HASEGAWA vs KITAMURA 538 SCRA 26 (2007) G.R. No. 149177 November 23, 2007

FACTS:

Nippon Engineering Consultants (Nippon), a Japanese consultancy firm providing technical and management support in the infrastructure projects national permanently residing in the Philippines. The agreement provides that Kitamaru was to extend professional services to Nippon for a year. Nippon assigned Kitamaru to work as the project manager of the Southern Tagalog Access Road (STAR) project. When the STAR project was near completion, DPWH engaged the consultancy services of Nippon, this time for the detailed engineering & construction supervision of the Bongabon-Baler Road Improvement (BBRI) Project. Kitamaru was named as the project manger in the contract.

Hasegawa, Nippon’s general manager for its International Division, informed Kitamaru that the company had no more intention of automatically renewing his ICA. His services would be engaged by the company only up to the substantial completion of the STAR Project.

Kitamaru demanded that he be assigned to the BBRI project. Nippon insisted that Kitamaru’s contract was for a fixed term that had expired. Kitamaru then filed for specific performance & damages w/ the RTC of Lipa City. Nippon filed a MTD.

Nippon’s contention: The ICA had been perfected in Japan & executed by & between Japanese nationals. Thus, the RTC of Lipa City has no jurisdiction. The claim for improper pre-termination of Kitamaru’s ICA could only be heard & ventilated in the proper courts of Japan following the principles of lex loci celebrationis & lex contractus.

The RTC denied the motion to dismiss. The CA ruled hat the principle of lex loci celebrationis was not applicable to the case, because nowhere in the pleadings was the validity of the written agreement put in issue. It held that the RTC was correct in applying the principle of lex loci solutionis.

ISSUE:

Whether or not the subject matter jurisdiction of Philippine courts in civil cases for specific performance & damages involving contracts executed outside the country by foreign nationals may be assailed on the principles of lex loci celebrationis, lex contractus, “the state of the most significant relationship rule,” or forum non conveniens.

HELD:

NO. In the judicial resolution of conflicts problems, 3 consecutive phases are involved: jurisdiction, choice of law, and recognition and enforcement of

1

judgments. Jurisdiction & choice of law are 2 distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice of law asks the further question whether the application of a substantive law w/c will determine the merits of the case is fair to both parties. The power to exercise jurisdiction does not automatically give a state constitutional authority to apply forum law. While jurisdiction and the choice of the lex fori will often coincide, the “minimum contacts” for one do not always provide the necessary “significant contacts” for the other. The question of whether the law of a state can be applied to a transaction is different from the question of whether the courts of that state have jurisdiction to enter a judgment.

In this case, only the 1st phase is at issue—jurisdiction. Jurisdiction, however, has various aspects. For a court to validly exercise its power to adjudicate a controversy, it must have jurisdiction over the plaintiff/petitioner, over the defendant/respondent, over the subject matter, over the issues of the case and, in cases involving property, over the res or the thing w/c is the subject of the litigation. In assailing the trial court's jurisdiction herein, Nippon is actually referring to subject matter jurisdiction.

Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority w/c establishes and organizes the court. It is given only by law and in the manner prescribed by law. It is further determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the claims asserted therein. To succeed in its motion for the dismissal of an action for lack of jurisdiction over the subject matter of the claim, the movant must show that the court or tribunal cannot act on the matter submitted to it because no law grants it the power to adjudicate the claims.

In the instant case, Nippon, in its MTD, does not claim that the RTC is not properly vested by law w/ jurisdiction to hear the subject controversy for a civil case for specific performance & damages is one not capable of pecuniary estimation & is properly cognizable by the RTC of Lipa City. What they rather raise as grounds to question subject matter jurisdiction are the principles of lex loci celebrationis and lex contractus, and the “state of the most significant relationship rule.” The Court finds the invocation of these grounds unsound.

Lex loci celebrationis relates to the “law of the place of the ceremony” or the law of the place where a contract is made. The doctrine of lex contractus  or lex loci contractus means the “law of the place where a contract is executed or to be performed.” It controls the nature, construction, and validity of the contract and it may pertain to the law voluntarily agreed upon by the parties or the law intended by them either expressly or implicitly. Under the “state of the most significant relationship rule,” to ascertain what state law to apply to a dispute, the court should determine which state has the most substantial connection to the occurrence and the parties. In a case involving a contract, the court should

2

consider where the contract was made, was negotiated, was to be performed, and the domicile, place of business, or place of incorporation of the parties. This rule takes into account several contacts and evaluates them according to their relative importance with respect to the particular issue to be resolved.

Since these 3 principles in conflict of laws make reference to the law applicable to a dispute, they are rules proper for the 2nd phase, the choice of law. They determine which state's law is to be applied in resolving the substantive issues of a conflicts problem. Necessarily, as the only issue in this case is that of jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for.

Further, Nippon’s premature invocation of choice-of-law rules is exposed by the fact that they have not yet pointed out any conflict between the laws of Japan and ours. Before determining which law should apply, 1st there should exist a conflict of laws situation requiring the application of the conflict of laws rules. Also, when the law of a foreign country is invoked to provide the proper rules for the solution of a case, the existence of such law must be pleaded and proved.

It should be noted that when a conflicts case, one involving a foreign element, is brought before a court or administrative agency, there are 3 alternatives open to the latter in disposing of it: (1) dismiss the case, either because of lack of jurisdiction or refusal to assume jurisdiction over the case; (2) assume jurisdiction over the case and apply the internal law of the forum; or (3) assume jurisdiction over the case and take into account or apply the law of some other State or States.The court’s power to hear cases and controversies is derived from the Constitution and the laws. While it may choose to recognize laws of foreign nations, the court is not limited by foreign sovereign law short of treaties or other formal agreements, even in matters regarding rights provided by foreign sovereigns.

Neither can the other ground raised, forum non conveniens, be used to deprive the RTC of its jurisdiction. 1st, it is not a proper basis for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include it as a ground. 2nd, whether a suit should be entertained or dismissed on the basis of the said doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the RTC. In this case, the RTC decided to assume jurisdiction. 3rd, the propriety of dismissing a case based on this principle requires a factual determination; hence, this conflicts principle is more properly considered a matter of defense.

ASIAVEST VS. CA AND PNCC  

ASIAVEST MERCHANT BANKERS (M) BERHAD vs. CA and PNCCG.R. No. 110263, July 20, 2001

Facts: Petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the laws of Malaysia while private respondent Philippine National

3

Construction Corporation is a corporation duly incorporated and existing under Philippine laws.

Petitioner initiated a suit for collection against private respondent, then known as Construction and Development Corporation of the Philippines, before the High Court of Malaya in Kuala Lumpur entitled “Asiavest Merchant Bankers (M) Berhad v. Asiavest CDCP Sdn. Bhd. and Construction and Development Corporation of the Philippines.”

Petitioner sought to recover the indemnity of the performance bond it had put up in favor of private respondent to guarantee the completion of the Felda Project and the nonpayment of the loan it extended to Asiavest-CDCP Sdn. Bhd. for the completion of Paloh Hanai and Kuantan By Pass; Project.

The High Court of Malaya (Commercial Division) rendered judgment in favor of the petitioner and against the private respondent. Following unsuccessful attempts to secure payment from private respondent under the judgment, petitioner initiated the complaint before RTC of Pasig, Metro Manila, to enforce the judgment of the High Court of Malaya.

Private respondent sought the dismissal of the case via a Motion to Dismiss, contending that the alleged judgment of the High Court of Malaya should be denied recognition or enforcement since on in face, it is tainted with want of jurisdiction, want of notice to private respondent, collusion and/or fraud, and there is a clear mistake of law or fact. Dismissal was, however, denied by the trial court considering that the grounds relied upon are not the proper grounds in a motion to dismiss under Rule 16 of the Revised Rules of Court.

