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.

QUISUMBING, J.:

This petition for certiorari pursuant to Rule 45 of the Rules of Court seeks to annul and set
aside the Resolution  dated September 27, 1995 and the Decision  dated April 10, 1996
1 2

of the Court of Appeals  in CA-G.R. SP No. 36533,  and the Orders  dated August 29,
3 4 5

1994   and February 2, 1995  that were issued by the trial court in Civil Case No. Q-93-
6 7

18394. 8

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

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

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 lune 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.  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. 
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,   she was terminated from the service by SAUDIA, without her being informed
12

of the cause.

On November 23, 1993, Morada filed a Complaint   for damages against SAUDIA, and
13

Khaled Al-Balawi ("Al-Balawi"), its country manager.

On January 19, 1994, SAUDIA filed an Omnibus Motion To Dismiss   which raised the
14

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)  . Saudia
15

filed a reply   thereto on March 3, 1994.

16

On June 23, 1994, Morada filed an Amended Complaint   wherein Al-Balawi was
17

dropped as party defendant. On August 11, 1994, Saudia filed its Manifestation and
Motion to Dismiss Amended Complaint  . 18

The trial court issued an Order   dated August 29, 1994 denying the Motion to Dismiss
19

Amended Complaint filed by Saudia.

From the Order of respondent Judge   denying the Motion to Dismiss, SAUDIA filed
20

on September 20, 1994, its Motion for Reconsideration   of the Order dated August 29,
21

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 Opposition   (To 22

Defendant's Motion for Reconsideration).

In the Reply   filed with the trial court on October 24, 1994, SAUDIA alleged that since
23

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 Order   dated February 2, 1995,

24

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 plaintiffs 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.  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 Order   with the Court of Appeals.
26

Respondent Court of Appeals promulgated a Resolution with Temporary Restraining

Order   dated February 23, 1995, prohibiting the respondent Judge from further
27

conducting any proceeding, unless otherwise directed, in the interim.

In another Resolution   promulgated on September 27, 1995, now assailed, the

28

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 Petition   for
29

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 Decision   dated April 10, 1996, now also assailed. It ruled that the
30

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 Order   dated April 30, 1996, given due course by this Court.
31

After both parties submitted their Memoranda,   the instant case is now deemed
32

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.  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 THIS

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.  34

On the other hand, private respondent contends that since her Amended Complaint is
based on Articles 19   and 21   of the Civil Code, then the instant case is properly a
35 36

matter of domestic law.  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 Complaint   dated June 23, 1994:
38

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., 3rd 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 reauested 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 sigh 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 manger, 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 Philippines 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. 
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.  40

The forms in which this foreign element may appear are many.   The foreign element
41

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. 
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
jurisdiction   confronts the court a quo.
43

After a careful study of the private respondent's Amended Complaint,   and the 44

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,   this Court held that:
45

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 allegations   in the Amended Complaint, read in the light of the Rules of
46

Court on jurisdiction   we find that the Regional Trial Court (RTC) of Quezon City
47

possesses jurisdiction over the subject matter of the suit.   Its authority to try and
48

hear the case is provided for under Section 1 of Republic Act No. 7691, to wit:

Sec. 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 cots 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) xxx xxx xxx

(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 plaintiffs choice of forum
should rarely be disturbed. 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   praying for the
50

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.:  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. 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.  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.  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."   The purpose of
55

"characterization" is to enable the forum to select the proper law.  56

Our starting point of analysis here is not a legal relation, but a factual situation, event,
or operative fact.   An essential element of conflict rules is the indication of a "test" or
57

"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.  58

Note that one or more circumstances may be present to serve as the possible test for
the determination of the applicable law.   These "test factors" or "points of contact"
59

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.   (Emphasis ours.)
60

After a careful study of the pleadings on record, including allegations in the Amended
Complaint deemed admitted 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 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 totality 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 liability   have been advanced to offer
61

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. 
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,   raised
63
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 complained
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."   As aptly
64

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.   And as 65

correctly held by the respondent appellate court, "considering that it was the
petitioner who was invoking the applicability of the law of Saudi Arabia, then the
burden was on it [petitioner] to plead and to establish what the law of Saudi Arabia
is". 
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 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.
G.R. No. 101538 June 23, 1992

AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.

CRUZ, J.:

This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows:

Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of the High Contracting
Parties, either before the court of the domicile of the carrier or of his principal place of business, or where he has a place of
business through which the contract has been made, or before the court at the place of destination.

The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is a foreign
corporation with principal office in Minnesota, U.S.A. and licensed to do business and maintain a branch office in the Philippines.

On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. U.S.A., for his flight from San
Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986. No date was
specified for his return to San Francisco. 1

On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departure to
Manila. Despite a previous confirmation and re-confirmation, he was informed that he had no reservation for his flight from Tokyo
to Manila. He therefore had to be wait-listed.

On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. On April 13, 1987, NOA moved
to dismiss the complaint on the ground of lack of jurisdiction. Citing the above-quoted article, it contended that the complaint
could be instituted only in the territory of one of the High Contracting Parties, before:

1. the court of the domicile of the carrier;

2. the court of its principal place of business;

3. the court where it has a place of business through which the contract had been made;

4. the court of the place of destination.

The private respondent contended that the Philippines was not its domicile nor was this its principal place of business. Neither
was the petitioner's ticket issued in this country nor was his destination Manila but San Francisco in the United States.

On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The petitioner appealed to the Court of
Appeals, which affirmed the decision of the lower court. 3 On June 26, 1991, the petitioner filed a motion for reconsideration, but
the same was denied. 4 The petitioner then came to this Court, raising substantially the same issues it submitted in the Court of
Appeals.

The assignment of errors may be grouped into two major issues, viz:

(1) the constitutionality of Article 28(1) of the Warsaw Convention; and

(2) the jurisdiction of Philippine courts over the case.

The petitioner also invokes Article 24 of the Civil Code on the protection of minors.

THE ISSUE OF CONSTITUTIONALITY

A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention violates the
constitutional guarantees of due process and equal protection.

The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International
Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was
concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed
by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The
Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay
issued Proclamation No. 201, declaring our formal adherence thereto. "to the end that the same and every article and clause
thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof." 5

The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and
effect of law in this country.
The petitioner contends that Article 28(1) cannot be applied in the present case because it is unconstitutional. He argues that
there is no substantial distinction between a person who purchases a ticket in Manila and a person who purchases his ticket in
San Francisco. The classification of the places in which actions for damages may be brought is arbitrary and irrational and thus
violates the due process and equal protection clauses.

It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that the essential requisites of
a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving a conflict of
legal rights susceptible of judicial determination; the constitutional question must have been opportunely raised by the proper
party; and the resolution of the question is unavoidably necessary to the decision of the case itself. 6

Courts generally avoid having to decide a constitutional question. This attitude is based on the doctrine of separation of powers,
which enjoins upon the departments of the government a becoming respect for each other's acts.

The treaty which is the subject matter of this petition was a joint legislative-executive act. The presumption is that it was first
carefully studied and determined to be constitutional before it was adopted and given the force of law in this country.

The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the Convention considered the
four places designated in Article 28 the most convenient forums for the litigation of any claim that may arise between the airline
and its passenger, as distinguished from all other places. At any rate, we agree with the respondent court that this case can be
decided on other grounds without the necessity of resolving the constitutional issue.

B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention is inapplicable because
of a fundamental change in the circumstances that served as its basis.

The petitioner goes at great lengths to show that the provisions in the Convention were intended to protect airline companies
under "the conditions prevailing then and which have long ceased to exist." He argues that in view of the significant developments
in the airline industry through the years, the treaty has become irrelevant. Hence, to the extent that it has lost its basis for
approval, it has become unconstitutional.

The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine constitutes an attempt to
formulate a legal principle which would justify non-performance of a treaty obligation if the conditions with relation to which the
parties contracted have changed so materially and so unexpectedly as to create a situation in which the exaction of performance
would be unreasonable." 7 The key element of this doctrine is the vital change in the condition of the contracting parties that they
could not have foreseen at the time the treaty was concluded.

The Court notes in this connection the following observation made in Day v. Trans World Airlines, Inc.: 8

The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of air travel . . . The Warsaw
delegates knew that, in the years to come, civil aviation would change in ways that they could not foresee. They wished to design
a system of air law that would be both durable and flexible enough to keep pace with these changes . . . The ever-changing
needs of the system of civil aviation can be served within the framework they created.

It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy. However, that
circumstance alone is not sufficient justification for the rejection of the treaty at this time. The changes recited by the petitioner
were, realistically, not entirely unforeseen although they were expected in a general sense only. In fact, the Convention itself,
anticipating such developments, contains the following significant provision:

Article 41. Any High Contracting Party shall be entitled not earlier than two years after the coming into force of this convention to
call for the assembling of a new international conference in order to consider any improvements which may be made in this
convention. To this end, it will communicate with the Government of the French Republic which will take the necessary measures
to make preparations for such conference.

But the more important consideration is that the treaty has not been rejected by the Philippine government. The doctrine of  rebus
sic stantibus does not operate automatically to render the treaty inoperative. There is a necessity for a formal act of rejection,
usually made by the head of State, with a statement of the reasons why compliance with the treaty is no longer required.

In lieu thereof, the treaty may be denounced even without an expressed justification for this action. Such denunciation is
authorized under its Article 39, viz:

Article 39. (1) Any one of the High Contracting Parties may denounce this convention by a notification addressed to the
Government of the Republic of Poland, which shall at once inform the Government of each of the High Contracting Parties.

(2) Denunciation shall take effect six months after the notification of denunciation, and shall operate only as regards the party
which shall have proceeded to denunciation.

Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to Article 39, is not a function of the
courts but of the other branches of government. This is a political act. The conclusion and renunciation of treaties is the
prerogative of the political departments and may not be usurped by the judiciary. The courts are concerned only with the
interpretation and application of laws and treaties in force and not with their wisdom or efficacy.

C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the United States, because this would
deny him the right to access to our courts.

The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would constitute a
constructive denial of his right to access to our courts for the protection of his rights. He would consequently be deprived of this
vital guaranty as embodied in the Bill of Rights.

Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law. It
does not mean that a person can go to any court for redress of his grievances regardless of the nature or value of his claim. If the
petitioner is barred from filing his complaint before our courts, it is because they are not vested with the appropriate jurisdiction
under the Warsaw Convention, which is part of the law of our land.

II

THE ISSUE OF JURISDICTION.

A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw Convention is a rule merely of
venue and was waived by defendant when it did not move to dismiss on the ground of improper venue.

By its own terms, the Convention applies to all international transportation of persons performed by aircraft for hire.

International transportation is defined in paragraph (2) of Article 1 as follows:

(2) For the purposes of this convention, the expression "international transportation" shall mean any transportation in which,
according to the contract made by the parties, the place of departure and the place of destination, whether or not there be a
break in the transportation or a transshipment, are situated [either] within the territories of two High Contracting Parties . . .

Whether the transportation is "international" is determined by the contract of the parties, which in the case of passengers is the
ticket. When the contract of carriage provides for the transportation of the passenger between certain designated terminals
"within the territories of two High Contracting Parties," the provisions of the Convention automatically apply and exclusively
govern the rights and liabilities of the airline and its passenger.

Since the flight involved in the case at bar is international, the same being from the United States to the Philippines and back to
the United States, it is subject to the provisions of the Warsaw Convention, including Article 28(1), which enumerates the four
places where an action for damages may be brought.

Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the
petitioner cites several cases holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by the
private respondent supporting the conclusion that the provision is jurisdictional. 10

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon d court which
otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as fixed by statute may be
changed by the consent of the parties and an objection that the plaintiff brought his suit in the wrong county may be waived by
the failure of the defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to
jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition exists against their
alteration. 11

A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the
wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory
nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to
"regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any
provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in
Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration
in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage
occurred.

This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, Ltd., 12 where it was held:

. . . Of more, but still incomplete, assistance is the wording of Article 28(2), especially when considered in the light of Article 32.
Article 28(2) provides that "questions of procedure shall be governed by the law of the court to which the case is submitted"
(Emphasis supplied). Section (2) thus may be read to leave for domestic decision questions regarding the suitability and location
of a particular Warsaw Convention case.

In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in the
international sense must be established in accordance with Article 28(1) of the Warsaw Convention, following which the
jurisdiction of a particular court must be established pursuant to the applicable domestic law. Only after the question of which
court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of the
court to which the case is submitted.

The petitioner submits that since Article 32 states that the parties are precluded "before the damages occurred" from amending
the rules of Article 28(1) as to the place where the action may be brought, it would follow that the Warsaw Convention was not
intended to preclude them from doing so "after the damages occurred."

Article 32 provides:

Art. 32. Any clause contained in the contract and all special agreements entered into before the damage occurred by which the
parties purport to infringe the rules laid down by this convention, whether by deciding the law to be applied, or by altering the
rules as to jurisdiction, shall be null and void. Nevertheless for the transportation of goods, arbitration clauses shall be allowed,
subject to this convention, if the arbitration is to take place within one of the jurisdictions referred to in the first paragraph of Article
28.

His point is that since the requirements of Article 28(1) can be waived "after the damages (shall have) occurred," the article
should be regarded as possessing the character of a "venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss on
the ground of lack of jurisdiction, the private respondent has waived improper venue as a ground to dismiss.

The foregoing examination of Article 28(1) in relation to Article 32 does not support this conclusion. In any event, we agree that
even granting arguendo that Article 28(1) is a venue and not a jurisdictional provision, dismissal of the case was still in order. The
respondent court was correct in affirming the ruling of the trial court on this matter, thus:
Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True it is that NOA averred in its
MOTION TO DISMISS that the ground thereof is "the Court has no subject matter jurisdiction to entertain the Complaint" which
SANTOS considers as equivalent to "lack of jurisdiction over the subject matter . . ." However, the gist of NOA's argument in its
motion is that the Philippines is not the proper place where SANTOS could file the action — meaning that the venue of the action
is improperly laid. Even assuming then that the specified ground of the motion is erroneous, the fact is the proper ground of the
motion — improper venue — has been discussed therein.

Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if there are special circumstances
justifying this conclusion, as in the petition at bar. As we observed in Javier vs. Intermediate Court of Appeals: 13

Legally, of course, the lack of proper venue was deemed waived by the petitioners when they failed to invoke it in their original
motion to dismiss. Even so, the motivation of the private respondent should have been taken into account by both the trial judge
and the respondent court in arriving at their decisions.

The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of Appeals, where it was held that Article
28(1) is a venue provision. However, the private respondent avers that this was in effect reversed by the case of  Aranas v. United
Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision. Neither of these cases is binding on this
Court, of course, nor was either of them appealed to us. Nevertheless, we here express our own preference for the later case of
Aranas insofar as its pronouncements on jurisdiction conform to the judgment we now make in this petition.

B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the Warsaw Convention, this case was
properly filed in the Philippines, because Manila was the destination of the plaintiff.

The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In that case, Mrs.
Silverberg purchased a round-trip ticket from Montreal to Los Angeles and back to Montreal. The date and time of departure were
specified but not of the return flight. The plane crashed while on route from Montreal to Los Angeles, killing Mrs. Silverberg. Her
administratrix filed an action for damages against Air Canada in the U.S. District Court of California. The defendant moved to
dismiss for lack of jurisdiction but the motion was denied thus:

. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as evidenced by the ticket booklets and
the Flight Coupon No. 1, was a contract for Air Canada to carry Mrs. Silverberg to Los Angeles on a certain flight, a certain time
and a certain class, but that the time for her to return remained completely in her power. Coupon No. 2 was only a continuing
offer by Air Canada to give her a ticket to return to Montreal between certain dates. . . .

The only conclusion that can be reached then, is that "the place of destination" as used in the Warsaw Convention is considered
by both the Canadian C.T.C. and the United States C.A.B. to describe at least two "places of destination,"  viz., the "place of
destination" of a particular flight either an "outward destination" from the "point of origin" or from the "outward point of destination"
to any place in Canada.

Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight on which Mrs. Silverberg was killed,
was Los Angeles according to the ticket, which was the contract between the parties and the suit is properly filed in this Court
which has jurisdiction.

The Petitioner avers that the present case falls squarely under the above ruling because the date and time of his return flight to
San Francisco were, as in the Aanestad case, also left open. Consequently, Manila and not San Francisco should be considered
the petitioner's destination.

The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States District Court (Eastern
District of Pennsylvania) said:

. . . Although the authorities which addressed this precise issue are not extensive, both the cases and the commentators are
almost unanimous in concluding that the "place of destination" referred to in the Warsaw Convention "in a trip consisting of
several parts . . . is the ultimate destination that is accorded treaty jurisdiction." . . .

But apart from that distinguishing feature, I cannot agree with the Court's analysis in  Aanestad; whether the return portion of the
ticket is characterized as an option or a contract, the carrier was legally bound to transport the passenger back to the place of
origin within the prescribed time and. the passenger for her part agreed to pay the fare and, in fact, did pay the fare. Thus there
was mutuality of obligation and a binding contract of carriage, The fact that the passenger could forego her rights under the
contract does not make it any less a binding contract. Certainly, if the parties did not contemplate the return leg of the journey, the
passenger would not have paid for it and the carrier would not have issued a round trip ticket.

We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is determined by the
terms of the contract of carriage or, specifically in this case, the ticket between the passenger and the carrier. Examination of the
petitioner's ticket shows that his ultimate destination is San Francisco. Although the date of the return flight was left open, the
contract of carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from Manila.
Manila should therefore be considered merely an agreed stopping place and not the destination.

The petitioner submits that the Butz case could not have overruled the Aanestad case because these decisions are from different
jurisdictions. But that is neither here nor there. In fact, neither of these cases is controlling on this Court. If we have preferred the
Butz case, it is because, exercising our own freedom of choice, we have decided that it represents the better, and correct,
interpretation of Article 28(1).

Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination" and not an
"agreed stopping place" that controls for purposes of ascertaining jurisdiction under the Convention.

The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination. The
use of the singular in this expression indicates the understanding of the parties to the Convention that every contract of carriage
has one place of departure and one place of destination. An intermediate place where the carriage may be broken is not
regarded as a "place of destination."
C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the Warsaw Convention, this case was
properly filed in the Philippines because the defendant has its domicile in the Philippines.

The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting its provisions,
American courts have taken the broad view that the French legal meaning must govern. 18 In French, he says, the "domicile" of
the carrier means every place where it has a branch office.

The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was held:

The plaintiffs' first contention is that Air France is domiciled in the United States. They say that the domicile of a corporation
includes any country where the airline carries on its business on "a regular and substantial basis," and that the United States
qualifies under such definition. The meaning of domicile cannot, however, be so extended. The domicile of a corporation is
customarily regarded as the place where it is incorporated, and the courts have given the meaning to the term as it is used in
article 28(1) of the Convention. (See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo v. Societe
Anonyme Belge d' Exploitation de la Navigation Aerienne Sabena Belgian World Airlines (E.D. pa. 1962). 207 F. Supp, 191;
Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F. Suppl. 971, 974). Moreover, the structure of article 28(1),
viewed as a whole, is also incompatible with the plaintiffs' claim. The article, in stating that places of business are among the
bases of the jurisdiction, sets out two places where an action for damages may be brought; the country where the carrier's
principal place of business is located, and the country in which it has a place of business through which the particular contract in
question was made, that is, where the ticket was bought, Adopting the plaintiffs' theory would at a minimum blur these carefully
drawn distinctions by creating a third intermediate category. It would obviously introduce uncertainty into litigation under the
article because of the necessity of having to determine, and without standards or criteria, whether the amount of business done
by a carrier in a particular country was "regular" and "substantial." The plaintiff's request to adopt this basis of jurisdiction is in
effect a request to create a new jurisdictional standard for the Convention.

Furthermore, it was argued in another case 20 that:

. . . In arriving at an interpretation of a treaty whose sole official language is French, are we bound to apply French law? . . . We
think this question and the underlying choice of law issue warrant some discussion
. . . We do not think this statement can be regarded as a conclusion that internal French law is to be "applied" in the choice of law
sense, to determine the meaning and scope of the Convention's terms. Of course, French legal usage must be considered in
arriving at an accurate English translation of the French. But when an accurate English translation is made and agreed upon, as
here, the inquiry into meaning does not then revert to a quest for a past or present French law to be "applied" for revelation of the
proper scope of the terms. It does not follow from the fact that the treaty is written in French that in interpreting it, we are forever
chained to French law, either as it existed when the treaty was written or in its present state of development. There is no
suggestion in the treaty that French law was intended to govern the meaning of Warsaw's terms, nor have we found any
indication to this effect in its legislative history or from our study of its application and interpretation by other courts. Indeed,
analysis of the cases indicates that the courts, in interpreting and applying the Warsaw Convention, have, not considered
themselves bound to apply French law simply because the Convention is written in French. . . .

We agree with these rulings.

Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under Article 28(1). By
specifying the three other places, to wit, the principal place of business of the carrier, its place of business where the contract was
made, and the place of destination, the article clearly meant that these three other places were not comprehended in the term
"domicile."

D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention does not apply to actions
based on tort.

The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and in bad faith,
discriminated against the petitioner, and committed a willful misconduct because it canceled his confirmed reservation and gave
his reserved seat to someone who had no better right to it. In short. the private respondent committed a tort.

Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He argues that in at least
two American cases, 21 it was held that Article 28(1) of the Warsaw Convention does not apply if the action is based on tort.

This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was interpreted thus:

. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly excludes any relief not provided for
in the Convention as modified by the Montreal Agreement. It does not, however, limit the kind of cause of action on which the
relief may be founded; rather it provides that any action based on the injuries specified in Article 17 "however founded,"  i.e.,
regardless of the type of action on which relief is founded, can only be brought subject to the conditions and limitations
established by the Warsaw System. Presumably, the reason for the use of the phrase "however founded," in two-fold: to
accommodate all of the multifarious bases on which a claim might be founded in different countries, whether under code law or
common law, whether under contract or tort, etc.; and to include all bases on which a claim seeking relief for an injury might be
founded in any one country. In other words, if the injury occurs as described in Article 17, any relief available is subject to the
conditions and limitations established by the Warsaw System, regardless of the particular cause of action which forms the basis
on which a plaintiff could seek
relief . . .

The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is insufficient to exclude the
case from the comprehension of the Warsaw Convention. The petitioner has apparently misconstrued the import of Article 25(l) of
the Convention, which reads as follows:

Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this Convention which exclude or limit his liability. if
the damage is caused by his willful misconduct or by such default on his part as, in accordance with the law of the court to which
the case is submitted, is considered to be equivalent to willful misconduct.

It is understood under this article that the court called upon to determine the applicability of the limitation provision must first be
vested with the appropriate jurisdiction. Article 28(1) is the provision in the Convention which defines that jurisdiction. Article
22 23 merely fixes the monetary ceiling for the liability of the carrier in cases covered by the Convention. If the carrier is indeed
guilty of willful misconduct, it can avail itself of the limitations set forth in this article. But this can be done only if the action has first
been commenced properly under the rules on jurisdiction set forth in Article 28(1).

III

THE ISSUE OF PROTECTION TO MINORS

The petitioner calls our attention to Article 24 of the Civil Code, which states:

Art. 24. In all contractual property or other relations, when one of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.

Application of this article to the present case is misplaced. The above provision assumes that the court is vested with jurisdiction
to rule in favor of the disadvantaged minor, As already explained, such jurisdiction is absent in the case at bar.

