general provisions of the

Labor Code.

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. 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. 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.

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, 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.

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.

#107 Triple DOCTRINE: Lex Loci Contractus: Established is the rule that lex loci contractus
Eight Integrated (the law of the place where the contract is made) governs in this jurisdiction. There
Services v. is no question that the contract of employment in this case was perfected here in
NLRC, G.R. No. the Philippines.
129584 (3
December FACTS:
1998)
Private respondent Osdana was recruited by petitioner for employment with the
Topic: latter’s principal, Gulf Catering Company (GCC), a firm based in the Kingdom of
Contracts Saudi Arabia. Under the original employment contract, Osdana was engaged to
work as "Food Server" for a period of thirty-six (36) months with a salary of five
Digested by: hundred fifty Saudi rials (SR550).
Fernandez, Klmn
Osdana claims she was required by the petitioner to pay a total of eleven thousand
nine hundred fifty pesos (P11,950.00) in placement fees and other charges, for which
DONE no receipt was issued. She was likewise asked to undergo a medical examination
conducted by the Philippine Medical Tests System, a duly accredited clinic for
overseas workers, which found her to be "Fit of Employment."

Subsequently, petitioner asked Osdana to sign another "Contractor-Employee

Agreement" which provided that she would be employed as a waitress for twelve (12)
months with a salary of two hundred eighty US dollars ($280). It was this
employment agreement which was approved by the Philippine Overseas
Employment Administration (POEA).
On September 16, 1992, Osdana left for Riyadh, Saudi Arabia, and commenced
working for GCC. She was assigned to the College of Public Administration of
the Oleysha University and, contrary to the terms and conditions of the
employment contract, was made to wash dishes, cooking pots, and utensils,
perform janitorial work and other tasks which were unrelated to her job
designation as waitress. Making matters worse was the fact that she was made
to work a grueling twelve-hour shift, from six o’clock in the morning to six
o’clock in the evening, without overtime pay.

Because of the long hours and the strenuous nature of her work, Osdana suffered
from numbness and pain in her arms. The pain was such that she had to be
confined at the Ladies Villa, a housing facility of GCC, from June 18 to August
22, 1993, during which period, she was not paid her salaries.

After said confinement, Osdana was allowed to resume work, this time as Food
Server and Cook at the Hota Bani Tameem Hospital, where she worked seven
days a week from August 22 to October 5, 1993. Again, she was not
compensated.

Then, from October 6 to October 23, 1993, Osdana was again confined at the
Ladies Villa for no apparent reason. During this period, she was still not paid her
salary.

On October 24, 1993, she was re-assigned to the Oleysha University to wash
dishes and do other menial tasks. As with her previous assignment at the said
University, Osdana worked long hours and under harsh conditions. Because of
this, she was diagnosed as having Bilateral Carpal Tunnel Syndrome, a
condition precipitated by activities requiring "repeated flexion, pronation, and
supination of the wrist and characterized by excruciating pain and numbness
in the arms.

As the pain became unbearable, Osdana had to be hospitalized. She underwent

two surgical operations, one in January 1994, another on April 23, 1994. Between
these operations, she was not given any work assignments even if she was willing
and able to do light work in accordance with her doctor’s advice. Again, Osdana was
not paid any compensation for the period between February to April 22, 1994.

After her second operation, Osdana was discharged from the hospital on April 25,
1994. The medical report stated that "she had very good improvement of the
symptoms and she was discharged on the second day of the operation."

Four days later, however, she was dismissed from work, allegedly on the ground
of illness. She was not given any separation pay nor was she paid her salaries
for the periods when she was not allowed to work.

Upon her return to the Philippines, Osdana sought the help of petitioner, but to no
avail. She was thus constrained to file a complaint before the POEA against
petitioner, praying for unpaid and underpaid salaries, salaries for the unexpired
portion of the employment contract, moral and exemplary damages and attorney’s
fees, as well as the revocation, cancellation, suspension and/or imposition of
administrative sanctions against petitioner.

Ruling of Labor Arbiter: It ruled in favor of Osdana.

Aggrieved by the labor arbiter’s decision, petitioner appealed to the NLRC

Decision of NLRC: It affirmed Labor Arbiter’s Decision.

Hence, this petition for certiorari.
ISSUE: Whether or not the NLRC acted with grave abuse of discretion in ruling in
favor of Osdana even if there was no factual or legal basis for the award

RULING: No, the NLRC did not act with grave abuse of discretion.

Article 284 of the Labor Code is clear on the matter of termination by reason of
disease or illness, viz:

"Art. 284. Disease as a ground for termination — An employer may terminate

the services of an employee who has been found to be suffering from any
disease and whose continued employment is prohibited by law or prejudicial
to his health as well as the health of his co-employees: . . ."

Specifically, Section 8, Rule I, Book VI of the Omnibus Rules Implementing the Labor
Code provides:

"Sec. 8. Disease as a ground for dismissal — Where the employee suffers

from a disease and his continued employment is prohibited by law or
prejudicial to his health or to the health of his co-employees, the employer
shall not terminate his employment unless there is a certification by
competent public authority that the disease is of such nature or at such a
stage that it cannot be cured within a period of six (6) months with proper
medical treatment. If the disease or ailment can be cured within the period,
the employer shall not terminate the employee but shall ask the employee to
take a leave. The employer shall reinstate such employee to his former
position immediately upon the restoration of his normal health." (Emphasis
supplied)

Viewed in the light of the foregoing provisions, the manner by which Osdana was
terminated was clearly in violation of the Labor Code and its implementing rules and
regulations.

In the first place, Osdana’s continued employment despite her illness was not
prohibited by law nor was it prejudicial to her health, as well as that of her
co-employees.

Petitioner attributes good faith on the part of its principal, claiming that "It was the
concern for the welfare and physical well-being (sic) of private respondent that drove
her employer to take the painful decision of terminating her from the service and
having her repatriated to the Philippines at its expense.

The Court notes, however, that aside from these bare allegations, petitioner
has not presented any medical certificate or similar document from a
competent public health authority in support of its claims.

On the medical certificate requirement, petitioner erroneously argues that "private

respondent was employed in Saudi Arabia and not here in the Philippines. Hence,
there was a physical impossibility to secure from a Philippine public health
authority the alluded medical certificate that the public respondent’s illness will not be
cured within a period of six months."

Petitioner entirely misses the point, as counsel for private respondent states in the
Comment. The rule simply prescribes a "certification by a competent public
health authority" and not a "Philippine public health authority."

If, indeed, Osdana was physically unfit to continue her employment, her employer
could have easily obtained a certification to that effect from a competent public health
authority in Saudi Arabia, thereby heading off any complaint for illegal dismissal.
The requirement for a medical certificate under Article 284 of the Labor Code cannot
be dispensed with; otherwise, it would sanction the unilateral and arbitrary
determination by the employer of the gravity or extent of the employee’s illness and
thus defeat the public policy on the protection of labor.

As the Court observed in Prieto v. NLRC, "The Court is not unaware of the many
abuses suffered by our overseas workers in the foreign land where they have
ventured, usually with heavy hearts, in pursuit of a more fulfilling future. Breach of
contract, maltreatment, rape, insufficient nourishment, sub-human lodgings, insults
and other forms of debasement, are only a few of the inhumane acts to which they
are subjected by their foreign employers, who probably feel they can do as they
please in their country. While these workers may indeed have relatively little defense
against exploitation while they are abroad, that disadvantage must not continue to
burden them when they return to their own territory to voice their muted complaint.
There is no reason why, in their own land, the protection of our own laws cannot be
extended to them in full measure for the redress of their grievances."

Petitioner likewise attempts to sidestep the medical certificate requirement by

contending that since Osdana was working in Saudi Arabia, her employment
was subject to the laws of the host country. Apparently, petitioner hopes to
make it appear that the labor laws of Saudi Arabia do not require any
certification by a competent public health authority in the dismissal of
employees due to illness.

Again, petitioner’s argument is without merit.

First, established is the rule that lex loci contractus (the law of the place where the
contract is made) governs in this jurisdiction. There is no question that the
contract of employment in this case was perfected here in the Philippines.
Therefore, the Labor Code, its implementing rules and regulations, and other
laws affecting labor apply in this case. Furthermore, settled is the rule that the
courts of the forum will not enforce any foreign claim obnoxious to the forum’s public
policy. Here in the Philippines, employment agreements are more than contractual in
nature. The Constitution itself, in Article XIII Section 3, guarantees the special
protection of workers, to wit:

"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.

It shall guarantee the rights of all workers to self-organization, collective bargaining

and negotiations, and peaceful concerted activities, including the right to strike in
accordance with law. They shall be entitled to security of tenure, humane conditions
of work, and a living wage. They shall also participate in policy and decision-making
processes affecting their rights and benefits as may be provided by law.
x x x

This public policy should be borne in mind in this case because to allow foreign
employers to determine for and by themselves whether an overseas contract worker
may be dismissed on the ground of illness would encourage illegal or arbitrary
pre-termination of employment contracts.

Notes:
Example: Contract made in Singapore. Parties are Filipinos (?)
1. What law applies on the contract? Lex Loci Contractus
2. What if SG Law does not allow attachments for debts below 2M? (one key
problem)
3. Another problem would be proving and pleading SG laws - but thats not
really an issue for this topic.
 Lex loci contractus - the law of the place where the contract is made
Problem: you apply foreign law

#108 Phil. https://lawphil.net/judjuris/juri2004/jul2004/gr_140047_2004.html

Export and
Foreign Loan
Guarantee DOCTRINE:
Corp. v. V.P.
Eusebio
Construction FACTS:
Inc. (2004) ■ November 8, 1980: State Organization of Buildings (SOB),
Ministry of Housing and Construction, Baghdad, Iraq, awarded the
Topic: construction of the Institute of Physical Therapy–Medical
Contracts Rehabilitation Center, Phase II, in Baghdad, Iraq, (Project) to
Ajyal Trading and Contracting Company (Ajyal), a firm duly
Digested by: licensed with the Kuwait Chamber of Commerce for
Garcia, Charisse ID5,416,089/046 (or about US$18,739,668)
■ March 7, 1981: 3-Plex International, Inc. represented by
Spouses Eduardo and Iluminada Santos a local contractor
DONE engaged in construction business, entered into a joint venture
agreement with Ajyal. However since it was not accredited under
the Philippine Overseas Construction Board (POCB), it had to
assign and transfer all its right to VPECI.
■ VPECI entered into an agreement that the execution of the project
will be under their joint management.
■ To comply with the requirements of performance bond of
ID271,808/610 and an an advance payment bond of
ID541,608/901, 3-Plex and VPECI applied for the issuance of a
guarantee with Philguarantee, a government financial institution
empowered to issue guarantees for qualified Filipino contractors
to secure the performance of approved service contracts abroad.
■ Subsequently, letters of guarantee were issued by
Philguarantee to the Rafidain Bank of Baghdad. 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 Philguarantee
■ The Surety Bond was later amended 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
■ SOB and the joint venture VPECI and Ajyal executed the service
contract for the construction of the Institute of Physical Therapy –
Medical Rehabilitation Center, Phase II, in Baghdad, Iraq. It
commenced only on the last week of August 1981 instead of the
June 2 1981
■ Prior to the deadline, upon foreseeing the impossibility to meet it,
the surety bond was also extended for more than 12 times until
May 1987 and the Advance Payment Guarantee was extended
three times more until it was cancelled for reimbursement
■ 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
 ■ 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 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.
■ VPECI advised the Philguarantee not to pay yet Al Ahli
Bank because efforts were being exerted for the amicable
settlement of the Project
■ VPECI 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 Philguarantee
■ VPECI requested the Central Bank to hold in abeyance the
payment by the Philguarantee "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
■ Central Bank authorized the remittance to Al Ahli Bank
■ 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 Philguarantee for the advances
made on its counter-guarantee but they failed to pay so a case
was filed in the RTC
■ RTC and CA: ruled against Philguarantee since no cause of
action; at the time the call was made on the guarantee which was
executed for a specific period, the guarantee had already lapsed
or expired caused by VPECI. Inequity to allow the Philguarantee
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.

ISSUE: W/N the Philippine laws should be applied in determining VPECI's

default in the performance of its obligations under the service contract

HELD: YES.
■ 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) - none in this case
■ 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 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
■ 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.” 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
■ delay or the non-completion of the Project was caused by
factors not imputable to the respondent contractor such as the
war in Iraq
■ 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. It could also set up compensation as regards what the
creditor SOB may owe the principal debtor VPECI.
■ 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.

NOTES:
■ SOB did not pay in dollar (should pay in dollar as agreed)
■ SOB - reimbursement from VP; subrogated
■ Guarantee - not liable unless there is default on the principal
debtor
■ Obligation of a guarantor arises only upon default of the
principal debtor
■ Surety - advantage is that surety is not liable if the principal debtor
can still perform the obligation; principally liable
■ Philiguarantee - guarantor; necessary to determine that VP
Eusebio has defaulted
■ Philguarantee argued it was a surety
■ Letter of guaranty - in the event of default by VP Eusebio
■ Case: default in the principal contract - construction of
Medical center in Iraq; significant portion of the project will
be carried out in Iraq
■ Applying intentionis or solutionis - Law of Iraq; but was not proved
■ Doctrine of processual presumption
■ Was there delay on the part of VP Eusebio? No, SOB was not
able to comply with its obligation for paying in US dollars.
■ Why is it essential? If not paid on time and in the proper manner,
delay will incur.

How to determine what law applies?

GR - intrinsic validity - lex contractus (proper law of the contract)(NO RULE

YET; refer to other rules)
 1. To determine whether there is delay, answer WON the petitioner was
a guarantor or a surety.
2. How do you answer choice of law question? Answered by referring to
different rules.

In a conflict issue in a contract matter: Lex Loci Contractus - general

rule that applies to laws regarding contracts in relation to the other rules i.e.
voluntatis, intentionis and solutionis.

1. Lex loci voluntatis - law agreed upon by the parties (2)

2. Lex loci intentionis - in the absence of express provision; intended by the
parties, whether expressly or impliedly (law intended by the parties) (3)
● How to determine implied intention of the parties - most significant
relationship test
● Arguably, the result of application of lex loci intentionis, will result to
the application of lex loci solutionis
3. Lex loci solutionis - law of the place of performance; (4)
4. Lex loci contractus - law of the place where the contract is made (1)
*all of these will help you find the law of the contract

Note: voluntatis is usually applied first. Then, Alternatively you may adopt
intentionis or solutionis as the facts may require.

Generally, contracts have a choice of law provision governing the contract. In

the absence of choice of law clause, you may choose lex loci intentionis by
determining the state with the most significant relationship test.

How do you answer? The best way is to cite PhilGuarantee and the 3 rules
stated therein.

Jurisdiction and choice of law are different.

