CONFLICT OF LAWS -- CASES

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 112573 February 9, 1995

NORTHWEST ORIENT AIRLINES, INC. petitioner, vs.COURT OF APPEALS and C.F. SHARP & COMPANY INC., respondents.

 

PADILLA, JR., J.:

This petition for review on certiorari seeks to set aside the decision of the Court of Appeals affirming the dismissal of the petitioner's complaint to enforce the judgment of a Japanese court. The principal issue here is whether a Japanese court can acquire jurisdiction over a Philippine corporation doing business in Japan by serving summons through diplomatic channels on the Philippine corporation at its principal office in Manila after prior attempts to serve summons in Japan had failed.

Petitioner Northwest Orient Airlines, Inc. (hereinafter NORTHWEST), a corporation organized under the laws of the State of Minnesota, U.S.A., sought to enforce in Civil Case No. 83-17637 of the Regional Trial Court (RTC), Branch 54, Manila, a judgment rendered in its favor by a Japanese court against private respondent C.F. Sharp & Company, Inc., (hereinafter SHARP), a corporation incorporated under Philippine laws.

As found by the Court of Appeals in the challenged decision of 10 November 1993, 1 the following are the factual and procedural antecedents of this controversy:

On May 9, 1974, plaintiff Northwest Airlines and defendant C.F. Sharp & Company, through its Japan branch, entered into an International Passenger Sales Agency Agreement, whereby the former authorized the latter to sell its air transportation tickets. Unable to remit the proceeds of the ticket sales made by defendant on behalf of the plaintiff under the said agreement, plaintiff on March 25, 1980 sued defendant in Tokyo, Japan, for collection of the unremitted proceeds of the ticket sales, with claim for damages.

On April 11, 1980, a writ of summons was issued by the 36th Civil Department, Tokyo District Court of Japan against defendant at its office at the Taiheiyo Building, 3rd floor, 132, Yamashita-cho, Naka-ku, Yokohoma, Kanagawa Prefecture. The attempt to serve the summons was unsuccessful because the bailiff was advised by a person in the office that Mr. Dinozo, the person believed to be authorized to receive court processes was in Manila and would be back on April 24, 1980.

On April 24, 1980, bailiff returned to the defendant's office to serve the summons. Mr. Dinozo refused to accept the same claiming that he was no longer an employee of the defendant.

After the two attempts of service were unsuccessful, the judge of the Tokyo District Court decided to have the complaint and the writs of summons served at the head office of the defendant in Manila. On July 11, 1980, the Director of the Tokyo District Court requested the Supreme Court of Japan to serve the summons through diplomatic channels upon the defendant's head office in Manila.

On August 28, 1980, defendant received from Deputy Sheriff Rolando Balingit the writ of summons (p. 276, Records). Despite receipt of the same, defendant failed to appear at the scheduled hearing. Thus, the Tokyo Court proceeded to hear the plaintiff's complaint and on [January 29, 1981], rendered judgment ordering the defendant to pay the plaintiff the sum of 83,158,195 Yen and damages for delay at the rate of 6% per annum from August 28, 1980 up to and until payment is completed (pp. 12-14, Records).

On March 24, 1981, defendant received from Deputy Sheriff Balingit copy of the judgment. Defendant not having appealed the judgment, the same became final and executory.

Plaintiff was unable to execute the decision in Japan, hence, on May 20, 1983, a suit for enforcement of the judgment was filed by plaintiff before the Regional Trial Court of Manila Branch 54. 2

On July 16, 1983, defendant filed its answer averring that the judgment of the Japanese Court sought to be enforced is null and void and unenforceable in this jurisdiction having been rendered without due and proper notice to the defendant and/or with collusion or fraud and/or upon a clear mistake of law and fact (pp. 41-45, Rec.).

Unable to settle the case amicably, the case was tried on the merits. After the plaintiff rested its case, defendant on April 21, 1989, filed a Motion for Judgment on a Demurrer to Evidence based on two grounds: (1) the foreign judgment sought to be enforced is null and void for want of

jurisdiction and (2) the said judgment is contrary to Philippine law and public policy and rendered without due process of law. Plaintiff filed its opposition after which the court a quo rendered the now assailed decision dated June 21, 1989 granting the demurrer motion and dismissing the complaint (Decision, pp. 376-378, Records). In granting the demurrer motion, the trial court held that:

The foreign judgment in the Japanese Court sought in this action is null and void for want of jurisdiction over the person of the defendant considering that this is an action in personam; the Japanese Court did not acquire jurisdiction over the person of the defendant because jurisprudence requires that the defendant be served with summons in Japan in order for the Japanese Court to acquire jurisdiction over it, the process of the Court in Japan sent to the Philippines which is outside Japanese jurisdiction cannot confer jurisdiction over the defendant in the case before the Japanese Court of the case at bar. Boudard versus Tait 67 Phil. 170. The plaintiff contends that the Japanese Court acquired jurisdiction because the defendant is a resident of Japan, having four (4) branches doing business therein and in fact had a permit from the Japanese government to conduct business in Japan (citing the exhibits presented by the plaintiff); if this is so then service of summons should have been made upon the defendant in Japan in any of these alleged four branches; as admitted by the plaintiff the service of the summons issued by the Japanese Court was made in the Philippines thru a Philippine Sheriff. This Court agrees that if the defendant in a foreign court is a resident in the court of that foreign court such court could acquire jurisdiction over the person of the defendant but it must be served upon the defendant in the territorial jurisdiction of the foreign court. Such is not the case here because the defendant was served with summons in the Philippines and not in Japan.

Unable to accept the said decision, plaintiff on July 11, 1989 moved for reconsideration of the decision, filing at the same time a conditional Notice of Appeal, asking the court to treat the said notice of appeal "as in effect after and upon issuance of the court's denial of the motion for reconsideration."

Defendant opposed the motion for reconsideration to which a Reply dated August 28, 1989 was filed by the plaintiff.

On October 16, 1989, the lower court disregarded the Motion for Reconsideration and gave due course to the plaintiff's Notice of Appeal. 3

In its decision, the Court of Appeals sustained the trial court. It agreed with the latter in its reliance upon Boudard vs. Tait 4 wherein it was held that "the process of the court has no extraterritorial effect and no jurisdiction is acquired over the person of the defendant by serving him beyond the boundaries of the state." To support its position, the Court of Appeals further stated:

In an action strictly in personam, such as the instant case, personal service of summons within the forum is required for the court to acquire jurisdiction over the defendant (Magdalena Estate Inc. vs. Nieto, 125 SCRA 230). To confer jurisdiction on the court, personal or substituted service of summons on the defendant not extraterritorial service is necessary (Dial Corp vs. Soriano, 161 SCRA 739).

But while plaintiff-appellant concedes that the collection suit filed is an action in personam, it is its theory that a distinction must be made between an action in personam against a resident defendant and an action in personam against a non-resident defendant. Jurisdiction is acquired over a non-resident defendant only if he is served personally within the jurisdiction of the court and over a resident defendant if by personal, substituted or constructive service conformably to statutory authorization. Plaintiff-appellant argues that since the defendant-appellee maintains branches in Japan it is considered a resident defendant. Corollarily, personal, substituted or constructive service of summons when made in compliance with the procedural rules is sufficient to give the court jurisdiction to render judgment in personam.

Such an argument does not persuade.

It is a general rule that processes of the court cannot lawfully be served outside the territorial limits of the jurisdiction of the court from which it issues (Carter vs. Carter; 41 S.E. 2d 532, 201) and this is regardless of the residence or citizenship of the party thus served (Iowa-Rahr vs. Rahr, 129 NW 494, 150 Iowa 511, 35 LRC, NS, 292, Am. Case 1912 D680). There must be actual service within the proper territorial limits on defendant or someone authorized to accept service for him. Thus, a defendant, whether a resident or not in the forum where the action is filed, must be served with summons within that forum.

But even assuming a distinction between a resident defendant and non-resident defendant were to be adopted, such distinction applies only to natural persons and not in the corporations. This finds support in the concept that "a corporation has no home or residence in the sense in which those terms are applied to natural persons" (Claude Neon Lights vs.

Phil. Advertising Corp., 57 Phil. 607). Thus, as cited by the defendant-appellee in its brief:

Residence is said to be an attribute of a natural person, and can be predicated on an artificial being only by more or less imperfect analogy. Strictly speaking, therefore, a corporation can have no local residence or habitation. It has been said that a corporation is a mere ideal existence, subsisting only in contemplation of law — an invisible being which can have, in fact, no locality and can occupy no space, and therefore cannot have a dwelling place. (18 Am. Jur. 2d, p. 693 citing Kimmerle v. Topeka, 88 370, 128 p. 367; Wood v. Hartfold F. Ins. Co., 13 Conn 202)

Jurisprudence so holds that the foreign or domestic character of a corporation is to be determined by the place of its origin where its charter was granted and not by the location of its business activities (Jennings v. Idaho Rail Light & P. Co., 26 Idaho 703, 146 p. 101), A corporation is a "resident" and an inhabitant of the state in which it is incorporated and no other (36 Am. Jur. 2d, p. 49).

Defendant-appellee is a Philippine Corporation duly organized under the Philippine laws. Clearly, its residence is the Philippines, the place of its incorporation, and not Japan. While defendant-appellee maintains branches in Japan, this will not make it a resident of Japan. A corporation does not become a resident of another by engaging in business there even though licensed by that state and in terms given all the rights and privileges of a domestic corporation (Galveston H. & S.A.R. Co. vs. Gonzales, 151 US 496, 38 L ed. 248, 4 S Ct. 401).

On this premise, defendant appellee is a non-resident corporation. As such, court processes must be served upon it at a place within the state in which the action is brought and not elsewhere (St. Clair vs. Cox, 106 US 350, 27 L ed. 222, 1 S. Ct. 354). 5

It then concluded that the service of summons effected in Manila or beyond the territorial boundaries of Japan was null and did not confer jurisdiction upon the Tokyo District Court over the person of SHARP; hence, its decision was void.

Unable to obtain a reconsideration of the decision, NORTHWEST elevated the case to this Court contending that the respondent court erred in holding that SHARP was not a resident of Japan and that summons on SHARP could only be validly served within that country.

A foreign judgment is presumed to be valid and binding in the country from which it comes, until the contrary is shown. It is also proper to presume the regularity of the proceedings and the giving of due notice therein. 6

Under Section 50, Rule 39 of the Rules of Court, a judgment in an action in personam of a tribunal of a foreign country having jurisdiction to pronounce the same is presumptive evidence of a right as between the parties and their successors-in-interest by a subsequent title. The judgment may, however, be assailed by evidence of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. Also, under Section 3 of Rule 131, a court, whether of the Philippines or elsewhere, enjoys the presumption that it was acting in the lawful exercise of jurisdiction and has regularly performed its official duty.

Consequently, the party attacking a foreign judgment has the burden of overcoming the presumption of its validity. 7 Being the party challenging the judgment rendered by the Japanese court, SHARP had the duty to demonstrate the invalidity of such judgment. In an attempt to discharge that burden, it contends that the extraterritorial service of summons effected at its home office in the Philippines was not only ineffectual but also void, and the Japanese Court did not, therefore acquire jurisdiction over it.

It is settled that matters of remedy and procedure such as those relating to the service of process upon a defendant are governed by the lex fori or the internal law of the forum. 8 In this case, it is the procedural law of Japan where the judgment was rendered that determines the validity of the extraterritorial service of process on SHARP. As to what this law is is a question of fact, not of law. It may not be taken judicial notice of and must be pleaded and proved like any other fact. 9 Sections 24 and 25, Rule 132 of the Rules of Court provide that it may be evidenced by an official publication or by a duly attested or authenticated copy thereof. It was then incumbent upon SHARP to present evidence as to what that Japanese procedural law is and to show that under it, the assailed extraterritorial service is invalid. It did not. Accordingly, the presumption of validity and regularity of the service of summons and the decision thereafter rendered by the Japanese court must stand.