CONCLUSION

A number of countries have signified their concern over the problem of citizens being denied access to their own courts because
of the restrictive provision of Article 28(1) of the Warsaw Convention. Among these is the United States, which has proposed an
amendment that would enable the passenger to sue in his own domicile if the carrier does business in that jurisdiction. The
reason for this proposal is explained thus:

In the event a US citizen temporarily residing abroad purchases a Rome to New York to Rome ticket on a foreign air carrier which
is generally subject to the jurisdiction of the US, Article 28 would prevent that person from suing the carrier in the US in a
"Warsaw Case" even though such a suit could be brought in the absence of the Convention.

The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention, which was adopted at Guatemala
City on March 8,
1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum number of contracting parties.
Pending such ratification, the petitioner will still have to file his complaint only in any of the four places designated by Article 28(1)
of the Warsaw Convention.

The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily have the right to sue in his own
courts simply because the defendant airline has a place of business in his country.

The Court can only sympathize with the petitioner, who must prosecute his claims in the United States rather than in his own
country at least inconvenience. But we are unable to grant him the relief he seeks because we are limited by the provisions of the
Warsaw Convention which continues to bind us. It may not be amiss to observe at this point that the mere fact that he will have to
litigate in the American courts does not necessarily mean he will litigate in vain. The judicial system of that country in known for its
sense of fairness and, generally, its strict adherence to the rule of law.

WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.
G.R. No. 94723 August 21, 1997

KAREN E. SALVACION, minor, thru Federico N. Salvacion, Jr., father and Natural
Guardian, and Spouses FEDERICO N. SALVACION, JR., and EVELINA E.
SALVACION, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, CHINA BANKING CORPORATION and GREG
BARTELLI y NORTHCOTT, respondents.

TORRES, JR., J.:

In our predisposition to discover the "original intent" of a statute, courts become the
unfeeling pillars of the status quo. Ligle do we realize that statutes or even constitutions are
bundles of compromises thrown our way by their framers. Unless we exercise vigilance, the
statute may already be out of tune and irrelevant to our day.

The petition is for declaratory relief. It prays for the following reliefs:

a.) Immediately upon the filing of this petition, an Order be issued restraining the
respondents from applying and enforcing Section 113 of Central Bank Circular No. 960;

b.) After hearing, judgment be rendered:

1.) Declaring the respective rights and duties of petitioners and respondents;

2.) Adjudging Section 113 of Central Bank Circular No. 960 as contrary to the provisions of
the Constitution, hence void; because its provision that "Foreign currency deposits shall be
exempt from attachment, garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body whatsoever

i.) has taken away the right of petitioners to have the bank deposit of defendant Greg Bartelli
y Northcott garnished to satisfy the judgment rendered in petitioners' favor in violation of
substantive due process guaranteed by the Constitution;

ii.) has given foreign currency depositors an undue favor or a class privilege in violation of
the equal protection clause of the Constitution;

iii.) has provided a safe haven for criminals like the herein respondent Greg Bartelli y
Northcott since criminals could escape civil liability for their wrongful acts by merely
converting their money to a foreign currency and depositing it in a foreign currency deposit
account with an authorized bank.

The antecedent facts:

On February 4, 1989, Greg Bartelli y Northcott, an American tourist, coaxed and lured
petitioner Karen Salvacion, then 12 years old to go with him to his apartment. Therein, Greg
Bartelli detained Karen Salvacion for four days, or up to February 7, 1989 and was able to
rape the child once on February 4, and three times each day on February 5, 6, and 7, 1989.
On February 7, 1989, after policemen and people living nearby, rescued Karen, Greg Bartelli
was arrested and detained at the Makati Municipal Jail. The policemen recovered from
Bartelli the following items: 1.) Dollar Check No. 368, Control No. 021000678-1166111303,
US 3,903.20; 2.) COCOBANK Bank Book No. 104-108758-8 (Peso Acct.); 3.) Dollar
Account — China Banking Corp., US$/A#54105028-2; 4.) ID-122-30-8877; 5.) Philippine
Money (P234.00) cash; 6.) Door Keys 6 pieces; 7.) Stuffed Doll (Teddy Bear) used in
seducing the complainant.

On February 16, 1989, Makati Investigating Fiscal Edwin G. Condaya filed against Greg
Bartelli, Criminal Case No. 801 for Serious Illegal Detention and Criminal Cases Nos. 802,
803, 804, and 805 for four (4) counts of Rape. On the same day, petitioners filed with the
Regional Trial Court of Makati Civil Case No. 89-3214 for damages with preliminary
attachment against Greg Bartelli. On February 24, 1989, the day there was a scheduled
hearing for Bartelli's petition for bail the latter escaped from jail.

On February 28, 1989, the court granted the fiscal's Urgent Ex-Parte Motion for the Issuance
of Warrant of Arrest and Hold Departure Order. Pending the arrest of the accused Greg
Bartelli y Northcott, the criminal cases were archived in an Order dated February 28, 1989.

Meanwhile, in Civil Case No. 89-3214, the Judge issued an Order dated February 22, 1989
granting the application of herein petitioners, for the issuance of the writ of preliminary
attachment. After petitioners gave Bond No. JCL (4) 1981 by FGU Insurance Corporation in
the amount of P100,000.00, a Writ of Preliminary Attachment was issued by the trial court
on February 28, 1989.

On March 1, 1989, the Deputy Sheriff of Makati served a Notice of Garnishment on China
Banking Corporation. In a letter dated March 13, 1989 to the Deputy Sheriff of Makati, China
Banking Corporation invoked Republic Act No. 1405 as its answer to the notice of
garnishment served on it. On March 15, 1989, Deputy Sheriff of Makati Armando de
Guzman sent his reply to China Banking Corporation saying that the garnishment did not
violate the secrecy of bank deposits since the disclosure is merely incidental to a
garnishment properly and legally made by virtue of a court order which has placed the
subject deposits in custodia legis. In answer to this letter of the Deputy Sheriff of Makati,
China Banking Corporation, in a letter dated March 20, 1989, invoked Section 113 of Central
Bank Circular No. 960 to the effect that the dollar deposits or defendant Greg Bartelli are
exempt from attachment, garnishment, or any other order or process of any court, legislative
body, government agency or any administrative body, whatsoever.

This prompted the counsel for petitioners to make an inquiry with the Central Bank in a letter
dated April 25, 1989 on whether Section 113 of CB Circular No. 960 has any exception or
whether said section has been repealed or amended since said section has rendered
nugatory the substantive right of the plaintiff to have the claim sought to be enforced by the
civil action secured by way of the writ of preliminary attachment as granted to the plaintiff
under Rule 57 of the Revised Rules of Court. The Central Bank responded as follows:

May 26, 1989

Ms. Erlinda S. Carolino

12 Pres. Osmena Avenue
South Admiral Village
Paranaque, Metro Manila

Dear Ms. Carolino:

This is in reply to your letter dated April 25, 1989 regarding your inquiry on Section 113, CB
Circular No. 960 (1983).

The cited provision is absolute in application. It does not admit of any exception, nor has the
same been repealed nor amended.

The purpose of the law is to encourage dollar accounts within the country's banking system
which would help in the development of the economy. There is no intention to render futile
the basic rights of a person as was suggested in your subject letter. The law may be harsh
as some perceive it, but it is still the law. Compliance is, therefore, enjoined.

Very truly yours,

(SGD) AGAPITO S. FAJARDO

Director1

Meanwhile, on April 10, 1989, the trial court granted petitioners' motion for leave to serve
summons by publication in the Civil Case No. 89-3214 entitled "Karen Salvacion, et al. vs.
Greg Bartelli y Northcott." Summons with the complaint was a published in the Manila Times
once a week for three consecutive weeks. Greg Bartelli failed to file his answer to the
complaint and was declared in default on August 7, 1989. After hearing the case ex-parte,
the court rendered judgment in favor of petitioners on March 29, 1990, the dispositive
portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant,

ordering the latter:

1. To pay plaintiff Karen E. Salvacion the amount of P500,000.00 as moral damages;

2. To pay her parents, plaintiffs spouses Federico N. Salvacion, Jr., and Evelina E.
Salvacion the amount of P150,000.00 each or a total of P300,000.00 for both of them;

3. To pay plaintiffs exemplary damages of P100,000.00; and

4. To pay attorney's fees in an amount equivalent to 25% of the total amount of damages
herein awarded;

5. To pay litigation expenses of P10,000.00; plus

6. Costs of the suit.

SO ORDERED.

The heinous acts of respondent Greg Bartelli which gave rise to the award were related in
graphic detail by the trial court in its decision as follows:

The defendant in this case was originally detained in the municipal jail of Makati but was
able to escape therefrom on February 24, 1989 as per report of the Jail Warden of Makati to
the Presiding Judge, Honorable Manuel M. Cosico of the Regional Trial Court of Makati,
Branch 136, where he was charged with four counts of Rape and Serious Illegal Detention
(Crim. Cases Nos. 802 to 805). Accordingly, upon motion of plaintiffs, through counsel,
summons was served upon defendant by publication in the Manila Times, a newspaper of
general circulation as attested by the Advertising Manager of the Metro Media Times, Inc.,
the publisher of the said newspaper. Defendant, however, failed to file his answer to the
complaint despite the lapse of the period of sixty (60) days from the last publication; hence,
upon motion of the plaintiffs, through counsel, defendant was declared in default and
plaintiffs were authorized to present their evidence ex parte.

In support of the complaint, plaintiffs presented as witnesses the minor Karen E. Salvacion,
her father, Federico N. Salvacion, Jr., a certain Joseph Aguilar and a certain Liberato
Madulio, who gave the following testimony:

Karen took her first year high school in St. Mary's Academy in Pasay City but has recently
transferred to Arellano University for her second year.

In the afternoon of February 4, 1989, Karen was at the Plaza Fair Makati Cinema Square,
with her friend Edna Tangile whiling away her free time. At about 3:30 p.m. while she was
finishing her snack on a concrete bench in front of Plaza Fair, an American approached her.
She was then alone because Edna Tangile had already left, and she was about to go home.
(TSN, Aug. 15, 1989, pp. 2 to 5)

The American asked her name and introduced himself as Greg Bartelli. He sat beside her
when he talked to her. He said he was a Math teacher and told her that he has a sister who
is a nurse in New York. His sister allegedly has a daughter who is about Karen's age and
who was with him in his house along Kalayaan Avenue. (TSN, Aug. 15, 1989, pp. 4-5)

The American asked Karen what was her favorite subject and she told him it's Pilipino. He
then invited her to go with him to his house where she could teach Pilipino to his niece. He
even gave her a stuffed toy to persuade her to teach his niece. (Id., pp. 5-6)

They walked from Plaza Fair along Pasong Tamo, turning right to reach the defendant's
house along Kalayaan Avenue. (Id., p. 6)
When they reached the apartment house, Karen noticed that defendant's alleged niece was
not outside the house but defendant told her maybe his niece was inside. When Karen did
not see the alleged niece inside the house, defendant told her maybe his niece was upstairs,
and invited Karen to go upstairs. (Id., p. 7)

Upon entering the bedroom defendant suddenly locked the door. Karen became nervous
because his niece was not there. Defendant got a piece of cotton cord and tied Karen's
hands with it, and then he undressed her. Karen cried for help but defendant strangled her.
He took a packing tape and he covered her mouth with it and he circled it around her head.
(Id., p. 7)

Then, defendant suddenly pushed Karen towards the bed which was just near the door. He
tied her feet and hands spread apart to the bed posts. He knelt in front of her and inserted
his finger in her sex organ. She felt severe pain. She tried to shout but no sound could come
out because there were tapes on her mouth. When defendant withdrew his finger it was full
of blood and Karen felt more pain after the withdrawal of the finger. (Id., p. 8)

He then got a Johnson's Baby Oil and he applied it to his sex organ as well as to her sex
organ. After that he forced his sex organ into her but he was not able to do so. While he was
doing it, Karen found it difficult to breathe and she perspired a lot while feeling severe pain.
She merely presumed that he was able to insert his sex organ a little, because she could not
see. Karen could not recall how long the defendant was in that position. (Id. pp. 8-9)

After that, he stood up and went to the bathroom to wash. He also told Karen to take a
shower and he untied her hands. Karen could only hear the sound of the water while the
defendant, she presumed, was in the bathroom washing his sex organ. When she took a
shower more blood came out from her. In the meantime, defendant changed the mattress
because it was full of blood. After the shower, Karen was allowed by defendant to sleep.
She fell asleep because she got tired crying. The incident happened at about 4:00 p.m.
Karen had no way of determining the exact time because defendant removed her watch.
Defendant did not care to give her food before she went to sleep. Karen woke up at about
8:00 o'clock the following morning. (Id., pp. 9-10)

The following day, February 5, 1989, a Sunday, after a breakfast of biscuit and coke at
about 8:30 to 9:00 a.m. defendant raped Karen while she was still bleeding. For lunch, they
also took biscuit and coke. She was raped for the second time at about 12:00 to 2:00 p.m. In
the evening, they had rice for dinner which defendant had stored downstairs; it was he who
cooked the rice that is why it looks like "lugaw". For the third time, Karen was raped again
during the night. During those three times defendant succeeded in inserting his sex organ
but she could not say whether the organ was inserted wholly.

Karen did not see any firearm or any bladed weapon. The defendant did not tie her hands
and feet nor put a tape on her mouth anymore but she did not cry for help for fear that she
might be killed; besides, all the windows and doors were closed. And even if she shouted for
help, nobody would hear her. She was so afraid that if somebody would hear her and would
be able to call the police, it was still possible that as she was still inside the house,
defendant might kill her. Besides, the defendant did not leave that Sunday, ruling out her
chance to call for help. At nighttime he slept with her again. (TSN, Aug. 15, 1989, pp. 12-14)

On February 6, 1989, Monday, Karen was raped three times, once in the morning for thirty
minutes after a breakfast of biscuits; again in the afternoon; and again in the evening. At
first, Karen did not know that there was a window because everything was covered by a
carpet, until defendant opened the window for around fifteen minutes or less to let some air
in, and she found that the window was covered by styrofoam and plywood. After that, he
again closed the window with a hammer and he put the styrofoam, plywood, and carpet
back. (Id., pp. 14-15)

That Monday evening, Karen had a chance to call for help, although defendant left but kept
the door closed. She went to the bathroom and saw a small window covered by styrofoam
and she also spotted a small hole. She stepped on the bowl and she cried for help through
the hole. She cried: "Maawa no po kayo so akin. Tulungan n'yo akong makalabas
dito. Kinidnap ako!" Somebody heard her. It was a woman, probably a neighbor, but she got
angry and said she was "istorbo". Karen pleaded for help and the woman told her to sleep
and she will call the police. She finally fell asleep but no policeman came. (TSN, Aug. 15,
1989, pp. 15-16)

She woke up at 6:00 o'clock the following morning, and she saw defendant in bed, this time
sleeping. She waited for him to wake up. When he woke up, he again got some food but he
always kept the door locked. As usual, she was merely fed with biscuit and coke. On that
day, February 7, 1989, she was again raped three times. The first at about 6:30 to 7:00 a.m.,
the second at about 8:30 — 9:00, and the third was after lunch at 12:00 noon. After he had
raped her for the second time he left but only for a short while. Upon his return, he caught
her shouting for help but he did not understand what she was shouting about. After she was
raped the third time, he left the house. (TSN, Aug. 15, 1989, pp. 16-17) She again went to
the bathroom and shouted for help. After shouting for about five minutes, she heard many
voices. The voices were asking for her name and she gave her name as Karen Salvacion.
After a while, she heard a voice of a woman saying they will just call the police. They were
also telling her to change her clothes. She went from the bathroom to the room but she did
not change her clothes being afraid that should the neighbors call for the police and the
defendant see her in different clothes, he might kill her. At that time she was wearing a T-
shirt of the American because the latter washed her dress. (Id., p. 16)

Afterwards, defendant arrived and he opened the door. He asked her if she had asked for
help because there were many policemen outside and she denied it. He told her to change
her clothes, and she did change to the one she was wearing on Saturday. He instructed her
to tell the police that she left home and willingly; then he went downstairs but he locked the
door. She could hear people conversing but she could not understand what they were
saying. (Id., p. 19)

When she heard the voices of many people who were conversing downstairs, she knocked
repeatedly at the door as hard as she could. She heard somebody going upstairs and when
the door was opened, she saw a policeman. The policeman asked her name and the reason
why she was there. She told him she was kidnapped. Downstairs, he saw about five
policemen in uniform and the defendant was talking to them. "Nakikipag-areglo po sa mga
pulis," Karen added. "The policeman told him to just explain at the precinct. (Id., p. 20)

They went out of the house and she saw some of her neighbors in front of the house. They
rode the car of a certain person she called Kuya Boy together with defendant, the
policeman, and two of her neighbors whom she called Kuya Bong Lacson and one Ate Nita.
They were brought to Sub-Station I and there she was investigated by a policeman. At about
2:00 a.m., her father arrived, followed by her mother together with some of their neighbors.
Then they were brought to the second floor of the police headquarters. (Id., p. 21)

At the headquarters, she was asked several questions by the investigator. The written
statement she gave to the police was marked as Exhibit A. Then they proceeded to the
National Bureau of Investigation together with the investigator and her parents. At the NBI, a
doctor, a medico-legal officer, examined her private parts. It was already 3:00 in the early
morning of the following day when they reached the NBI. (TSN, Aug. 15, 1989, p. 22) The
findings of the medico-legal officer has been marked as Exhibit B.

She was studying at the St. Mary's Academy in Pasay City at the time of the incident but she
subsequently transferred to Apolinario Mabini, Arellano University, situated along Taft
Avenue, because she was ashamed to be the subject of conversation in the school. She first
applied for transfer to Jose Abad Santos, Arellano University along Taft Avenue near the
Light Rail Transit Station but she was denied admission after she told the school the true
reason for her transfer. The reason for their denial was that they might be implicated in the
case. (TSN, Aug. 15, 1989, p. 46)

xxx xxx xxx

After the incident, Karen has changed a lot. She does not play with her brother and sister
anymore, and she is always in a state of shock; she has been absent-minded and is
ashamed even to go out of the house. (TSN, Sept. 12, 1989, p. 10) She appears to be
restless or sad, (Id., p. 11) The father prays for P500,000.00 moral damages for Karen for
this shocking experience which probably, she would always recall until she reaches old age,
and he is not sure if she could ever recover from this experience. (TSN, Sept. 24, 1989, pp.
10-11)
Pursuant to an Order granting leave to publish notice of decision, said notice was published
in the Manila Bulletin once a week for three consecutive weeks. After the lapse of fifteen
(15) days from the date of the last publication of the notice of judgment and the decision of
the trial court had become final, petitioners tried to execute on Bartelli's dollar deposit with
China Banking Corporation. Likewise, the bank invoked Section 113 of Central Bank
Circular No. 960.

Thus, petitioners decided to seek relief from this Court.

The issues raised and the arguments articulated by the parties boil down to two:

May this Court entertain the instant petition despite the fact that original jurisdiction in
petitions for declaratory relief rests with the lower court? Should Section 113 of Central Bank
Circular No. 960 and Section 8 of R.A. 6426, as amended by P.D. 1246, otherwise known as
the Foreign Currency Deposit Act be made applicable to a foreign transient?

Petitioners aver as heretofore stated that Section 113 of Central Bank Circular No. 960
providing that "Foreign currency deposits shall be exempt from attachment, garnishment, or
any other order or process of any court, legislative body, government agency or any
administrative body whatsoever." should be adjudged as unconstitutional on the grounds
that: 1.) it has taken away the right of petitioners to have the bank deposit of defendant Greg
Bartelli y Northcott garnished to satisfy the judgment rendered in petitioners' favor in
violation of substantive due process guaranteed by the Constitution; 2.) it has given foreign
currency depositors an undue favor or a class privilege in violation of the equal protection
clause of the Constitution; 3.) it has provided a safe haven for criminals like the herein
respondent Greg Bartelli y Northcott since criminals could escape civil liability for their
wrongful acts by merely converting their money to a foreign currency and depositing it in a
foreign currency deposit account with an authorized bank; and 4.) The Monetary Board, in
issuing Section 113 of Central Bank Circular No. 960 has exceeded its delegated quasi-
legislative power when it took away: a.) the plaintiffs substantive right to have the claim
sought to be enforced by the civil action secured by way of the writ of preliminary attachment
as granted by Rule 57 of the Revised Rules of Court; b.) the plaintiffs substantive right to
have the judgment credit satisfied by way of the writ of execution out of the bank deposit of
the judgment debtor as granted to the judgment creditor by Rule 39 of the Revised Rules of
Court, which is beyond its power to do so.

On the other hand, respondent Central Bank, in its Comment alleges that the Monetary
Board in issuing Section 113 of CB Circular No. 960 did not exceed its power or authority
because the subject Section is copied verbatim from a portion of R.A. No. 6426 as amended
by P.D. 1246. Hence, it was not the Monetary Board that grants exemption from attachment
or garnishment to foreign currency deposits, but the law (R.A. 6426 as amended) itself; that
it does not violate the substantive due process guaranteed by the Constitution because a.) it
was based on a law; b.) the law seems to be reasonable; c.) it is enforced according to
regular methods of procedure; and d.) it applies to all members of a class.

Expanding, the Central Bank said; that one reason for exempting the foreign currency
deposits from attachment, garnishment or any other order or process of any court, is to
assure the development and speedy growth of the Foreign Currency Deposit System and
the Offshore Banking System in the Philippines; that another reason is to encourage the
inflow of foreign currency deposits into the banking institutions thereby placing such
institutions more in a position to properly channel the same to loans and investments in the
Philippines, thus directly contributing to the economic development of the country; that the
subject section is being enforced according to the regular methods of procedure; and that it
applies to all foreign currency deposits made by any person and therefore does not violate
the equal protection clause of the Constitution.

Respondent Central Bank further avers that the questioned provision is needed to promote
the public interest and the general welfare; that the State cannot just stand idly by while a
considerable segment of the society suffers from economic distress; that the State had to
take some measures to encourage economic development; and that in so doing persons
and property may be subjected to some kinds of restraints or burdens to secure the general
welfare or public interest. Respondent Central Bank also alleges that Rule 39 and Rule 57 of
the Revised Rules of Court provide that some properties are exempted from
execution/attachment especially provided by law and R.A. No. 6426 as amended is such a
law, in that it specifically provides, among others, that foreign currency deposits shall be
exempted from attachment, garnishment, or any other order or process of any court,
legislative body, government agency or any administrative body whatsoever.

For its part, respondent China Banking Corporation, aside from giving reasons similar to that
of respondent Central Bank, also stated that respondent China Bank is not unmindful of the
inhuman sufferings experienced by the minor Karen E. Salvacion from the beastly hands of
Greg Bartelli; that it is only too willing to release the dollar deposit of Bartelli which may
perhaps partly mitigate the sufferings petitioner has undergone; but it is restrained from
doing so in view of R.A. No. 6426 and Section 113 of Central Bank Circular No. 960; and
that despite the harsh effect of these laws on petitioners, CBC has no other alternative but to
follow the same.

This Court finds the petition to be partly meritorious.

Petitioner deserves to receive the damages awarded to her by the court. But this petition for
declaratory relief can only be entertained and treated as a petition for mandamus to require
respondents to honor and comply with the writ of execution in Civil Case No. 89-3214.

