SECOND DIVISION

CRESCENT PETROLEUM, LTD., G.R. No. 155014

Petitioner,

Present:

Puno, J.,

- versus - Chairman,

Austria-Martinez,

Callejo, Sr.,

Tinga, and

*Chico-Nazario, JJ.

M/V “LOK MAHESHWARI,”

THE SHIPPING CORPORATION

OF INDIA, and PORTSERV LIMITED Promulgated:

and/or TRANSMAR SHIPPING, INC.,

Respondents. November 11, 2005

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

- x

DECISION

PUNO, J.:

This petition for review on certiorari under Rule 45 seeks the (a)

reversal of the November 28, 2001 Decision of the Court of Appeals in

CA-G.R. No. CV-54920,[1]

which dismissed for “want of jurisdiction”

the instant case, and the September 3, 2002 Resolution of the same

appellate court,[2]

which denied petitioner‟s motion for reconsideration,

and (b) reinstatement of the July 25, 1996 Decision[3]

of the Regional

Trial Court (RTC) in Civil Case No. CEB-18679, which held that

respondents were solidarily liable to pay petitioner the sum prayed for in

the complaint.

The facts are as follows: Respondent M/V “Lok Maheshwari”

(Vessel) is an oceangoing vessel of Indian registry that is owned by

respondent Shipping Corporation of India (SCI), a corporation organized

and existing under the laws of India and principally owned by the

Government of India. It was time-chartered by respondent SCI to Halla

Merchant Marine Co. Ltd. (Halla), a South Korean company. Halla, in

turn, sub-chartered the Vessel through a time charter to Transmar

Shipping, Inc. (Transmar). Transmar further sub-chartered the Vessel to

Portserv Limited (Portserv). Both Transmar and Portserv are

corporations organized and existing under the laws of Canada.

On or about November 1, 1995, Portserv requested petitioner

Crescent Petroleum, Ltd. (Crescent), a corporation organized and

existing under the laws of Canada that is engaged in the business of

selling petroleum and oil products for the use and operation of

oceangoing vessels, to deliver marine fuel oils (bunker fuels) to the

Vessel. Petitioner Crescent granted and confirmed the request through

an advice via facsimile dated November 2, 1995. As security for the

payment of the bunker fuels and related services, petitioner Crescent

received two (2) checks in the amounts of US$100,000.00 and

US$200,000.00. Thus, petitioner Crescent contracted with its supplier,

Marine Petrobulk Limited (Marine Petrobulk), another Canadian

corporation, for the physical delivery of the bunker fuels to the Vessel.

On or about November 4, 1995, Marine Petrobulk delivered the

bunker fuels amounting to US$103,544 inclusive of barging and

demurrage charges to the Vessel at the port of Pioneer Grain,

Vancouver, Canada. The Chief Engineer Officer of the Vessel duly

acknowledged and received the delivery receipt. Marine Petrobulk

issued an invoice to petitioner Crescent for the US$101,400.00 worth of

the bunker fuels. Petitioner Crescent issued a check for the same

amount in favor of Marine Petrobulk, which check was duly encashed.

Having paid Marine Petrobulk, petitioner Crescent issued a revised

invoice dated November 21, 1995 to “Portserv Limited, and/or the

Master, and/or Owners, and/or Operators, and/or Charterers of M/V

„Lok Maheshwari‟” in the amount of US$103,544.00 with instruction to

remit the amount on or before December 1, 1995. The period lapsed and

several demands were made but no payment was received. Also, the

checks issued to petitioner Crescent as security for the payment of the

bunker fuels were dishonored for insufficiency of funds. As a

consequence, petitioner Crescent incurred additional expenses of

US$8,572.61 for interest, tracking fees, and legal fees.

On May 2, 1996, while the Vessel was docked at the port of Cebu

City, petitioner Crescent instituted before the RTC of Cebu City an

action “for a sum of money with prayer for temporary restraining order

and writ of preliminary attachment” against respondents Vessel and SCI,

Portserv and/or Transmar. The case was raffled to Branch 10 and

docketed as Civil Case No. CEB-18679.

On May 3, 1996, the trial court issued a writ of attachment against

the Vessel with bond at P2,710,000.00. Petitioner Crescent withdrew its

prayer for a temporary restraining order and posted the required bond.

On May 18, 1996, summonses were served to respondents Vessel

and SCI, and Portserv and/or Transmar through the Master of the

Vessel. On May 28, 1996, respondents Vessel and SCI, through Pioneer

Insurance and Surety Corporation (Pioneer), filed an urgent ex-parte

motion to approve Pioneer‟s letter of undertaking, to consider it as

counter-bond and to discharge the attachment. On May 29, 1996, the

trial court granted the motion; thus, the letter of undertaking was

approved as counter-bond to discharge the attachment.

For failing to file their respective answers and upon motion of

petitioner Crescent, the trial court declared respondents Vessel and SCI,

Portserv and/or Transmar in default. Petitioner Crescent was allowed to

present its evidence ex-parte.

On July 25, 1996, the trial court rendered its decision in favor of

petitioner Crescent, thus:

WHEREFORE, premises considered, judgment is

hereby rendered in favor of plaintiff [Crescent] and against

the defendants [Vessel, SCI, Portserv and/or Transmar].

Consequently, the latter are hereby ordered to pay

plaintiff jointly and solidarily, the following:

(a) the sum of US$103,544.00, representing the

outstanding obligation;

(b) interest of US$10,978.50 as of July 3, 1996,

plus additional interest at 18% per annum for

the period thereafter, until the principal account

is fully paid;

(c) attorney‟s fees of P300,000.00; and

(d) P200,000.00 as litigation expenses.

SO ORDERED.

On August 19, 1996, respondents Vessel and SCI appealed to the

Court of Appeals. They attached copies of the charter parties between

respondent SCI and Halla, between Halla and Transmar, and between

Transmar and Portserv. They pointed out that Portserv was a time

charterer and that there is a clause in the time charters between

respondent SCI and Halla, and between Halla and Transmar, which

states that “the Charterers shall provide and pay for all the fuel except as

otherwise agreed.” They submitted a copy of Part II of the Bunker Fuel

Agreement between petitioner Crescent and Portserv containing a

stipulation that New York law governs the “construction, validity and

performance” of the contract. They likewise submitted certified copies

of the Commercial Instruments and Maritime Lien Act of the United

States (U.S.), some U.S. cases, and some Canadian cases to support

their defense.

On November 28, 2001, the Court of Appeals issued its assailed

Decision, which reversed that of the trial court, viz:

WHEREFORE, premises considered, the Decision

dated July 25, 1996, issued by the Regional Trial Court of

Cebu City, Branch 10, is hereby REVERSED and SET

ASIDE, and a new one is entered DISMISSING the instant

case for want of jurisdiction.

The appellate court denied petitioner Crescent‟s motion for

reconsideration explaining that it “dismissed the instant action primarily

on the ground of forum non conveniens considering that the parties are

foreign corporations which are not doing business in the Philippines.”

Hence, this petition submitting the following issues for

resolution, viz:

1. Philippine courts have jurisdiction over a

foreign vessel found inside Philippine waters for the

enforcement of a maritime lien against said vessel

and/or its owners and operators;

2. The principle of forum non conveniens is

inapplicable to the instant case;

3. The trial court acquired jurisdiction over the

subject matter of the instant case, as well as over

the res and over the persons of the parties;

4. The enforcement of a maritime lien on the

subject vessel is expressly granted by law. The Ship

Mortgage Acts as well as the Code of Commerce

provides for relief to petitioner for its unpaid claim;

5. The arbitration clause in the contract was not

rigid or inflexible but expressly allowed petitioner to

enforce its maritime lien in Philippine courts provided

the vessel was in the Philippines;

6. The law of the state of New York is

inapplicable to the present controversy as the same has

not been properly pleaded and proved;

7. Petitioner has legal capacity to sue before

Philippine courts as it is suing upon an isolated

business transaction;

8. Respondents were duly served summons

although service of summons upon respondents is not

a jurisdictional requirement, the action being a

suit quasi in rem;

9. The trial court‟s decision has factual and legal

bases; and,

10. The respondents should be held jointly and

solidarily liable.

In a nutshell, this case is for the satisfaction of unpaid supplies

furnished by a foreign supplier in a foreign port to a vessel of foreign

registry that is owned, chartered and sub-chartered by foreign entities.

Under Batas Pambansa Bilang 129, as amended by Republic Act

No. 7691, RTCs exercise exclusive original jurisdiction “(i)n all actions

in admiralty and maritime where the demand or claim exceeds two

hundred thousand pesos (P200,000) or in Metro Manila, where such

demand or claim exceeds four hundred thousand pesos (P400,000).”

Two (2) tests have been used to determine whether a case involving a

contract comes within the admiralty and maritime jurisdiction of a court

- the locational test and the subject matter test. The English rule

follows the locational test wherein maritime and admiralty jurisdiction,

with a few exceptions, is exercised only on contracts made upon the sea

and to be executed thereon. This is totally rejected under the American

rule where the criterion in determining whether a contract is maritime

depends on the nature and subject matter of the contract, having

reference to maritime service and transactions.[4]

In International

Harvester Company of the Philippines v. Aragon,[5]

we adopted the

American rule and held that “(w)hether or not a contract is maritime

depends not on the place where the contract is made and is to be

executed, making the locality the test, but on the subject matter of the

contract, making the true criterion a maritime service or a maritime

transaction.”

A contract for furnishing supplies like the one involved in this case

is maritime and within the jurisdiction of admiralty.[6]

It may be invoked

before our courts through an action in rem or quasi in rem or an action in

personam. Thus: [7]

x x x

“Articles 579 and 584 [of the Code of Commerce]

provide a method of collecting or enforcing not only the

liens created under Section 580 but also for the collection of

any kind of lien whatsoever.”[8]

In the Philippines, we have

a complete legislation, both substantive and adjective, under

which to bring an action in rem against a vessel for the

purpose of enforcing liens. The substantive law is found in

Article 580 of the Code of Commerce. The procedural law

is to be found in Article 584 of the same Code. The result is,

therefore, that in the Philippines any vessel – even though it

be a foreign vessel – found in any port of this Archipelago

may be attached and sold under the substantive law which

defines the right, and the procedural law contained in the

Code of Commerce by which this right is to be enforced.[9]

x

x x. But where neither the law nor the contract between the

parties creates any lien or charge upon the vessel, the only

way in which it can be seized before judgment is by pursuing

the remedy relating to attachment under Rule 59 [now Rule

57] of the Rules of Court.[10]

But, is petitioner Crescent entitled to a maritime lien under our

laws? Petitioner Crescent bases its claim of a maritime lien onSections

21, 22 and 23 of Presidential Decree No. 1521 (P.D. No. 1521), also

known as the Ship Mortgage Decree of 1978,viz:

Sec. 21. Maritime Lien for Necessaries; persons

entitled to such lien. - Any person furnishing repairs,

supplies, towage, use of dry dock or maritime railway, or

other necessaries, to any vessel, whether foreign or

domestic, upon the order of the owner of such vessel, or of a

person authorized by the owner, shall have a maritime lien

on the vessel, which may be enforced by suit in rem, and it

shall be necessary to allege or prove that credit was given to

the vessel.

Sec. 22. Persons Authorized to Procure Repairs,

Supplies and Necessaries. - The following persons shall be

presumed to have authority from the owner to procure

repairs, supplies, towage, use of dry dock or marine railway,

and other necessaries for the vessel: The managing owner,

ship‟s husband, master or any person to whom the

management of the vessel at the port of supply is entrusted.

No person tortuously or unlawfully in possession or charge

of a vessel shall have authority to bind the vessel.

Sec. 23. Notice to Person Furnishing Repairs,

Supplies and Necessaries. - The officers and agents of a

vessel specified in Section 22 of this Decree shall be taken

to include such officers and agents when appointed by a

charterer, by an owner pro hac vice, or by an agreed

purchaser in possession of the vessel; but nothing in this

Decree shall be construed to confer a lien when the furnisher

knew, or by exercise of reasonable diligence could have

ascertained, that because of the terms of a charter party,

agreement for sale of the vessel, or for any other reason, the

person ordering the repairs, supplies, or other necessaries

was without authority to bind the vessel therefor.

Petitioner Crescent submits that these provisions apply to both

domestic and foreign vessels, as well as domestic and foreign suppliers

of necessaries. It contends that the use of the term “any person” in

Section 21 implies that the law is not restricted to domestic suppliers but

also includes all persons who supply provisions and necessaries to a

vessel, whether foreign or domestic. It points out further that the law

does not indicate that the supplies or necessaries must be furnished in

the Philippines in order to give petitioner the right to seek enforcement

of the lien with a Philippine court.[11]

Respondents Vessel and SCI, on the other hand, maintain that

Section 21 of the P.D. No. 1521 or the Ship Mortgage Decree of 1978

does not apply to a foreign supplier like petitioner Crescent as the

provision refers only to a situation where the person furnishing the

supplies is situated inside the territory of the Philippines and not where

the necessaries were furnished in a foreign jurisdiction like Canada.[12]

We find against petitioner Crescent.

I.

P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted

“to accelerate the growth and development of the shipping industry” and

“to extend the benefits accorded to overseas shipping under Presidential

Decree No. 214 to domestic shipping.”[13]

It is patterned closely from the

U.S. Ship Mortgage Act of 1920 and the Liberian Maritime Law relating

to preferred mortgages.[14]

Notably, Sections 21, 22 and 23 of P.D. No.

1521 or the Ship Mortgage Decree of 1978 are identical to Subsections

P, Q, and R, respectively, of the U.S. Ship Mortgage Act of 1920, which

is part of the Federal Maritime Lien Act. Hence, U.S. jurisprudence

finds relevance to determining whether P.D. No. 1521 or the Ship

Mortgage Decree of 1978 applies in the present case.

The various tests used in the U.S. to determine whether a maritime

lien exists are the following:

One. “In a suit to establish and enforce a maritime lien for

supplies furnished to a vessel in a foreign port, whether such lien exists,

or whether the court has or will exercise jurisdiction, depends on the law

of the country where the supplies were furnished, which must be

pleaded and proved.”[15]

This principle was laid down in the 1888 case

of The Scotia,[16]

reiterated inThe Kaiser Wilhelm II[17]

(1916), in The

Woudrichem[18]

(1921) and in The City of Atlanta[19]

(1924).

Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which

replaced such single-factor methodologies as the law of the place of

supply.[20]

In Lauritzen v. Larsen,[21]

a Danish seaman, while temporarily in

New York, joined the crew of a ship of Danish flag and registry that is

owned by a Danish citizen. He signed the ship‟s articles providing that

the rights of the crew members would be governed by Danish law and

by the employer‟s contract with the Danish Seamen‟s Union, of which

he was a member. While in Havana and in the course of his

employment, he was negligently injured. He sued the shipowner in a

federal district court in New York for damages under the Jones Act. In

holding that Danish law and not the Jones Act was applicable, the

Supreme Court adopted a multiple-contact test to determine, in the

absence of a specific Congressional directive as to the statute‟s reach,

which jurisdiction‟s law should be applied. The following factors were

considered: (1) place of the wrongful act; (2) law of the flag; (3)

allegiance or domicile of the injured; (4) allegiance of the defendant

shipowner; (5) place of contract; (6) inaccessibility of foreign forum;

and (7) law of the forum.

Several years after Lauritzen, the U.S. Supreme Court in the case

of Romero v. International Terminal Operating Co.[22]

again

considered a foreign seaman‟s personal injury claim under both the

Jones Act and the general maritime law. The Court held that the factors

first announced in the case of Lauritzen were applicable not only to

personal injury claims arising under the Jones Act but to all matters

arising under maritime law in general.[23]

Hellenic Lines, Ltd. v. Rhoditis[24]

was also a suit under the Jones

Act by a Greek seaman injured aboard a ship of Greek registry while in

American waters. The ship was operated by a Greek corporation which

has its largest office in New York and another office in New Orleans and

whose stock is more than 95% owned by a U.S. domiciliary who is also

a Greek citizen. The ship was engaged in regularly scheduled runs

between various ports of the U.S. and the Middle East, Pakistan, and

India, with its entire income coming from either originating or

terminating in the U.S. The contract of employment provided that Greek

law and a Greek collective bargaining agreement would apply between

the employer and the seaman and that all claims arising out of the

employment contract were to be adjudicated by a Greek court. The U.S.

Supreme Court observed that of the seven factors listed in the

Lauritzen test, four were in favor of the shipowner and against

jurisdiction. In arriving at the conclusion that the Jones Act applies, it

ruled that the application of the Lauritzen test is not a mechanical one. It

stated thus: “[t]he significance of one or more factors must be

considered in light of the national interest served by the assertion of

Jones Act jurisdiction. (footnote omitted) Moreover, the list of seven

factors in Lauritzen was not intended to be exhaustive. x x x [T]he

shipowner‟s base of operations is another factor of importance in

determining whether the Jones Act is applicable; and there well may be

others.”

The principles enunciated in these maritime tort cases have been

extended to cases involving unpaid supplies and necessaries such as the

cases of Forsythe International U.K., Ltd. v. M/V Ruth

Venture,[25]

and Comoco Marine Services v. M/V El

Centroamericano.[26]

Three. The factors provided in Restatement (Second) of

Conflicts of Law have also been applied, especially in resolving cases

brought under the Federal Maritime Lien Act. Their application

suggests that in the absence of an effective choice of law by the parties,

the forum contacts to be considered include: (a) the place of contracting;

(b) the place of negotiation of the contract; (c) the place of performance;

(d) the location of the subject matter of the contract; and (e) the

domicile, residence, nationality, place of incorporation and place of

business of the parties.[27]

In Gulf Trading and Transportation Co. v. The Vessel Hoegh

Shield,[28]

an admiralty action in rem was brought by an American

supplier against a vessel of Norwegian flag owned by a Norwegian

Company and chartered by a London time charterer for unpaid fuel oil

and marine diesel oil delivered while the vessel was in U.S. territory.

The contract was executed in London. It was held that because the

bunker fuel was delivered to a foreign flag vessel within the jurisdiction

of the U.S., and because the invoice specified payment in the U.S., the

admiralty and maritime law of the U.S. applied. The U.S. Court of

Appeals recognized the modern approach to maritime conflict of law

problems introduced in the Lauritzen case. However, it observed that

Lauritzen involved a torts claim under the Jones Act while the present

claim involves an alleged maritime lien arising from unpaid supplies. It

made a disclaimer that its conclusion is limited to the unique

circumstances surrounding a maritime lien as well as the statutory

directives found in the Maritime Lien Statute and that the initial choice

of law determination is significantly affected by the statutory

policies surrounding a maritime lien. It ruled that the facts in the case

call for the application of the Restatement (Second) of Conflicts of Law.

The U.S. Court gave much significance to the congressional intent in

enacting the Maritime Lien Statute to protect the interests of American

supplier of goods, services or necessaries by making maritime liens

available where traditional services are routinely rendered. It concluded

that the Maritime Lien Statute represents a relevant policy of the forum

that serves the needs of the international legal system as well as the basic

policies underlying maritime law. The court also gave equal importance

to the predictability of result and protection of justified expectations in a

particular field of law. In the maritime realm, it is expected that when

necessaries are furnished to a vessel in an American port by an

American supplier, the American Lien Statute will apply to protect that

supplier regardless of the place where the contract was formed or the

nationality of the vessel.

The same principle was applied in the case of Swedish Telecom

Radio v. M/V Discovery I[29]

where the American court refused to

apply the Federal Maritime Lien Act to create a maritime lien for goods

and services supplied by foreign companies in foreign ports. In this

case, a Swedish company supplied radio equipment in a Spanish port to

refurbish a Panamanian vessel damaged by fire. Some of the contract

negotiations occurred in Spain and the agreement for supplies between

the parties indicated Swedish company‟s willingness to submit to

Swedish law. The ship was later sold under a contract of purchase

providing for the application of New York law and was arrested in the

U.S. The U.S. Court of Appeals also held that while the contacts-based

framework set forth in Lauritzen was useful in the analysis of all

maritime choice of law situations, the factors were geared towards a

seaman‟s injury claim. As in Gulf Trading, the lien arose by operation

of law because the ship‟s owner was not a party to the contract under

which the goods were supplied. As a result, the court found it more

appropriate to consider the factors contained in Section 6 of the

Restatement (Second) of Conflicts of Law. The U.S. Court held that the

primary concern of the Federal Maritime Lien Act is the protection of

American suppliers of goods and services.

The same factors were applied in the case of Ocean Ship Supply,

Ltd. v. M/V Leah.[30]

II.

Finding guidance from the foregoing decisions, the Court cannot

sustain petitioner Crescent‟s insistence on the application of P.D. No.

1521 or the Ship Mortgage Decree of 1978 and hold that a maritime lien

exists.

First. Out of the seven basic factors listed in the case

of Lauritzen, Philippine law only falls under one – the law of the

forum. All other elements are foreign – Canada is the place of the

wrongful act, of the allegiance or domicile of the injured and the place

of contract; India is the law of the flag and the allegiance of the

defendant shipowner. Balancing these basic interests, it is inconceivable

that the Philippine court has any interest in the case that outweighs the

interests of Canada or India for that matter.

Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is

inapplicable following the factors under Restatement (Second) of

Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D.

No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily to

protect Filipino suppliers and was not intended to create a lien from a

contract for supplies between foreign entities delivered in a foreign port.

Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of

1978 and rule that a maritime lien exists would not promote the public

policy behind the enactment of the law to develop the domestic shipping

industry. Opening up our courts to foreign suppliers by granting them a

maritime lien under our laws even if they are not entitled to a maritime

lien under their laws will encourage forum shopping.

Finally. The submission of petitioner is not in keeping with the

reasonable expectation of the parties to the contract. Indeed, when the

parties entered into a contract for supplies in Canada, they could not

have intended the laws of a remote country like the Philippines to

determine the creation of a lien by the mere accident of the Vessel‟s

being in Philippine territory.

III.

But under which law should petitioner Crescent prove the

existence of its maritime lien?

In light of the interests of the various foreign elements involved, it

is clear that Canada has the most significant interest in this dispute. The

injured party is a Canadian corporation, the sub-charterer which placed

the orders for the supplies is also Canadian, the entity which physically

delivered the bunker fuels is in Canada, the place of contracting and

negotiation is in Canada, and the supplies were delivered in Canada.

The arbitration clause contained in the Bunker Fuel Agreement

which states that New York law governs the “construction, validity and

performance” of the contract is only a factor that may be considered in

the choice-of-law analysis but is not conclusive. As in the cases of Gulf

Trading and Swedish Telecom, the lien that is the subject matter of this

case arose by operation of law and not by contract because the

shipowner was not a party to the contract under which the goods were

supplied.

It is worthy to note that petitioner Crescent never alleged and

proved Canadian law as basis for the existence of a maritime lien. To

the end, it insisted on its theory that Philippine law applies. Petitioner

contends that even if foreign law applies, since the same was not

properly pleaded and proved, such foreign law must be presumed to be

the same as Philippine law pursuant to the doctrine of processual

presumption.

Thus, we are left with two choices: (1) dismiss the case for

petitioner‟s failure to establish a cause of action[31]

or (2) presume that

Canadian law is the same as Philippine law. In either case, the case has

to be dismissed.

It is well-settled that a party whose cause of action or defense

depends upon a foreign law has the burden of proving the foreign law.

Such foreign law is treated as a question of fact to be properly pleaded

and proved.[32]

Petitioner Crescent‟s insistence on enforcing a maritime

lien before our courts depended on the existence of a maritime lien

under the proper law. By erroneously claiming a maritime lien under

Philippine law instead of proving that a maritime lien exists under

Canadian law, petitioner Crescent failed to establish a cause of action.[33]

Even if we apply the doctrine of processual presumption, the result

will still be the same. Under P.D. No. 1521 or the Ship Mortgage

Decree of 1978, the following are the requisites for maritime liens on

necessaries to exist: (1) the “necessaries” must have been furnished to

and for the benefit of the vessel; (2) the “necessaries” must have been

necessary for the continuation of the voyage of the vessel; (3) the credit

must have been extended to the vessel; (4) there must be necessity for

the extension of the credit; and (5) the necessaries must be ordered by

persons authorized to contract on behalf of the vessel.[34]

These do not

avail in the instant case.

First. It was not established that benefit was extended to the

vessel. While this is presumed when the master of the ship is the one

who placed the order, it is not disputed that in this case it was the sub-

charterer Portserv which placed the orders to petitioner Crescent.[35]

Hence, the presumption does not arise and it is incumbent upon

petitioner Crescent to prove that benefit was extended to the vessel.

Petitioner did not.

Second. Petitioner Crescent did not show any proof that the

marine products were necessary for the continuation of the vessel.

Third. It was not established that credit was extended to the

vessel. It is presumed that “in the absence of fraud or collusion, where

advances are made to a captain in a foreign port, upon his request, to

pay for necessary repairs or supplies to enable his vessel to prosecute

her voyage, or to pay harbor dues, or for pilotage, towage and like

services rendered to the vessel, that they are made upon the credit of the

vessel as well as upon that of her owners.”[36]

In this case, it was the

sub-charterer Portserv which requested for the delivery of the bunker

fuels. The issuance of two checks amounting to US$300,000 in favor of

petitioner Crescent prior to the delivery of the bunkers as security for

the payment of the obligation weakens petitioner Crescent‟s contention

that credit was extended to the Vessel.

We also note that when copies of the charter parties were

submitted by respondents in the Court of Appeals, the time charters

between respondent SCI and Halla and between Halla and Transmar

were shown to contain a clause which states that “the Charterers shall

provide and pay for all the fuel except as otherwise agreed.” This

militates against petitioner Crescent‟s position that Portserv is

authorized by the shipowner to contract for supplies upon the credit of

the vessel.

Fourth. There was no proof of necessity of credit. A necessity of

credit will be presumed where it appears that the repairs and supplies

were necessary for the ship and that they were ordered by the master.

This presumption does not arise in this case since the fuels were not

ordered by the master and there was no proof of necessity for the

supplies.

Finally. The necessaries were not ordered by persons authorized

to contract in behalf of the vessel as provided under Section 22 of P.D.

No. 1521 or the Ship Mortgage Decree of 1978 - the managing owner,

the ship‟s husband, master or any person with whom the management of

the vessel at the port of supply is entrusted. Clearly, Portserv, a sub-

charterer under a time charter, is not someone to whom the management

of the vessel has been entrusted. A time charter is a contract for the use

of a vessel for a specified period of time or for the duration of one or

more specified voyages wherein the owner of the time-chartered vessel

retains possession and control through the master and crew who remain

his employees.[37]

Not enjoying the presumption of authority, petitioner

Crescent should have proved that Portserv was authorized by the

shipowner to contract for supplies. Petitioner failed.

A discussion on the principle of forum non conveniens is

unnecessary.

IN VIEW WHEREOF, the Decision of the Court of Appeals in

CA-G.R. No. CV 54920, dated November 28, 2001, and its subsequent

Resolution of September 3, 2002 are AFFIRMED. The instant petition

for review on certiorari is DENIED for lack of merit. Cost against

petitioner.