Alternatively in the light of the absence of proof regarding Japanese law, the presumption of identity or similarity or the so-called processual presumption 10 may be invoked. Applying it, the Japanese law on the matter is presumed to be similar with the Philippine law on service of summons on a private foreign corporation doing business in the Philippines. Section 14, Rule 14 of the Rules of Court provides that if the defendant is a foreign corporation doing business in the Philippines, service may be made: (1) on its resident agent designated in accordance with law for that purpose, or, (2) if there is no such resident agent, on the government official designated by law to that effect; or (3) on any of its officers or agents within the Philippines.

If the foreign corporation has designated an agent to receive summons, the designation is exclusive, and service of summons is without force and gives the court no jurisdiction unless made upon him. 11

Where the corporation has no such agent, service shall be made on the government official designated by law, to wit: (a) the Insurance Commissioner in the case of a foreign insurance company; (b) the Superintendent of Banks, in the case of a foreign

banking corporation; and (c) the Securities and Exchange Commission, in the case of other foreign corporations duly licensed to do business in the Philippines. Whenever service of process is so made, the government office or official served shall transmit by mail a copy of the summons or other legal proccess to the corporation at its home or principal office. The sending of such copy is a necessary part of the service. 12

SHARP contends that the laws authorizing service of process upon the Securities and Exchange Commission, the Superintendent of Banks, and the Insurance Commissioner, as the case may be, presuppose a situation wherein the foreign corporation doing business in the country no longer has any branches or offices within the Philippines. Such contention is belied by the pertinent provisions of the said laws. Thus, Section 128 of the Corporation Code 13 and Section 190 of the Insurance Code 14 clearly contemplate two situations: (1) if the corporation had left the Philippines or had ceased to transact business therein, and (2) if the corporation has no designated agent. Section 17 of the General Banking Act 15 does not even speak a corporation which had ceased to transact business in the Philippines.

Nowhere in its pleadings did SHARP profess to having had a resident agent authorized to receive court processes in Japan. This silence could only mean, or least create an impression, that it had none. Hence, service on the designated government official or on any of SHARP's officers or agents in Japan could be availed of. The respondent, however, insists that only service of any of its officers or employees in its branches in Japan could be resorted to. We do not agree. As found by the respondent court, two attempts at service were made at SHARP's Yokohama branch. Both were unsuccessful. On the first attempt, Mr. Dinozo, who was believed to be the person authorized to accept court process, was in Manila. On the second, Mr. Dinozo was present, but to accept the summons because, according to him, he was no longer an employee of SHARP. While it may be true that service could have been made upon any of the officers or agents of SHARP at its three other branches in Japan, the availability of such a recourse would not preclude service upon the proper government official, as stated above.

As found by the Court of Appeals, it was the Tokyo District Court which ordered that summons for SHARP be served at its head office in the Philippine's after the two attempts of service had failed. 16 The Tokyo District Court requested the Supreme Court of Japan to cause the delivery of the summons and other legal documents to the Philippines. Acting on that request, the Supreme Court of Japan sent the summons together with the other legal documents to the Ministry of Foreign Affairs of Japan which, in turn, forwarded the same to the Japanese Embassy in Manila . Thereafter, the court processes were delivered to the Ministry (now Department) of Foreign Affairs of the Philippines, then to the Executive Judge of the Court of First Instance (now Regional Trial Court) of Manila, who forthwith ordered Deputy Sheriff Rolando Balingit to serve the same on SHARP at its principal office in Manila. This service is equivalent to service on the proper government official under Section 14, Rule 14 of the Rules of Court, in relation to Section 128 of the Corporation Code. Hence, SHARP's contention that such manner of service is not valid under Philippine laws holds no water. 17

In deciding against the petitioner, the respondent court sustained the trial court's reliance on Boudard vs. Tait 18 where this Court held:

The fundamental rule is that jurisdiction in personam over nonresidents, so as to sustain a money judgment, must be based upon personal service within the state which renders the judgment.

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The process of a court, has no extraterritorial effect, and no jurisdiction is acquired over the person of the defendant by serving him beyond the boundaries of the state. Nor has a judgment of a court of a foreign country against a resident of this country having no property in such foreign country based on process served here, any effect here against either the defendant personally or his property situated here.

Process issuing from the courts of one state or country cannot run into another, and although a nonresident defendant may have been personally served with such process in the state or country of his domicile, it will not give such jurisdiction as to authorize a personal judgment against him.

It further availed of the ruling in Magdalena Estate, Inc. vs. Nieto 19 and Dial Corp. vs. Soriano, 20 as well as the principle laid down by the Iowa Supreme Court in the 1911 case of Raher vs. Raher. 21

The first three cases are, however, inapplicable. Boudard involved the enforcement of a judgment of the civil division of the Court of First Instance of Hanoi, French Indo-China. The trial court dismissed the case because the Hanoi court never acquired jurisdiction over the person of the defendant considering that "[t]he, evidence adduced at the trial conclusively proves that neither the appellee [the defendant] nor his agent or employees were ever in Hanoi, French Indo-China; and that the deceased Marie Theodore Jerome Boudard had never, at any time, been his employee." In Magdalena Estate, what was declared invalid resulting in the failure of the court to acquire jurisdiction over the person of the defendants in an action in personam was the service of summons through publication against non-appearing resident defendants. It was claimed that the latter concealed themselves to avoid personal service of summons upon them. In Dial, the defendants were foreign corporations which were not, domiciled and licensed to engage in business in the Philippines and which did not have officers or agents, places of business, or properties here. On the other hand, in the instant case, SHARP was doing business in Japan and was maintaining four branches therein.

Insofar as to the Philippines is concerned, Raher is a thing of the past. In that case, a divided Supreme Court of Iowa declared that the principle that there can be no jurisdiction in a court of a territory to render a personal judgment against anyone upon service made outside its limits was applicable alike to cases of residents and non-residents. The principle was put at rest by the United States Supreme Court when it

ruled in the 1940 case of Milliken vs. Meyer 22 that domicile in the state is alone sufficient to bring an absent defendant within the reach of the state's jurisdiction for purposes of a personal judgment by means of appropriate substituted service or personal service without the state. This principle is embodied in section 18, Rule 14 of the Rules of Court which allows service of summons on residents temporarily out of the Philippines to be made out of the country. The rationale for this rule was explained in Milliken as follows:

[T]he authority of a state over one of its citizens is not terminated by the mere fact of his absence from the state. The state which accords him privileges and affords protection to him and his property by virtue of his domicile may also exact reciprocal duties. "Enjoyment of the privileges of residence within the state, and the attendant right to invoke the protection of its laws, are inseparable" from the various incidences of state citizenship. The responsibilities of that citizenship arise out of the relationship to the state which domicile creates. That relationship is not dissolved by mere absence from the state. The attendant duties, like the rights and privileges incident to domicile, are not dependent on continuous presence in the state. One such incident of domicile is amenability to suit within the state even during sojourns without the state, where the state has provided and employed a reasonable method for apprising such an absent party of the proceedings against him. 23

The domicile of a corporation belongs to the state where it was incorporated. 24 In a strict technical sense, such domicile as a corporation may have is single in its essence and a corporation can have only one domicile which is the state of its creation. 25

Nonetheless, a corporation formed in one-state may, for certain purposes, be regarded a resident in another state in which it has offices and transacts business. This is the rule in our jurisdiction and apropos thereto, it may be necessery to quote what we stated in State Investment House, Inc, vs. Citibank, N.A., 26 to wit:

The issue is whether these Philippine branches or units may be considered "residents of the Philippine Islands" as that term is used in Section 20 of the Insolvency Law . . . or residents of the state under the laws of which they were respectively incorporated. The answer cannot be found in the Insolvency Law itself, which contains no definition of the term, resident, or any clear indication of its meaning. There are however other statutes, albeit of subsequent enactment and effectivity, from which enlightening notions of the term may be derived.

The National Internal Revenue Code declares that the term "'resident foreign corporation' applies to a foreign corporation engaged in trade or business within the Philippines," as distinguished from a "'non-resident foreign corporation' . . . (which is one) not engaged in trade or bussiness within the Philippines." [Sec. 20, pars. (h) and (i)].

The Offshore Banking Law, Presidential Decree No. 1034, states "that branches, subsidiaries, affiliation, extension offices or any other units of corporation or juridical person organized under the laws of any foreign country operating in the Philippines shall be considered residents of the Philippines. [Sec. 1(e)].

The General Banking Act, Republic Act No. 337, places "branches and agencies in the Philippines of foreign banks . . . (which are) called Philippine branches," in the same category as "commercial banks, savings associations, mortgage banks, development banks, rural banks, stock savings and loan associations" (which have been formed and organized under Philippine laws), making no distinction between the former and the latter in so far as the terms "banking institutions" and "bank" are used in the Act [Sec. 2], declaring on the contrary that in "all matters not specifically covered by special provisions applicable only to foreign banks, or their branches and agencies in the Philippines, said foreign banks or their branches and agencies lawfully doing business in the Philippines "shall be bound by all laws, rules, and regulations applicable to domestic banking corporations of the same class, except such laws, rules and regulations as provided for the creation, formation, organization, or dissolution of corporations or as fix the relation, liabilities, responsibilities, or duties of members, stockholders or officers of corporation. [Sec. 18].

This court itself has already had occasion to hold [Claude Neon Lights, Fed. Inc. vs. Philippine Advertising Corp., 57 Phil. 607] that a foreign corporation licitly doing business in the Philippines, which is a defendant in a civil suit, may not be considered a non-resident within the scope of the legal provision authorizing attachment against a defendant not residing in the Philippine Islands; [Sec. 424, in relation to Sec. 412 of Act No. 190, the Code of Civil Procedure; Sec. 1(f), Rule 59 of the Rules of 1940, Sec. 1(f), Rule 57, Rules of 1964] in other words, a preliminary attachment may not be applied for and granted solely on the asserted fact that the defendant is a foreign corporation authorized to do business in the Philippines — and is consequently and necessarily, "a party who resides out of the Philippines." Parenthetically, if it may not be considered as a party not residing in the Philippines, or as a party who resides out of the country, then, logically, it must be considered a party who does reside in the Philippines, who is a resident of the country. Be this as it may, this Court pointed out that:

. . . Our laws and jurisprudence indicate a purpose to assimilate foreign corporations, duly licensed to do business here, to the status of domestic corporations. (Cf. Section 73, Act No. 1459, and Marshall Wells Co. vs. Henry W. Elser & Co., 46 Phil. 70, 76; Yu Cong Eng vs. Trinidad, 47 Phil. 385, 411) We think it would be entirely out of line with this policy

should we make a discrimination against a foreign corporation, like the petitioner, and subject its property to the harsh writ of seizure by attachment when it has complied not only with every requirement of law made specially of foreign corporations, but in addition with every requirement of law made of domestic corporations. . . .

Obviously, the assimilation of foreign corporations authorized to do business in the Philippines "to the status of domestic corporations, subsumes their being found and operating as corporations, hence, residing, in the country.

The same principle is recognized in American law: that the residence of a corporation, if it can be said to have a residence, is necessarily where it exercises corporate functions . . .;" that it is considered as dwelling "in the place where its business is done . . .," as being "located where its franchises are exercised . . .," and as being "present where it is engaged in the prosecution of the corporate enterprise;" that a "foreign corporation licensed to do business in a state is a resident of any country where it maintains an office or agent for transaction of its usual and customary business for venue purposes;" and that the "necessary element in its signification is locality of existence." [Words and Phrases, Permanent Ed., vol. 37, pp. 394, 412, 493].

In as much as SHARP was admittedly doing business in Japan through its four duly registered branches at the time the collection suit against it was filed, then in the light of the processual presumption, SHARP may be deemed a resident of Japan, and, as such, was amenable to the jurisdiction of the courts therein and may be deemed to have assented to the said courts' lawful methods of serving process. 27

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

We find NORTHWEST's claim for attorney's fees, litigation expenses, and exemplary damages to be without merit. We find no evidence that would justify an award for attorney's fees and litigation expenses under Article 2208 of the Civil Code of the Philippines. Nor is an award for exemplary damages warranted. Under Article 2234 of the Civil Code, before the court may consider the question of whether or not exemplary damages should be awarded, the plaintiff must show that he is entitled to moral, temperate, or compensatory damaged. There being no such proof presented by NORTHWEST, no exemplary damages may be adjudged in its favor.