Subsequently, private respondent filed its Answer with Compulsory Counter claim’s and therein raised the grounds it brought up in its motion to dismiss. In its Reply filed, the petitioner contended that the High Court of Malaya acquired jurisdiction over the person of private respondent by its voluntary submission the court’s jurisdiction through its appointed counsel. Furthermore, private respondent’s counsel waived any and all objections to the High Court’s jurisdiction in a pleading filed before the court.

In due time, the trial court rendered its decision dismissing petitioner’s complaint. Petitioner interposed an appeal with the Court of Appeals, but the appellate court dismissed the same and affirmed the decision of the trial court.

Issue: Whether or not the CA erred in denying recognition and enforcement to the Malaysian Court judgment.

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

4

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 the 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 Under Section 50(b), Rule 39 of the Revised Rules of Court, which was the governing law at the time the instant case was decided by the trial court and respondent appellate court, a judgment, against a person, of a tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. In addition, under Section 3(n), Rule 131 of the Revised Rules of Court, a court, whether in the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of its jurisdiction. Hence, once the authenticity of the foreign judgment is proved, the party attacking a foreign judgment, is tasked with the burden of overcoming its presumptive validity.

In the instant case, petitioner sufficiently established the existence of the money judgment of the High Court of Malaya by the evidence it offered. Petitioner’s sole witness, testified to the effect that he is in active practice of the law profession in Malaysia; that he was connected with Skrine and Company as Legal Assistant up to 1981; that private respondent, then known as Construction and Development Corporation of the Philippines, was sued by his client, Asiavest Merchant Bankers (M) Berhad, in Kuala Lumpur; that the writ of summons were served on March 17, 1983 at the registered office of private respondent and on March 21, 1983 on Cora S. Deala, a financial planning officer of private respondent for Southeast Asia operations; that upon the filing of the case, Messrs. Allen and Gledhill, Advocates and Solicitors, with address at 24th Floor, UMBC Building, Jalan Sulaiman, Kuala Lumpur, entered their conditional appearance for private respondent questioning the regularity of the service of the writ of summons but subsequently withdrew the same when it realized that the writ was properly served; that because private respondent failed to file a statement of defense within two (2) weeks, petitioner filed an application for summary judgment and submitted affidavits and documentary evidence in support of its claim; that the matter was then heard before the High Court of Kuala Lumpur in a series of dates where private respondent was represented by counsel; and that the end result of all these proceedings is the judgment sought to be enforced.

5

In addition to the said testimonial evidence, petitioner also offered the documentary evidence to support their claim.

Having thus proven, through the foregoing evidence, the existence and authenticity of the foreign judgment, said foreign judgment enjoys presumptive validity and the burden then fell upon the party who disputes its validity, herein private respondent, to prove otherwise. However, private respondent failed to sufficiently discharge the burden that fell upon it – to prove by clear and convincing evidence the grounds which it relied upon to prevent enforcement of the Malaysian High Court judgment.

MIJARES V. RANADA (2005)

Facts:

Invoking the Alien Tort Act, petitioners Mijares, et al.*, all of whom suffered human rights violations during the Marcos era, obtained a Final Judgment in their favor against the Estate of the late Ferdinand Marcos amounting to roughly $1.9B in compensatory and exemplary damages for tortuous violations of international law in the US District Court of Hawaii. This Final Judgment was affirmed by the US Court of Appeals.

As a consequence, Petitioners filed a Complaint with the RTC Makati for the enforcement of the Final Judgment, paying P410 as docket and filing fees based on Rule 141, §7(b) where the value of the subject matter is incapable of pecuniary estimation. The Estate of Marcos however, filed a MTD alleging the non-payment of the correct filing fees. RTC Makati dismissed the Complaint stating that the subject matter was capable of pecuniary estimation as it involved a judgment rendered by a foreign court ordering the payment of a definite sum of money allowing for the easy determination of the value of the foreign judgment. As such, the proper filing fee was P472M, which Petitioners had not paid.

6

Issue: Whether or not the amount paid by the Petitioners is the proper filing fee. Ruling:

Yes, but on a different basis—amount merely corresponds to the same amount required for “other actions not involving property”. RTC Makati erred in concluding that the filing fee should be computed on the basis of the total sum claimed or the stated value of the property in litigation. The Petitioner’s Complaint was lodged against the Estate of Marcos but it is clearly based on a judgment, the Final Judgment of the US District Court. However, the Petitioners err in stating that the Final Judgment is incapable of pecuniary estimation because it is so capable.

On this point, Petitioners state that this might lead to an instance wherein a first level court (MTC, MeTC, etc.) would have jurisdiction to enforce a foreign judgment. Under the B.P.129, such courts are not vested with such jurisdiction. §33 of B.P.129 refers to instances wherein the cause of action or subject matter pertains to an assertion of rights over property or a sum of money. But here, the subject matter is the foreign judgment itself. §16 of B.P.129 reveals that the complaint for enforcement of judgment even if capable of pecuniary estimation would fall under the jurisdiction of the RTCs.

Thus, the Complaint to enforce the US District Court judgment is one capable of pecuniary estimations but at the same time, it is also an action based on judgment against an estate, thus placing it beyond the ambit of §7(a) of Rule 141. What governs the proper computation of the filing fees over Complaints for the enforcement of foreign judgments is §7(b)(3), involving “other actions not involving property.”

Northwest Orient Airlines, Inc. v. CA (1995)

G.R. No. 112573  February 9, 1995Lessons Applicable: Territoriality Principle (conflicts of law)

FACTS: Northwest Airlines (Northwest) and C.F. Sharp & Company (C.F.), through its

Japan branch, entered into an International Passenger Sales Agency Agreement, whereby the Northwest authorized the C.F. to sell its air transportation tickets

7

March 25, 1980: Unable to remit the proceeds of the ticket sales, Northwest sued C.F. in Tokyo, Japan, for collection of the unremitted proceeds of the ticket sales, with claim for damages

April 11, 1980: writ of summons was issued by the 36th Civil Department, Tokyo District Court of Japan

o The attempt to serve the summons was unsuccessful because Mr. Dinozo was in Manila and would be back on April 24, 1980

April 24, 1980: Mr. Dinozo returned to C.F. Office to serve the summons but he refused to receive claiming that he no longer an employee

After the 2 attempts of service were unsuccessful, Supreme Court of Japan sent the summons together with the other legal documents to the Ministry of Foreign Affairs of Japan> Japanese Embassy in Manila>Ministry (now Department) of Foreign Affairs of the Philippines>Executive Judge of the Court of First Instance (now Regional Trial Court) of Manila who ordered Deputy Sheriff Rolando Balingit>C.F. Main Office

August 28, 1980:  C.F. received from Deputy Sheriff Rolando Balingit the writ of summons but failed to appear at the scheduled hearing. 

January 29, 1981: Tokyo Court rendered judgment ordering the C.F. 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

March 24, 1981: C.F. received from Deputy Sheriff Balingit copy of the judgment. C.F. did not appeal so it became final and executory

May 20, 1983: Northwest filed a suit for enforcement of the judgment a RTC

July 16, 1983: C.F. 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

CA sustained RTC: Court agrees that if the C.F. in a foreign court is a resident in the court of that foreign court such court could acquire jurisdiction over the person of C.F. but it must be served in the territorial jurisdiction of the foreign court

ISSUE: W/N the Japanese Court has jurisdiction over C.F.