SO ORDERED.

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 114776 February 2, 2000

MENANDRO B. LAUREANO, petitioner, vs. COURT OF APPEALS AND SINGAPORE AIRLINES LIMITED, respondents.

QUISUMBING, J.:

This petition for review on certiorari under Rule 45 of the Rules of Court seeks to reverse the Decision of the Court of Appeals, dated October 29, 1993, in C.A. G.R. No. CV 34476, as well as its Resolution dated February 28, 1994, which denied the motion for reconsideration.

The facts of the case as summarized by the respondent appellate court are as follows:

Sometime in 1978, plaintiff [Menandro B. Laureano, herein petitioner], then Director of Flight Operations and Chief Pilot of Air Manila, applied for employment with defendant company [herein private respondent] through its Area Manager in Manila.

On September 30, 1978, after the usual personal interview, defendant wrote to plaintiff, offering a contract of employment as an expatriate B-707 captain for an original period of two (2) years commencing on January 21, 1978. Plaintiff accepted the offer and commenced working on January 20, 1979. After passing the six-month probation period, plaintiffs appointment was confirmed effective July 21, 1979. (Annex "B", p. 30, Rollo).

On July 21, 1979, defendant offered plaintiff an extension of his two-year contract to five (5) years effective January 21, 1979 to January 20, 1984 subject to the terms and conditions set forth in the contract of employment, which the latter accepted (Annex "C" p. 31, Rec.).

During his service as B-707 captain, plaintiff on August 24, 1980, while in command of a flight, committed a noise violation offense at the Zurich Airport, for which plaintiff apologized.(Exh. "3", p. 307, Rec.).

Sometime in 1980, plaintiff featured in a tail scraping incident wherein the tail of the aircraft scraped or touched the runway during landing. He was suspended for a few days until he was investigated by board headed by Capt. Choy. He was reprimanded.

On September 25, 1981, plaintiff was invited to take a course of A-300 conversion training at Aeroformacion, Toulouse, France at dependant's expense. Having successfully completed and passed the training course, plaintiff was cleared on April 7, 1981, for solo duty as captain of the Airbus A-300 and subsequently appointed as captain of the A-300 fleet commanding an Airbus A-300 in flights over Southeast Asia. (Annexes "D", "E" and "F", pp. 34-38, Rec.).

Sometime in 1982, defendant, hit by a recession, initiated cost-cutting measures. Seventeen (17) expatriate captains in the Airbus fleet were found in excess of the defendant's requirement (t.s.n., July 6, 1988. p. 11). Consequently, defendant informed its expatriate pilots including plaintiff of the situation and advised them to take advance leaves. (Exh. "15", p. 466, Rec.)

Realizing that the recession would not be for a short time, defendant decided to terminate its excess personnel (t.s.n., July 6, 1988, p. 17). It did not, however, immediately terminate it's A-300 pilots. It reviewed their qualifications for possible promotion to the B-747 fleet. Among the 17 excess Airbus pilots reviewed, twelve were found qualified. Unfortunately, plaintiff was not one of the twelve.

On October 5, 1982, defendant informed plaintiff of his termination effective November 1, 1982 and that he will be paid three (3) months salary in lieu of three months notice (Annex "I", pp. 41-42, Rec.). Because he could not uproot his family on such short notice, plaintiff requested a three-month notice to afford him time to exhaust all possible avenues for reconsideration and retention. Defendant gave only two (2) months notice and one (1) month salary. (t.s.n., Nov. 12, 1987. p. 25).

Aggrieved, plaintiff on June 29, 1983, instituted a case for illegal dismissal before the Labor Arbiter. Defendant moved to dismiss on jurisdiction grounds. Before said motion was resolved, the complaint was withdrawn. Thereafter, plaintiff filed the instant case for damages due to illegal termination of contract of services before the court a quo (Complaint, pp. 1-10, Rec.).

Again, defendant on February 11, 1987 filed a motion to dismiss alleging inter alia: (1) that the court has no jurisdiction over the subject matter of the case, and (2) that Philippine courts have no jurisdiction over the instant case. Defendant contends that the complaint is for illegal dismissal together with a money claim arising out of and in the course of plaintiffs employment "thus it is the Labor Arbiter and the NLRC who have the jurisdiction pursuant to Article 217 of the Labor Code" and that, since plaintiff was employed in Singapore, all other aspects of his employment contract and/or documents executed in Singapore. Thus, defendant postulates that Singapore laws should apply and courts thereat shall have jurisdiction. (pp. 50-69, Rec.).

In traversing defendant's arguments, plaintiff claimed that: (1) where the items demanded in a complaint are the natural consequences flowing from a breach of an obligation and not labor benefits, the case is intrinsically a civil dispute; (2) the case involves a question that is beyond the field of specialization of labor arbiters; and (3) if the complaint is grounded not on the employee's dismissal per se but on the manner of said dismissal and the consequence thereof, the case falls under the jurisdiction of the civil courts. (pp. 70-73, Rec.)

On March 23, 1987, the court a quo denied defendant's motion to dismiss (pp. 82-84, Ibid). The motion for reconsideration was likewise denied. (p. 95 ibid.)

On September 16, 1987, defendant filed its answer reiterating the grounds relied upon in its motion to dismiss and further arguing that plaintiff is barred by laches, waiver, and estoppel from instituting the complaint and that he has no cause of action . (pp. 102-115)

1

On April 10, 1991, the trial court handed down its decision in favor of plaintiff. The dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiff Menandro Laureano and against defendant Singapore Airlines Limited, ordering defendant to pay plaintiff the amounts of —

SIN$396,104.00, or its equivalent in Philippine currency at the current rate of exchange at the time of payment, as and for unearned compensation with legal interest from the filing of the complaint until fully paid;

SIN$154,742.00, or its equivalent in Philippine currency at the current rate of exchange at the time of payment; and the further amounts of P67,500.00 as consequential damages with legal interest from the filing of the complaint until fully paid;

P1,000,000.00 as and for moral damages; P1,000,000.00 as and for exemplary damages; and P100,000.00 as and for attorney's fees.

Costs against defendant.

SO ORDERED.2

Singapore Airlines timely appealed before the respondent court and raised the issues of jurisdiction, validity of termination, estoppel, and damages.

On October 29, 1993, the appellate court set aside the decision of the trial court, thus,

. . . In the instant case, the action for damages due to illegal termination was filed by plaintiff-appellee only on January 8, 1987 or more than four (4) years after the effectivity date of his dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already prescribed.

WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE. The complaint is hereby dismissed.

SO ORDERED.3

Petitioner's and Singapore Airlines' respective motions for reconsideration were denied.

Now, before the Court, petitioner poses the following queries:

1. IS THE PRESENT ACTION ONE BASED ON CONTRACT WHICH PRESCRIBES IN TEN YEARS UNDER ARTICLE 1144 OF THE NEW CIVIL CODE OR ONE FOR DAMAGES ARISING FROM AN INJURY TO THE RIGHTS OF THE PLAINTIFF WHICH PRESCRIBES IN FOUR YEARS UNDER ARTICLE 1146 OF THE NEW CIVIL CODE?

2. CAN AN EMPLOYEE WITH A FIXED PERIOD OF EMPLOYMENT BE RETRENCHED BY HIS EMPLOYER?

3. CAN THERE BE VALID RETRENCHMENT IF AN EMPLOYER MERELY FAILS TO REALIZE THE EXPECTED PROFITS EVEN IF IT WERE NOT, IN FACT, INCURRING LOSSES?

At the outset, we find it necessary to state our concurrence on the assumption of jurisdiction by the Regional Trial Court of Manila, Branch 9. The trial court rightly ruled on the application of Philippine law, thus:

Neither can the Court determine whether the termination of the plaintiff is legal under the Singapore Laws because of the defendant's failure to show which specific laws of Singapore Laws apply to this case. As substantially discussed in the preceding paragraphs, the Philippine Courts do not take judicial notice of the laws of Singapore. The defendant that claims the applicability of the Singapore Laws to this case has the burden of proof. The defendant has failed to do so. Therefore, the Philippine law should be applied.

4

Respondent Court of Appeals acquired jurisdiction when defendant filed its appeal before said court.

5 On this matter,

respondent court was correct when it barred defendant-appellant below from raising further the issue of jurisdiction.

6

Petitioner now raises the issue of whether his action is one based on Article 1144 or on Article 1146 of the Civil Code. According to him, his termination of employment effective November 1, 1982, was based on an employment contract which is under Article 1144, so his action should prescribe in 10 years as provided for in said article. Thus he claims the ruling of the appellate court based on Article 1146 where prescription is only four (4) years, is an error. The appellate court concluded that the action for illegal dismissal originally filed before the Labor Arbiter on June 29, 1983, but which was withdrawn, then filed again in 1987 before the Regional Trial Court, had already prescribed.

In our view, neither Article 11447 nor Article 1146

8 of the Civil

Code is here pertinent. What is applicable is Article 291 of the Labor Code, viz:

Art. 291. Money claims. — All money claims arising from employee-employer relations accruing during the effectivity of this Code shall be filed within three (3) years from the time the cause of action accrued; otherwise they shall be forever barred.

x x x x x x x x x

What rules on prescription should apply in cases like this one has long been decided by this Court. In illegal dismissal, it is settled, that the ten-year prescriptive period fixed in Article 1144 of the Civil Code may not be invoked by petitioners, for the Civil Code is a law of general application, while the prescriptive period fixed in Article 292 of the Labor Code [now Article 291] is a SPECIAL LAW applicable to claims arising from employee-employer relations.

9

More recently in De Guzman vs. Court of Appeals,10

where the money claim was based on a written contract, the Collective Bargaining Agreement, the Court held:

. . . The language of Art. 291 of the Labor Code does not limit its application only to "money claims specifically recoverable under said Code" but covers all money claims arising from an employee-employer relations" (Citing Cadalin v. POEA Administrator, 238 SCRA 721, 764 [1994]; and Uy v. National Labor Relations Commission, 261 SCRA 505, 515 [1996]). . . .

It should be noted further that Article 291 of the Labor Code is a special law applicable to money claims arising from employer-employee relations; thus, it necessarily prevails over Article 1144 of the Civil Code, a general law. Basic is the rule in statutory construction that "where two statutes are of equal theoretical application to a particular case, the one designed therefore should prevail." (Citing Leveriza v.

Intermediate Appellate Court, 157 SCRA 282, 294.) Generalia specialibus non derogant.

11

In the light of Article 291, aforecited, we agree with the appellate court's conclusion that petitioner's action fordamages due to illegal termination filed again on January 8, 1987 or more than four (4) years after the effective date of his dismissal on November 1, 1982 has already prescribed.

In the instant case, the action for damages due to illegal termination was filed by plaintiff-appelle only on January 8, 1987 or more than four (4) years after the effectivity date of his dismissal on November 1, 1982. Clearly, plaintiff-appellee's action has already prescribed.

We base our conclusion not on Article 1144 of the Civil Code but on which sets the prescription period at three (3) years and which governs under this jurisdiction.

Petitioner claims that the running of the prescriptive period was tolled when he filed his complaint for illegal dismissal before the Labor Arbiter of the National Labor Relations Commission. However, this claim deserves scant consideration; it has no legal leg to stand on. In Olympia International, Inc., vs., Court of Appeals, we held that "although the commencement of a civil action stops the running of the statute of prescription or limitations, its dismissal or voluntary abandonment by the plaintiff leaves in exactly the same position as though no action had been commenced at all."

12

Now, as to whether petitioner's separation from the company due to retrenchment was valid, the appellate court found that the employment contract of petitioner allowed for pre-termination of employment. We agree with the Court of Appeals when it said,

It is a settled rule that contracts have the force of law between the parties. From the moment the same is perfected, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences which, according to their nature, may be in keeping with good faith, usage and law. Thus, when plaintiff-appellee accepted the offer of employment, he was bound by the terms and conditions set forth in the contract, among others, the right of mutual termination by giving three months written notice or by payment of three months salary. Such provision is clear and readily understandable, hence, there is no room for interpretation.

x x x x x x x x x

Further, plaintiff-appellee's contention that he is not bound by the provisions of the Agreement, as he is not a signatory thereto, deserves no merit. It must be noted that when plaintiff-appellee's employment was confirmed, he applied for membership with the Singapore Airlines Limited (Pilots) Association, the signatory to the aforementioned Agreement. As such, plaintiff-appellee is estopped from questioning the legality of the said agreement or any proviso contained therein.

13

Moreover, the records of the present case clearly show that respondent court's decision is amply supported by evidence and it did not err in its findings, including the reason for the retrenchment:

When defendant-appellant was faced with the world-wide recession of the airline industry resulting in a slow down in the company's growth particularly in the regional operation (Asian Area) where the Airbus 300 operates. It had no choice but to adopt cost cutting measures, such as cutting down services, number of frequencies of flights, and

reduction of the number of flying points for the A-300 fleet (t.s.n., July 6, 1988, pp. 17-18). As a result, defendant-appellant had to lay off A-300 pilots, including plaintiff-appellee, which it found to be in excess of what is reasonably needed.

14

All these considered, we find sufficient factual and legal basis to conclude that petitioner's termination from employment was for an authorized cause, for which he was given ample notice and opportunity to be heard, by respondent company. No error nor grave abuse of discretion, therefore, could be attributed to respondent appellate court.1âwphi1.nêt

ACCORDINGLY, the instant petition is DISMISSED. The decision of the Court of Appeals in C.A. CV No. 34476 is AFFIRMED.

SO ORDERED.

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-55960 November 24, 1988

YAO KEE, SZE SOOK WAH, SZE LAI CHO, and SY CHUN YEN, petitioners, vs. AIDA SY-GONZALES, MANUEL SY, TERESITA SY-BERNABE, RODOLFO SY, and HONORABLE COURT OF APPEALS, respondents.

Montesa, Albon, & Associates for petitioners.

De Lapa, Salonga, Fulgencio & De Lunas for respondents.

CORTES, J.:

Sy Kiat, a Chinese national. died on January 17, 1977 in Caloocan City where he was then residing, leaving behind real and personal properties here in the Philippines worth P300,000.00 more or less.

Thereafter, Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy filed a petition for the grant of letters of administration docketed as Special Proceedings Case No. C-699 of the then Court of First Instance of Rizal Branch XXXIII, Caloocan City. In said petition they alleged among others that (a) they are the children of the deceased with Asuncion Gillego; (b) to their knowledge Sy Mat died intestate; (c) they do not recognize Sy Kiat's marriage to Yao Kee nor the filiation of her children to him; and, (d) they nominate Aida Sy-Gonzales for appointment as administratrix of the intestate estate of the deceased [Record on Appeal, pp. 4-9; Rollo, p. 107.]

The petition was opposed by Yao Kee, Sze Sook Wah, Sze Lai Cho and Sy Yun Chen who alleged that: (a) Yao Kee is the lawful wife of Sy Kiat whom he married on January 19, 1931 in China; (b) the other oppositors are the legitimate children of the deceased with Yao Kee; and, (c) Sze Sook Wah is the eldest among them and is competent, willing and desirous to become the administratrix of the estate of Sy Kiat [Record on Appeal, pp. 12-13; Rollo, p. 107.] After hearing, the probate court, finding among others that:

(1) Sy Kiat was legally married to Yao Kee [CFI decision, pp. 12-27; Rollo, pp. 49-64;]

(2) Sze Sook Wah, Sze Lai Cho and Sze Chun Yen are the legitimate children of Yao Kee with Sy Mat [CFI decision, pp. 28-31; Rollo. pp. 65-68;] and,

(3) Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy are the acknowledged illegitimate offsprings of Sy Kiat with Asuncion Gillego [CFI decision, pp. 27-28; Rollo, pp. 64- 65.]

held if favor of the oppositors (petitioners herein) and appointed Sze Sook Wah as the administratrix of the intestate estate of the deceased [CFI decision, pp. 68-69; Rollo, pp. 105-106.]

On appeal the Court of Appeals rendered a decision modifying that of the probate court, the dispositive portion of which reads:

IN VIEW OF THE FOREGOING, the decision of the lower Court is hereby MODIFIED and SET ASIDE and a new judgment rendered as follows:

(1) Declaring petitioners Aida Sy-Gonzales, Manuel Sy, Teresita Sy- Bernabe and Rodolfo Sy acknowledged natural children of the deceased Sy Kiat with Asuncion Gillego, an unmarried woman with whom he lived as husband and wife without benefit of marriage for many years:

(2) Declaring oppositors Sze Sook Wah, Sze Lai Chu and Sze Chun Yen, the acknowledged natural children of the deceased Sy Kiat with his Chinese wife Yao Kee, also known as Yui Yip, since the legality of the alleged marriage of Sy Mat to Yao Kee in China had not been

proven to be valid to the laws of the Chinese People's Republic of China (sic);

(3) Declaring the deed of sale executed by Sy Kiat on December 7, 1976 in favor of Tomas Sy (Exhibit "G-1", English translation of Exhibit "G") of the Avenue Tractor and Diesel Parts Supply to be valid and accordingly, said property should be excluded from the estate of the deceased Sy Kiat; and

(4) Affirming the appointment by the lower court of Sze Sook Wah as judicial administratrix of the estate of the deceased. [CA decision, pp. 11-12; Rollo, pp. 36- 37.]

From said decision both parties moved for partial reconsideration, which was however denied by respondent court. They thus interposed their respective appeals to this Court.

Private respondents filed a petition with this Court docketed as G.R. No. 56045 entitled "Aida Sy-Gonzales, Manuel Sy, Teresita Sy-Bernabe and Rodolfo Sy v. Court of Appeals, Yao Kee, Sze Sook Wah, Sze Lai Cho and Sy Chun Yen" questioning paragraphs (3) and (4) of the dispositive portion of the Court of Appeals' decision. The Supreme Court however resolved to deny the petition and the motion for reconsideration. Thus on March 8, 1982 entry of judgment was made in G.R. No. 56045. **

The instant petition, on the other hand, questions paragraphs (1) and (2) of the dispositive portion of the decision of the Court of Appeals. This petition was initially denied by the Supreme Court on June 22, 1981. Upon motion of the petitioners the Court in a resolution dated September 16, 1981 reconsidered the denial and decided to give due course to this petition. Herein petitioners assign the following as errors:

I. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THE MARRIAGE OF SY KIAT TO YAO YEE AS NOT HAVE (sic) BEEN PROVEN VALID IN ACCORDANCE WITH LAWS OF THE PEOPLE'S REPUBLIC OF CHINA.

II. RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING AIDA SY-GONZALES, MANUEL SY, TERESITA SY-BERNABE AND RODOLFO SY AS NATURAL CHILDREN OF SY KIAT WITH ASUNCION GILLEGO. [Petition, p. 2; Rollo, p. 6.]

I. Petitioners argue that the marriage of Sy Kiat to Yao Kee in accordance with Chinese law and custom was conclusively proven. To buttress this argument they rely on the following testimonial and documentary evidence.

First, the testimony of Yao Kee summarized by the trial court as follows:

Yao Kee testified that she was married to Sy Kiat on January 19, 1931 in Fookien, China; that she does not have a marriage certificate because the practice during that time was for elders to agree upon the betrothal of their children, and in her case, her elder brother was the one who contracted or entered into [an] agreement with the parents of her husband; that the agreement was that she and Sy Mat would be married, the wedding date was set, and invitations were sent out; that the said agreement was complied with; that she has five children with Sy Kiat, but two of them died; that those who are alive are Sze Sook Wah, Sze Lai Cho, and Sze Chun Yen, the eldest being Sze Sook Wah who is already 38 years old; that Sze Sook Wah was born on November 7, 1939; that she and her husband,

Sy Mat, have been living in FooKien, China before he went to the Philippines on several occasions; that the practice during the time of her marriage was a written document [is exchanged] just between the parents of the bride and the parents of the groom, or any elder for that matter; that in China, the custom is that there is a go- between, a sort of marriage broker who is known to both parties who would talk to the parents of the bride-to-be; that if the parents of the bride-to-be agree to have the groom-to-be their son in-law, then they agree on a date as an engagement day; that on engagement day, the parents of the groom would bring some pieces of jewelry to the parents of the bride-to-be, and then one month after that, a date would be set for the wedding, which in her case, the wedding date to Sy Kiat was set on January 19, 1931; that during the wedding the bridegroom brings with him a couch (sic) where the bride would ride and on that same day, the parents of the bride would give the dowry for her daughter and then the document would be signed by the parties but there is no solemnizing officer as is known in the Philippines; that during the wedding day, the document is signed only by the parents of the bridegroom as well as by the parents of the bride; that the parties themselves do not sign the document; that the bride would then be placed in a carriage where she would be brought to the town of the bridegroom and before departure the bride would be covered with a sort of a veil; that upon reaching the town of the bridegroom, the bridegroom takes away the veil; that during her wedding to Sy Kiat (according to said Chinese custom), there were many persons present; that after Sy Kiat opened the door of the carriage, two old ladies helped her go down the carriage and brought her inside the house of Sy Mat; that during her wedding, Sy Chick, the

eldest brother of Sy Kiat, signed the document with her mother; that as to the whereabouts of that document, she and Sy Mat were married for 46 years already and the document was left in China and she doubt if that document can still be found now; that it was left in the possession of Sy Kiat's family; that right now, she does not know the whereabouts of that document because of the lapse of many years and because they left it in a certain place and it was already eaten by the termites; that after her wedding with Sy Kiat, they lived immediately together as husband and wife, and from then on, they lived together; that Sy Kiat went to the Philippines sometime in March or April in the same year they were married; that she went to the Philippines in 1970, and then came back to China; that again she went back to the Philippines and lived with Sy Mat as husband and wife; that she begot her children with Sy Kiat during the several trips by Sy Kiat made back to China. [CFI decision, pp. 13-15; Rollo, pp. 50-52.]

Second, the testimony of Gan Ching, a younger brother of Yao Kee who stated that he was among the many people who attended the wedding of his sister with Sy Kiat and that no marriage certificate is issued by the Chinese government, a document signed by the parents or elders of the parties being sufficient [CFI decision, pp. 15-16; Rollo, pp. 52-53.]

Third, the statements made by Asuncion Gillego when she testified before the trial court to the effect that (a) Sy Mat was married to Yao Kee according to Chinese custom; and, (b) Sy Kiat's admission to her that he has a Chinese wife whom he married according to Chinese custom [CFI decision, p. 17; Rollo, p. 54.]

Fourth, Sy Kiat's Master Card of Registered Alien issued in Caloocan City on October 3, 1972 where the following entries are found: "Marital status—Married"; "If married give name of spouses—Yao Kee"; "Address-China; "Date of marriage—1931"; and "Place of marriage—China" [Exhibit "SS-1".]

Fifth, Sy Kiat's Alien Certificate of Registration issued in Manila on January 12, 1968 where the following entries are likewise found: "Civil status—Married"; and, 'If married, state name and address of spouse—Yao Kee Chingkang, China" [Exhibit "4".]

And lastly, the certification issued in Manila on October 28, 1977 by the Embassy of the People's Republic of China to the effect that "according to the information available at the Embassy Mr. Sy Kiat a Chinese national and Mrs. Yao Kee alias Yui Yip also Chinese were married on January 19, 1931 in Fukien, the People's Republic of China" [Exhibit "5".]

These evidence may very well prove the fact of marriage between Yao Kee and Sy Kiat. However, the same do not suffice to establish the validity of said marriage in accordance with Chinese law or custom.

Custom is defined as "a rule of conduct formed by repetition of acts, uniformly observed (practiced) as a social rule, legally binding and obligatory" [In the Matter of the Petition for Authority to Continue Use of the Firm Name "Ozaeta, Romulo, de Leon, Mabanta and Reyes", July 30, 1979, SCRA 3, 12 citing JBL Reyes & RC Puno, Outline of Phil. Civil Law, Fourth Ed., Vol. 1, p. 7.] The law requires that "a custom must be proved as a fact, according to the rules of evidence" [Article 12, Civil Code.] On this score the Court had occasion to state that "a local custom as a source of right can not be considered by a court of justice unless such custom is properly established by competent evidence like any other fact" [Patriarca v. Orate, 7 Phil. 390, 395 (1907).] The

same evidence, if not one of a higher degree, should be required of a foreign custom.

The law on foreign marriages is provided by Article 71 of the Civil Code which states that:

Art. 71. All marriages performed outside the Philippines in accordance with the laws in force in the country where they were performed and valid there as such, shall also be valid in this country, except bigamous, Polygamous, or incestuous marriages, as determined by Philippine law. (Emphasis supplied.) ***

Construing this provision of law the Court has held that to establish a valid foreign marriage two things must be proven, namely: (1) the existence of the foreign law as a question of fact; and (2) the alleged foreign marriage by convincing evidence [Adong v. Cheong Seng Gee, 43 Phil. 43, 49 (1922).]

In proving a foreign law the procedure is provided in the Rules of Court. With respect to an unwritten foreign law, Rule 130 section 45 states that:

SEC. 45. Unwritten law.—The oral testimony of witnesses, skilled therein, is admissible as evidence of the unwritten law of a foreign country, as are also printed and published books of reports of decisions of the courts of the foreign country, if proved to be commonly admitted in such courts.

Proof of a written foreign law, on the other hand, is provided for under Rule 132 section 25, thus:

SEC. 25. Proof of public or official record.—An official record or an entry therein, when admissible for any purpose, may be evidenced by an official publication

thereof or by a copy attested by the officer having the legal custody of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a secretary of embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept and authenticated by the seal of his office.

The Court has interpreted section 25 to include competent evidence like the testimony of a witness to prove the existence of a written foreign law [Collector of Internal Revenue v. Fisher 110 Phil. 686, 700-701 (1961) citing Willamette Iron and Steel Works v. Muzzal, 61 Phil. 471 (1935).]

In the case at bar petitioners did not present any competent evidence relative to the law and custom of China on marriage. The testimonies of Yao and Gan Ching cannot be considered as proof of China's law or custom on marriage not only because they are self-serving evidence, but more importantly, there is no showing that they are competent to testify on the subject matter. For failure to prove the foreign law or custom, and consequently, the validity of the marriage in accordance with said law or custom, the marriage between Yao Kee and Sy Kiat cannot be recognized in this jurisdiction.

Petitioners contend that contrary to the Court of Appeals' ruling they are not duty bound to prove the Chinese law on marriage as judicial notice thereof had been taken by this Court in the case of Sy Joc Lieng v. Sy Quia [16 Phil. 137 (1910).]

This contention is erroneous. Well-established in this jurisdiction is the principle that Philippine courts cannot take judicial notice of foreign laws. They must be alleged and proved as any other fact [Yam Ka Lim v. Collector of Customs, 30 Phil. 46, 48 (1915); Fluemer v. Hix, 54 Phil. 610 (1930).]