WHEREFORE, the instant petition is partly GRANTED, and the challenged decision is AFFIRMED insofar as it denied NORTHWEST's claims for attorneys fees, litigation expenses, and exemplary damages but REVERSED insofar as in sustained the trial

court's dismissal of NORTHWEST's complaint in Civil Case No. 83-17637 of Branch 54 of the Regional Trial Court of Manila, and another in its stead is hereby rendered ORDERING private respondent C.F. SHARP L COMPANY, INC. to pay to NORTHWEST the amounts adjudged in the foreign judgment subject of said case, with interest thereon at the legal rate from the filing of the complaint therein until the said foreign judgment is fully satisfied.

Costs against the private respondent.

SO ORDERED.

Padilla, Bellosillo, Quaison and Kapunan, JJ., concur.

SECOND DIVISION

[G.R. No. 108538. January 22, 1996]

LOURDES A. VALMONTE and ALFREDO D. VALMONTE, petitioners, vs. THE HONORABLE COURT OF APPEALS, THIRD DIVISION and ROSITA DIMALANTA,

respondents.

D E C I S I O N

MENDOZA, J.:

Petitioner Lourdes A. Valmonte is a foreign resident. The question is whether in an action for partition filed against her and her husband, who is also her attorney, summons intended for her may be served on her husband, who has a law office in the Philippines. The Regional Trial Court of Manila, Branch 48, said no and refused to declare Lourdes A. Valmonte in default, but the Court of Appeals said yes. Hence this petition for review on certiorari.

The facts of the case are as follows:

Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are husband and wife. They are both residents of 90222 Carkeek Drive South Seattle, Washington, U.S.A. Petitioner Alfredo D. Valmonte, who is a member of the Philippine bar, however, practices his profession in the Philippines, commuting for this purpose between his residence in the state of Washington and Manila, where he holds office at S-304 Gedisco Centre, 1564 A. Mabini, Ermita, Manila.

On March 9, 1992, private respondent Rosita Dimalanta, who is the sister of petitioner Lourdes A. Valmonte, filed a complaint for partition of real property and accounting of rentals against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte before the Regional Trial Court of Manila, Branch 48. The subject of the action is a three-door apartment located in Paco, Manila.

In her Complaint, private respondent alleged:

The plaintiff is of legal age, a widow and is at present a resident of 14823 Conway Road, Chesterfield, Missouri, U.S.A., while the defendants are spouses, of legal age and at present residents of 90222 Carkeek Drive, South Seattle, Washington, U.S.A., but, for purposes of this complaint may be served with summons at Gedisco Center, Unit 304, 1564 A. Mabini St., Ermita, Manila where defendant Alfredo D. Valmonte as defendant Lourdes Arreola Valmonte’s spouse holds office and where he can be found.

Apparently, the foregoing averments were made on the basis of a letter previously sent by petitioner Lourdes A. Valmonte to private respondent’s counsel

in which, in regard to the partition of the property in question, she referred private respondent’s counsel to her husband as the party to whom all communications intended for her should be sent. The letter reads:

July 4, 1991

Dear Atty. Balgos:

This is in response to your letter, dated 20 June 1991, which I received on 3 July 1991. Please address all communications to my lawyer, Atty. Alfredo D. Valmonte, whose address, telephone and fax numbers appear below.

c/o Prime MarineGedisco Center, Unit 3041564 A. Mabini, ErmitaMetro ManilaTelephone: 521-1736Fax: 21-2095

Service of summons was then made upon petitioner Alfredo D. Valmonte, who at the time, was at his office in Manila. Petitioner Alfredo D. Valmonte accepted the summons, insofar as he was concerned, but refused to accept the summons for his wife, Lourdes A. Valmonte, on the ground that he was not authorized to accept the process on her behalf. Accordingly the process server left without leaving a copy of the summons and complaint for petitioner Lourdes A. Valmonte.

Petitioner Alfredo D. Valmonte thereafter filed his Answer with Counterclaim. Petitioner Lourdes A. Valmonte, however, did not file her Answer. For this reason private respondent moved to declare her in default. Petitioner Alfredo D. Valmonte entered a special appearance in behalf of his wife and opposed the private respondent’s motion.

In its Order dated July 3, 1992, the trial court, denied private respondent’s motion to declare petitioner Lourdes A. Valmonte in default. A motion for reconsideration was similarly denied on September 23, 1992. Whereupon, private respondent filed a petition for certiorari, prohibition and mandamus with the Court of Appeals.

On December 29, 1992, the Court of Appeals rendered a decision granting the petition and declaring Lourdes A. Valmonte in default. A copy of the appellate court’s decision was received by petitioner Alfredo D. Valmonte on January 15, 1993 at his Manila office and on January 21, 1993 in Seattle, Washington. Hence, this petition.

The issue at bar is whether in light of the facts set forth above, petitioner Lourdes A. Valmonte was validly served with summons. In holding that she had been, the Court of Appeals stated:1[1]

1

[I]n her above-quoted reply, Mrs. Valmonte clearly and unequivocally directed the aforementioned counsel of Dimalanta to address all communications (evidently referring to her controversy with her sister Mrs. Dimalanta over the Paco property, now the subject of the instant case) to her lawyer who happens also to be her husband. Such directive was made without any qualification just as was her choice/designation of her husband Atty. Valmonte as her lawyer likewise made without any qualification or reservation. Any disclaimer therefore on the part of Atty. Valmonte as to his being his wife’s attorney (at least with regard to the dispute vis-a-vis [sic] the Paco property) would appear to be feeble or trifling, if not incredible.

This view is bolstered by Atty. Valmonte’s subsequent alleged special appearance made on behalf of his wife. Whereas Mrs. Valmonte had manifestly authorized her husband to serve as her lawyer relative to her dispute with her sister over the Paco property and to receive all communications regarding the same and subsequently to appear on her behalf by way of a so-called special appearance, she would nonetheless now insist that the same husband would nonetheless had absolutely no authority to receive summons on her behalf. In effect, she is asserting that representation by her lawyer (who is also her husband) as far as the Paco property controversy is concerned, should only be made by him when such representation would be favorable to her but not otherwise. It would obviously be inequitable for this Court to allow private respondent Lourdes A. Valmonte to hold that her husband has the authority to represent her when an advantage is to be obtained by her and to deny such authority when it would turn out to be her disadvantage. If this be allowed, Our Rules of Court, instead of being an instrument to promote justice would be made use of to thwart or frustrate the same.

xxx xxx xxx

Turning to another point, it would not do for Us to overlook the fact that the disputed summons was served not upon just an ordinary lawyer of private respondent Lourdes A. Valmonte, but upon her lawyer husband. But that is not all, the same lawyer/husband happens to be also her co-defendant in the instant case which involves real property which, according to her lawyer/husband/ co-defendant, belongs to the conjugal partnership of the defendants (the spouses Valmonte). It is highly inconceivable and certainly it would be contrary to human nature for the lawyer/husband/co-defendant to keep to himself the fact that they (the spouses Valmonte) had been sued with regard to a property which he claims to be conjugal. Parenthetically, there is nothing in the records of the case before Us regarding any manifestation by private respondent Lourdes A. Valmonte about her lack of knowledge about the case instituted against her and her lawyer/husband/co-defendant by her sister Rosita.

PREMISES CONSIDERED, the instant petition for certiorari, prohibition and mandamus is given due course. This Court hereby Resolves to nullify the orders of the court a quo dated July 3, 1992 and September 23, 1992 and further declares private respondent Lourdes Arreola Valmonte as having been properly served with summons.

Petitioners assail the aforequoted decision, alleging that the Court of Appeals erred (1) in refusing to apply the provisions of Rule 14, § 17 of the Revised Rules of Court and applying instead Rule 14, § 8 when the fact is that petitioner Lourdes A. Valmonte is a nonresident defendant; and (2) because even if Rule 14, § 8 is the applicable provision, there was no valid substituted service as there was no strict compliance with the requirement by leaving a copy of the summons and complaint with petitioner Alfredo D. Valmonte. Private respondent, upon the other hand, asserts that petitioners are invoking a technicality and that strict adherence to the rules would only result in a useless ceremony.

We hold that there was no valid service of process on Lourdes A. Valmonte.

To provide perspective, it will be helpful to determine first the nature of the action filed against petitioners Lourdes A. Valmonte and Alfredo D. Valmonte by private respondent, whether it is an action in personam, in rem or quasi in rem. This is because the rules on service of summons embodied in Rule 14 apply according to whether an action is one or the other of these actions.

In an action in personam, personal service of summons or, if this is not possible and he cannot be personally served, substituted service, as provided in Rule 14, § 7-82[2] is essential for the acquisition by the court of jurisdiction over the person of a defendant who does not voluntarily submit himself to the authority of the court.3[3] If defendant cannot be served with summons because he is temporarily abroad, but otherwise he is a Philippine resident, service of summons may, by leave of court, be made by publication.4[4] Otherwise stated, a resident defendant in an action in personam, who cannot be personally served with summons, may be summoned either by means of substituted service in accordance with Rule 14, § 8 or by publication as provided in § 17 and 18 of the same Rule.5[5]

In all of these cases, it should be noted, defendant must be a resident of the Philippines, otherwise an action in personam cannot be brought because jurisdiction over his person is essential to make a binding decision.

On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person of the defendant is not essential for giving the court jurisdiction so long as the court acquires jurisdiction over the res. If the defendant is a nonresident and he is not found in the country, summons may be served extraterritorially in accordance with Rule 14, § 17, which provides:

2

3

4

5

§ 17. Extraterritorial service. - When the defendant does not reside and is not found in the Philippines and the action affects the personal status of the plaintiff or relates to, or the subject of which is, property within the Philippines, in which the defendant has or claims a lien or interest, actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the defendant from any interest therein, or the property of the defendant has been attached within the Philippines, service may, by leave of court, be effected out of the Philippines by personal service as under Section 7; or by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient. Any order granting such leave shall specify a reasonable time, which shall not be less than sixty (60) days after notice, within which the defendant must answer.

In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is that it has jurisdiction over the res, i.e. the personal status of the plaintiff who is domiciled in the Philippines or the property litigated or attached. Service of summons in the manner provided in § 17 is not for the purpose of vesting it with jurisdiction but for complying with the requirements of fair play or due process, so that he will be informed of the pendency of the action against him and the possibility that property in the Philippines belonging to him or in which he has an interest may be subjected to a judgment in favor of the plaintiff and he can thereby take steps to protect his interest if he is so minded.6[6]

Applying the foregoing rules to the case at bar, private respondent’s action, which is for partition and accounting under Rule 69, is in the nature of an action quasi in rem. Such an action is essentially for the purpose of affecting the defendant’s interest in a specific property and not to render a judgment against him. As explained in the leading case of Banco Español Filipino v. Palanca :7[7]

[An action quasi in rem is] an action which while not strictly speaking an action in rem partakes of that nature and is substantially such. . . . The action quasi in rem differs from the true action in rem in the circumstance that in the former an individual is named as defendant and the purpose of the proceeding is to subject his interest therein to the obligation or lien burdening the property. All proceedings having for their sole object the sale or other disposition of the property of the defendant, whether by attachment, foreclosure, or other form of remedy, are in a general way thus designated. The judgment entered in these proceedings is conclusive only between the parties.

As petitioner Lourdes A. Valmonte is a nonresident who is not found in the Philippines, service of summons on her must be in accordance with Rule 14, § 17. Such service, to be effective outside the Philippines, must be made either (1) by personal service; (2) by publication in a newspaper of general circulation in such places and for such time as the court may order, in which case a copy of the summons and order of the court should be

6

7

sent by registered mail to the last known address of the defendant; or (3) in any other manner which the court may deem sufficient.