HELD: YES. instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied NORTHWEST's claims for attorneys fees, litigation expenses, and exemplary damages

8

Consequently, the party attacking (C.F.) a foreign judgment has the burden of overcoming the presumption of its validity

Accordingly, the presumption of validity and regularity of the service of summons and the decision thereafter rendered by the Japanese court must stand.

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: 

o (1) on its resident agent designated in accordance with law for that purpose, or, 

o (2) if there is no such resident agent, on the government official designated by law to that effect; or 

o (3) on any of its officers or agents within the Philippines.

o If the foreign corporation has designated an agent to receive summons, the designation is exclusive, and service of summons is without force and gives the court no jurisdiction unless made upon him. 

o 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

(c) the Securities and Exchange Commission, in the case of other foreign corporations duly licensed to do business in the Philippines. Whenever service of process is so made, the government office or official served shall transmit by mail a copy of the summons or other legal proccess to the corporation at its home or principal office. The sending of such copy is a necessary part of the service.

The 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

Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations

We think it would be entirely out of line with this policy should we make a discrimination against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only with every requirement of law made specially of foreign

9

corporations, but in addition with every requirement of law made of domestic corporations

In as much as SHARP was admittedly doing business in Japan through its four duly registered branches at the time the collection suit against it was filed, then in the light of the processual presumption, SHARP may be deemed a resident of Japan, and, as such, was amenable to the jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful methods of serving process.

Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only under the processual presumption but also because of the presumption of regularity of performance of official duty. 

PHILSEC VS. CA

PHILSEC INVESTMENT et al vs.CA et alG.R. No. 103493June 19, 1997

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

10

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?

HELD: CA reversed. Case remanded to RTC-Makati

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

11

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.

12

MHC AND MHICL vs. NLRC et al (G.R. No. 120077) October 13, 2000

FACTS: private respondent Santos was an overseas worker employed as a printer at the Mazoon Printing Press, Sultanate of Oman. Subsequently he was directly hired by the Palace Hotel, Beijing, People’s Republic of China and later terminated due to retrenchment.

Petitioners are the Manila Hotel Corporation (“MHC”) and the Manila Hotel International Company, Limited (“MHICL”).

When the case was filed in 1990, MHC was still a government-owned and controlled corporation duly organized and existing under the laws of the Philippines. MHICL is a corporation duly organized and existing under the laws of Hong Kong. MHC is an “incorporator” of MHICL, owning 50% of its capital stock.

By virtue of a “management agreement” with the Palace Hotel, MHICL trained the personnel and staff of the Palace Hotel at Beijing, China.

Now the facts.

During his employment with the Mazoon Printing Press, respondent Santos received a letter from Mr. Shmidt, General Manager, Palace Hotel, Beijing, China. Mr. Schmidt informed respondent Santos that he was recommended by one Buenio, a friend of his. Mr. Shmidt offered respondent Santos the same position as printer, but with a higher monthly salary and increased benefits. Respondent Santos wrote to Mr. Shmidt and signified his acceptance of the offer.

The Palace Hotel Manager, Mr. Henk mailed a ready to sign employment contract to respondent Santos. Santos resigned from the Mazoon Printing Press. Santos wrote the Palace Hotel and acknowledged Mr. Henk’s letter. The employment contract stated that his employment would be for a period of two years. He then started to work at the Palace Hotel.

Subsequently, respondent Santos signed an amended “employment agreement” with the Palace Hotel. In the contract, Mr. Shmidt represented the Palace Hotel. The Vice President (Operations and Development) of petitioner MHICL Cergueda signed the employment agreement under the word “noted”.

13

After working in the Palace hotel for less than 1 year, the Palace Hotel informed respondent Santos by letter signed by Mr. Shmidt that his employment at the Palace Hotel print shop would be terminated due to business reverses brought about by the political upheaval in China. The Palace Hotel terminated the employment of Santos and paid all benefits due him, including his plane fare back to the Philippines. Santos was repatriated to the Philippines.

Santos filed a complaint for illegal dismissal with the Arbitration Branch, NCR, NLRC. He prayed for an award of AD, ED and AF for. The complaint named MHC, MHICL, the Palace Hotel and Mr. Shmidt as respondents. The Palace Hotel and Mr. Shmidt were not served with summons and neither participated in the proceedings before the LA.

The LA decided the case against petitioners. Petitioners appealed to the NLRC, arguing that the POEA, not the NLRC had jurisdiction over the case. The NLRC promulgated a resolution, stating that the appealed Decision be declared null and void for want of jurisdiction

Santos moved for reconsideration of the afore-quoted resolution. He argued that the case was not cognizable by the POEA as he was not an “overseas contract worker. The NLRC granted the motion and reversed itself. The NLRC directed another LA to hear the case on the question of whether private respondent was retrenched or dismissed. The La found that Santos was illegally dismissed from employment and recommended that he be paid actual damages equivalent to his salaries for the unexpired portion of his contract. The NLRC ruled in favor of private respondent. Petitioners filed an MR arguing that the LA’s recommendation had no basis in law and in fact, however it was denied. Hence, this petition.

ISSUE: Is the NLRC a proper forum to decide this case?

HELD: petition granted; the orders and resolutions of the NLRC are annulled.

NO

Forum Non-Conveniens

The NLRC was a seriously inconvenient forum.

We note that the main aspects of the case transpired in two foreign jurisdictions and the case involves purely foreign elements. The only link that the Philippines has with the case is that Santos is a Filipino citizen. The Palace Hotel and MHICL are foreign corporations. Not all cases involving our citizens can be tried here.

The employment contract. — Respondent Santos was hired directly by the Palace Hotel, a foreign employer, through correspondence sent to the Sultanate of Oman, where respondent Santos was then employed. He was hired without the intervention of the POEA or any authorized recruitment agency of the government.

Under the rule of forum non conveniens, a Philippine court or agency may assume jurisdiction over the case if it chooses to do so provided: (1) that the Philippine

14

court is one to which the parties may conveniently resort to; (2) that the Philippine court is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine court has or is likely to have power to enforce its decision. The conditions are unavailing in the case at bar.

Not Convenient. — We fail to see how the NLRC is a convenient forum given that all the incidents of the case — from the time of recruitment, to employment to dismissal occurred outside the Philippines. The inconvenience is compounded by the fact that the proper defendants, the Palace Hotel and MHICL are not nationals of the Philippines. Neither .are they “doing business in the Philippines.” Likewise, the main witnesses, Mr. Shmidt and Mr. Henk are non-residents of the Philippines.

No power to determine applicable law. — Neither can an intelligent decision be made as to the law governing the employment contract as such was perfected in foreign soil. This calls to fore the application of the principle of lex loci contractus (the law of the place where the contract was made).

The employment contract was not perfected in the Philippines. Santos signified his acceptance by writing a letter while he was in the Republic of Oman. This letter was sent to the Palace Hotel in the People’s Republic of China.

No power to determine the facts. — Neither can the NLRC determine the facts surrounding the alleged illegal dismissal as all acts complained of took place in Beijing, People’s Republic of China. The NLRC was not in a position to determine whether the Tiannamen Square incident truly adversely affected operations of the Palace Hotel as to justify Santos’ retrenchment.

Principle of effectiveness, no power to execute decision. — Even assuming that a proper decision could be reached by the NLRC, such would not have any binding effect against the employer, the Palace Hotel. The Palace Hotel is a corporation incorporated under the laws of China and was not even served with summons. Jurisdiction over its person was not acquired.