Moreover a reading of said case would show that the party alleging the foreign marriage presented a witness, one Li Ung Bieng, to prove that matrimonial letters mutually exchanged by the contracting parties constitute the essential requisite for a marriage to be considered duly solemnized in China. Based on his testimony, which as found by the Court is uniformly corroborated by authors on the subject of Chinese marriage, what was left to be decided was the issue of whether or not the fact of marriage in accordance with Chinese law was duly proven [Sy Joc Lieng v. Sy Quia, supra., at p. 160.]

Further, even assuming for the sake of argument that the Court has indeed taken judicial notice of the law of China on marriage in the aforecited case, petitioners however have not shown any proof that the Chinese law or custom obtaining at the time the Sy Joc Lieng marriage was celebrated in 1847 was still the law when the alleged marriage of Sy Kiat to Yao Kee took place in 1931 or eighty-four (84) years later.

Petitioners moreover cite the case of U.S. v. Memoracion [34 Phil. 633 (1916)] as being applicable to the instant case. They aver that the judicial pronouncement in the Memoracion case, that the testimony of one of the contracting parties is competent evidence to show the fact of marriage, holds true in this case.

The Memoracion case however is not applicable to the case at bar as said case did not concern a foreign marriage and the issue posed was whether or not the oral testimony of a spouse is competent evidence to prove the fact of marriage in a complaint for adultery.

Accordingly, in the absence of proof of the Chinese law on marriage, it should be presumed that it is the same as ours *** [Wong Woo Yiu v. Vivo, G.R. No. L-21076, March 31, 1965, 13 SCRA 552, 555.] Since Yao Kee admitted in her testimony that there was no solemnizing officer as is known here in the Philippines [See Article 56, Civil Code] when her alleged marriage to Sy Mat was celebrated [CFI decision, p. 14; Rollo, p. 51], it therefore follows that her marriage to Sy Kiat, even if true, cannot be recognized in this jurisdiction [Wong Woo Yiu v. Vivo, supra., pp. 555-556.]

II. The second issue raised by petitioners concerns the status of private respondents.

Respondent court found the following evidence of petitioners' filiation:

(1) Sy Kiat's Master Card of Registered Alien where the following are entered: "Children if any: give number of children—Four"; and, "Name—All living in China" [Exhibit "SS-1";]

(2) the testimony of their mother Yao Kee who stated that she had five children with Sy Kiat, only three of whom are alive namely, Sze Sook Wah, Sze Lai Chu and Sze Chin Yan [TSN, December 12, 1977, pp. 9-11;] and,

(3) an affidavit executed on March 22,1961 by Sy Kiat for presentation to the Local Civil Registrar of Manila to support Sze Sook Wah's application for a marriage license, wherein Sy Kiat expressly stated that she is his daughter [Exhibit "3".]

Likewise on the record is the testimony of Asuncion Gillego that Sy Kiat told her he has three daughters with his Chinese wife, two

of whom—Sook Wah and Sze Kai Cho—she knows, and one adopted son [TSN, December 6,1977, pp. 87-88.]

However, as petitioners failed to establish the marriage of Yao Kee with Sy Mat according to the laws of China, they cannot be accorded the status of legitimate children but only that of acknowledged natural children. Petitioners are natural children, it appearing that at the time of their conception Yao Kee and Sy Kiat were not disqualified by any impediment to marry one another [See Art. 269, Civil Code.] And they are acknowledged children of the deceased because of Sy Kiat's recognition of Sze Sook Wah [Exhibit "3"] and its extension to Sze Lai Cho and Sy Chun Yen who are her sisters of the full blood [See Art. 271, Civil Code.]

Private respondents on the other hand are also the deceased's acknowledged natural children with Asuncion Gillego, a Filipina with whom he lived for twenty-five (25) years without the benefit of marriage. They have in their favor their father's acknowledgment, evidenced by a compromise agreement entered into by and between their parents and approved by the Court of First Instance on February 12, 1974 wherein Sy Kiat not only acknowleged them as his children by Asuncion Gillego but likewise made provisions for their support and future inheritance, thus:

xxx xxx xxx

2. The parties also acknowledge that they are common-law husband and wife and that out of such relationship, which they have likewise decided to definitely and finally terminate effective immediately, they begot five children, namely: Aida Sy, born on May 30, 1950; Manuel Sy, born on July 1, 1953; Teresita Sy, born on January 28, 1955; Ricardo Sy now deceased, born on December 14, 1956; and Rodolfo Sy, born on May 7, 1958.

3. With respect to the AVENUE TRACTOR AND DIESEL PARTS SUPPLY ... , the parties mutually agree and covenant that—

(a) The stocks and merchandize and the furniture and equipments ..., shall be divided into two equal shares between, and distributed to, Sy Kiat who shall own one-half of the total and the other half to Asuncion Gillego who shall transfer the same to their children, namely, Aida Sy, Manuel Sy, Teresita Sy, and Rodolfo Sy.

(b) the business name and premises ... shall be retained by Sy Kiat. However, it shall be his obligation to give to the aforenamed children an amount of One Thousand Pesos ( Pl,000.00 ) monthly out of the rental of the two doors of the same building now occupied by Everett Construction.

xxx xxx xxx

(5) With respect to the acquisition, during the existence of the common-law husband-and-wife relationship between the parties, of the real estates and properties registered and/or appearing in the name of Asuncion Gillego ... , the parties mutually agree and covenant that the said real estates and properties shall be transferred in equal shares to their children, namely, Aida Sy, Manuel Sy, Teresita Sy, and Rodolfo Sy, but to be administered by Asuncion Gillego during her lifetime ... [Exhibit "D".] (Emphasis supplied.)

xxx xxx xxx

This compromise agreement constitutes a statement before a court of record by which a child may be voluntarily acknowledged [See Art. 278, Civil Code.]

Petitioners further argue that the questions on the validity of Sy Mat's marriage to Yao Kee and the paternity and filiation of the parties should have been ventilated in the Juvenile and Domestic Relations Court.

Specifically, petitioners rely on the following provision of Republic Act No. 5502, entitled "An Act Revising Rep. Act No. 3278, otherwise known as the Charter of the City of Caloocan', with regard to the Juvenile and Domestic Relations Court:

SEC. 91-A. Creation and Jurisdiction of the Court.—

xxx xxx xxx

The provisions of the Judiciary Act to the contrary notwithstanding, the court shall have exclusive original jurisdiction to hear and decide the following cases:

xxx xxx xxx

(2) Cases involving custody, guardianship, adoption, revocation of adoption, paternity and acknowledgment;

(3) Annulment of marriages, relief from marital obligations, legal separation of spouses, and actions for support;

(4) Proceedings brought under the provisions of title six and title seven, chapters one to three of the civil code;

xxx xxx xxx

and the ruling in the case of Bartolome v. Bartolome [G.R. No. L-23661, 21 SCRA 1324] reiterated in Divinagracia v. Rovira [G.R. No. L-42615, 72 SCRA 307.]

With the enactment of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act of 1980, the Juvenile and Domestic Relations Courts were abolished. Their functions and jurisdiction are now vested with the Regional Trial Courts [See Section 19 (7), B.P. Blg. 129 and Divinagracia v. Belosillo, G.R. No. L-47407, August 12, 1986, 143 SCRA 356, 360] hence it is no longer necessary to pass upon the issue of jurisdiction raised by petitioners.

Moreover, even without the exactment of Batas Pambansa Blg. 129 we find in Rep. Act No. 5502 sec. 91-A last paragraph that:

xxx xxx xxx

If any question involving any of the above matters should arise as an incident in any case pending in the ordinary court, said incident shall be determined in the main case.

xxx xxx xxx

As held in the case of Divinagracia v. Rovira [G.R. No. L42615. August 10, 1976, 72 SCRA 307]:

xxx xxx xxx

It is true that under the aforequoted section 1 of Republic Act No. 4834 **** a case involving paternity and acknowledgment may be ventilated as an incident in the intestate or testate proceeding (See Baluyot vs. Ines Luciano, L-42215, July 13, 1976). But that legal provision presupposes that such an administration

proceeding is pending or existing and has not been terminated. [at pp. 313-314.] (Emphasis supplied.)

xxx xxx xxx

The reason for ths rule is not only "to obviate the rendition of conflicting rulings on the same issue by the Court of First Instance and the Juvenile and Domestic Relations Court" [Vda. de Baluyut v. Luciano, G.R. No. L-42215, July 13, 1976, 72 SCRA 52, 63] but more importantly to prevent multiplicity of suits. Accordingly, this Court finds no reversible error committed by respondent court.

WHEREFORE, the decision of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Feliciano and Bidin, JJ., concur.

SECOND DIVISION

[G.R. No. 119602. October 6, 2000]

WILDVALLEY SHIPPING CO., LTD. petitioner, vs. COURT OF APPEALS and PHILIPPINE PRESIDENT LINES INC., respondents.

D E C I S I O N

BUENA, J.:

This is a petition for review on certiorari seeking to set aside the decision of the Court of Appeals which reversed the decision of the lower court in CA-G.R. CV No. 36821, entitled "Wildvalley

Shipping Co., Ltd., plaintiff-appellant, versus Philippine President Lines, Inc., defendant-appellant."

The antecedent facts of the case are as follows:

Sometime in February 1988, the Philippine Roxas, a vessel owned by Philippine President Lines, Inc., private respondent herein, arrived in Puerto Ordaz, Venezuela, to load iron ore. Upon the completion of the loading and when the vessel was ready to leave port, Mr. Ezzar del Valle Solarzano Vasquez, an official pilot of Venezuela, was designated by the harbour authorities in Puerto Ordaz to navigate the Philippine Roxas through the Orinoco River.

[1] He was asked to pilot the said vessel on February 11,

1988[2]

boarding it that night at 11:00 p.m.[3]

The master (captain) of the Philippine Roxas, Captain Nicandro Colon, was at the bridge together with the pilot (Vasquez), the vessel's third mate (then the officer on watch), and a helmsman when the vessel left the port

[4] at 1:40 a.m. on

February 12, 1988.[5]

Captain Colon left the bridge when the vessel was under way.

[6]

The Philippine Roxas experienced some vibrations when it entered the San Roque Channel at mile 172.

[7] The vessel

proceeded on its way, with the pilot assuring the watch officer that the vibration was a result of the shallowness of the channel.

[8]

Between mile 158 and 157, the vessel again experienced some vibrations.

[9] These occurred at 4:12 a.m.

[10] It was then that

the watch officer called the master to the bridge.[11]

The master (captain) checked the position of the vessel[12]

and verified that it was in the centre of the channel.

[13] He then went to

confirm, or set down, the position of the vessel on the chart.[14]

He ordered Simplicio A. Monis, Chief Officer of the President Roxas, to check all the double bottom tanks.

[15]

At around 4:35 a.m., the Philippine Roxas ran aground in the Orinoco River,

[16] thus obstructing the ingress and egress of

vessels.

As a result of the blockage, the Malandrinon, a vessel owned by herein petitioner Wildvalley Shipping Company, Ltd., was unable to sail out of Puerto Ordaz on that day.

Subsequently, Wildvalley Shipping Company, Ltd. filed a suit with the Regional Trial Court of Manila, Branch III against Philippine President Lines, Inc. and Pioneer Insurance Company (the underwriter/insurer of Philippine Roxas) for damages in the form of unearned profits, and interest thereon amounting to US $400,000.00 plus attorney's fees, costs, and expenses of litigation. The complaint against Pioneer Insurance Company was dismissed in an Order dated November 7, 1988.

[17]

At the pre-trial conference, the parties agreed on the following facts:

"1. The jurisdictional facts, as specified in their respective pleadings;

"2. That defendant PPL was the owner of the vessel Philippine Roxas at

the time of the incident;

"3. That defendant Pioneer Insurance was the insurance underwriter for

defendant PPL;

"4. That plaintiff Wildvalley Shipping Co., Inc. is the owner of the

vessel Malandrinon, whose passage was obstructed by the vessel

Philippine Roxas at Puerto Ordaz, Venezuela, as specified in par. 4, page

2 of the complaint;

"5. That on February 12, 1988, while the Philippine Roxas was

navigating the channel at Puerto Ordaz, the said vessel grounded and as

a result, obstructed navigation at the channel;

"6. That the Orinoco River in Puerto Ordaz is a compulsory pilotage

channel;

"7. That at the time of the incident, the vessel, Philippine Roxas, was

under the command of the pilot Ezzar Solarzano, assigned by the

government thereat, but plaintiff claims that it is under the command of

the master;

"8. The plaintiff filed a case in Middleburg, Holland which is related to

the present case;

"9. The plaintiff caused the arrest of the Philippine Collier, a vessel

owned by the defendant PPL;

"10. The Orinoco River is 150 miles long and it takes approximately 12

hours to navigate out of the said river;

"11. That no security for the plaintiff's claim was given until after the

Philippine Collier was arrested; and

"12. That a letter of guarantee, dated 12-May-88 was issued by the

Steamship Mutual Underwriters Ltd."[18]

The trial court rendered its decision on October 16, 1991 in favor of the petitioner, Wildvalley Shipping Co., Ltd. The dispositive portion thereof reads as follows:

"WHEREFORE, judgment is rendered for the plaintiff, ordering

defendant Philippine President Lines, Inc. to pay to the plaintiff the sum

of U.S. $259,243.43, as actual and compensatory damages, and U.S.

$162,031.53, as expenses incurred abroad for its foreign lawyers, plus

additional sum of U.S. $22,000.00, as and for attorney's fees of

plaintiff's local lawyer, and to pay the cost of this suit.

"Defendant's counterclaim is dismissed for lack of merit.

"SO ORDERED."[19]

Both parties appealed: the petitioner appealing the non-award of interest with the private respondent questioning the decision on the merits of the case.

After the requisite pleadings had been filed, the Court of Appeals came out with its questioned decision dated June 14, 1994,

[20] the dispositive portion of which reads as follows:

"WHEREFORE, finding defendant-appellant's appeal to be meritorious,

judgment is hereby rendered reversing the Decision of the lower

court. Plaintiff-appellant's Complaint is dismissed and it is ordered to

pay defendant-appellant the amount of Three Hundred Twenty-three

Thousand, Forty-two Pesos and Fifty-three Centavos (P323,042.53) as

and for attorney's fees plus cost of suit. Plaintiff-appellant's appeal is

DISMISSED.

"SO ORDERED."[21]

Petitioner filed a motion for reconsideration[22]

but the same was denied for lack of merit in the resolution dated March 29, 1995.

[23]

Hence, this petition.

The petitioner assigns the following errors to the court a quo:

1. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT UNDER PHILIPPINE LAW NO FAULT OR NEGLIGENCE CAN BE ATTRIBUTED TO THE MASTER NOR THE OWNER OF THE "PHILIPPINE ROXAS" FOR THE GROUNDING OF SAID VESSEL RESULTING IN THE BLOCKAGE OF THE RIO ORINOCO;

2. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN REVERSING THE FINDINGS OF FACTS OF THE TRIAL COURT CONTRARY TO EVIDENCE;

3. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT THE "PHILIPPINE ROXAS" IS SEAWORTHY;

4. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN DISREGARDING VENEZUELAN LAW DESPITE THE FACT THAT THE SAME HAS BEEN SUBSTANTIALLY PROVED IN THE TRIAL COURT WITHOUT ANY OBJECTION FROM PRIVATE RESPONDENT, AND WHOSE OBJECTION WAS INTERPOSED BELATEDLY ON APPEAL;

5. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN AWARDING ATTORNEY'S FEES AND COSTS TO PRIVATE RESPONDENT WITHOUT ANY FAIR OR REASONABLE BASIS WHATSOEVER;

6. RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING THAT PETITIONER'S CAUSE IS MERITORIOUS HENCE, PETITIONER SHOULD BE ENTITLED TO ATTORNEY'S FEES, COSTS AND INTEREST.

The petition is without merit.

The primary issue to be determined is whether or not Venezuelan law is applicable to the case at bar.

It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them.Like any other fact, they must be alleged and proved.

[24]

A distinction is to be made as to the manner of proving a written and an unwritten law. The former falls under Section 24, Rule 132 of the Rules of Court, as amended, the entire provision of which is quoted hereunder. Where the foreign law sought to be proved is "unwritten," the oral testimony of expert witnesses is admissible, as are printed and published books of reports of

decisions of the courts of the country concerned if proved to be commonly admitted in such courts.

[25]

Section 24 of Rule 132 of the Rules of Court, as amended, provides:

"Sec. 24. Proof of official record. -- The record of public documents

referred to in paragraph (a) of Section 19, when admissible for any

purpose, may be evidenced by an official publication thereof or by a

copy attested by the officer having the legal custody of the record, or by

his deputy, and accompanied, if the record is not kept in the

Philippines, with a certificate that such officer has the custody. If the

office in which the record is kept is in a foreign country, the certificate

may be made by a secretary of the embassy or legation, consul general,

consul, vice consul, or consular agent or by any officer in the foreign

service of the Philippines stationed in the foreign country in which the

record is kept, and authenticated by the seal of his office."

(Underscoring supplied)

The court has interpreted Section 25 (now Section 24) to include competent evidence like the testimony of a witness to prove the existence of a written foreign law.

[26]

In the noted case of Willamette Iron & Steel Works vs. Muzzal,

[27] it was held that:

"… Mr. Arthur W. Bolton, an attorney-at-law of San Francisco,

California, since the year 1918 under oath, quoted verbatim section 322

of the California Civil Code and stated that said section was in force at

the time the obligations of defendant to the plaintiff were incurred, i.e.

on November 5, 1928 and December 22, 1928. This evidence

sufficiently established the fact that the section in question was the law

of the State of California on the above dates. A reading of sections 300

and 301 of our Code of Civil Procedure will convince one that these

sections do not exclude the presentation of other competent evidence to

prove the existence of a foreign law.

"`The foreign law is a matter of fact …You ask the witness what the law

is; he may, from his recollection, or on producing and referring to books,

say what it is.' (Lord Campbell concurring in an opinion of Lord Chief

Justice Denman in a well-known English case where a witness was

called upon to prove the Roman laws of marriage and was permitted to

testify, though he referred to a book containing the decrees of the

Council of Trent as controlling, Jones on Evidence, Second Edition,

Volume 4, pages 3148-3152.) x x x.”

We do not dispute the competency of Capt. Oscar Leon Monzon, the Assistant Harbor Master and Chief of Pilots at Puerto Ordaz, Venezuela,

[28] to testify on the existence of

the Reglamento General de la Ley de Pilotaje (pilotage law of Venezuela)

[29] and the Reglamento Para la Zona de Pilotaje N

o 1

del Orinoco (rules governing the navigation of the Orinoco River). Captain Monzon has held the aforementioned posts for eight years.

[30] As such he is in charge of designating the pilots for

maneuvering and navigating the Orinoco River. He is also in charge of the documents that come into the office of the harbour masters.

[31]

Nevertheless, we take note that these written laws were not proven in the manner provided by Section 24 of Rule 132 of the Rules of Court.

The Reglamento General de la Ley de Pilotaje was published in the Gaceta Oficial

[32]of the Republic of Venezuela. A photocopy

of theGaceta Oficial was presented in evidence as an official publication of the Republic of Venezuela.

The Reglamento Para la Zona de Pilotaje No 1 del Orinoco is

published in a book issued by the Ministerio de Comunicaciones of Venezuela.

[33] Only a photocopy of the said

rules was likewise presented as evidence.

Both of these documents are considered in Philippine jurisprudence to be public documents for they are the written

official acts, or records of the official acts of the sovereign authority, official bodies and tribunals, and public officers of Venezuela.

[34]

For a copy of a foreign public document to be admissible, the following requisites are mandatory: (1) It must be attested by the officer having legal custody of the records or by his deputy; and (2) It must be accompanied by a certificate by a secretary of the embassy or legation, consul general, consul, vice consular or consular agent or foreign service officer, and with the seal of his office.

[35] The latter requirement is not a mere technicality but is

intended to justify the giving of full faith and credit to the genuineness of a document in a foreign country.

[36]

It is not enough that the Gaceta Oficial, or a book published by the Ministerio de Comunicaciones of Venezuela, was presented as evidence with Captain Monzon attesting it. It is also required by Section 24 of Rule 132 of the Rules of Court that a certificate that Captain Monzon, who attested the documents, is the officer who had legal custody of those records made by a secretary of the embassy or legation, consul general, consul, vice consul or consular agent or by any officer in the foreign service of the Philippines stationed in Venezuela, and authenticated by the seal of his office accompanying the copy of the public document. No such certificate could be found in the records of the case.

With respect to proof of written laws, parol proof is objectionable, for the written law itself is the best evidence. According to the weight of authority, when a foreign statute is involved, the best evidence rule requires that it be proved by a duly authenticated copy of the statute.

[37]

At this juncture, we have to point out that the Venezuelan law was not pleaded before the lower court.

A foreign law is considered to be pleaded if there is an allegation in the pleading about the existence of the foreign law,

its import and legal consequence on the event or transaction in issue.

[38]

A review of the Complaint[39]

revealed that it was never alleged or invoked despite the fact that the grounding of the M/V Philippine Roxas occurred within the territorial jurisdiction of Venezuela.

We reiterate that under the rules of private international law, a foreign law must be properly pleaded and proved as a fact. In the absence of pleading and proof, the laws of a foreign country, or state, will be presumed to be the same as our own local or domestic law and this is known as processual presumption.

[40]

Having cleared this point, we now proceed to a thorough study of the errors assigned by the petitioner.

Petitioner alleges that there was negligence on the part of the private respondent that would warrant the award of damages.

There being no contractual obligation, the private respondent is obliged to give only the diligence required of a good father of a family in accordance with the provisions of Article 1173 of the New Civil Code, thus:

“Art. 1173. The fault or negligence of the obligor consists in the

omission of that diligence which is required by the nature of the

obligation and corresponds with the circumstances of the persons, of the

time and of the place. When negligence shows bad faith, the provisions

of articles 1171 and 2201, paragraph 2, shall apply.

“If the law or contract does not state the diligence which is to be

observed in the performance, that which is expected of a good father of a

family shall be required.”

The diligence of a good father of a family requires only that diligence which an ordinary prudent man would exercise with regard to his own property. This we have found private

respondent to have exercised when the vessel sailed only after the "main engine, machineries, and other auxiliaries" were checked and found to be in good running condition;

[41] when the

master left a competent officer, the officer on watch on the bridge with a pilot who is experienced in navigating the Orinoco River; when the master ordered the inspection of the vessel's double bottom tanks when the vibrations occurred anew.

[42]

The Philippine rules on pilotage, embodied in Philippine Ports Authority Administrative Order No. 03-85, otherwise known as the Rules and Regulations Governing Pilotage Services, the Conduct of Pilots and Pilotage Fees in Philippine Ports enunciate the duties and responsibilities of a master of a vessel and its pilot, among other things.

The pertinent provisions of the said administrative order governing these persons are quoted hereunder:

“Sec. 11. Control of Vessels and Liability for Damage. -- On

compulsory pilotage grounds, the Harbor Pilot providing the service to a

vessel shall be responsible for the damage caused to a vessel or to life

and property at ports due to his negligence or fault. He can be absolved

from liability if the accident is caused by force majeure or natural

calamities provided he has exercised prudence and extra diligence to

prevent or minimize the damage.

“The Master shall retain overall command of the vessel even on pilotage

grounds whereby he can countermand or overrule the order or command

of the Harbor Pilot on board. In such event, any damage caused to a

vessel or to life and property at ports by reason of the fault or negligence

of the Master shall be the responsibility and liability of the registered

owner of the vessel concerned without prejudice to recourse against said

Master.

“Such liability of the owner or Master of the vessel or its pilots shall be

determined by competent authority in appropriate proceedings in the

light of the facts and circumstances of each particular case.

―x x x

“Sec. 32. Duties and Responsibilities of the Pilots or Pilots‟

Association. -- The duties and responsibilities of the Harbor Pilot shall

be as follows:

―x x x

“f) A pilot shall be held responsible for the direction of a vessel from the

time he assumes his work as a pilot thereof until he leaves it anchored or

berthed safely; Provided, however, that his responsibility shall cease at

the moment the Master neglects or refuses to carry out his order."

The Code of Commerce likewise provides for the obligations expected of a captain of a vessel, to wit:

“Art. 612. The following obligations shall be inherent in the office of

captain:

―x x x

"7. To be on deck on reaching land and to take command on entering

and leaving ports, canals, roadsteads, and rivers, unless there is a pilot

on board discharging his duties. x x x.”

The law is very explicit. The master remains the overall commander of the vessel even when there is a pilot on board. He remains in control of the ship as he can still perform the duties conferred upon him by law

[43] despite the presence of a pilot who

is temporarily in charge of the vessel. It is not required of him to be on the bridge while the vessel is being navigated by a pilot.

However, Section 8 of PPA Administrative Order No. 03-85, provides:

“Sec. 8. Compulsory Pilotage Service - For entering a harbor and

anchoring thereat, or passing through rivers or straits within a pilotage

district, as well as docking and undocking at any pier/wharf, or shifting

from one berth or another, every vessel engaged in coastwise and

foreign trade shall be under compulsory pilotage.

―xxx.‖

The Orinoco River being a compulsory pilotage channel necessitated the engaging of a pilot who was presumed to be knowledgeable of every shoal, bank, deep and shallow ends of the river. In his deposition, pilot Ezzar Solarzano Vasquez testified that he is an official pilot in the Harbour at Port Ordaz, Venezuela,

[44] and that he had been a pilot for twelve (12)

years.[45]

He also had experience in navigating the waters of the Orinoco River.

[46]

The law does provide that the master can countermand or overrule the order or command of the harbor pilot on board. The master of the Philippine Roxas deemed it best not to order him (the pilot) to stop the vessel,

[47] mayhap, because the latter had

assured him that they were navigating normally before the grounding of the vessel.

[48] Moreover, the pilot had admitted that

on account of his experience he was very familiar with the configuration of the river as well as the course headings, and that he does not even refer to river charts when navigating the Orinoco River.

[49]

Based on these declarations, it comes as no surprise to us that the master chose not to regain control of the ship. Admitting his limited knowledge of the Orinoco River, Captain Colon relied on the knowledge and experience of pilot Vasquez to guide the vessel safely.

“Licensed pilots, enjoying the emoluments of compulsory pilotage, are

in a different class from ordinary employees, for they assume to have a

skill and a knowledge of navigation in the particular waters over which

their licenses extend superior to that of the master; pilots are bound to

use due diligence and reasonable care and skill. A pilot's ordinary skill is

in proportion to the pilot's responsibilities, and implies a knowledge and

observance of the usual rules of navigation, acquaintance with the waters

piloted in their ordinary condition, and nautical skill in avoiding all

known obstructions. The character of the skill and knowledge required

of a pilot in charge of a vessel on the rivers of a country is very different

from that which enables a navigator to carry a vessel safely in the

ocean. On the ocean, a knowledge of the rules of navigation, with charts

that disclose the places of hidden rocks, dangerous shores, or other

dangers of the way, are the main elements of a pilot's knowledge and

skill. But the pilot of a river vessel, like the harbor pilot, is selected for

the individual's personal knowledge of the topography through which

the vessel is steered."[50]

We find that the grounding of the vessel is attributable to the pilot. When the vibrations were first felt the watch officer asked him what was going on, and pilot Vasquez replied that "(they) were in the middle of the channel and that the vibration was as (sic) a result of the shallowness of the channel."