This Court has no original and exclusive jurisdiction over a petition for declaratory
relief.  However, exceptions to this rule have been recognized. Thus, where the petition has
2

far-reaching implications and raises questions that should be resolved, it may be treated as
one for mandamus. 3

Here is a child, a 12-year old girl, who in her belief that all Americans are good and in her
gesture of kindness by teaching his alleged niece the Filipino language as requested by the
American, trustingly went with said stranger to his apartment, and there she was raped by
said American tourist Greg Bartelli. Not once, but ten times. She was detained therein for
four (4) days. This American tourist was able to escape from the jail and avoid punishment.
On the other hand, the child, having received a favorable judgment in the Civil Case for
damages in the amount of more than P1,000,000.00, which amount could alleviate the
humiliation, anxiety, and besmirched reputation she had suffered and may continue to suffer
for a long, long time; and knowing that this person who had wronged her has the money,
could not, however get the award of damages because of this unreasonable law. This
questioned law, therefore makes futile the favorable judgment and award of damages that
she and her parents fully deserve. As stated by the trial court in its decision,

Indeed, after hearing the testimony of Karen, the Court believes that it was undoubtedly a
shocking and traumatic experience she had undergone which could haunt her mind for a
long, long time, the mere recall of which could make her feel so humiliated, as in fact she
had been actually humiliated once when she was refused admission at the Abad Santos
High School, Arellano University, where she sought to transfer from another school, simply
because the school authorities of the said High School learned about what happened to her
and allegedly feared that they might be implicated in the case.

xxx xxx xxx

The reason for imposing exemplary or corrective damages is due to the wanton and bestial
manner defendant had committed the acts of rape during a period of serious illegal detention
of his hapless victim, the minor Karen Salvacion whose only fault was in her being so naive
and credulous to believe easily that defendant, an American national, could not have such a
bestial desire on her nor capable of committing such a heinous crime. Being only 12 years
old when that unfortunate incident happened, she has never heard of an old Filipino adage
that in every forest there is a
snake, . . . .
4

If Karen's sad fate had happened to anybody's own kin, it would be difficult for him to fathom
how the incentive for foreign currency deposit could be more important than his child's rights
to said award of damages; in this case, the victim's claim for damages from this alien who
had the gall to wrong a child of tender years of a country where he is a mere visitor. This
further illustrates the flaw in the questioned provisions.
It is worth mentioning that R.A. No. 6426 was enacted in 1983 or at a time when the
country's economy was in a shambles; when foreign investments were minimal and
presumably, this was the reason why said statute was enacted. But the realities of the
present times show that the country has recovered economically; and even if not, the
questioned law still denies those entitled to due process of law for being unreasonable and
oppressive. The intention of the questioned law may be good when enacted. The law failed
to anticipate the iniquitous effects producing outright injustice and inequality such as the
case before us.

It has thus been said that —

But I also know,  that laws and institutions must go hand in hand with the progress of the
5

human mind. As that becomes more developed, more enlightened, as new discoveries are
made, new truths are disclosed and manners and opinions change with the change of
circumstances, institutions must advance also, and keep pace with the times. . . We might
as well require a man to wear still the coat which fitted him when a boy, as civilized society
to remain ever under the regimen of their barbarous ancestors.

In his Comment, the Solicitor General correctly opined, thus:

The present petition has far-reaching implications on the right of a national to obtain redress
for a wrong committed by an alien who takes refuge under a law and regulation promulgated
for a purpose which does not contemplate the application thereof envisaged by the alien.
More specifically, the petition raises the question whether the protection against attachment,
garnishment or other court process accorded to foreign currency deposits by PD No. 1246
and CB Circular No. 960 applies when the deposit does not come from a lender or investor
but from a mere transient or tourist who is not expected to maintain the deposit in the bank
for long.

The resolution of this question is important for the protection of nationals who are victimized
in the forum by foreigners who are merely passing through.

xxx xxx xxx

. . . Respondents China Banking Corporation and Central Bank of the Philippines refused to
honor the writ of execution issued in Civil Case No. 89-3214 on the strength of the following
provision of Central Bank Circular No. 960:

Sec. 113. Exemption from attachment. — Foreign currency deposits shall be exempt from
attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever.

Central Bank Circular No. 960 was issued pursuant to Section 7 of Republic Act No. 6426:

Sec. 7. Rules and Regulations. The Monetary Board of the Central Bank shall promulgate
such rules and regulations as may be necessary to carry out the provisions of this Act which
shall take effect after the publication of such rules and regulations in the Official Gazette and
in a newspaper of national circulation for at least once a week for three consecutive weeks.
In case the Central Bank promulgates new rules and regulations decreasing the rights of
depositors, the rules and regulations at the time the deposit was made shall govern.

The aforecited Section 113 was copied from Section 8 of Republic Act NO. 6426, as
amended by P.D. 1246, thus:

Sec. 8. Secrecy of Foreign Currency Deposits. — All foreign currency deposits authorized
under this Act, as amended by Presidential Decree No. 1035, as well as foreign currency
deposits authorized under Presidential Decree No. 1034, are hereby declared as and
considered of an absolutely confidential nature and, except upon the written permission of
the depositor, in no instance shall such foreign currency deposits be examined, inquired or
looked into by any person, government official, bureau or office whether judicial or
administrative or legislative or any other entity whether public or private: Provided, however,
that said foreign currency deposits shall be exempt from attachment, garnishment, or any
other order or process of any court, legislative body, government agency or any
administrative body whatsoever.

The purpose of PD 1246 in according protection against attachment, garnishment and other
court process to foreign currency deposits is stated in its whereases, viz.:

WHEREAS, under Republic Act No. 6426, as amended by Presidential Decree No. 1035,
certain Philippine banking institutions and branches of foreign banks are authorized to
accept deposits in foreign currency;

WHEREAS, under the provisions of Presidential Decree No. 1034 authorizing the
establishment of an offshore banking system in the Philippines, offshore banking units are
also authorized to receive foreign currency deposits in certain cases;

WHEREAS, in order to assure the development and speedy growth of the Foreign Currency
Deposit System and the Offshore Banking System in the Philippines, certain incentives were
provided for under the two Systems such as confidentiality of deposits subject to certain
exceptions and tax exemptions on the interest income of depositors who are nonresidents
and are not engaged in trade or business in the Philippines;

WHEREAS, making absolute the protective cloak of confidentiality over such foreign
currency deposits, exempting such deposits from tax, and guaranteeing the vested rights of
depositors would better encourage the inflow of foreign currency deposits into the banking
institutions authorized to accept such deposits in the Philippines thereby placing such
institutions more in a position to properly channel the same to loans and investments in the
Philippines, thus directly contributing to the economic development of the country;

Thus, one of the principal purposes of the protection accorded to foreign currency deposits
is "to assure the development and speedy growth of the Foreign Currency Deposit system
and the Offshore Banking in the Philippines" (3rd Whereas).

The Offshore Banking System was established by PD No. 1034. In turn, the purposes of PD
No. 1034 are as follows:

WHEREAS, conditions conducive to the establishment of an offshore banking system, such

as political stability, a growing economy and adequate communication facilities, among
others, exist in the Philippines;

WHEREAS, it is in the interest of developing countries to have as wide access as possible

to the sources of capital funds for economic development;

WHEREAS, an offshore banking system based in the Philippines will be advantageous and
beneficial to the country by increasing our links with foreign lenders, facilitating the flow of
desired investments into the Philippines, creating employment opportunities and expertise in
international finance, and contributing to the national development effort.

WHEREAS, the geographical location, physical and human resources, and other positive
factors provide the Philippines with the clear potential to develop as another financial center
in Asia;

On the other hand, the Foreign Currency Deposit system was created by PD. No. 1035. Its
purposes are as follows:

WHEREAS, the establishment of an offshore banking system in the Philippines has been
authorized under a separate decree;

WHEREAS, a number of local commercial banks, as depository bank under the Foreign
Currency Deposit Act (RA No. 6426), have the resources and managerial competence to
more actively engage in foreign exchange transactions and participate in the grant of foreign
currency loans to resident corporations and firms;
WHEREAS, it is timely to expand the foreign currency lending authority of the said
depository banks under RA 6426 and apply to their transactions the same taxes as would be
applicable to transaction of the proposed offshore banking units;

It is evident from the above [Whereas clauses] that the Offshore Banking System and the
Foreign Currency Deposit System were designed to draw deposits from
foreign lenders and investors (Vide second Whereas of PD No. 1034; third Whereas of PD
No. 1035). It is these deposits that are induced by the two laws and given protection and
incentives by them.

Obviously, the foreign currency deposit made by a transient or a tourist is not the kind of
deposit encouraged by PD Nos. 1034 and 1035 and given incentives and protection by said
laws because such depositor stays only for a few days in the country and, therefore, will
maintain his deposit in the bank only for a short time.

Respondent Greg Bartelli, as stated, is just a tourist or a transient. He deposited his dollars
with respondent China Banking Corporation only for safekeeping during his temporary stay
in the Philippines.

For the reasons stated above, the Solicitor General thus submits that the dollar deposit of
respondent Greg Bartelli is not entitled to the protection of Section 113 of Central Bank
Circular No. 960 and PD No. 1246 against attachment, garnishment or other court
processes. 6

In fine, the application of the law depends on the extent of its justice. Eventually, if we rule
that the questioned Section 113 of Central Bank Circular No. 960 which exempts from
attachment, garnishment, or any other order or process of any court, legislative body,
government agency or any administrative body whatsoever, is applicable to a foreign
transient, injustice would result especially to a citizen aggrieved by a foreign guest like
accused Greg Bartelli. This would negate Article 10 of the New Civil Code which provides
that "in case of doubt in the interpretation or application of laws, it is presumed that the
lawmaking body intended right and justice to prevail. "Ninguno non deue enriquecerse
tortizeramente con dano de otro." Simply stated, when the statute is silent or ambiguous,
this is one of those fundamental solutions that would respond to the vehement urge of
conscience. (Padilla vs. Padilla, 74 Phil. 377).

It would be unthinkable, that the questioned Section 113 of Central Bank No. 960 would be
used as a device by accused Greg Bartelli for wrongdoing, and in so doing, acquitting the
guilty at the expense of the innocent.

Call it what it may — but is there no conflict of legal policy here? Dollar against Peso?
Upholding the final and executory judgment of the lower court against the Central Bank
Circular protecting the foreign depositor? Shielding or protecting the dollar deposit of a
transient alien depositor against injustice to a national and victim of a crime? This situation
calls for fairness against legal tyranny.

We definitely cannot have both ways and rest in the belief that we have served the ends of
justice.

IN VIEW WHEREOF, the provisions of Section 113 of CB Circular No. 960 and PD No.
1246, insofar as it amends Section 8 of R.A. No. 6426 are hereby held to be
INAPPLICABLE to this case because of its peculiar circumstances. Respondents are hereby
REQUIRED to COMPLY with the writ of execution issued in Civil Case No. 89-3214, "Karen
Salvacion, et al. vs. Greg Bartelli y Northcott, by Branch CXLIV, RTC Makati and to
RELEASE to petitioners the dollar deposit of respondent Greg Bartelli y Northcott in such
amount as would satisfy the judgment.

SO ORDERED.
G.R. No. 61594 September 28, 1990

PAKISTAN INTERNATIONAL AIRLINES CORPORATION, petitioner,

vs
HON. BLAS F. OPLE, in his capacity as Minister of Labor; HON. VICENTE
LEOGARDO, JR., in his capacity as Deputy Minister; ETHELYNNE B. FARRALES and
MARIA MOONYEEN MAMASIG, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

Ledesma, Saludo & Associates for private respondents.

FELICIANO, J.:

On 2 December 1978, petitioner Pakistan International Airlines Corporation ("PIA"), a foreign corporation licensed to do business
in the Philippines, executed in Manila two (2) separate contracts of employment, one with private respondent Ethelynne B.
Farrales and the other with private respondent Ma. M.C. Mamasig. 1 The contracts, which became effective on 9 January 1979,
provided in pertinent portion as follows:

5. DURATION OF EMPLOYMENT AND PENALTY

This agreement is for a period of three (3) years, but can be extended by the mutual consent
of the parties.

xxx xxx xxx

6. TERMINATION

xxx xxx xxx

Notwithstanding anything to contrary as herein provided, PIA reserves the right to terminate
this agreement at any time by giving the EMPLOYEE notice in writing in advance one month
before the intended termination or in lieu thereof, by paying the EMPLOYEE wages
equivalent to one month's salary.

xxx xxx xxx

10. APPLICABLE LAW:

This agreement shall be construed and governed under and by the laws of Pakistan, and
only the Courts of Karachi, Pakistan shall have the jurisdiction to consider any matter arising
out of or under this agreement.

Respondents then commenced training in Pakistan. After their training period, they began
discharging their job functions as flight attendants, with base station in Manila and flying
assignments to different parts of the Middle East and Europe.

On 2 August 1980, roughly one (1) year and four (4) months prior to the expiration of the
contracts of employment, PIA through Mr. Oscar Benares, counsel for and official of the
local branch of PIA, sent separate letters both dated 1 August 1980 to private respondents
Farrales and Mamasig advising both that their services as flight stewardesses would be
terminated "effective 1 September 1980, conformably to clause 6 (b) of the employment
agreement [they had) executed with [PIA]." 2

On 9 September 1980, private respondents Farrales and Mamasig jointly instituted a

complaint, docketed as NCR-STF-95151-80, for illegal dismissal and non-payment of
company benefits and bonuses, against PIA with the then Ministry of Labor and Employment
("MOLE"). After several unfruitful attempts at conciliation, the MOLE hearing officer Atty.
Jose M. Pascual ordered the parties to submit their position papers and evidence supporting
their respective positions. The PIA submitted its position paper,   but no evidence, and there
3

claimed that both private respondents were habitual absentees; that both were in the habit
of bringing in from abroad sizeable quantities of "personal effects"; and that PIA personnel at
the Manila International Airport had been discreetly warned by customs officials to advise
private respondents to discontinue that practice. PIA further claimed that the services of both
private respondents were terminated pursuant to the provisions of the employment contract.

In his Order dated 22 January 1981, Regional Director Francisco L. Estrella ordered the
reinstatement of private respondents with full backwages or, in the alternative, the payment
to them of the amounts equivalent to their salaries for the remainder of the fixed three-year
period of their employment contracts; the payment to private respondent Mamasig of an
amount equivalent to the value of a round trip ticket Manila-USA Manila; and payment of a
bonus to each of the private respondents equivalent to their one-month salary.   The Order
4

stated that private respondents had attained the status of regular employees after they had
rendered more than a year of continued service; that the stipulation limiting the period of the
employment contract to three (3) years was null and void as violative of the provisions of the
Labor Code and its implementing rules and regulations on regular and casual employment;
and that the dismissal, having been carried out without the requisite clearance from the
MOLE, was illegal and entitled private respondents to reinstatement with full backwages.

On appeal, in an Order dated 12 August 1982, Hon. Vicente Leogardo, Jr., Deputy Minister,
MOLE, adopted the findings of fact and conclusions of the Regional Director and affirmed
the latter's award save for the portion thereof giving PIA the option, in lieu of reinstatement,
"to pay each of the complainants [private respondents] their salaries corresponding to the
unexpired portion of the contract[s] [of employment] . . .". 
5

In the instant Petition for Certiorari, petitioner PIA assails the award of the Regional Director
and the Order of the Deputy Minister as having been rendered without jurisdiction; for having
been rendered without support in the evidence of record since, allegedly, no hearing was
conducted by the hearing officer, Atty. Jose M. Pascual; and for having been issued in
disregard and in violation of petitioner's rights under the employment contracts with private
respondents.

1. Petitioner's first contention is that the Regional Director, MOLE, had no jurisdiction over
the subject matter of the complaint initiated by private respondents for illegal dismissal,
jurisdiction over the same being lodged in the Arbitration Branch of the National Labor
Relations Commission ("NLRC") It appears to us beyond dispute, however, that both at the
time the complaint was initiated in September 1980 and at the time the Orders assailed were
rendered on January 1981 (by Regional Director Francisco L. Estrella) and August 1982 (by
Deputy Minister Vicente Leogardo, Jr.), the Regional Director had jurisdiction over
termination cases.

Art. 278 of the Labor Code, as it then existed, forbade the termination of the services of
employees with at least one (1) year of service without prior clearance from the Department
of Labor and Employment:

Art. 278. Miscellaneous Provisions — . . .

(b) With or without a collective agreement, no employer may shut down his establishment or
dismiss or terminate the employment of employees with at least one year of service during
the last two (2) years, whether such service is continuous or broken, without prior written
authority issued in accordance with such rules and regulations as the Secretary may
promulgate . . . (emphasis supplied)

Rule XIV, Book No. 5 of the Rules and Regulations Implementing the Labor Code, made
clear that in case of a termination without the necessary clearance, the Regional Director
was authorized to order the reinstatement of the employee concerned and the payment of
backwages; necessarily, therefore, the Regional Director must have been given jurisdiction
over such termination cases:

Sec. 2. Shutdown or dismissal without clearance. — Any shutdown or dismissal without prior
clearance shall be conclusively presumed to be termination of employment without a just
cause. The Regional Director shall, in such case order the immediate reinstatement of the
employee and the payment of his wages from the time of the shutdown or dismissal until the
time of reinstatement. (emphasis supplied)

Policy Instruction No. 14 issued by the Secretary of Labor, dated 23 April 1976, was similarly
very explicit about the jurisdiction of the Regional Director over termination of employment
cases:

Under PD 850, termination cases — with or without CBA — are now placed under the
original jurisdiction of the Regional Director. Preventive suspension cases, now made
cognizable for the first time, are also placed under the Regional Director. Before PD 850,
termination cases where there was a CBA were under the jurisdiction of the grievance
machinery and voluntary arbitration, while termination cases where there was no CBA were
under the jurisdiction of the Conciliation Section.

In more details, the major innovations introduced by PD 850 and its implementing rules and
regulations with respect to termination and preventive suspension cases are:

1. The Regional Director is now required to rule on every application for clearance, whether
there is opposition or not, within ten days from receipt thereof.

xxx xxx xxx

(Emphasis supplied)

2. The second contention of petitioner PIA is that, even if the Regional Director had
jurisdiction, still his order was null and void because it had been issued in violation of
petitioner's right to procedural due process .  This claim, however, cannot be given serious
6

consideration. Petitioner was ordered by the Regional Director to submit not only its position
paper but also such evidence in its favor as it might have. Petitioner opted to rely solely
upon its position paper; we must assume it had no evidence to sustain its assertions. Thus,
even if no formal or oral hearing was conducted, petitioner had ample opportunity to explain
its side. Moreover, petitioner PIA was able to appeal his case to the Ministry of Labor and
Employment.  7

There is another reason why petitioner's claim of denial of due process must be rejected. At
the time the complaint was filed by private respondents on 21 September 1980 and at the
time the Regional Director issued his questioned order on 22 January 1981, applicable
regulation, as noted above, specified that a "dismissal without prior clearance shall be
conclusively presumed to be termination of employment without a cause", and the Regional
Director was required in such case to" order the immediate reinstatement of the employee
and the payment of his wages from the time of the shutdown or dismiss until . . .
reinstatement." In other words, under the then applicable rule, the Regional Director did not
even have to require submission of position papers by the parties in view of the
conclusive (juris et de jure) character of the presumption created by such applicable law and
regulation. In Cebu Institute of Technology v. Minister of Labor and Employment,   the Court
8

pointed out that "under Rule 14, Section 2, of the Implementing Rules and Regulations, the
termination of [an employee] which was without previous clearance from the Ministry of
Labor is conclusively presumed to be without [just] cause . . . [a presumption which] cannot
be overturned by any contrary proof however strong."

3. In its third contention, petitioner PIA invokes paragraphs 5 and 6 of its contract of
employment with private respondents Farrales and Mamasig, arguing that its relationship
with them was governed by the provisions of its contract rather than by the general
provisions of the Labor Code. 9

Paragraph 5 of that contract set a term of three (3) years for that relationship, extendible by
agreement between the parties; while paragraph 6 provided that, notwithstanding any other
provision in the Contract, PIA had the right to terminate the employment agreement at any
time by giving one-month's notice to the employee or, in lieu of such notice, one-months
salary.

A contract freely entered into should, of course, be respected, as PIA argues, since a
contract is the law between the parties.   The principle of party autonomy in contracts is not,
10
however, an absolute principle. The rule in Article 1306, of our Civil Code is that the
contracting parties may establish such stipulations as they may deem
convenient, "provided they are not contrary to law, morals, good customs, public order or
public policy." Thus, counter-balancing the principle of autonomy of contracting parties is the
equally general rule that provisions of applicable law, especially provisions relating to
matters affected with public policy, are deemed written into the contract.   Put a little
11

differently, the governing principle is that parties may not contract away applicable
provisions of law especially peremptory provisions dealing with matters heavily impressed
with public interest. The law relating to labor and employment is clearly such an area and
parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other. It is thus necessary to
appraise the contractual provisions invoked by petitioner PIA in terms of their consistency
with applicable Philippine law and regulations.

As noted earlier, both the Labor Arbiter and the Deputy Minister, MOLE, in effect held that
paragraph 5 of that employment contract was inconsistent with Articles 280 and 281 of the
Labor Code as they existed at the time the contract of employment was entered into, and
hence refused to give effect to said paragraph 5. These Articles read as follows:

Art. 280. Security of Tenure. — In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this
Title An employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and to his backwages computed from the time his
compensation was withheld from him up to the time his reinstatement.

Art. 281. Regular and Casual Employment. The provisions of written agreement to the
contrary notwithstanding and regardless of the oral agreements of the parties, an
employment shall be deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or trade of
the employer, except where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding

paragraph: provided, that, any employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be considered as regular employee with
respect to the activity in which he is employed and his employment shall continue while such
actually exists. (Emphasis supplied)

In Brent School, Inc., et al. v. Ronaldo Zamora, etc., et al.,   the Court had occasion to
12

examine in detail the question of whether employment for a fixed term has been outlawed
under the above quoted provisions of the Labor Code. After an extensive examination of the
history and development of Articles 280 and 281, the Court reached the conclusion that a
contract providing for employment with a fixed period was not necessarily unlawful:

There can of course be no quarrel with the proposition that where from the circumstances it
is apparent that periods have been imposed to preclude acquisition of tenurial security by
the employee, they should be struck down or disregarded as contrary to public policy,
morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise,
where the reason for the law does not exist e.g. where it is indeed the employee himself who
insists upon a period or where the nature of the engagement is such that, without being
seasonal or for a specific project, a definite date of termination is a sine qua non would an
agreement fixing a period be essentially evil or illicit, therefore anathema Would such an
agreement come within the scope of Article 280 which admittedly was enacted "to prevent
the circumvention of the right of the employee to be secured in . . . (his) employment?"