This is not to say that Philippine courts and agencies have no power to solve controversies involving foreign employers. Neither are we saying that we do not have power over an employment contract executed in a foreign country. If Santos were an “overseas contract worker”, a Philippine forum, specifically the POEA, not the NLRC, would protect him. He is not an “overseas contract worker” a fact which he admits with conviction.Even assuming that the NLRC was the proper forum, even on the merits, the NLRC’s decision cannot be sustained.

II. MHC Not Liable

Even if we assume two things: (1) that the NLRC had jurisdiction over the case, and (2) that MHICL was liable for Santos’ retrenchment, still MHC, as a separate and distinct juridical entity cannot be held liable.

True, MHC is an incorporator of MHICL and owns 50% of its capital stock. However, this is not enough to pierce the veil of corporate fiction between MHICL and MHC.

15

In Traders Royal Bank v. CA, we held that “the mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate personalities.”

It is basic that a corporation has a personality separate and distinct from those composing it as well as from that of any other legal entity to which it may be related. Clear and convincing evidence is needed to pierce the veil of corporate fiction. In this case, we find no evidence to show that MHICL and MHC are one and the same entity.

III. MHICL not Liable

Santos predicates MHICL’s liability on the fact that MHICL “signed” his employment contract with the Palace Hotel. This fact fails to persuade us.

First, we note that the Vice President (Operations and Development) of MHICL, Cergueda signed the employment contract as a mere witness. He merely signed under the word “noted”.

When one “notes” a contract, one is not expressing his agreement or approval, as a party would. In Sichangco v. Board of Commissioners of Immigration, the Court recognized that the term “noted” means that the person so noting has merely taken cognizance of the existence of an act or declaration, without exercising a judicious deliberation or rendering a decision on the matter.Second, and more importantly, there was no existing employer-employee relationship between Santos and MHICL. In determining the existence of an employer-employee relationship, the following elements are considered:

“(1) the selection and engagement of the employee;“(2) the payment of wages;“(3) the power to dismiss; and“(4) the power to control employee’s conduct.”

MHICL did not have and did not exercise any of the aforementioned powers. It did not select respondent Santos as an employee for the Palace Hotel. He was referred to the Palace Hotel by his friend, Buenio. MHICL did not engage respondent Santos to work. The terms of employment were negotiated and finalized through correspondence between Santos, Mr. Schmidt and Mr. Henk, who were officers and representatives of the Palace Hotel and not MHICL. Neither did Santos adduce any proof that MHICL had the power to control his conduct. Finally, it was the Palace Hotel, through Mr. Schmidt and not MHICL that terminated respondent Santos’ services.

Likewise, there is no evidence to show that the Palace Hotel and MHICL are one and the same entity. The fact that the Palace Hotel is a member of the “Manila Hotel Group” is not enough to pierce the corporate veil between MHICL and the Palace Hotel.

16

Considering that the NLRC was forum non-conveniens and considering further that no employer-employee relationship existed between MHICL, MHC and Santos, the LA clearly had no jurisdiction over respondent’s claim in the NLRC case. In all the cases under the exclusive and original jurisdiction of the LA, an employer-employee relationship is an indispensable jurisdictional requirement.

HSBC VS. SHERMAN

HONGKONG AND SHANGHAI BANKING CORPORATION (HSBC) vs. SHERMAN et alG.R. No. 72494August 11, 1989

FACTS: It appears that sometime in 1981, Eastern Book Supply Service PTE, Ltd. (COMPANY), a company incorporated in Singapore applied with and was granted by HSBC Singapore branch an overdraft facility in the maximum amount of Singapore dollars 200,000 with interest at 3% over HSBC prime rate, payable monthly, on amounts due under said overdraft facility.

As a security for the repayment by the COMPANY of sums advanced by HSBC to it through the aforesaid overdraft facility, in 1982, both private respondents and a certain Lowe, all of whom were directors of the COMPANY at such time, executed a Joint and Several Guarantee in favor of HSBC whereby private respondents and Lowe agreed to pay, jointly and severally, on demand all sums owed by the COMPANY to petitioner BANK under the aforestated overdraft facility.

The Joint and Several Guarantee provides, inter alia, that:This guarantee and all rights, obligations and liabilities arising hereunder shall be construed and determined under and may be enforced in accordance with the laws of the Republic of Singapore. We hereby agree that the Courts of Singapore shall have jurisdiction over all disputes arising under this guarantee. …

The COMPANY failed to pay its obligation. Thus, HSBC demanded payment and inasmuch as the private respondents still failed to pay, HSBC filed A complaint for collection of a sum of money against private respondents Sherman and Reloj before RTC of Quezon City.Private respondents filed an MTD on the ground of lack of jurisdiction over the subject matter. The trial court denied the motion. They then filed before the respondent IAC a petition for prohibition with preliminary injunction and/or prayer for a restraining order. The IAC rendered a decision enjoining the RTC Quezon City from taking further cognizance of the case and to dismiss the same for filing with the proper court of Singapore which is the proper forum. MR denied, hence this petition.

ISSUE: Do Philippine courts have jurisdiction over the suit, vis-a-vis the Guarantee stipulation regarding jurisdiction?

HELD: YES

17

One basic principle underlies all rules of jurisdiction in International Law: a State does not have jurisdiction in the absence of some reasonable basis for exercising it, whether the proceedings are in rem quasi in rem or in personam. To be reasonable, the jurisdiction must be based on some minimum contacts that will not offend traditional notions of fair play and substantial justiceThe defense of private respondents that the complaint should have been filed in Singapore is based merely on technicality. They did not even claim, much less prove, that the filing of the action here will cause them any unnecessary trouble, damage, or expense. On the other hand, there is no showing that petitioner BANK filed the action here just to harass private respondents.

**

In the case of Neville Y. Lamis Ents., et al. v. Lagamon, etc., where the stipulation was “[i]n case of litigation, jurisdiction shall be vested in the Court of Davao City.” We held:

Anent the claim that Davao City had been stipulated as the venue, suffice it to say that a stipulation as to venue does not preclude the filing of suits in the residence of plaintiff or defendant under Section 2 (b), Rule 4, ROC, in the absence of qualifying or restrictive words in the agreement which would indicate that the place named is the only venue agreed upon by the parties.Applying the foregoing to the case at bar, the parties did not thereby stipulate that only the courts of Singapore, to the exclusion of all the rest, has jurisdiction. Neither did the clause in question operate to divest Philippine courts of jurisdiction. In International Law, jurisdiction is often defined as the light of a State to exercise authority over persons and things within its boundaries subject to certain exceptions. Thus, a State does not assume jurisdiction over travelling sovereigns, ambassadors and diplomatic representatives of other States, and foreign military units stationed in or marching through State territory with the permission of the latter’s authorities. This authority, which finds its source in the concept of sovereignty, is exclusive within and throughout the domain of the State. A State is competent to take hold of any judicial matter it sees fit by making its courts and agencies assume jurisdiction over all kinds of cases brought before them

NOTES:

The respondent IAC likewise ruled that:… In a conflict problem, a court will simply refuse to entertain the case if it is not authorized by law to exercise jurisdiction. And even if it is so authorized, it may still refuse to entertain the case by applying the principle of forum non conveniens. …However, whether a suit should be entertained or dismissed on the basis of the principle of forum non conveniens depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial court. Thus, the IAC should not have relied on such principle.

18

CADALIN ET AL VS. POEA ET AL

BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the rest of 1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in-fact, Atty. GERARDO A. DEL MUNDOvs. PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION’S ADMINISTRATOR, NLRC, BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS CORPORATIONGRN 104776, December 5,1994.

FACTS:

This is a consolidation of 3 cases of SPECIAL CIVIL ACTIONS in the Supreme Court for Certiorari.