Since in the case at bar, the service of summons upon petitioner Lourdes A. Valmonte was not done by means of any of the first two modes, the question is whether the service on her attorney, petitioner Alfredo D. Valmonte, can be justified under the third mode, namely, “in any . . . manner the court may deem sufficient.”

We hold it cannot. This mode of service, like the first two, must be made outside the Philippines, such as through the Philippine Embassy in the foreign country where the defendant resides.8[8] Moreover, there are several reasons why the service of summons on Atty. Alfredo D. Valmonte cannot be considered a valid service of summons on petitioner Lourdes A. Valmonte. In the first place, service of summons on petitioner Alfredo D. Valmonte was not made upon the order of the court as required by Rule 14, § 17 and certainly was not a mode deemed sufficient by the court which in fact refused to consider the service to be valid and on that basis declare petitioner Lourdes A. Valmonte in default for her failure to file an answer.

In the second place, service in the attempted manner on petitioner was not made upon prior leave of the trial court as required also in Rule 14, § 17. As provided in § 19, such leave must be applied for by motion in writing, supported by affidavit of the plaintiff or some person on his behalf and setting forth the grounds for the application.

Finally, and most importantly, because there was no order granting such leave, petitioner Lourdes A. Valmonte was not given ample time to file her Answer which, according to the rules, shall be not less than sixty (60) days after notice. It must be noted that the period to file an Answer in an action against a resident defendant differs from the period given in an action filed against a nonresident defendant who is not found in the Philippines. In the former, the period is fifteen (15) days from service of summons, while in the latter, it is at least sixty (60) days from notice.

Strict compliance with these requirements alone can assure observance of due process. That is why in one case,9[9] although the Court considered publication in the Philippines of the summons (against the contention that it should be made in the foreign state where defendant was residing) sufficient, nonetheless the service was considered insufficient because no copy of the summons was sent to the last known correct address in the Philippines.

Private respondent cites the ruling in De Leon v. Hontanosas, 67 SCRA 458,462-463 (1975), in which it was held that service of summons upon the defendant’s husband was binding on her. But the ruling in that case is justified because summons were served upon defendant’s husband in their conjugal home in Cebu City and the wife was only temporarily absent, having gone to Dumaguete City for a vacation. The action was for

8

9

collection of a sum of money. In accordance with Rule 14, § 8, substituted service could be made on any person of sufficient discretion in the dwelling place of the defendant, and certainly defendant’s husband, who was there, was competent to receive the summons on her behalf. In any event, it appears that defendant in that case submitted to the jurisdiction of the court by instructing her husband to move for the dissolution of the writ of attachment issued in that case.

On the other hand, in the case of Gemperle v. Schenker,10[10] it was held that service on the wife of a nonresident defendant was found sufficient because the defendant had appointed his wife as his attorney-in-fact. It was held that although defendant Paul Schenker was a Swiss citizen and resident of Switzerland, service of summons upon his wife Helen Schenker who was in the Philippines was sufficient because she was her husband’s representative and attorney-in-fact in a civil case, which he had earlier filed against William Gemperle. In fact Gemperle’s action was for damages arising from allegedly derogatory statements contained in the complaint filed in the first case. As this Court said, “i]n other words, Mrs. Schenker had authority to sue, and had actually sued, on behalf of her husband, so that she was, also, empowered to represent him in suits filed against him, particularly in a case, like the one at bar, which is a consequence of the action brought by her on his behalf.”11[11] Indeed, if instead of filing an independent action Gemperle filed a counterclaim in the action brought by Mr. Schenker against him, there would have been no doubt that the trial court could have acquired jurisdiction over Mr. Schenker through his agent and attorney-in-fact, Mrs. Schenker.

In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not appoint her husband as her attorney-in-fact. Although she wrote private respondent’ s attorney that “all communications” intended for her should be addressed to her husband who is also her lawyer at the latter’s address in Manila, no power of attorney to receive summons for her can be inferred therefrom. In fact the letter was written seven months before the filing of this case below, and it appears that it was written in connection with the negotiations between her and her sister, respondent Rosita Dimalanta, concerning the partition of the property in question. As is usual in negotiations of this kind, the exchange of correspondence was carried on by counsel for the parties. But the authority given to petitioner’s husband in these negotiations certainly cannot be construed as also including an authority to represent her in any litigation.

For the foregoing reasons, we hold that there was no valid service on petitioner Lourdes A. Valmonte in this case.

WHEREFORE, the decision appealed from is REVERSED and the orders dated July 3, 1992 and September 23, 1992 of the Regional Trial Court of Manila, Branch 48 are REINSTATED.

SO ORDERED.

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11

Regalado (Chairman), Romero, and Puno, JJ., concur.

Republic of the PhilippinesSUPREME 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., concur.

THIRD DIVISION

 

KAZUHIRO HASEGAWA and NIPPON ENGINEERING CONSULTANTS CO., LTD.,

Petitioners,

G.R. No. 149177

Present:

- versus -

MINORU KITAMURA,

Respondent.

YNARES-SANTIAGO, J.,

Chairperson,

AUSTRIA-MARTINEZ,

CHICO-NAZARIO,

NACHURA, and

REYES, JJ.

Promulgated:

November 23, 2007

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

 

 

DECISION

 

NACHURA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules

of Court assailing the April 18, 2001 Decision12[1] of the Court of Appeals (CA) in CA-

G.R. SP No. 60827, and the July 25, 2001 Resolution13[2] denying the motion for

reconsideration thereof.

12

13

On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd.

(Nippon), a Japanese consultancy firm providing technical and management support in

the infrastructure projects of foreign governments,14[3] entered into an Independent

Contractor Agreement (ICA) with respondent Minoru Kitamura, a Japanese national

permanently residing in the Philippines.15[4] The agreement provides that respondent

was to extend professional services to Nippon for a year starting on April 1, 1999. 16[5]

Nippon then assigned respondent to work as the project manager of the Southern

Tagalog Access Road (STAR) Project in the Philippines, following the company's

consultancy contract with the Philippine Government.17[6]

When the STAR Project was near completion, the Department of Public Works

and Highways (DPWH) engaged the consultancy services of Nippon, on January 28,

2000, this time for the detailed engineering and construction supervision of the

Bongabon-Baler Road Improvement (BBRI) Project.18[7] Respondent was named as the

project manager in the contract's Appendix 3.1.19[8]

 

On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager

for its International Division, informed respondent that the company had no more

intention of automatically renewing his ICA. His services would be engaged by the

company only up to the substantial completion of the STAR Project on March 31, 2000,

just in time for the ICA's expiry.20[9]

14

15

16

17

18

19

20

Threatened with impending unemployment, respondent, through his lawyer,

requested a negotiation conference and demanded that he be assigned to the BBRI

project. Nippon insisted that respondent’s contract was for a fixed term that had already

expired, and refused to negotiate for the renewal of the ICA.21[10]

As he was not able to generate a positive response from the petitioners,

respondent consequently initiated on June 1, 2000 Civil Case No. 00-0264 for specific

performance and damages with the Regional Trial Court of Lipa City.22[11]

For their part, petitioners, contending that the ICA had been perfected in Japan

and executed by and between Japanese nationals, moved to dismiss the complaint for

lack of jurisdiction. They asserted that the claim for improper pre-termination of

respondent's ICA could only be heard and ventilated in the proper courts of Japan

following the principles of lex loci celebrationis and lex contractus.23[12]

In the meantime, on June 20, 2000, the DPWH approved Nippon's request for

the replacement of Kitamura by a certain Y. Kotake as project manager of the BBRI

Project.24[13]

 

On June 29, 2000, the RTC, invoking our ruling in Insular Government v.

Frank25[14] that matters connected with the performance of contracts are regulated by

the law prevailing at the place of performance,26[15] denied the motion to dismiss.27[16]

21

22

23

24

25

26

27

The trial court subsequently denied petitioners' motion for reconsideration,28[17]

prompting them to file with the appellate court, on August 14, 2000, their first Petition

for Certiorari under Rule 65 [docketed as CA-G.R. SP No. 60205].29[18] On August 23,

2000, the CA resolved to dismiss the petition on procedural grounds—for lack of

statement of material dates and for insufficient verification and certification against

forum shopping.30[19] An Entry of Judgment was later issued by the appellate court on

September 20, 2000.31[20]

Aggrieved by this development, petitioners filed with the CA, on September 19,

2000, still within the reglementary period, a second Petition for Certiorari under Rule 65

already stating therein the material dates and attaching thereto the proper verification

and certification. This second petition, which substantially raised the same issues as

those in the first, was docketed as CA-G.R. SP No. 60827.32[21]

Ruling on the merits of the second petition, the appellate court rendered the

assailed April 18, 2001 Decision33[22] finding no grave abuse of discretion in the trial

court's denial of the motion to dismiss. The CA ruled, among others, that the principle of

lex loci celebrationis was not applicable to the case, because nowhere in the pleadings

was the validity of the written agreement put in issue. The CA thus declared that the trial

court was correct in applying instead the principle of lex loci solutionis.34[23]

Petitioners' motion for reconsideration was subsequently denied by the CA in the

assailed July 25, 2001 Resolution.35[24]

28

29

30

31

32

33

34

35

Remaining steadfast in their stance despite the series of denials, petitioners

instituted the instant Petition for Review on Certiorari36[25] imputing the following errors

to the appellate court:

 

A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE TRIAL COURT VALIDLY EXERCISED JURISDICTION OVER THE INSTANT CONTROVERSY, DESPITE THE FACT THAT THE CONTRACT SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS ENTERED INTO BY AND BETWEEN TWO JAPANESE NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE AND EXECUTED IN TOKYO, JAPAN. B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE NEED TO REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.37[26]  

The pivotal question that this Court is called upon to resolve is whether the

subject matter jurisdiction of Philippine courts in civil cases for specific performance and

damages involving contracts executed outside the country by foreign nationals may be

assailed on the principles of lex loci celebrationis, lex contractus, the “state of the most

significant relationship rule,” or forum non conveniens.

However, before ruling on this issue, we must first dispose of the procedural

matters raised by the respondent.

Kitamura contends that the finality of the appellate court's decision in CA-G.R.

SP No. 60205 has already barred the filing of the second petition docketed as CA-G.R.

SP No. 60827 (fundamentally raising the same issues as those in the first one) and the

instant petition for review thereof.

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37

We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of

the petition's defective certification of non-forum shopping, it was a dismissal without

prejudice.38[27] The same holds true in the CA's dismissal of the said case due to

defects in the formal requirement of verification39[28] and in the other requirement in

Rule 46 of the Rules of Court on the statement of the material dates.40[29] The dismissal

being without prejudice, petitioners can re-file the petition, or file a second petition

attaching thereto the appropriate verification and certification—as they, in fact did—and

stating therein the material dates, within the prescribed period41[30] in Section 4, Rule

65 of the said Rules.42[31]

The dismissal of a case without prejudice signifies the absence of a decision on

the merits and leaves the parties free to litigate the matter in a subsequent action as

though the dismissed action had not been commenced. In other words, the termination

of a case not on the merits does not bar another action involving the same parties, on

the same subject matter and theory.43[32]

Necessarily, because the said dismissal is without prejudice and has no res

judicata effect, and even if petitioners still indicated in the verification and certification of

the second certiorari petition that the first had already been dismissed on procedural

grounds,44[33] petitioners are no longer required by the Rules to indicate in their

certification of non-forum shopping in the instant petition for review of the second

certiorari petition, the status of the aforesaid first petition before the CA. In any case, an

omission in the certificate of non-forum shopping about any event that will not constitute

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39

40

41

42

43

44

res judicata and litis pendentia, as in the present case, is not a fatal defect. It will not

warrant the dismissal and nullification of the entire proceedings, considering that the

evils sought to be prevented by the said certificate are no longer present.45[34]

The Court also finds no merit in respondent's contention that petitioner

Hasegawa is only authorized to verify and certify, on behalf of Nippon, the certiorari

petition filed with the CA and not the instant petition. True, the Authorization46[35] dated

September 4, 2000, which is attached to the second certiorari petition and which is also

attached to the instant petition for review, is limited in scope—its wordings indicate that

Hasegawa is given the authority to sign for and act on behalf of the company only in the

petition filed with the appellate court, and that authority cannot extend to the instant

petition for review.47[36] In a plethora of cases, however, this Court has liberally applied

the Rules or even suspended its application whenever a satisfactory explanation and a

subsequent fulfillment of the requirements have been made.48[37] Given that petitioners

herein sufficiently explained their misgivings on this point and appended to their

Reply49[38] an updated Authorization50[39] for Hasegawa to act on behalf of the

company in the instant petition, the Court finds the same as sufficient compliance with

the Rules.