As it is evident from even only the three examples already given that Article 280 of the
Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of
employment contracts to which the lack of a fixed period would be an anomaly, but would
also appear to restrict, without reasonable distinctions, the right of an employee to freely
stipulate with his employer the duration of his engagement, it logically follows that such a
literal interpretation should be eschewed or avoided. The law must be given reasonable
interpretation, to preclude absurdity in its application. Outlawing the whole concept of term
employment and subverting to boot the principle of freedom of contract to remedy the evil of
employers" using it as a means to prevent their employees from obtaining security of tenure
is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping
off the head.

xxx xxx xxx

Accordingly, and since the entire purpose behind the development of legislation culminating
in the present Article 280 of the Labor Code clearly appears to have been, as already
observed, to prevent circumvention of the employee's right to be secure in his tenure, the
clause in said article indiscriminately and completely ruling out all written or oral agreements
conflicting with the concept of regular employment as defined therein should be construed to
refer to the substantive evil that the Code itself has singled out: agreements entered into
precisely to circumvent security of tenure. It should have no application to instances where a
fixed period of employment was agreed upon knowingly and voluntarily by the parties,
without any force, duress or improper pressure being brought to bear upon the employee
and absent any other circumstances vitiating his consent, or where it satisfactorily appears
that the employer and employee dealt with each other on more or less equal terms with no
moral dominance whatever being exercised by the former over the latter. Unless thus limited
in its purview, the law would be made to apply to purposes other than those explicitly stated
by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to
absurd and unintended consequences. (emphasis supplied)

It is apparent from Brent School that the critical consideration is the presence or absence of

a substantial indication that the period specified in an employment agreement was designed
to circumvent the security of tenure of regular employees which is provided for in Articles
280 and 281 of the Labor Code. This indication must ordinarily rest upon some aspect of the
agreement other than the mere specification of a fixed term of the ernployment agreement,
or upon evidence aliunde of the intent to evade.

Examining the provisions of paragraphs 5 and 6 of the employment agreement between

petitioner PIA and private respondents, we consider that those provisions must be read
together and when so read, the fixed period of three (3) years specified in paragraph 5 will
be seen to have been effectively neutralized by the provisions of paragraph 6 of that
agreement. Paragraph 6 in effect took back from the employee the fixed three (3)-year
period ostensibly granted by paragraph 5 by rendering such period in effect a facultative one
at the option of the employer PIA. For petitioner PIA claims to be authorized to shorten that
term, at any time and for any cause satisfactory to itself, to a one-month period, or even less
by simply paying the employee a month's salary. Because the net effect of paragraphs 5 and
6 of the agreement here involved is to render the employment of private respondents
Farrales and Mamasig basically employment at the pleasure of petitioner PIA, the Court
considers that paragraphs 5 and 6 were intended to prevent any security of tenure from
accruing in favor of private respondents even during the limited period of three (3)
years,  and thus to escape completely the thrust of Articles 280 and 281 of the Labor Code.
13

Petitioner PIA cannot take refuge in paragraph 10 of its employment agreement which
specifies, firstly, the law of Pakistan as the applicable law of the agreement and, secondly,
lays the venue for settlement of any dispute arising out of or in connection with the
agreement "only [in] courts of Karachi Pakistan". The first clause of paragraph 10 cannot be
invoked to prevent the application of Philippine labor laws and regulations to the subject
matter of this case, i.e., the employer-employee relationship between petitioner PIA and
private respondents. We have already pointed out that the relationship is much affected with
public interest and that the otherwise applicable Philippine laws and regulations cannot be
rendered illusory by the parties agreeing upon some other law to govern their relationship.
Neither may petitioner invoke the second clause of paragraph 10, specifying the Karachi
courts as the sole venue for the settlement of dispute; between the contracting parties. Even
a cursory scrutiny of the relevant circumstances of this case will show the multiple and
substantive contacts between Philippine law and Philippine courts, on the one hand, and the
relationship between the parties, upon the other: the contract was not only executed in the
Philippines, it was also performed here, at least partially; private respondents are Philippine
citizens and respondents, while petitioner, although a foreign corporation, is licensed to do
business (and actually doing business) and hence resident in the Philippines; lastly, private
respondents were based in the Philippines in between their assigned flights to the Middle
East and Europe. All the above contacts point to the Philippine courts and administrative
agencies as a proper forum for the resolution of contractual disputes between the parties.
Under these circumstances, paragraph 10 of the employment agreement cannot be given
effect so as to oust Philippine agencies and courts of the jurisdiction vested upon them by
Philippine law. Finally, and in any event, the petitioner PIA did not undertake to plead and
prove the contents of Pakistan law on the matter; it must therefore be presumed that the
applicable provisions of the law of Pakistan are the same as the applicable provisions of
Philippine law.14

We conclude that private respondents Farrales and Mamasig were illegally dismissed and
that public respondent Deputy Minister, MOLE, had not committed any grave abuse of
discretion nor any act without or in excess of jurisdiction in ordering their reinstatement with
backwages. Private respondents are entitled to three (3) years backwages without
qualification or deduction. Should their reinstatement to their former or other substantially
equivalent positions not be feasible in view of the length of time which has gone by since
their services were unlawfully terminated, petitioner should be required to pay separation
pay to private respondents amounting to one (1) month's salary for every year of service
rendered by them, including the three (3) years service putatively rendered.

ACCORDINGLY, the Petition for certiorari is hereby DISMISSED for lack of merit, and the
Order dated 12 August 1982 of public respondent is hereby AFFIRMED, except that (1)
private respondents are entitled to three (3) years backwages, without deduction or
qualification; and (2) should reinstatement of private respondents to their former positions or
to substantially equivalent positions not be feasible, then petitioner shall, in lieu thereof, pay
to private respondents separation pay amounting to one (1)-month's salary for every year of
service actually rendered by them and for the three (3) years putative service by private
respondents. The Temporary Restraining Order issued on 13 September 1982 is hereby
LIFTED. Costs against petitioner.

SO ORDERED.
G.R. No. 92013 July 25, 1990

SALVADOR H. LAUREL, petitioner,
vs.
RAMON GARCIA, as head of the Asset Privatization Trust, RAUL MANGLAPUS, as
Secretary of Foreign Affairs, and CATALINO MACARAIG, as Executive
Secretary, respondents.

G.R. No. 92047 July 25, 1990

DIONISIO S. OJEDA, petitioner,
vs.
EXECUTIVE SECRETARY MACARAIG, JR., ASSETS PRIVATIZATION TRUST
CHAIRMAN RAMON T. GARCIA, AMBASSADOR RAMON DEL ROSARIO, et al., as
members of the PRINCIPAL AND BIDDING COMMITTEES ON THE
UTILIZATION/DISPOSITION PETITION OF PHILIPPINE GOVERNMENT PROPERTIES IN
JAPAN, respondents.

Arturo M. Tolentino for petitioner in 92013.

GUTIERREZ, JR., J.:

These are two petitions for prohibition seeking to enjoin respondents, their representatives and agents from proceeding
with the bidding for the sale of the 3,179 square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan
scheduled on February 21, 1990. We granted the prayer for a temporary restraining order effective February 20, 1990.
One of the petitioners (in G.R. No. 92047) likewise prayes for a writ of mandamus to compel the respondents to fully
disclose to the public the basis of their decision to push through with the sale of the Roppongi property inspire of
strong public opposition and to explain the proceedings which effectively prevent the participation of Filipino citizens
and entities in the bidding process.

The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court
on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed,
the respondents were required to file a comment by the Court's resolution dated
February 22, 1990. The two petitions were consolidated on March 27, 1990 when the
memoranda of the parties in the Laurel case were deliberated upon.

The Court could not act on these cases immediately because the respondents filed a
motion for an extension of thirty (30) days to file comment in G.R. No. 92047, followed
by a second motion for an extension of another thirty (30) days which we granted on
May 8, 1990, a third motion for extension of time granted on May 24, 1990 and a fourth
motion for extension of time which we granted on June 5, 1990 but calling the
attention of the respondents to the length of time the petitions have been pending.
After the comment was filed, the petitioner in G.R. No. 92047 asked for thirty (30) days
to file a reply. We noted his motion and resolved to decide the two (2) cases.

The subject property in this case is one of the four (4) properties in Japan acquired by
the Philippine government under the Reparations Agreement entered into with Japan
on May 9, 1956, the other lots being:

(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has
an area of approximately 2,489.96 square meters, and is at present the site of the
Philippine Embassy Chancery;

(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around
764.72 square meters and categorized as a commercial lot now being used as a
warehouse and parking lot for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku,
Kobe, a residential lot which is now vacant.

The properties and the capital goods and services procured from the Japanese
government for national development projects are part of the indemnification to the
Filipino people for their losses in life and property and their suffering during World
War II.

The Reparations Agreement provides that reparations valued at $550 million would be
payable in twenty (20) years in accordance with annual schedules of procurements to
be fixed by the Philippine and Japanese governments (Article 2, Reparations
Agreement). Rep. Act No. 1789, the Reparations Law, prescribes the national policy
on procurement and utilization of reparations and development loans. The
procurements are divided into those for use by the government sector and those
for private parties in projects as the then National Economic Council shall determine.
Those intended for the private sector shall be made available by sale to Filipino
citizens or to one hundred (100%) percent Filipino-owned entities in national
development projects.

The Roppongi property was acquired from the Japanese government under the
Second Year Schedule and listed under the heading "Government Sector", through
Reparations Contract No. 300 dated June 27, 1958. The Roppongi property consists of
the land and building "for the Chancery of the Philippine Embassy" (Annex M-D to
Memorandum for Petitioner, p. 503). As intended, it became the site of the Philippine
Embassy until the latter was transferred to Nampeidai on July 22, 1976 when the
Roppongi building needed major repairs. Due to the failure of our government to
provide necessary funds, the Roppongi property has remained undeveloped since
that time.

A proposal was presented to President Corazon C. Aquino by former Philippine

Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a lease
agreement with a Japanese firm - Kajima Corporation — which shall construct two (2)
buildings in Roppongi and one (1) building in Nampeidai and renovate the present
Philippine Chancery in Nampeidai. The consideration of the construction would be
the lease to the foreign corporation of one (1) of the buildings to be constructed in
Roppongi and the two (2) buildings in Nampeidai. The other building in Roppongi
shall then be used as the Philippine Embassy Chancery. At the end of the lease
period, all the three leased buildings shall be occupied and used by the Philippine
government. No change of ownership or title shall occur. (See Annex "B" to Reply to
Comment) The Philippine government retains the title all throughout the lease period
and thereafter. However, the government has not acted favorably on this proposal
which is pending approval and ratification between the parties. Instead, on August 11,
1986, President Aquino created a committee to study the disposition/utilization of
Philippine government properties in Tokyo and Kobe, Japan through Administrative
Order No. 3, followed by Administrative Orders Numbered 3-A, B, C and D.

On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino
citizens or entities to avail of separations' capital goods and services in the event of
sale, lease or disposition. The four properties in Japan including the Roppongi were
specifically mentioned in the first "Whereas" clause.

Amidst opposition by various sectors, the Executive branch of the government has
been pushing, with great vigor, its decision to sell the reparations properties starting
with the Roppongi lot. The property has twice been set for bidding at a minimum floor
price of $225 million. The first bidding was a failure since only one bidder qualified.
The second one, after postponements, has not yet materialized. The last scheduled
bidding on February 21, 1990 was restrained by his Court. Later, the rules on bidding
were changed such that the $225 million floor price became merely a suggested floor
price.

The Court finds that each of the herein petitions raises distinct issues. The petitioner
in G.R. No. 92013 objects to the alienation of the Roppongi property to anyone while
the petitioner in G.R. No. 92047 adds as a principal objection the alleged unjustified
bias of the Philippine government in favor of selling the property to non-Filipino
citizens and entities. These petitions have been consolidated and are resolved at the
same time for the objective is the same - to stop the sale of the Roppongi property.

The petitioner in G.R. No. 92013 raises the following issues:

(1) Can the Roppongi property and others of its kind be alienated by the Philippine
Government?; and

(2) Does the Chief Executive, her officers and agents, have the authority and
jurisdiction, to sell the Roppongi property?

Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of
the government to alienate the Roppongi property assails the constitutionality of
Executive Order No. 296 in making the property available for sale to non-Filipino
citizens and entities. He also questions the bidding procedures of the Committee on
the Utilization or Disposition of Philippine Government Properties in Japan for being
discriminatory against Filipino citizens and Filipino-owned entities by denying them
the right to be informed about the bidding requirements.

II

In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related
lots were acquired as part of the reparations from the Japanese government for
diplomatic and consular use by the Philippine government. Vice-President Laurel
states that the Roppongi property is classified as one of public dominion, and not of
private ownership under Article 420 of the Civil Code (See infra).

The petitioner submits that the Roppongi property comes under "property intended
for public service" in paragraph 2 of the above provision. He states that being one of
public dominion, no ownership by any one can attach to it, not even by the State. The
Roppongi and related properties were acquired for "sites for chancery, diplomatic,
and consular quarters, buildings and other improvements" (Second Year Reparations
Schedule). The petitioner states that they continue to be intended for a necessary
service. They are held by the State in anticipation of an opportune use. (Citing 3
Manresa 65-66). Hence, it cannot be appropriated, is outside the commerce of man, or
to put it in more simple terms, it cannot be alienated nor be the subject matter of
contracts (Citing Municipality of Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-
use of the Roppongi property at the moment, the petitioner avers that the same
remains property of public dominion so long as the government has not used it for
other purposes nor adopted any measure constituting a removal of its original
purpose or use.

The respondents, for their part, refute the petitioner's contention by saying that the
subject property is not governed by our Civil Code but by the laws of Japan where the
property is located. They rely upon the rule of lex situs which is used in determining
the applicable law regarding the acquisition, transfer and devolution of the title to a
property. They also invoke Opinion No. 21, Series of 1988, dated January 27, 1988 of
the Secretary of Justice which used the lex situs in explaining the inapplicability of
Philippine law regarding a property situated in Japan.

The respondents add that even assuming for the sake of argument that the Civil Code
is applicable, the Roppongi property has ceased to become property of public
dominion. It has become patrimonial property because it has not been used for public
service or for diplomatic purposes for over thirteen (13) years now (Citing Article 422,
Civil Code) and because the intention by the Executive Department and the
Congress to convert it to private use has been manifested by overt acts, such as,
among others: (1) the transfer of the Philippine Embassy to Nampeidai (2) the
issuance of administrative orders for the possibility of alienating the four government
properties in Japan; (3) the issuance of Executive Order No. 296; (4) the enactment by
the Congress of Rep. Act No. 6657 [the Comprehensive Agrarian Reform Law] on
June 10, 1988 which contains a provision stating that funds may be taken from the
sale of Philippine properties in foreign countries; (5) the holding of the public bidding
of the Roppongi property but which failed; (6) the deferment by the Senate in
Resolution No. 55 of the bidding to a future date; thus an acknowledgment by the
Senate of the government's intention to remove the Roppongi property from the
public service purpose; and (7) the resolution of this Court dismissing the petition
in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to enjoin the
second bidding of the Roppongi property scheduled on March 30, 1989.

III

In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the
constitutionality of Executive Order No. 296. He had earlier filed a petition in G.R. No.
87478 which the Court dismissed on August 1, 1989. He now avers that the executive
order contravenes the constitutional mandate to conserve and develop the national
patrimony stated in the Preamble of the 1987 Constitution. It also allegedly violates:

(1) The reservation of the ownership and acquisition of alienable lands of the public
domain to Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22
and 23 of Commonwealth Act 141). i•t•c-aüsl

(2) The preference for Filipino citizens in the grant of rights, privileges and
concessions covering the national economy and patrimony (Section 10, Article VI,
Constitution);

(3) The protection given to Filipino enterprises against unfair competition and trade
practices;

(4) The guarantee of the right of the people to information on all matters of public
concern (Section 7, Article III, Constitution);

(5) The prohibition against the sale to non-Filipino citizens or entities not wholly
owned by Filipino citizens of capital goods received by the Philippines under the
Reparations Act (Sections 2 and 12 of Rep. Act No. 1789); and

(6) The declaration of the state policy of full public disclosure of all transactions
involving public interest (Section 28, Article III, Constitution).

Petitioner Ojeda warns that the use of public funds in the execution of an
unconstitutional executive order is a misapplication of public funds He states that
since the details of the bidding for the Roppongi property were never publicly
disclosed until February 15, 1990 (or a few days before the scheduled bidding), the
bidding guidelines are available only in Tokyo, and the accomplishment of
requirements and the selection of qualified bidders should be done in Tokyo,
interested Filipino citizens or entities owned by them did not have the chance to
comply with Purchase Offer Requirements on the Roppongi. Worse, the Roppongi
shall be sold for a minimum price of $225 million from which price capital gains tax
under Japanese law of about 50 to 70% of the floor price would still be deducted.

IV

The petitioners and respondents in both cases do not dispute the fact that the
Roppongi site and the three related properties were through reparations agreements,
that these were assigned to the government sector and that the Roppongi property
itself was specifically designated under the Reparations Agreement to house the
Philippine Embassy.

The nature of the Roppongi lot as property for public service is expressly spelled out.
It is dictated by the terms of the Reparations Agreement and the corresponding
contract of procurement which bind both the Philippine government and the
Japanese government.

There can be no doubt that it is of public dominion unless it is convincingly shown

that the property has become patrimonial. This, the respondents have failed to do.

As property of public dominion, the Roppongi lot is outside the commerce of man. It
cannot be alienated. Its ownership is a special collective ownership for general use
and enjoyment, an application to the satisfaction of collective needs, and resides in
the social group. The purpose is not to serve the State as a juridical person, but the
citizens; it is intended for the common and public welfare and cannot be the object of
appropration. (Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the
Civil Code of the Philippines, 1963 Edition, Vol. II, p. 26).

The applicable provisions of the Civil Code are:

ART. 419. Property is either of public dominion or of private ownership.

ART. 420. The following things are property of public dominion

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks shores roadsteads, and others of similar
character;

(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth.

ART. 421. All other property of the State, which is not of the character stated in the
preceding article, is patrimonial property.

The Roppongi property is correctly classified under paragraph 2 of Article 420 of the
Civil Code as property belonging to the State and intended for some public service.

Has the intention of the government regarding the use of the property been changed
because the lot has been Idle for some years? Has it become patrimonial?

The fact that the Roppongi site has not been used for a long time for actual Embassy
service does not automatically convert it to patrimonial property. Any such
conversion happens only if the property is withdrawn from public use (Cebu Oxygen
and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues to be part
of the public domain, not available for private appropriation or ownership until there
is a formal declaration on the part of the government to withdraw it from being such
(Ignacio v. Director of Lands, 108 Phil. 335 [1960]).

The respondents enumerate various pronouncements by concerned public officials

insinuating a change of intention. We emphasize, however, that an abandonment of
the intention to use the Roppongi property for public service and to make it
patrimonial property under Article 422 of the Civil Code must be
definite Abandonment cannot be inferred from the non-use alone specially if the non-
use was attributable not to the government's own deliberate and indubitable will but
to a lack of financial support to repair and improve the property (See Heirs of Felino
Santiago v. Lazaro, 166 SCRA 368 [1988]). Abandonment must be a certain and
positive act based on correct legal premises.

A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment

of the Roppongi property's original purpose. Even the failure by the government to
repair the building in Roppongi is not abandonment since as earlier stated, there
simply was a shortage of government funds. The recent Administrative Orders
authorizing a study of the status and conditions of government properties in Japan
were merely directives for investigation but did not in any way signify a clear
intention to dispose of the properties.

Executive Order No. 296, though its title declares an "authority to sell", does not have
a provision in its text expressly authorizing the sale of the four properties procured
from Japan for the government sector. The executive order does not declare that the
properties lost their public character. It merely intends to make the
properties available to foreigners and not to Filipinos alone in case of a sale, lease or
other disposition. It merely eliminates the restriction under Rep. Act No. 1789 that
reparations goods may be sold only to Filipino citizens and one hundred (100%)
percent Filipino-owned entities. The text of Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and of other laws to
the contrary notwithstanding, the above-mentioned properties can be made available
for sale, lease or any other manner of disposition to non-Filipino citizens or to entities
owned by non-Filipino citizens.

Executive Order No. 296 is based on the wrong premise or assumption that the
Roppongi and the three other properties were earlier converted into alienable real
properties. As earlier stated, Rep. Act No. 1789 differentiates the procurements for the
government sector and the private sector (Sections 2 and 12, Rep. Act No. 1789). Only
the private sector properties can be sold to end-users who must be Filipinos or
entities owned by Filipinos. It is this nationality provision which was amended by
Executive Order No. 296.

Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the
sources of funds for its implementation, the proceeds of the disposition of the
properties of the Government in foreign countries, did not withdraw the Roppongi
property from being classified as one of public dominion when it mentions Philippine
properties abroad. Section 63 (c) refers to properties which are alienable and not to
those reserved for public use or service. Rep Act No. 6657, therefore, does not
authorize the Executive Department to sell the Roppongi property. It merely
enumerates possible sources of future funding to augment (as and when needed) the
Agrarian Reform Fund created under Executive Order No. 299. Obviously any
property outside of the commerce of man cannot be tapped as a source of funds.

The respondents try to get around the public dominion character of the Roppongi
property by insisting that Japanese law and not our Civil Code should apply.

It is exceedingly strange why our top government officials, of all people, should be
the ones to insist that in the sale of extremely valuable government property,
Japanese law and not Philippine law should prevail. The Japanese law - its coverage
and effects, when enacted, and exceptions to its provision — is not presented to the
Court It is simply asserted that the lex loci rei sitae or Japanese law should apply
without stating what that law provides. It is a ed on faith that Japanese law would
allow the sale.

We see no reason why a conflict of law rule should apply when no conflict of law
situation exists. A conflict of law situation arises only when: (1) There is a dispute
over the title or ownership of an immovable, such that the capacity to take and
transfer immovables, the formalities of conveyance, the essential validity and effect
of the transfer, or the interpretation and effect of a conveyance, are to be determined
(See Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law
on land ownership and its conveyance is asserted to conflict with a domestic law on
the same matters. Hence, the need to determine which law should apply.

In the instant case, none of the above elements exists.

The issues are not concerned with validity of ownership or title. There is no question
that the property belongs to the Philippines. The issue is the authority of the
respondent officials to validly dispose of property belonging to the State. And the
validity of the procedures adopted to effect its sale. This is governed by Philippine
Law. The rule of lex situs does not apply.

The assertion that the opinion of the Secretary of Justice sheds light on the relevance
of the lex situs rule is misplaced. The opinion does not tackle the alienability of the
real properties procured through reparations nor the existence in what body of the
authority to sell them. In discussing who are capable of acquiring the lots, the
Secretary merely explains that it is the foreign law which should determine who can
acquire the properties so that the constitutional limitation on acquisition of lands of
the public domain to Filipino citizens and entities wholly owned by Filipinos is
inapplicable. We see no point in belaboring whether or not this opinion is correct.
Why should we discuss who can acquire the Roppongi lot when there is no showing
that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the
recommendation by the investigating committee to sell the Roppongi property was
premature or, at the very least, conditioned on a valid change in the public character
of the Roppongi property. Moreover, the approval does not have the force and effect
of law since the President already lost her legislative powers. The Congress had
already convened for more than a year.

Assuming for the sake of argument, however, that the Roppongi property is no longer
of public dominion, there is another obstacle to its sale by the respondents.

There is no law authorizing its conveyance.

Section 79 (f) of the Revised Administrative Code of 1917 provides

Section 79 (f ) Conveyances and contracts to which the Government is a party. — In

cases in which the Government of the Republic of the Philippines is a party to any
deed or other instrument conveying the title to real estate or to any other property the
value of which is in excess of one hundred thousand pesos, the respective
Department Secretary shall prepare the necessary papers which, together with the
proper recommendations, shall be submitted to the Congress of the Philippines for
approval by the same. Such deed, instrument, or contract shall be executed and
signed by the President of the Philippines on behalf of the Government of the
Philippines unless the Government of the Philippines unless the authority therefor be
expressly vested by law in another officer. (Emphasis supplied)

The requirement has been retained in Section 48, Book I of the Administrative Code of
1987 (Executive Order No. 292).