[51]

Pilot Ezzar Solarzano Vasquez was assigned to pilot the vessel Philippine Roxas as well as other vessels on the Orinoco River due to his knowledge of the same. In his experience as a pilot, he should have been aware of the portions which are shallow and which are not. His failure to determine the depth of the said river and his decision to plod on his set course, in all probability, caused damage to the vessel. Thus, we hold him as negligent and liable for its grounding.

In the case of Homer Ramsdell Transportation Company vs. La Compagnie Generale Transatlantique, 182 U.S. 406, it was held that:

“x x x The master of a ship, and the owner also, is liable for any injury

done by the negligence of the crew employed in the ship. The same

doctrine will apply to the case of a pilot employed by the master or

owner, by whose negligence any injury happens to a third person or his

property: as, for example, by a collision with another ship, occasioned

by his negligence. And it will make no difference in the case that the

pilot, if any is employed, is required to be a licensed pilot; provided the

master is at liberty to take a pilot, or not, at his pleasure, for in such a

case the master acts voluntarily, although he is necessarily required to

select from a particular class. On the other hand, if it is compulsive

upon the master to take a pilot, and, a fortiori, if he is bound to do so

under penalty, then, and in such case, neither he nor the owner will

be liable for injuries occasioned by the negligence of the pilot; for in

such a case the pilot cannot be deemed properly the servant of the master

or the owner, but is forced upon them, and the maxim Qui facit per

alium facit per se does not apply." (Underscoring supplied)

Anent the river passage plan, we find that, while there was none,

[52] the voyage has been sufficiently planned and monitored

as shown by the following actions undertaken by the pilot, Ezzar Solarzano Vasquez, to wit: contacting the radio marina via VHF for information regarding the channel, river traffic,

[53] soundings of

the river, depth of the river, bulletin on the buoys.[54]

The officer on watch also monitored the voyage.

[55]

We, therefore, do not find the absence of a river passage plan to be the cause for the grounding of the vessel.

The doctrine of res ipsa loquitur does not apply to the case at bar because the circumstances surrounding the injury do not clearly indicate negligence on the part of the private respondent. For the said doctrine to apply, the following conditions must be met: (1) the accident was of such character as to warrant an inference that it would not have happened except for defendant's negligence; (2) the accident must have been caused by an agency or instrumentality within the exclusive management or control of the person charged with the negligence complained of; and (3) the accident must not have been due to any voluntary action or contribution on the part of the person injured.

[56]

As has already been held above, there was a temporary shift of control over the ship from the master of the vessel to the pilot on a compulsory pilotage channel. Thus, two of the requisites necessary for the doctrine to apply, i.e., negligence and control, to render the respondent liable, are absent.

As to the claim that the ship was unseaworthy, we hold that it is not.

The Lloyd’s Register of Shipping confirmed the vessel’s seaworthiness in a Confirmation of Class issued on February 16, 1988 by finding that "the above named ship (Philippine Roxas) maintained the class "+100A1 Strengthened for Ore Cargoes, Nos. 2 and 8 Holds may be empty (CC) and +LMC" from 31/12/87 up until the time of casualty on or about 12/2/88."

[57] The same

would not have been issued had not the vessel been built according to the standards set by Lloyd's.

Samuel Lim, a marine surveyor, at Lloyd's Register of Shipping testified thus:

"Q Now, in your opinion, as a surveyor, did top side tank have any bearing at all to the seaworthiness of the vessel?

"A Well, judging on this particular vessel, and also basing on the class record of the vessel, wherein recommendations were made on the top side tank, and it was given sufficient time to be repaired, it means that the vessel is fit to travel even with those defects on the ship.

"COURT

What do you mean by that? You explain. The vessel is fit to travel even with defects? Is that what you mean? Explain.

"WITNESS

"A Yes, your Honor. Because the class society which register (sic) is the third party looking into the condition of the vessel

and as far as their record states, the vessel was class or maintained, and she is fit to travel during that voyage."

―x x x

"ATTY. MISA

Before we proceed to other matter, will you kindly tell us what is (sic) the 'class +100A1 Strengthened for Ore Cargoes', mean?

"WITNESS

"A Plus 100A1 means that the vessel was built according to Lloyd's rules and she is capable of carrying ore bulk cargoes, but she is particularly capable of carrying Ore Cargoes with No. 2 and No. 8 holds empty.

―x x x

"COURT

The vessel is classed, meaning?

"A Meaning she is fit to travel, your Honor, or seaworthy."[58]

It is not required that the vessel must be perfect. To be seaworthy, a ship must be reasonably fit to perform the services, and to encounter the ordinary perils of the voyage, contemplated by the parties to the policy.

[59]

As further evidence that the vessel was seaworthy, we quote the deposition of pilot Vasquez:

"Q Was there any instance when your orders or directions were not complied with because of the inability of the vessel to do so?

"A No.

"Q. Was the vessel able to respond to all your commands and orders?

"A. The vessel was navigating normally.‖[60]

Eduardo P. Mata, Second Engineer of the Philippine Roxas submitted an accident report wherein he stated that on February 11, 1988, he checked and prepared the main engine, machineries and all other auxiliaries and found them all to be in good running condition and ready for maneuvering. That same day the main engine, bridge and engine telegraph and steering gear motor were also tested.

[61] Engineer Mata also prepared the fuel for

consumption for maneuvering and checked the engine generators.

[62]

Finally, we find the award of attorney’s fee justified.

Article 2208 of the New Civil Code provides that:

"Art. 2208. In the absence of stipulation, attorney's fees and expenses of

litigation, other than judicial costs, cannot be recovered, except:

―x x x

"(11) In any other case where the court deems it just and equitable that

attorney's fees and expenses of litigation should be recovered.

―x x x‖

Due to the unfounded filing of this case, the private respondent was unjustifiably forced to litigate, thus the award of attorney’s fees was proper.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is DENIED and the decision of the Court of Appeals in CA G.R. CV No. 36821 is AFFIRMED.

SO ORDERED.

SECOND DIVISION

[G.R. No. 103493. June 19, 1997]

PHILSEC INVESTMENT CORPORATION, BPI-INTERNATIONAL FINANCE LIMITED, and ATHONA HOLDINGS, N.V., petitioners, vs. THE HONORABLE COURT OF APPEALS, 1488, INC., DRAGO DAIC, VENTURA O. DUCAT, PRECIOSO R. PERLAS, and WILLIAM H. CRAIG, respondents.

D E C I S I O N

MENDOZA, J.:

This case presents for determination the conclusiveness of a foreign judgment upon the rights of the parties under the same cause of action asserted in a case in our local court. Petitioners brought this case in the Regional Trial Court of Makati, Branch 56, which, in view of the pendency at the time of the foreign action, dismissed Civil Case No. 16563 on the ground of litis pendentia, in addition to forum non conveniens. On appeal, the Court of Appeals affirmed. Hence this petition for review on certiorari.

The facts are as follows:

On January 15, 1983, private respondent Ventura O. Ducat obtained separate loans from petitioners Ayala International Finance Limited (hereafter called AYALA)

[1] and Philsec

Investment Corporation (hereafter called PHILSEC) in the sum of US$2,500,000.00, secured by shares of stock owned by Ducat with a market value of P14,088,995.00. In order to facilitate the payment of the loans, private respondent 1488, Inc., through its president, private respondent Drago Daic, assumed Ducat’s obligation under an Agreement, dated January 27, 1983, whereby 1488, Inc. executed a Warranty Deed with Vendor’s Lien by which it sold to petitioner Athona Holdings, N.V. (hereafter called ATHONA) a parcel of land in Harris County, Texas, U.S.A., for

US$2,807,209.02, while PHILSEC and AYALA extended a loan to ATHONA in the amount of US$2,500,000.00 as initial payment of the purchase price. The balance of US$307,209.02 was to be paid by means of a promissory note executed by ATHONA in favor of 1488, Inc. Subsequently, upon their receipt of the US$2,500,000.00 from 1488, Inc., PHILSEC and AYALA released Ducat from his indebtedness and delivered to 1488, Inc. all the shares of stock in their possession belonging to Ducat.

As ATHONA failed to pay the interest on the balance of US$307,209.02, the entire amount covered by the note became due and demandable. Accordingly, on October 17, 1985, private respondent 1488, Inc. sued petitioners PHILSEC, AYALA, and ATHONA in the United States for payment of the balance of US$307,209.02 and for damages for breach of contract and for fraud allegedly perpetrated by petitioners in misrepresenting the marketability of the shares of stock delivered to 1488, Inc. under the Agreement. Originally instituted in the United States District Court of Texas, 165th Judicial District, where it was docketed as Case No. 85-57746, the venue of the action was later transferred to the United States District Court for the Southern District of Texas, where 1488, Inc. filed an amended complaint, reiterating its allegations in the original complaint. ATHONA filed an answer with counterclaim, impleading private respondents herein as counterdefendants, for allegedly conspiring in selling the property at a price over its market value. Private respondent Perlas, who had allegedly appraised the property, was later dropped as counterdefendant. ATHONA sought the recovery of damages and excess payment allegedly made to 1488, Inc. and, in the alternative, the rescission of sale of the property. For their part, PHILSEC and AYALA filed a motion to dismiss on the ground of lack of jurisdiction over their person, but, as their motion was denied, they later filed a joint answer with counterclaim against private respondents and Edgardo V. Guevarra, PHILSEC’s own former president, for the rescission of the sale on the ground that

the property had been overvalued. On March 13, 1990, the United States District Court for the Southern District of Texas dismissed the counterclaim against Edgardo V. Guevarra on the ground that it was ―frivolous and [was] brought against him simply to humiliate and embarrass him.‖ For this reason, the U.S. court imposed so-called Rule 11 sanctions on PHILSEC and AYALA and ordered them to pay damages to Guevarra.

On April 10, 1987, while Civil Case No. H-86-440 was pending in the United States, petitioners filed a complaint ―For Sum of Money with Damages and Writ of Preliminary Attachment‖ against private respondents in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 16563. The complaint reiterated the allegation of petitioners in their respective counterclaims in Civil Action No. H-86-440 of the United States District Court of Southern Texas that private respondents committed fraud by selling the property at a price 400 percent more than its true value of US$800,000.00. Petitioners claimed that, as a result of private respondents’ fraudulent misrepresentations, ATHONA, PHILSEC, and AYALA were induced to enter into the Agreement and to purchase the Houston property. Petitioners prayed that private respondents be ordered to return to ATHONA the excess payment of US$1,700,000.00 and to pay damages. On April 20, 1987, the trial court issued a writ of preliminary attachment against the real and personal properties of private respondents.

[2]

Private respondent Ducat moved to dismiss Civil Case No. 16563 on the grounds of (1) litis pendentia, vis-a-vis Civil Action No. H-86-440 filed by 1488, Inc. and Daic in the U.S., (2) forum non conveniens, and (3) failure of petitioners PHILSEC and BPI-IFL to state a cause of action. Ducat contended that the alleged overpricing of the property prejudiced only petitioner ATHONA, as buyer, but not PHILSEC and BPI-IFL which were not parties to the sale and whose only participation was to extend financial accommodation to ATHONA under a separate loan

agreement. On the other hand, private respondents 1488, Inc. and its president Daic filed a joint ―Special Appearance and Qualified Motion to Dismiss,‖ contending that the action being in personam, extraterritorial service of summons by publication was ineffectual and did not vest the court with jurisdiction over 1488, Inc., which is a non-resident foreign corporation, and Daic, who is a non-resident alien.

On January 26, 1988, the trial court granted Ducat’s motion to dismiss, stating that ―the evidentiary requirements of the controversy may be more suitably tried before the forum of the litis pendentia in the U.S., under the principle in private international law of forum non conveniens,‖ even as it noted that Ducat was not a party in the U.S. case.

A separate hearing was held with regard to 1488, Inc. and Daic’s motion to dismiss. On March 9, 1988, the trial court

[3] granted the motion to dismiss filed by 1488, Inc. and Daic

on the ground of litis pendentia considering that

the “main factual element” of the cause of action in this case which is

the validity of the sale of real property in the United States between

defendant 1488 and plaintiff ATHONA is the subject matter of the

pending case in the United States District Court which, under the

doctrine of forum non conveniens, is the better (if not exclusive)

forum to litigate matters needed to determine the assessment and/or

fluctuations of the fair market value of real estate situated in

Houston, Texas, U.S.A. from the date of the transaction in 1983 up

to the present and verily, . . . (emphasis by trial court)

The trial court also held itself without jurisdiction over 1488, Inc. and Daic because they were non-residents and the action was not an action in rem or quasi in rem, so that extraterritorial service of summons was ineffective. The trial court subsequently lifted the writ of attachment it had earlier issued against the shares of stocks of 1488, Inc. and Daic.

Petitioners appealed to the Court of Appeals, arguing that the trial court erred in applying the principle of litis pendentia and forum non conveniens and in ruling that it had no jurisdiction over the defendants, despite the previous attachment of shares of stocks belonging to 1488, Inc. and Daic.

On January 6, 1992, the Court of Appeals[4]

affirmed the dismissal of Civil Case No. 16563 against Ducat, 1488, Inc., and Daic on the ground of litis pendentia, thus:

The plaintiffs in the U.S. court are 1488 Inc. and/or Drago Daic, while

the defendants are Philsec, the Ayala International Finance Ltd. (BPI-

IFL‟s former name) and the Athona Holdings, NV. The case at bar

involves the same parties. The transaction sued upon by the parties, in

both cases is the Warranty Deed executed by and between Athona

Holdings and 1488 Inc. In the U.S. case, breach of contract and the

promissory note are sued upon by 1488 Inc., which likewise alleges

fraud employed by herein appellants, on the marketability of Ducat‟s

securities given in exchange for the Texas property. The recovery of a

sum of money and damages, for fraud purportedly committed by

appellees, in overpricing the Texas land, constitute the action before the

Philippine court, which likewise stems from the same Warranty Deed.

The Court of Appeals also held that Civil Case No. 16563 was an action in personam for the recovery of a sum of money for alleged tortious acts, so that service of summons by publication did not vest the trial court with jurisdiction over 1488, Inc. and Drago Daic. The dismissal of Civil Case No. 16563 on the ground of forum non conveniens was likewise affirmed by the Court of Appeals on the ground that the case can be better tried and decided by the U.S. court:

The U.S. case and the case at bar arose from only one main transaction,

and involve foreign elements, to wit: 1) the property subject matter of

the sale is situated in Texas, U.S.A.; 2) the seller, 1488 Inc. is a non-

resident foreign corporation; 3) although the buyer, Athona Holdings, a

foreign corporation which does not claim to be doing business in the

Philippines, is wholly owned by Philsec, a domestic corporation, Athona

Holdings is also owned by BPI-IFL, also a foreign corporation; 4) the

Warranty Deed was executed in Texas, U.S.A.

In their present appeal, petitioners contend that:

1. THE DOCTRINE OF PENDENCY OF ANOTHER ACTION BETWEEN THE SAME PARTIES FOR THE SAME CAUSE (LITIS PENDENTIA) RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE TRIAL COURT’S DISMISSAL OF THE CIVIL ACTION IS NOT APPLICABLE.

2. THE PRINCIPLE OF FORUM NON CONVENIENS ALSO RELIED UPON BY THE COURT OF APPEALS IN AFFIRMING THE DISMISSAL BY THE TRIAL COURT OF THE CIVIL ACTION IS LIKEWISE NOT APPLICABLE.

3. AS A COROLLARY TO THE FIRST TWO GROUNDS, THE COURT OF APPEALS ERRED IN NOT HOLDING THAT PHILIPPINE PUBLIC POLICY REQUIRED THE ASSUMPTION, NOT THE RELINQUISHMENT, BY THE TRIAL COURT OF ITS RIGHTFUL JURISDICTION IN THE CIVIL ACTION FOR THERE IS EVERY REASON TO PROTECT AND VINDICATE PETITIONERS’ RIGHTS FOR TORTIOUS OR WRONGFUL ACTS OR CONDUCT PRIVATE RESPONDENTS (WHO ARE MOSTLY NON-RESIDENT ALIENS) INFLICTED UPON THEM HERE IN THE PHILIPPINES.

We will deal with these contentions in the order in which they are made.

First. It is important to note in connection with the first point that while the present case was pending in the Court of Appeals, the United States District Court for the Southern District of Texas

rendered judgment[5]

in the case before it. The judgment, which was in favor of private respondents, was affirmed on appeal by the Circuit Court of Appeals.

[6] Thus, the principal issue to be

resolved in this case is whether Civil Case No. 16536 is barred by the judgment of the U.S. court.

Private respondents contend that for a foreign judgment to be pleaded as res judicata, a judgment admitting the foreign decision is not necessary. On the other hand, petitioners argue that the foreign judgment cannot be given the effect of res judicata without giving them an opportunity to impeach it on grounds stated in Rule 39, §50 of the Rules of Court, to wit: ―want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.‖

Petitioners’ contention is meritorious. While this Court has given the effect of res judicata to foreign judgments in several cases,

[7] it was after the parties opposed to the judgment had

been given ample opportunity to repel them on grounds allowed under the law.

[8] It is not necessary for this purpose to initiate a

separate action or proceeding for enforcement of the foreign judgment. What is essential is that there is opportunity to challenge the foreign judgment, in order for the court to properly determine its efficacy. This is because in this jurisdiction, with respect to actions in personam, as distinguished from actions in rem, a foreign judgment merely constitutes prima facie evidence of the justness of the claim of a party and, as such, is subject to proof to the contrary.

[9] Rule 39, §50 provides:

SEC. 50. Effect of foreign judgments. - The effect of a judgment of a

tribunal of a foreign country, having jurisdiction to pronounce the

judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is

conclusive upon the title to the thing;

(b) In case of a judgment against a person, the judgment is presumptive

evidence of a right as between the parties and their successors in interest

by a subsequent title; but the judgment may be repelled by evidence of a

want of jurisdiction, want of notice to the party, collusion, fraud, or clear

mistake of law or fact.

Thus, in the case of General Corporation of the Philippines v. Union Insurance Society of Canton, Ltd.,

[10] which private

respondents invoke for claiming conclusive effect for the foreign judgment in their favor, the foreign judgment was considered res judicata because this Court found ―from the evidence as well as from appellant’s own pleadings‖

[11] that the foreign court did not

make a ―clear mistake of law or fact‖ or that its judgment was void for want of jurisdiction or because of fraud or collusion by the defendants. Trial had been previously held in the lower court and only afterward was a decision rendered, declaring the judgment of the Supreme Court of the State of Washington to have the effect of res judicata in the case before the lower court. In the same vein, in Philippine International Shipping Corp. v. Court of Appeals,

[12] this Court held that the foreign judgment was valid

and enforceable in the Philippines there being no showing that it was vitiated by want of notice to the party, collusion, fraud or clear mistake of law or fact. The prima facie presumption under the Rule had not been rebutted.

In the case at bar, it cannot be said that petitioners were given the opportunity to challenge the judgment of the U.S. court as basis for declaring it res judicata or conclusive of the rights of private respondents. The proceedings in the trial court were summary. Neither the trial court nor the appellate court was even furnished copies of the pleadings in the U.S. court or apprised of the evidence presented thereat, to assure a proper determination of whether the issues then being litigated in the U.S. court were exactly the issues raised in this case such that the judgment that might be rendered would constitute res judicata. As the trial court stated in its disputed order dated March 9, 1988:

On the plaintiff‟s claim in its Opposition that the causes of action

of this case and the pending case in the United States are not

identical, precisely the Order of January 26, 1988 never found that

the causes of action of this case and the case pending before the

USA Court, were identical. (emphasis added)

It was error therefore for the Court of Appeals to summarily rule that petitioners’ action is barred by the principle of res judicata. Petitioners in fact questioned the jurisdiction of the U.S. court over their persons, but their claim was brushed aside by both the trial court and the Court of Appeals.

[13]

Moreover, the Court notes that on April 22, 1992, 1488, Inc. and Daic filed a petition for the enforcement of judgment in the Regional Trial Court of Makati, where it was docketed as Civil Case No. 92-1070 and assigned to Branch 134, although the proceedings were suspended because of the pendency of this case. To sustain the appellate court’s ruling that the foreign judgment constitutes res judicata and is a bar to the claim of petitioners would effectively preclude petitioners from repelling the judgment in the case for enforcement. An absurdity could then arise: a foreign judgment is not subject to challenge by the plaintiff against whom it is invoked, if it is pleaded to resist a claim as in this case, but it may be opposed by the defendant if the foreign judgment is sought to be enforced against him in a separate proceeding. This is plainly untenable. It has been held therefore that:

[A] foreign judgment may not be enforced if it is not recognized in the

jurisdiction where affirmative relief is being sought. Hence, in the

interest of justice, the complaint should be considered as a petition for

the recognition of the Hongkong judgment under Section 50 (b), Rule

39 of the Rules of Court in order that the defendant, private respondent

herein, may present evidence of lack of jurisdiction, notice, collusion,

fraud or clear mistake of fact and law, if applicable.[14]

Accordingly, to insure the orderly administration of justice, this case and Civil Case No. 92-1070 should be consolidated.

[15] After

all, the two have been filed in the Regional Trial Court of Makati, albeit in different salas, this case being assigned to Branch 56 (Judge Fernando V. Gorospe), while Civil Case No. 92-1070 is pending in Branch 134 of Judge Ignacio Capulong. In such proceedings, petitioners should have the burden of impeaching the foreign judgment and only in the event they succeed in doing so may they proceed with their action against private respondents.

Second. Nor is the trial court’s refusal to take cognizance of the case justifiable under the principle of forum non conveniens. First, a motion to dismiss is limited to the grounds under Rule 16, §1, which does not include forum non conveniens.

[16] The propriety of dismissing a case based on this

principle requires a factual determination, hence, it is more properly considered a matter of defense. Second, while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after ―vital facts are established, to determine whether special circumstances‖ require the court’s desistance.

[17]

In this case, the trial court abstained from taking jurisdiction solely on the basis of the pleadings filed by private respondents in connection with the motion to dismiss. It failed to consider that one of the plaintiffs (PHILSEC) is a domestic corporation and one of the defendants (Ventura Ducat) is a Filipino, and that it was the extinguishment of the latter’s debt which was the object of the transaction under litigation. The trial court arbitrarily dismissed the case even after finding that Ducat was not a party in the U.S. case.

Third. It was error we think for the Court of Appeals and the trial court to hold that jurisdiction over 1488, Inc. and Daic could not be obtained because this is an action in personam and summons were served by extraterritorial service. Rule 14, §17 on

extraterritorial service provides that service of summons on a non-resident defendant may be effected out of the Philippines by leave of Court where, among others, ―the property of the defendant has been attached within the Philippines.‖

[18] It is not disputed that the

properties, real and personal, of the private respondents had been attached prior to service of summons under the Order of the trial court dated April 20, 1987.

[19]

Fourth. As for the temporary restraining order issued by the Court on June 29, 1994, to suspend the proceedings in Civil Case No. 92-1445 filed by Edgardo V. Guevarra to enforce so-called Rule 11 sanctions imposed on the petitioners by the U.S. court, the Court finds that the judgment sought to be enforced is severable from the main judgment under consideration in Civil Case No. 16563. The separability of Guevarra’s claim is not only admitted by petitioners,

[20] it appears from the pleadings that

petitioners only belatedly impleaded Guevarra as defendant in Civil Case No. 16563.

[21] Hence, the TRO should be lifted and

Civil Case No. 92-1445 allowed to proceed.

WHEREFORE, the decision of the Court of Appeals is REVERSED and Civil Case No. 16563 is REMANDED to the Regional Trial Court of Makati for consolidation with Civil Case No. 92-1070 and for further proceedings in accordance with this decision. The temporary restraining order issued on June 29, 1994 is hereby LIFTED.

SO ORDERED.

Republic of the Philippines SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 77085 April 26, 1989

PHILIPPINE INTERNATIONAL SHIPPING CORPORATION (PISC), 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., petitioners, vs. THE HON. COURT OF APPEALS, HON. JOSE C. DE GUZMAN, as Judge presiding Branch 93 of the Regional Trial Court of Quezon City, INTERPOOL, LTD. and SHERIFF NORBERTO V. DOBLADA JR.,respondents.

R E S O L U T I O N

FELICIANO, J.:

The subject of the present Petition is the Decision of the Court of Appeals dated 12 December 1986, in CA-G.R. SP No. 10614. The appellate court upheld the Order of Branch 93 of the Regional Trial Court of Quezon City granting the issuance of a writ of execution, in Civil Case No. Q-39927.

The undisputed facts are stated in the appealed decision:

Plaintiff [respondent Interpool, Ltd.] is a foreign corporation, duly organized and existing under the laws of Bahamas Islands with office and business address at 630, 3rd Avenue, New York, New York, and not licensed to do, and not doing business, in the Philippines.

Defendants Philippine International Shipping Corporation, Philippine Construction Consortium Corporation, Pacific Mills Inc., and Universal Steel

Smelting Company, Inc., are corporations duly organized and existing under and by virtue of the laws of the Philippines. The other defendants, George Lim Marcos Bautista, Carlos Laude, Tan Sing Lim, Antonio Liu Lao and Ong Teh are Philippine residents.

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 (Exhibit B) 1 and the Master Equipment Leasing Agreement (Exhibit C ), 2 both dated June 8, 1979.

Defendants Philippine Construction Consortium Corporation, Pacific Mills Inc. and Universal Steel Smelting Company, guaranteed to pay (sic) 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 (Exhibit J). 3

The other defendants, namely: 1) George Lim; 2) Marcos Bautista; 3) Carlos Laude 4) Tan Sing Lim; 5) Antonio Liu Lao and 6) Ong Teh, unconditionally and irrevocably guaranteed to pay (sic) plaintiff all payments due to it under the Master Equipment Leasing Agreement (Exhibit C) and Membership Agreement and Hiring Conditions (Exhibit B) dated June 8, 1979, in the amounts at the time and in the manner set out in the

said agreements and to indemnify plaintiff against all claims, liabilities, costs, damages and expenses (including legal fees) suffered or incurred by plaintiff, arising out of or in connection with any failure by defendant Philippine International Shipping Corporation to perform any of its obligations under the aforesaid Agreements (Exhibit D, E, F, G, H, and I). 4

In 1979 to 1981, defendant Philippine International Shipping Corporation incurred outstanding and unpaid obligations with the plaintiff, in the amount of $94,456.28, representing unpaid per diems, drop-off charges, interest and other agreed charges.

The plaintiff sent letters to the defendants (Exhibit K, L, M, N 0, P, Q, R, S and T ), 5 demanding payment of their outstanding and unpaid obligations, but to no avail, so plaintiff was constrained to file a case against the principal defendant, (PISC) before the United States District Court, Southern District of New York, which was docketed as 83 Civil 290 (EW) Plaintiff obtained a Default Judgment on July 3, 1983 against (PISC) ordering it to pay the plaintiff the sum 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 (Exhibit A). 6

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 [docketed as Civil Case No. Q-39927, Branch 93, Regional Trial Court of Quezon City] (Annex A) 7 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 (Annexes D, E, F, G, H, I, and J of the Complaint).