3 Clauses:
1. Arbitration clause
2. Choice of law clause
3.

#109 Saudi DOCTRINE:

Arabian Airlines
v Rebesencio, FACTS:
GR 198587, 14
Jan 2015 Petitioner Saudi Arabian Airlines (Saudia) is a foreign corporation established
Topic:
and existing under the laws of Jeddah, Kingdom of Saudi Arabia. It has a
Contracts Philippine office located at 4/F, Metro House Building, Sen. Gil J. Puyat
Avenue, Makati City.
Digested by:
Gorez, John Respondents (complainants before the Labor Arbiter) were recruited and
hired by Saudia as Temporary Flight Attendants with the accreditation and
approval of the Philippine Overseas Employment Administration. They were
DONE permanent flight attendants of Saudia.

Respondents continued their employment with Saudia until they were

separated from service on various dates in 2006.

Respondents contended that the termination of their employment was

illegal. They alleged that the termination was made solely because they were
pregnant.

As respondents alleged, initially, Saudia had given its approval but later on
informed respondents that its management in Jeddah, Saudi Arabia had
disapproved their maternity leaves. In addition, it required respondents to file
their resignation letters.

Respondents were told that if they did not resign, Saudia would terminate
them all the same.

Saudia anchored its disapproval of respondents' maternity leaves and

demand for their resignation on its "Unified Employment Contract for
Female Cabin Attendants" (Unified Contract). Under the Unified Contract,
the employment of a Flight Attendant who becomes pregnant is rendered
void.

Respondents emphasized that the Unified Contract took effect on September

23, 2006 (the first day of Ramadan), well after they had filed and had their
maternity leaves approved. Ma. Jopette filed her maternity leave application
on September 5, 2006. Montassah filed her maternity leave application on
August 29, 2006, and its approval was already indicated in Saudia's
computer system by August 30, 2006. Rouen Ruth filed her maternity leave
application on September 13, 2006, and Loraine filed her maternity leave
application on August 22, 2006.

Respondents filed a Complaint against Saudia and its officers for illegal
dismissal and for underpayment of salary, overtime pay, premium pay for
holiday, rest day, premium, service incentive leave pay, 13th month pay,
separation pay, night shift differentials, medical expense reimbursements,
retirement benefits, illegal deduction, lay-over expense and allowances,
moral and exemplary damages, and attorney's fees.

Saudia assailed the jurisdiction of the Labor Arbiter. It claimed that all the
determining points of contact referred to foreign law and insisted that the
Complaint ought to be dismissed on the ground of forum non conveniens.

ISSUE:
Whether the Labor Arbiter and the National Labor Relations Commission may
exercise jurisdiction over Saudi Arabian Airlines and apply Philippine law in
adjudicating the present dispute;

RULING:

Saudia asserts that Philippine courts and/or tribunals are not in a

position to make an intelligent decision as to the law and the facts. This
is because respondents' Cabin Attendant contracts require the
application of the laws of Saudi Arabia, rather than those of the
Philippines. It claims that the difficulty of ascertaining foreign law calls into
operation the principle of forum non conveniens, thereby rendering
improper the exercise of jurisdiction by Philippine tribunals.

A choice of law governing the validity of contracts or the interpretation of its

provisions does not necessarily imply forum non conveniens. Choice of law
and forum non conveniens are entirely different matters.

Contractual choice of law provisions factor into transnational litigation and

dispute resolution in one of or in a combination of four ways: (1) procedures
for settling disputes, e.g., arbitration; (2) forum, i.e., venue; (3) governing law;
and (4) basis for interpretation. Forum non conveniens relates to, but is not
subsumed by, the second of these.

Likewise, contractual choice of law is not determinative of jurisdiction.

Stipulating on the laws of a given jurisdiction as the governing law of a
contract does not preclude the exercise of jurisdiction by tribunals elsewhere.

Philippine law is definite as to what governs the formal or extrinsic

validity of contracts. The first paragraph of Article 17 of the Civil Code
provides that "[t]he forms and solemnities of contracts . . . shall be
governed by the laws of the country in which they are executed" (i.e.,
lex loci celebrationis).

In contrast, there is no statutorily established mode of settling conflict of laws

situations on matters pertaining to substantive content of contracts. It
has been noted that three (3) modes have emerged: (1) lex loci
contractus or the law of the place of the making; (2) lex loci solutionis
or the law of the place of performance; and (3) lex loci intentionis or the
law intended by the parties.

The assertion of SAUDIA is the lex loci intentionis.

Our law on contracts recognizes the validity of contractual choice of law

provisions. Where such provisions exist, Philippine tribunals, acting as the
forum court, generally defer to the parties' articulated choice.

This is consistent with the fundamental principle of autonomy of contracts.

Article 1306 of the Civ:l Code expressly provides that "[t]he contracting
parties may establish 'such stipulations, clauses, terms and conditions as
they may deem convenient." Nevertheless, while a Philippine tribunal (acting
as the forum court) is called upon to respect the parties' choice of governing
law, such respect must not be so permissive as to lose sight of
considerations of law, morals, good customs, public order, or public policy
that underlie the contract central to the controversy.

So informed and animated, we emphasize the glaringly discriminatory

nature of Saudia's policy. As argued by respondents, Saudia's policy
entails the termination of employment of flight attendants who become
pregnant. At the risk of stating the obvious, pregnancy is an occurrence
that pertains specifically to women. Saudia's policy excludes from and
restricts employment on the basis of no other consideration but sex.

We do not lose sight of the reality that pregnancy does present physical
limitations that may render difficult the performance of functions associated
with being a flight attendant. Nevertheless, it would be the height of iniquity to
view pregnancy as a disability so permanent and immutable that, it must
entail the termination of one's employment. It is clear to us that any
individual, regardless of gender, may be subject to exigencies that limit the
performance of functions. However, we fail to appreciate how pregnancy
could be such an impairing occurrence that it leaves no other recourse but
the complete termination of the means through which a woman earns a living.

As the present dispute relates to (what the respondents alleged to be) the
illegal termination of respondents' employment, this case is immutably a
matter of public interest and public policy. Consistent with clear
pronouncements in law and jurisprudence, Philippine laws properly find
application in and govern this case. 'Moreover, as this premise for Saudia's
insistence on the application forum non conveniens has been shattered, it
follows that Philippine tribunals may properly assume jurisdiction over the
present controversy. Philippine jurisprudence provides ample illustrations of
when a court's renunciation of jurisdiction on account of forum non
conveniens is proper or improper.'

Notes:

● Dismissed - pregnant
● SAUDIA - PH court has no jurisdiction
● SC - applied lex loci intentionis
● SC - salient points in the case:
1. Applicability of forum non conveniens
2. Even if a foreign law applies, this court can still assume jurisdiction
but apply foreign law.
3. In any case, forum non conveniens is a question of fact. It cannot be
evaluated based merely on initial pleadings.

Choice of law question..

I. With respect to formal and extrinsic validity - Art. 17, NCC (Lex Loci
Celebracionis)

II. With respect to intrinsic validity - refer Phil Export case

● 1. Lex loci voluntatis – Preferred

● 2. Lex loci intentionis
● 3. Lex loci solutionis
● 4. Lex loci contractus

Justice Leonen:
1. Jurisdiction and choice of law are different, by extension, choice of
law and forum non conveniens are different.
2. In any case, the question of jurisdiction is left to the sound discretion
of the court. Forum non conveniens presupposes the jurisdiction of
the courts. But the court may also decline to assume jurisdiction. It is
a “should or should not” issue. In forum non conveniens, apply should
not.
3. In any case, forum non conveniens is a question of fact. It is not
something determined by the courts based on the pleadings. It must
 be resolved as a factual matter.
4. Conversely, just because the courts decide to assume jurisdiction
doesn’t mean it applies the PH law.

Extrinsic Validity: formalities and solemnities - apply Art. 17

Intrinsic - no statutory rule; apply the 4 rules; in the absence of the intention,
apply most significant relationship rule
3 MODES:
1. lex loci contractus or the law of the place of the making;
2. lex loci solutionis or the law of the place of performance; and
3. lex loci intentionis or the law intended by the parties.
(express/implied)
J. Leonen applied lex loci intentionis.
may be applied with property law matter
apply the law of the contract.
capacity to contract - national law applies

#110 DOCTRINE:
Continental
Micronesia v FACTS:
Basso, GR
178382-83, 23 Petitioner Continental Micronesia is a foreign corporation organized and existing
Sept 2015 under the laws of and domiciled in the United States of America. It is licensed to do
business in the Philippines. Respondent, a US citizen residing in the Philippines,
Topic: accepted an offer to be a General Manager position by Mr. Braden, Managing
Contracts Director-Asia of Continental Airlines. On November 7, 1992, CMI took over the
Philippine operations of Continental, with respondent retaining his position as
Digested by: General Manager.
Lanutan, Lauro
Thereafter, respondent received a letter from Mr. Schulz, who was then CMI’s Vice
President of Marketing and Sales, informing him that he has agreed to work in CMI
as a consultant on an “as needed basis.” Respondent wrote a counter-proposal that
was rejected by CMI.

Respondent then filed a complaint for illegal dismissal against the petitioner
corporation. Alleging the presence of foreign elements, CMI filed a Motion to Dismiss
on the ground of lack of jurisdiction over the person of CMI and the subject matter of
the controversy.

The Labor Arbiter agreed with CMI that the employment contract was executed in the
US “since the letter-offer was under the Texas letterhead and the acceptance of
Complainant was returned there.” Thus, applying the doctrine of lex loci
celebrationis, US laws apply. Also, applying lex loci contractus, the Labor Arbiter
ruled that the parties did not intend to apply Philippine laws.

The NLRC ruled that the Labor Arbiter acquired jurisdiction over the case when CMI
voluntarily submitted to his office’s jurisdiction by presenting evidence, advancing
arguments in support of the legality of its acts, and praying for reliefs on the merits of
the case.
 The Court of Appeals ruled that the Labor Arbiter and the NLRC had jurisdiction over
the subject matter of the case and over the parties.

ISSUE:

Whether labor tribunals have jurisdiction over the case.

RULING:

Yes. The Court ruled that the labor tribunals had jurisdiction over the parties and the
subject matter of the case. The employment contract of Basso was replete with
references to US laws, and that it originated from and was returned to the US, do not
automatically preclude our labor tribunals from exercising jurisdiction to hear and try
this case.

On the other hand, jurisdiction over the person of CMI was acquired through the
coercive process of service of summons. CMI never denied that it was served with
summons. CMI has, in fact, voluntarily appeared and participated in the proceedings
before the courts. Though a foreign corporation, CMI is licensed to do business in the
Philippines and has a local business address here.

The purpose of the law in requiring that foreign corporations doing business in the
country be licensed to do so, is to subject the foreign corporations to the jurisdiction
of our courts.

Where the facts establish the existence of foreign elements, the case presents a
conflicts-of-laws issue. Under the doctrine of forum non conveniens, a Philippine
court in a conflict-of-laws case may assume jurisdiction 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. All these
requisites are present here.

#111 DFA v BCA DOCTRINE:

Intl Corp, GR
225051, 19 July Arbitration is deemed a special proceeding and governed by the special provisions of
2017 RA 9285, its IRR, and the Special ADR Rules. RA 9285 is the general law applicable
to all matters and controversies to be resolved through alternative dispute resolution
Topic: methods. While enacted only in 2004, we held that RA 9285 applies to pending
Contracts arbitration proceedings since it is a procedural law, which has retroactive effect.

Digested by: Principles:

Manlangit, Naz
Court intervention is allowed under RA No. 9285 in the following instances: (1) when
a party in the arbitration proceedings requests for an interim measure of protection;
(2) judicial review of arbitral awards by the Regional Trial Court (RTC); and (3)
appeal from the RTC decisions on arbitral awards to the Court of Appeals.

RA No. 9285 declares the policy of the State to actively promote pa1iy autonomy in
the resolution of disputes or the freedom of the parties to make their own
arrangements to resolve their disputes. Towards this end, the State shall encourage
and actively promote the use of Alternative Dispute Resolution as an important
means to achieve speedy and impartial justice and declog court dockets.

Court intervention in the Special ADR Rules is allowed through these remedies: (1)
Specific Court Relief, which includes Judicial Relief Involving the Issue of Existence,
Validity and Enforceability of the Arbitral Agreement, Interim Measures of Protection,
Challenge to the Appointment of Arbitrator, Termination of Mandate of Arbitrator,
Assistance in Taking Evidence, Confidentiality/Protective Orders, Confirmation,
Correction or Vacation of A ward in Domestic Arbitration, all to be filed with the RTC;
(2) a motion for reconsideration may be filed by a party with the RTC on the grounds
specified in Rule 19.1; (3) an appeal to the Court of Appeals through a petition for
review under Rule 19.2 or through a special civil action for certiorari under Rule
19.26; and (4) a petition for certiorari with the Supreme Court from a judgment or
final order or resolution of the Court of Appeals, raising only questions of law.

FACTS:

DFA entered into an Amended-Built-Operate-Transfer (BOT) Agreement with BCA

International Corp. and awarded to the latter the Machine Readable Passport and
Visa Project (MRP/V Project). In the course of implementing the MRP/V Project,
conflict arose and DFA sought to terminate the agreement.

BCA Int’l Corp. opposed the termination and requested for arbitration on April 20,
2006. The Arbitral Tribunal was constituted on June 29, 2009.

The Arbitral issued Procedural Order No. 11, allowing BCA International Corp. to
submit its Amended Statement of Claims of actual damages amounting to
390,000,000 plus an additional 10,000,000 for exemplary, temperate or nominal
damages in order for the claim to conform to the evidence presented by the
respondent.

Thereafter, it issued Procedural No. 12 which disallows the presentation of additional

evidence by BCA International Corp. to prove the increase in the amount of claim,
and disallowed the taking of testimonial evidence from any witness by any party.
Procedural No. 12 denied DFA’s motion for reconsideration of Procedural No. 11.

Aggrieved, DFA filed a petition for Certiorari under Rule 65 of the Rules of Court
before the SC with application of a TRO and/or preliminary injunction for the
annulment of Procedural Nos. 11 and 12. DFA avers that the amendment caused
undue delay and prejudice to it; that the amendment relied falls outside the scope of
the arbitration clause and hence outside the jurisdiction of the Ad Hoc Tribunal. Also,
it contends that the parties in this case has agreed to refer any dispute to arbitration
under the 1976 UNCITRAL Arbitration Rules and not by Alternative Dispute
Resolution (ADR) Act of 2004 (R.A. 9285) for to do so would amount to transgression
of vested rights and vitiation of consent to arbitration proceedings.

On the other hand, respondent contends that SC has no jurisdiction to intervene in

private arbitration, which is a special proceeding governed by the ADR Act of 2004
(R.A. 9285), its IRR and Special ADR Rules; that the tribunal derives their authority
to hear and resolve cases from the contractual consent of the parties expressed in
Sec. 19.02 of the Agreement.