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of

the Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines,
by the President, unless the authority therefor is expressly vested by law in another
officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of
any political subdivision or of any corporate agency or instrumentality, by the
executive head of the agency or instrumentality. (Emphasis supplied)

It is not for the President to convey valuable real property of the government on his or
her own sole will. Any such conveyance must be authorized and approved by a law
enacted by the Congress. It requires executive and legislative concurrence.

Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the
sale of the Roppongi property does not withdraw the property from public domain
much less authorize its sale. It is a mere resolution; it is not a formal declaration
abandoning the public character of the Roppongi property. In fact, the Senate
Committee on Foreign Relations is conducting hearings on Senate Resolution No.
734 which raises serious policy considerations and calls for a fact-finding
investigation of the circumstances behind the decision to sell the Philippine
government properties in Japan.

The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass
upon the constitutionality of Executive Order No. 296. Contrary to respondents'
assertion, we did not uphold the authority of the President to sell the Roppongi
property. The Court stated that the constitutionality of the executive order was not the
real issue and that resolving the constitutional question was "neither necessary nor
finally determinative of the case." The Court noted that "[W]hat petitioner ultimately
questions is the use of the proceeds of the disposition of the Roppongi property." In
emphasizing that "the decision of the Executive to dispose of the Roppongi property
to finance the CARP ... cannot be questioned" in view of Section 63 (c) of Rep. Act No.
6657, the Court did not acknowledge the fact that the property became alienable nor
did it indicate that the President was authorized to dispose of the Roppongi property.
The resolution should be read to mean that in case the Roppongi property is re-
classified to be patrimonial and alienable by authority of law, the proceeds of a sale
may be used for national economic development projects including the CARP.

Moreover, the sale in 1989 did not materialize. The petitions before us question the
proposed 1990 sale of the Roppongi property. We are resolving the issues raised in
these petitions, not the issues raised in 1989.

Having declared a need for a law or formal declaration to withdraw the Roppongi
property from public domain to make it alienable and a need for legislative authority
to allow the sale of the property, we see no compelling reason to tackle the
constitutional issues raised by petitioner Ojeda.

The Court does not ordinarily pass upon constitutional questions unless these
questions are properly raised in appropriate cases and their resolution is necessary
for the determination of the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not
pass upon a constitutional question although properly presented by the record if the
case can be disposed of on some other ground such as the application of a statute or
general law (Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad
Commission v. Pullman Co., 312 U.S. 496 [1941]).

The petitioner in G.R. No. 92013 states why the Roppongi property should not be
sold:

The Roppongi property is not just like any piece of property. It was given to the
Filipino people in reparation for the lives and blood of Filipinos who died and suffered
during the Japanese military occupation, for the suffering of widows and orphans
who lost their loved ones and kindred, for the homes and other properties lost by
countless Filipinos during the war. The Tokyo properties are a monument to the
bravery and sacrifice of the Filipino people in the face of an invader; like the
monuments of Rizal, Quezon, and other Filipino heroes, we do not expect economic
or financial benefits from them. But who would think of selling these monuments?
Filipino honor and national dignity dictate that we keep our properties in Japan as
memorials to the countless Filipinos who died and suffered. Even if we should
become paupers we should not think of selling them. For it would be as if we sold the
lives and blood and tears of our countrymen. (Rollo- G.R. No. 92013, p.147)

The petitioner in G.R. No. 92047 also states:

Roppongi is no ordinary property. It is one ceded by the Japanese government in

atonement for its past belligerence for the valiant sacrifice of life and limb and for
deaths, physical dislocation and economic devastation the whole Filipino people
endured in World War II.

It is for what it stands for, and for what it could never bring back to life, that its
significance today remains undimmed, inspire of the lapse of 45 years since the war
ended, inspire of the passage of 32 years since the property passed on to the
Philippine government.

Roppongi is a reminder that cannot — should not — be dissipated ... (Rollo-92047, p.

9)

It is indeed true that the Roppongi property is valuable not so much because of the
inflated prices fetched by real property in Tokyo but more so because of its symbolic
value to all Filipinos — veterans and civilians alike. Whether or not the Roppongi and
related properties will eventually be sold is a policy determination where both the
President and Congress must concur. Considering the properties' importance and
value, the laws on conversion and disposition of property of public dominion must be
faithfully followed.

WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of

prohibition is issued enjoining the respondents from proceeding with the sale of the
Roppongi property in Tokyo, Japan. The February 20, 1990 Temporary Restraining
Order is made PERMANENT.

SO ORDERED.

Melencio-Herrera, Paras, Bidin, Griño-Aquino and Regalado, JJ., concur.

Separate Opinions

 
CRUZ, J., concurring:

I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add
the following observations only for emphasis.

It is clear that the respondents have failed to show the President's legal authority to
sell the Roppongi property. When asked to do so at the hearing on these petitions,
the Solicitor General was at best ambiguous, although I must add in fairness that this
was not his fault. The fact is that there is -no such authority. Legal expertise alone
cannot conjure that statutory permission out of thin air.

Exec. Order No. 296, which reads like so much legislative, double talk, does not
contain such authority. Neither does Rep. Act No. 6657, which simply allows the
proceeds of the sale of our properties abroad to be used for the comprehensive
agrarian reform program. Senate Res. No. 55 was a mere request for the deferment of
the scheduled sale of tile Roppongi property, possibly to stop the transaction
altogether; and ill any case it is not a law. The sale of the said property may be
authorized only by Congress through a duly enacted statute, and there is no such
law.

Once again, we have affirmed the principle that ours is a government of laws and not
of men, where every public official, from the lowest to the highest, can act only by
virtue of a valid authorization. I am happy to note that in the several cases where this
Court has ruled against her, the President of the Philippines has submitted to this
principle with becoming grace.

PADILLA, J., concurring:

I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few
observations which could help in further clarifying the issues.

Under our tripartite system of government ordained by the Constitution, it is

Congress that lays down or determines policies. The President executes such
policies. The policies determined by Congress are embodied in legislative
enactments that have to be approved by the President to become law. The President,
of course, recommends to Congress the approval of policies but, in the final analysis,
it is Congress that is the policy - determining branch of government.

The judiciary interprets the laws and, in appropriate cases, determines whether the
laws enacted by Congress and approved by the President, and presidential acts
implementing such laws, are in accordance with the Constitution.

The Roppongi property was acquired by the Philippine government pursuant to the
reparations agreement between the Philippine and Japanese governments. Under
such agreement, this property was acquired by the Philippine government for a
specific purpose, namely, to serve as the site of the Philippine Embassy in Tokyo,
Japan. Consequently, Roppongi is a property of public dominion and intended for
public service, squarely falling within that class of property under Art. 420 of the Civil
Code, which provides:

Art. 420. The following things are property of public dominion :

(1) ...

(2) Those which belong to the State, without being for public use, and are intended for
some public service or for the development of the national wealth. (339a)

Public dominion property intended for public service cannot be alienated unless the
property is first transformed into private property of the state otherwise known as
patrimonial property of the state.   The transformation of public dominion property to
1

state patrimonial property involves, to my mind, a policy decision. It is a policy

decision because the treatment of the property varies according to its classification.
Consequently, it is Congress which can decide and declare the conversion of
Roppongi from a public dominion property to a state patrimonial property. Congress
has made no such decision or declaration.

Moreover, the sale of public property (once converted from public dominion to state
patrimonial property) must be approved by Congress, for this again is a matter of
policy (i.e. to keep or dispose of the property). Sec. 48, Book 1 of the Administrative
Code of 1987 provides:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of

the Government is authorized by law to be conveyed, the deed of conveyance shall be
executed in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines,
by the President, unless the authority therefor is expressly vested by law in another
officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of
any political subdivision or of any corporate agency or instrumentality, by the
executive head of the agency or instrumentality. (Emphasis supplied)

But the record is bare of any congressional decision or approval to sell Roppongi.
The record is likewise bare of any congressional authority extended to the President
to sell Roppongi thru public bidding or otherwise.

It is therefore, clear that the President cannot sell or order the sale of Roppongi thru
public bidding or otherwise without a prior congressional approval, first, converting
Roppongi from a public dominion property to a state patrimonial property, and,
second, authorizing the President to sell the same.

ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the

temporary restraining order earlier issued by this Court.

SARMIENTO, J., concurring:

The central question, as I see it, is whether or not the so-called "Roppongi property'
has lost its nature as property of public dominion, and hence, has become
patrimonial property of the State. I understand that the parties are agreed that it was
property intended for "public service" within the contemplation of paragraph (2), of
Article 430, of the Civil Code, and accordingly, land of State dominion, and beyond
human commerce. The lone issue is, in the light of supervening developments, that is
non-user thereof by the National Government (for diplomatic purposes) for the last
thirteen years; the issuance of Executive Order No. 296 making it available for sale to
any interested buyer; the promulgation of Republic Act No. 6657, the Comprehensive
Agrarian Reform Law, making available for the program's financing, State assets
sold; the approval by the President of the recommendation of the investigating
committee formed to study the property's utilization; and the issuance of Resolution
No. 55 of the Philippine Senate requesting for the deferment of its disposition it,
"Roppongi", is still property of the public dominion, and if it is not, how it lost that
character.

When land of the public dominion ceases to be one, or when the change takes place,
is a question our courts have debated early. In a 1906 decision,   it was held that
1

property of the public dominion, a public plaza in this instance, becomes patrimonial
upon use thereof for purposes other than a plaza. In a later case,   this ruling was
2

reiterated. Likewise, it has been held that land, originally private property, has
become of public dominion upon its donation to the town and its conversion and use
as a public plaza.   It is notable that under these three cases, the character of the property,
3

and any change occurring therein, depends on the actual use to which it is dedicated.  4

Much later, however, the Court held that "until a formal declaration on the part of the
Government, through the executive department or the Legislative, to the effect that the land .
. . is no longer needed for [public] service- for public use or for special industries, [it]
continue[s] to be part of the public [dominion], not available for private expropriation or
ownership."   So also, it was ruled that a political subdivision (the City of Cebu in this case)
5

alone may declare (under its charter) a city road abandoned and thereafter, to dispose of it.  6

In holding that there is "a need for a law or formal declaration to withdraw the Roppongi
property from public domain to make it alienable and a land for legislative authority to allow
the sale of the property"   the majority lays stress to the fact that: (1) An affirmative act —
7

executive or legislative — is necessary to reclassify property of the public dominion, and (2)
a legislative decree is required to make it alienable. It also clears the uncertainties brought
about by earlier interpretations that the nature of property-whether public or patrimonial is
predicated on the manner it is actually used, or not used, and in the same breath, repudiates
the Government's position that the continuous non-use of "Roppongi", among other
arguments, for "diplomatic purposes", has turned it into State patrimonial property.

I feel that this view corresponds to existing pronouncements of this Court, among other
things, that: (1) Property is presumed to be State property in the absence of any showing to
the contrary;   (2) With respect to forest lands, the same continue to be lands of the public
8

dominion unless and until reclassified by the Executive Branch of the Government;    and (3)
9

All natural resources, under the Constitution, and subject to exceptional cases, belong to the
State. 
10

I am elated that the Court has banished previous uncertainties.

FELICIANO, J., dissenting

With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E.
Gutierrez, Jr.

For purposes of this separate opinion, I assume that the piece of land located in 306
Roppongi, 5-Chome, Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi
property") may be characterized as property of public dominion, within the meaning of Article
420 (2) of the Civil Code:

[Property] which belong[s] to the State, without being for public use, and are intended for
some public service -.

It might not be amiss however, to note that the appropriateness of trying to bring within the
confines of the simple threefold classification found in Article 420 of the Civil Code ("property
for public use property "intended for some public service" and property intended "for the
development of the national wealth") all property owned by the Republic of the Philippines
whether found within the territorial boundaries of the Republic or located within the territory
of another sovereign State, is not self-evident. The first item of the classification property
intended for public use — can scarcely be properly applied to property belonging to the
Republic but found within the territory of another State. The third item of the classification
property intended for the development of the national wealth is illustrated, in Article 339 of
the Spanish Civil Code of 1889, by mines or mineral properties. Again, mineral lands owned
by a sovereign State are rarely, if ever, found within the territorial base of another sovereign
State. The task of examining in detail the applicability of the classification set out in Article
420 of our Civil Code to property that the Philippines happens to own outside its own
boundaries must, however, be left to academicians.

For present purposes, too, I agree that there is no question of conflict of laws that is,  at the
present time, before this Court. The issues before us relate essentially to authority to sell the
Roppongi property so far as Philippine law is concerned.

The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has
been converted into patrimonial property or property of the private domain of the State; and
(b) assuming an affirmative answer to (a), whether or not there is legal authority to dispose
of the Roppongi property.

Addressing the first issue of conversion of property of public dominion intended for some
public service, into property of the private domain of the Republic, it should be noted that the
Civil Code does not address the question of who has authority to effect such conversion.
Neither does the Civil Code set out or refer to any procedure for such conversion.

Our case law, however, contains some fairly explicit pronouncements on this point, as
Justice Sarmiento has pointed out in his concurring opinion. In Ignacio v. Director of
Lands (108 Phils. 335 [1960]), petitioner Ignacio argued that if the land in question formed
part of the public domain, the trial court should have declared the same no longer necessary
for public use or public purposes and which would, therefore, have become disposable and
available for private ownership. Mr. Justice Montemayor, speaking for the Court, said:

Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer
washed by the waters of the sea and is not necessary for purposes of public utility, or for the
establishment of special industries, or for coast-guard service, the government shall declare
it to be the property of the owners of the estates adjacent thereto and as an increment
thereof. We believe that only the executive and possibly the legislative departments have
the authority and the power to make the declaration that any land so gained by the sea, is
not necessary for purposes of public utility, or for the establishment of special industries, or
for coast-guard service. If no such declaration has been made by said departments, the lot
in question forms part of the public domain. (Natividad v. Director of Lands, supra.)

The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y
Monteverde v. Director of Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p. 52).

... is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to
determine whether any public land are to be used for the purposes specified in Article 4 of
the Law of Waters. Consequently, until a formal declaration on the part of the Government,
through the executive department or the Legislature, to the effect that the land in question is
no longer needed for coast-guard service, for public use or for special industries, they
continue to be part of the public domain not available for private appropriation or
ownership. (108 Phil. at 338-339; emphasis supplied)

Thus, under Ignacio, either the Executive Department or the Legislative Department may

convert property of the State of public dominion into patrimonial property of the State. No
particular formula or procedure of conversion is specified either in statute law or in case law.
Article 422 of the Civil Code simply states that: "Property of public dominion, when no longer
intended for public use or for public service, shall form part of the patrimonial property of the
State". I respectfully submit, therefore, that the only requirement which is legitimately
imposable is that the intent to convert must be reasonably clear from a consideration of the
acts or acts of the Executive Department or of the Legislative Department which are said to
have effected such conversion.
The same legal situation exists in respect of conversion of property of public dominion
belonging to municipal corporations, i.e., local governmental units, into patrimonial property
of such entities. In Cebu Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City
Council of Cebu by resolution declared a certain portion of an existing street as an
abandoned road, "the same not being included in the city development plan". Subsequently,
by another resolution, the City Council of Cebu authorized the acting City Mayor to sell the
land through public bidding. Although there was no formal and explicit declaration of
conversion of property for public use into patrimonial property, the Supreme Court said:

xxx xxx xxx

(2) Since that portion of the city street subject of petitioner's application for registration of
title was withdrawn from public use, it follows that such withdrawn portion becomes
patrimonial property which can be the object of an ordinary contract.

Article 422 of the Civil Code expressly provides that "Property of public dominion, when no
longer intended for public use of for public service, shall form part of the patrimonial property
of the State."

Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and
unequivocal terms, states that "Property thus withdrawn from public servitude may be used
or conveyed for any purpose for which other real property belonging to the City may be
lawfully used or conveyed."

Accordingly, the withdrawal of the property in question from public use and its subsequent
sale to the petitioner is valid. Hence, the petitioner has a registrable title over the lot in
question. (66 SCRA at 484-; emphasis supplied)

Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property
owned by municipal corporations simple non-use or the actual dedication of public property
to some use other than "public use" or some "public service", was sufficient legally to
convert such property into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20
[1906]- Municipality of Hinunganan v. Director of Lands 24 Phil. 124 [1913]; Province of
Zamboanga del Norte v. City of Zamboanga, 22 SCRA 1334 (1968).

I would also add that such was the case not only in respect of' property of municipal
corporations but also in respect of property of the State itself. Manresa in commenting on
Article 341 of the 1889 Spanish Civil Code which has been carried over verbatim into our
Civil Code by Article 422 thereof, wrote:

La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que los
bienes de dominio publico dejan de serlo. Si la Administracion o la autoridad competente
legislative realizan qun acto en virtud del cual cesa el destino o uso publico de los bienes de
que se trata naturalmente la dificultad queda desde el primer momento resuelta. Hay un
punto de partida cierto para iniciar las relaciones juridicas a que pudiera haber lugar Pero
puede ocurrir que no haya taldeclaracion expresa, legislativa or administrativa, y, sin
embargo, cesar de hecho el destino publico de los bienes; ahora bien, en este caso, y para
los efectos juridicos que resultan de entrar la cosa en el comercio de los hombres,' se
entedera que se ha verificado la conversion de los bienes patrimoniales?

El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la afirmativa, y por
nuestra parte creemos que tal debe ser la soluciion. El destino de las cosas no depende
tanto de una declaracion expresa como del uso publico de las mismas, y cuanda el uso
publico cese con respecto de determinados bienes, cesa tambien su situacion en el dominio
publico. Si una fortaleza en ruina se abandona y no se repara, si un trozo de la via publica
se abandona tambien por constituir otro nuevo an mejores condiciones....ambos bienes
cesan de estar Codigo, y leyes especiales mas o memos administrativas. (3 Manresa,
Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis supplied)

The majority opinion says that none of the executive acts pointed to by the Government
purported, expressly or definitely, to convert the Roppongi property into patrimonial property
— of the Republic. Assuming that to be the case, it is respectfully submitted that cumulative
effect of the executive acts here involved was to convert property originally intended for and
devoted to public service into patrimonial property of the State, that is, property susceptible
of disposition to and appropration by private persons. These executive acts, in their totality if
not each individual act, make crystal clear the intent of the Executive Department to effect
such conversion. These executive acts include:

(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study
the disposition/utilization of the Government's property in Japan, The Committee was
composed of officials of the Executive Department: the Executive Secretary; the Philippine
Ambassador to Japan; and representatives of the Department of Foreign Affairs and the
Asset Privatization Trust. On 19 September 1988, the Committee recommended to the
President the sale of one of the lots (the lot specifically in Roppongi) through public bidding.
On 4 October 1988, the President approved the recommendation of the Committee.

On 14 December 1988, the Philippine Government by diplomatic note informed the

Japanese Ministry of Foreign Affairs of the Republic's intention to dispose of the property in
Roppongi. The Japanese Government through its Ministry of Foreign Affairs replied that it
interposed no objection to such disposition by the Republic. Subsequently, the President
and the Committee informed the leaders of the House of Representatives and of the Senate
of the Philippines of the proposed disposition of the Roppongi property.

(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming
that the majority opinion is right in saying that Executive Order No. 296 is insufficient
to authorize the sale of the Roppongi property, it is here submitted with respect that
Executive Order No. 296 is more than sufficient to indicate an intention to convert the
property previously devoted to public service into patrimonial property that is capable of
being sold or otherwise disposed of

(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public
purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically
convert the property into patrimonial property. I respectfully urge that prolonged non-
use, conjoined with the other factors here listed, was legally effective to convert the lot in
Roppongi into patrimonial property of the State. Actually, as already pointed out, case law
involving property of municipal corporations is to the effect that simple non-use or the actual
dedication of public property to some use other than public use or public service, was
sufficient to convert such property into patrimonial property of the local governmental entity
concerned. Also as pointed out above, Manresa reached the same conclusion in respect of
conversion of property of the public domain of the State into property of the private domain
of the State.

The majority opinion states that "abandonment cannot be inferred from the non-use alone
especially if the non-use was attributable not to the Government's own deliberate and
indubitable will but to lack of financial support to repair and improve the property" (Majority
Opinion, p. 13). With respect, it may be stressed that there is no abandonment involved
here, certainly no abandonment of property or of property rights. What is involved is the
charge of the classification of the property from property of the public domain into property of
the private domain of the State. Moreover, if for fourteen (14) years, the Government did not
see fit to appropriate whatever funds were necessary to maintain the property in Roppongi in
a condition suitable for diplomatic representation purposes, such circumstance may, with
equal logic, be construed as a manifestation of the crystalizing intent to change the
character of the property.

(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the
sale of the lot in Roppongi. The circumstance that this bidding was not successful certainly
does not argue against an intent to convert the property involved into property that is
disposable by bidding.

The above set of events and circumstances makes no sense at all if it does not, as a whole,
show at least the intent on the part of the Executive Department (with the knowledge of the
Legislative Department) to convert the property involved into patrimonial property that is
susceptible of being sold.

II
Having reached an affirmative answer in respect of the first issue, it is necessary to address
the second issue of whether or not there exists legal authority for the sale or disposition of
the Roppongi property.

The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917
which reads as follows:

SEC. 79 (f). Conveyances and contracts to which the Government is a party. — In cases in

which the Government of the Republic of the Philippines is a party to any deed or other
instrument conveying the title to real estate or to any other property the value of which is in
excess of one hundred thousand pesos, the respective Department Secretary shall prepare
the necessary papers which, together with the proper recommendations, shall be submitted
to the Congress of the Philippines for approval by the same. Such deed, instrument, or
contract shall be executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the authority therefor be expressly vested by law in
another officer. (Emphasis supplied)

The majority opinion then goes on to state that: "[T]he requirement has been retained in
Section 4, Book I of the Administrative Code of 1987 (Executive Order No. 292)" which
reads:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be executed
in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of
the agency or instrumentality. (Emphasis supplied)

Two points need to be made in this connection. Firstly, the requirement of obtaining specific
approval of Congress when the price of the real property being disposed of is in excess of
One Hundred Thousand Pesos (P100,000.00) under the Revised Administrative Code of
1917, has been deleted from Section 48 of the 1987 Administrative Code. What Section 48
of the present Administrative Code refers to is authorization by law for the conveyance.
Section 48 does not purport to be itself a source of legal authority for conveyance of real
property of the Government. For Section 48 merely specifies the official authorized to
execute and sign on behalf of the Government the deed of conveyance in case of such a
conveyance.

Secondly, examination of our statute books shows that authorization by law for disposition of
real property of the private domain of the Government, has been granted by Congress both
in the form of (a) a general, standing authorization for disposition of patrimonial property of
the Government; and (b) specific legislation authorizing the disposition of particular pieces of
the Government's patrimonial property.

Standing legislative authority for the disposition of land of the private domain of the
Philippines is provided by Act No. 3038, entitled "An Act Authorizing the Secretary of
Agriculture and Natural Resources to Sell or Lease Land of the Private Domain of the
Government of the Philippine Islands (now Republic of the Philippines)", enacted on 9
March 1922. The full text of this statute is as follows:

Be it enacted by the Senate and House of Representatives of the Philippines in Legislature

assembled and by the authority of the same:

SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary of the
Environment and Natural Resources) is hereby authorized to sell or lease land of the private
domain of the Government of the Philippine Islands, or any part thereof, to such persons,
corporations or associations as are, under the provisions of Act Numbered Twenty-eight
hundred and seventy-four, (now Commonwealth Act No. 141, as amended) known as the
Public Land Act, entitled to apply for the purchase or lease or agricultural public land.
SECTION 2. The sale of the land referred to in the preceding section shall, if such land is
agricultural, be made in the manner and subject to the limitations prescribed in chapters five
and six, respectively, of said Public Land Act, and if it be classified differently, in conformity
with the provisions of chapter nine of said Act: Provided, however, That the land necessary
for the public service shall be exempt from the provisions of this Act.