The defendants (herein petitioners) were duly summoned, but they failed to answer the complaint. On motion of the plaintiff, they were declared in default 8 and the plaintiff (herein private respondent) was allowed to present its evidence ex parte.

On April 11, 1985 the court rendered judgment for the plaintiff, 9 the dispositive part reading as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants, ordering:

1) The defendant, Philippine International Shipping Corporation, and the defendants-Guarantors, to jointly and severally pay plaintiff the liquidated amount of $80,779.33, together with interest in the amount of $13,676.95 and costs in the amount of $80.00 or a total of $94,456.28, pursuant to the Default Judgment rendered by the United States District Court, Southern District of New York, or in the Philippine currency equivalent of the aforesaid amount of $94,456.28, computed at the time of payment, with interest for late payment at the rate of 18% per annum from July 4, 1983, until fully paid;

2) The defendant, Philippine International Shipping Corporation, and the defendants-Guarantors, to jointly and severally pay plaintiff the sum equivalent to twenty (20%) percent of the total amount due from the defendants by way of attorney's fees; and

3) To pay the costs.

On May 17, 1985, the defendants appealed the decision to this Appellate Court (AC-G.R. UDK No. 7383) which dismissed the appeal on November 13, 1985 for failure of the appellants to pay the docketing fee despite their receipt of the notice to do so on August 26, 1985. 10 Entry of that final resolution was made on December 6,1985.

In view of the finality of the decision, the plaintiff filed on July 23, 1986 a motion for execution and for appointment of a special sheriff to enforce it. 11

Over the defendants' opposition, the trial court issued an order of execution on October 15, 1986 and appointed Norberto V. Doblado, Jr., of the office of the Makati Sheriff, as special sheriff for the purpose (Annex D). 12

On 20 November 1986, petitioners (defendants below) filed with the Court of Appeals a Petition to Annul Judgment (docketed as C.A.-GR SP No. 10614) 13 directed at the 15 October 1986 Order of the Regional Trial Court. On 12 December 1986, the appellate court rendered a Decision 14 denying that petition for lack of merit. A Motion for Reconsideration was likewise denied for lack of merit.15

In the instant Petition for Review, filed with this Court on 27 February 1987, petitioners allege that both the Default Judgment rendered by the U.S. District Court, Southern District of New York, in 83 Civil 290 (EW), and the Decision of the Regional Trial Court of Quezon City, in Civil Case No. Q-39927, are null and void essentially on jurisdictional grounds. 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 ty

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 Philippine International Shipping Corporation (PISC) the other nine (9) petitioners not having been impleaded originally in the case filed in New York, U.S.A.

The Petition must fail.

1. To begin with, 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." 17 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 18 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, 19 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.

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 [i.e., PISC and Interpool] and their successors in interest by a subsequent title." 20 We note, further that there has been in this case no showing by petitioners that the Default Judgment rendered by the U.S. District Court in 83 Civil 290 (EW) was vitiated by "want of notice to the party, collusion, fraud, or clear mistake of law or fact. " 21 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.

2. The existence of liability (i.e., in the amount of U.S.$94,456.28) 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 nine (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. With respect to the latter, Section 6,

Rule 3 of the Revised Rules of Court expressly provides:

Sec. 6. Permissive joinder of parties. All persons in whom or against whom any right to relief in respect to or arising out of the same transaction or series of transactions is alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise provided in these rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law or fact common to all such plaintiffs or to all such defendants may arise in the action; but the court may make such orders as may be just to prevent any plaintiff or defendant from being embarrassed or put to expense in connection with any proceedings in which he may have no interest. (Emphasis supplied)

The record shows that said nine (9) petitioners had executed continuing guarantees" to secure performance by petitioner PISC of its contractual obligations, under the Membership Agreement and Hiring Conditions and Master Equipment Leasing Agreement with respondent Interpool. 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 of U.S.$94,456.28 is precisely premised upon a breach by PISC of its own obligations under those Agreements. We, therefore, consider the nine (9) other petitioners as persons 44 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. Petitioners' argument of lack or absence of jurisdiction on the part of the Quezon City Regional Trial Court, on the alleged ground of non-service of notice or summons in Civil Case No. Q-39927, does not persuade. But we do not need to address this specific argument. For even assuming (though merely arguendo) 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 a Motion for Extension of Time to file Answer 22 (dated 9 December 1983) as well as Motion for Bill of Particulars 23 (dated 15 December 1983), both addressing respondent Interpool's .Complaint in Civil Case No. Q-39927. In those pleadings, petitioners not only manifested their intention to controvert the allegations in the Complaint, but they neither questioned nor assailed the jurisdiction of the trial court, either over the case filed against them or over their individual persons, as defendants therein. 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. 24

ACCORDINGLY, the Petition for Review is DENIED and the Decision dated 12 December 1986 of the Court of Appeals in C.A.-G.R. SP No. 10614, is hereby AFFIRMED. This Resolution is immediately executory. Costs against petitioners.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concu

THIRD DIVISION

[G.R. No. 137378. October 12, 2000]

PHILIPPINE ALUMINUM WHEELS, INC., petitioner, vs. FASGI ENTERPRISES, INC., respondent.

D E C I S I O N

VITUG, J.:

On 01 June 1978, FASGI Enterprises Incorporated ("FASGI"), a corporation organized and existing under and by virtue of the laws of the State of California, United States of America, entered into a distributorship arrangement with Philippine Aluminum Wheels, Incorporated ("PAWI"), a Philippine corporation, and Fratelli Pedrini Sarezzo S.P.A. ("FPS"), an Italian corporation. The agreement provided for the purchase, importation and distributorship in the United States of aluminum wheels manufactured by PAWI. Pursuant to the contract, PAWI shipped to FASGI a total of eight thousand five hundred ninety four (8,594) wheels, with an FOB value of US$216,444.30 at the time of shipment, the first batch arriving in two containers and the second in three containers. Thereabouts, FASGI paid PAWI the FOB value of the wheels. Unfortunately, FASGI later found the shipment to be defective and in non-compliance with stated requirements, viz;

"A. contrary to the terms of the Distributorship Agreement and in

violation of U.S. law, the country of origin (the Philippines) was not

stamped on the wheels;

"B. the wheels did not have weight load limits stamped on them as

required to avoid mounting on excessively heavy vehicles, resulting in

risk of damage or bodily injury to consumers arising from possible

shattering of the wheels;

"C. many of the wheels did not have an indication as to which models of

automobile they would fit;

"D. many of the wheels did not fit the model automobiles for which they

were purportedly designed;

"E. some of the wheels did not fit any model automobile in use in the

United States;

"F. most of the boxes in which the wheels were packed indicated that the

wheels were approved by the Specialty Equipment Manufacturer's

Association (hereafter, `SEMA'); in fact no SEMA approval has been

obtained and this indication was therefore false and could result in fraud

upon retail customers purchasing the wheels."[1]

On 21 September 1979, FASGI instituted an action against PAWI and FPS for breach of contract and recovery of damages in the amount of US$2,316,591.00 before the United States District Court for the Central District of California. In January 1980, during the pendency of the case, the parties entered into a settlement, entitled "Transaction" with the corresponding Italian translation "Convenzione Transsativa," where it was stipulated that FPS and PAWI would accept the return of not less than 8,100 wheels after restoring to FASGI the purchase price of US$268,750.00 via four (4) irrevocable letters of credit ("LC"). The rescission of the contract of distributorship was to be effected within the period starting January up until April 1980.

[2]

In a telex message, dated 02 March 1980, PAWI president Romeo Rojas expressed the company's inability to comply with the foregoing agreement and proposed a revised schedule of payment. The message, in part, read:

"We are most anxious in fulfilling all our obligations under compromise

agreement executed by our Mr. Giancarlo Dallera and your Van

Curen. We have tried our best to comply with our commitments,

however, because of the situation as mentioned in the foregoing and

currency regulations and restrictions imposed by our government on the

outflow, of foreign currency from our country, we are constrained to

request for a revised schedule of shipment and opening of L/Cs.

"After consulting with our bank and government monetary agencies and

on the assumption that we submit the required pro-forma invoices we

can open the letters of credit in your favor under the following schedule:

"A) First L/C - it will be issued in April 1980 payable 90 days thereafter

"B) Second L/C - it will be issued in June 1980 payable 90 days

thereafter

"C) Third L/C - it will be issued in August 1980 payable 90 days

thereafter

"D) Fourth L/C - it will be issued in November 1980 payable 90 days

thereafter

"We understand your situation regarding the lease of your

warehouse. For this reason, we are willing to defray the extra storage

charges resulting from this new schedule. If you cannot renew the lease

[of] your present warehouse, perhaps you can arrange to transfer to

another warehouse and storage charges transfer thereon will be for our

account. We hope you understand our position. The delay and the

revised schedules were caused by circumstances totally beyond our

control."[3]

On 21 April 1980, again through a telex message, PAWI informed FASGI that it was impossible to open a letter of credit on or before April 1980 but assured that it would do its best to comply with the suggested schedule of payments.

[4] In its telex

reply of 29 April 1980, FASGI insisted that PAWI should meet the terms of the proposed schedule of payments, specifically its undertaking to open the first LC within April of 1980, and that "If the letter of credit is not opened by April 30, 1980, then x x x [it would] immediately take all necessary legal action to protect [its] position."

[5]

Despite its assurances, and FASGI's insistence, PAWI failed to open the first LC in April 1980 allegedly due to Central Bank "inquiries and restrictions," prompting FASGI to pursue its complaint for damages against PAWI before the California district court. Pre-trial conference was held on 24 November 1980. In the interim, the parties, realizing the protracted process of litigation, resolved to enter into another arrangement, this time entitled "Supplemental Settlement Agreement," on 26 November 1980. In substance, the covenant provided that FASGI would deliver to PAWI a container of wheels for every LC opened and paid by PAWI:

"3. Agreement

"3.1 Sellers agree to pay FASGI Two Hundred Sixty-Eight Thousand,

Seven Hundred Fifty and 00/100 Dollars ($268,750.00), plus interest

and storage costs as described below. Sellers shall pay such amount by

delivering to FASGI the following four (4) irrevocable letters of credit,

confirmed by Crocker Bank, Main Branch, Fresno, California, as set

forth below:

"(i) on or before June 30, 1980, a documentary letter of credit in the

amount of (a) Sixty-Five Thousand, Three Hundred Sixty-nine and

00/100 Dollars ($65,369.00), (b) plus interest on that amount at the

annual rate of 16.25% from January 1, 1980 until July 31, 1980, (c) plus

Two Thousand Nine Hundred Forty Dollars and 00/100 ($2,940.00) and

(d) with interest on that sum at the annual rate of 16.25% from May 1,

1980 to July 31, 1980, payable on or after August 31, 1980;

"(ii) on or before September 1, 1980, a documentary letter of credit in

the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-Three

Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Two Thousand,

Nine Hundred Forty and 00/100 Dollars ($2,940.00), plus (c) interest at

an annual rate equal to the prime rate of Crocker Bank, San Francisco, in

effect from time to time, plus two percent on the amount in (a) from

January 1, 1980 until December 21, 1980, and on the amount set forth in

(b) from May 1, 1980 until December 21, 1980, payable ninety days

after the date of the bill of lading under the letter of credit;

"(iii) on or before November 1, 1980, a documentary letter of credit in

the amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-Three

Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Two Thousand,

Nine Hundred Forty and 00/100 Dollars ($2,490.00), plus (c) interest at

an annual rate equal to the prime rate of Crocker Bank, San Francisco, in

effect from time to time, plus two percent on the amount in (a) from

January 1, 1980 until February 21, 1981, and on the amount set forth in

(b) from May 1, 1980 until February 21, 1981, payable ninety days after

the date of the bill of lading under the latter of credit;

"(iv) on or before January 1, 1981, a documentary letter of credit in the

amount of (a) Sixty-Seven Thousand, Seven Hundred Ninety-Three

Dollars and Sixty-Seven Cents ($67,793.67) plus (b) Five Thousand,

Eight Hundred Eighty and 00/100 Dollars ($5,880.00), plus (c) interest

at an annual rate equal to the prime rate of Crocker Bank, San Francisco,

in effect from time to time, plus two percent on the amount in (a) from

January 1, 1980 until April 21, 1981, and on the amount set forth in (b)

from May 1, 1980 until April 21, 1981, payable ninety days after the

date of the bill of lading under the latter of credit."[6]

Anent the wheels still in the custody of FASGI, the supplemental settlement agreement provided that -

"3.4 (a) Upon execution of this Supplemental Settlement Agreement, the

obligations of FASGI to store or maintain the Containers and Wheels

shall be limited to (i) storing the Wheels and Containers in their present

warehouse location and (ii) maintaining in effect FASGI's current

insurance in favor of FASGI, insuring against usual commercial risks for

such storage in the principal amount of the Letters of Credit described in

Paragraph 3.1. FASGI shall bear no liability, responsibility or risk for

uninsurable risks or casualties to the Containers or Wheels.

"x x x x x x x x x

"(e) From and after February 28, 1981, unless delivery of the Letters of

Credit are delayed past such date pursuant to the penultimate Paragraph

3.1, in which case from and after such later date, FASGI shall have no

obligation to maintain, store or deliver any of the Containers or

Wheels."[7]

The deal allowed FASGI to enter before the California court the foregoing stipulations in the event of the failure of PAWI to make good the scheduled payments; thus -

"3.5 Concurrently with execution and delivery hereof, the parties have

executed and delivered a Mutual Release (the `Mutual Release'), and a

Stipulation for Judgment (the `Stipulation for Judgment') with respect to

the Action. In the event of breach of this Supplemental Settlement

Agreement by Sellers, FASGI shall have the right to apply immediately

to the Court for entry of Judgment pursuant to the Stipulation for

Judgment in the full amount thereof, less credit for any payments made

by Sellers pursuant to this Supplemental Settlement Agreement. FASGI

shall have the right thereafter to enforce the Judgment against PAWI and

FPS in the United States and in any other country where assets of FPS or

PAWI may be located, and FPS and PAWI hereby waive all defenses in

any such country to execution or enforcement of the Judgment by

FASGI. Specifically, FPS and PAWI each consent to the jurisdiction of

the Italian and Philippine courts in any action brought by FASGI to seek

a judgment in those countries based upon a judgment against FPS or

PAWI in the Action."[8]

In accordance with the aforementioned paragraph 3.5 of the agreement, the parties made the following stipulation before the California court:

"The undersigned parties hereto, having entered into a Supplemental

Settlement Agreement in this action,

"IT IS HEREBY STIPULATED by and between plaintiff FASGI

Enterprises, Inc. (`FASGI') and defendants Philippine Aluminum

Wheels, Inc., (`PAWI'), and each of them, that judgment may be entered

in favor of plaintiff FASGI and against PAWI, in the amount of Two

Hundred Eighty Three Thousand Four Hundred Eighty And 01/100ths

Dollars ($283,480.01).

"Plaintiff FASGI shall also be entitled to its costs of suit, and to

reasonable attorneys' fees as determined by the Court added to the above

judgment amount."[9]

The foregoing supplemental settlement agreement, as well as the motion for the entry of judgment, was executed by FASGI president Elena Buholzer and PAWI counsel Mr. Thomas Ready.

PAWI, again, proved to be remiss in its obligation under the supplemental settlement agreement. While it opened the first LC on 19 June 1980, it, however, only paid on it nine (9) months after, or on 20 March 1981, when the letters of credit by then were supposed to have all been already posted. This lapse, notwithstanding, FASGI promptly shipped to PAWI the first container of wheels. Again, despite the delay incurred by PAWI on the second LC, FASGI readily delivered the second container. Later, PAWI totally defaulted in opening and paying the third and the fourth LCs, scheduled to be opened on or before, respectively, 01 September 1980 and 01 November 1980, and each to be paid ninety (90) days after the date of the bill of lading

under the LC. As so expressed in their affidavits, FASGI counsel Frank Ker and FASGI president Elena Buholzer were more inclined to believe that PAWI's failure to pay was due not to any restriction by the Central Bank or any other cause than its inability to pay. These doubts were based on the telex message of PAWI president Romeo Rojas who attached a copy of a communication from the Central Bank notifying PAWI of the bank's approval of PAWI's request to open LCs to cover payment for the re-importation of the wheels. The communication having been sent to FASGI before the supplemental settlement agreement was executed, FASGI speculated that at the time PAWI subsequently entered into the supplemental settlement agreement, its request to open LCs had already been approved by the Central Bank. Irked by PAWI's persistent default, FASGI filed with the US District Court of the Central District of California the following stipulation for judgment against PAWI.

"PLEASE TAKE NOTICE that on May 17, 1982 at 10:00 A.M. in the

Courtroom of the Honorable Laughlin E. Waters of the above Court,

plaintiff FASGI ENTERPRISES, INC. (hereinafter `FASGI') will move

the Court for entry of Judgment against defendant PHILIPPINE

ALUMINUM WHEELS, INC. (hereinafter `PAWI'), pursuant to the

Stipulation for Judgment filed concurrently herewith, executed on behalf

of FASGI and PAWI by their respective attorneys, acting as their

authorized agents.

"Judgment will be sought in the total amount of P252,850.60, including

principal and interest accrued through May 17, 1982, plus the sum of

$17,500.00 as reasonable attorneys' fees for plaintiff in prosecuting this

action.

"The Motion will be made under Rule 54 of the Federal Rules of Civil

Procedure, pursuant to and based upon the Stipulation for Judgment, the

Supplemental Settlement Agreement filed herein on or about November

21, 1980, the Memorandum of Points and Authorities and Affidavits of

Elena Buholzer, Franck G. Ker and Stan Cornwell all filed herewith, and

upon all the records, files and pleadings in this action.

"The Motion is made on the grounds that defendant PAWI has breached

its obligations as set forth in the Supplemental Settlement Agreement,

and that the Supplemental Settlement Agreement expressly permits

FASGI to enter the Stipulation for Judgment in the event that PAWI has

not performed under the Supplemental Settlement Agreement."[10]

On 24 August 1982, FASGI filed a notice of entry of judgment. A certificate of finality of judgment was issued, on 07 September 1982, by the US District Judge of the District Court for the Central District of California. PAWI, by this time, was approximately twenty (20) months in arrears in its obligation under the supplemental settlement agreement.

Unable to obtain satisfaction of the final judgment within the United States, FASGI filed a complaint for "enforcement of foreign judgment" inFebruary 1983, before the Regional Trial Court, Branch 61, of Makati, Philippines. The Makati court, however, in an order of 11 September 1990, dismissed the case, thereby denying the enforcement of the foreign judgment within Philippine jurisdiction, on the ground that the decree was tainted with collusion, fraud, and clear mistake of law and fact.

[11] The lower

court ruled that the foreign judgment ignored the reciprocal obligations of the parties. While the assailed foreign judgment ordered the return by PAWI of the purchase amount, no similar order was made requiring FASGI to return to PAWI the third and fourth containers of wheels.

[12] This situation, the trial court

maintained, amounted to an unjust enrichment on the part of FASGI. Furthermore, the trial court said, the supplemental settlement agreement and the subsequent motion for entry of judgment upon which the California court had based its judgment were a nullity for having been entered into by Mr. Thomas Ready, counsel for PAWI, without the latter's authorization.

FASGI appealed the decision of the trial court to the Court of Appeals. In a decision,

[13] dated 30 July 1997, the appellate court

reversed the decision of the trial court and ordered the full enforcement of the California judgment.

Hence this appeal.

Generally, in the absence of a special compact, no sovereign is bound to give effect within its dominion to a judgment rendered by a tribunal of another country;

[14] however, the rules of comity,

utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in different countries.

[15]

In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar as the immediate parties and the underlying cause of action are concerned so long as it is convincingly shown that there has been an opportunity for a full and fair hearing before a court of competent jurisdiction; that trial upon regular proceedings has been conducted, following due citation or voluntary appearance of the defendant and under a system of jurisprudence likely to secure an impartial administration of justice; and that there is nothing to indicate either a prejudice in court and in the system of laws under which it is sitting or fraud in procuring the judgment.

[16] A foreign judgment

is presumed to be valid and binding in the country from which it comes, until a contrary showing, on the basis of a presumption of regularity of proceedings and the giving of due notice in the foreign forum. Rule 39, section 48 of the Rules of Court of the Philippines provides:

Sec. 48. Effect of foreign judgments or final orders - The effect of a

judgment or final order of a tribunal of a foreign country, having

jurisdiction to render the judgment or final order is as follows:

x x x x

(b) In case of a judgment or final order against a person, the judgment or

final order is presumptive evidence of a right as between the parties and

their successors-in-interest by a subsequent title.

In either case, the judgment or final order may be repelled by evidence a

want of jurisdiction, want of notice to the party, collusion, fraud, or clear

mistake of law or fact.

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

[17] one of the early Philippine cases on the enforcement of

foreign judgments, this Court has ruled that a judgment for a sum of money rendered in a foreign court is presumptive evidence of a right between the parties and their successors-in-interest by subsequent title, but when suit for its enforcement is brought in a Philippine court, such judgment may be repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact. In Northwest Orient Airlines, Inc., vs. Court of Appeals,

[18] the Court has said that a party attacking a

foreign judgment is tasked with the burden of overcoming its presumptive validity.

PAWI claims that its counsel, Mr. Ready, has acted without its authority. Verily, in this jurisdiction, it is clear that an attorney cannot, without a client's authorization, settle the action or subject matter of the litigation even when he honestly believes that such a settlement will best serve his client's interest.

[19]

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 on09 October 1981, PAWI President Romeo S. Rojas sent a communication to Elena Buholzer of FASGI that failed to mention Mr. Ready's supposed lack of authority. On the contrary, the letter confirmed the terms of the agreement when Mr. Rojas sought forbearance for the impending delay in the opening of the first letter of credit under the schedule stipulated in the agreement.

It is an accepted rule that when a client, upon becoming aware of the compromise and the judgment thereon, fails to promptly repudiate the action of his attorney, he will not afterwards be heard to complain about it.

[20]

Nor could PAWI claim any prejudice by the settlement. PAWI was spared from possibly paying FASGI substantial amounts of damages and incurring heavy litigation expenses normally generated in a full-blown trial. PAWI, under the agreement was afforded time to reimburse FASGI the price it had paid for the defective wheels. PAWI, should not, after its opportunity to enjoy the benefits of the agreement, be allowed to later disown the arrangement when the terms thereof ultimately would prove to operate against its hopeful expectations.

PAWI assailed not only Mr. Ready's authority to sign on its behalf the Supplemental Settlement Agreement but denounced likewise his authority to enter into a stipulation for judgment before the California court on 06 August 1982 on the ground that it had by then already terminated the former's services. For his part, Mr. Ready admitted that while he did receive a request from Manuel Singson of PAWI to withdraw from the motion of judgment, the request unfortunately came too late. In an explanatory telex, Mr. Ready told Mr. Singson that under American Judicial Procedures when a motion for judgment had already been filed a counsel would not be permitted to withdraw unilaterally without a court order. From the time the stipulation for judgment was entered into on 26 April 1982 until the certificate of finality of judgment was issued by the California court on 07

September 1982, no notification was issued by PAWI to FASGI regarding its termination of Mr. Ready's services. If PAWI were indeed hoodwinked by Mr. Ready who purportedly acted in collusion with FASGI, it should have aptly raised the issue before the forum which issued the judgment in line with the principle of international comity that a court of another jurisdiction should refrain, as a matter of propriety and fairness, from so assuming the power of passing judgment on the correctness of the application of law and the evaluation of the facts of the judgment issued by another tribunal.

[21]

Fraud, to hinder the enforcement within this jurisdiction of a foreign judgment, must be extrinsic, i.e., fraud based on facts not controverted or resolved in the case where judgment is rendered,

[22] or that which would go to the jurisdiction of the court

or would deprive the party against whom judgment is rendered a chance to defend the action to which he has a meritorious case or defense. In fine, intrinsic fraud, that is, fraud which goes to the very existence of the cause of action - such as fraud in obtaining the consent to a contract - is deemed already adjudged, and it, therefore, cannot militate against the recognition or enforcement of the foreign judgment.

[23]

Even while the US judgment was against both FPS and PAWI, FASGI had every right to seek enforcement of the judgment solely against PAWI or, for that matter, only against FPS. FASGI, in its complaint, explained:

"17. There exists, and at all times relevant herein there existed, a unity of

interest and ownership between defendant PAWI and defendant FPS, in

that they are owned and controlled by the same shareholders and

managers, such that any individuality and separateness between these

defendants has ceased, if it ever existed, and defendant FPS is the alter

ego of defendant PAWI. The two entities are used interchangeably by

their shareholders and managers, and plaintiff has found it impossible to

ascertain with which entity it is dealing at any one time. Adherence to

the fiction of separate existence of these defendant corporations would

permit an abuse of the corporate privilege and would promote injustice

against this plaintiff because assets can easily be shifted between the two

companies thereby frustrating plaintiff's attempts to collect on any

judgment rendered by this Court."[24]

Paragraph 14 of the Supplemental Settlement Agreement fixed the liability of PAWI and FPS to be "joint and several" or solidary. The enforcement of the judgment against PAWI alone would not, of course, preclude it from pursuing and recovering whatever contributory liability FPS might have pursuant to their own agreement.

PAWI would argue that it was incumbent upon FASGI to first return the second and the third containers of defective wheels before it could be required to return to FASGI the purchase price therefor,

[25] relying on their original agreement (the

"Transaction").[26]

Unfortunately, PAWI defaulted on its covenants thereunder that thereby occasioned the subsequent execution of the supplemental settlement agreement. This time the parties agreed, under paragraph 3.4(e)

[27] thereof, that any further default

by PAWI would release FASGI from any obligation to maintain, store or deliver the rejected wheels. The supplemental settlement agreement evidently superseded, at the very least on this point, the previous arrangements made by the parties.

PAWI cannot, by this petition for review, seek refuge over a business dealing and decision gone awry. Neither do the courts function to relieve a party from the effects of an unwise or unfavorable contract freely entered into. As has so aptly been explained by the appellate court, the over-all picture might, indeed, appear to be onerous to PAWI but it should bear emphasis that the settlement which has become the basis for the foreign judgment has not been the start of a business venture but the end of a failed one, and each party, naturally, has had to negotiate from either position of strength or weakness depending

on its own perception of who might have to bear the blame for the failure and the consequence of loss.

[28]

Altogether, the Court finds no reversible error on the part of the appellate court in its appealed judgment.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED. No costs.

SO ORDERED.

Melo, (Chairman), Panganiban, Purisima, and Gonzaga-Reyes, JJ., concur.

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 114323 July 23, 1998

OIL AND NATURAL GAS COMMISSION, petitioner,

vs.

COURT OF APPEALS and PACIFIC CEMENT COMPANY, INC., respondents.