ISSUE:

What law should govern the Arbitration Proceedings?

RULING:

Under Article 33 of the UNCITRAL Arbitration Rules governing the parties, "the
arbitral tribunal shall apply the law designated by the parties as applicable to the
substance of the dispute." "Failing such designation by the parties, the arbitral
tribunal shall apply the law determined by the conflict of laws rules which it considers
applicable." Established in this jurisdiction is the rule that the law of the place where
the contract is made governs, or lex loci contractus. As the parties did not designate
the applicable law and the Agreement was perfected in the Philippines, our
Arbitration laws, particularly, RA No. 876, RA No. 9285 and its IRR, and the Special
ADR Rules apply. The IRR of RA No. 9285 provides that "[t]he arbitral tribunal shall
decide the dispute in accordance with such law as is chosen by the parties. In the
absence of such agreement, Philippine law shall apply."

Arbitration is deemed a special proceeding and governed by the special provisions of

RA 9285, its IRR, and the Special ADR Rules. RA 9285 is the general law applicable
to all matters and controversies to be resolved through alternative dispute resolution
methods. While enacted only in 2004, we held that RA 9285 applies to pending
arbitration proceedings since it is a procedural law, which has retroactive effect. The
IRR of RA 9285 reiterates that RA 9285 is procedural in character and applicable to
all pending arbitration proceedings. Consistent with Article 2046 of the Civil Code,
the Special ADR Rules were formulated and were also applied to all pending
arbitration proceedings covered by RA 9285, provided no vested rights are impaired.

Thus, contrary to DFA's contention, RA 9285, its IRR, and the Special ADR Rules are
applicable to the present arbitration proceedings. The arbitration between the DFA
and BCA is still pending, since no arbitral award has yet been rendered. Moreover,
DFA did not allege any vested rights impaired by the application of those procedural
rules.

As to the issue of petition for certiorari:

Whether the petition filed before the Court is proper.

No. The order being questioned is not from a judgment or final order or resolution of
the court of appeals but only from an interlocutory order of an arbitral tribunal.

In an earlier case filed by petitioner entitled Department of Foreign Affairs v. BCA

International Corporation, docketed as G.R. No. 210858, the Court ruled therein RA
9285, its IRR, and the Special ADR Rules are applicable to the present arbitration
proceedings.

RA No. 9285 declares the policy of the State to actively promote party autonomy in
the resolution of disputes or the freedom of the parties to make their own
arrangements to resolve their disputes. Towards this end, the State shall encourage
and actively promote the use of Alternative Dispute Resolution as an important
means to achieve speedy and impartial justice and declog court dockets.

Court intervention is allowed under RA No. 9285 in the following instances:

(1) when a party in the arbitration proceedings requests for an interim measure of
protection;

(2) judicial review of arbitral awards by the Regional Trial Court (RTC); and

(3) appeal from the RTC decisions on arbitral awards to the Court of Appeals.

Rule 19.37 of Special ADR Rules provides that a party desiring to appeal by
certiorari from a judgment or final order or resolution of the Court of Appeals issued
pursuant to these Special ADR Rules may file with the Supreme Court a verified
petition for review on certiorari. The petition shall raise only questions of law, which
must be distinctly set forth.

It is clear that an appeal by certiorari to the Supreme Court is from a judgment or

final order or resolution of the Court of Appeals and only questions of law may be
 raised. There have been instances when we overlooked the rule on hierarchy of
courts and took cognizance of a petition for certiorari alleging grave abuse of
discretion by the Regional Trial Court when it granted interim relief to a party and
issued an Order assailed by the petitioner, considering the transcendental
importance of the issue involved therein or to better serve the ends of justice when
the case is determined on the merits rather on technicality.

However, in this case, the appeal by certiorari is not from a final Order of the Court of
Appeals or the Regional Trial Court, but from an interlocutory order of the Arbitral
Tribunal; hence, the petition must be dismissed for failure to observe the rules on
court intervention allowed by RA No. 9285 and the Special ADR Rules, specifically
Rule 19.36 and Rule 19.37 of the latter, in the pending arbitration proceedings of the
parties to this case.

J. TORTS AND CRIMES

SAUDIA Lex loci delicti commissi - law of the place where the tortious act was
CASE, supra committed
(review)
This case applied the most significant relationship rule, the following
points of contact must be taken into account, as well as the place, conduct,
nationality, etc.

SAUDIA Case (points of contact)

i. nationality of plaintiff & defendant
ii. the place where the overall harm occurred - Phils. is the state with more
significant relationship with the problem
iii. place where the conduct causing the injury occurred
iv. place where the relationship between parties are centered

Note: Objectively, Saudi had the most significant relationship. But the court is
not wrong. The court placed greater weight on the effects of all the tortious
act would be felt by the plaintiff in the Phils. (not a mechanical test) You
may evaluate each point of contact to determine the most significant
relationship.

Interest Analysis/Approach - applied in PH by way of exceptions.

How do you combine? Apply the most significant relationship except where
the public policy of the PH demands the application of the PH law.

#112 SS Lotus DOCTRINE:

Case, P.C.I.J. ​A rule of international law, which prohibits a state from exercising criminal jurisdiction
Ser. A, No. 10, over a foreign national who commits acts outside of the state’s national jurisdiction,
p. 4 (1927) does not exist.

Topic: Lotus Principle. This means that states can do as they wish unless it is made
Torts and Crimes explicit that it is prohibited in international law.

Digested by:
FACTS:
Opigal, Amil
A collision occurred shortly before midnight on the 2nd of August 1926 between the
French mail steamer Lotus and the Turkish collier Boz-Kourt. The French mail
steamer was captained by a French citizen by the name Demons while the Turkish
collier Boz-Kourt was captained by Hassan Bey. The Turks lost eight men after
their ship cut into two and sank as a result of the collision. The mishap occurred at
Mytilene in Greece.

Although the Lotus did all it could do within its power to help the ship wrecked and 10
persons but 8 died, it continued on its course to Constantinople, where it arrived on
August 3.

On the 5th of August, Lieutenant Demons was asked by the Turkish authority to go
ashore to give evidence. After Demons was examined, he was placed under arrest
without informing the French Consul-General. Both Demons and Hassan Bey were
accused and charged of unintentional killing which is generally referred to as man
slaughtering.

Demons was sentenced to jail for 80 days with a fine of 22 pounds while Hassan Bey
was sentenced to a more serious penalty.

This basis was contended by Demons on the ground that the court lacked jurisdiction
over him. With this, both countries agreed to submit to the Permanent Court of
International Justice, the question of whether the exercise of Turkish criminal
jurisdiction over Demons for an incident that occurred on the high seas contravened
international law.

ISSUE:
​
Whether or not the rule of international law which prohibits a state from exercising
criminal jurisdiction over a foreign national who commits acts outside of the state’s
national jurisdiction exist.

RULING:
No. A rule of international law, which prohibits a state from exercising criminal
jurisdiction over a foreign national who commits acts outside of the state’s national
jurisdiction, does not exist.

Failing the existence of a permissive rule to the contrary is the first and foremost
restriction imposed by international law on a state and it may not exercise its power
in any form in the territory of another state. This does not imply that international law
prohibits a state from exercising jurisdiction in its own territory, in respect of any case
that relates to acts that have taken place abroad which it cannot rely on some
permissive rule of international law.

In this situation, it is impossible to hold that there is a rule of international law that
prohibits Turkey from prosecuting Demons because he was aboard a French ship.
This stems from the fact that the effects of the alleged offense occurred on a Turkish
vessel.

Hence, both states here may exercise concurrent jurisdiction over this matter
because there is no rule of international law in regards to collision cases to the
effect that criminal proceedings are exclusively within the jurisdiction of the state
whose flag is flown.
Legal Impact

Lotus Principle

The Lotus case laid the foundation of the lotus principle. There are certain special
rules that have come out in relation to the lotus case regarding the collision, local
claim, etjc.

The first lotus principle was related to the jurisdiction of a country or state with its
territory. A state or country has no right to exercise its power outside its border
without international agreement or enacted laws giving it the right to do so. This is
the first lotus principle. It is stated in Paragraph 45 that one country cannot operate
without its jurisdiction unless there is a special law enacted by an international
tribunal to be applied.

The second principle of the lotus case was that a country or state has the right to use
its power within its territory. The state may exercise its authority in matters of any
nature that it deems necessary to exercise. The state shall have the right to exercise
its jurisdiction within its own authority even if there is no specific international law that
gives the state exclusive powers to do so. In such cases, the country or state shall
apply for a broader extension of the jurisdiction which is protected by the supreme
rules of international law. This is stated in Paragraph 46 and Para 47.

From the lotus principle, it was understandable that a country or state was given
special freedom within its territory. There were no restrictions on international law. In
the case of Turkey, Boz-Kourt, their vessel was considered their own territory. This
gave Turkey the right to bring any action against France and Mr. Demons.

Important notice

● After this case, a convention was signed at Geneva in 1958 (the High Seas
Convention) that specifically addressed jurisdiction on collisions on the high
seas under Article 11.
● Article 11, in three paragraphs state:
○ 1. In the event of a collision at the high seas, no penal or disciplinary
proceedings may be instituted against the master or any service
person of the ship other than the flag state of the ship or the
nationality of the person.
○ 2. For disciplinary procedures, only the state issuer of a master’s
licence have the ability to withdraw it, even if the holder of the
licence is not a national of the issuing state.
○ 3. No arrest or detention of a ship can be ordered by any authorities
other than the flag state of the ship.
● Had this convention been in place before the time of the Lotus collision, the
judgment of the PCIJ would have been different. Turkey would not have had
the jurisdiction to institute criminal proceedings against M. Demons due to
Article 11 paragraph 1.
● The exact wording of Article 11 is also included in the convention's
successor, UNCLOS (United Nations Convention of the Law of the Sea of
1982) under Article 97.
#113 Filartiga v. DOCTRINE:
Pens-Irala, 630
F. 2d 876 (2d However, where the nations of the world have adopted a norm in terms so formal and
Cir, 1980) unambiguous as to make it international "law," the interests of the global community
transcend those of any one state. That does not mean that traditional choice-of-law
Topic: principles are irrelevant. Clearly the court should consider the interests of Paraguay
Torts and Crimes to the extent they do not inhibit the appropriate enforcement of the applicable
international law or conflict with the public policy of the United States.
Digested by:
Quinones, Erika
FACTS:

Plaintiffs, Dolly M.E. and Dr. Joel Filartiga, citizens of Paraguay, brought this action
against defendant Pena, also a Paraguayan citizen, and the former Inspector
General of Police of Asuncion. They alleged that Pena tortured and murdered
Joelito Filartiga, the seventeen year old brother and son, respectively, of plaintiffs, in
retaliation for Dr. Filartiga's opposition to President Alfredo Stroessner's government.
Plaintiffs invoked jurisdiction under, among other provisions, 28 U.S.C. § 1350,
giving the district court "original jurisdiction of any civil action by an alien for a
tort only, committed in violation of the law of nations or a treaty of the United
States. All parties were Paraguayan citizens. Jurisdiction was based on the Alien
Tort Statute, 28 U.S.C. S 1350, which provided jurisdiction for tort committed in
violation of the law of nations.

The Court of Appeals held that "deliberate torture perpetrated under color of official
authority violates universally accepted norms of the international law of human rights,
regardless of the nationality of the parties," and that 28 U.S.C. § 1350 gave
jurisdiction over an action asserting such a tort committed in violation of the law of
nations. The case was dismissed by the district court for lack of jurisdiction to which
Filartiga (P) appealed.

ISSUE:

● Does the "tort" to which the statute refers mean a wrong "in violation
of the law of nations" or merely a wrong actionable under the law of the
appropriate sovereign state? If so, will the Paraguay law apply first?

RULING:
1. Paraguay law applies first. The common law of the United States includes, of
course, the principles collected under the rubric of conflict of laws. For the
most part in international matters those principles have been concerned with
the relevant policies of the interested national states, and with "the needs" of
the "international systems." The chief function of international choice-of-law
rules has been said to be to further harmonious relations and commercial
intercourse between states.

However, where the nations of the world have adopted a norm in terms so
formal and unambiguous as to make it international "law," the interests of the
global community transcend those of any one state. That does not mean that
traditional choice-of-law principles are irrelevant. Clearly the court should
consider the interests of Paraguay to the extent they do not inhibit the
appropriate enforcement of the applicable international law or conflict with
the public policy of the United States.

In this case, the torture and death of Joelito occurred in Paraguay. The
plaintiffs and Pena are Paraguayan and lived in Paraguay when the
torture took place, although Dolly Filartiga has applied for permanent
asylum in the United States. It was in Paraguay that plaintiffs suffered
 the claimed injuries, with the exception of the emotional trauma which
followed Dolly Filartiga to this country. The parties' relationships with
each other and with Joelito were centred in Paraguay.

Moreover, the written Paraguayan law prohibits torture. The Constitution of

Paraguay, art. 50. The Paraguayan Penal Code, art. 337, provides that
homicide by torture is punishable by a imprisonment for 15 to 20 years.
Affidavit of Alejandro Miguel Garro, December 9, 1982. Paraguay is a
signatory to the American Convention on Human Rights, which proscribes
the use of torture. Paraguayan law purports to allow recovery for wrongful
death, including specific pecuniary damages, "moral damage," and court
costs and attorney's fees. Thus, the pertinent formal Paraguayan law is
ascertainable.

All these factors make it appropriate to look first to Paraguayan law in

determining the remedy for the violation of international law. See Lauritzen v.
Larsen. It might be objected that, despite Paraguay's official ban on torture,
the "law" of that country is what it does in fact, and torture persists
throughout the country. Where a nation's pronouncements form part of the
consensus establishing an international law, however, it does not lie in the
mouth of a citizen of that nation, though it professes one thing and does
another, to claim that his country did not mean what it said. In concert with
the other nations of the world Paraguay prohibited torture and thereby
reaped the benefits the condemnation brought with it. Paraguayan citizens
may not pretend that no such condemnation exists. If there be hypocrisy, we
can only say with La Rochefoucauld that "hypocrisy is the homage which
vice pays to virtue." To the extent that Pena might have expected that
Paraguay would not hold him responsible for his official acts, that was not a
"justified" expectation so as to make unfair the application to him of the
written law of Paraguay.