SECTION 3. This Act shall take effect on its approval.

Approved, March 9, 1922. (Emphasis supplied)

Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain
of the State, it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now
Chapter 9 of the present Public Land Act (Commonwealth Act No. 141, as amended) and
that both statutes refer to: "any tract of land of the public domain which being neither timber
nor mineral land, is intended to be used for residential purposes or for commercial or
industrial purposes other than agricultural" (Emphasis supplied). In other words, the statute
i•t•c-aüsl 

covers the sale or lease or residential, commercial or industrial land of the private domain of
the State.

Implementing regulations have been issued for the carrying out of the provisions of Act No.
3038. On 21 December 1954, the then Secretary of Agriculture and Natural Resources
promulgated Lands Administrative Orders Nos. 7-6 and 7-7 which were entitled,
respectively: "Supplementary Regulations Governing the Sale of the Lands of the Private
Domain of the Republic of the Philippines"; and "Supplementary Regulations Governing
the Lease of Lands of Private Domain of the Republic of the Philippines" (text in 51 O.G. 28-
29 [1955]).

It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in
effect and has not been repealed.  1

Specific legislative authorization for disposition of particular patrimonial properties of the

State is illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted
on 26 April 1904, which provided for the disposition of the friar lands, purchased by the
Government from the Roman Catholic Church, to bona fide settlers and occupants thereof
or to other persons. In Jacinto v. Director of Lands (49 Phil. 853 [1926]), these friar lands
were held to be private and patrimonial properties of the State. Act No. 2360, enacted on -28
February 1914, authorized the sale of the San Lazaro Estate located in the City of Manila,
which had also been purchased by the Government from the Roman Catholic Church. In
January 1916, Act No. 2555 amended Act No. 2360 by including therein all lands and
buildings owned by the Hospital and the Foundation of San Lazaro theretofor leased by
private persons, and which were also acquired by the Philippine Government.

After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only
one statute authorizing the President to dispose of a specific piece of property. This statute
is Republic Act No. 905, enacted on 20 June 1953, which authorized the

President to sell an Identified parcel of land of the private domain of the National
Government to the National Press Club of the Philippines, and to other recognized national
associations of professionals with academic standing, for the nominal price of P1.00. It
appears relevant to note that Republic Act No. 905 was not an outright disposition in
perpetuity of the property involved- it provided for reversion of the property to the National
Government in case the National Press Club stopped using it for its headquarters. What
Republic Act No. 905 authorized was really a donation, and not a sale.

The basic submission here made is that Act No. 3038 provides standing legislative
authorization for disposition of the Roppongi property which, in my view, has been converted
into patrimonial property of the Republic. 2

To some, the submission that Act No. 3038 applies not only to lands of the private domain of
the State located in the Philippines but also to patrimonial property found outside the
Philippines, may appear strange or unusual. I respectfully submit that such position is not
any more unusual or strange than the assumption that Article 420 of the Civil Code applies
not only to property of the Republic located within Philippine territory but also to property
found outside the boundaries of the Republic.

It remains to note that under the well-settled doctrine that heads of Executive Departments
are alter egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and
in view of the constitutional power of control exercised by the President over department
heads (Article VII, Section 17,1987 Constitution), the President herself may carry out the
function or duty that is specifically lodged in the Secretary of the Department of Environment
and Natural Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very least, the
President retains the power to approve or disapprove the exercise of that function or duty
when done by the Secretary of Environment and Natural Resources.

It is hardly necessary to add that the foregoing analyses and submissions relate only to the
austere question of existence of legal power or authority. They have nothing to do with much
debated questions of wisdom or propriety or relative desirability either of the proposed
disposition itself or of the proposed utilization of the anticipated proceeds of the property
involved. These latter types of considerations He within the sphere of responsibility of the
political departments of government the Executive and the Legislative authorities.

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013
and 92047.

Fernan, C.J., Narvasa, Gancayco, Cortes and Medialdea, JJ., concurring.

Separate Opinions

CRUZ, J., concurring:

I concur completely with the excellent ponencia of Mr. Justice Gutierrez and will add the
following observations only for emphasis.

It is clear that the respondents have failed to show the President's legal authority to sell the
Roppongi property. When asked to do so at the hearing on these petitions, the Solicitor
General was at best ambiguous, although I must add in fairness that this was not his fault.
The fact is that there is -no such authority. Legal expertise alone cannot conjure that
statutory permission out of thin air.

Exec. Order No. 296, which reads like so much legislative, double talk, does not contain
such authority. Neither does Rep. Act No. 6657, which simply allows the proceeds of the
sale of our properties abroad to be used for the comprehensive agrarian reform program.
Senate Res. No. 55 was a mere request for the deferment of the scheduled sale of tile
Roppongi property, possibly to stop the transaction altogether; and ill any case it is not a
law. The sale of the said property may be authorized only by Congress through a duly
enacted statute, and there is no such law.

Once again, we have affirmed the principle that ours is a government of laws and not of
men, where every public official, from the lowest to the highest, can act only by virtue of a
valid authorization. I am happy to note that in the several cases where this Court has ruled
against her, the President of the Philippines has submitted to this principle with becoming
grace.

PADILLA, J., concurring:

I concur in the decision penned by Mr. Justice Gutierrez, Jr., I only wish to make a few
observations which could help in further clarifying the issues.
Under our tripartite system of government ordained by the Constitution, it is Congress that
lays down or determines policies. The President executes such policies. The policies
determined by Congress are embodied in legislative enactments that have to be approved
by the President to become law. The President, of course, recommends to Congress the
approval of policies but, in the final analysis, it is Congress that is the policy - determining
branch of government.

The judiciary interprets the laws and, in appropriate cases, determines whether the laws
enacted by Congress and approved by the President, and presidential acts implementing
such laws, are in accordance with the Constitution.

The Roppongi property was acquired by the Philippine government pursuant to the
reparations agreement between the Philippine and Japanese governments. Under such
agreement, this property was acquired by the Philippine government for a specific purpose,
namely, to serve as the site of the Philippine Embassy in Tokyo, Japan. Consequently,
Roppongi is a property of public dominion and intended for public service, squarely falling
within that class of property under Art. 420 of the Civil Code, which provides:

Art. 420. The following things are property of public dominion :

(1) ...

(2) Those which belong to the State, without being for public use, and are intended for some
public service or for the development of the national wealth. (339a)

Public dominion property intended for public service cannot be alienated unless the property
is first transformed into private property of the state otherwise known as patrimonial property
of the state.   The transformation of public dominion property to state patrimonial property
1

involves, to my mind, a policy decision. It is a policy decision because the treatment of the
property varies according to its classification. Consequently, it is Congress which can decide
and declare the conversion of Roppongi from a public dominion property to a state
patrimonial property. Congress has made no such decision or declaration.

Moreover, the sale of public property (once converted from public dominion to state
patrimonial property) must be approved by Congress, for this again is a matter of policy (i.e.
to keep or dispose of the property). Sec. 48, Book 1 of the Administrative Code of 1987
provides:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be executed
in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of
the agency or instrumentality. (Emphasis supplied)

But the record is bare of any congressional decision or approval to sell Roppongi. The
record is likewise bare of any congressional authority extended to the President to sell
Roppongi thru public bidding or otherwise.

It is therefore, clear that the President cannot sell or order the sale of Roppongi thru public
bidding or otherwise without a prior congressional approval, first, converting Roppongi from
a public dominion property to a state patrimonial property, and, second, authorizing the
President to sell the same.

ACCORDINGLY, my vote is to GRANT the petition and to make PERMANENT the

temporary restraining order earlier issued by this Court.
SARMIENTO, J., concurring:

The central question, as I see it, is whether or not the so-called "Roppongi property' has lost
its nature as property of public dominion, and hence, has become patrimonial property of the
State. I understand that the parties are agreed that it was property intended for "public
service" within the contemplation of paragraph (2), of Article 430, of the Civil Code, and
accordingly, land of State dominion, and beyond human commerce. The lone issue is, in the
light of supervening developments, that is non-user thereof by the National Government (for
diplomatic purposes) for the last thirteen years; the issuance of Executive Order No. 296
making it available for sale to any interested buyer; the promulgation of Republic Act No.
6657, the Comprehensive Agrarian Reform Law, making available for the program's
financing, State assets sold; the approval by the President of the recommendation of the
investigating committee formed to study the property's utilization; and the issuance of
Resolution No. 55 of the Philippine Senate requesting for the deferment of its disposition it,
"Roppongi", is still property of the public dominion, and if it is not, how it lost that character.

When land of the public dominion ceases to be one, or when the change takes place, is a
question our courts have debated early. In a 1906 decision,   it was held that property of the
1

public dominion, a public plaza in this instance, becomes patrimonial upon use thereof for
purposes other than a plaza. In a later case,   this ruling was reiterated. Likewise, it has
2

been held that land, originally private property, has become of public dominion upon its
donation to the town and its conversion and use as a public plaza.   It is notable that under
3

these three cases, the character of the property, and any change occurring therein, depends
on the actual use to which it is dedicated. 4

Much later, however, the Court held that "until a formal declaration on the part of the
Government, through the executive department or the Legislative, to the effect that the land .
. . is no longer needed for [public] service- for public use or for special industries, [it]
continue[s] to be part of the public [dominion], not available for private expropriation or
ownership."   So also, it was ruled that a political subdivision (the City of Cebu in this case)
5

alone may declare (under its charter) a city road abandoned and thereafter, to dispose of it.  6

In holding that there is "a need for a law or formal declaration to withdraw the Roppongi
property from public domain to make it alienable and a land for legislative authority to allow
the sale of the property"   the majority lays stress to the fact that: (1) An affirmative act —
7

executive or legislative — is necessary to reclassify property of the public dominion, and (2)
a legislative decree is required to make it alienable. It also clears the uncertainties brought
about by earlier interpretations that the nature of property-whether public or patrimonial is
predicated on the manner it is actually used, or not used, and in the same breath, repudiates
the Government's position that the continuous non-use of "Roppongi", among other
arguments, for "diplomatic purposes", has turned it into State patrimonial property.

I feel that this view corresponds to existing pronouncements of this Court, among other
things, that: (1) Property is presumed to be State property in the absence of any showing to
the contrary;   (2) With respect to forest lands, the same continue to be lands of the public
8

dominion unless and until reclassified by the Executive Branch of the Government;   and (3)
9

All natural resources, under the Constitution, and subject to exceptional cases, belong to the
State. 10

I am elated that the Court has banished previous uncertainties.

FELICIANO, J., dissenting

With regret, I find myself unable to share the conclusions reached by Mr. Justice Hugo E.
Gutierrez, Jr.

For purposes of this separate opinion, I assume that the piece of land located in 306
Roppongi, 5-Chome, Minato-ku Tokyo, Japan (hereinafter referred to as the "Roppongi
property") may be characterized as property of public dominion, within the meaning of Article
420 (2) of the Civil Code:
[Property] which belong[s] to the State, without being for public use, and are intended for
some public service -.

It might not be amiss however, to note that the appropriateness of trying to bring within the
confines of the simple threefold classification found in Article 420 of the Civil Code ("property
for public use property "intended for some public service" and property intended "for the
development of the national wealth") all property owned by the Republic of the Philippines
whether found within the territorial boundaries of the Republic or located within the territory
of another sovereign State, is not self-evident. The first item of the classification property
intended for public use — can scarcely be properly applied to property belonging to the
Republic but found within the territory of another State. The third item of the classification
property intended for the development of the national wealth is illustrated, in Article 339 of
the Spanish Civil Code of 1889, by mines or mineral properties. Again, mineral lands owned
by a sovereign State are rarely, if ever, found within the territorial base of another sovereign
State. The task of examining in detail the applicability of the classification set out in Article
420 of our Civil Code to property that the Philippines happens to own outside its own
boundaries must, however, be left to academicians.

For present purposes, too, I agree that there is no question of conflict of laws that is, at the
present time, before this Court. The issues before us relate essentially to authority to sell the
Roppongi property so far as Philippine law is concerned.

The majority opinion raises two (2) issues: (a) whether or not the Roppongi property has
been converted into patrimonial property or property of the private domain of the State; and
(b) assuming an affirmative answer to (a), whether or not there is legal authority to dispose
of the Roppongi property.

Addressing the first issue of conversion of property of public dominion intended for some
public service, into property of the private domain of the Republic, it should be noted that the
Civil Code does not address the question of who has authority to effect such conversion.
Neither does the Civil Code set out or refer to any procedure for such conversion.

Our case law, however, contains some fairly explicit pronouncements on this point, as
Justice Sarmiento has pointed out in his concurring opinion. In Ignacio v. Director of
Lands (108 Phils. 335 [1960]), petitioner Ignacio argued that if the land in question formed
part of the public domain, the trial court should have declared the same no longer necessary
for public use or public purposes and which would, therefore, have become disposable and
available for private ownership. Mr. Justice Montemayor, speaking for the Court, said:

Article 4 of the Law of Waters of 1866 provides that when a portion of the shore is no longer
washed by the waters of the sea and is not necessary for purposes of public utility, or for the
establishment of special industries, or for coast-guard service, the government shall declare
it to be the property of the owners of the estates adjacent thereto and as an increment
thereof. We believe that only the executive and possibly the legislative departments have
the authority and the power to make the declaration that any land so gained by the sea, is
not necessary for purposes of public utility, or for the establishment of special industries, or
for coast-guard service. If no such declaration has been made by said departments, the lot
in question forms part of the public domain. (Natividad v. Director of Lands, supra.)

The reason for this pronouncement, according to this Tribunal in the case of Vicente Joven y
Monteverde v. Director of Lands, 93 Phil., 134 (cited in Velayo's Digest, Vol. 1, p. 52).

... is undoubtedly that the courts are neither primarily called upon, nor indeed in a position to
determine whether any public land are to be used for the purposes specified in Article 4 of
the Law of Waters. Consequently, until a formal declaration on the part of the Government,
through the executive department or the Legislature, to the effect that the land in question is
no longer needed for coast-guard service, for public use or for special industries, they
continue to be part of the public domain not available for private appropriation or
ownership. (108 Phil. at 338-339; emphasis supplied)
Thus, under Ignacio, either the Executive Department or the Legislative Department may
convert property of the State of public dominion into patrimonial property of the State. No
particular formula or procedure of conversion is specified either in statute law or in case law.
Article 422 of the Civil Code simply states that: "Property of public dominion, when no longer
intended for public use or for public service, shall form part of the patrimonial property of the
State". I respectfully submit, therefore, that the only requirement which is legitimately
imposable is that the intent to convert must be reasonably clear from a consideration of the
acts or acts of the Executive Department or of the Legislative Department which are said to
have effected such conversion.

The same legal situation exists in respect of conversion of property of public dominion
belonging to municipal corporations, i.e., local governmental units, into patrimonial property
of such entities. In Cebu Oxygen Acetylene v. Bercilles (66 SCRA 481 [1975]), the City
Council of Cebu by resolution declared a certain portion of an existing street as an
abandoned road, "the same not being included in the city development plan". Subsequently,
by another resolution, the City Council of Cebu authorized the acting City Mayor to sell the
land through public bidding. Although there was no formal and explicit declaration of
conversion of property for public use into patrimonial property, the Supreme Court said:

xxx xxx xxx

(2) Since that portion of the city street subject of petitioner's application for registration of
title was withdrawn from public use, it follows that such withdrawn portion becomes
patrimonial property which can be the object of an ordinary contract.

Article 422 of the Civil Code expressly provides that "Property of public dominion, when no
longer intended for public use of for public service, shall form part of the patrimonial property
of the State."

Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and
unequivocal terms, states that "Property thus withdrawn from public servitude may be used
or conveyed for any purpose for which other real property belonging to the City may be
lawfully used or conveyed."

Accordingly, the withdrawal of the property in question from public use and its subsequent
sale to the petitioner is valid. Hence, the petitioner has a registrable title over the lot in
question. (66 SCRA at 484-; emphasis supplied)

Thus, again as pointed out by Sarmiento J., in his separate opinion, in the case of property
owned by municipal corporations simple non-use or the actual dedication of public property
to some use other than "public use" or some "public service", was sufficient legally to
convert such property into patrimonial property (Municipality of Oas v. Roa, 7 Phil. 20
[1906]- Municipality of Hinunganan v. Director of Lands 24 Phil. 124 [1913]; Province of
Zamboanga del Norte v. City of Zamboanga, 22 SCRA 1334 (1968).

I would also add that such was the case not only in respect of' property of municipal
corporations but also in respect of property of the State itself. Manresa in commenting on
Article 341 of the 1889 Spanish Civil Code which has been carried over verbatim into our
Civil Code by Article 422 thereof, wrote:

La dificultad mayor en todo esto estriba, naturalmente, en fijar el momento en que los
bienes de dominio publico dejan de serlo. Si la Administracion o la autoridad competente
legislative realizan qun acto en virtud del cual cesa el destino o uso publico de los bienes de
que se trata naturalmente la dificultad queda desde el primer momento resuelta. Hay un
punto de partida cierto para iniciar las relaciones juridicas a que pudiera haber lugar Pero
puede ocurrir que no haya taldeclaracion expresa, legislativa or administrativa, y, sin
embargo, cesar de hecho el destino publico de los bienes; ahora bien, en este caso, y para
los efectos juridicos que resultan de entrar la cosa en el comercio de los hombres,' se
entedera que se ha verificado la conversion de los bienes patrimoniales?

El citado tratadista Ricci opina, respecto del antiguo Codigo italiano, por la afirmativa, y por
nuestra parte creemos que tal debe ser la soluciion. El destino de las cosas no depende
tanto de una declaracion expresa como del uso publico de las mismas, y cuanda el uso
publico cese con respecto de determinados bienes, cesa tambien su situacion en el dominio
publico. Si una fortaleza en ruina se abandona y no se repara, si un trozo de la via publica
se abandona tambien por constituir otro nuevo an mejores condiciones....ambos bienes
cesan de estar Codigo, y leyes especiales mas o memos administrativas. (3 Manresa,
Comentarios al Codigo Civil Espanol, p. 128 [7a ed.; 1952) (Emphasis supplied)

The majority opinion says that none of the executive acts pointed to by the Government
purported, expressly or definitely, to convert the Roppongi property into patrimonial property
— of the Republic. Assuming that to be the case, it is respectfully submitted that cumulative
effect of the executive acts here involved was to convert property originally intended for and
devoted to public service into patrimonial property of the State, that is, property susceptible
of disposition to and appropration by private persons. These executive acts, in their totality if
not each individual act, make crystal clear the intent of the Executive Department to effect
such conversion. These executive acts include:

(a) Administrative Order No. 3 dated 11 August 1985, which created a Committee to study
the disposition/utilization of the Government's property in Japan, The Committee was
composed of officials of the Executive Department: the Executive Secretary; the Philippine
Ambassador to Japan; and representatives of the Department of Foreign Affairs and the
Asset Privatization Trust. On 19 September 1988, the Committee recommended to the
President the sale of one of the lots (the lot specifically in Roppongi) through public bidding.
On 4 October 1988, the President approved the recommendation of the Committee.

On 14 December 1988, the Philippine Government by diplomatic note informed the

Japanese Ministry of Foreign Affairs of the Republic's intention to dispose of the property in
Roppongi. The Japanese Government through its Ministry of Foreign Affairs replied that it
interposed no objection to such disposition by the Republic. Subsequently, the President
and the Committee informed the leaders of the House of Representatives and of the Senate
of the Philippines of the proposed disposition of the Roppongi property.

(b) Executive Order No. 296, which was issued by the President on 25 July 1987. Assuming
that the majority opinion is right in saying that Executive Order No. 296 is insufficient
to authorize the sale of the Roppongi property, it is here submitted with respect that
Executive Order No. 296 is more than sufficient to indicate an intention to convert the
property previously devoted to public service into patrimonial property that is capable of
being sold or otherwise disposed of

(c) Non-use of the Roppongi lot for fourteen (14) years for diplomatic or for any other public
purposes. Assuming (but only arguendo) that non-use does not, by itself, automatically
convert the property into patrimonial property. I respectfully urge that prolonged non-
use, conjoined with the other factors here listed, was legally effective to convert the lot in
Roppongi into patrimonial property of the State. Actually, as already pointed out, case law
involving property of municipal corporations is to the effect that simple non-use or the actual
dedication of public property to some use other than public use or public service, was
sufficient to convert such property into patrimonial property of the local governmental entity
concerned. Also as pointed out above, Manresa reached the same conclusion in respect of
conversion of property of the public domain of the State into property of the private domain
of the State.

The majority opinion states that "abandonment cannot be inferred from the non-use alone
especially if the non-use was attributable not to the Government's own deliberate and
indubitable will but to lack of financial support to repair and improve the property" (Majority
Opinion, p. 13). With respect, it may be stressed that there is no abandonment involved
here, certainly no abandonment of property or of property rights. What is involved is the
charge of the classification of the property from property of the public domain into property of
the private domain of the State. Moreover, if for fourteen (14) years, the Government did not
see fit to appropriate whatever funds were necessary to maintain the property in Roppongi in
a condition suitable for diplomatic representation purposes, such circumstance may, with
equal logic, be construed as a manifestation of the crystalizing intent to change the
character of the property.

(d) On 30 March 1989, a public bidding was in fact held by the Executive Department for the
sale of the lot in Roppongi. The circumstance that this bidding was not successful certainly
does not argue against an intent to convert the property involved into property that is
disposable by bidding.

The above set of events and circumstances makes no sense at all if it does not, as a whole,
show at least the intent on the part of the Executive Department (with the knowledge of the
Legislative Department) to convert the property involved into patrimonial property that is
susceptible of being sold.

II

Having reached an affirmative answer in respect of the first issue, it is necessary to address
the second issue of whether or not there exists legal authority for the sale or disposition of
the Roppongi property.

The majority opinion refers to Section 79(f) of the Revised Administrative Code of 1917
which reads as follows:

SEC. 79 (f). Conveyances and contracts to which the Government is a party. — In cases in

which the Government of the Republic of the Philippines is a party to any deed or other
instrument conveying the title to real estate or to any other property the value of which is in
excess of one hundred thousand pesos, the respective Department Secretary shall prepare
the necessary papers which, together with the proper recommendations, shall be submitted
to the Congress of the Philippines for approval by the same. Such deed, instrument, or
contract shall be executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the authority therefor be expressly vested by law in
another officer. (Emphasis supplied)

The majority opinion then goes on to state that: "[T]he requirement has been retained in
Section 4, Book I of the Administrative Code of 1987 (Executive Order No. 292)" which
reads:

SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the
Government is authorized by law to be conveyed, the deed of conveyance shall be executed
in behalf of the government by the following:

(1) For property belonging to and titled in the name of the Republic of the Philippines, by the
President, unless the authority therefor is expressly vested by law in another officer.