MARTINEZ, J.:

This proceeding involves the enforcement of a foreign judgment rendered by the Civil Judge of Dehra Dun, India in favor of the

petitioner, OIL AND NATURAL GAS COMMISSION and against the private respondent, PACIFIC CEMENT COMPANY, INCORPORATED.

The petitioner is a foreign corporation owned and controlled by the Government of India while the private respondent is a private corporation duly organized and existing under the laws of the Philippines. The present conflict between the petitioner and the private respondent has its roots in a contract entered into by and between both parties on February 26, 1983 whereby the private respondent undertook to supply the petitioner FOUR THOUSAND THREE HUNDRED (4,300) metric tons of oil well cement. In consideration therefor, the petitioner bound itself to pay the private respondent the amount of FOUR HUNDRED SEVENTY-SEVEN THOUSAND THREE HUNDRED U.S. DOLLARS ($477,300.00) by opening an irrevocable, divisible, and confirmed letter of credit in favor of the latter. The oil well cement was loaded on board the ship MV SURUTANA NAVA at the port of Surigao City, Philippines for delivery at Bombay and Calcutta, India. However, due to a dispute between the shipowner and the private respondent, the cargo was held up in Bangkok and did not reach its point destination. Notwithstanding the fact that the private respondent had already received payment and despite several demands made by the petitioner, the private respondent failed to deliver the oil well cement. Thereafter, negotiations ensued between the parties and they agreed that the private respondent will replace the entire 4,300 metric tons of oil well cement with Class "G" cement cost free at the petitioner's designated port. However, upon inspection, the Class "G" cement did not conform to the petitioner's specifications. The petitioner then informed the private respondent that it was referring its claim to an arbitrator pursuant to Clause 16 of their contract which stipulates:

Except where otherwise provided in the supply order/contract all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions or otherwise concerning the materials or the execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof shall be referred to the sole arbitration of the persons appointed by Member of the Commission at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a Commission employer (sic) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the matter in dispute or difference.

The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason the Member of the Commission shall appoint another person to act as arbitrator in accordance with the terms of the contract/supply order. Such person shall be entitled to proceed with reference from the stage at which it was left by his predecessor. Subject as aforesaid the provisions of the Arbitration Act, 1940, or any Statutory modification or re-enactment there of and the rules made there under and for the time being in force shall apply to the arbitration proceedings under this clause.

The arbitrator may with the consent of parties enlarge the time, from time to time, to make and publish the award.

The venue for arbitration shall be at Dehra dun. 1*

On July 23, 1988, the chosen arbitrator, one Shri N.N. Malhotra, resolved the dispute in petitioner's favor setting forth the arbitral award as follows:

NOW THEREFORE after considering all facts of the case, the evidence, oral and documentarys adduced by the claimant and carefully examining the various written statements, submissions, letters, telexes, etc. sent by the respondent, and the oral arguments addressed by the counsel for the claimants, I, N.N. Malhotra, Sole Arbitrator, appointed under clause 16 of the supply order dated 26.2.1983, according to which the parties, i.e. M/S Oil and Natural Gas Commission and the Pacific Cement Co., Inc. can refer the dispute to the sole arbitration under the provision of the Arbitration Act. 1940, do hereby award and direct as follows: —

The Respondent will pay the following to the claimant: —

1. Amount received by the Respondent

against the letter of credit No. 11/19

dated 28.2.1983 US $ 477,300.00

2. Re-imbursement of expenditure incurred

by the claimant on the inspection team's

visit to Philippines in August 1985 US $ 3,881.00

3. L.C. Establishment charges incurred

by the claimant US $ 1,252.82

4. Loss of interest suffered by claimant

from 21.6.83 to 23.7.88 US $ 417,169.95

Total amount of award US $ 899,603.77

In addition to the above, the respondent would also be liable to pay to the claimant the interest at the rate of 6% on the above amount, with effect from 24.7.1988 up to the actual date of payment by the Respondent in full settlement of the claim as awarded or the date of the decree, whichever is earlier.

I determine the cost at Rs. 70,000/- equivalent to US $5,000 towards the expenses on Arbitration, legal expenses, stamps duly incurred by the claimant. The cost will be shared by the parties in equal proportion.

Pronounced at Dehra Dun to-day, the 23rd of July 1988.

2

To enable the petitioner to execute the above award in its favor, it filed a Petition before the Court of the Civil Judge in Dehra Dun. India (hereinafter referred to as the foreign court for brevity), praying that the decision of the arbitrator be made "the Rule of Court" in India. The foreign court issued notices to the private respondent for filing objections to the petition. The private respondent complied and sent its objections dated January 16, 1989. Subsequently, the said court directed the private respondent to pay the filing fees in order that the latter's objections could be given consideration. Instead of paying the required filing fees, the

private respondent sent the following communication addressed to the Civil judge of Dehra Dun:

The Civil Judge

Dehra Dun (U.P.) India

Re: Misc. Case No. 5 of 1989

M/S Pacific Cement Co.,

Inc. vs. ONGC Case

Sir:

1. We received your letter dated 28 April 1989 only last 18 May 1989.

2. Please inform us how much is the court fee to be paid. Your letter did not mention the amount to be paid.

3. Kindly give us 15 days from receipt of your letter advising us how much to pay to comply with the same.

Thank you for your kind consideration.

Pacific Cement Co., Inc.

By:

Jose Cortes, Jr.

President 3

Without responding to the above communication, the foreign court refused to admit the private respondent's objections for failure to pay the required filing fees, and thereafter issued an Order on February 7, 1990, to wit:

ORDER

Since objections filed by defendant have been rejected through Misc. Suit No. 5 on 7.2.90, therefore, award should be made Rule of the Court.

ORDER

Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of conditions of award decree is passed. Award Paper No. 3/B-1 shall be a part of the decree. The plaintiff shall also be entitled to get from defendant (US$ 899,603.77 (US$ Eight Lakhs ninety nine thousand six hundred and three point seventy seven only) along with 9% interest per annum till the last date of realisation.

4

Despite notice sent to the private respondent of the foregoing order and several demands by the petitioner for compliance therewith, the private respondent refused to pay the amount adjudged by the foreign court as owing to the petitioner. Accordingly, the petitioner filed a complaint with Branch 30 of the Regional Trial Court (RTC) of Surigao City for the enforcement of the aforementioned judgment of the foreign court. The private respondent moved to dismiss the complaint on the following grounds: (1) plaintiffs lack of legal capacity to sue; (2) lack of cause of action; and (3) plaintiffs claim or demand has been waived, abandoned, or otherwise extinguished. The petitioner filed its opposition to the said motion to dismiss, and the private respondent, its rejoinder thereto. On January 3, 1992, the RTC issued an order upholding the petitioner's legal capacity to sue,

albeit dismissing the complaint for lack of a valid cause of action. The RTC held that the rule prohibiting foreign corporations transacting business in the Philippines without a license from maintaining a suit in Philippine courts admits of an exception, that is, when the foreign corporation is suing on an isolated transaction as in this case.

5 Anent the issue of the sufficiency of

the petitioner's cause of action, however, the RTC found the referral of the dispute between the parties to the arbitrator under Clause 16 of their contract erroneous. According to the RTC,

[a] perusal of the shove-quoted clause (Clause 16) readily shows that the matter covered by its terms is limited to "ALL QUESTIONS AND DISPUTES, RELATING TO THE MEANING OF THE SPECIFICATION, DESIGNS, DRAWINGS AND INSTRUCTIONS HEREIN BEFORE MENTIONED and as to the QUALITY OF WORKMANSHIP OF THE ITEMS ORDERED or as to any other questions, claim, right or thing whatsoever, but qualified to "IN ANY WAY ARISING OR RELATING TO THE SUPPLY ORDER/CONTRACT, DESIGN, DRAWING, SPECIFICATION, etc.," repeating the enumeration in the opening sentence of the clause.

The court is inclined to go along with the observation of the defendant that the breach, consisting of the non-delivery of the purchased materials, should have been properly litigated before a court of law, pursuant to Clause No. 15 of the Contract/Supply Order, herein quoted, to wit:

"JURISDICTION

All questions, disputes and differences, arising under out of or in connection with this supply order, shall be subject to the

EXCLUSIVE JURISDICTION OF THE COURT, within the local limits of whose jurisdiction and the place from which this supply order is situated."

6

The RTC characterized the erroneous submission of the dispute to the arbitrator as a "mistake of law or fact amounting to want of jurisdiction". Consequently, the proceedings had before the arbitrator were null and void and the foreign court had therefore, adopted no legal award which could be the source of an enforceable right.

7

The petitioner then appealed to the respondent Court of Appeals which affirmed the dismissal of the complaint. In its decision, the appellate court concurred with the RTC's ruling that the arbitrator did not have jurisdiction over the dispute between the parties, thus, the foreign court could not validly adopt the arbitrator's award. In addition, the appellate court observed that the full text of the judgment of the foreign court contains the dispositive portion only and indicates no findings of fact and law as basis for the award. Hence, the said judgment cannot be enforced by any Philippine court as it would violate the constitutional provision that no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based.

8 The appellate court ruled further that the dismissal of the

private respondent's objections for non-payment of the required legal fees, without the foreign court first replying to the private respondent's query as to the amount of legal fees to be paid, constituted want of notice or violation of due process. Lastly, it pointed out that the arbitration proceeding was defective because the arbitrator was appointed solely by the petitioner, and the fact that the arbitrator was a former employee of the latter gives rise to a presumed bias on his part in favor of the petitioner.

9

A subsequent motion for reconsideration by the petitioner of the appellate court's decision was denied, thus, this petition for review on certiorari citing the following as grounds in support thereof:

RESPONDENT COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE LOWER COURT'S ORDER OF DISMISSAL SINCE:

A. THE NON-DELIVERY OF THE CARGO WAS A MATTER PROPERLY COGNIZABLE BY THE PROVISIONS OF CLAUSE 16 OF THE CONTRACT;

B. THE JUDGMENT OF THE CIVIL COURT OF DEHRADUN, INDIA WAS AN AFFIRMATION OF THE FACTUAL AND LEGAL FINDINGS OF THE ARBITRATOR AND THEREFORE ENFORCEABLE IN THIS JURISDICTION;

C. EVIDENCE MUST BE RECEIVED TO REPEL THE EFFECT OF A PRESUMPTIVE RIGHT UNDER A FOREIGN JUDGMENT.

10

The threshold issue is whether or not the arbitrator had jurisdiction over the dispute between the petitioner and the private respondent under Clause 16 of the contract. To reiterate, Clause 16 provides as follows:

Except where otherwise provided in the supply order/contract all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions or otherwise concerning the materials or the

execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof shall be referred to the sole arbitration of the persons appointed by Member of the Commission at the time of dispute. It will be no objection to any such appointment that the arbitrator so appointed is a Commission employer (sic) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the matter in dispute or difference.

11

The dispute between the parties had its origin in the non-delivery of the 4,300 metric tons of oil well cement to the petitioner. The primary question that may be posed, therefore, is whether or not the non-delivery of the said cargo is a proper subject for arbitration under the above-quoted Clause 16. The petitioner contends that the same was a matter within the purview of Clause 16, particularly the phrase, ". . . or as to any other questions, claim, right or thing whatsoever, in any way arising or relating to the supply order/contract, design, drawing, specification, instruction . . .".

12 It is argued that the foregoing phrase allows

considerable latitude so as to include non-delivery of the cargo which was a "claim, right or thing relating to the supply order/contract". The contention is bereft of merit. First of all, the petitioner has misquoted the said phrase, shrewdly inserting a comma between the words "supply order/contract" and "design" where none actually exists. An accurate reproduction of the phrase reads, ". . . or as to any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions . . .". The absence of a comma between the words "supply order/contract" and "design" indicates that the former cannot be taken separately but should be viewed in conjunction with the words "design, drawing, specification,

instruction or these conditions". It is thus clear that to fall within the purview of this phrase, the "claim, right or thing whatsoever" must arise out of or relate to the design, drawing, specification, or instruction of the supply order/contract. The petitioner also insists that the non-delivery of the cargo is not only covered by the foregoing phrase but also by the phrase, ". . . or otherwise concerning the materials or the execution or failure to execute the same during the stipulated/extended period or after completion/abandonment thereof . . .".

The doctrine of noscitur a sociis, although a rule in the construction of statutes, is equally applicable in the ascertainment of the meaning and scope of vague contractual stipulations, such as the aforementioned phrase. According to the maxim noscitur a sociis, where a particular word or phrase is ambiguous in itself or is equally susceptible of various meanings, its correct construction may be made clear and specific by considering the company of the words in which it is found or with which it is associated, or stated differently, its obscurity or doubt may be reviewed by reference to associated words.

13 A close examination of Clause

16 reveals that it covers three matters which may be submitted to arbitration namely,

(1) all questions and disputes, relating to the meaning of the specification designs, drawings and instructions herein before mentioned and as to quality of workmanship of the items ordered; or

(2) any other question, claim, right or thing whatsoever, in any way arising out of or relating to the supply order/contract design, drawing, specification, instruction or these conditions; or

(3) otherwise concerning the materials or the execution or failure to execute the same during stipulated/extended period or after the completion/abandonment thereof.

The first and second categories unmistakably refer to questions and disputes relating to the design, drawing, instructions, specifications or quality of the materials of the supply/order contract. In the third category, the clause, "execution or failure to execute the same", may be read as "execution or failure to execute the supply order/contract". But in accordance with the doctrine of noscitur a sociis, this reference to the supply order/contract must be construed in the light of the preceding words with which it is associated, meaning to say, as being limited only to the design, drawing, instructions, specifications or quality of the materials of the supply order/contract. The non-delivery of the oil well cement is definitely not in the nature of a dispute arising from the failure to execute the supply order/contract design, drawing, instructions, specifications or quality of the materials. That Clause 16 should pertain only to matters involving the technical aspects of the contract is but a logical inference considering that the underlying purpose of a referral to arbitration is for such technical matters to be deliberated upon by a person possessed with the required skill and expertise which may be otherwise absent in the regular courts.

This Court agrees with the appellate court in its ruling that the non-delivery of the oil well cement is a matter properly cognizable by the regular courts as stipulated by the parties in Clause 15 of their contract:

All questions, disputes and differences, arising under out of or in connection with this supply order, shall be subject to the exclusive jurisdiction of the court, within the local limits of whose jurisdiction and the place from which this supply order is situated.

14

The following fundamental principles in the interpretation of contracts and other instruments served as our guide in arriving at the foregoing conclusion:

Art. 1373. If some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import which is most adequate to render it effectual.

15

Art. 1374. The various stipulations of a contract shall be interpreted together, attributing the doubtful ones that sense which may result from all of them taken jointly.

16

Sec. 11. Instrument construed so as to give effect to all provisions. In the construction of an instrument, where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all.

17

Thus, this Court has held that as in statutes, the provisions of a contract should not be read in isolation from the rest of the instrument but, on the contrary, interpreted in the light of the other related provisions.

18 The whole and every part of a contract must

be considered in fixing the meaning of any of its harmonious whole. Equally applicable is the canon of construction that in interpreting a statute (or a contract as in this case), care should be taken that every part thereof be given effect, on the theory that it was enacted as an integrated measure and not as a hodge-podge of conflicting provisions. The rule is that a construction that would render a provision inoperative should be avoided; instead, apparently inconsistent provisions should be reconciled whenever possible as parts of a coordinated and harmonious whole.

19

The petitioner's interpretation that Clause 16 is of such latitude as to contemplate even the non-delivery of the oil well cement would in effect render Clause 15 a mere superfluity. A perusal of Clause 16 shows that the parties did not intend arbitration to be the sole means of settling disputes. This is manifest from Clause 16 itself which is prefixed with the proviso, "Except where otherwise provided in the supply order/contract . . .", thus indicating that the

jurisdiction of the arbitrator is not all encompassing, and admits of exceptions as may be provided elsewhere in the supply order/contract. We believe that the correct interpretation to give effect to both stipulations in the contract is for Clause 16 to be confined to all claims or disputes arising from or relating to the design, drawing, instructions, specifications or quality of the materials of the supply order/contract, and for Clause 15 to cover all other claims or disputes.

The petitioner then asseverates that granting, for the sake of argument, that the non-delivery of the oil well cement is not a proper subject for arbitration, the failure of the replacement cement to conform to the specifications of the contract is a matter clearly falling within the ambit of Clause 16. In this contention, we find merit. When the 4,300 metric tons of oil well cement were not delivered to the petitioner, an agreement was forged between the latter and the private respondent that Class "G" cement would be delivered to the petitioner as replacement. Upon inspection, however, the replacement cement was rejected as it did not conform to the specifications of the contract. Only after this latter circumstance was the matter brought before the arbitrator. Undoubtedly, what was referred to arbitration was no longer the mere non-delivery of the cargo at the first instance but also the failure of the replacement cargo to conform to the specifications of the contract, a matter clearly within the coverage of Clause 16.

The private respondent posits that it was under no legal obligation to make replacement and that it undertook the latter only "in the spirit of liberality and to foster good business relationship".

20 Hence, the undertaking to deliver the replacement

cement and its subsequent failure to conform to specifications are not anymore subject of the supply order/contract or any of the provisions thereof. We disagree.

As per Clause 7 of the supply order/contract, the private respondent undertook to deliver the 4,300 metric tons of oil well cement at "BOMBAY (INDIA) 2181 MT and CALCUTTA 2119 MT".

21 The failure of the private respondent to deliver the cargo

to the designated places remains undisputed. Likewise, the fact that the petitioner had already paid for the cost of the cement is not contested by the private respondent. The private respondent claims, however, that it never benefited from the transaction as it was not able to recover the cargo that was unloaded at the port of Bangkok.

22 First of all, whether or not the private respondent was

able to recover the cargo is immaterial to its subsisting duty to make good its promise to deliver the cargo at the stipulated place of delivery. Secondly, we find it difficult to believe this representation. In its Memorandum filed before this Court, the private respondent asserted that the Civil Court of Bangkok had already ruled that the non-delivery of the cargo was due solely to the fault of the carrier.

23 It is, therefore, but logical to assume that

the necessary consequence of this finding is the eventual recovery by the private respondent of the cargo or the value thereof. What inspires credulity is not that the replacement was done in the spirit of liberality but that it was undertaken precisely because of the private respondent's recognition of its duty to do so under the supply order/contract, Clause 16 of which remains in force and effect until the full execution thereof.

We now go to the issue of whether or not the judgment of the foreign court is enforceable in this jurisdiction in view of the private respondent's allegation that it is bereft of any statement of facts and law upon which the award in favor of the petitioner was based. The pertinent portion of the judgment of the foreign court reads:

ORDER

Award dated 23.7.88, Paper No. 3/B-1 is made Rule of the Court. On the basis of conditions of award decree is passed. Award Paper No. 3/B-1 shall be a part of the decree. The plaintiff shall also be entitled to get from defendant (US$ 899,603.77 (US$ Eight Lakhs ninety nine thousand six hundred and three point seventy seven only) along with 9% interest per annum till the last date of realisation.

24

As specified in the order of the Civil Judge of Dehra Dun, "Award Paper No. 3/B-1 shall be a part of the decree". This is a categorical declaration that the foreign court adopted the findings of facts and law of the arbitrator as contained in the latter's Award Paper. Award Paper No. 3/B-1, contains an exhaustive discussion of the respective claims and defenses of the parties, and the arbitrator's evaluation of the same. Inasmuch as the foregoing is deemed to have been incorporated into the foreign court's judgment the appellate court was in error when it described the latter to be a "simplistic decision containing literally, only the dispositive portion".

25

The constitutional mandate that no decision shall be rendered by any court without expressing therein dearly and distinctly the facts and the law on which it is based does not preclude the validity of "memorandum decisions" which adopt by reference the findings of fact and conclusions of law contained in the decisions of inferior tribunals. In Francisco v. Permskul,

26 this Court held that

the following memorandum decision of the Regional Trial Court of Makati did not transgress the requirements of Section 14, Article VIII of the Constitution:

MEMORANDUM DECISION

After a careful perusal, evaluation and study of the records of this case, this Court hereby adopts by reference the findings of fact and conclusions of law

contained in the decision of the Metropolitan Trial Court of Makati, Metro Manila, Branch 63 and finds that there is no cogent reason to disturb the same.

WHEREFORE, judgment appealed from is hereby affirmed in toto.

27 (Emphasis supplied.)

This Court had occasion to make a similar pronouncement in the earlier case of Romero v. Court of Appeals,

28 where the

assailed decision of the Court of Appeals adopted the findings and disposition of the Court of Agrarian Relations in this wise:

We have, therefore, carefully reviewed the evidence and made a re-assessment of the same, and We are persuaded, nay compelled, to affirm the correctness of the trial court's factual findings and the soundness of its conclusion. For judicial convenience and expediency, therefore, We hereby adopt by way of reference, the findings of facts and conclusions of the court a quo spread in its decision, as integral part of this Our decision.

29 (Emphasis supplied)

Hence, even in this jurisdiction, incorporation by reference is allowed if only to avoid the cumbersome reproduction of the decision of the lower courts, or portions thereof, in the decision of the higher court.

30This is particularly true when

the decision sought to be incorporated is a lengthy and thorough discussion of the facts and conclusions arrived at, as in this case, where Award Paper No. 3/B-1 consists of eighteen (18) single spaced pages.

Furthermore, the recognition to be accorded a foreign judgment is not necessarily affected by the fact that the procedure in the courts of the country in which such judgment was rendered differs from that of the courts of the country in which the judgment is

relied on. 31

This Court has held that matters of remedy and procedure are governed by the lex fori or the internal law of the forum.

32 Thus, if under the procedural rules of the Civil Court of

Dehra Dun, India, a valid judgment may be rendered by adopting the arbitrator's findings, then the same must be accorded respect. In the same vein, if the procedure in the foreign court mandates that an Order of the Court becomes final and executory upon failure to pay the necessary docket fees, then the courts in this jurisdiction cannot invalidate the order of the foreign court simply because our rules provide otherwise.

The private respondent claims that its right to due process had been blatantly violated, first by reason of the fact that the foreign court never answered its queries as to the amount of docket fees to be paid then refused to admit its objections for failure to pay the same, and second, because of the presumed bias on the part of the arbitrator who was a former employee of the petitioner.

Time and again this Court has held that the essence of due process is to be found in the reasonable opportunity to be heard and submit any evidence one may have in support of one's defense

33 or stated otherwise, what is repugnant to due process

is the denial of opportunity to be heard. 34

Thus, there is no violation of due process even if no hearing was conducted, where the party was given a chance to explain his side of the controversy and he waived his right to do so.

35

In the instant case, the private respondent does not deny the fact that it was notified by the foreign court to file its objections to the petition, and subsequently, to pay legal fees in order for its objections to be given consideration. Instead of paying the legal fees, however, the private respondent sent a communication to the foreign court inquiring about the correct amount of fees to be paid. On the pretext that it was yet awaiting the foreign court's reply, almost a year passed without the private respondent paying

the legal fees. Thus, on February 2, 1990, the foreign court rejected the objections of the private respondent and proceeded to adjudicate upon the petitioner's claims. We cannot subscribe to the private respondent's claim that the foreign court violated its right to due process when it failed to reply to its queries nor when the latter rejected its objections for a clearly meritorious ground. The private respondent was afforded sufficient opportunity to be heard. It was not incumbent upon the foreign court to reply to the private respondent's written communication. On the contrary, a genuine concern for its cause should have prompted the private respondent to ascertain with all due diligence the correct amount of legal fees to be paid. The private respondent did not act with prudence and diligence thus its plea that they were not accorded the right to procedural due process cannot elicit either approval or sympathy from this Court.

36

The private respondent bewails the presumed bias on the part of the arbitrator who was a former employee of the petitioner. This point deserves scant consideration in view of the following stipulation in the contract:

. . . . It will be no objection any such appointment that the arbitrator so appointed is a Commission employer (sic) that he had to deal with the matter to which the supply or contract relates and that in the course of his duties as Commission's employee he had expressed views on all or any of the matter in dispute or difference.

37 (Emphasis supplied.)

Finally, we reiterate hereunder our pronouncement in the case of Northwest Orient Airlines, Inc. v. Court of Appeals

38 that:

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.

39

Consequently, the party attacking a foreign judgment, the private respondent herein, had the burden of overcoming the presumption of its validity which it failed to do in the instant case.

The foreign judgment being valid, there is nothing else left to be done than to order its enforcement, despite the fact that the petitioner merely prays for the remand of the case to the RTC for further proceedings. As this Court has ruled on the validity and enforceability of the said foreign judgment in this jurisdiction, further proceedings in the RTC for the reception of evidence to prove otherwise are no longer necessary.

WHEREFORE, the instant petition is GRANTED, and the assailed decision of the Court of Appeals sustaining the trial court's dismissal of the OIL AND NATURAL GAS COMMISSION's complaint in Civil Case No. 4006 before Branch 30 of the RTC of Surigao City is REVERSED, and another in its stead is hereby rendered ORDERING private respondent PACIFIC CEMENT COMPANY, INC. to pay to petitioner the amounts adjudged in the foreign judgment subject of said case.

SO ORDERED.

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 110263 July 20, 2001

ASIAVEST MERCHANT BANKERS (M) BERHAD, petitioner, vs. COURT OF APPEALS and PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, respondents.

DELEON, JR., J.:

Before us is a petition for review on certiorari of the Decision1 of

the Court of Appeals dated May 19,1993 in CA-G.R. CY No. 35871 affirming the Decision

2 dated October 14,1991 of the

Regional Trial Court of Pasig, Metro Manila, Branch 168 in Civil Case No. 56368 which dismissed the complaint of petitioner Asiavest Merchant Bankers (M) Berhad for the enforcement of the money of the judgment of the High Court of Malaysia in Kuala Lumpur against private respondent Philippine National Construction Corporation.1âwphi1.nêt

The petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the laws of Malaysia while private respondent Philippine National Construction Corporation is a corporation duly incorporated and existing under Philippine laws.

It appears that sometime in 1983, 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."

3

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.

On September 13, 1985, the High Court of Malaya (Commercial Division) rendered judgment in favor of the petitioner and against the private respondent which is also designated therein as the "2nd Defendant. "

The judgment reads in full:

SUIT NO. C638 of 1983

Between

Asiavest Merchant Bankers (M) Berhad

Plaintiffs

And

1. Asiavest -CDCP Sdn. Bhd. Defendant

2. Construction & Development Corporation of the Philippines

JUDGMENT

The 2nd Defendant having entered appearance herein and the Court having under Order 14, rule 3 ordered that judgment as hereinafter provided be entered for the Plaintiffs against the 2nd Defendant.

IT IS THIS DAY ADJUDGED that the 2nd defendant do pay the Plaintiffs the sum of $5, 108,290.23 (Ringgit Five million one hundred and eight thousand two hundred and ninety and Sen twenty-three) together with interest at the rate of 12% per annum on

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and

(ii) the sum of $2,521,423.32 from the 11th day of March

1983 to the date of payment; and $350.00 (Ringgit Three Hundred and Fifty) costs.