#114 In re DOCTRINE:
Estate of
Ferdinand FACTS:
Marcos, 1994
U.S. App. Lexis During Ferdinand Marcos' tenure as President of the Philippines, up to 10,000 people
14796 (9th Circ., in the Philippines were allegedly tortured, summarily executed or disappeared at the
1994) hands of military intelligence personnel acting pursuant to martial law declared by
Marcos. Marcos, his family, Ver and others loyal to Marcos fled to Hawaii. One month
Topic: later, a number of lawsuits were filed against Marcos, Ver, and/or Imee Marcos
Torts and Crimes Manotoc, claiming that the plaintiffs had been arrested and tortured, or were
thefamilies of people arrested, tortured, and executed. All actions were dismissed by
Digested by: district courts on the "act of state" defense; we reversed and remanded in an
Remoreras, unpublished decision. The Judicial Panel on Multi-District Litigation then consolidated
Sandy all cases in the District of Hawaii and the case was certified as a class action.

On November 1, 1991, the plaintiffs moved for a preliminary injunction to prevent the
Estate from transferring or secreting any assets in order to preserve the possibility of
collecting a judgement. The Estate had earlier been enjoined from transferring or
secreting assets in an action brought by the Republic of the Philippines against
Ferdinand Marcos. That preliminary injunction had been appealed, and was affirmed.
When the preliminary injunction in that case was dissolved due to a settlement, the
plaintiffs in this action immediately sought the continuation of that injunction. The
district court granted the motion.

Pending this interlocutory appeal of the preliminary injunction, trial on liability

proceeded. On September 24, 1992, the jury rendered a verdict in favor of the class
and the individually-named plaintiffs (except for plaintiff Wilson Madayag). The
Estate's motion for JNOV was denied, and judgement was entered in favor of the
prevailing plaintiffs. The preliminary injunction was modified on November 16, 1993,
to set forth the jury verdict on liability, to compel the legal representatives of the
Estate to fully and completely answer plaintiffs' interrogatories regarding the assets
of the estate, to name the Swiss banks at which the Marcoses had deposited monies
as representatives of the Estate, and to permit the plaintiffs to take discovery
regarding these assets. On February 23, 1994, the jury awarded the plaintiffs $1.2
billion in exemplary damages. The jury will reconvene to determine compensatory
damages.

ISSUE:

W/N the foreign state is immuned to damages for personal injury or death?

RULING:

NO.

We have previously rejected the Estate's argument that FSIA immunizes alleged acts
of torture and execution by a foreign official. On appeal from entry of default
judgement against Imee Marcos-Manotoc, we rejected Marcos-Manotoc's assertion
that she was entitled to sovereign immunity because her challenged actions were
premised on her authority as a government agent. In Chuidian v. Philippine Nat'l
Bank, 912 F.2d 1095 (9th Cir.1990), we had held that FSIA does not immunize a
foreign official engaged in acts beyond the scope of his authority: Where the officer's
powers are limited by statute, his actions beyond those limitations are considered
individual and not sovereign actions. The officer is not doing the business which the
sovereign has empowered him to do.

We held that upon default, Marcos-Manotoc admitted that she acted on her own
authority, not that of the Republic of the Philippines. Her acts were not taken within
any official mandate and were therefore not the acts of an agency or instrumentality
of a foreign state within the meaning of FSIA.

Like Marcos-Manotoc, the Estate argues that Marcos' acts were premised on his
official authority, and thus fall within FSIA. However, because the allegations of the
complaint are taken as true for purposes of determining whether an action should be
dismissed, Marcos' actions should be treated as taken without official mandate
pursuant to his own authority.

Further, we rejected the argument that Marcos' actions were "official" or "public" acts
when we reversed the dismissal of the actions against Ferdinand Marcos on the "act
of state doctrine." In Estate I, we explained: This conclusion that Marcos-Manotoc's
acts were not taken pursuant to an official mandate] is consistent with our earlier
decision that the same allegations against former President Marcos are not
nonjusticiable "acts of state." See Trajano v. Marcos, 878 F.2d 1439 (9th Cir.1989). In
so holding, we implicitly rejected the possibility that the acts set out in Trajano's
complaint were public acts of the sovereign. Moreover, in the Republic of the
Philippines, we held that Marcos' alleged illegal acts were not official acts pursuant to
his authority as President of the Philippines.

(If Atty asks about the subject matter jurisdiction under the Alien Tort Act)

The Alien Tort Act, 28 U.S.C. Sec. 1350, enacted as part of the First Judiciary Act of
1789, provides:The district courts shall have original jurisdiction of any civil action by
an alien for a tort only, committed in violation of the law of nations or a treaty of the
United States. In upholding the default judgment against Marcos-Manotoc, we held
 that a "suit as an alien for the tort of wrongful death, committed by military
intelligence officials through torture prohibited by the law of nations, is within the
jurisdictional grant of Sec. 1350.". In so holding, we rejected all of the Estate's
arguments now asserted on appeal.

The Estate contends that there is no jurisdiction pursuant to the "Arising Under"
Clause of Art. III because 28 U.S.C. Sec. 1350 is purely a jurisdictional statute. In
Estate I, we agreed that a jurisdictional statute could "not alone confer jurisdiction on
the federal courts, and that the rights of the parties must stand or fall on federal
substantive law to pass constitutional muster." However, we disagreed that there was
no federal substantive law governing the dispute.

First, we concluded that even where FSIA was held inapplicable, there was federal
subject matter jurisdiction by virtue of the required analysis of whether immunity
would be granted under FSIA. We also rejected the Estate's argument that
international law does not provide a basis for federal court jurisdiction under Sec.
1350: [T]he prohibition against official torture carries with it the force of a jus cogens
norm, which enjoys the highest status within international law.... We therefore
conclude that the district court did not err in founding jurisdiction on a violation of the
jus cogens norm prohibiting official torture.

#115 Trajano v.
Marcos, 113 S.
Ct. 2959 (1993) DOCTRINE:

Topic: FACTS: Agapita Trajano, a citizen of the Philippines who then lived in Hawaii, sued
Torts and Crimes former President Marcos, Ver and Marcos’ daughter, Imee Marcos a for the
kidnapping, torture and murder of her son, Archimedes Trajano in 1977. Trajano was
Digested by: a student at the Mapua Institute Technology. He went to an open forum discussion at
Tudtud, Kiara which Marcos-Manotoc was speaking. When Trajano asked a question about her
appointment as director of an organization, he was kidnapped, interrogated, and
tortured to death by military intelligence personnel who were acting under Ver's
direction, pursuant to martial law declared by Marcos, and under the authority of Ver,
Marcos, and Marcos-Manotoc. The District Court of Hawaii concluded that the torture
and death of Trajano was a violation of fundamental human rights constituted a tort in
violation of the law of nations under the Alien Tort Statute and awarded damages of
$4l6 million and attorney’s fees. Marcos-Manotoc assailed jurisdiction of the U.S.
Court over the case.

ISSUE: Does the U.S. Court have jurisdiction over the case filed by Agapita Trajano?

RULING: YES. For an action to prosper under the Alien Tort Statute, it requires a
claim by an alien, a tort and a violation of the international law. Section 130 of the
same law provides: “The district courts shall have original jurisdiction of any civil
action by an alien for a tort only, committed in violation of the law of nations or a
treaty of the United States.” Here, Trajano’s suit as an alien for the tort of wrongful
death, committed by military intelligence officials through torture prohibited by the law
of nations was within the jurisdictional grant of Section 130 of the Alien Tort Statute.
#116 Saudi DOCTRINE:
Arabian Airlines
v. CA, supra FACTS: An action for tort where a Filipina was illegally dismissed by her
employer, Saudi Arabia Airlines, arising from the incident where she almost
Topic: got raped. She went to the Philippines and filed a civil action for damages.
Torts and Crimes The defendants were based in Saudi Arabia so there is foreign element
involved. Especially so that some acts which were parts of the complaint also
Digested by:
Aquino, Zaira took place in Saudi Arabia.

ISSUE: Whether the trial court has jurisdiction over the case.

[Note: It is in this case where the SC applied the most significant relationship
theory in determining liability involving foreign elements. Allegedly, there were
tortious acts committed in the Philippines as well as in Saudi Arabia.]

RULING: Yes.

The SC correspondingly applied the connecting factor which refers to the

conflict of laws rules in the Philippines on tort. The COL rules in the
Philippines that governs torts is the principle of lex loci delicti commissi (the
law of the country where the tortious act is committed).

In this case, the SC believed that all these factors relate to the Philippines as
the lex loci delicti commissi.Applying the Most Significant Relationship Rule.
The country where most of the significant components of the transaction or
event took place is the Philippines:

1) The complainant, the stewardess is a Filipino national

2) The acts of deception employed by the airline in convincing her to go
back to Saudi Arabia in the guise of asking her help in the
investigation of the culprits when in truth and in fact, the purpose
there was to charge and prosecute him for the crime, took place in the
Philippines.
3) The damage to the plaintiff’s reputation occurred in the Philippine
community
4) The defendants in one way or the other, was deemed to be doing
business in the Philippines having a sales agent for purposes of
selling airline tickets.

NOTE:
Lex loci delicti commissi governs only the substantive aspects of the dispute
1. Liability of the parties or the tortfeasor
2. The defenses available to the tortfeasor
3. Nature of the damages that complainant may recover
4. Extent of amount of damages that may be recovered
5. Prescription

For purposes of conflict of laws rule on torts, prescription is treated as a

substantive issue. Thus, governed by the law of the place where the tortious
act was committed (lex loci delicti commissi) and not the law of the place
where the tort action is filed.
 K. Recognition and Enforcement of Foreign Judgement and
Foreign Arbitral Awards

#117 National CASE LINK:

Union Fire https://lawphil.net/judjuris/juri1990/apr1990/gr_87958_1990.html
Insurance
Company of DOCTRINE: The INSURER cannot avoid the binding effect of the arbitration clause.
Pittsburgh v. By subrogation, it became privy to the Charter Party as fully as the SHIPPER before
Stolt-Nielsen the latter was indemnified, because as subrogee it stepped into the shoes of the
Philippines, SHIPPER and is subrogated merely to the latter's rights.
Inc., G.R. No.
87958 (26 April FACTS:
1990) United Coconut Chemicals, Inc. (SHIPPER) shipped 404.774 metric tons of
distilled C6-C18 fatty acid on board MT "Stolt Sceptre," a tanker owned by
Topic: Stolt-Nielsen Philippines Inc. (CARRIER), from Bauan, Batangas, Philippines,
Recognition and consigned to "Nieuwe Matex" at Rotterdam, Netherlands, covered by a Tanker Bill of
Enforcement of Lading. The shipment was insured under a marine cargo policy with Petitioner
Foreign National Union Fire Insurance Company of Pittsburg (INSURER), through its
Judgement and settling agent in the Philippines, the American International Underwriters
Foreign Arbitral (Philippines), Inc.
Awards
It appears that the Bill of Lading issued by the CARRIER contained a general
Digested by: statement of incorporation of the terms of a Charter Party between the SHIPPER and
Baclayon, Ruchi Parcel Tankers, Inc., entered into in Greenwich, Connecticut, USA.

Upon receipt of the cargo by the CONSIGNEE in the Netherlands, it was found to be
discolored and totally contaminated. The claim filed by the SHIPPER-ASSURED with
the CARRIER having been denied, the INSURER indemnified the SHIPPER
pursuant to the stipulation in the marine cargo policy covering said shipment.

The INSURER filed suit against the CARRIER, before the Regional Trial Court of
Makati, Branch 58 (RTC), for recovery of the sum of P1,619,469.21, with interest,
representing the amount the INSURER had paid the SHIPPER-ASSURED. The
CARRIER moved to dismiss/suspend the proceedings on the ground that the
RTC had no jurisdiction over the claim the same being an arbitrable one; that as
subrogee of the SHIPPER-ASSURED, the INSURER is subject to the provisions of
the Bill of Lading, which includes a provision that the shipment is carried under and
pursuant to the terms of the Charter Party, dated 21 December 1984, between the
SHIPPER-ASSURED and Parcel Tankers, Inc. providing for arbitration.

The INSURER opposed the dismissal/suspension of the proceedings on the

ground that it was not legally bound to submit the claim for arbitration
inasmuch as the arbitration clause provided in the Charter Party was not
incorporated into the Bill of Lading, and that the arbitration clause is void for being
unreasonable and unjust.

The INSURER postulates that it cannot be bound by the Charter Party because, as
insurer, it is subrogee only with respect to the Bill of Lading; that only the Bill of
Lading should regulate the relation among the INSURER, the holder of the Bill of
Lading, and the CARRIER; and that in order to bind it, the arbitral clause in the
Charter Party should have been incorporated into the Bill of Lading.

RTC initially denied the Motion but subsequently reconsidered and suspended the
proceedings.

On appeal before the CA, the said court set aside the ruling of RTC and ordered the
INSURER to refer its claim for arbitration.
 ISSUE:
Whether or not the terms Charter Party, particularly the provision on arbitration, are
binding on the INSURER.

RULING: YES

It is settled law that the charter may be made part of the contract under which
the goods are carried by an appropriate reference in the Bill of Lading. This
should include the provision on arbitration even without a specific stipulation to that
effect. The entire contract must be read together and its clauses interpreted in
relation to one another and not by parts.

As the respondent Appellate Court found, the INSURER "cannot feign ignorance of
the arbitration clause since it was already charged with notice of the existence of the
charter party due to an appropriate reference thereof in the bill of lading and, by the
exercise of ordinary diligence, it could have easily obtained a copy thereof either
from the shipper or the charterer."

The Court that the INSURER cannot avoid the binding effect of the arbitration clause.
By subrogation, it became privy to the Charter Party as fully as the SHIPPER before
the latter was indemnified, because as subrogee, it stepped into the shoes of the
SHIPPER-ASSURED and is surrogated merely to the latter's rights. It can recover
only the amount that is recoverable by the assured. And since the right of action
of the SHIPPER-ASSURED is governed by the provisions of the Bill of Lading, which
includes by reference the terms of the Charter Party, necessarily a suit by the
INSURER is subject to the same agreements.

Arbitration, as an alternative mode of settling disputes, has long been recognized

and accepted in our jurisdiction. Republic Act No. 876 (The Arbitration Law) also
expressly authorizes arbitration of domestic disputes. Foreign arbitration is a system
of settling commercial disputes of an international character was likewise recognized
when the Philippines adhered to the United Nations "Convention on the Recognition
and the Enforcement of Foreign Arbitral Awards of 1958" under the Resolution No.
71 of the Philippine Senate, giving reciprocal recognition and allowing enforcement of
international arbitration agreements between parties of different nationalities within a
contracting state.

It has not been shown that the arbitral clause in question is null and void, inoperative,
or incapable of being performed. Nor has any conflict been pointed out between the
Charter Party and the Bill of Lading.

In fine, referral to arbitration in New York pursuant to the arbitration clause, and the
suspension of the proceedings, pending the return of the arbitral award, is indeed
called for.