On June 6, 1984, Cadalin, Amul and Evangelista, in their own behalf and on behalf of 728 other OCWs instituted a class suit by filing an “Amended Complaint” with the POEA for money claims arising from their recruitment by ASIA INTERNATIONAL BUILDERS CORPORATION (AIBC) and employment by BROWN & ROOT INTERNATIONAL, INC (BRI) which is a foreign corporation with headquarters in Houston, Texas, and is engaged in construction; while AIBC is a domestic

19

corporation licensed as a service contractor to recruit, mobilize and deploy Filipino workers for overseas employment on behalf of its foreign principals.

The amended complaint sought the payment of the unexpired portion of the employment contracts, which was terminated prematurely, and secondarily, the payment of the interest of the earnings of the Travel and Reserved Fund; interest on all the unpaid benefits; area wage and salary differential pay; fringe benefits; reimbursement of SSS and premium not remitted to the SSS; refund of withholding tax not remitted to the BIR; penalties for committing prohibited practices; as well as the suspension of the license of AIBC and the accreditation of BRII

On October 2, 1984, the POEA Administrator denied the “Motion to Strike Out of the Records” filed by AIBC but required the claimants to correct the deficiencies in the complaint pointed out.

AIB and BRII kept on filing Motion for Extension of Time to file their answer. The POEA kept on granting such motions.

On November 14, 1984, claimants filed an opposition to the motions for extension of time and asked that AIBC and BRII declared in default for failure to file their answers.

On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file their answers within ten days from receipt of the order.

(at madami pang motions ang na-file, new complainants joined the case, ang daming inavail na remedies ng both parties)On June 19, 1987, AIBC finally submitted its answer to the complaint. At the same hearing, the parties were given a period of 15 days from said date within which to submit their respective position papers. On February 24, 1988, AIBC and BRII submitted position paper. On October 27, 1988, AIBC and BRII filed a “Consolidated Reply,” POEA Adminitartor rendered his decision which awarded the amount of $824, 652.44 in favor of only 324 complainants. Claimants submitted their “Appeal Memorandum For Partial Appeal” from the decision of the POEA. AIBC also filed its MR and/or appeal in addition to the “Notice of Appeal” filed earlier.

NLRC promulgated its Resolution, modifying the decision of the POEA. The resolution removed some of the benefits awarded in favor of the claimants. NLRC denied all the MRs. Hence, these petitions filed by the claimants and by AlBC and BRII.

The case rooted from the Labor Law enacted by Bahrain where most of the complainants were deployed. His Majesty Ise Bin Selman Al Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1176, otherwise known re the Labour Law for the Private Sector. Some of the provision of Amiri Decree No. 23 that are relevant to the claims of the complainants-appellants are as follows:

“Art. 79: x x x A worker shall receive payment for each extra hour equivalent to his wage entitlement increased by a minimum of twenty-rive per centurn thereof for hours worked during the day; and by a minimum off fifty per centurn thereof for

20

hours worked during the night which shall be deemed to being from seven o’clock in the evening until seven o’clock in the morning .”

Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.If employee worked, 150% of his normal wage shall be paid to him x x x.”

Art. 81; x x x When conditions of work require the worker to work on any official holiday, he shall be paid an additional sum equivalent to 150% of his normal wage.”

Art. 84: Every worker who has completed one year’s continuous service with his employer shall be entitled to Laos on full pay for a period of not less than 21 days for each year increased to a period not less than 28 days after five continuous years of service.”

A worker shall be entitled to such leave upon a quantum meruit in respect of the proportion of his service in that year.”

Art. 107: A contract of employment made for a period of indefinite duration may be terminated by either party thereto after giving the other party prior notice before such termination, in writing, in respect of monthly paid workers and fifteen days’ notice in respect of other workers. The party terminating a contract without the required notice shall pay to the other party compensation equivalent to the amount of wages payable to the worker for the period of such notice or the unexpired portion thereof.”

Art. Ill: x x x the employer concerned shall pay to such worker, upon termination of employment, a leaving indemnity for the period of his employment calculated on the basis of fifteen days’ wages for each year of the first three years of service and of one month’s wages for each year of service thereafter. Such worker shall be entitled to payment of leaving indemnity upon a quantum meruit in proportion to the period of his service completed within a year.”

ISSUE:

1. WON the foreign law should govern or the contract of the parties.(WON the complainants who have worked in Bahrain are entitled to the above-mentioned benefits provided by Amiri Decree No. 23 of Bahrain).

2. WON the Bahrain Law should apply in the case. (Assuming it is applicable WON complainants’ claim for the benefits provided therein have prescribed.)

3. Whether or not the instant cases qualify as; a class suit (siningit ko nalang)(the rest of the issues in the full text of the case refer to Labor Law)

RULING:

1. NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence governing the pleading and proof of a foreign law and admitted in evidence a

21

simple copy of the Bahrain’s Amiri Decree No. 23 of 1976 (Labour Law for the Private Sector).

NLRC applied the Amiri Deere, No. 23 of 1976, which provides for greater benefits than those stipulated in the overseas-employment contracts of the claimants. It was of the belief that where the laws of the host country are more favorable and beneficial to the workers, then the laws of the host country shall form part of the overseas employment contract. It approved the observation of the POEA Administrator that in labor proceedings, all doubts in the implementation of the provisions of the Labor Code and its implementing regulations shall be resolved in favor of labor.

The overseas-employment contracts, which were prepared by AIBC and BRII themselves, provided that the laws of the host country became applicable to said contracts if they offer terms and conditions more favorable than those stipulated therein. However there was a part of the employment contract which provides that the compensation of the employee may be “adjusted downward so that the total computation plus the non-waivable benefits shall be equivalent to the compensation” therein agree,’ another part of the same provision categorically states “that total remuneration and benefits do not fall below that of the host country regulation and custom.”

Any ambiguity in the overseas-employment contracts should be interpreted against AIBC and BRII, the parties that drafted it. Article 1377 of the Civil Code of the Philippines provides:‘The interpretation of obscure words or stipulations in a contract shall not favor the party who caused the obscurity.”

Said rule of interpretation is applicable to contracts of adhesion where there is already a prepared form containing the stipulations of the employment contract and the employees merely “take it or leave it.” The presumption is that there was an imposition by one party against the other and that the employees signed the contracts out of necessity that reduced their bargaining power.We read the overseas employment contracts in question as adopting the provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof. The parties to a contract may select the law by which it is to be governed. In such a case, the foreign law is adopted as a “system” to regulate the relations of the parties, including questions of their capacity to enter into the contract, the formalities to be observed by them, matters of performance, and so forth. Instead of adopting the entire mass of the foreign law, the parties may just agree that specific provisions of a foreign statute shall be deemed incorporated into their contract “as a set of terms.” By such reference to the provisions of the foreign law, the contract does not become a foreign contract to be governed by the foreign law. The said law does not operate as a statute but as a set of contractual terms deemed written in the contract.

A basic policy of contract is to protect the expectation of the parties. Such party expectation is protected by giving effect to the parties’ own choice of the applicable law. The choice of law must, however, bear some relationship the parties or their transaction. There is no question that the contracts sought to be

22

enforced by claimants have a direct connection with the Bahrain law because the services were rendered in that country.

2. NLRC ruled that the prescriptive period for the filing of the claims of the complainants was 3 years, as provided in Article 291 of the Labor Code of the Philippines, and not ten years as provided in Article 1144 of the Civil Code of the Philippines nor one year as provided in the Amiri Decree No. 23 of 1976.

Article 156 of the Amiri Decree No. 23 of 1976 provides:“A claim arising out of a contract of employment shall not actionable after the lapse of one year from the date of the expiry of the Contract”.