Dated the 13th day of September, 1985.

Senior Assistant Registrar, High Court, Kuala Lumpur

This Judgment is filed by Messrs. Skrine & Co., 3rd

Floor, Straits Trading Building, No.4, Leboh Pasar, Besar, Kuala Lumpur, Solicitors for the Plaintiffs abovenamed. (VP/Ong/81194.7/83)

4

On the same day, September 13, 1985, the High Court of Malaya issued an Order directing the private respondent (also designated therein as the "2nd Defendant") to pay petitioner interest on the sums covered by the said Judgment, thus:

SUIT NO. C638 of 1983

Between

Asiavest Merchant Bankers (M) Berhad

Plaintiffs

And

1. Asiavest -CDCP Sdn. Bhd. Defendants

2. Construction & Development Corporation of the Philippines

BEFORE THE SENIOR

ASSISTANT REGISTRAR

CIK SUSILA S. PARAM THIS 13th DAY OF SEPTEMBER 1985

IN CHAMBERS

ORDER

Upon the application of Asiavest Merchant Bankers (M) Berhad, the Plaintiffs in this action AND UPON READINGthe Summons in Chambers dated the 16th day of August, 1984 and the Affidavit of Lee Foong Mee affirmed on the 14th day of August 1984 both filed herein AND UPON HEARING Mr. T. Thomas of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant abovenamed on the 26th day of December 1984 IT WAS ORDERED that the Plaintiffs be at liberty to sign final judgment against the 2nd Defendant for the sum of $5,108,290.23 AND IT WAS ORDERED that the 2nd Defendant do pay the Plaintiffs the costs of suit at $350.00AND IT WAS FURTHER ORDERED that the plaintiffs be at liberty to apply for payment of interest AND upon the application of the Plaintiffs for payment of interest coming on for hearing on the 1st day of August in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant above-named AND UPON HEARING Counsel as aforesaid BY CONSENT IT WAS ORDERED that the 2nd Defendant do pay the Plaintiffs interest at a rate to be assessed AND the same coming on for assessment this day in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant AND UPON HEARING Counsel as aforesaid BY CONSENT IT IS ORDERED that the 2nd Defendant do pay the Plaintiffs interest at the rate of 12% per annum on:

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and

(ii) the sum Of $2,521,423.32 from the 11th day of March 1983 to the date of Payment.

Dated the 13th day of September,1985.

Senior Assistant Registrar, High Court, Kuala Lumpur.5

Following unsuccessful attempts6 to secure payment from private

respondent under the judgment, petitioner initiated on September 5, 1988 the complaint before Regional Trial Court of Pasig, Metro Manila, to enforce the judgment of the High Court of Malaya.

7

Private respondent sought the dismissal of the case via a Motion to Dismiss filed on October 5, 1988, 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.

8 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.

9

On May 22, 1989, private respondent filed its Answer with Compulsory Counter claim's

10 and therein raised the grounds it

brought up in its motion to dismiss. In its Reply filed11

on June 8, 1989, 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, Mr. Khay Chay Tee. 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 dated October 14, 1991 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 in a Decision dated May 19, 1993.

Hence, the instant Petition which is anchored on two (2) assigned errors,

12 to wit:

I

THE COURT OF APPEALS ERRED IN HOLDING THAT THE MALAYSIAN COURT DID NOT ACQUIRE PERSONAL JURISDICTION OVER PNCC, NOTWITHSTANDING THAT (a) THE FOREIGN COURT HAD SERVED SUMMONS ON PNCC AT ITS MALAYSlA OFFICE, AND (b) PNCC ITSELF APPEARED BY COUNSEL IN THE CASE BEFORE THAT COURT.

II

THE COURT OF APPEALS ERRED IN DENYING RECOGNITION AND ENFORCEMENT TO (SIC) THE MALAYSIAN COURT JUDGMENT.

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;

13 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.

14

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.

15

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),

16 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. Vinayak Prabhakar Pradhan, presented as petitioner's sole witness, testified to the effect that he is in active practice of the law profession in Malaysia;

17 that he was

connected with Skrine and Company as Legal Assistant up to 1981;

18 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;

19that 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;

20 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;

21 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;

22 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;

23 and that the end result of all these

proceedings is the judgment sought to be enforced.

In addition to the said testimonial evidence, petitioner offered the following documentary evidence:

(a) A certified and authenticated copy of the Judgment promulgated by the Malaysian High Court dated September 13, 1985 directing private respondent to pay petitioner the sum of $5,108,290.23 Malaysian Ringgit plus interests from March 1983 until fully paid;

24

(b) A certified and authenticated copy of the Order dated September 13,1985 issued by the Malaysian High Court in Civil Suit No. C638 of 1983;

25

(c) Computation of principal and interest due as of January 31, 1990 on the amount adjudged payable to petitioner by private respondent;

26

(d) Letter and Statement of Account of petitioner's counsel in Malaysia indicating the costs for prosecuting and implementing the Malaysian High Court's Judgment;

27

(e) Letters between petitioner's Malaysian counsel, Skrine and Co., and its local counsel, Sycip Salazar Law Offices, relative to institution of the action in the Philippines;

28

(f) Billing Memorandum of Sycip Salazar Law Offices dated January 2, 1990 showing attorney's fees paid by and due from petitioner;

29

(g) Statement of Claim, Writ of Summons and Affidavit of Service of such writ in petitioner's suit against private respondent before the Malaysian High Court;

30

(h) Memorandum of Conditional Appearance dated March 28, 1983 filed by counsel for private respondent with the Malaysian High Court;

31

(i) Summons in Chambers and Affidavit of Khaw Chay Tee, cotmsel for private respondent, submitted during the proceedings before the Malaysian High Court;

32

(j) Record of the Court's Proceedings in Civil Case No. C638 of 1983.

33

(k) Petitioner 's verified Application for Summary Judgment dated August 14, 1984;

34 and

(l) Letter dated November 6, 1985 from petitioner's Malaysian Counsel to private respondent's counsel in Malaysia.

35

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.

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, namely, (a) that jurisdiction was not acquired by the Malaysian Court over the person of private respondent due to alleged improper service of summons upon private respondent and the alleged lack of authority of its counsel to appear and represent private respondent in the suit; (b) the foreign judgment is allegedly tainted by evident collusion, fraud and clear mistake of fact or law; and (c) not only were the requisites for enforcement or recognition allegedly not complied with but also that the Malaysian judgment is allegedly contrary to the Constitutional prescription that the "every decision must state the facts and law on which it is based."

36

Private respondent relied solely on the testimony of its two (2) witnesses, namely, Mr. Alfredo. Calupitan, an accountant of private respondent, and Virginia Abelardo, Executive Secretary and a member of the staff of the Corporate Secretariat Section of the Corporate Legal Division, of private respondent, both of whom failed to shed light and amplify its defense or claim for non-enforcement of the foreign judgment against it.

Mr. Calupitan's testimony centered on the following: that from January to December 1982 he was assigned in Malaysia as Project Comptroller of the Pahang Project Package A and B for road construction under the joint venture of private respondent and Asiavest Holdings;

37 that under the joint venture, Asiavest

Holdings would handle the financial aspect of the project, which is fifty-one percent (51 %) while private respondent would handle the technical aspect of the project, or forty-nine percent (49%);

38 and, that Cora Deala was not authorized to receive

summons for and in behalf of the private respondent.39

Ms. Abelardo's testimony, on the other hand, focused on the following: that there was no board resolution authorizing Allen and Gledhill to admit all the claims of petitioner in the suit brought before the High Court of Malaya,

40 though on cross-examination she

admitted that Allen and Gledhill were the retained lawyers of private respondent in Malaysia.

41

The foregoing reasons or grounds relied upon by private respondent in preventing enforcement and recognition of the Malaysian judgment primarily refer to matters of remedy and procedure taken by the Malaysian High Court relative to the suit for collection initiated by petitioner. Needless to stress, the recognition to be accorded a foreign judgment is not necessarily affected by the fact that the procedure in the courts of the country in which such judgment was rendered differs from that of the courts of the country in which the judgment is relied on.

42Ultimately, matters of remedy and procedure such as those

relating to the service of summons or court process upon the defendant, the authority of counsel to appear and represent a defendant and the formal requirements in a decision are governed by the lex fori or the internal law of the forum,

43 i.e., the law of

Malaysia in this case.

In this case, it is the procedural law of Malaysia where the judgment was rendered that determines the validity of the service of court process on private respondent as well as other matters raised by it. As to what the Malaysian procedural law is, remains 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 of Rule 132 of the Revised 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 private respondent to present evidence as to what that Malaysian procedural law is and to show that under it, the assailed service of

summons upon a financial officer of a corporation, as alleged by it, is invalid. It did not. Accordingly, the presumption of validity and regularity of service of summons and the decision thereafter rendered by the High Court of Malaya must stand.

44

On the matter of alleged lack of authority of the law firm of Allen and Gledhill to represent private respondent, not only did the private respondent's witnesses admit that the said law firm of Allen and Gledhill were its counsels in its transactions in Malaysia,

45 but of greater significance is the fact that petitioner

offered in evidence relevant Malaysian jurisprudence46

to the effect that (a) it is not necessary under Malaysian law for counsel appearing before the Malaysian High Court to submit a special power of attorney authorizing him to represent a client before said court, (b) that counsel appearing before the Malaysian High Court has full authority to compromise the suit, and (c) that counsel appearing before the Malaysian High Court need not comply with certain pre-requisites as required under Philippine law to appear and compromise judgments on behalf of their clients before said court.

47

Furthermore, there is no basis for or truth to the appellate court's conclusion that the conditional appearance of private respondent's counsel who was allegedly not authorized to appear and represent, cannot be considered as voluntary submission to the jurisdiction of the High Court of Malaya, inasmuch as said conditional appearance was not premised on the alleged lack of authority of said counsel but the conditional appearance was entered to question the regularity of the service of the writ of summons. Such conditional appearance was in fact subsequently withdrawn when counsel realized that the writ was properly served.

48

On the ground that collusion, fraud and, clear mistake of fact and law tainted the judgment of the High Court of Malaya, no clear

evidence of the same was adduced or shown. The facts which the trial court found "intriguing" amounted to mere conjectures and specious observations. The trial court's finding on the absence of judgment against Asiavest-CDCP Sdn. Bhd. is contradicted by evidence on record that recovery was also sought against Asiavest-CDCP Sdn. Bhd. but the same was found insolvent.

49 Furthermore, even when the foreign judgment is

based on the drafts prepared by counsel for the successful party, such is not per se indicative of collusion or fraud. Fraud to hinder the enforcement within the 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,

50 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 defense.

51 Intrinsic fraud is one

which goes to the very existence of the cause of action is deemed already adjudged, and it, therefore, cannot militate against the recognition or enforcement of the foreign judgment.

52 Evidence is

wanting on the alleged extrinsic fraud. Hence, such unsubstantiated allegation cannot give rise to liability therein.

Lastly, there is no merit to the argument that the foreign judgment is not enforceable in view of the absence of any statement of facts and law upon which the award in favor of the petitioner was based. As aforestated, the lex fori or the internal law of the forum governs matters of remedy and procedure.

53 Considering that

under the procedural rules of the High Court of Malaya, a valid judgment may be rendered even without stating in the judgment every fact and law upon which the judgment is based, then the same must be accorded respect and the courts in the jurisdiction cannot invalidate the judgment of the foreign court simply because our rules provide otherwise.

All in all, private respondent had the ultimate duty to demonstrate the alleged invalidity of such foreign judgment, being the party

challenging the judgment rendered by the High Court of Malaya. But instead of doing so, private respondent merely argued, to which the trial court agreed, that the burden lay upon petitioner to prove the validity of the money judgment. Such is clearly erroneous and would render meaningless the presumption of validity accorded a foreign judgment were the party seeking to enforce it be required to first establish its validity.

54

WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated May 19,1993 in CA-G.R CY No. 35871 sustaining the Decision dated October 14, 1991 in Civil Case No. 56368 of the Regional Trial Court of Pasig, Branch 168 denying the enforcement of the Judgment dated September 13, 1985 of the High Court of Malaya in Kuala Lumpur is REVERSED and SET ASIDE, and another in its stead is hereby renderedORDERING private respondent Philippine National Construction Corporation to pay petitioner Asiavest Merchant Bankers (M) Berhad the amounts adjudged in the said foreign Judgment, subject of the said case.

Costs against the private respondent.

SO ORDERED.

Bellosillo, Mendoza, and Buena, JJ. , concur.

Republic of the Philippines SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 139325 April 12, 2005

PRISCILLA C. MIJARES, LORETTA ANN P. ROSALES, HILDA B. NARCISO, SR. MARIANI DIMARANAN, SFIC, and JOEL C. LAMANGAN in their behalf and on behalf of the Class Plaintiffs in Class Action No. MDL 840, United States District Court of Hawaii, Petitioner, vs. HON. SANTIAGO JAVIER RANADA, in his capacity as Presiding Judge of Branch 137, Regional Trial Court, Makati City, and the ESTATE OF FERDINAND E. MARCOS, through its court appointed legal representatives in Class Action MDL 840, United States District Court of Hawaii, namely: Imelda R. Marcos and Ferdinand Marcos, Jr., Respondents.

D E C I S I O N

TINGA, J.:

Our martial law experience bore strange unwanted fruits, and we have yet to finish weeding out its bitter crop. While the restoration of freedom and the fundamental structures and processes of democracy have been much lauded, according to a significant number, the changes, however, have not sufficiently healed the colossal damage wrought under the oppressive conditions of the martial law period. The cries of justice for the tortured, the murdered, and the desaparecidos arouse outrage and sympathy in the hearts of the fair-minded, yet the dispensation of the appropriate relief due them cannot be extended through the same caprice or whim that characterized the ill-wind of martial rule. The damage done was not merely personal but institutional, and the proper rebuke to the iniquitous past has to involve the award of reparations due within the confines of the restored rule of law.

The petitioners in this case are prominent victims of human rights violations

1 who, deprived of the opportunity to directly confront the

man who once held absolute rule over this country, have chosen to do battle instead with the earthly representative, his estate. The

clash has been for now interrupted by a trial court ruling, seemingly comported to legal logic, that required the petitioners to pay a whopping filing fee of over Four Hundred Seventy-Two Million Pesos (P472,000,000.00) in order that they be able to enforce a judgment awarded them by a foreign court. There is an understandable temptation to cast the struggle within the simplistic confines of a morality tale, and to employ short-cuts to arrive at what might seem the desirable solution. But easy, reflexive resort to the equity principle all too often leads to a result that may be morally correct, but legally wrong.

Nonetheless, the application of the legal principles involved in this case will comfort those who maintain that our substantive and procedural laws, for all their perceived ambiguity and susceptibility to myriad interpretations, are inherently fair and just. The relief sought by the petitioners is expressly mandated by our laws and conforms to established legal principles. The granting of this petition for certiorari is warranted in order to correct the legally infirm and unabashedly unjust ruling of the respondent judge.

The essential facts bear little elaboration. On 9 May 1991, a complaint was filed with the United States District Court (US District Court), District of Hawaii, against the Estate of former Philippine President Ferdinand E. Marcos (Marcos Estate). The action was brought forth by ten Filipino citizens

2 who each alleged

having suffered human rights abuses such as arbitrary detention, torture and rape in the hands of police or military forces during the Marcos regime.

3 The Alien Tort Act was invoked as basis for the

US District Court's jurisdiction over the complaint, as it involved a suit by aliens for tortious violations of international law.

4 These

plaintiffs brought the action on their own behalf and on behalf of a class of similarly situated individuals, particularly consisting of all current civilian citizens of the Philippines, their heirs and beneficiaries, who between 1972 and 1987 were tortured,

summarily executed or had disappeared while in the custody of military or paramilitary groups. Plaintiffs alleged that the class consisted of approximately ten thousand (10,000) members; hence, joinder of all these persons was impracticable.

The institution of a class action suit was warranted under Rule 23(a) and (b)(1)(B) of the US Federal Rules of Civil Procedure, the provisions of which were invoked by the plaintiffs. Subsequently, the US District Court certified the case as a class action and created three (3) sub-classes of torture, summary execution and disappearance victims.

5 Trial ensued, and

subsequently a jury rendered a verdict and an award of compensatory and exemplary damages in favor of the plaintiff class. Then, on 3 February 1995, the US District Court, presided by Judge Manuel L. Real, rendered a Final Judgment (Final Judgment) awarding the plaintiff class a total of One Billion Nine Hundred Sixty Four Million Five Thousand Eight Hundred Fifty Nine Dollars and Ninety Cents ($1,964,005,859.90). The Final Judgment was eventually affirmed by the US Court of Appeals for the Ninth Circuit, in a decision rendered on 17 December 1996.

6

On 20 May 1997, the present petitioners filed Complaint with the Regional Trial Court, City of Makati (Makati RTC) for the enforcement of the Final Judgment. They alleged that they are members of the plaintiff class in whose favor the US District Court awarded damages.

7 They argued that since the Marcos Estate

failed to file a petition for certiorari with the US Supreme Court after the Ninth Circuit Court of Appeals had affirmed the Final Judgment, the decision of the US District Court had become final and executory, and hence should be recognized and enforced in the Philippines, pursuant to Section 50, Rule 39 of the Rules of Court then in force.

8

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

It alleged that petitioners had only paid Four Hundred Ten Pesos (P410.00) as docket and filing fees, notwithstanding the fact that they sought to enforce a monetary amount of damages in the amount of over Two and a Quarter Billion US Dollars (US$2.25 Billion). The Marcos Estate cited Supreme Court Circular No. 7, pertaining to the proper computation and payment of docket fees. In response, the petitioners claimed that an action for the enforcement of a foreign judgment is not capable of pecuniary estimation; hence, a filing fee of only Four Hundred Ten Pesos (P410.00) was proper, pursuant to Section 7(c) of Rule 141.

9

On 9 September 1998, respondent Judge Santiago Javier Ranada

10 of the Makati RTC issued the subject Orderdismissing

the complaint without prejudice. Respondent judge opined that contrary to the petitioners' submission, the subject matter of the complaint was indeed capable of pecuniary estimation, as it involved a judgment rendered by a foreign court ordering the payment of definite sums of money, allowing for easy determination of the value of the foreign judgment. On that score, Section 7(a) of Rule 141 of the Rules of Civil Procedure would find application, and the RTC estimated the proper amount of filing fees was approximately Four Hundred Seventy Two Million Pesos, which obviously had not been paid.

Not surprisingly, petitioners filed a Motion for Reconsideration, which Judge Ranada denied in an Order dated 28 July 1999. From this denial, petitioners filed a Petition for Certiorari under Rule 65 assailing the twin orders of respondent judge.

11 They

prayed for the annulment of the questioned orders, and an order directing the reinstatement of Civil Case No. 97-1052 and the conduct of appropriate proceedings thereon.

Petitioners submit that their action is incapable of pecuniary estimation as the subject matter of the suit is the enforcement of a foreign judgment, and not an action for the collection of a sum of

money or recovery of damages. They also point out that to require the class plaintiffs to pay Four Hundred Seventy Two Million Pesos (P472,000,000.00) in filing fees would negate and render inutile the liberal construction ordained by the Rules of Court, as required by Section 6, Rule 1 of the Rules of Civil Procedure, particularly the inexpensive disposition of every action.

Petitioners invoke Section 11, Article III of the Bill of Rights of the Constitution, which provides that "Free access to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty," a mandate which is essentially defeated by the required exorbitant filing fee. The adjudicated amount of the filing fee, as arrived at by the RTC, was characterized as indisputably unfair, inequitable, and unjust.

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

12 It urged that the petition be granted and a

judgment rendered, ordering the enforcement and execution of the District Court judgment in accordance with Section 48, Rule 39 of the 1997 Rules of Civil Procedure. For the CHR, the Makati RTC erred in interpreting the action for the execution of a foreign judgment as a new case, in violation of the principle that once a case has been decided between the same parties in one country on the same issue with finality, it can no longer be relitigated again in another country.

13 The CHR likewise invokes the

principle of comity, and of vested rights.

The Court's disposition on the issue of filing fees will prove a useful jurisprudential guidepost for courts confronted with actions enforcing foreign judgments, particularly those lodged against an estate. There is no basis for the issuance a limited pro hac vice ruling based on the special circumstances of the petitioners as victims of martial law, or on the emotionally-charged allegation of human rights abuses.

An examination of Rule 141 of the Rules of Court readily evinces that the respondent judge ignored the clear letter of the law when he concluded that the filing fee be computed based on the total sum claimed or the stated value of the property in litigation.

In dismissing the complaint, the respondent judge relied on Section 7(a), Rule 141 as basis for the computation of the filing fee of over P472 Million. The provision states:

SEC. 7. Clerk of Regional Trial Court.-

(a) For filing an action or a permissive counterclaim or money claim against an estate not based on judgment, or for filing with leave of court a third-party, fourth-party, etc., complaint, or a complaint in intervention, and for all clerical services in the same time, if the total sum claimed, exclusive of interest, or the started value of the property in litigation, is:

1. Less than P 100,00.00 – P 500.00

2. P 100,000.00 or more but less than P 150,000.00

– P 800.00

3. P 150,000.00 or more but less than P 200,000.00

– P 1,000.00

4. P 200,000.00 or more but less than P 250,000.00

– P 1,500.00

5. P 250,000.00 or more but less than P 300,00.00

– P 1,750.00

6. P 300,000.00 or more but not more than P 400,000.00

– P 2,000.00

7. P 350,000.00 or more but not more than P400,000.00

– P 2,250.00

8. For each P 1,000.00 in excess of P 400,000.00

– P 10.00

(Emphasis supplied)

Obviously, the above-quoted provision covers, on one hand, ordinary actions, permissive counterclaims, third-party, etc. complaints and complaints-in-interventions, and on the other, money claims against estates which are not based on judgment. Thus, the relevant question for purposes of the present petition is whether the action filed with the lower court is a "money claim against an estate not based on judgment."

Petitioners' complaint may have been lodged against an estate, but it is clearly based on a judgment, the Final Judgment of the US District Court. The provision does not make any distinction between a local judgment and a foreign judgment, and where the law does not distinguish, we shall not distinguish.

A reading of Section 7 in its entirety reveals several instances wherein the filing fee is computed on the basis of the amount of the relief sought, or on the value of the property in litigation. The filing fee for requests for extrajudicial foreclosure of mortgage is based on the amount of indebtedness or the mortgagee's claim.

14 In special proceedings involving properties such as for

the allowance of wills, the filing fee is again based on the value of the property.

15 The aforecited rules evidently have no application

to petitioners' complaint.

Petitioners rely on Section 7(b), particularly the proviso on actions where the value of the subject matter cannot be estimated. The provision reads in full:

SEC. 7. Clerk of Regional Trial Court.-

(b) For filing

1. Actions where the value

of the subject matter

cannot be estimated --- P 600.00

2. Special civil actions except

judicial foreclosure which

shall be governed by

paragraph (a) above --- P 600.00

3. All other actions not

involving property --- P 600.00

In a real action, the assessed value of the property, or if there is none, the estimated value, thereof shall be alleged by the claimant and shall be the basis in computing the fees.

It is worth noting that the provision also provides that in real actions, the assessed value or estimated value of the property shall be alleged by the claimant and shall be the basis in computing the fees. Yet again, this provision does not apply in the case at bar. A real action is one where the plaintiff seeks the recovery of real property or an action affecting title to or recovery of possession of real property.

16 Neither the complaint nor the

award of damages adjudicated by the US District Court involves any real property of the Marcos Estate.

Thus, respondent judge was in clear and serious error when he concluded that the filing fees should be computed on the basis of the schematic table of Section 7(a), as the action involved pertains to a claim against an estate based on judgment. What

provision, if any, then should apply in determining the filing fees for an action to enforce a foreign judgment?

To resolve this question, a proper understanding is required on the nature and effects of a foreign judgment in this jurisdiction.

The rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in different countries.

17 This principle

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

18 and expressly recognized in our jurisprudence beginning

with Ingenholl v. Walter E. Olsen & Co.19

The conditions required by the Philippines for recognition and enforcement of a foreign judgment were originally contained in Section 311 of the Code of Civil Procedure, which was taken from the California Code of Civil Procedure which, in turn, was derived from the California Act of March 11, 1872.

20Remarkably, the procedural rule now outlined in

Section 48, Rule 39 of the Rules of Civil Procedure has remained unchanged down to the last word in nearly a century. Section 48 states:

SEC. 48. Effect of foreign judgments. — The effect of a judgment of a tribunal of a foreign country, having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing;

(b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title;

In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, 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. For an actionin rem, the foreign judgment is deemed conclusive upon the title to the thing, while in an action in personam, the foreign judgment is presumptive, and not conclusive, of a right as between the parties and their successors in interest by a subsequent title.

21 However,

in both cases, the foreign judgment is susceptible to impeachment in our local courts on the grounds of want of jurisdiction or notice to the party,

22 collusion, fraud,

23 or clear mistake of law or

fact.24

Thus, the party aggrieved by the foreign judgment is entitled to defend against the enforcement of such decision in the local forum. It is essential that there should be an opportunity to challenge the foreign judgment, in order for the court in this jurisdiction to properly determine its efficacy.

25

It is clear then that it is usually necessary for an action to be filed in order to enforce a foreign judgment

26, even if such judgment

has conclusive effect as in the case of in rem actions, if only for the purpose of allowing the losing party an opportunity to challenge the foreign judgment, and in order for the court to properly determine its efficacy.

27 Consequently, the party

attacking a foreign judgment has the burden of overcoming the presumption of its validity.

28

The rules are silent as to what initiatory procedure must be undertaken in order to enforce a foreign judgment in the Philippines. But there is no question that the filing of a civil complaint is an appropriate measure for such purpose. A civil action is one by which a party sues another for the enforcement or protection of a right,

29 and clearly an action to enforce a foreign

judgment is in essence a vindication of a right prescinding either

from a "conclusive judgment upon title" or the "presumptive evidence of a right."

30 Absent perhaps a statutory grant of

jurisdiction to a quasi-judicial body, the claim for enforcement of judgment must be brought before the regular courts.

31

There are distinctions, nuanced but discernible, between the cause of action arising from the enforcement of a foreign judgment, and that arising from the facts or allegations that occasioned the foreign judgment. They may pertain to the same set of facts, but there is an essential difference in the right-duty correlatives that are sought to be vindicated. For example, in a complaint for damages against a tortfeasor, the cause of action emanates from the violation of the right of the complainant through the act or omission of the respondent. On the other hand, in a complaint for the enforcement of a foreign judgment awarding damages from the same tortfeasor, for the violation of the same right through the same manner of action, the cause of action derives not from the tortious act but from the foreign judgment itself.

More importantly, the matters for proof are different. Using the above example, the complainant will have to establish before the court the tortious act or omission committed by the tortfeasor, who in turn is allowed to rebut these factual allegations or prove extenuating circumstances. Extensive litigation is thus conducted on the facts, and from there the right to and amount of damages are assessed. On the other hand, in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself, and not the facts from which it prescinds.