#118 Querubin DOCTRINE: Because the decree is interlocutory, it cannot be implemented in the
vs. Querubin, Philippines. Where the judgment is merely interlocutory, the determination of the
G.R. No. L-3693 question by the Court which rendered it did not settle and adjudge finally the rights of
(29 July 1950) the parties.

Topic: FACTS: Silvestre Querubin is from Caoayan, Ilocos Sur, of Filipino parents. In 1926
Recognition and he went to the United States in order to study but with the purpose of returning later
Enforcement of to his native country. He obtained the title of "Master of Arts and Sciences" at the
Foreign "University of Southern California," an institution domiciled in Los Angeles, California,
Judgement and where the respondent began to live in 1934.
Foreign Arbitral
Awards In 1943, Silvestre Querubin married the appellant, Margaret Querubin, in
Albuquerque, New Mexico. As a result of this marriage, Querubina Querubin was
Digested by: born, who, at the time of the hearing of the case in the CFI Ilocos Sur, was four years
Cagampang, Emi old, more or less.

In 1948, the appellant filed a lawsuit for divorce against the respondent, based on
"mental cruelty." The divorce was granted to the husband by virtue of a counterclaim
filed by him and based on the infidelity of his wife. At the request of the defendant
and counter-plaintiff, (appealed in this habeas corpus action) the Superior Court of
Los Angeles issued an interlocutory judgment of divorce order providing the custody
of the minor as follows:

1. The care, custody and control of the minor child, 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; and
6. 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.

The respondent arrived in Caoayan, Ilocos Sur, where he currently lives, taking with
him the girl Querubina, whom he brought to the Philippines because, as a father, he
wanted to prevent her from becoming aware of the indecent behavior of his own
mother. The respondent wanted his daughter to be educated in an environment of
high morality.

At the request of the appellant Margaret, the Superior Court of Los Angeles,
California modified its order:

The interlocutory decree is modified so as to provide that custody of the child

shall be awarded to plaintiff, and defendant shall have the right of
reasonable visitation. Defendant shall pay plaintiff for the support of the child
$30 each month on the 1st day thereof, beginning Jan. 1950.

On the day of the hearing of this habeas corpus case in Ilocos Sur, the respondent
declared that he had never tried to change his citizenship; that when he came to the
country he had about P2,000 in savings; that three weeks after his arrival he
received an offer to teach with a monthly salary of P250 at the college established by
Dr. Sobrepea in Villasis, Pangasinan; that he has never been deprived of parental
authority by court order, declared absent from the Philippines, or subject to civil
interdiction. According to the court a quo, the respondent is of irreproachable
conduct.

The appellant Margaret Querubin, through her lawyer, filed a petition for habeas
corpus in the CFI Ilocos Sur, claiming custody of her daughter Querubina, alleging
as a basis the interlocutory decree of the California court who granted her such
custody. This was denied. Hence, the appeal.

The appellant maintains that under article 48 of Rule 39, the decree Exhibit A-1 of
the Court of Los Angeles, California, must be complied with in the Philippines.
ISSUE: WON the interlocutory order from the Los Angeles Court may be applied in
the Philippines.

RULING: No, the interlocutory order from the Los Angeles Court may not be applied
in the Philippines.

An interlocutory decree on custody of a minor is not a final decision. By its nature it

is not firm. It is subject to change as circumstances change. Because the
interlocutory decree, Exhibit A-1, does not constitute a final decision, its
compliance cannot be requested in the Philippines.

In the United States itself, enforcement of an interlocutory order cannot be sought in

another state's court.

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 finally adjudge the rights of the parties."

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 is 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.

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. 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.

In general, a divorce decree entrusting the custody of a child of the marriage to one
of the spouses is respected by the courts of other states "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."

In the present case the circumstances have changed. Querubina is no longer in Los
Angeles but in Caoayan, Ilocos Sur. He is under the care of his father. There is an
enormous distance from Los Angeles and the current domicile of the minor and the
cost of the ticket to that city would be very high, and it is even possible that it is
beyond the appellant's reach. There is no evidence that she is in a position to pay the
travel expenses of the minor and the person accompanying her. She is not a pack of
cigarettes that can be mailed to Los Angeles.

There is no evidence that the circumstances that occurred in Los Angeles prevailed
in the same state until the moment the case was heard in the CFI Ilocos Sur. There is
also no evidence that the appellant has sufficient funds to pay for the trip of the girl
Querubina from Caoayan, Ilocos Sur, to Los Angeles, California, and to answer for
her food, care and education, and it is stated in records that the father, more than
anyone, is interested in the care and education of his daughter, and that he has
savings of more than P2,000 deposited in a bank, we believe that the Court a quo did
not err in denying the request.

The vital and transcendental question of the future of the girl is superior to all
consideration. The state watches over its citizens. Article 171 of the Civil Code
provides that "The Courts may deprive parents of parental authority, or suspend its
exercise, if they treat their children excessively harshly, or if they give them orders,
advice or corrupting examples." In Cortes against Castilloand, this Court declared
that the CFI did not err in appointing the grandmother, as guardian of two minors,
instead of her mother who was convicted of adultery.

Article 154 of the Civil Code provides that "The father, and failing that, the mother,
have power over their legitimate non-emancipated children." However, if this power is
improperly exercised, the courts, as we have already said, can deprive it of it and
entrust the care of the minor to other institutions, as provided in article 6 of Rule 100,
which is a reproduction of article 771 of Law No. 190.

Under Divorce Law No. 2710, the guilty spouse is not entitled to custody of minor
children. Current legislation, good customs and the interests of public order advise
that the girl should be out of the care of a mother who has violated the oath of fidelity
to her husband.

In the matter of Manuela Barretto Gonzales against Augusto Gonzales, it was

requested by the plaintiff that the divorce obtained by the defendant in Reno, Nevada
be confirmed and ratified by the Manila CFI. This court issued a judgment pursuant
to the petition. Taking into account article 9 of the Civil Code, which provides that
"The laws relating to the rights and duties of the family, or to the status, condition and
legal capacity of persons, oblige Spaniards (Filipinos) even if they reside in a foreign
country" and article 11 of the same code that says in part that "... the prohibitive laws
concerning people, their acts or their property, and those whose purpose is public
order and good customs, will not be left without effect by laws or sentences handed
down.

Foreign court rulings cannot be enforced in the Philippines if they are contrary
to law, custom and public order. If said decisions, by the simple theory of
reciprocity, judicial courtesy and international politeness, are a sufficient basis for our
courts to decide based on them, then our courts would be in the poor situation of
having to issue sentences contrary to our laws, customs and public order. This is
absurd.

In Ingenohl vs.Olsen & Co., the scope of international courtesy was discussed.
Article 311 of the Code of Civil Procedure, which is today Article 48, Rule 39, was
the basis for the action brought by Ingenohl. He requested in his lawsuit that the
Manila CFI rule in accordance with that issued by the Hongkong High Court. After the
corresponding hearing, the court ruled in favor of the plaintiff with legal interest
and costs. On appeal, it was alleged that the lower court erred in not declaring that
the decision and judgment of the Hong Kong High Court was rendered and recorded
as a result of a manifest error of fact and law. This Court declared that “It is a
well-established principle that, in the absence of a treaty or law, and by virtue of
courtesy and international law, the judgment of the HK High Court is not binding in
the PH.”

If the request is granted, the minor would be under the care of her mother who was
judicially declared guilty of marital infidelity; she would live under a roof together with
the man who dishonored her mother and offended her father; she would play and
grow with the fruit of her mother's adulterous love; she would reach puberty with the
idea that a woman who was unfaithful to her husband has the right to take care of
 her daughter.

If the request is denied, the girl would live with her father with the benefit of
exclusive parental care, and not with the divided attention of a mother who has to
care for her husband, her two daughters and a third girl, the protected. For the
welfare of the minor Querubina, which is what matters most in the present case, the
custody of her by her father should be considered preferential.

In the United States itself, the cardinal point that the courts take into account is not
the claim of the parties or the force of the interlocutory decree, but the well-being of
the minor.

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 v .
Aldridge, 204 NW 324.)

The appellant, as a last resort, invokes the community of nations. Reciprocity,

courtesy between nations is not absolute. It governs when there is a treaty and
there is equality of legislation. The reciprocity doctrine is adopted when the foreign
court has jurisdiction to hear the case, the parties have appeared and discussed the
matter in substance. Sometimes it is granted as a privilege but not as a strict right.
The requested courtesy has not been recognized by this Court when it declared that
the rights and duties of family, status, condition and legal capacity of persons are
governed by the laws of the Philippines and not by those of America (Gonzales v .
Gonzales, supra) and did not uphold the Hong Kong High Court's decision because it
was erroneous in its findings of fact and law (Ingenohl v . Olsen and Co., supra ).

The reciprocity between the states of the American Union is not absolute. It is not
an unbreakable rule. The various cases cited above demonstrate this. Here is
another case:

"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 NW, 384.)

We have already seen that the interlocutory order transferring custody of the minor
to the appellant is in conflict with the express provisions of the legislation in
force in the Philippines.

#119 Borthwick DOCTRINE:

vs. Castro
REMEDIAL LAW; EFFECT OF FOREIGN JUDGMENT; JUDGMENT IS
Bartolome, 152
SCRA 229 PRESUMPTIVE EVIDENCE OF A RIGHT BETWEEN PARTIES. — It is true that a
(1987) foreign judgment against a person is merely "presumptive evidence of a right as
between the parties," and rejection thereof may be justified, among others, by
Topic: "evidence of a want of jurisdiction" of the issuing authority, under Rule 39 of the
Recognition and Rules of Court. In the case at bar, the jurisdiction of the Circuit Court of Hawaii
Enforcement of hinged entirely on the existence of either of two facts in accordance with its State
Foreign
Judgement and laws, i.e., either Borthwick owned real property in Hawaii, or the promissory notes
Foreign Arbitral sued upon resulted from his business transactions therein. Scallon's complaint
Awards clearly alleged both facts. Borthwick was accorded opportunity to answer the
complaint and impugn those facts, but he failed to appear and was in consequence
Digested by:
declared in default. There thus exists no evidence in the record of the Hawaii case
Ceballos, Pia
upon which to lay a conclusion of lack of jurisdiction. The opportunity to negate the
foreign court's competence by proving the non-existence of said jurisdictional facts
established in the original action, was again afforded to Borthwick in the Court of
First Instance of Makati, where enforcement of the Hawaii judgment was sought.
This time it was the summons of the domestic court which Borthwick chose to
ignore, but with the same result: he was declared in default. And in the default
judgment subsequently promulgated, the Court a quo decreed enforcement of the
judgment affirming among others the jurisdictional facts, that Borthwick owned real
property in Hawaii and transacted business therein. It is plain that what Borthwick
seeks in essence is one more opportunity, a third, to challenge the jurisdiction of
the Hawaii Court and the merits of the cause of action which that Court had
adjudged to have been established against him. This he may obtain only if he
succeeds in showing that the declaration of his default was incorrect. He has
unfortunately not been able to do that; hence, the verdict must go against him.
FACTS:

1. By action commenced in the Circuit Court of the First Circuit, State of Hawaii,
U.S.A., Joseph E. Scallon sought to Compel payment by William B.
Borthwick on four (4) promissory notes in the amounts of $32,408.95,
$29,584.94, $2,832.59 and $40,000.00, plus stipulated interest.
2. Scallon’s complaint alleged, inter alia, that Borthwick, an American citizen
living in the Philippines, owned real property interests in Hawaii where
he last resided and transacted business therein; that business dealings
which transpired in Honolulu, Hawaii had given rise to the promissory notes
sued upon, and Borthwick had failed to pay the sums thereunder owing upon
maturity and despite demand.
3. Attached to the complaint were the promissory notes, which although
uniformly specifying the city of Palos Verdes, Los Angeles, California as the
place of payment. Borthwick being then in Monterey, California, summons
was served upon him personally in that place, pursuant to Hawaiian law
allowing service of process on a person outside the territorial confines of the
State, if he had otherwise submitted himself to the jurisdiction of its courts as
to causes of action arising from, among others, the act of transacting any
business within Hawaii — alleged to consist as to Borthwick in the
negotiation and dealings regarding the promissory notes. Borthwick ignored
the summons. Default was entered against him, and in due course a default
judgement was rendered. However, Scallon’s attempts to have the
judgement executed in Hawaii and California failed, because no assets of
Borthwick could be found in those states.
4. Scallon and his wife, Jewell, then came to the Philippines and on March 15,
1980 brought suit against Borthwick in the Court of First Instance of Makati,
seeking enforcement of the default judgement of the Hawaii Court and
asserting two other alternative causes of action.

ISSUE:

Whether or not the court of Hawaii acquired jurisdiction over the case
rendering the default judgement valid.

RULING:

Yes. It is true that a foreign judgement against a person is merely “presumptive

 evidence of a right as between the parties,” and rejection thereof may be justified,
among others, by “evidence of a want of jurisdiction” of the issuing authority, under
Rule 39 of the Rules of Court.In the case at bar, the jurisdiction of the Circuit Court of
Hawaii hinged entirely on the existence of either of two facts in accordance with its
State laws, i.e., either Borthwick owned real property in Hawaii, or the promissory
notes sued upon resulted from his business transactions therein. Scallon’s complaint
clearly alleged both facts. Borthwick was accorded opportunity to answer the
complaint and impugn those facts, but he failed to appear and was in consequence
declared in default. There thus exists no evidence in the record of the Hawaii case
upon which to lay a conclusion of lack of jurisdiction, as Borthwick now urges.

The opportunity to negate the foreign court’s competence by proving the

non-existence of said jurisdictional facts established in the original action, was again
afforded to Borthwick in the Court of First Instance of Makati, where enforcement of
the Hawaii judgment was sought. This time it was the summons of the domestic court
which Borthwick chose to ignore, but with the same result: he was declared in
default. And in the default judgment subsequently promulgated, the Court a
quo decreed enforcement of the judgment affirming among others the
jurisdictional facts, that Borthwick owned real property in Hawaii and transacted
business therein.

It is not for this Court to disturb the express finding of the Court of First Instance that
Daniel was Borthwick’s resident domestic houseboy, and of sufficient age and
discretion to accept substituted service of summons for Borthwick. Under Rule 42 of
the Rules of Court, a party appealling from the Courts of First Instance (now the
Regional Trial Courts) to the Supreme Court may “raise only questions of law (and)
no other question,”23 and is thus precluded from impugning the factual findings of
the trial court, being deemed to have admitted the correctness of such findings24
and waived his right to open them to question.