As a general rule, a foreign procedural law will not be applied in the forum (local court), Procedural matters, such as service of process, joinder of actions, period and requisites for appeal, and so forth, are governed by the laws of the forum. This is true even if the action is based upon a foreign substantive law.

A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be viewed either as procedural or substantive, depending on the characterization given such a law. In Bournias v. Atlantic Maritime Company (220 F. 2d. 152, 2d Cir. [1955]), where the issue was the applicability of the Panama Labor Code in a case filed in the State of New York for claims arising from said Code, the claims would have prescribed under the Panamanian Law but not under the Statute of Limitations of New York. The U.S. Circuit Court of Appeals held that the Panamanian Law was procedural as it was not “specifically intended to be substantive,” hence, the prescriptive period provided in the law of the forum should apply. The Court observed: “. . . we are dealing with a statute of limitations of a foreign country, and it is not clear on the face of the statute that its purpose was to limit the enforceability, outside as well as within the foreign country concerned, of the substantive rights to which the statute pertains. We think that as a yardstick for determining whether that was the purpose, this test is the most satisfactory one.

The Court further noted: “Applying that test here it appears to us that the libellant is entitled to succeed, for the respondents have failed to satisfy us that the Panamanian period of limitation in question was specifically aimed against the particular rights which the libellant seeks to enforce. The Panama Labor Code is a statute having broad objectives.” The American court applied the statute of limitations of New York, instead of the Panamanian law, after finding that there was no showing that the Panamanian law on prescription was intended to be substantive. Being considered merely a procedural law even in Panama, it has to give way to the law of the forum (local Court) on prescription of actions.

However the characterization of a statute into a procedural or substantive law becomes irrelevant when the country of the forum (local Court) has a “borrowing statute.” Said statute has the practical effect of treating the foreign statute of limitation as one of substance. A “borrowing statute” directs the state of the forum (local Court) to apply the foreign statute of limitations to the pending claims based on a foreign law. While there are several kinds of “borrowing statutes,” one form

23

provides that an action barred by the laws of the place where it accrued will not be enforced in the forum even though the local statute was not run against it.

Section 48 of Code of Civil Procedure is of this kind. It provides: “If by the laws of the state or country where the cause of action arose, the action is barred, it is also barred in the Philippine Islands.”

Section 48 has not been repealed or amended by the Civil Code of the Philippines. In the light of the 1987 Constitution, however, Section 48 cannot be enforced ex proprio vigore insofar as it ordains the application in this jurisdiction of Section 156 of the Amiri Decree No. 23 of 1976.

The courts of the forum (local Court) will not enforce any foreign claim obnoxious to the forum’s public policy. To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as regards the claims in question would contravene the public policy on the protection to labor.

In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:“The state shall promote social justice in all phases of national development” (Sec. 10).‘The state affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare” (Sec. 18).

In Article XIII on Social Justice and Human Rights, the 1987 Constitution provides:“Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all.”

Thus, the applicable law on prescription is the Philippine law.

The next question is whether the prescriptive period governing the filing of the claims is 3 years, as provided by the Labor Code or 10 years, as provided by the Civil Code of the Philippines.

Article 1144 of the Civil Code of the Philippines provides:“The following actions must be brought within ten years from the time the right of action accross:

(1) Upon a written contract; (2) Upon an obligation created by law; (3) Upon a judgment”In this case, the claim for pay differentials is primarily anchored on the written contracts between the litigants, the ten-year prescriptive period provided by Art. 1144(l) of the New Civil Code should govern.

3. NO. A class suit is proper where the subject matter of the controversy is one of common or general interest to many and the parties are so numerous that it is impracticable to bring them all before the court. When all the claims are for benefits granted under the Bahrain law many of the claimants worked outside Bahrain. Some of the claimants were deployed in Indonesia under different terms and condition of employment.

24

Inasmuch as the First requirement of a class suit is not present (common or general interest based on the Amiri Decree of the State of Bahrain), it is only logical that only those who worked in Bahrain shall be entitled to rile their claims in a class suit.

While there are common defendants (AIBC and BRII) and the nature of the claims is the same (for employee’s benefits), there is no common question of law or fact. While some claims are based on the Amiri Law of Bahrain, many of the claimants never worked in that country, but were deployed elsewhere. Thus, each claimant is interested only in his own demand and not in the claims of the other employees of defendants. A claimant has no concern in protecting the interests of the other claimants as shown by the fact, that hundreds of them have abandoned their co-claimants and have entered into separate compromise settlements of their respective claims. The claimants who worked in Bahrain can not be allowed to sue in a class suit in a judicial proceeding.

WHEREFORE, all the three petitioners are DISMISSED.

25

GODARD vs. GRAY

RULING"... The plaintiffs, who are Frenchmen, sued the defendants, who are

Englishmen, on a charterparty made at Sunderland, which charterparty contained the following clause: "Penalty forr non-performance of this agreement, estimated amount of freight." The French Court below, treating this clause as fixing the amount of liquidated damages, gave judgment against the defendants for the amount of freight on two voyages. On appeal, the superior Court reduced the amount to the estimated freight of one voyage, giving as their reason that the charterparty itself "t'txait'indemnitd a laquelle chacune des parties aurait droit pour inex4cution de la convention par la faute de 1'autre; que moyennant paiement de cette indemnity chacune des parties avait le droit de rompre la convention," and the tribunal proceeds to observe that the amount thus decreed was after all more than sufficient to cover all the plaintiffs' loss.

All parties in France seem to have taken it for granted that the words in the charterparty were to be understood in their natural sense; but the English law is accurately expressed in Abbott on Shipping, Pt. 3, c. 1, a. 6, 5th ed., p. 170, and had that passage been brought to the notice of the French tribunal, it would have known that in an English charterparty, as is there stated, "Such a clause is not the absolute limit of damages on either side; the party may, if he thinks fit, ground his action upon the other clauses or covenants, and may, in such action, recover damages beyond the amount of the penalty, if in justice they shall be found to exceed it. On the other hand, if the party sue on such a penal clause, he cannot, in effect, recover more than the damage actually sustained." But it was not brought to the notice of the French tribunal that according to the interpretation put by the English law on such a contract, a penal clause of this sort was in fact idle and inoperative. If it had been, they would, probably, have interpreted the English contract made in England according to the English construction.

The question raised by the plea is, whether this is a bar to the action brought in England to enforce that judgment.

x x x

"It is not an admitted principle of the law of nations that a State is bound to enforce within its territories the judgment of a foreign tribunal. Several of the continental nations (including France) do not enforce the judgments of other countries, unless where there are reciprocal treaties to that effect. But in England and in those States which are governed by the common Iaw, such judgments are enforced, not by virtue of any treaty, nor by virtue of any statute, but upon a principle very well stated by Parke, B., in Williams v. Jones (13 M. & W. 628; 14 L.J. Exch. 145): "Where a Court of competent jurisdiction has adjudicated a certain

26

sum to be due from one person to another, a legal obligation aribes to pay the sum, on which an action of debt to enforce the judgment may be maintained. It is in this way that the judgments of foreign and colonial Courts are supported and enforced." And taking this as the principle, it seems to follow that anything which negatives the existence of that legal obligation, or excuses the defendant from the performance of it, must form a good defense to the action. It must be open, therefore, to the defendant to show that the Court which pronounced the judgment had no jurisdiction to pronounce it, either because they exceeded the jurisdiction given to them by the foreign law, or because he, the defendant, was not subject to that jurisdiction; and so far the foreign judgment must be examinable. Probably the defendant may show that the judgment was obtained by the fraud of the plaintiff, for that would show that the defendant was excused from the per-formance of an obligation thus obtained; and it may be that where the foreign Cc urt has knowingly and perversely disregarded the rights given to an English subject by English law, that forms a valid excuse for disregarding the obligation thus imposed on him; but we prefer to imitate the caution of the present Lord Chancellor, in Castrique v. Imrie [L.ft. 4 H.L., at p. 445 (above)] and to leave those questions to be decided when they arise, only observing that in the present case, as in that, "the whole of the facts appear to have been inquired into by the French Courts, judicially, honestly, and with the intention to arrive at the right conclusion, and having heard the facts as stated before them they came to a conclusion which justified them in France in deciding as they did decide."