(2) For property belonging to the Republic of the Philippines but titled in the name of any
political subdivision or of any corporate agency or instrumentality, by the executive head of
the agency or instrumentality. (Emphasis supplied)

Two points need to be made in this connection. Firstly, the requirement of obtaining specific
approval of Congress when the price of the real property being disposed of is in excess of
One Hundred Thousand Pesos (P100,000.00) under the Revised Administrative Code of
1917, has been deleted from Section 48 of the 1987 Administrative Code. What Section 48
of the present Administrative Code refers to is authorization by law for the conveyance.
Section 48 does not purport to be itself a source of legal authority for conveyance of real
property of the Government. For Section 48 merely specifies the official authorized to
execute and sign on behalf of the Government the deed of conveyance in case of such a
conveyance.

Secondly, examination of our statute books shows that authorization by law for disposition of
real property of the private domain of the Government, has been granted by Congress both
in the form of (a) a general, standing authorization for disposition of patrimonial property of
the Government; and (b) specific legislation authorizing the disposition of particular pieces of
the Government's patrimonial property.

Standing legislative authority for the disposition of land of the private domain of the
Philippines is provided by Act No. 3038, entitled "An Act Authorizing the Secretary of
Agriculture and Natural Resources to Sell or Lease Land of the Private Domain of the
Government of the Philippine Islands (now Republic of the Philippines)", enacted on 9
March 1922. The full text of this statute is as follows:
Be it enacted by the Senate and House of Representatives of the Philippines in Legislature
assembled and by the authority of the same:

SECTION 1. The Secretary of Agriculture and Natural Resources (now Secretary of the
Environment and Natural Resources) is hereby authorized to sell or lease land of the private
domain of the Government of the Philippine Islands, or any part thereof, to such persons,
corporations or associations as are, under the provisions of Act Numbered Twenty-eight
hundred and seventy-four, (now Commonwealth Act No. 141, as amended) known as the
Public Land Act, entitled to apply for the purchase or lease or agricultural public land.

SECTION 2. The sale of the land referred to in the preceding section shall, if such land is
agricultural, be made in the manner and subject to the limitations prescribed in chapters five
and six, respectively, of said Public Land Act, and if it be classified differently, in conformity
with the provisions of chapter nine of said Act: Provided, however, That the land necessary
for the public service shall be exempt from the provisions of this Act.

SECTION 3. This Act shall take effect on its approval.

Approved, March 9, 1922. (Emphasis supplied)

Lest it be assumed that Act No. 3038 refers only to agricultural lands of the private domain
of the State, it must be noted that Chapter 9 of the old Public Land Act (Act No. 2874) is now
Chapter 9 of the present Public Land Act (Commonwealth Act No. 141, as amended) and
that both statutes refer to: "any tract of land of the public domain which being neither timber
nor mineral land, is intended to be used for residential purposes or for commercial or
industrial purposes other than agricultural" (Emphasis supplied). In other words, the statute
covers the sale or lease or residential, commercial or industrial land of the private domain of
the State.

Implementing regulations have been issued for the carrying out of the provisions of Act No.
3038. On 21 December 1954, the then Secretary of Agriculture and Natural Resources
promulgated Lands Administrative Orders Nos. 7-6 and 7-7 which were entitled,
respectively: "Supplementary Regulations Governing the Sale of the Lands of the Private
Domain of the Republic of the Philippines"; and "Supplementary Regulations Governing
the Lease of Lands of Private Domain of the Republic of the Philippines" (text in 51 O.G. 28-
29 [1955]).

It is perhaps well to add that Act No. 3038, although now sixty-eight (68) years old, is still in
effect and has not been repealed.  1

Specific legislative authorization for disposition of particular patrimonial properties of the

State is illustrated by certain earlier statutes. The first of these was Act No. 1120, enacted
on 26 April 1904, which provided for the disposition of the friar lands, purchased by the
Government from the Roman Catholic Church, to bona fide settlers and occupants thereof
or to other persons. In Jacinto v. Director of Lands (49 Phil. 853 [1926]), these friar lands
were held to be private and patrimonial properties of the State. Act No. 2360, enacted on -28
February 1914, authorized the sale of the San Lazaro Estate located in the City of Manila,
which had also been purchased by the Government from the Roman Catholic Church. In
January 1916, Act No. 2555 amended Act No. 2360 by including therein all lands and
buildings owned by the Hospital and the Foundation of San Lazaro theretofor leased by
private persons, and which were also acquired by the Philippine Government.

After the enactment in 1922 of Act No. 3038, there appears, to my knowledge, to be only
one statute authorizing the President to dispose of a specific piece of property. This statute
is Republic Act No. 905, enacted on 20 June 1953, which authorized the

President to sell an Identified parcel of land of the private domain of the National
Government to the National Press Club of the Philippines, and to other recognized national
associations of professionals with academic standing, for the nominal price of P1.00. It
appears relevant to note that Republic Act No. 905 was not an outright disposition in
perpetuity of the property involved- it provided for reversion of the property to the National
Government in case the National Press Club stopped using it for its headquarters. What
Republic Act No. 905 authorized was really a donation, and not a sale.
The basic submission here made is that Act No. 3038 provides standing legislative
authorization for disposition of the Roppongi property which, in my view, has been converted
into patrimonial property of the Republic. 2

To some, the submission that Act No. 3038 applies not only to lands of the private domain of
the State located in the Philippines but also to patrimonial property found outside the
Philippines, may appear strange or unusual. I respectfully submit that such position is not
any more unusual or strange than the assumption that Article 420 of the Civil Code applies
not only to property of the Republic located within Philippine territory but also to property
found outside the boundaries of the Republic.

It remains to note that under the well-settled doctrine that heads of Executive Departments
are alter egos of the President (Villena v. Secretary of the Interior, 67 Phil. 451 [1939]), and
in view of the constitutional power of control exercised by the President over department
heads (Article VII, Section 17,1987 Constitution), the President herself may carry out the
function or duty that is specifically lodged in the Secretary of the Department of Environment
and Natural Resources (Araneta v. Gatmaitan 101 Phil. 328 [1957]). At the very least, the
President retains the power to approve or disapprove the exercise of that function or duty
when done by the Secretary of Environment and Natural Resources.

It is hardly necessary to add that the foregoing analyses and submissions relate only to the
austere question of existence of legal power or authority. They have nothing to do with much
debated questions of wisdom or propriety or relative desirability either of the proposed
disposition itself or of the proposed utilization of the anticipated proceeds of the property
involved. These latter types of considerations He within the sphere of responsibility of the
political departments of government the Executive and the Legislative authorities.

For all the foregoing, I vote to dismiss the Petitions for Prohibition in both G.R. Nos. 92013
and 92047.
G.R. No. 133876 December 29, 1999

BANK OF AMERICA, NT and SA, petitioner,

vs.
AMERICAN REALTY CORPORATION and COURT OF APPEALS, respondents.

BUENA, J.:

Does a mortgage-creditor waive its remedy to foreclose the real estate mortgage constituted
over a third party mortgagor's property situated in the Philippines by filing an action for the
collection of the principal loan before foreign courts?

Sought to be reversed in the instant petition for review on certiorari under Rule 45 of the
Rules of Court are the decision   of public respondent Court of Appeals in CA G.R. CV No.
1

51094, promulgated on 30 September 1997 and its resolution,   dated 22 May 1998, denying
2

petitioner's motion for reconsideration.

Petitioner Bank of America NT & SA (BANTSA) is an international banking and financing

institution duly licensed to do business in the Philippines, organized and existing under and
by virtue of the laws of the State of California, United States of America while private
respondent American Realty Corporation (ARC) is a domestic corporation.

Bank of America International Limited (BAIL), on the other hand, is a limited liability
company organized and existing under the laws of England.

As borne by the records, BANTSA and BAIL on several occasions granted three major multi-
million United States (US) Dollar loans to the following corporate borrowers: (1) Liberian
Transport Navigation, S.A.; (2) El Challenger S.A. and (3) Eshley Compania Naviera S.A.
(hereinafter collectively referred to as "borrowers"), all of which are existing under and by
virtue of the laws of the Republic of Panama and are foreign affiliates of private
respondent.  3

Due to the default in the payment of the loan amortizations, BANTSA and the corporate
borrowers signed and entered into restructuring agreements. As additional security for the
restructured loans, private respondent ARC as third party mortgagor executed two real
estate mortgages,   dated 17 February 1983 and 20 July 1984, over its parcels of land
4

including improvements thereon, located at Barrio Sto. Cristo, San Jose Del Monte,
Bulacan, and which are covered by Transfer Certificate of Title Nos. T-78759, T-78760, T-
78761, T-78762 and T-78763.
Eventually, the corporate borrowers defaulted in the payment of the restructured loans
prompting petitioner BANTSA to file civil actions   before foreign courts for the collection of
5

the principal loan, to wit:

a) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court
(1992-Folio No 2098) against Liberian Transport Navigation S.A., Eshley Compania Naviera
S.A., El Challenger S.A., Espriona Shipping Company S.A., Eddie Navigation Corp., S.A.,
Eduardo Katipunan Litonjua and Aurelio Katipunan Litonjua on June 17, 1992.

b) In England, in its High Court of Justice, Queen's Bench Division, Commercial Court
(1992-Folio No. 2245) against El Challenger S.A., Espriona Shipping Company S.A.,
Eduardo Katipuan Litonjua & Aurelio Katipunan Litonjua on July 2, 1992;

c) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992)
against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company
S.A. Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering
(Edyship) Co., Inc., Aurelio Katipunan Litonjua, Jr. and Eduardo Katipunan Litonjua on
November 19, 1992; and

d) In Hongkong, in the Supreme Court of Hongkong High Court (Action No. 4040 of 1992)
against Eshley Compania Naviera S.A., El Challenger S.A., Espriona Shipping Company,
S.A., Pacific Navigators Corporation, Eddie Navigation Corporation S.A., Litonjua Chartering
(Edyship) Co., Jr. and Eduardo Katipunan Litonjua on November 21, 1992.

In the civil suits instituted before the foreign courts, private respondent ARC, being a third
party mortgagor, was private not impleaded as party-defendant.

On 16 December 1992, petitioner BANTSA filed before the Office of the Provincial Sheriff of
Bulacan, Philippines an application for extrajudicial foreclosure   of real estate mortgage.
6

On 22 January 1993, after due publication and notice, the mortgaged real properties were
sold at public auction in an extrajudicial foreclosure sale, with Integrated Credit and
Corporation Services Co (ICCS) as the highest bidder for the sum of Twenty four Million
Pesos (P24,000.000.00).  7

On 12 February 1993, private respondent filed before the Pasig Regional Trial Court, Branch
159, an action for damages   against the petitioner, for the latter's act of foreclosing
8

extrajudicially the real estate mortgages despite the pendency of civil suits before foreign
courts for the collection of the principal loan.

In its answer   petitioner alleged that the rule prohibiting the mortgagee from foreclosing the
9

mortgage after an ordinary suit for collection has been filed, is not applicable in the present
case, claiming that:

a) The plaintiff, being a mere third party mortgagor and not a party to the principal
restructuring agreements, was never made a party defendant in the civil cases filed in
Hongkong and England;

b) There is actually no civil suit for sum of money filed in the Philippines since the civil
actions were filed in Hongkong and England. As such, any decisions (sic) which may be
rendered in the abovementioned courts are not (sic) enforceable in the Philippines unless a
separate action to enforce the foreign judgments is first filed in the Philippines, pursuant to
Rule 39, Section 50 of the Revised Rules of Court.

c) Under English Law, which is the governing law under the principal agreements, the
mortgagee does not lose its security interest by filing civil actions for sums of money.

On 14 December 1993, private respondent filed a motion for

suspension   of the redemption period on the ground that "it cannot exercise said right of
10

redemption without at the same time waiving or contradicting its contentions in the case that
the foreclosure of the mortgage on its properties is legally improper and therefore invalid."
In an order   dated 28 January 1994, the trial court granted the private respondent's motion
11

for suspension after which a copy of said order was duly received by the Register of Deeds
of Meycauayan, Bulacan.

On 07 February 1994, ICCS, the purchaser of the mortgaged properties at the foreclosure
sale, consolidated its ownership over the real properties, resulting to the issuance of
Transfer Certificate of Title Nos. T-18627, T-186272, T-186273, T-16471 and T-16472 in its
name.

On 18 March 1994, after the consolidation of ownership in its favor, ICCS sold the real
properties to Stateland Investment Corporation for the amount of Thirty Nine Million Pesos
(P39,000,000.00).   Accordingly, Transfer Certificate of Title Nos. T-187781(m), T-
12

187782(m), T-187783(m), T-16653P(m) and T-16652P(m) were issued in the latter's name.

After trial, the lower court rendered a decision   in favor of private respondent ARC dated 12
13

May 1993, the decretal portion of which reads:

WHEREFORE, judgment is hereby rendered declaring that the filing in foreign courts by the
defendant of collection suits against the principal debtors operated as a waiver of the
security of the mortgages. Consequently, the plaintiff's rights as owner and possessor of the
properties then covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-78763, T-
78760 and T-78761, all of the Register of Deeds of Meycauayan, Bulacan, Philippines, were
violated when the defendant caused the extrajudicial foreclosure of the mortgages
constituted thereon.

Accordingly, the defendant is hereby ordered to pay the plaintiff the following sums, all with
legal interest thereon from the date of the filing of the complaint up to the date of actual
payment:

1) Actual or compensatory damages in the amount of Ninety Nine Million Pesos

(P99,000,000.00);

2) Exemplary damages in the amount of Five Million Pesos (P5,000,000.00); and

3) Costs of suit.

SO ORDERED.

On appeal, the Court of Appeals affirmed the assailed decision of the lower court prompting
petitioner to file a motion for reconsideration which the appellate court denied.

Hence, the instant petition for review   on certiorari where herein petitioner BANTSA
14

ascribes to the Court of Appeals the following assignment of errors:

1. The Honorable Court of Appeals disregarded the doctrines laid down by this Hon.
Supreme Court in the cases of Caltex Philippines, Inc. vs. Intermediate Appellate
Court docketed as G.R. No. 74730 promulgated on August 25, 1989 and Philippine
Commercial International Bank vs. IAC, 196 SCRA 29 (1991 case), although said cases
were duly cited, extensively discussed and specifically mentioned, as one of the issues in
the assignment of errors found on page 5 of the decision dated September 30, 1997.

2. The Hon. Court of Appeals acted with grave abuse of discretion when it awarded the
private respondent actual and exemplary damages totalling P171,600,000.00, as of July 12,
1998 although such huge amount was not asked nor prayed for in private respondent's
complaint, is contrary to law and is totally unsupported by evidence (sic).

In fine, this Court is called upon to resolve two main issues:

1. Whether or not the petitioner's act of filing a collection suit against the principal debtors for
the recovery of the loan before foreign courts constituted a waiver of the remedy of
foreclosure.
2. Whether or not the award by the lower court of actual and exemplary damages in favor of
private respondent ARC, as third-party mortgagor, is proper.

The petition is bereft of merit.

First, as to the issue of availability of remedies, petitioner submits that a waiver of the
remedy of foreclosure requires the concurrence of two requisites: an ordinary civil action for
collection should be filed and subsequently a final judgment be correspondingly rendered
therein.

According to petitioner, the mere filing of a personal action to collect the principal loan does
not suffice; a final judgment must be secured and obtained in the personal action so that
waiver of the remedy of foreclosure may be appreciated. To put it differently, absent any of
the two requisites, the mortgagee-creditor is deemed not to have waived the remedy of
foreclosure.

We do not agree.

Certainly, this Court finds petitioner's arguments untenable and upholds the jurisprudence
laid down in Bachrach   and similar cases adjudicated thereafter, thus:
15

In the absence of express statutory provisions, a mortgage creditor may institute against the
mortgage debtor either a personal action or debt or a real action to foreclose the mortgage.
In other words, he may he may pursue either of the two remedies, but not both. By such
election, his cause of action can by no means be impaired, for each of the two remedies is
complete in itself. Thus, an election to bring a personal action will leave open to him all the
properties of the debtor for attachment and execution, even including the mortgaged
property itself. And, if he waives such personal action and pursues his remedy against the
mortgaged property, an unsatisfied judgment thereon would still give him the right to sue for
a deficiency judgment, in which case, all the properties of the defendant, other than the
mortgaged property, are again open to him for the satisfaction of the deficiency. In either
case, his remedy is complete, his cause of action undiminished, and any advantages
attendant to the pursuit of one or the other remedy are purely accidental and are all under
his right of election. On the other hand, a rule that would authorize the plaintiff to bring a
personal action against the debtor and simultaneously or successively another action
against the mortgaged property, would result not only in multiplicity of suits so offensive to
justice (Soriano vs. Enriques, 24 Phil. 584) and obnoxious to law and equity (Osorio vs. San
Agustin, 25 Phil., 404), but also in subjecting the defendant to the vexation of being sued in
the place of his residence or of the residence of the plaintiff, and then again in the place
where the property lies.

In Danao vs. Court of Appeals,   this Court, reiterating jurisprudence enunciated in Manila
16

Trading and Supply Co vs. Co Kim   and Movido vs.

17

RFC,   invariably held:

18

. . . The rule is now settled that a mortgage creditor may elect to waive his security and
bring, instead, an ordinary action to recover the indebtedness with the right to execute a
judgment thereon on all the properties of the debtor, including the subject matter of the
mortgage . . . , subject to the qualification that if he fails in the remedy by him elected, he
cannot pursue further the remedy he has waived. (Emphasis Ours)

Anent real properties in particular, the Court has laid down the rule that a mortgage creditor
may institute against the mortgage debtor either a personal action for debt or a real action to
foreclose the mortgage.  19

In our jurisdiction, the remedies available to the mortgage creditor are deemed alternative
and not cumulative. Notably, an election of one remedy operates as a waiver of the other.
For this purpose, a remedy is deemed chosen upon the filing of the suit for collection or
upon the filing of the complaint in an action for foreclosure of mortgage, pursuant to the
provision of Rule 68 of the of the 1997 Rules of Civil Procedure. As to extrajudicial
foreclosure, such remedy is deemed elected by the mortgage creditor upon filing of the
petition not with any court of justice but with the Office of the Sheriff of the province where
the sale is to be made, in accordance with the provisions of Act No. 3135, as amended by
Act No. 4118.

In the case at bench, private respondent ARC constituted real estate mortgages over its
properties as security for the debt of the principal debtors. By doing so, private respondent
subjected itself to the liabilities of a third party mortgagor. Under the law, third persons who
are not parties to a loan may secure the latter by pledging or mortgaging their own
property. 20

Notwithstanding, there is no legal provision nor jurisprudence in our jurisdiction which makes
a third person who secures the fulfillment of another's obligation by mortgaging his own
property, to be solidarily bound with the principal obligor. The signatory to the principal
contract—loan—remains to be primarily bound. It is only upon default of the latter that the
creditor may have recourse on the mortgagors by foreclosing the mortgaged properties in
lieu of an action for the recovery of the amount of the loan.  21

In the instant case, petitioner's contention that the requisites of filing the action for collection
and rendition of final judgment therein should concur, is untenable.

Thus, in Cerna vs. Court of Appeals,   we agreed with the petitioner in said case, that the
22

filing of a collection suit barred the foreclosure of the mortgage:

A mortgagee who files a suit for collection abandons the remedy of foreclosure of the chattel
mortgage constituted over the personal property as security for the debt or value of the
promissory note when he seeks to recover in the said collection suit.

. . . When the mortgagee elects to file a suit for collection, not foreclosure, thereby
abandoning the chattel mortgage as basis for relief, he clearly manifests his lack of desire
and interest to go after the mortgaged property as security for the promissory note . . . .

Contrary to petitioner's arguments, we therefore reiterate the rule, for clarity and emphasis,
that the mere act of filing of an ordinary action for collection operates as a waiver of the
mortgage-creditor's remedy to foreclose the mortgage. By the mere filing of the ordinary
action for collection against the principal debtors, the petitioner in the present case is
deemed to have elected a remedy, as a result of which a waiver of the other necessarily
must arise. Corollarily, no final judgment in the collection suit is required for the rule on
waiver to apply.

Hence, in Caltex Philippines, Inc. vs. Intermediate-Appellate Court,   a case relied upon by
23

petitioner, supposedly to buttress its contention, this Court had occasion to rule that the
mere act of filing a collection suit for the recovery of a debt secured by a mortgage
constitutes waiver of the other remedy of foreclosure.

In the case at bar, petitioner BANTSA only has one cause of action which is non-payment of
the debt. Nevertheless, alternative remedies are available for its enjoyment and exercise.
Petitioner then may opt to exercise only one of two remedies so as not to violate the rule
against splitting a cause of action.

As elucidated by this Court in the landmark case of Bachrach Motor Co., Inc, vs. Icarangal.  24

For non-payment of a note secured by mortgage, the creditor has a single cause of action
against the debtor. This single cause of action consists in the recovery of the credit with
execution of the security. In other words, the creditor in his action may make two demands,
the payment of the debt and the foreclosure of his mortgage. But both demands arise from
the same cause, the non-payment of the debt, and for that reason, they constitute a single
cause of action. Though the debt and the mortgage constitute separate agreements, the
latter is subsidiary to the former, and both refer to one and the same obligation.
Consequently, there exists only one cause of action for a single breach of that obligation.
Plaintiff, then, by applying the rules above stated, cannot split up his single cause of action
by filing a complaint for payment of the debt, and thereafter another complaint for
foreclosure of the mortgage. If he does so, the filing of the first complaint will bar the
subsequent complaint. By allowing the creditor to file two separate complaints
simultaneously or successively, one to recover his credit and another to foreclose his
mortgage, we will, in effect, be authorizing him plural redress for a single breach of contract
at so much cost to the courts and with so much vexation and oppression to the debtor.

Petitioner further faults the Court of Appeals for allegedly disregarding the doctrine
enunciated in Caltex wherein this High Court relaxed the application of the general rules to
wit:

In the present case, however, we shall not follow this rule to the letter but declare that it is
the collection suit which was waived and/or abandoned. This ruling is more in harmony with
the principles underlying our judicial system. It is of no moment that the collection suit was
filed ahead, what is determinative is the fact that the foreclosure proceedings ended even
before the decision in the collection suit was rendered. . . .

Notably, though, petitioner took the Caltex ruling out of context. We must stress that the
Caltex case was never intended to overrule the well-entrenched doctrine enunciated
Bachrach, which to our mind still finds applicability in cases of this sort. To reiterate,
Bachrach is still good law.

We then quote the decision   of the trial court, in the present case, thus:
25

The aforequoted ruling in Caltex is the exception rather than the rule, dictated by the
peculiar circumstances obtaining therein. In the said case, the Supreme Court chastised
Caltex for making ". . . a mockery of our judicial system when it initially filed a collection suit
then, during the pendency thereof, foreclosed extrajudicially the mortgaged property which
secured the indebtedness, and still pursued the collection suit to the end." Thus, to prevent a
mockery of our judicial system", the collection suit had to be nullified because the
foreclosure proceedings have already been pursued to their end and can no longer be
undone.

x x x           x x x          x x x

In the case at bar, it has not been shown whether the defendant pursued to the end or are
still pursuing the collection suits filed in foreign courts. There is no occasion, therefore, for
this court to apply the exception laid down by the Supreme Court in Caltex by nullifying the
collection suits. Quite obviously, too, the aforesaid collection suits are beyond the reach of
this Court. Thus the only way the court may prevent the spector of a creditor having "plural
redress for a single breach of contract" is by holding, as the Court hereby holds, that the
defendant has waived the right to foreclose the mortgages constituted by the plaintiff on its
properties originally covered by Transfer Certificates of Title Nos. T-78759, T-78762, T-
78760 and T-78761. (RTC Decision pp., 10-11)

In this light, the actuations of Caltex are deserving of severe criticism, to say the least. 
26

Moreover, petitioner attempts to mislead this Court by citing the case of PCIB vs.
IAC.   Again, petitioner tried to fit a square peg in a round hole. It must be stressed that far
27

from overturning the doctrine laid down in Bachrach, this Court in PCIB buttressed its firm
stand on this issue by declaring:

While the law allows a mortgage creditor to either institute a personal action for the debt or a
real action to foreclosure the mortgage, he cannot pursue both remedies simultaneously or
successively as was done by PCIB in this case.

x x x           x x x          x x x

Thus, when the PCIB filed Civil Case No. 29392 to enforce payment of the 1.3 million
promissory note secured by real estate mortgages and subsequently filed a petition for
extrajudicial foreclosure, it violates the rule against splitting a cause of action.