#120 Philippine DOCTRINE:

International
Shipping vs. FACTS:
CA, 172 SCRA Plaintiff [respondent Interpool, Ltd.] is a foreign corporation, duly organized and
810 (1989) existing under the laws of Bahamas Islands with office and business address at 630,
3rd Avenue, New York, New York -- it is not licensed to do, and not doing business, in
Topic: the Philippines.
Recognition and
Enforcement of Defendants Philippine International Shipping Corp., Philippine Construction
Foreign Consortium Corp., Pacific Mills Inc., and Universal Steel Smelting Company, Inc., are
Judgement and corporations duly organized and existing under and by virtue of the laws of the
Foreign Arbitral Philippines.
Awards
The other defendants, George Lim Marcos Bautista, Carlos Laude, Tan Sing Lim,
Digested by: Antonio Liu Lao and Ong Teh are Philippine residents.
Dobrea, Errol
In 1979 to 1981, the defendant, Philippine International Shipping Corporation (PISC)
leased from the plaintiff and its wholly owned subsidiary, the Container Trading
Corporation, several containers pursuant to the Membership Agreement and Hiring
Conditions and the Master Equipment Leasing Agreement both dated June 8,
1979.

Defendants Philippine Construction Consortium Corporation, Pacific Mills Inc. and

Universal Steel Smelting Company, guaranteed to pay all monies due, or to become
due, to the plaintiff from (PISC) and any liability of the latter arising out of the leasing
or purchasing of equipment from the plaintiff or any of its subsidiaries, affiliates
and/or agents of I.S.C. dry cargo containers and/or chassis, including but not limited,
to per diem leasing charges, damages protection plan charges, damages charge
and/or replacement costs of constructively and/or totally lost containers as well as
handling and drop-off charges.

Because of the unjustifiable failure and refusal of PISC and its guarantors to jointly
and severally pay their obligations to the plaintiff, the latter filed on November 16,
1983 a complaint to enforce the default judgment of the U.S. District Court
against the defendant PISC and also to enforce the individually executed
Continuing Guaranties of the other defendants.

The defendants were duly summoned, but they failed to answer the complaint.

On motion of the plaintiff, they were declared in default and the plaintiff was allowed
to present its evidence ex parte.

ISSUE:
1. WON foreign court acquire jurisdiction over the case. - YES
2. WON court has jurisdiction over the 9 petitioner-guarantors who were not
impleaded in the original case. - YES
3. WON RTC has jurisdiction. - YES

RULING:
1. The evidence of record clearly shows that the U.S. District Court had validly
acquired jurisdiction over petitioner (PISC) under the procedural law
applicable in that forum i.e., the U.S. Federal Rules on Civil Procedure.

Copies of the Summons and Complaint 16 in 83 Civil 290 (EW) which were in fact
attached to the Petition for Review filed with this Court, were stamped “Received, 18
Jan 1983, PISC Manila.” indicating that service thereof had been made upon and
acknowledged by the (PISC) office in Manila on, 18 January 1983, and that (PISC)
had actual notice of such Complaint and Summons.

Moreover, copies of said Summons and Complaint had likewise been served upon
Prentice-Hall Corporation System, Inc. (New York), petitioner PISCs agent, expressly
designated by it in the Master Equipment Leasing Agreement with respondent
Interpool. “for the purpose of accepting service of any process within the State of
New York, USA with respect to any claim or controversy arising out of or relating to
directly or indirectly, this Lease.”

The record also shows that petitioner PISC, without, however, assailing the
jurisdiction of the U.S. District Court over the person of petitioner, had filed a Motion
to Dismiss the Complaint in 83 Civil 290 (EW) which Motion was denied. All of the
foregoing matters, which were stated specifically in the U.S. District Court’s disputed
Default Judgement, have not been disproven or otherwise overcome by petitioners,
whose bare and unsubstantiated allegations cannot prevail over clear and convincing
evidence of record to the contrary.

2. The record shows that said nine (9) petitioners had executed "continuing
guarantees".

As guarantors, they had held themselves out as liable. "whether jointly, severally, or
in the alternative," to respondent Interpool under their separate "continuing
guarantees" executed in the Philippines, for any breach of those Agreements on the
part of PISC The liability of the nine (9) other petitioners was, in other words, not
based upon the Membership Agreement and the Master Equipment Leasing
Agreement to which they were not parties.
 The New York Award is based on a breach on that agreement.

We, therefore, consider the nine (9) other petitioners as persons "against whom [a]
right to relief in respect to or arising out of the same transaction or series of
transactions [has been] alleged to exist." as contemplated in the Rule quoted above
and, consequently, properly impleaded as defendants in Civil Case No. Q-39927.
There was, in other words, no need at all, in order that Civil Case No. Q-39927 would
prosper, for respondent Interpool to have first impleaded the nine (9) other petitioners
in the New York case and there obtain judgment against all ten (10) petitioners.

3. Even assuming that none of the ten (10) petitioner herein had been served
with notice or summons below, the record shows, however, that they did in
fact file with the Regional Trial Court Motion for Extension of Time to file
Answer as well as a BOP. They controvert the complaint of the Respondent
but never questioned the jurisdiction of RTC.

There was here, in effect, voluntary submission to the jurisdiction of the Quezon
City trial court by petitioners, who are thereby estopped from asserting otherwise
before this Court.

#121 Northwest DOCTRINE:

Orient Airlines,
Inc. vs. Court The principal issue here is whether a Japanese court can acquire jurisdiction over a
ofAppeals, 241 Philippine corporation doing business in Japan by serving summons through
SCRA 192 diplomatic channels on the Philippine corporation at its principal office in Manila after
(1995)
prior attempts to serve summons in Japan had failed.
Topic:
Recognition and FACTS: Northwest Airlines (Petitioner), a corporation organized under the laws of the
Enforcement of State of Minnesota, U.S.A and C.F. Sharp & Company or SHARP (Defendant), a
Foreign corporation incorporated under Philippine laws through its Japan branch, entered into
Judgement and an International Passenger Sales Agency Agreement, whereby the Northwest
Foreign Arbitral authorized the SHARP to sell its air transportation tickets
Awards
Defendant was unable to remit the proceeds of the ticket sales, thus Northwest
Digested by: sued SHARP in Tokyo, Japan, for collection of the unremitted proceeds of the ticket
Eso, Jun sales, with claim for damages.

Writ of summons was issued by the 36th Civil Department, Tokyo District Court of
Japan. The bailiff (peace officer or deputy sheriff) attempted to serve the summons to
SHARP but was unsuccessful because Mr. Dinozo (person believed to be authorized
to receive court processes in Japan) was in Manila.

Upon arrival of Mr. Dinozo to Japan, the bailiff returned to SHARP Office to serve the
summons but Mr. Dinozo refused to receive claiming that he is no longer an
employee of SHARP.

After the 2 attempts of service were unsuccessful, Supreme Court of Japan sent
send 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.

SHARP received from Deputy Sheriff Rolando Balingit the writ of summons but failed
to appear at the scheduled hearing. Tokyo Court rendered judgment ordering the
SHARP to pay 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.

SHARP received from Deputy Sheriff Balingit copy of the judgment but they did not
appeal so it became final and executory.

Northwest filed a suit for enforcement of the judgment at RTC in Manila.

Defense: SHARP averred that the Japanese Court sought to be enforced is null and
void and unenforceable in this jurisdiction having been rendered without due and
proper notice and/or with collusion or fraud and/or upon a clear mistake of law and
fact. 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 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.

The RTC rendered judgment in favor of SHARP and ruled that the Tokyo Court failed
to acquire jurisdiction over the defendant, and thus, the decision was null and void.

Northwest Orient filed an appeal and the Court of Appeals upheld the RTC’s
decision. It held 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. To confer jurisdiction on the court, personal or substituted service
of summons on the defendant not extraterritorial service is necessary. 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.

ISSUE: WON the Japanese Court acquired jurisdictionn over SHARP? Yes

RULING: (T) Yes, the Japanese Court acquired jurisdictionn over SHARP.

(R)

AWARD IS PRESUMED VALID AND BINDING

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.

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.

REMEDY AND PROCEDURE FOLLOWS THE 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. 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.

PROCESSUAL PRESUMPTION
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.

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.

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 (c) the Securities and Exchange Commission, in the case
of other foreign corporations duly licensed to do business in the Philippines.

(A) 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 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 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 Philippine's after the two
attempts of service had failed. 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.

(C) 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.
#122 PHILSEC DOCTRINE: While this Court has given the effect of res judicata to foreign judgments
vs. CA, G.R. in several cases, it was after the parties opposed to the judgment had been given
103493, (19 ample opportunity to repel them on grounds allowed under the law. This is because
June 1997) 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
Topic: the claim of a party and, as such, is subject to proof to the contrary. Rule 39, §50
Recognition and provides:
Enforcement of
Foreign Sec. 50. Effect of foreign judgments. — The effect of a judgment of a tribunal of a
Judgement and foreign country, having jurisdiction to pronounce the judgment is as follows:
Foreign Arbitral
Awards (a) In case of a judgment upon a specific thing, the judgment is conclusive upon the
title to the thing;
Digested by: (b) In case of a judgment against a person, the judgment is presumptive evidence of
Facundo, a right as between the parties and their successors in interest by a subsequent title;
Ardiane 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.

FACTS: Private respondent Ducat obtained separate loans from petitioners Ayala
International Finance Limited (AYALA) and Philsec Investment Corp (PHILSEC),
secured by shares of stock owned by Ducat.

In order to facilitate the payment of the loans, private respondent 1488, Inc., through
its president, private respondent Daic, assumed Ducat’s obligation under an
Agreement, whereby 1488, Inc. executed a Warranty Deed with Vendor’s Lien by
which it sold to petitioner Athona Holdings, N.V. (ATHONA) a parcel of land in Texas,
U.S.A., while PHILSEC and AYALA extended a loan to ATHONA as initial payment of
the purchase price. The balance was to be paid by means of a promissory note
executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the
money 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, the entire amount covered by
the note became due and demandable. Accordingly, private respondent 1488, Inc.
sued petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of
the balance 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.

While the Civil Case 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 RTC Makati. The complaint reiterated the allegation of
petitioners in their respective counterclaims in the Civil Action in 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.

Ducat moved to dismiss the Civil Case in the RTC-Makati on the grounds of (1) litis
pendentia, vis-a-vis the Civil Action in the U.S., (2) forum non conveniens, and (3)
failure of petitioners PHILSEC and BPI-IFL to state a cause of action.

The trial court granted Ducat’s MTD, 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.

Petitioners appealed to the CA, arguing that the trial court erred in applying the
principle of litis pendentia and forum non conveniens.

The CA affirmed the dismissal of Civil Case against Ducat, 1488, Inc., and Daic on
the ground of litis pendentia.

ISSUE: Is the Civil Case in the RTC-Makati barred by the judgment of the U.S.
court?

RULING:

NO

While this Court has given the effect of res judicata to foreign judgments in several
cases, it was after the parties opposed to the judgment had been given ample
opportunity to repel them on grounds allowed under the law. 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. 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.

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.

Second. Nor is the trial court’s refusal to take cognizance of the case justifiable under
the principle of forum non conveniens:

First, a MTD is limited to the grounds under Rule 16, sec.1, which does not include
forum non conveniens. 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.
#123 Philippine FACTS:
Aluminum On June 1, 1978, FASGI Enterprises, Inc., an American corporation, entered into a
Wheels Inc. vs. distributorship arrangement with Philippine Aluminum Wheels, Inc. (PAWI), a
FASGI
Philippine corporation, and Fratelli Pedrini Sarezzo S.P.A., (FPS), an Italian
Enterprises,
G.R. No. 137378 corporation. Pursuant to their contract, PAWI shipped to FASGI a total of eight
(12 October thousand five hundred ninety four (8,594) wheels, with an FOB value of
2000) US$216,444.30 at the time of shipment. FASGI paid PAWI the FOB value of the
wheels. Unfortunately, FASGI found the shipment to be defective and in
Topic: non-compliance with stated requirements.
Recognition and
Enforcement of
On 21 September 1979, FASGI instituted an action against PAWI and FPS for
Foreign
Judgement and breach of contract and recovery of damages before the United States District
Foreign Arbitral Court for the Central District of California. During the pendency of the case, the
Awards parties entered into a settlement, entitled "Transaction". Despite PAWI's assurances,
and FASGI's insistence, PAWI failed to open the first Letter of Credit (LC) in April
Digested by: 1980 as agreed upon in the said "Transaction," prompting FASGI to pursue its
Falcone, Jon complaint for damages against PAWI before the California District Court. In the
interim, the parties resolved to enter into another arrangement, "Supplemental
Settlement Agreement," which provided that FASGI would deliver to PAWI a
container of wheels for every LC opened and paid by PAWI, and in the event of
failure to comply therewith, FASGI is allowed to apply before the California court for
the entry of judgment based on that Supplemental Settlement Agreement. Again,
PAWI proved to be remiss in its obligation under the Supplemental Settlement
Agreement. Thus, on 24 August 1982, FASGI filed a notice of entry of judgment with
the US District Court of the Central District of California.

On 07 September 1982, a certificate of finality of judgment was issued. Unable to

obtain satisfaction of the final judgment within the United States, FASGI filed a
complaint for enforcement of foreign judgment before the Regional Trial Court,
Branch 61, Makati.

The Makati court, however, dismissed the case. On appeal, the appellate court
reversed the decision of the trial court and ordered the full enforcement of the
California judgment. Hence, this appeal.

ISSUE:
Whether or not courts have jurisdiction to allow the enforcement of the foreign
judgement within Philippine jurisdiction.

RULING:
YES. 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;
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.

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. 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.

In Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Co. Inc., 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, 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.

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. 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.

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, 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.

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.

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, relying on their original agreement (the "Transaction").
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) 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, 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 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.

#124 Priscilla C. DOCTRINE:

Mijares et al., v.
Hon. Santiago FACTS: On 9 May 1991, a complaint was filed with the United States District Court
Javier Ranada (US District Court), District of Hawaii, against the Estate of former Philippine
et al., G.R. No. President Ferdinand E. Marcos (Marcos Estate). The action was brought forth by ten
139325 (12 April Filipino citizens who each alleged having suffered human rights abuses... was
2005) 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... plaintiffs brought
Topic: the action on their own behalf and on behalf of a class of similarly situated
Recognition and individuals,... particularly consisting of all current civilian citizens of the Philippines,
Enforcement of their heirs and beneficiaries, who between 1972 and 1987 were tortured, summarily
Foreign executed or had disappeared while in the custody of military or paramilitary groups.
Judgement and Institution of a class action suit was warranted under Rule 23(a) and (b)(1)(B) of
Foreign Arbitral the US Federal Rules of Civil Procedure, the provisions of which were invoked by the
Awards plaintiffs. 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
Digested by: Court, presided by Judge Manuel L. Real, rendered a Final Judgment (Final
Fernandez, Klmn 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).

Judgment was eventually affirmed by the US Court of Appeals for the Ninth
Circuit, in a decision rendered on 17 December 1996.

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 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.

5 February 1998, the Marcos Estate filed a motion to dismiss, raising, among others,
the non-payment of the correct filing fees.