However, the Court cannot extend the same liberal treatment to the defect in the

verification and certification. As respondent pointed out, and to which we agree,

Hasegawa is truly not authorized to act on behalf of Nippon in this case. The aforesaid

September 4, 2000 Authorization and even the subsequent August 17, 2001

Authorization were issued only by Nippon's president and chief executive officer, not by

the company's board of directors. In not a few cases, we have ruled that corporate

45

46

47

48

49

50

powers are exercised by the board of directors; thus, no person, not even its officers,

can bind the corporation, in the absence of authority from the board.51[40] Considering

that Hasegawa verified and certified the petition only on his behalf and not on behalf of

the other petitioner, the petition has to be denied pursuant to Loquias v. Office of the

Ombudsman.52[41] Substantial compliance will not suffice in a matter that demands

strict observance of the Rules.53[42] While technical rules of procedure are designed not

to frustrate the ends of justice, nonetheless, they are intended to effect the proper and

orderly disposition of cases and effectively prevent the clogging of court dockets.54[43]

Further, the Court has observed that petitioners incorrectly filed a Rule 65

petition to question the trial court's denial of their motion to dismiss. It is a well-

established rule that an order denying a motion to dismiss is interlocutory, and cannot

be the subject of the extraordinary petition for certiorari or mandamus.  The appropriate

recourse is to file an answer and to interpose as defenses the objections raised in the

motion, to proceed to trial, and, in case of an adverse decision, to elevate the entire

case by appeal in due course.55[44] While there are recognized exceptions to this rule,56

[45] petitioners' case does not fall among them.

 

This brings us to the discussion of the substantive issue of the case.

Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question

its jurisdiction to hear and resolve the civil case for specific performance and damages

filed by the respondent. The ICA subject of the litigation was entered into and perfected

51

52

53

54

55

56

in Tokyo, Japan, by Japanese nationals, and written wholly in the Japanese language.

Thus, petitioners posit that local courts have no substantial relationship to the

parties57[46] following the [state of the] most significant relationship rule in Private

International Law.58[47]

The Court notes that petitioners adopted an additional but different theory when

they elevated the case to the appellate court. In the Motion to Dismiss59[48] filed with

the trial court, petitioners never contended that the RTC is an inconvenient forum. They

merely argued that the applicable law which will determine the validity or invalidity of

respondent's claim is that of Japan, following the principles of lex loci celebrationis and

lex contractus.60[49] While not abandoning this stance in their petition before the

appellate court, petitioners on certiorari significantly invoked the defense of forum non

conveniens.61[50] On petition for review before this Court, petitioners dropped their other

arguments, maintained the forum non conveniens defense, and introduced their new

argument that the applicable principle is the [state of the] most significant relationship

rule.62[51]

Be that as it may, this Court is not inclined to deny this petition merely on the

basis of the change in theory, as explained in Philippine Ports Authority v. City of Iloilo.63

[52] We only pointed out petitioners' inconstancy in their arguments to emphasize their

incorrect assertion of conflict of laws principles.

To elucidate, in the judicial resolution of conflicts problems, three consecutive

phases are involved: jurisdiction, choice of law, and recognition and enforcement of

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58

59

60

61

62

63

judgments. Corresponding to these phases are the following questions: (1) Where can

or should litigation be initiated? (2) Which law will the court apply? and (3) Where can

the resulting judgment be enforced?64[53]

Analytically, jurisdiction and choice of law are two distinct concepts.65[54]

Jurisdiction considers whether it is fair to cause a defendant to travel to this state;

choice of law asks the further question whether the application of a substantive law

which will determine the merits of the case is fair to both parties. The power to exercise

jurisdiction does not automatically give a state constitutional authority to apply forum

law. While jurisdiction and the choice of the lex fori will often coincide, the “minimum

contacts” for one do not always provide the necessary “significant contacts” for the

other.66[55] The question of whether the law of a state can be applied to a transaction is

different from the question of whether the courts of that state have jurisdiction to enter a

judgment.67[56]

In this case, only the first phase is at issue—jurisdiction. Jurisdiction, however,

has various aspects. For a court to validly exercise its power to adjudicate a

controversy, it must have jurisdiction over the plaintiff or the petitioner, over the

defendant or the respondent, over the subject matter, over the issues of the case and,

in cases involving property, over the res or the thing which is the subject of the

litigation.68[57] In assailing the trial court's jurisdiction herein, petitioners are actually

referring to subject matter jurisdiction.

Jurisdiction over the subject matter in a judicial proceeding is conferred by the

sovereign authority which establishes and organizes the court. It is given only by law

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65

66

67

68

and in the manner prescribed by law.69[58] It is further determined by the allegations of

the complaint irrespective of whether the plaintiff is entitled to all or some of the claims

asserted therein.70[59] To succeed in its motion for the dismissal of an action for lack of

jurisdiction over the subject matter of the claim,71[60] the movant must show that the

court or tribunal cannot act on the matter submitted to it because no law grants it the

power to adjudicate the claims.72[61]

 

In the instant case, petitioners, in their motion to dismiss, do not claim that the

trial court is not properly vested by law with jurisdiction to hear the subject controversy

for, indeed, Civil Case No. 00-0264 for specific performance and damages is one not

capable of pecuniary estimation and is properly cognizable by the RTC of Lipa City. 73

[62] What they rather raise as grounds to question subject matter jurisdiction are the

principles of lex loci celebrationis and lex contractus, and the “state of the most

significant relationship rule.”

 

The Court finds the invocation of these grounds unsound.

Lex loci celebrationis relates to the “law of the place of the ceremony”74[63] or the

law of the place where a contract is made.75[64] The doctrine of lex contractus or lex

loci contractus means the “law of the place where a contract is executed or to be

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70

71

72

73

74

75

performed.”76[65] It controls the nature, construction, and validity of the contract77[66]

and it may pertain to the law voluntarily agreed upon by the parties or the law intended

by them either expressly or implicitly.78[67] Under the “state of the most significant

relationship rule,” to ascertain what state law to apply to a dispute, the court should

determine which state has the most substantial connection to the occurrence and the

parties. In a case involving a contract, the court should consider where the contract was

made, was negotiated, was to be performed, and the domicile, place of business, or

place of incorporation of the parties.79[68] This rule takes into account several contacts

and evaluates them according to their relative importance with respect to the particular

issue to be resolved.80[69]

Since these three principles in conflict of laws make reference to the law

applicable to a dispute, they are rules proper for the second phase, the choice of law. 81

[70] They determine which state's law is to be applied in resolving the substantive

issues of a conflicts problem.82[71] Necessarily, as the only issue in this case is that of

jurisdiction, choice-of-law rules are not only inapplicable but also not yet called for.

Further, petitioners' premature invocation of choice-of-law rules is exposed by the

fact that they have not yet pointed out any conflict between the laws of Japan and ours.

Before determining which law should apply, first there should exist a conflict of laws

situation requiring the application of the conflict of laws rules.83[72] Also, when the law of

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82

83

a foreign country is invoked to provide the proper rules for the solution of a case, the

existence of such law must be pleaded and proved.84[73]

It should be noted that when a conflicts case, one involving a foreign element, is

brought before a court or administrative agency, there are three alternatives open to the

latter in disposing of it: (1) dismiss the case, either because of lack of jurisdiction or

refusal to assume jurisdiction over the case; (2) assume jurisdiction over the case and

apply the internal law of the forum; or (3) assume jurisdiction over the case and take

into account or apply the law of some other State or States.85[74] The court’s power to

hear cases and controversies is derived from the Constitution and the laws. While it

may choose to recognize laws of foreign nations, the court is not limited by foreign

sovereign law short of treaties or other formal agreements, even in matters regarding

rights provided by foreign sovereigns.86[75]

  Neither can the other ground raised, forum non conveniens,87[76] be used to

deprive the trial court of its jurisdiction herein. First, it is not a proper basis for a motion

to dismiss because Section 1, Rule 16 of the Rules of Court does not include it as a

ground.88[77] Second, whether a suit should be entertained or dismissed on the basis of

the said doctrine depends largely upon the facts of the particular case and is addressed

to the sound discretion of the trial court.89[78] In this case, the RTC decided to assume

jurisdiction. Third, the propriety of dismissing a case based on this principle requires a

factual determination; hence, this conflicts principle is more properly considered a

matter of defense.90[79]

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90

Accordingly, since the RTC is vested by law with the power to entertain and hear

the civil case filed by respondent and the grounds raised by petitioners to assail that

jurisdiction are inappropriate, the trial and appellate courts correctly denied the

petitioners’ motion to dismiss.

WHEREFORE, premises considered, the petition for review on certiorari is

DENIED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justic

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 162894             February 26, 2008

RAYTHEON INTERNATIONAL, INC., petitioner, vs.STOCKTON W. ROUZIE, JR., respondent.

D E C I S I O N

TINGA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure which seeks the reversal of the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. SP No. 67001 and the dismissal of the civil case filed by respondent against petitioner with the trial court.

As culled from the records of the case, the following antecedents appear:

Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing under the laws of the State of Connecticut, United States of America, and respondent Stockton W. Rouzie, Jr., an American citizen, entered into a contract whereby BMSI hired respondent as its representative to negotiate the sale of services in several government projects in the Philippines for an agreed remuneration of 10% of the gross receipts. On 11 March 1992, respondent secured a service contract with the

Republic of the Philippines on behalf of BMSI for the dredging of rivers affected by the Mt. Pinatubo eruption and mudflows.3

On 16 July 1994, respondent filed before the Arbitration Branch of the National Labor Relations Commission (NLRC) a suit against BMSI and Rust International, Inc. (RUST), Rodney C. Gilbert and Walter G. Browning for alleged nonpayment of commissions, illegal termination and breach of employment contract.4 On 28 September 1995, Labor Arbiter Pablo C. Espiritu, Jr. rendered judgment ordering BMSI and RUST to pay respondent’s money claims.5 Upon appeal by BMSI, the NLRC reversed the decision of the Labor Arbiter and dismissed respondent’s complaint on the ground of lack of jurisdiction.6 Respondent elevated the case to this Court but was dismissed in a Resolution dated 26 November 1997. The Resolution became final and executory on 09 November 1998.

On 8 January 1999, respondent, then a resident of La Union, instituted an action for damages before the Regional Trial Court (RTC) of Bauang, La Union. The Complaint,7 docketed as Civil Case No. 1192-BG, named as defendants herein petitioner Raytheon International, Inc. as well as BMSI and RUST, the two corporations impleaded in the earlier labor case. The complaint essentially reiterated the allegations in the labor case that BMSI verbally employed respondent to negotiate the sale of services in government projects and that respondent was not paid the commissions due him from the Pinatubo dredging project which he secured on behalf of BMSI. The complaint also averred that BMSI and RUST as well as petitioner itself had combined and functioned as one company.