As stated in Section 48, Rule 39, the actionable issues are generally restricted to a review of jurisdiction of the foreign court, the service of personal notice, collusion, fraud, or mistake of fact or law. The limitations on review is in consonance with a strong and pervasive policy in all legal systems to limit repetitive litigation

on claims and issues.32

Otherwise known as the policy of preclusion, it seeks to protect party expectations resulting from previous litigation, to safeguard against the harassment of defendants, to insure that the task of courts not be increased by never-ending litigation of the same disputes, and – in a larger sense – to promote what Lord Coke in the Ferrer's Case of 1599 stated to be the goal of all law: "rest and quietness."

33 If every

judgment of a foreign court were reviewable on the merits, the plaintiff would be forced back on his/her original cause of action, rendering immaterial the previously concluded litigation.

34

is incapable of pecuniary estimation. Admittedly the proposition, as it applies in this case, is counter-intuitive, and thus deserves strict scrutiny. For in all practical intents and purposes, the matter at hand is capable of pecuniary estimation, down to the last cent.

In the assailedthe enforcement of a foreign

judgmentPetitioners appreciate this distinction, and rely upon it to support the proposition that the subject matter of the complaintOrder, the respondent judge pounced upon this point without equivocation:

The Rules use the term "where the value of the subject matter cannot be estimated." The subject matter of the present case is the judgment rendered by the foreign court ordering defendant to pay plaintiffs definite sums of money, as and for compensatory damages. The Court finds that the value of the foreign judgment can be estimated; indeed, it can even be easily determined. The Court is not minded to distinguish between the enforcement of a judgment and the amount of said judgment, and separate the two, for purposes of determining the correct filing fees. Similarly, a plaintiff suing on promissory note for P1 million cannot be allowed to pay only P400 filing fees (sic), on the reasoning that the subject matter of his suit is not the P1 million, but the

enforcement of the promissory note, and that the value of such "enforcement" cannot be estimated.

35

The jurisprudential standard in gauging whether the subject matter of an action is capable of pecuniary estimation is well-entrenched. The Marcos Estate cites Singsong v. Isabela Sawmill and Raymundo v. Court of Appeals, which ruled:

[I]n determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought. If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim. However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance (now Regional Trial Courts).

On the other hand, petitioners cite the ponencia of Justice JBL Reyes in Lapitan v. Scandia,

36 from which the rule

in Singsong and Raymundo actually derives, but which incorporates this additional nuance omitted in the latter cases:

xxx However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, like in suits to have the defendant perform his part of the contract (specific performance) and in actions for support, or for annulment of judgment or to foreclose a mortgage, this Court has considered such

actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance.

37

Petitioners go on to add that among the actions the Court has recognized as being incapable of pecuniary estimation include legality of conveyances and money deposits,

38 validity of a

mortgage,39

the right to support,40

validity of documents,

41 rescission of contracts,

42 specific

performance,43

and validity or annulment of judgments.44

It is urged that an action for enforcement of a foreign judgment belongs to the same class.

This is an intriguing argument, but ultimately it is self-evident that while the subject matter of the action is undoubtedly the enforcement of a foreign judgment, the effect of a providential award would be the adjudication of a sum of money. Perhaps in theory, such an action is primarily for "the enforcement of the foreign judgment," but there is a certain obtuseness to that sort of argument since there is no denying that the enforcement of the foreign judgment will necessarily result in the award of a definite sum of money.

But before we insist upon this conclusion past beyond the point of reckoning, we must examine its possible ramifications. Petitioners raise the point that a declaration that an action for enforcement of foreign judgment may be capable of pecuniary estimation might lead to an instance wherein a first level court such as the Municipal Trial Court would have jurisdiction to enforce a foreign judgment. But under the statute defining the jurisdiction of first level courts, B.P. 129, such courts are not vested with jurisdiction over actions for the enforcement of foreign judgments.

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in civil

cases. — Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:

(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate, including the grant of provisional remedies in proper cases, where the value of the personal property, estate, or amount of the demand does not exceed One hundred thousand pesos (P100,000.00) or, in Metro Manila where such personal property, estate, or amount of the demand does not exceed Two hundred thousand pesos (P200,000.00) exclusive of interest damages of whatever kind, attorney's fees, litigation expenses, and costs, the amount of which must be specifically alleged: Provided, That where there are several claims or causes of action between the same or different parties, embodied in the same complaint, the amount of the demand shall be the totality of the claims in all the causes of action, irrespective of whether the causes of action arose out of the same or different transactions;

(2) Exclusive original jurisdiction over cases of forcible entry and unlawful detainer: Provided, That when, in such cases, the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession.

(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever

kind, attorney's fees, litigation expenses and costs: Provided, That value of such property shall be determined by the assessed value of the adjacent lots.

45

Section 33 of B.P. 129 refers to instances wherein the cause of action or subject matter pertains to an assertion of rights and interests over property or a sum of money. But as earlier pointed out, the subject matter of an action to enforce a foreign judgment is the foreign judgment itself, and the cause of action arising from the adjudication of such judgment.

An examination of Section 19(6), B.P. 129 reveals that the instant complaint for enforcement of a foreign judgment, even if capable of pecuniary estimation, would fall under the jurisdiction of the Regional Trial Courts, thus negating the fears of the petitioners. Indeed, an examination of the provision indicates that it can be relied upon as jurisdictional basis with respect to actions for enforcement of foreign judgments, provided that no other court or office is vested jurisdiction over such complaint:

Sec. 19. Jurisdiction in civil cases. — Regional Trial Courts shall exercise exclusive original jurisdiction:

xxx

(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising jurisdiction or any court, tribunal, person or body exercising judicial or quasi-judicial functions.

Thus, we are comfortable in asserting the obvious, that the complaint to enforce the US District Court judgment is one capable of pecuniary estimation. But at the same time, it is also an action based on judgment against an estate, thus placing it beyond the ambit of Section 7(a) of Rule 141. What provision then governs the proper computation of the filing fees over the instant

complaint? For this case and other similarly situated instances, we find that it is covered by Section 7(b)(3), involving as it does, "other actions not involving property."

Notably, the amount paid as docket fees by the petitioners on the premise that it was an action incapable of pecuniary estimation corresponds to the same amount required for "other actions not involving property." The petitioners thus paid the correct amount of filing fees, and it was a grave abuse of discretion for respondent judge to have applied instead a clearly inapplicable rule and dismissed the complaint.

There is another consideration of supreme relevance in this case, one which should disabuse the notion that the doctrine affirmed in this decision is grounded solely on the letter of the procedural rule. We earlier adverted to the the internationally recognized policy of preclusion,

46 as well as the principles of comity, utility

and convenience of nations47

as the basis for the evolution of the rule calling for the recognition and enforcement of foreign judgments. The US Supreme Court in Hilton v. Guyot

48 relied

heavily on the concept of comity, as especially derived from the landmark treatise of Justice Story in his Commentaries on the Conflict of Laws of 1834.

49 Yet the notion of "comity" has since

been criticized as one "of dim contours"50

or suffering from a number of fallacies.

51Other conceptual bases for the recognition

of foreign judgments have evolved such as the vested rights theory or the modern doctrine of obligation.

52

There have been attempts to codify through treaties or multilateral agreements the standards for the recognition and enforcement of foreign judgments, but these have not borne fruition. The members of the European Common Market accede to the Judgments Convention, signed in 1978, which eliminates as to participating countries all of such obstacles to recognition such as reciprocity and révision au fond.

53 The most ambitious of these

attempts is the Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, prepared in 1966 by the Hague Conference of International Law.

54 While it

has not received the ratifications needed to have it take effect,55

it is recognized as representing current scholarly thought on the topic.

56 Neither the Philippines nor the United States are

signatories to the Convention.

Yet even if there is no unanimity as to the applicable theory behind the recognition and enforcement of foreign judgments or a universal treaty rendering it obligatory force, there is consensus that the viability of such recognition and enforcement is essential. Steiner and Vagts note:

. . . The notion of unconnected bodies of national law on private international law, each following a quite separate path, is not one conducive to the growth of a transnational community encouraging travel and commerce among its members. There is a contemporary resurgence of writing stressing the identity or similarity of the values that systems of public and private international law seek to further – a community interest in common, or at least reasonable, rules on these matters in national legal systems. And such generic principles as reciprocity play an important role in both fields.

57

Salonga, whose treatise on private international law is of worldwide renown, points out:

Whatever be the theory as to the basis for recognizing foreign judgments, there can be little dispute that the end is to protect the reasonable expectations and demands of the parties. Where the parties have submitted a matter for adjudication in the court of one state, and proceedings there are not tainted with irregularity, they may fairly be expected

to submit, within the state or elsewhere, to the enforcement of the judgment issued by the court.

58

There is also consensus as to the requisites for recognition of a foreign judgment and the defenses against the enforcement thereof. As earlier discussed, the exceptions enumerated in Section 48, Rule 39 have remain unchanged since the time they were adapted in this jurisdiction from long standing American rules. The requisites and exceptions as delineated under Section 48 are but a restatement of generally accepted principles of international law. Section 98 of The Restatement, Second, Conflict of Laws, states that "a valid judgment rendered in a foreign nation after a fair trial in a contested proceeding will be recognized in the United States," and on its face, the term "valid" brings into play requirements such notions as valid jurisdiction over the subject matter and parties.

59 Similarly, the notion that

fraud or collusion may preclude the enforcement of a foreign judgment finds affirmation with foreign jurisprudence and commentators,

60 as well as the doctrine that the foreign judgment

must not constitute "a clear mistake of law or fact."61

And finally, it has been recognized that "public policy" as a defense to the recognition of judgments serves as an umbrella for a variety of concerns in international practice which may lead to a denial of recognition.

62

The viability of the public policy defense against the enforcement of a foreign judgment has been recognized in this jurisdiction.

63 This defense allows for the application of local

standards in reviewing the foreign judgment, especially when such judgment creates only a presumptive right, as it does in cases wherein the judgment is against a person.

64 The defense is

also recognized within the international sphere, as many civil law nations adhere to a broad public policy exception which may result in a denial of recognition when the foreign court, in the light of the choice-of-law rules of the recognizing court, applied the

wrong law to the case.65

The public policy defense can safeguard against possible abuses to the easy resort to offshore litigation if it can be demonstrated that the original claim is noxious to our constitutional values.

There is no obligatory rule derived from treaties or conventions that requires the Philippines to recognize foreign judgments, or allow a procedure for the enforcement thereof. However, generally accepted principles of international law, by virtue of the incorporation clause of the Constitution, form part of the laws of the land even if they do not derive from treaty obligations.

66 The

classical formulation in international law sees those customary rules accepted as binding result from the combination two elements: the established, widespread, and consistent practice on the part of States; and a psychological element known as the opinion juris sive necessitates (opinion as to law or necessity). Implicit in the latter element is a belief that the practice in question is rendered obligatory by the existence of a rule of law requiring it.

67

While the definite conceptual parameters of the recognition and enforcement of foreign judgments have not been authoritatively established, the Court can assert with certainty that such an undertaking is among those generally accepted principles of international law.

68 As earlier demonstrated, there is a widespread

practice among states accepting in principle the need for such recognition and enforcement, albeit subject to limitations of varying degrees. The fact that there is no binding universal treaty governing the practice is not indicative of a widespread rejection of the principle, but only a disagreement as to the imposable specific rules governing the procedure for recognition and enforcement.

Aside from the widespread practice, it is indubitable that the procedure for recognition and enforcement is embodied in the

rules of law, whether statutory or jurisprudential, adopted in various foreign jurisdictions. In the Philippines, this is evidenced primarily by Section 48, Rule 39 of the Rules of Court which has existed in its current form since the early 1900s. Certainly, the Philippine legal system has long ago accepted into its jurisprudence and procedural rules the viability of an action for enforcement of foreign judgment, as well as the requisites for such valid enforcement, as derived from internationally accepted doctrines. Again, there may be distinctions as to the rules adopted by each particular state,

69 but they all prescind from the

premise that there is a rule of law obliging states to allow for, however generally, the recognition and enforcement of a foreign judgment. The bare principle, to our mind, has attained the status of opinio juris in international practice.

This is a significant proposition, as it acknowledges that the procedure and requisites outlined in Section 48, Rule 39 derive their efficacy not merely from the procedural rule, but by virtue of the incorporation clause of the Constitution. Rules of procedure are promulgated by the Supreme Court,

70 and could very well be

abrogated or revised by the high court itself. Yet the Supreme Court is obliged, as are all State components, to obey the laws of the land, including generally accepted principles of international law which form part thereof, such as those ensuring the qualified recognition and enforcement of foreign judgments.

71

Thus, relative to the enforcement of foreign judgments in the Philippines, it emerges that there is a general right recognized within our body of laws, and affirmed by the Constitution, to seek recognition and enforcement of foreign judgments, as well as a right to defend against such enforcement on the grounds of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

The preclusion of an action for enforcement of a foreign judgment in this country merely due to an exhorbitant assessment of docket fees is alien to generally accepted practices and principles in international law. Indeed, there are grave concerns in conditioning the amount of the filing fee on the pecuniary award or the value of the property subject of the foreign decision. Such pecuniary award will almost certainly be in foreign denomination, computed in accordance with the applicable laws and standards of the forum.

72 The vagaries of inflation, as well as the relative low-

income capacity of the Filipino, to date may very well translate into an award virtually unenforceable in this country, despite its integral validity, if the docket fees for the enforcement thereof were predicated on the amount of the award sought to be enforced. The theory adopted by respondent judge and the Marcos Estate may even lead to absurdities, such as if applied to an award involving real property situated in places such as the United States or Scandinavia where real property values are inexorably high. We cannot very well require that the filing fee be computed based on the value of the foreign property as determined by the standards of the country where it is located.

As crafted, Rule 141 of the Rules of Civil Procedure avoids unreasonableness, as it recognizes that the subject matter of an action for enforcement of a foreign judgment is the foreign judgment itself, and not the right-duty correlatives that resulted in the foreign judgment. In this particular circumstance, given that the complaint is lodged against an estate and is based on the US District Court's Final Judgment, this foreign judgment may, for purposes of classification under the governing procedural rule, be deemed as subsumed under Section 7(b)(3) of Rule 141, i.e., within the class of "all other actions not involving property." Thus, only the blanket filing fee of minimal amount is required.

Finally, petitioners also invoke Section 11, Article III of the Constitution, which states that "[F]ree access to the courts and

quasi-judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty." Since the provision is among the guarantees ensured by the Bill of Rights, it certainly gives rise to a demandable right. However, now is not the occasion to elaborate on the parameters of this constitutional right. Given our preceding discussion, it is not necessary to utilize this provision in order to grant the relief sought by the petitioners. It is axiomatic that the constitutionality of an act will not be resolved by the courts if the controversy can be settled on other grounds

73 or unless the resolution thereof is indispensable for the

determination of the case.74

One more word. It bears noting that Section 48, Rule 39 acknowledges that the Final Judgment is not conclusive yet, but presumptive evidence of a right of the petitioners against the Marcos Estate. Moreover, the Marcos Estate is not precluded to present evidence, if any, of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. This ruling, decisive as it is on the question of filing fees and no other, does not render verdict on the enforceability of the Final Judgment before the courts under the jurisdiction of the Philippines, or for that matter any other issue which may legitimately be presented before the trial court. Such issues are to be litigated before the trial court, but within the confines of the matters for proof as laid down in Section 48, Rule 39. On the other hand, the speedy resolution of this claim by the trial court is encouraged, and contumacious delay of the decision on the merits will not be brooked by this Court.

WHEREFORE, the petition is GRANTED. The assailed orders are NULLIFIED and SET ASIDE, and a new order REINSTATING Civil Case No. 97-1052 is hereby issued. No costs.

SO ORDERED.

Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

Republic of the Philippines SUPREME COURT

Manila

EN BANC

G.R. No. L-22470 May 28, 1970

SOORAJMULL NAGARMULL, plaintiff-appellee, vs. BINALBAGAN-ISABELA SUGAR COMPANY, INC., defendant-appellant.

S. Emiliano Calma for plaintiff-appellee.

Salonga, Ordoñez & Associates for defendant-appellant.

(Report)

DIZON, J.:

Appeal taken by Binalbagan-Isabela Sugar Company, Inc. from the decision of the Court of First Instance of Manila in Civil Case No. 41103 entitled Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Company, Inc." of the following tenor:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in favor of the plaintiff, Soorajmull Nagarmull, ordering the defendant, Binalbagan-Isabela

Sugar Co., Inc. to pay said plaintiff the sum of 18,562 rupees and 8 annas, with reservation for the plaintiff to prove its equivalent in Philippine pesos on the date of the filing of the complaint, plus the costs of suit.

The parties submitted to the trial court the following, stipulation of facts:

1. Under Contract G/14370 dated May 6, 1949, plaintiff, a foreign corporation with offices at No. 8 Dalhousie Square (East) Calcutta, India, agreed to sell to defendant, a domestic corporation with offices at the Chronicle Building, Aduana Street, Manila, 1,700,000 pieces of Hessian bags at $26.20 per 100 bags, C.I.F. Iloilo. Shipment of these bags was to be made in equal installments of 425,000 pcs. or 425 bales (1,000 pcs. to a bale during each of the months of July, August, September and October, 1949. A copy of this contract marked Annex 'A' and the Calcutta Jute Fabrics Shippers Association Form 1935 which was made a part of the contract and marked as Annex 'A-l' are hereto attached.

2. This agreement was confirmed in a letter by the plaintiff to the defendant on May 7, 1949, copy of which is attached hereto and made a part hereof as Annex 'B'; .

3. On September 8, 1949, plaintiff advised defendant that of the 850 bales scheduled for shipment in July and August, the former was able to ship only 310 bales owing to the alleged failure of the Adamjee Jute Mills to supply the goods in due time. Copy of plaintiff's letter is attached hereto as Annex 'C' and made an integral part hereof; "4. In a letter dated September 29, 1949, defendant requested plaintiff to ship 100 bales of the

540 bales defaulted from the July and August shipments. A copy of this letter marked Annex 'D' is hereto attached. In this connection, it may also be mentioned that of the 425 bales scheduled for shipment in September, 54 bales were likewise defaulted resulting in a total of 154 bales which is now the object of the controversy.

5. Defendant requested plaintiff to pay 5% of the value of the 154 bales defaulted as penalty which plaintiff did.

6. Meanwhile, on October 1, 1949, the Government of India increased the export duty of jute bags from 80 to 350 rupees per ton, and on October 5, 1949, plaintiff requested defendant to increase its letter of credit to cover the enhanced rate of export duty imposed upon the goods that were to be shipped in October, reminding the latter that under their agreement, any alteration in export duty was to be for the buyer's account. Copy of plaintiff's letter is attached hereto as Annex 'E';

7. On October 25, 1949, defendant, in compliance with plaintiff's request, increased the amount of its letter of credit by $10,986.25 to cover the increase in export duty on 425 bales scheduled under the contract for the shipment in October, 1949. A copy of defendants letter marked Annex 'F' is hereto attached;

8. On October 27, 1949, plaintiff wrote to defendant for a further increase of $4,000.00 in its letter of credit to cover the shipment of 154 bales which under the contract should have been included in the July, August and September shipments. A copy of said letter is attached hereto as Annex 'G';

9. On November 17, 1949, plaintiff wrote defendant a letter reiterating its claim for $4,000.00 corresponding to the increased export taxes on the 154 bales delivered to defendant from the defaulted shipments for the months of July, August and September, 1949. A copy of said letter is attached hereto as Annex 'H';

10. On February 6, 1951, defendant received notification from the Bengal Chamber of Commerce Tribunal of Arbitration in Calcutta, India, advising it that on December 28, 1950, Plaintiff applied to said Tribunal for arbitration regarding their claim. The Tribunal requested the defendant to send them its version of the case. This, defendant did on March 1, 1951, thru the then Government Corporate Counsel, former Justice Pompeyo Diaz. A copy of the letter of authority is attached as Annex 'I';

11. The case was heard by the Tribunal of Arbitration on July 5, 1951. Having previously requested the Secretary Foreign Affairs for Assistance, defendant was represented at the hearing by the Philippine Consulate General in Calcutta, India, by Consul Jose Moreno. A copy of the authority, consisting of the letter of Government Corporate Counsel Pompeyo Diaz, dated March 1, 1951, and 1st Indorsement thereon, dated March 2, 1951, are attached hereto as Annexes 'J' and 'J-1';

12. As presented to the Tribunal of Arbitration, the whole case revolved on the question of whether or not defendant is liable to the plaintiff for the payment of increased export taxes imposed by the Indian Government on the shipments of jute sacks. Defendant contended that if the jute sacks in question were

delivered by plaintiff in the months of July, August, and September, 1949, pursuant to the terms of the contract, then there would have been no increased export taxes to pay because said increased taxes became effective only on October 1, 1949, while on the other hand, plaintiff argued that the contract between the parties and all papers and documents made parts thereto should prevail, including defendant's letter of September 29, 1949;

13. The Bengal Chamber of Commerce, Tribunal of Arbitration, refused to sustain defendant's contention and decided in favor of the plaintiff, ordering the defendant to pay to the plaintiff the sum of 18,562 rupees and 8 annas. This award was thereafter referred to the Calcutta High Court which issued a decree affirming the award;

14. For about two years, the plaintiff attempted to enforce the said award through the Philippine Charge de'Affaires in Calcutta, the Indian Legation here in the Philippines, and the Department of Foreign Affairs. On September 22, 1952, plaintiff, thru the Department of Foreign Affairs, sought to enforce its claim to which letter defendant replied on August 11, 1952, saying that they are not bound by the decision of the Bengal Chamber of Commerce and consequently are not obligated to pay the claim in question. Copies of said letters are attached hereto as Annexes 'K' and 'L', respectively;

15. For more than three years thereafter, no communication was received by defendant from the plaintiff regarding their claim until January 26, 1956, when Atty. S. Emiliano Calma wrote the defendant a

letter of demand, copy of which is attached hereto as Annex 'M';

16. On February 3, 1956, defendant's counsel replied informing Atty. S. Emiliano Calma that it refuses to pay plaintiff's claim because the same has no foundation in law and in fact. A copy of this letter is attached hereto as Annex 'N';

17. Thereafter, no communication was received by defendant from plaintiff or its lawyers regarding their claim until June, 1959, when the present complaint was filed.

FINALLY, parties thru their respective counsel, state that much as they have endeavored to agree on all matters of fact, they have failed to do so on certain points. It is, therefore respectfully prayed of this Honorable Court that parties be allowed to present evidence on the disputed facts.

Thereafter the parties submitted additional evidence pursuant to the reservation they made in the above stipulation.

The appeal was elevated to the Court of Appeals but the latter, by its resolution of January 27, 1964, elevated it to this Court because the additional documents and oral evidence presented by the parties did not raise any factual issue, and said court further found that "the three assigned errors quoted above all pose questions of law."

As may be gathered from the pleadings and the facts stipulated, the action below was for the enforcement of a foreign judgment: the decision rendered by the Tribunal of Arbitration of the Bengal Chamber of Commerce in Calcutta, India, as affirmed by the High Court of Judicature of Calcutta. The appealed decision provides

for its enforcement subject to the right reserved to appellee to present evidence on the equivalent in Philippine currency of the amount adjudged in Indian currency. The record does not disclose any evidence presented for that purpose subsequent to the rendition of judgment.

To secure a reversal of the appealed decision appellant claims that the lower court committed the following errors:

I

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF-APPELLEE, A FOREIGN CORPORATION NOT LICENSED TO TRANSACT BUSINESS IN THE PHILIPPINES, HAS THE RIGHT TO SUE IN PHILIPPINE COURTS.

II

THE LOWER COURT ERRED WHEN IT FAILED TO CONSIDER PLAINTIFF-APPELLEE'S DEFAULT, AND INSTEAD RELIED SOLELY ON THE AWARD OF THE BENGAL CHAMBER OF COMMERCE TRIBUNAL OF ARBITRATION.

III

THE LOWER COURT ERRED WHEN IT HELD THAT PLAINTIFF-APPELLEE WAS NOT GUILTY OF LACHES.

The main issue to be resolved is whether or not the decision of the Tribunal of Arbitration of the Bengal Chamber of Commerce, as affirmed by the High Court of Judicature of Calcutta, is enforceable in the Philippines.

For the purpose of this decision We shall assume that appellee — contrary to appellant's contention — has the right to sue in Philippine courts and that, as far as the instant case is concerned, it is not guilty of laches. This notwithstanding, We are constrained to reverse the appealed decision upon the ground that it is based upon a clear mistake of law and its enforcement will give rise to a patent injustice.

It is true that under the provisions of Section 50 of Rule 39, Rules of Court, a judgment for a sum of money rendered by a foreign court "is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title", but when suit for its enforcement is brought in a Philippine court, said judgment "may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact" (Emphasis supplied.)

Upon the facts of record, We are constrained to hold that the decision sought to be enforced was rendered upon a "clear mistake of law" and because of that it makes appellant — an innocent party — suffer the consequences of the default or breach of contract committed by appellee.

There is no question at all that appellee was guilty of a breach of contract when it failed to deliver one-hundred fifty-four Hessian bales which, according to the contract entered into with appellant, should have been delivered to the latter in the months of July, August and September, all of the year 1949. It is equally clear beyond doubt that had these one-hundred fifty-four bales been delivered in accordance with the contract aforesaid, the increase in the export tax due upon them would not have been imposed because said increased export tax became effective only on October 1, 1949.

To avoid its liability for the aforesaid increase in the export tax, appellee claims that appellant should be held liable therefor on

the strength of its letter of September 29, 1949 asking appellee to ship the shortage. This argument is unavailing because it is not only illogical but contrary to known principles of fairness and justice. When appellant demanded that appellee deliver the shortage of 154 bales it did nothing more than to demand that to which it was entitled as a matter of right. The breach of contract committed by appellee gave appellant, under the law and even under general principles of fairness, the right to rescind the contract or to ask for its specific performance, in either case with right to demand damages. Part of the damages appellant was clearly entitled to recover from appellee growing out of the latter's breach of the contract consists precisely of the amount of the increase decreed in the export tax due on the shortage — which, because of appellee's fault, had to be delivered after the effectivity of the increased export tax.

To the extent, therefore, that the decisions of the Tribunal of Arbitration of the Bengal Chamber of Commerce and of the High Court of Judicature of Calcutta fail to apply to the facts of this case fundamental principles of contract, the same may be impeached, as they have been sufficiently impeached by appellant, on the ground of "clear mistake of law". We agree in this regard with the majority opinion in Ingenohl vs. Walter E. Olsen & Co. (47 Phil. 189), although its view was reversed by the Supreme Court of the United States (273 U.S. 541, 71 L. ed. 762) which at that time had jurisdiction to review by certiorari decisions of this Court. We can not sanction a clear mistake of law that would work an obvious injustice upon appellant.

WHEREFORE, the appealed judgment is reversed and set aside, with costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Fernando, Teehankee, Barredo and Villamor, JJ., concur.

Castro, J., is on leave.