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).

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 September 1998, respondent Judge Santiago Javier Ranada of the Makati RTC
issued the subject Order dismissing the complaint without prejudice.

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,... 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.

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.

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,"

Commission on Human Rights (CHR) was permitted to intervene in this case.

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. The CHR likewise invokes the principle of
comity, and of vested rights.

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:
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.

Issues:
1) whether the action filed with the lower court is a "money claim against an
estate not based on judgment."
2) What provision, if any, then... should apply in determining the filing fees for
an action to enforce a foreign judgment?
3) What provision then governs the proper computation of the filing fees over
the instant complaint?

Ruling:
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.

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.

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.

the complaint nor the award of damages adjudicated by the US District Court
involves any real... property of the Marcos Estate.

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. This principle
was prominently affirmed in the leading American case of Hilton v. Guyot

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:

EC. 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;... 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.

There is an evident distinction between a foreign judgment in an action in rem and

one in personam... 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... 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." Absent perhaps a statutory grant of
jurisdiction to a quasi-judicial body, the claim for enforcement of judgment must be
brought before the regular courts... 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.

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.

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.

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.

For in all practical intents and purposes, the matter at hand is capable of pecuniary
estimation, down to the last cent.

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.

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.

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.

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.

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."

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.

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.

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.
#125 Asiavest DOCTRINE:
Merchant
Bankers vs. FACTS:
Court
ofAppeals, G.R. ISSUE:
No. 110263 (20
July 2001) RULING:

Topic:
Recognition and
Enforcement of
Foreign
Judgement and
Foreign Arbitral
Awards

Digested by:
Garcia, Charisse

#126 Republic DOCTRINE:

v. Gingoyon,
G.R. No. 166429 FACTS:
(1 February
2006) ISSUE:

Topic: RULING:
Recognition and
Enforcement of
Foreign
Judgement and
Foreign Arbitral
Awards

Digested by:
Gorez, John

#127 Jorge DOCTRINE:

Gonzales, et al.
v. Climax FACTS:
Mining Ltd., et
al., G.R. No. Petitioner Jorge Gonzales, as claimowner of mineral deposits... entered into a
161957 (22 co-production, joint venture and/or production-sharing letter-agreement... designated
January 2007) as the May 14, 1987 Letter of Intent with Geophilippines, Inc, and Inmex Ltd. Under
the agreement, petitioner, as claimowner, granted to Geophilippines, Inc. and Inmex
Topic: Ltd. collectively, the exclusive right to explore and survey the mining claims for a
Recognition and period... of thirty-six (36) months within which the latter could decide to take an
Enforcement of operating agreement on the mining claims and/or develop, operate, mine and
Foreign otherwise exploit the mining claims and market any and all minerals that may be
Judgement and derived therefrom.
Foreign Arbitral
Awards On 28 February 1989, the parties to the May 14, 1987 Letter of Intent renegotiated
 the same into the February 28, 1989 Agreement whereby the exploration of the
Digested by: mining claims was extended for another period of three years.
Lanutan, Lauro
On 9 March 1991, petitioner Gonzales, Arimco Mining Corporation, Geophilippines
Inc., Inmex Ltd., and Aumex Philippines, Inc. signed a document

Under the Addendum Contract, Arimco Mining Corporation would apply to the
Government of the Philippines for permission to mine the claims as the
Government's contractor under a Financial and Technical

Assistance Agreement (FTAA).

Respondents executed the Operating and Financial Accommodation Contract

(between Climax-Arimco Mining Corporation and Climax Mining Ltd., as first parties,
and Australasian Philippines Mining Inc., as second party) dated 23 December 1996
and

Assignment, Accession Agreement

(between Climax-Arimco Mining Corporation and Australasian Philippines Mining

Inc.) dated 3 December 1996. Respondent Climax Mining Corporation (Climax) and
respondent Australasian Philippines Mining Inc. (APMI)... entered into a
Memorandum of Agreement... dated 1 June 1991 whereby the former transferred its
FTAA to the latter.

On 8 November 1999, petitioner Gonzales filed before the Panel of Arbitrators,

Region II, Mines and Geosciences Bureau of the Department of Environment and
Natural Resources, against respondents Climax-Arimco Mining Corporation
(Climax-Arimco), Climax, and APMI,... a Complaint... seeking the declaration of
nullity or termination of the Addendum Contract, the FTAA, the Operating and
Financial Accommodation Contract, the Assignment, Accession Agreement, and the

Memorandum of Agreement. Petitioner Gonzales prayed for an unspecified amount

of actual and exemplary damages plus attorney's fees and for the issuance of a
temporary restraining order and/or writ of preliminary injunction to restrain or enjoin
respondents from further... implementing the questioned agreements. He sought said
releifs on the grounds of "FRAUD, OPPRESSION and/or VIOLATION of Section 2,
Article XII of the CONSTITUTION perpetrated by these foreign RESPONDENTS,
conspiring and confederating with one another and with each... other…."

ISSUE:

(a) Whether there was forum-shopping on the part of respondents for their
failure to disclose to this Court their filing of a Petition to Compel for
Arbitration before the Regional Trial Court of Makati City, Branch 148, which is
currently pending.

(c) Whether the complaint filed by petitioner raises a mining dispute over
which the Panel of Arbitrators has jurisdiction, or a judicial question which
should properly be brought before the regular courts.

(d) Whether the dispute between the parties should be brought for arbitration
under Rep. Act No. 876.

RULING:

A judicial question is a question that is proper for determination by the courts, as

opposed to a moot question or one properly decided by the executive or legislative
branch.

A judicial question is raised when the determination of the question involves... the
exercise of a judicial function; that is, the question involves the determination of what
the law is and what the legal rights of the parties are with respect to the matter in
controversy.

On the other hand, a mining dispute is a dispute involving (a) rights to mining areas,
(b) mineral agreements, FTAAs, or permits, and (c) surface owners, occupants and
claimholders/concessionaires.

Under Republic Act No. 7942 (otherwise known as the

Philippine Mining Act of 1995), the Panel of Arbitrators has exclusive and original
jurisdiction to hear and decide these mining disputes.

The Court of Appeals, in its questioned decision, correctly stated that the Panel's
jurisdiction is limited only... to those mining disputes which raise questions of fact or
matters requiring the application of technological knowledge and experience.

In Pearson v. Intermediate Appellate Court,... this Court observed that the trend has
been to make the adjudication of mining cases a purely administrative matter

Decisions of the Supreme Court on... mining disputes have recognized a distinction
between (1) the primary powers granted by pertinent provisions of law to the then
Secretary of Agriculture and Natural Resources (and the bureau directors) of an
executive or administrative nature, such as granting of license,... permits, lease and
contracts, or approving, rejecting, reinstating or canceling applications, or deciding
conflicting applications, and (2) controversies or disagreements of civil or contractual
nature between litigants which are questions of a judicial nature that may be...
adjudicated only by the courts of justice. This distinction is carried on even in Rep.
Act No. 7942.

It is apparent that the Panel of Arbitrators is bereft of jurisdiction over the Complaint
filed by petitioner. The basic issue in petitioner's Complaint is the presence of fraud
or misrepresentation allegedly attendant to the execution of the Addendum

Contract and the other contracts emanating from it, such that the contracts are
rendered invalid and not binding upon the parties.

They can be ratified.

The main question raised was the validity of the Addendum Contract, the FTAA and
the subsequent contracts.

The Complaint is not exclusively within the jurisdiction of the Panel of Arbitrators just
because, or for as long as, the dispute involves an FTAA.

The Complaint raised the issue of the constitutionality of the FTAA, which is definitely
a judicial question. The question of constitutionality is exclusively within the
jurisdiction of the courts to resolve as this would clearly involve the exercise of
judicial power.

The Panel of Arbitrators does not have jurisdiction over such an issue since it does
not involve the application of technical knowledge and expertise relating to mining.

Arbitration before the Panel of Arbitrators is proper only when there is a

disagreement between the parties as to some provisions of the contract between
them, which needs the interpretation and the application of that particular knowledge
 and expertise possessed by members of... that Panel. It is not proper when one of
the parties repudiates the existence or validity of such contract or agreement on the
ground of fraud or oppression as in this case. The validity of the contract cannot be
subject of arbitration proceedings. Allegations of fraud and... duress in the execution
of a contract are matters within the jurisdiction of the ordinary courts of law. These
questions are legal in nature and require the application and interpretation of laws
and jurisprudence which is necessarily a judicial function.

We agree that the case should not be brought under the ambit of the Arbitration Law,
but for a different reason. The question of validity of the contract containing the
agreement to submit to arbitration will affect the applicability of the arbitration clause
itself. A party... cannot rely on the contract and claim rights or obligations under it and
at the same time impugn its existence or validity. Indeed, litigants are enjoined from
taking inconsistent positions. As previously discussed, the complaint should have
been filed before the regular courts... as it involved issues which are judicial in nature

#128 Jorge DOCTRINE:

Gonzales, et al.
v. Climax Arbitration, as an alternative mode of settling disputes, has long been recognized
Mining Ltd., et and accepted in our jurisdiction. The Civil Code is explicit on the matter. R.A. No. 876
al., G.R. No. also expressly authorizes arbitration of domestic disputes. Foreign arbitration, as a
161957 (22 system of settling commercial disputes of an international character, was likewise
January 2007) recognized when the Philippines adhered to the United Nations "Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards of 1958," under the 10
Topic: May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition
Recognition and and allowing enforcement of international arbitration agreements between parties of
Enforcement of different nationalities within a contracting state. The enactment of R.A. No. 9285 on 2
Foreign April 2004 further institutionalized the use of alternative dispute resolution systems,
Judgement and including arbitration, in the settlement of disputes.
Foreign Arbitral
Awards FACTS:

Digested by: This is a consolidation of two petitions rooted in the same disputed Addendum
Manlangit, Naz Contract entered into by the parties.

In one case, the Court held that the DENR Panel of Arbitrators had no jurisdiction
over the complaint for the annulment of the Addendum Contract on grounds of fraud
and violation of the Constitution and that the action should have been brought before
the regular courts as it involved judicial issues.

Gonzales averred that the DENR Panel of Arbitrators Has jurisdiction because the
case involves a mining dispute that properly falls within the ambit of the Panel’s
authority.

Respondents Climax Mining Ltd., et al., on the other hand, seek

reconsideration/clarification on the decision holding that the case should not be
brought for arbitration under R.A. No. 876. They argued that the arbitration clause in
the Addendum Contract should be treated as an agreement independent of the other
terms of the contract, and that a claimed rescission of the main contract does not
avoid the duty to arbitrate.

In another case, Gonzales challenged the order of the RTC requiring him to proceed
with the arbitration proceedings while the complaint for the nullification of the
Addendum Contract was pending before the DENR Panel of Arbitrators. He
contended that any issue as to the nullity, inoperativeness, or incapability of
performance of the arbitration clause/agreement raised by one of the parties to the
alleged arbitration agreement must be determined by the court prior to referring them
to arbitration.

While Climax-Arimco contended that an application to compel arbitration under Sec.

6 of R.A. No. 876 confers on the trial court only a limited and special jurisdiction, i.e.,
a jurisdiction solely to determine (a) whether or not the parties have a written contract
to arbitrate, and (b) if the defendant has failed to comply with that contract.

ISSUE:

Whether or not arbitration is proper even though issues of validity and nullity of the
Addendum Contract and, consequently, of the arbitration clause were raised.

RULING: YES

Arbitration, as an alternative mode of settling disputes, has long been recognized

and accepted in our jurisdiction. The Civil Code is explicit on the matter. R.A. No. 876
also expressly authorizes arbitration of domestic disputes. Foreign arbitration, as a
system of settling commercial disputes of an international character, was likewise
recognized when the Philippines adhered to the United Nations "Convention on the
Recognition and the Enforcement of Foreign Arbitral Awards of 1958," under the 10
May 1965 Resolution No. 71 of the Philippine Senate, giving reciprocal recognition
and allowing enforcement of international arbitration agreements between parties of
different nationalities within a contracting state. The enactment of R.A. No. 9285 on 2
April 2004 further institutionalized the use of alternative dispute resolution systems,
including arbitration, in the settlement of disputes.

In La Naval Drug Corporation v. Court of Appeals, the Court held that R.A. No. 876
explicitly confines the court's authority only to the determination of whether or not
there is an agreement in writing providing for arbitration. In the affirmative, the statute
ordains that the court shall issue an order "summarily directing the parties to proceed
with the arbitration in accordance with the terms thereof." If the court, upon the other
hand, finds that no such agreement exists, "the proceeding shall be dismissed." The
cited case also stressed that the proceedings are summary in nature.

Implicit in the summary nature of the judicial proceedings is the separable or

independent character of the arbitration clause or agreement.

The doctrine of separability, or severability as others call it, enunciates that an

arbitration agreement is independent of the main contract. The arbitration agreement
is to be treated as a separate agreement and the arbitration agreement does not
automatically terminate when the contract of which it is part comes to an end.

The separability of the arbitration agreement is especially significant to the

determination of whether the invalidity of the main contract also nullifies the
arbitration clause. Indeed, the doctrine denotes that the invalidity of the main
contract, also referred to as the container contract, does not affect the validity of the
arbitration agreement. Irrespective of the fact that the main contract is invalid, the
arbitration clause/agreement still remains valid and enforceable.

The validity of the contract containing the agreement to submit to arbitration does not
affect the applicability of the arbitration clause itself. A contrary ruling would suggest
that a party’s mere repudiation of the main contract is sufficient to avoid arbitration.
That is exactly the situation that the separability doctrine, as well as jurisprudence
applying it, seeks to avoid.

The Court added that when it declared that the case should not be brought for
arbitration, it should be clarified that the case referred to is the case actually filed by
Gonzales before the DENR Panel of Arbitrators, which was for the nullification of the
 main contract on the ground of fraud, as it had already been determined that the
case should have been brought before the regular courts involving as it did judicial
issues.

—-------------------------------

As to the issue of prescription, Gonzales’s claims of fraud and misrepresentation

attending the execution of the Addendum Contract are grounds for the annulment of
a voidable contract under the Civil Code. Under Art. 1391 of the Code, an action for
annulment shall be brought within four years, in the case of fraud, beginning from the
time of the discovery of the same. However, the time of the discovery of the alleged
fraud is not clear from the allegations of Gonzales’s complaint. That being the
situation coupled with the fact that this Court is not a trier of facts, any ruling on the
issue of prescription would be uncalled for or even unnecessary.