In its Answer,8 petitioner alleged that contrary to respondent’s claim, it was a foreign corporation duly licensed to do business in the Philippines and denied entering into any arrangement with respondent or paying the latter any sum of money. Petitioner also denied combining with BMSI and RUST for the purpose of assuming the alleged obligation of the said companies.9 Petitioner also referred to the NLRC decision which disclosed that per the written agreement between respondent and BMSI and RUST, denominated as "Special Sales Representative Agreement," the rights and obligations of the parties shall be governed by the laws of the State of Connecticut.10 Petitioner sought the dismissal of the complaint on grounds of failure to state a cause of action and forum non conveniens and prayed for damages by way of compulsory counterclaim.11

On 18 May 1999, petitioner filed an Omnibus Motion for Preliminary Hearing Based on Affirmative Defenses and for Summary Judgment12 seeking the dismissal of the complaint on grounds of forum non conveniens and failure to state a cause of action. Respondent opposed the same. Pending the resolution of the omnibus motion, the deposition of Walter Browning was taken before the Philippine Consulate General in Chicago.13

In an Order14 dated 13 September 2000, the RTC denied petitioner’s omnibus motion. The trial court held that the factual allegations in the complaint, assuming the same to

be admitted, were sufficient for the trial court to render a valid judgment thereon. It also ruled that the principle of forum non conveniens was inapplicable because the trial court could enforce judgment on petitioner, it being a foreign corporation licensed to do business in the Philippines.15

Petitioner filed a Motion for Reconsideration16 of the order, which motion was opposed by respondent.17 In an Order dated 31 July 2001,18 the trial court denied petitioner’s motion. Thus, it filed a Rule 65 Petition19 with the Court of Appeals praying for the issuance of a writ of certiorari and a writ of injunction to set aside the twin orders of the trial court dated 13 September 2000 and 31 July 2001 and to enjoin the trial court from conducting further proceedings.20

On 28 August 2003, the Court of Appeals rendered the assailed Decision21 denying the petition for certiorari for lack of merit. It also denied petitioner’s motion for reconsideration in the assailed Resolution issued on 10 March 2004.22

The appellate court held that although the trial court should not have confined itself to the allegations in the complaint and should have also considered evidence aliunde in resolving petitioner’s omnibus motion, it found the evidence presented by petitioner, that is, the deposition of Walter Browning, insufficient for purposes of determining whether the complaint failed to state a cause of action. The appellate court also stated that it could not rule one way or the other on the issue of whether the corporations, including petitioner, named as defendants in the case had indeed merged together based solely on the evidence presented by respondent. Thus, it held that the issue should be threshed out during trial.23 Moreover, the appellate court deferred to the discretion of the trial court when the latter decided not to desist from assuming jurisdiction on the ground of the inapplicability of the principle of forum non conveniens.

Hence, this petition raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST RAYTHEON INTERNATIONAL, INC.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24

Incidentally, respondent failed to file a comment despite repeated notices. The Ceferino Padua Law Office, counsel on record for respondent, manifested that the lawyer handling the case, Atty. Rogelio Karagdag, had severed relations with the law firm even before the filing of the instant petition and that it could no longer find the whereabouts of Atty. Karagdag or of respondent despite diligent efforts. In a Resolution25 dated 20 November 2006, the Court resolved to dispense with the filing of a comment.

The instant petition lacks merit.

Petitioner mainly asserts that the written contract between respondent and BMSI included a valid choice of law clause, that is, that the contract shall be governed by the laws of the State of Connecticut. It also mentions the presence of foreign elements in the dispute – namely, the parties and witnesses involved are American corporations and citizens and the evidence to be presented is located outside the Philippines – that renders our local courts inconvenient forums. Petitioner theorizes that the foreign elements of the dispute necessitate the immediate application of the doctrine of forum non conveniens.

Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in judicial resolution of conflicts-of-laws problems, namely: jurisdiction, choice of law, and recognition and enforcement of judgments. Thus, in the instances27 where the Court held that the local judicial machinery was adequate to resolve controversies with a foreign element, the following requisites had to be proved: (1) that the Philippine Court is one to which the parties may conveniently resort; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and (3) that the Philippine Court has or is likely to have the power to enforce its decision.28

On the matter of jurisdiction over a conflicts-of-laws problem where the case is filed in a Philippine court and where the court has jurisdiction over the subject matter, the parties and the res, it may or can proceed to try the case even if the rules of conflict-of-laws or the convenience of the parties point to a foreign forum. This is an exercise of sovereign prerogative of the country where the case is filed.29

Jurisdiction over the nature and subject matter of an action is conferred by the Constitution and the law30 and by the material allegations in the complaint, irrespective of whether or not the plaintiff is entitled to recover all or some of the claims or reliefs sought therein.31 Civil Case No. 1192-BG is an action for damages arising from an alleged breach of contract. Undoubtedly, the nature of the action and the amount of damages prayed are within the jurisdiction of the RTC.

As regards jurisdiction over the parties, the trial court acquired jurisdiction over herein respondent (as party plaintiff) upon the filing of the complaint. On the other hand, jurisdiction over the person of petitioner (as party defendant) was acquired by its voluntary appearance in court.32

That the subject contract included a stipulation that the same shall be governed by the laws of the State of Connecticut does not suggest that the Philippine courts, or any other foreign tribunal for that matter, are precluded from hearing the civil action. Jurisdiction and choice of law are two distinct concepts. Jurisdiction considers whether it is fair to cause a defendant to travel to this state; choice of law asks the further question whether the application of a substantive law which will determine the merits of the case is fair to both parties.33 The choice of law stipulation will become relevant only when the substantive issues of the instant case develop, that is, after hearing on the merits proceeds before the trial court.

Under the doctrine of forum non conveniens, a court, in conflicts-of-laws cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere.34 Petitioner’s averments of the foreign elements in the instant case are not sufficient to oust the trial court of its jurisdiction over Civil Case No. No. 1192-BG and the parties involved.

Moreover, the propriety of dismissing a case based on the principle of forum non conveniens requires a factual determination; hence, it is more properly considered as a matter of defense. While it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the court’s desistance.35

Finding no grave abuse of discretion on the trial court, the Court of Appeals respected its conclusion that it can assume jurisdiction over the dispute notwithstanding its foreign elements. In the same manner, the Court defers to the sound discretion of the lower courts because their findings are binding on this Court.

Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause of action against petitioner. Failure to state a cause of action refers to the insufficiency of allegation in the pleading.36 As a general rule, the elementary test for failure to state a cause of action is whether the complaint alleges facts which if true would justify the relief demanded.37

The complaint alleged that petitioner had combined with BMSI and RUST to function as one company. Petitioner contends that the deposition of Walter Browning rebutted this allegation. On this score, the resolution of the Court of Appeals is instructive, thus:

x x x Our examination of the deposition of Mr. Walter Browning as well as other documents produced in the hearing shows that these evidence aliunde are not quite sufficient for us to mete a ruling that the complaint fails to state a cause of action.

Annexes "A" to "E" by themselves are not substantial, convincing and conclusive proofs that Raytheon Engineers and Constructors, Inc. (REC) assumed the warranty obligations of defendant Rust International in the Makar Port Project in General Santos City, after Rust International ceased to exist after being absorbed by REC. Other documents already submitted in evidence are likewise meager to preponderantly conclude that Raytheon International, Inc., Rust International[,] Inc. and Brand Marine Service, Inc. have combined into one company, so much so that Raytheon International, Inc., the surviving company (if at all) may be held liable for the obligation of BMSI to respondent Rouzie for unpaid commissions. Neither these documents clearly speak otherwise.38

As correctly pointed out by the Court of Appeals, the question of whether petitioner, BMSI and RUST merged together requires the presentation of further evidence, which only a full-blown trial on the merits can afford.

WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 67001 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

DANTE O. TINGAAssociate Justice

FIRST DIVISION

[G.R. No. 122191. October 8, 1998]

SAUDI ARABIAN AIRLINES, petitioner, vs. COURT OF APPEALS, MILAGROS P. MORADA and HON. RODOLFO A. ORTIZ, in his capacity as Presiding Judge of

Branch 89, Regional Trial Court of Quezon City, respondents.

D E C I S I O N

QUISUMBING, J.:

This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set aside the Resolutioni[1] dated September 27, 1995 and the Decisionii[2] dated April 10, 1996 of the Court of Appealsiii[3] in CA-G.R. SP No. 36533,iv[4] and the Ordersv[5] dated August 29, 1994vi[6] and February 2, 1995vii[7] that were issued by the trial court in Civil Case No. Q-93-18394.viii[8]

The pertinent antecedent facts which gave rise to the instant petition, as stated in the questioned Decisionix[9], are as follows:

“On January 21, 1988 defendant SAUDIA hired plaintiff as a Flight Attendant for its airlines based in Jeddah, Saudi Arabia. x x x

On April 27, 1990, while on a lay-over in Jakarta, Indonesia, plaintiff went to a disco dance with fellow crew members Thamer Al-Gazzawi and Allah Al-Gazzawi, both Saudi nationals. Because it was almost morning when they returned to their hotels, they agreed to have breakfast together at the room of

Thamer. When they were in te (sic) room, Allah left on some pretext. Shortly after he did, Thamer attempted to rape plaintiff. Fortunately, a roomboy and several security personnel heard her cries for help and rescued her. Later, the Indonesian police came and arrested Thamer and Allah Al-Gazzawi, the latter as an accomplice.

When plaintiff returned to Jeddah a few days later, several SAUDIA officials interrogated her about the Jakarta incident. They then requested her to go back to Jakarta to help arrange the release of Thamer and Allah. In Jakarta, SAUDIA Legal Officer Sirah Akkad and base manager Baharini negotiated with the police for the immediate release of the detained crew members but did not succeed because plaintiff refused to cooperate. She was afraid that she might be tricked into something she did not want because of her inability to understand the local dialect. She also declined to sign a blank paper and a document written in the local dialect. Eventually, SAUDIA allowed plaintiff to return to Jeddah but barred her from the Jakarta flights.

Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they were again put in service by defendant SAUDI (sic). In September 1990, defendant SAUDIA transferred plaintiff to Manila.

On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors requested her to see Mr. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him, he brought her to the police station where the police took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her to make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the police return her passport and allowed her to catch the afternoon flight out of Jeddah.

One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Miniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sign a document written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila.

Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance from SAUDIA’s Manila manager, Aslam Saleemi, that the investigation was routinary and that it posed no danger to her.

In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the airport, however, just as her plane

was about to take off, a SAUDIA officer told her that the airline had forbidden her to take flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders.

On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment and shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing and listening to the music in violation of Islamic laws; and (3) socializing with the male crew, in contravention of Islamic tradition.”x[10]

Facing conviction, private respondent sought the help of her employer, petitioner SAUDIA. Unfortunately, she was denied any assistance. She then asked the Philippine Embassy in Jeddah to help her while her case is on appeal. Meanwhile, to pay for her upkeep, she worked on the domestic flight of SAUDIA, while Thamer and Allah continued to serve in the international flights.xi[11]

Because she was wrongfully convicted, the Prince of Makkah dismissed the case against her and allowed her to leave Saudi Arabia. Shortly before her return to Manila,xii

[12] she was terminated from the service by SAUDIA, without her being informed of the cause.

On November 23, 1993, Morada filed a Complaintxiii[13] for damages against SAUDIA, and Khaled Al-Balawi (“Al- Balawi”), its country manager.

On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismissxiv[14] which raised the following grounds, to wit: (1) that the Complaint states no cause of action against Saudia; (2) that defendant Al-Balawi is not a real party in interest; (3) that the claim or demand set forth in the Complaint has been waived, abandoned or otherwise extinguished; and (4) that the trial court has no jurisdiction to try the case.

On February 10, 1994, Morada filed her Opposition (To Motion to Dismiss)xv[15] Saudia filed a replyxvi[16] thereto on March 3, 1994.

On June 23, 1994, Morada filed an Amended Complaintxvii[17] wherein Al-Balawi was dropped as party defendant. On August 11, 1994, Saudia filed its Manifestation and Motion to Dismiss Amended Complaintxviii[18].

The trial court issued an Orderxix[19] dated August 29, 1994 denying the Motion to Dismiss Amended Complaint filed by Saudia.

From the Order of respondent Judgexx[20] denying the Motion to Dismiss, SAUDIA filed on September 20, 1994, its Motion for Reconsiderationxxi[21] of the Order dated August 29, 1994. It alleged that the trial court has no jurisdiction to hear and try the case on the

basis of Article 21 of the Civil Code, since the proper law applicable is the law of the Kingdom of Saudi Arabia. On October 14, 1994, Morada filed her Oppositionxxii[22] (To Defendant’s Motion for Reconsideration).