If, indeed, foreign judgments were enforced by our Courts out of politeness and courtesy to the tribunals of other countries, one could understand its being said that though our Courts would not be so rude as to inquire whether the foreign Court had made a mistake, or to allow the defendant to assert that it had, yet that if the foreign Court itself admitted its blunder they would not then act: but it is quite contrary to every analogy to suppose that an English Court of law exercises any discretion of this sort. We enforce a legal obligation, and we admit any defense which shows that there is no legal obligation or a legal excuse for not fulfilling it; but in no case that we know of is it ever said that a defence shall be admitted if it is easily proved, and rejected If it would give the Court much trouble to investigate it. Yet on what other principle can we admit as a defence that there is a mistake of English law apparent an the face of the proceedings, and reject a defence that there is a mistake of Spanish or even Scotch law apparent in the proceedings, or that there was a mistake of English law not apparent on the proceedings, but which the defendant avers that he can show did exist."

27

HILTON vs. GUYOT*TO FOLLOW

PAWI vs FASGI (PHILIPPINE ALUMINUM WHEELS INC. vs. FASGI ENTERPRISES) G.R. No. 1367378, October 12, 2000

FACTSOn 01 June 1978, FASGI Enterprises Incorporated ("FASGI"), a corporation organized and existing under and by virtue of the laws of the State of California, United States of America, entered into a distributorship arrangement with Philippine Aluminum Wheels, Incorporated ("PAWI"), a Philippine corporation, and Fratelli Pedrini Sarezzo S.P.A. ("FPS"), an Italian corporation. The agreement provided for the purchase, importation and distributorship in the United States of aluminum wheels manufactured by PAWI. FASGI then paid PAWI the FOB value of the wheels. Unfortunately, FASGI later found the shipment to be defective and in non-compliance with the contract.

On 21 September 1979, FASGI instituted an action against PAWI and FPS for breach of contract and recovery of damages in the amount of US$2,316,591.00

28

before the United States District Court for the Central District of California. In the interim, two agreements were entered by the parties but PAWI kept on failing to discharge its obligations therein. Irked by PAWI's persistent default, FASGI filed with the US District Court of the Central District of California the agreements for judgment against PAWI. On 24 August 1982, FASGI filed a notice of entry of judgment. Unable to obtain satisfaction of the final judgment within the United States, FASGI filed a complaint for "enforcement of foreign judgment", before RTC Makati. The Makati court, however, dismissed the case, on the ground that the decree was tainted with collusion, fraud, and clear mistake of law and fact. The lower court ruled that the foreign judgment ignored the reciprocal obligations of the parties. While the assailed foreign judgment ordered the return by PAWI of the purchase amount, no similar order was made requiring FASGI to return to PAWI the third and fourth containers of wheels. This situation, amounted to an unjust enrichment on the part of FASGI. Furthermore, the RTC said, agreements which the California court had based its judgment were a nullity for having been entered into by Mr. Thomas Ready, counsel for PAWI, without the latter's authorization. However, the Court of Appeals reversed this decision.

ISSUEShould the Philippine Court enforce the foreign judgment? YES

RULINGIn 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. 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. However, PAWI failed to substantiate this complain with sufficient evidence. Hence, the foreign judgment must be enforced.

Even if PAWI assailed that fraud tainted the agreements which the US Court based its judgment, this cannot prevent the enforcement of said judgment. PAWI claimed that there was collusion and fraud in the signing of the agreements. Although the US Court already adjudicated on this matter, PAWI insisted on raising it again in this Court. 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.

29

QUERUBIN vs. QUERUBIN

G.R. No. L-3693 July 29, 1953

FACTS(In 1934, Silvestre Querubin, a Filipino, married petitioner Margaret Querubin, in Albuquerque, New Mexico. 'They had a daughter, Querubina.

Margaret filed for divorce in 1948 alleging "mental cruelty." Silvestre filed a countersuit for divorce alleging Margaret's infidelity. In 1949, the Superior Court of Los Angeles granted the divorce and awarded "joint custody" of the child. Querubina was to be kept in a neutral home subject to reasonable visits by both parties. Both parents were restrained from taking Querubina out of California without the permission of the Court.

On March that year, custody was granted to Silvestre under an interlocutory decree (although the child was still kept in the neutral home) because at the time of the trial, Margaret was living w th another man.

Upon Margaret's petition, the interlocutory decree was modified. Since she had then married the man she was living with and had a stable home, the Court granted custody to Margaret with reasonable limitations on the part of the father.

Silvestre, together with Querubina, left San Francisco on November of the same year, went to the Philippines and stayed in Cagayan, Ilocos Sur, with the intent of protecting the child from the effects of her mother's scandalous conduct. He wanted the child tc be raised in a better environment.

In 1950, Margaret, through counsel, presented to the CFI a petition for habeas corpus for the custody of Querubina urlder the interlocutory decree of the California Court. She claims that under Art. 48 of Rule 39, the decree of the Los Angeles Court, granting her the child's custody, must be complied within the Philippines.]

RULING

"The decree is by no means final. It is subject to change with the circumstances. The first decree awarded the custody of the child to the father, prohibiting the mother from taking the child to her (Margaret's) home because of her adulterous relationship with another man. The decree was amended when Margaret was not in Los Angeles.

Because the decree is interlocutory, it cannot be implemented in the Philippines. Where the judgment is merely interlocutory, the determination of the question by the Court which rendered it did not settle and adjudge finally the rights of the parties.

In general, a decree of divorce awarding custody of the child to one of the spouses is respected by the Courts of other states "at the time and under the

30

circumstances of its rendition" but such a decree has no controlling effects in another state as to facts and conditions occurring subsequently to the date of the decree; and the Court of another state may, in proper proceedings, award custody otherwise upon proof of matters subsequent to the decree which justify the decree to the interest of the child.

In the case at bar, the circumstances have changed. Querubina is not in Los Angeles, she is in Cagayan, Ilocos Sur, under her father's care. It is a long way from one place to the other. Neither can Margaret prove that she can pay the cost of passage for the minor. She is not a packet of cigarettes one can send by mail.

Neither can she answer for Querubina's support, care and education. In comparison, the father has shown both interest in the child and capacity to provide for the needs of the child."

PHILIPPINE INTERNATIONAL SHIPPING vs. CA (172 SCRA 810)

FACTSIn 1979 to 1981, Philippine International Shipping Corporation (PISC) leased from Interpool Ltd. 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. The other petitioners Philippine Construction Consortium Corporation, Pacific Mills Inc. and Universal Steel Smelting Company, guaranteed to pay the obligation due and any liability of the PISC arising out of the leasing or purchasing of equipment.