#129 Korea DOCTRINE:

Technologies
Co. Ltd. v. FACTS:
Lerma, G.R. No. Korea Technologies Co., Ltd. [Korea Tech], a Korean corporation, entered into a
143581 (7 contract with Pacific General Steel Manufacturing Corporation [Pacific General], a
January 2008) domestic corporation, whereby Korea Tech undertook to ship and install in Pacific
General’s site in Carmona, Cavite the machinery and facilities necessary for
Topic: manufacturing LPG cylinders, and to initially operate the plant after it is installed.
Recognition and
Enforcement of The plant, after completion of installation, could not be operated by Pacific General
Foreign due to its financial difficulties affecting the supply of materials. The last payments
Judgement and made by Pacific General to Korea Tech consisted of postdated checks which were
Foreign Arbitral dishonored upon presentment.
Awards
According to Pacific General, it stopped payment because:
Digested by: 1. Korea Tech had delivered a hydraulic press which was different in kind and
Opigal, Amil of lower quality than that agreed upon.
2. Korea Tech also failed to deliver equipment parts already paid for by it. It
threatened to cancel the contract with Korea Tech and dismantle the
Carmona plant.

Finally, Pacific General filed before the Office of the Prosecutor a Complaint Affidavit
for estafa against Mr. Dae Hyun Kang, President of Korea Tech. Korea Tech informed
PGSMC that it could not unilaterally rescind the contract. Of greater importance to
the present article, KOGIES also insisted that their dispute be settled by arbitration
as provided by Article 15 of their contract — the arbitration clause.

Korea Tech initiated arbitration before the Korea Commercial Arbitration Board
[KCAB] in Seoul, Korea and, at the same time, commenced a civil action before the
Regional Trial Court [the “trial court”] where it prayed that Pacific General be
restrained from dismantling the plant and equipment. Pacific General opposed the
application and argued that the arbitration clause was null and void, being contrary to
public policy as it ousts the local court of jurisdiction. The trial court denied the
application for preliminary injunction and declared the arbitration agreement null and
void.

Korea Tech moved to dismiss the counterclaims for damages. Korea Tech filed a
petition for certiorari before the Court of Appeals [CA].

The court dismissed the petition and held that an arbitration clause which provided
for a final determination of the legal rights of the parties to the contract by arbitration
was against public policy. Further appeal was made to the Supreme Court by way of
a petition for review.
ISSUE:

1. Whether or not the arbitration clause is valid.

2. Whether or not the enforcement of award in a domestic or international
award.

RULING:

1. YES. The arbitration clause is valid.

It has not been shown to be contrary to any law, or against morals, good
customs, public order or public policy. The arbitration clause stipulates that
the arbitration must be done in Seoul, Korea in accordance with the
Commercial Arbitration Rules of the KCAB, and that the award is final and
binding. This is not contrary to public policy. We find no reason why the
arbitration clause should not be respected and complied with by both parties.

This ruling, the Court said, is consonant with the declared policy in Section 2
of the ADR Act that “the State (shall) actively promote party autonomy in the
resolution of disputes or the freedom of the parties to make their own
arrangements to resolve their disputes.” Citing Section 24 of the ADR Act,
the Court said the trial court does not have jurisdiction over disputes that are
properly the subject of arbitration pursuant to an arbitration clause. In the
earlier case of BF Corporation v. Court of Appeals and Shangri-la Properties,
Inc., where the trial court refused to refer the parties to arbitration
notwithstanding the existence of an arbitration agreement between them, the
Supreme Court said the trial court had prematurely exercised its jurisdiction
over the case. The Court further emphasized that a submission to arbitration
is a contract. As a rule, contracts are respected as the law between the
contracting parties and produce effect between them, their assigns and
heirs.8 Courts should liberally review arbitration clauses. Any doubt should
be resolved in favor of arbitration.

2. An arbitral award in a domestic or international arbitration is subject to

enforcement by a court upon application of the prevailing party for the
confirmation or recognition and enforcement of an award. Under Section 42
of the ADR Act, “The recognition and enforcement of such (foreign) arbitral
awards shall be filed with the Regional Trial Court in accordance with the
rules of procedure to be promulgated by the Supreme Court.” An arbitral
award is immediately executory upon the lapse of the period provided by law.
For an award rendered in domestic or non-international arbitration, unless a
petition to vacate the award is filed within thirty (30) days from the date of
serve upon the latter, the award is subject to confirmation by the court. For
an award rendered in a domestic, international arbitration, the period for filing
an application to set it aside is not later than three (3) months from the date
the applicant received the award, otherwise the court shall recognize and
enforce it.
#130 Fujiki v. DOCTRINE:
Marinay, GR
196049, 26 June 1. A recognition of a foreign judgment is NOT an action to nullify a marriage. It
2013 is an action for Philippine courts to recognize the effectivity of a foreign
judgment, which presupposes a case which was already tried and
Topic:
decided under foreign law. The procedure in A.M. No. 02-11-10-SC does
Recognition and
Enforcement of not apply in a petition to recognize a foreign judgment annulling a bigamous
Foreign marriage where one of the parties is a citizen of the foreign country. Neither
Judgement and can R.A. No. 8369 define the jurisdiction of the foreign court.
Foreign Arbitral 2. A foreign judgment relating to the status of a marriage affects the civil status,
Awards condition and legal capacity of its parties. However, the effect of a foreign
judgment is not automatic. To extend the effect of a foreign judgment in
Digested by:
the Philippines, Philippine courts must determine if the foreign
Quinones, Erika
judgment is consistent with domestic public policy and other
mandatory laws.

FACTS:

Petitioner Minoru Fujiki (Fujiki) is a Japanese national who married respondent Maria
Paz Galela Marinay (Marinay) in the Philippines on 23 January 2004. The marriage
did not sit well with petitioner's parents. Thus, Fujiki could not bring his wife to Japan
where he resides. Eventually, they lost contact with each other.

In 2008, Marinay met another Japanese, Shinichi Maekara (Maekara). Without the
first marriage being dissolved, Marinay and Maekara were married on 15 May 2008
in Quezon City, Philippines. Maekara brought Marinay to Japan. However, Marinay
allegedly suffered physical abuse from Maekara. She left Maekara and started to
contact Fujiki.

Fujiki and Marinay met in Japan and they were able to reestablish their relationship.
In 2010, Fujiki helped Marinay obtain a judgment from a family court in Japan which
declared the marriage between Marinay and Maekara void on the ground of
bigamy. On 14 January 2011, Fujiki filed a petition in the RTC entitled: "Judicial
Recognition of Foreign Judgment (or Decree of Absolute Nullity of Marriage)." Fujiki
prayed that (1) the Japanese Family Court judgment be recognized; (2) that the
bigamous marriage between Marinay and Maekara be declared void ab initio under
Articles 35 (4) and 41 of the Family Code of the Philippines; and (3) for the RTC to
direct the Local Civil Registrar of Quezon City to annotate the Japanese Family Court
judgment on the Certificate of Marriage between Marinay and Maekara and to
endorse such annotation to the Office of the Administrator and Civil Registrar
General in the National Statistics Office (NSO).

ISSUEs with RULING:

(1) Whether the Rule on Declaration of Absolute Nullity of Void Marriages and
Annulment of Voidable Marriages (A.M. No. 02-11-10-SC) is applicable.

No. A foreign judgment relating to the status of a marriage affects the civil status,
condition and legal capacity of its parties. However, the effect of a foreign
judgment is not automatic. To extend the effect of a foreign judgment in the
Philippines, Philippine courts must determine if the foreign judgment is
consistent with domestic public policy and other mandatory laws. Article 15 of
the Civil Code provides that "[l]aws relating to family rights and duties, or to the
status, condition and legal capacity of persons are binding upon citizens of the
Philippines, even though living abroad." This is the rule of lex nationalii in private
international law. Thus, the Philippine State may require, for effectivity in the
Philippines, recognition by Philippine courts of a foreign judgment affecting its citizen,
over whom it exercises personal jurisdiction relating to the status, condition and legal
capacity of such citizen.

A petition to recognize a foreign judgment declaring a marriage void does not require
relitigation under a Philippine court of the case as if it were a new petition for
declaration of nullity of marriage. Philippine courts cannot presume to know the
foreign laws under which the foreign judgment was rendered. They cannot substitute
their judgment on the status, condition and legal capacity of the foreign citizen who is
under the jurisdiction of another state. Thus, Philippine courts can only recognize
the foreign judgment as a fact according to the rules of evidence.

Since 1922 in Adong v. Cheong Seng Gee, Philippine courts have recognized
foreign divorce decrees between a Filipino and a foreign citizen if they are
successfully proven under the rules of evidence. Divorce involves the dissolution
of a marriage, but the recognition of a foreign divorce decree does not involve the
extended procedure under A.M. No. 02-11-10-SC or the rules of ordinary trial. While
the Philippines does not have a divorce law, Philippine courts may, however,
recognize a foreign divorce decree under the second paragraph of Article 26 of the
Family Code, to capacitate a Filipino citizen to remarry when his or her foreign
spouse obtained a divorce decree abroad.

In this case, there is therefore no reason to disallow Fujiki to simply prove as a

fact the Japanese Family Court judgment nullifying the marriage between
Marinay and Maekara on the ground of bigamy. While the Philippines has no
divorce law, the Japanese Family Court judgment is fully consistent with
Philippine public policy, as bigamous marriages are declared void from the
beginning under Article 35 (4) of the Family Code. Bigamy is a crime under Article
349 of the Revised Penal Code. Thus, Fujiki can prove the existence of the
Japanese Family Court judgment in accordance with Rule 132, Sections 24 and 25,
in relation to Rule 39, Section 48 (b) of the Rules of Court.

(2) Whether a husband or wife of a prior marriage can file a petition to

recognize a foreign judgment nullifying the subsequent marriage between his
or her spouse and a foreign citizen on the ground of bigamy.

YES. Since the recognition of a foreign judgment only requires proof of fact of the
judgment, it may be made in a special proceeding for cancellation or correction of
entries in the civil registry under Rule 108 of the Rules of Court. Rule 1, Section
3 of the Rules of Court provides that "[a] special proceeding is a remedy by which
a party seeks to establish a status, a right, or a particular fact." Rule 108 creates
a remedy to rectify facts of a person's life which are recorded by the State pursuant
to the Civil Register Law or Act No. 3753. These are facts of public consequence
such as birth, death or marriage, which the State has an interest in recording. As
noted by the Solicitor General, in Corpuz v. Sto. Tomas this Court declared that
"[t]he 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.

Section 2 (a) of A.M. No. 02-11-10-SC does not preclude a spouse of a subsisting
marriage to question the validity of a subsequent marriage on the ground of bigamy.
On the contrary, when Section 2 (a) states that "[a] petition for declaration of absolute
nullity of void marriage may be filed solely by the husband or the wife" — it refers to
the husband or the wife of the subsisting marriage. Under Article 35 (4) of the Family
Code, bigamous marriages are void from the beginning. Thus, the parties in a
bigamous marriage are neither the husband nor the wife under the law. The husband
or the wife of the prior subsisting marriage is the one who has the personality to file a
petition for declaration of absolute nullity of void marriage under Section 2 (a) of A.M.
No. 02-11-10-SC.

In this case, Fujiki has the personality to file a petition to recognize the
Japanese Family Court judgment nullifying the marriage between Marinay and
Maekara on the ground of bigamy because the judgment concerns his civil
status as married to Marinay. For the same reason he has the personality to file a
petition under Rule 108 to cancel the entry of marriage between Marinay and
Maekara in the civil registry on the basis of the decree of the Japanese Family Court.

(3) Whether the Regional Trial Court can recognize the foreign judgment in a
proceeding for cancellation or correction of entries in the Civil Registry under
Rule 108 of the Rules of Court.

Yes but only as to the aspect of recognition of the foreign judgment NOT
substituting it.

A recognition of a foreign judgment is not an action to nullify a marriage. It is

an action for Philippine courts to recognize the effectivity of a foreign judgment, which
presupposes a case which was already tried and decided under foreign law. The
procedure in A.M. No. 02-11-10-SC does not apply in a petition to recognize a foreign
judgment annulling a bigamous marriage where one of the parties is a citizen of the
foreign country. Neither can R.A. No. 8369 define the jurisdiction of the foreign court.

The principle in Article 26 of the Family Code applies in a marriage between a

Filipino and a foreign citizen who obtains a foreign judgment nullifying the marriage
on the ground of bigamy. The Filipino spouse may file a petition abroad to declare the
marriage void on the ground of bigamy. The principle in the second paragraph of
Article 26 of the Family Code applies because the foreign spouse, after the foreign
judgment nullifying the marriage, is capacitated to remarry under the laws of his or
her country. If the foreign judgment is not recognized in the Philippines, the Filipino
spouse will be discriminated — the foreign spouse can remarry while the Filipino
spouse cannot remarry.

Under the second paragraph of Article 26 of the Family Code, Philippine courts are
empowered to correct a situation where the Filipino spouse is still tied to the
marriage while the foreign spouse is free to marry. Moreover, notwithstanding Article
26 of the Family Code, Philippine courts already have jurisdiction to extend the effect
of a foreign judgment in the Philippines to the extent that the foreign judgment does
not contravene domestic public policy. A critical difference between the case of a
foreign divorce decree and a foreign judgment nullifying a bigamous marriage is
that bigamy, as a ground for the nullity of marriage, is fully consistent with Philippine
public policy as expressed in Article 35 (4) of the Family Code and Article 349 of the
Revised Penal Code. The Filipino spouse has the option to undergo full trial by filing
a petition for declaration of nullity of marriage under A.M. No. 02-11-10-SC, but this is
not the only remedy available to him or her. Philippine courts have jurisdiction to
recognize a foreign judgment nullifying a bigamous marriage, without prejudice to a
criminal prosecution for bigamy.

In the recognition of foreign judgments, Philippine courts are incompetent to

substitute their judgment on how a case was decided under foreign law. They cannot
decide on the "family rights and duties, or on the status, condition and legal capacity"
of the foreign citizen who is a party to the foreign judgment. Thus, Philippine courts
are limited to the question of whether to extend the effect of a foreign judgment
in the Philippines. In a foreign judgment relating to the status of a marriage
involving a citizen of a foreign country, Philippine courts only decide whether
to extend its effect to the Filipino party, under the rule of lex nationalii
expressed in Article 15 of the Civil Code.

For this purpose, Philippine courts will only determine (1) whether the foreign
judgment is inconsistent with an overriding public policy in the Philippines; and (2)
whether any alleging party is able to prove an extrinsic ground to repel the foreign
judgment, i.e., want of jurisdiction, want of notice to the party, collusion, fraud, or
clear mistake of law or fact. If there is neither inconsistency with public policy
nor adequate proof to repel the judgment, Philippine courts should, by default,
recognize the foreign judgment as part of the comity of nations. Section 48 (b),
Rule 39 of the Rules of Court states that the foreign judgment is already
"presumptive evidence of a right between the parties." Upon recognition of the
foreign judgment, this right becomes conclusive and the judgment serves as the
basis for the correction or cancellation of entry in the civil registry.