In the Replyxxiii[23] filed with the trial court on October 24, 1994, SAUDIA alleged that since its Motion for Reconsideration raised lack of jurisdiction as its cause of action, the Omnibus Motion Rule does not apply, even if that ground is raised for the first time on appeal. Additionally, SAUDIA alleged that the Philippines does not have any substantial interest in the prosecution of the instant case, and hence, without jurisdiction to adjudicate the same.

Respondent Judge subsequently issued another Orderxxiv[24] dated February 2, 1995, denying SAUDIA’s Motion for Reconsideration. The pertinent portion of the assailed Order reads as follows:

“Acting on the Motion for Reconsideration of defendant Saudi Arabian Airlines filed, thru counsel, on September 20, 1994, and the Opposition thereto of the plaintiff filed, thru counsel, on October 14, 1994, as well as the Reply therewith of defendant Saudi Arabian Airlines filed, thru counsel, on October 24, 1994, considering that a perusal of the plaintiff’s Amended Complaint, which is one for the recovery of actual, moral and exemplary damages plus attorney’s fees, upon the basis of the applicable Philippine law, Article 21 of the New Civil Code of the Philippines, is, clearly, within the jurisdiction of this Court as regards the subject matter, and there being nothing new of substance which might cause the reversal or modification of the order sought to be reconsidered, the motion for reconsideration of the defendant, is DENIED.

SO ORDERED.”xxv[25]

Consequently, on February 20, 1995, SAUDIA filed its Petition for Certiorari and Prohibition with Prayer for Issuance of Writ of Preliminary Injunction and/or Temporary Restraining Orderxxvi[26] with the Court of Appeals.

Respondent Court of Appeals promulgated a Resolution with Temporary Restraining Orderxxvii[27] dated February 23, 1995, prohibiting the respondent Judge from further conducting any proceeding, unless otherwise directed, in the interim.

In another Resolutionxxviii[28] promulgated on September 27, 1995, now assailed, the appellate court denied SAUDIA’s Petition for the Issuance of a Writ of Preliminary Injunction dated February 18, 1995, to wit:

“The Petition for the Issuance of a Writ of Preliminary Injunction is hereby DENIED, after considering the Answer, with Prayer to Deny Writ of Preliminary Injunction (Rollo, p. 135) the Reply and Rejoinder, it appearing that herein petitioner is not clearly entitled thereto (Unciano Paramedical College, et. Al., v. Court of Appeals, et. Al. , 100335, April 7, 1993, Second Division ).

SO ORDERED.”

On October 20, 1995, SAUDIA filed with this Honorable Court the instant Petitionxxix[29] for Review with Prayer for Temporary Restraining Order dated October 13, 1995.

However, during the pendency of the instant Petition, respondent Court of Appeals rendered the Decisionxxx[30] dated April 10, 1996, now also assailed. It ruled that the Philippines is an appropriate forum considering that the Amended Complaint’s basis for recovery of damages is Article 21 of the Civil Code, and thus, clearly within the jurisdiction of respondent Court. It further held that certiorari is not the proper remedy in a denial of a Motion to Dismiss, inasmuch as the petitioner should have proceeded to trial, and in case of an adverse ruling, find recourse in an appeal.

On May 7, 1996, SAUDIA filed its Supplemental Petition for Review with Prayer for Temporary Restraining Orderxxxi[31] dated April 30, 1996, given due course by this Court. After both parties submitted their Memoranda,xxxii[32] the instant case is now deemed submitted for decision.

Petitioner SAUDIA raised the following issues:

“I

The trial court has no jurisdiction to hear and try Civil Case No. Q-93-18394 based on Article 21 of the New Civil Code since the proper law applicable is the law of the Kingdom of Saudi Arabia inasmuch as this case involves what is known in private international law as a ‘conflicts problem’. Otherwise, the Republic of the Philippines will sit in judgment of the acts done by another sovereign state which is abhorred.

II.

Leave of court before filing a supplemental pleading is not a jurisdictional requirement. Besides, the matter as to absence of leave of court is now moot and academic when this Honorable Court required the respondents to comment on petitioner’s April 30, 1996 Supplemental Petition For Review With Prayer For A Temporary Restraining Order Within Ten (10) Days From Notice Thereof. Further, the Revised Rules of Court should be construed with liberality pursuant to Section 2, Rule 1 thereof.

III.

Petitioner received on April 22, 1996 the April 10, 1996 decision in CA-G.R. SP NO. 36533 entitled ‘Saudi Arabian Airlines v. Hon. Rodolfo A. Ortiz, et al.’ and filed its April 30, 1996 Supplemental Petition For Review With Prayer For A Temporary Restraining Order on May 7, 1996 at 10:29 a.m. or within the 15-day reglementary period as provided for under Section 1, Rule 45 of the Revised Rules of Court. Therefore, the decision in CA-G.R. SP NO. 36533 has not yet become final and executory and this Honorable Court can take cognizance of this case.”xxxiii[33]

From the foregoing factual and procedural antecedents, the following issues emerge for our resolution:

I.

WHETHER RESPONDENT APPELLATE COURT ERRED IN HOLDING THAT THE REGIONAL TRIAL COURT OF QUEZON CITY HAS JURISDICTION TO HEAR AND TRY CIVIL CASE NO. Q-93-18394 ENTITLED “MILAGROS P. MORADA V. SAUDI ARABIAN AIRLINES.”

II.

WHETHER RESPONDENT APPELLATE COURT ERRED IN RULING THAT IN THE CASE PHILIPPINE LAW SHOULD GOVERN.

Petitioner SAUDIA claims that before us is a conflict of laws that must be settled at the outset. It maintains that private respondent’s claim for alleged abuse of rights occurred in the Kingdom of Saudi Arabia. It alleges that the existence of a foreign element qualifies the instant case for the application of the law of the Kingdom of Saudi Arabia, by virtue of the lex loci delicti commissi rule.xxxiv[34]

On the other hand, private respondent contends that since her Amended Complaint is based on Articles 19xxxv[35] and 21xxxvi[36] of the Civil Code, then the instant case is properly a matter of domestic law.xxxvii[37]

Under the factual antecedents obtaining in this case, there is no dispute that the interplay of events occurred in two states, the Philippines and Saudi Arabia.

As stated by private respondent in her Amended Complaintxxxviii[38] dated June 23, 1994:

“2. Defendant SAUDI ARABIAN AIRLINES or SAUDIA is a foreign airlines corporation doing business in the Philippines. It may be served with summons and other court processes at Travel Wide Associated Sales (Phils.), Inc., 3 rd Floor, Cougar Building, 114 Valero St., Salcedo Village, Makati, Metro Manila.

x x x x x x x x x

6. Plaintiff learned that, through the intercession of the Saudi Arabian government, the Indonesian authorities agreed to deport Thamer and Allah after two weeks of detention. Eventually, they were again put in service by defendant SAUDIA. In September 1990, defendant SAUDIA transferred plaintiff to Manila.

7. On January 14, 1992, just when plaintiff thought that the Jakarta incident was already behind her, her superiors requested her to see MR. Ali Meniewy, Chief Legal Officer of SAUDIA, in Jeddah, Saudi Arabia. When she saw him,

he brought her to the police station where the police took her passport and questioned her about the Jakarta incident. Miniewy simply stood by as the police put pressure on her to make a statement dropping the case against Thamer and Allah. Not until she agreed to do so did the police return her passport and allowed her to catch the afternoon flight out of Jeddah.

8. One year and a half later or on June 16, 1993, in Riyadh, Saudi Arabia, a few minutes before the departure of her flight to Manila, plaintiff was not allowed to board the plane and instead ordered to take a later flight to Jeddah to see Mr. Meniewy, the Chief Legal Officer of SAUDIA. When she did, a certain Khalid of the SAUDIA office brought her to a Saudi court where she was asked to sign a document written in Arabic. They told her that this was necessary to close the case against Thamer and Allah. As it turned out, plaintiff signed a notice to her to appear before the court on June 27, 1993. Plaintiff then returned to Manila.

9. Shortly afterwards, defendant SAUDIA summoned plaintiff to report to Jeddah once again and see Miniewy on June 27, 1993 for further investigation. Plaintiff did so after receiving assurance from SAUDIA’s Manila manager, Aslam Saleemi, that the investigation was routinary and that it posed no danger to her.

10. In Jeddah, a SAUDIA legal officer brought plaintiff to the same Saudi court on June 27, 1993. Nothing happened then but on June 28, 1993, a Saudi judge interrogated plaintiff through an interpreter about the Jakarta incident. After one hour of interrogation, they let her go. At the airport, however, just as her plane was about to take off, a SAUDIA officer told her that the airline had forbidden her to take that flight. At the Inflight Service Office where she was told to go, the secretary of Mr. Yahya Saddick took away her passport and told her to remain in Jeddah, at the crew quarters, until further orders.

11. On July 3, 1993 a SAUDIA legal officer again escorted plaintiff to the same court where the judge, to her astonishment and shock, rendered a decision, translated to her in English, sentencing her to five months imprisonment and to 286 lashes. Only then did she realize that the Saudi court had tried her, together with Thamer and Allah, for what happened in Jakarta. The court found plaintiff guilty of (1) adultery; (2) going to a disco, dancing, and listening to the music in violation of Islamic laws; (3) socializing with the male crew, in contravention of Islamic tradition.

12. Because SAUDIA refused to lend her a hand in the case, plaintiff sought the help of the Philippine Embassy in Jeddah. The latter helped her pursue an appeal from the decision of the court. To pay for her upkeep, she worked on the domestic flights of defendant SAUDIA while, ironically, Thamer and Allah freely served the international flights.”xxxix[39]

Where the factual antecedents satisfactorily establish the existence of a foreign element, we agree with petitioner that the problem herein could present a “conflicts” case.

A factual situation that cuts across territorial lines and is affected by the diverse laws of two or more states is said to contain a “foreign element”. The presence of a foreign element is inevitable since social and economic affairs of individuals and associations are rarely confined to the geographic limits of their birth or conception.xl[40]

The forms in which this foreign element may appear are many.xli[41] The foreign element may simply consist in the fact that one of the parties to a contract is an alien or has a foreign domicile, or that a contract between nationals of one State involves properties situated in another State. In other cases, the foreign element may assume a complex form.xlii[42]

In the instant case, the foreign element consisted in the fact that private respondent Morada is a resident Philippine national, and that petitioner SAUDIA is a resident foreign corporation. Also, by virtue of the employment of Morada with the petitioner Saudia as a flight stewardess, events did transpire during her many occasions of travel across national borders, particularly from Manila, Philippines to Jeddah, Saudi Arabia, and vice versa, that caused a “conflicts” situation to arise.

We thus find private respondent’s assertion that the case is purely domestic, imprecise. A conflicts problem presents itself here, and the question of jurisdictionxliii[43] confronts the court a quo.

After a careful study of the private respondent’s Amended Complaint,xliv[44] and the Comment thereon, we note that she aptly predicated her cause of action on Articles 19 and 21 of the New Civil Code.

On one hand, Article 19 of the New Civil Code provides;

“Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with justice give everyone his due and observe honesty and good faith.”

On the other hand, Article 21 of the New Civil Code provides:

“Art. 21. Any person who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for damages.”

Thus, in Philippine National Bank (PNB) vs. Court of Appeals,xlv[45] this Court held that:

“The aforecited provisions on human relations were intended to expand the concept of torts in this jurisdiction by granting adequate legal remedy for the untold number of moral wrongs which is impossible for human foresight to specifically provide in the statutes.”

Although Article 19 merely declares a principle of law, Article 21 gives flesh to its provisions. Thus, we agree with private respondent’s assertion that violations of Articles 19 and 21 are actionable, with judicially enforceable remedies in the municipal forum.