In 1979 to 1981, PISC incurred outstanding and unpaid obligations with Interpool, in the amount of $94,456.28, representing unpaid per diems, drop-off charges, interest and other agreed charges, resulting in a case before the US District Court, Southern District of New York wherein a default judgment against petitioners was rendered ordering the corp. to pay in the amount of $80,779.33, as liquidated damages, together with interest in the amount of $13,676.95 and costs in the amount of $80.00. or for a total judgment of $94,456.28. To enforce the default judgment of the US District Court, a complaint was instituted against PISC and other guarantors before the QC RTC. PISC failed to answer the complaint and they were declared in default. The RTC ruled in favor of Interpool and which was affirmed by the CA.

In the first instance, petitioners contend that the U.S. District Court never acquired jurisdiction over their persons as they had not been served with summons and a copy of the Complaint in 83 Civil 290 (EW). In the second instance, petitioners contend that such jurisdictional infirmity effectively prevented the Regional Trial Court of Quezon City from taking cognizance of the Complaint in Civil Case No. Q-39927 and from enforcing the U.S. District Court's Default Judgment against them. Petitioners contend, finally, that assuming the validity of the disputed Default Judgment, the same may be enforced only against petitioner PISC the 9 petitioners not having been impleaded originally in the case filed in New York, U.S.A.

ISSUE

31

W/N the US District Court default judgment can be enforced and against the 9 other petitioners? Yes.

RULINGTo begin with, the evidence of record clearly shows that the U.S. District Court had validly acquired jurisdiction over 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 which were in fact attached to the Petition for Review filed with the SC, 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 That foreign judgment-which had become final and executory, no appeal having been taken therefrom and perfected by petitioner PISC-is thus "presumptive evidence of a right as between the parties and their successors in interest by a subsequent title." The SC note, further that there has been in this case no showing by petitioners that the Default Judgment rendered by the U.S. District Court was vitiated by "want of notice to the party, collusion, fraud, or clear mistake of law or fact. " In other words, the Default Judgment imposing upon petitioner PISC a liability of U.S.$94,456.28 in favor of respondent Interpool, is valid and may be enforced in this jurisdiction.

The existence of liability on the part of petitioner PISC having been duly established in the U.S. case, it was not improper for respondent Interpool, in seeking enforcement in this jurisdiction of the foreign judgment imposing such liability, to have included the other 9 petitioners herein (i.e., George Lim, Marcos Bautista, Carlos Laude,Tan Sing Lim, Antonio Liu Lao, Ong Teh Philippine Consortium Construction Corporation, Pacific Mills, Inc. and Universal Steel Smelting Co., Inc.) as defendants in Civil Case No. Q- 39927, filed with Branch 93 of the Regional Trial Court of Quezon City. The record shows that said 9 petitioners had executed continuing guarantees" to secure performance by petitioner PISC of its contractual obligations. 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. The New York award of U.S.$94,456.28 is precisely premised upon a breach by PISC of its own obligations under those Agreements. The SC consider the 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" 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 9 other petitioners in the New York case and there obtain judgment against all 10 petitioners.

32

ASIAVEST MERCHANT BANKERS vs. CA*DIGEST FOUND AT THE PREVIOUS COMPILATION (G.R. No. 110263 July20,2001)

NORTHWEST ORIENT AIRLINES INC. vs. CA (241 SCRA 192)

FACTS[In 1974, an International Passenger Sales Agency Agreement was entered into by plaintiff Northwest Orient Airlines (Northwest) and defendant C.F. Sharp & Co. (Sharp), through its Japan branch, whereby Northwest authorized Sharp to sell the former's airlines tickets. Sharp failed to remit the proceeds of the ticket sales it made on behalf of Northwest under the agreement which led the latter to sue in Tokyo for collection of the unremitted amount, with claim for damages.

33

The Tokyo District Court of Japan issued a writ of summons against Sharp at its office in Yokohama, Japan but the bailiff failed twice to serve the writs. Finally, the Tokyo District Court decided to have the writs of summons served at Sharp's head office in Manila. Sharp accepted the writs but despite such receipt, it failed to appear at the hearings. The District Court proceeded to hear the complaint and rendered judgment ordering Sharp to pay Northwest the sum of 83,158,195 Yen plus damages. Sharp failed to appeal and the judgment became final and executory.

Northwest failed to execute the decision in Japan, hence, it filed a suit for enforcement of the judgment before the Regional Trial Court of Manila. Sharp filed its answer averring that the judgment of the Japanese court is null and void and unenforceable in this jurisdiction having been rendered without due and proper notice to Sharp.

The case for enforcement of judgment was tried on the merits. Sharp filed a Motion for Judgment on a Demurrer to Evidence. The trial court granted the demurrer motion, holding that the foreign judgment in the Japanese court sought to be enforced is null and void for want of jurisdiction over the person of the defendant. Northwest appealed but the Court of Appeals sustained the trial court, holding that the process of the court has no extraterritorial effect and no jurisdiction was acquired over the person of the defendant by serving him beyond the boundaries of the state. Hence, this appeal by Northwest.]

RULING"A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein.

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has regularly performed its official duty.Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity. 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 as its home office in the Philippines was not only ineffectual but also void, and the Japanese Court did not, therefore, acquire jurisdiction over it.

It is settled that matters of remedy and procedure such as those relating to the service of process upon a defendant are governed by the lex fori or the internal law of the forum. 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

34

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 taat under it, the assailed extraterritorial service is invalid. It did not. Accordingly, the presumption of validity and regularity of the service of summons and the decision thereafter rendered by the Japanese court must stand.

Alternatively, in the light of the absence of proof regarding Japanese law, the presumption of identity or similarity or the so-called processual presumpcion 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 ir, the Philippines. Section 14 of the Rules of Court provides that if the defendant is a foreign corporation doing business in the Philippines, service may be made: 1) on its resident agent designated in accordance with law for that purpose, or 2) if there is no such resident agent, on the government official designated by law to that effect, or 3) on any of its officers or agents within the Philippines.

If the foreign corporation has designated an agent to receive summons, the designation is exclusive, and service of summons is without force and gives the court no jurisdiction unless made upon him.

Where the corporation has no such great 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. Whenever service of process is so made, the government office or official served shall transmit by mail a copy of the summons or other legal process to the corporation at its home or principal office. The sending of such copy is a necessary part of the service.

x x x

Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive court processes in Japan. This silence could only mean, or at least create an impression, that it had none. Hence, service on the designated government official or any of its officers or agents in Japan could be availed of.

x x x

As found by the Court of Appeals, it was the Tokyo District Court which ordered that summons for SHARP be served at its head office in the Philippines after the two attempts of service had failed. 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

35

(now Department) of Foreign Affairs of the Philippines then to the Executive Judge of the Court of First Instance (now Regional Trial Court) of Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to serve the same on SHARP at its principal office in Manila. This service is equivalent to service on the proper government official under Section 14, Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation Code. Hence, SHARP's contention that such manner of service is not valid under Philippine law holds no water.

x x x

Inasmuch as SHARP was admittedly doing business in Japan through its four registered branches at the time the collection suit against it was filed, then in the light of the processual presumption, SHARP may be deemed a resident of JAPAN, and, as such, was amenable to the jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful methods of serving process.

Accordingly, the extraterritorial service of summons on it by the Japanese Court was valid not only under the processual presumption but also because of the presumption of regularity of performance of official duty.

x x x

Wherefore, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied NORTHWEST's claims for attorney's fees, litigation expenses, and exemplary damages but REVERSED insofar as it sustained the trial court's dismissal of NORTHWEST's complaint in Civil Case No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and another in its stead is hereby rendered ORDERING private respondent C.F. SHARP & COMPANY, INC. to pay NORTHWEST the amounts adjudged in the foreign judgment subject of said case, with interest thereon at the legal rate from the filing of the complaint therein until the said foreign judgment is fully satisfied."

36