Based on the allegationsxlvi[46] in the Amended Complaint, read in the light of the Rules of Court on jurisdictionxlvii[47] we find that the Regional Trial Court (RTC) of Quezon City possesses jurisdiction over the subject matter of the suit.xlviii[48] Its authority to try and hear the case is provided for under Section 1 of Republic Act No. 7691, to wit:

“Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as the “Judiciary Reorganization Act of 1980”, is hereby amended to read as follows:

SEC. 19. Jurisdiction in Civil Cases. – Regional Trial Courts shall exercise exclusive jurisdiction:

x x x x x x x x x

(8) In all other cases in which demand, exclusive of interest, damages of whatever kind, attorney’s fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred Thousand pesos (P200,000.00). (Emphasis ours)

x x x x x x x x x

And following Section 2 (b), Rule 4 of the Revised Rules of Court—the venue, Quezon City, is appropriate:

“SEC. 2 Venue in Courts of First Instance. –[Now Regional Trial Court]

(a) x x x x x x x x x

(b) Personal actions. – All other actions may be commenced and tried where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiff resides, at the election of the plaintiff.”

Pragmatic considerations, including the convenience of the parties, also weigh heavily in favor of the RTC Quezon City assuming jurisdiction. Paramount is the private interest of the litigant. Enforceability of a judgment if one is obtained is quite obvious. Relative advantages and obstacles to a fair trial are equally important. Plaintiff may not, by choice of an inconvenient forum, ‘vex’, ‘harass’, or ‘oppress’ the defendant, e.g. by inflicting upon him needless expense or disturbance. But unless the balance is strongly in favor of the defendant, the plaintiff’s choice of forum should rarely be disturbed.xlix[49]

Weighing the relative claims of the parties, the court a quo found it best to hear the case in the Philippines. Had it refused to take cognizance of the case, it would be forcing plaintiff (private respondent now) to seek remedial action elsewhere, i.e. in the Kingdom

of Saudi Arabia where she no longer maintains substantial connections. That would have caused a fundamental unfairness to her.

Moreover, by hearing the case in the Philippines no unnecessary difficulties and inconvenience have been shown by either of the parties. The choice of forum of the plaintiff (now private respondent) should be upheld.

Similarly, the trial court also possesses jurisdiction over the persons of the parties herein. By filing her Complaint and Amended Complaint with the trial court, private respondent has voluntary submitted herself to the jurisdiction of the court.

The records show that petitioner SAUDIA has filed several motions l[50] praying for the dismissal of Morada’s Amended Complaint. SAUDIA also filed an Answer In Ex Abundante Cautelam dated February 20, 1995. What is very patent and explicit from the motions filed, is that SAUDIA prayed for other reliefs under the premises. Undeniably, petitioner SAUDIA has effectively submitted to the trial court’s jurisdiction by praying for the dismissal of the Amended Complaint on grounds other than lack of jurisdiction.

As held by this Court in Republic vs. Ker and Company, Ltd.:li[51]

“We observe that the motion to dismiss filed on April 14, 1962, aside from disputing the lower court’s jurisdiction over defendant’s person, prayed for dismissal of the complaint on the ground that plaintiff’s cause of action has prescribed. By interposing such second ground in its motion to dismiss, Ker and Co., Ltd. availed of an affirmative defense on the basis of which it prayed the court to resolve controversy in its favor. For the court to validly decide the said plea of defendant Ker & Co., Ltd., it necessarily had to acquire jurisdiction upon the latter’s person, who, being the proponent of the affirmative defense, should be deemed to have abandoned its special appearance and voluntarily submitted itself to the jurisdiction of the court.”

Similarly, the case of De Midgely vs. Ferandos, held that:

“When the appearance is by motion for the purpose of objecting to the jurisdiction of the court over the person, it must be for the sole and separate purpose of objecting to the jurisdiction of the court. If his motion is for any other purpose than to object to the jurisdiction of the court over his person, he thereby submits himself to the jurisdiction of the court. A special appearance by motion made for the purpose of objecting to the jurisdiction of the court over the person will be held to be a general appearance, if the party in said motion should, for example, ask for a dismissal of the action upon the further ground that the court had no jurisdiction over the subject matter.” lii[52]

Clearly, petitioner had submitted to the jurisdiction of the Regional Trial Court of Quezon City. Thus, we find that the trial court has jurisdiction over the case and that its exercise thereof, justified.

As to the choice of applicable law, we note that choice-of-law problems seek to answer two important questions: (1) What legal system should control a given situation where some of the significant facts occurred in two or more states; and (2) to what extent should the chosen legal system regulate the situation. liii[53]

Several theories have been propounded in order to identify the legal system that should ultimately control. Although ideally, all choice-of-law theories should intrinsically advance both notions of justice and predictability, they do not always do so. The forum is then faced with the problem of deciding which of these two important values should be stressed.liv[54]

Before a choice can be made, it is necessary for us to determine under what category a certain set of facts or rules fall. This process is known as “characterization”, or the “doctrine of qualification”. It is the “process of deciding whether or not the facts relate to the kind of question specified in a conflicts rule.” lv[55] The purpose of “characterization” is to enable the forum to select the proper law.lvi[56]

Our starting point of analysis here is not a legal relation, but a factual situation, event, or operative fact.lvii[57] An essential element of conflict rules is the indication of a “test” or “connecting factor” or “point of contact”. Choice-of-law rules invariably consist of a factual relationship (such as property right, contract claim) and a connecting factor or point of contact, such as the situs of the res, the place of celebration, the place of performance, or the place of wrongdoing.lviii[58]

Note that one or more circumstances may be present to serve as the possible test for the determination of the applicable law.lix[59] These “test factors” or “points of contact” or “connecting factors” could be any of the following:

“(1) The nationality of a person, his domicile, his residence, his place of sojourn, or his origin;

(2) the seat of a legal or juridical person, such as a corporation;

(3) the situs of a thing, that is, the place where a thing is, or is deemed to be situated. In particular, the lex situs is decisive when real rights are involved;

(4) the place where an act has been done, the locus actus , such as the place where a contract has been made, a marriage celebrated, a will signed or a tort committed. The lex loci actus is particularly important in contracts and torts;(5) the place where an act is intended to come into effect, e.g., the place of performance of contractual duties, or the place where a power of attorney is to be exercised;

(6) the intention of the contracting parties as to the law that should govern their agreement, the lex loci intentionis;

(7) the place where judicial or administrative proceedings are instituted or done. The lex fori—the law of the forum—is particularly important because, as we have seen earlier, matters of ‘procedure’ not going to the substance of the claim involved are governed by it; and because the lex fori applies whenever the content of the otherwise applicable foreign law is excluded from application in a given case for the reason that it falls under one of the exceptions to the applications of foreign law; and

(8) the flag of a ship, which in many cases is decisive of practically all legal relationships of the ship and of its master or owner as such. It also covers contractual relationships particularly contracts of affreightment.” lx[60] (Underscoring ours.)

After a careful study of the pleadings on record, including allegations in the Amended Complaint deemed submitted for purposes of the motion to dismiss, we are convinced that there is reasonable basis for private respondent’s assertion that although she was already working in Manila, petitioner brought her to Jeddah on the pretense that she would merely testify in an investigation of the charges she made against the two SAUDIA crew members for the attack on her person while they were in Jakarta. As it turned out, she was the one made to face trial for very serious charges, including adultery and violation of Islamic laws and tradition.

There is likewise logical basis on record for the claim that the “handing over” or “turning over” of the person of private respondent to Jeddah officials, petitioner may have acted beyond its duties as employer. Petitioner’s purported act contributed to and amplified or even proximately caused additional humiliation, misery and suffering of private respondent. Petitioner thereby allegedly facilitated the arrest, detention and prosecution of private respondent under the guise of petitioner’s authority as employer, taking advantage of the trust, confidence and faith she reposed upon it. As purportedly found by the Prince of Makkah, the alleged conviction and imprisonment of private respondent was wrongful. But these capped the injury or harm allegedly inflicted upon her person and reputation, for which petitioner could be liable as claimed, to provide compensation or redress for the wrongs done, once duly proven.

Considering that the complaint in the court a quo is one involving torts, the “connecting factor” or “point of contact” could be the place or places where the tortious conduct or lex loci actus occurred. And applying the torts principle in a conflicts case, we find that the Philippines could be said as a situs of the tort (the place where the alleged tortious conduct took place). This is because it is in the Philippines where petitioner allegedly deceived private respondent, a Filipina residing and working here. According to her, she had honestly believed that petitioner would, in the exercise of its rights and in the performance of its duties, “act with justice, give her her due and observe honesty and good faith.” Instead, petitioner failed to protect her, she claimed. That certain acts or parts of the injury allegedly occurred in another country is of no moment. For in our

view what is important here is the place where the over-all harm or the fatality of the alleged injury to the person, reputation, social standing and human rights of complainant, had lodged, according to the plaintiff below (herein private respondent). All told, it is not without basis to identify the Philippines as the situs of the alleged tort.

Moreover, with the widespread criticism of the traditional rule of lex loci delicti commissi, modern theories and rules on tort liabilitylxi[61] have been advanced to offer fresh judicial approaches to arrive at just results. In keeping abreast with the modern theories on tort liability, we find here an occasion to apply the “State of the most significant relationship” rule, which in our view should be appropriate to apply now, given the factual context of this case.

In applying said principle to determine the State which has the most significant relationship, the following contacts are to be taken into account and evaluated according to their relative importance with respect to the particular issue: (a) the place where the injury occurred; (b) the place where the conduct causing the injury occurred; (c) the domicile, residence, nationality, place of incorporation and place of business of the parties, and (d) the place where the relationship, if any, between the parties is centered.lxii[62]

As already discussed, there is basis for the claim that over-all injury occurred and lodged in the Philippines. There is likewise no question that private respondent is a resident Filipina national, working with petitioner, a resident foreign corporation engaged here in the business of international air carriage. Thus, the “relationship” between the parties was centered here, although it should be stressed that this suit is not based on mere labor law violations. From the record, the claim that the Philippines has the most significant contact with the matter in this dispute,lxiii[63] raised by private respondent as plaintiff below against defendant (herein petitioner), in our view, has been properly established.

Prescinding from this premise that the Philippines is the situs of the tort complaint of and the place “having the most interest in the problem”, we find, by way of recapitulation, that the Philippine law on tort liability should have paramount application to and control in the resolution of the legal issues arising out of this case. Further, we hold that the respondent Regional Trial Court has jurisdiction over the parties and the subject matter of the complaint; the appropriate venue is in Quezon City, which could properly apply Philippine law. Moreover, we find untenable petitioner’s insistence that “[s]ince private respondent instituted this suit, she has the burden of pleading and proving the applicable Saudi law on the matter.”lxiv[64] As aptly said by private respondent, she has “no obligation to plead and prove the law of the Kingdom of Saudi Arabia since her cause of action is based on Articles 19 and 21” of the Civil Code of the Philippines. In her Amended Complaint and subsequent pleadings she never alleged that Saudi law should govern this case.lxv[65] And as correctly held by the respondent appellate court, “considering that it was the petitioner who was invoking the applicability of the law of Saudi Arabia, thus the burden was on it [petitioner] to plead and to establish what the law of Saudi Arabia is”.lxvi[66]

Lastly, no error could be imputed to the respondent appellate court in upholding the trial court’s denial of defendant’s (herein petitioner’s) motion to dismiss the case. Not only was jurisdiction in order and venue properly laid, but appeal after trial was obviously available, and the expeditious trial itself indicated by the nature of the case at hand. Indubitably, the Philippines is the state intimately concerned with the ultimate outcome of the case below not just for the benefit of all the litigants, but also for the vindication of the country’s system of law and justice in a transnational setting. With these guidelines in mind, the trial court must proceed to try and adjudge the case in the light of relevant Philippine law, with due consideration of the foreign element or elements involved. Nothing said herein, of course, should be construed as prejudging the results of the case in any manner whatsoever.

WHEREFORE, the instant petition for certiorari is hereby DISMISSED. Civil Case No. Q-93-18394 entitled “Milagros P. Morada vs. Saudi Arabia Airlines” is hereby REMANDED to Regional Trial Court of Quezon City, Branch 89 for further proceedings.

SO ORDERED.

Davide, Jr., (Chairman), Bellosillo, Vitug, and Panganiban, JJ., concur.

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