Accordingly, applying the foregoing rules, we hold that petitioner, by the expediency of filing
four civil suits before foreign courts, necessarily abandoned the remedy to foreclose the real
estate mortgages constituted over the properties of third-party mortgagor and herein private
respondent ARC. Moreover, by filing the four civil actions and by eventually foreclosing
extrajudicially the mortgages, petitioner in effect transgressed the rules against splitting a
cause of action well-enshrined in jurisprudence and our statute books.

In Bachrach, this Court resolved to deny the creditor the remedy of foreclosure after the
collection suit was filed, considering that the creditor should not be afforded "plural redress
for a single breach of contract." For cause of action should not be confused with the remedy
created for its enforcement.  28

Notably, it is not the nature of the redress which is crucial but the efficacy of the remedy
chosen in addressing the creditor's cause. Hence, a suit brought before a foreign court
having competence and jurisdiction to entertain the action is deemed, for this purpose, to be
within the contemplation of the remedy available to the mortgagee-creditor. This
pronouncement would best serve the interest of justice and fair play and further discourage
the noxious practice of splitting up a lone cause of action.

Incidentally, BANTSA alleges that under English Law, which according to petitioner is the
governing law with regard to the principal agreements, the mortgagee does not lose its
security interest by simply filing civil actions for sums of money. 
29

We rule in the negative.

This argument shows desperation on the part of petitioner to rivet its crumbling cause. In the
case at bench, Philippine law shall apply notwithstanding the evidence presented by
petitioner to prove the English law on the matter.

In a long line of decisions, this Court adopted the well-imbedded principle in our jurisdiction
that there is no judicial notice of any foreign law. A foreign law must be properly pleaded and
proved as a fact.   Thus, if the foreign law involved is not properly pleaded and proved, our
30

courts will presume that the foreign law is the same as our local or domestic or internal
law.   This is what we refer to as the doctrine of processual presumption.
31

In the instant case, assuming arguendo that the English Law on the matter were properly
pleaded and proved in accordance with Section 24, Rule 132 of the Rules of Court and the
jurisprudence laid down in Yao Kee, et al. vs.
Sy-Gonzales,   said foreign law would still not find applicability.
32

Thus, when the foreign law, judgment or contract is contrary to a sound and established
public policy of the forum, the said foreign law, judgment or order shall not be applied. 
33

Additionally, prohibitive laws concerning persons, their acts or property, and those which
have for their object public order, public policy and good customs shall not be rendered
ineffective by laws or judgments promulgated, or by determinations or conventions agreed
upon in a foreign country. 34

The public policy sought to be protected in the instant case is the principle imbedded in our
jurisdiction proscribing the splitting up of a single cause of action.

Section 4, Rule 2 of the 1997 Rules of Civil Procedure is pertinent —

If two or more suits are instituted on the basis of the same cause of action, the filing of one
or a judgment upon the merits in any one is available as a ground for the dismissal of the
others.

Moreover, foreign law should not be applied when its application would work undeniable
injustice to the citizens or residents of the forum. To give justice is the most important
function of law; hence, a law, or judgment or contract that is obviously unjust negates the
fundamental principles of Conflict of Laws.  35

Clearly then, English Law is not applicable.

As to the second pivotal issue, we hold that the private respondent is entitled to the award of
actual or compensatory damages inasmuch as the act of petitioner BANTSA in
extrajudicially foreclosing the real estate mortgages constituted a clear violation of the rights
of herein private respondent ARC, as third-party mortgagor.

Actual or compensatory damages are those recoverable because of pecuniary loss in

business, trade, property, profession, job or occupation and the same must be proved,
otherwise if the proof is flimsy and non-substantial, no damages will be given.   Indeed, the
36

question of the value of property is always a difficult one to settle as valuation of real
property is an imprecise process since real estate has no inherent value readily
ascertainable by an appraiser or by the court.   The opinions of men vary so much
37

concerning the real value of property that the best the courts can do is hear all of the
witnesses which the respective parties desire to present, and then, by carefully weighing
that testimony, arrive at a conclusion which is just and equitable.  38

In the instant case, petitioner assails the Court of Appeals for relying heavily on the valuation
made by Philippine Appraisal Company. In effect, BANTSA questions the act of the
appellate court in giving due weight to the appraisal report composed of twenty three pages,
signed by Mr. Lauro Marquez and submitted as evidence by private respondent. The
appraisal report, as the records would readily show, was corroborated by the testimony of
Mr. Reynaldo Flores, witness for private respondent.

On this matter, the trial court observed:

The record herein reveals that plaintiff-appellee formally offered as evidence the appraisal
report dated March 29, 1993 (Exhibit J, Records, p. 409), consisting of twenty three (23)
pages which set out in detail the valuation of the property to determine its fair market value
(TSN, April 22, 1994, p. 4), in the amount of P99,986,592.00 (TSN, ibid., p. 5), together with
the corroborative testimony of one Mr. Reynaldo F. Flores, an appraiser and director of
Philippine Appraisal Company, Inc. (TSN, ibid., p. 3). The latter's testimony was subjected to
extensive cross-examination by counsel for defendant-appellant (TSN, April 22, 1994, pp. 6-
22). 
39

In the matter of credibility of witnesses, the Court reiterates the familiar and well-entrenched
rule that the factual findings of the trial court should be respected.   The time-tested
40

jurisprudence is that the findings and conclusions of the trial court on the credibility of
witnesses enjoy a badge of respect for the reason that trial courts have the advantage of
observing the demeanor of witnesses as they testify.  41

This Court will not alter the findings of the trial court on the credibility of witnesses,
principally because they are in a better position to assess the same than the appellate
court.   Besides, trial courts are in a better position to examine real evidence as well as
42

observe the demeanor of witnesses.  43

Similarly, the appreciation of evidence and the assessment of the credibility of witnesses
rest primarily with the trial court.   In the case at bar, we see no reason that would justify this
44

Court to disturb the factual findings of the trial court, as affirmed by the Court of Appeals,
with regard to the award of actual damages.

In arriving at the amount of actual damages, the trial court justified the award by presenting
the following ratiocination in its assailed decision  , to wit:
45

Indeed, the Court has its own mind in the matter of valuation. The size of the subject real
properties are (sic) set forth in their individuals titles, and the Court itself has seen the
character and nature of said properties during the ocular inspection it conducted. Based
principally on the foregoing, the Court makes the following observations:

1. The properties consist of about 39 hectares in Bo. Sto. Cristo, San Jose del Monte,
Bulacan, which is (sic) not distant from Metro Manila — the biggest urban center in the
Philippines — and are easily accessible through well-paved roads;

2. The properties are suitable for development into a subdivision for low cost housing, as
admitted by defendant's own appraiser (TSN, May 30, 1994, p. 31);
3. The pigpens which used to exist in the property have already been demolished. Houses
of strong materials are found in the vicinity of the property (Exhs. 2, 2-1 to 2-7), and the
vicinity is a growing community. It has even been shown that the house of the Barangay
Chairman is located adjacent to the property in question (Exh. 27), and the only remaining
piggery (named Cherry Farm) in the vicinity is about 2 kilometers away from the western
boundary of the property in question (TSN, November 19, p. 3);

4. It will not be hard to find interested buyers of the property, as indubitably shown by the
fact that on March 18, 1994, ICCS (the buyer during the foreclosure sale) sold the
consolidated real estate properties to Stateland Investment Corporation, in whose favor new
titles were issued, i.e., TCT Nos. T-187781(m); T-187782(m), T-187783(m); T-16653P(m)
and T-166521(m) by the Register of Deeds of Meycauayan (sic), Bulacan;

5. The fact that ICCS was able to sell the subject properties to Stateland Investment
Corporation for Thirty Nine Million (P39,000,000.00) Pesos, which is more than triple
defendant's appraisal (Exh. 2) clearly shows that the Court cannot rely on defendant's
aforesaid estimate (Decision, Records, p. 603).

It is a fundamental legal aphorism that the conclusions of the trial judge on the credibility of
witnesses command great respect and consideration especially when the conclusions are
supported by the evidence on record.   Applying the foregoing principle, we therefore hold
46

that the trial court committed no palpable error in giving credence to the testimony of
Reynaldo Flores, who according to the records, is a licensed real estate broker, appraiser
and director of Philippine Appraisal Company, Inc. since 1990.   As the records show, Flores
47

had been with the company for 26 years at the time of his testimony.

Of equal importance is the fact that the trial court did not confine itself to the appraisal report
dated 29 March 1993, and the testimony given by Mr. Reynaldo Flores, in determining the
fair market value of the real property. Above all these, the record would likewise show that
the trial judge in order to appraise himself of the characteristics and condition of the
property, conducted an ocular inspection where the opposing parties appeared and were
duly represented.

Based on these considerations and the evidence submitted, we affirm the ruling of the trial
court as regards the valuation of the property —

. . . a valuation of Ninety Nine Million Pesos (P99,000,000.00) for the 39-hectare properties
(sic) translates to just about Two Hundred Fifty Four Pesos (P254.00) per square meter.
This appears to be, as the court so holds, a better approximation of the fair market value of
the subject properties. This is the amount which should be restituted by the defendant to the
plaintiff by way of actual or compensatory damages . . . .  48

Further, petitioner ascribes error to the lower court awarding an amount allegedly not asked
nor prayed for in private respondent's complaint.

Notwithstanding the fact that the award of actual and compensatory damages by the lower
court exceeded that prayed for in the complaint, the same is nonetheless valid, subject to
certain qualifications.

On this issue, Rule 10, Section 5 of the Rules of Court is pertinent:

Sec. 5. Amendment to conform to or authorize presentation of evidence. — When issues not

raised by the pleadings are tried with the express or implied consent of the parties, they
shall be treated in all respects as if they had been raised in the pleadings. Such amendment
of the pleadings as may be necessary to cause them to conform to the evidence and to raise
these issues may be made upon motion of any party at any time, even after judgement; but
failure to amend does not affect the result of the trial of these issues. If evidence is objected
to at the trial on the ground that it is not within the issues made by the pleadings, the court
may allow the pleadings to be amended and shall do so with liberality if the presentation of
the merits of the action and the ends of substantial justice will be subserved thereby. The
court may grant a continuance to enable the amendment to be made.
The jurisprudence enunciated in Talisay-Silay Milling Co., Inc. vs. Asociacion de
Agricultures de Talisay-Silay, Inc.   citing Northern Cement Corporation vs. Intermediate
49

Appellate Court   is enlightening:

50

There have been instances where the Court has held that even without the necessary
amendment, the amount proved at the trial may be validly awarded, as in Tuazon v.
Bolanos (95 Phil. 106), where we said that if the facts shown entitled plaintiff to relief other
than that asked for, no amendment to the complaint was necessary, especially where
defendant had himself raised the point on which recovery was based. The appellate court
could treat the pleading as amended to conform to the evidence although the pleadings
were actually not amended. Amendment is also unnecessary when only clerical error or non
substantial matters are involved, as we held in Bank of the Philippine Islands vs. Laguna (48
Phil. 5). In Co Tiamco vs. Diaz (75 Phil. 672), we stressed that the rule on amendment need
not be applied rigidly, particularly where no surprise or prejudice is caused the objecting
party. And in the recent case of National Power Corporation vs. Court of Appeals (113
SCRA 556), we held that where there is a variance in the defendant's pleadings and the
evidence adduced by it at the trial, the Court may treat the pleading as amended to conform
with the evidence.

It is the view of the Court that pursuant to the above-mentioned rule and in light of the
decisions cited, the trial court should not be precluded from awarding an amount higher than
that claimed in the pleading notwithstanding the absence of the required amendment. But it
is upon the condition that the evidence of such higher amount has been presented properly,
with full opportunity on the part of the opposing parties to support their respective
contentions and to refute each other's evidence.

The failure of a party to amend a pleading to conform to the evidence adduced during trial
does not preclude an adjudication by the court on the basis of such evidence which may
embody new issues not raised in the pleadings, or serve as a basis for a higher award of
damages. Although the pleading may not have been amended to conform to the evidence
submitted during trial, judgment may nonetheless be rendered, not simply on the basis of
the issues alleged but also the basis of issues discussed and the assertions of fact proved in
the course of trial. The court may treat the pleading as if it had been amended to conform to
the evidence, although it had not been actually so amended. Former Chief Justice Moran
put the matter in this way:

When evidence is presented by one party, with the expressed or implied consent of the
adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly
as regards those issues, which shall be considered as if they have been raised in the
pleadings. There is implied consent to the evidence thus presented when the adverse party
fails to object thereto.

Clearly, a court may rule and render judgment on the basis of the evidence before it even
though the relevant pleading had not been previously amended, so long as no surprise or
prejudice is thereby caused to the adverse party. Put a little differently, so long as the basis
requirements of fair play had been met, as where litigants were given full opportunity to
support their respective contentions and to object to or refute each other's evidence, the
court may validly treat the pleadings as if they had been amended to conform to the
evidence and proceed to adjudicate on the basis of all the evidence before it.

In the instant case, inasmuch as the petitioner was afforded the opportunity to refute and
object to the evidence, both documentary and testimonial, formally offered by private
respondent, the rudiments of fair play are deemed satisfied. In fact, the testimony of
Reynaldo Flores was put under scrutiny during the course of the cross-examination. Under
these circumstances, the court acted within the bounds of its jurisdiction and committed no
reversible error in awarding actual damages the amount of which is higher than that prayed
for. Verily, the lower court's actuations are sanctioned by the Rules and supported by
jurisprudence.

Similarly, we affirm the grant of exemplary damages although the amount of Five Million
Pesos (P5,000,000.00) awarded, being excessive, is subject to reduction. Exemplary or
corrective damages are imposed, by way of example or correction for the public good, in
addition to the moral, temperate, liquidated or compensatory damages.   Considering its
51

purpose, it must be fair and reasonable in every case and should not be awarded to unjustly
enrich a prevailing party.   In our view, an award of P50,000.00 as exemplary damages in
52

the present case qualifies the test of reasonableness.

WHEREFORE, premises considered, the instant petition is DENIED for lack of merit. The
decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION of the amount
awarded as exemplary damages. According, petitioner is hereby ordered to pay private
respondent the sum of P99,000,000.00 as actual or compensatory damages; P50,000.00 as
exemplary damage and the costs of suit.

SO ORDERED.

G.R. No. L-104776 December 5, 1994

BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, and the

rest of 1,767 NAMED-COMPLAINANTS, thru and by their Attorney-in-fact, Atty.
GERARDO A. DEL MUNDO, petitioners,
vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION'S ADMINISTRATOR,
NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT INTERNATIONAL,
INC. AND/OR ASIA INTERNATIONAL BUILDERS CORPORATION, respondents.

G.R. Nos. 104911-14 December 5, 1994

BIENVENIDO M. CADALIN, ET AL., petitioners,

vs.
HON. NATIONAL LABOR RELATIONS COMMISSION, BROWN & ROOT
INTERNATIONAL, INC. and/or ASIA INTERNATIONAL BUILDERS
CORPORATION, respondents.

G.R. Nos. 105029-32 December 5, 1994

ASIA INTERNATIONAL BUILDER CORPORATION and BROWN & ROOT

INTERNATIONAL, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M. CADALIN, ROLANDO
M. AMUL, DONATO B. EVANGELISTA, ROMEO PATAG, RIZALINO REYES, IGNACIO
DE VERA, SOLOMON B. REYES, JOSE M. ABAN, EMIGDIO N. ABARQUEZ, ANTONIO
ACUPAN, ROMEO ACUPAN, BENJAMIN ALEJANDRE, WILFREDO D. ALIGADO,
MARTIN AMISTAD, JR., ROLANDO B. AMUL, AMORSOLO ANADING, ANTONIO T.
ANGLO, VICENTE ARLITA, HERBERT AYO, SILVERIO BALATAZO, ALFREDO
BALOBO, FALCONERO BANAAG, RAMON BARBOSA, FELIX BARCENA, FERNANDO
BAS, MARIO BATACLAN, ROBERTO S. BATICA, ENRICO BELEN, ARISTEO BICOL,
LARRY C. BICOL, PETRONILLO BISCOCHO, FELIX M. BOBIER, DIONISIO BOBONGO,
BAYANI S. BRACAMANTE, PABLITO BUSTILLO, GUILLERMO CABEZAS,
BIENVENIDO CADALIN, RODOLFO CAGATAN, AMANTE CAILAO, IRENEO CANDOR,
JOSE CASTILLO, MANUEL CASTILLO, REMAR CASTROJERES, REYNALDO CAYAS,
ROMEO CECILIO, TEODULO CREUS, BAYANI DAYRIT, RICARDO DAYRIT, ERNESTO
T. DELA CRUZ, FRANCISCO DE GUZMAN, ONOFRE DE RAMA, IGNACIO DE VERA,
MODESTO DIZON, REYNALDO DIZON, ANTONIO S. DOMINGUEZ, GILBERT EBRADA,
RICARDO EBRADA, ANTONIO EJERCITO, JR., EDUARTE ERIDAO, ELADIO
ESCOTOTO, JOHN ESGUERRA, EDUARDO ESPIRITU, ERNESTO ESPIRITU,
RODOLFO ESPIRITU, NESTOR M. ESTEVA, BENJAMIN ESTRADA, VALERIO
EVANGELISTA, OLIGARIO FRANCISCO, JESUS GABAWAN, ROLANDO GARCIA,
ANGEL GUDA, PACITO HERNANDEZ, ANTONIO HILARIO, HENRY L. JACOB,
HONESTO JARDINIANO, ANTONIO JOCSON, GERARDO LACSAMANA, EFREN U.
LIRIO LORETO LONTOC, ISRAEL LORENZO, ALEJANDRO LORINO, JOSE MABALAY,
HERMIE MARANAN, LEOVIGILDO MARCIAL, NOEL MARTINEZ, DANTE MATREO,
LUCIANO MELENDEZ, RENATO MELO, FRANCIS MEDIODIA, JOSE C. MILANES,
RAYMUNDO C. MILAY, CRESENCIANO MIRANDA, ILDEFONSO C. MOLINA,
ARMANDO B. MONDEJAR RESURRECCION D. NAZARENO, JUAN OLINDO,
FRANCISCO R. OLIVARES, PEDRO ORBISTA, JR., RICARDO ORDONEZ, ERNIE
PANCHO, JOSE PANCHO, GORGONIO P. PARALA, MODESTO PINPIN, JUANITO
PAREA, ROMEO I. PATAG, FRANCISCO PINPIN, LEONARDO POBLETE, JAIME
POLLOS, DOMINGO PONDALIS, EUGENIO RAMIREZ, LUCIEN M. RESPALL,
GAUDENCIO RETANAN, JR., TOMAS B. RETENER, ALVIN C. REYES, RIZALINO
REYES, SOLOMON B. REYES, VIRGILIO G. RICAZA, RODELIO RIETA, JR., BENITO
RIVERA, JR., BERNARDO J. ROBILLOS, PABLO A. ROBLES, JOSE ROBLEZA,
QUIRINO RONQUILLO, AVELINO M. ROQUE, MENANDRO L. SABINO, PEDRO
SALGATAR, EDGARDO SALONGA, NUMERIANO SAN MATEO, FELIZARDO DE LOS
SANTOS, JR., GABRIEL SANTOS, JUANITO SANTOS, PAQUITO SOLANTE,
CONRADO A. SOLIS, JR., RODOLFO SULTAN, ISAIAS TALACTAC, WILLIAM TARUC,
MENANDRO TEMPROSA, BIENVENIDO S. TOLENTINO, BENEDICTO TORRES,
MAXIMIANO TORRES, FRANCISCO G. TRIAS, SERGIO A. URSOLINO, ROGELIO
VALDEZ, LEGORIO E. VERGARA, DELFIN VICTORIA, GILBERT VICTORIA, HERNANE
VICTORIANO, FRANCISCO VILLAFLORES, DOMINGO VILLAHERMOSA, ROLANDO
VILLALOBOS, ANTONIO VILLAUZ, DANILO VILLANUEVA, ROGELIO VILLANUEVA,
ANGEL VILLARBA, JUANITO VILLARINO, FRANCISCO ZARA, ROGELIO AALAGOS,
NICANOR B. ABAD, ANDRES ABANES, REYNALDO ABANES, EDUARDO ABANTE,
JOSE ABARRO, JOSEFINO ABARRO, CELSO S. ABELANIO, HERMINIO ABELLA,
MIGUEL ABESTANO, RODRIGO G. ABUBO, JOSE B. ABUSTAN, DANTE ACERES,
REYNALDO S. ACOJIDO, LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO
ACUPAN, REYNALDO ACUPAN, SOLANO ACUPAN, MANUEL P. ADANA,
FLORENTINO R. AGNE, QUITERIO R. AGUDO, MANUEL P. AGUINALDO, DANTE
AGUIRRE, HERMINIO AGUIRRE, GONZALO ALBERTO, JR., CONRADO ALCANTARA,
LAMBERTO Q. ALCANTARA, MARIANITO J. ALCANTARA, BENCIO ALDOVER,
EULALIO V. ALEJANDRO, BENJAMIN ALEJANDRO, EDUARDO L. ALEJANDRO,
MAXIMINO ALEJANDRO, ALBERTO ALMENAR, ARNALDO ALONZO, AMADO
ALORIA, CAMILO ALVAREZ, MANUEL C. ALVAREZ, BENJAMIN R. AMBROCIO,
CARLOS AMORES, BERNARD P. ANCHETA, TIMOTEO O. ANCHETA, JEOFREY ANI,
ELINO P. ANTILLON, ARMANDRO B. ANTIPONO, LARRY T. ANTONIO, ANTONIO
APILADO, ARTURO P. APILADO, FRANCISCO APOLINARIO, BARTOLOME M.
AQUINO, ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M. AQUINO, ROBERTO
ARANGORIN, BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIO ARAULLO,
ALEXANDER ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO, JUANTO
AREVALO, RAMON AREVALO, RODOLFO AREVALO, EULALIO ARGUELLES,
WILFREDO P. ARICA, JOSE M. ADESILLO, ANTONIO ASUNCION, ARTEMIO M.
ASUNCION, EDGARDO ASUNCION, REXY M. ASUNCION, VICENTE AURELIO, ANGEL
AUSTRIA, RICARDO P. AVERILLA, JR., VIRGILIO AVILA, BARTOLOME AXALAN,
ALFREDO BABILONIA, FELIMON BACAL, JOSE L. BACANI, ROMULO R. BALBIERAN,
VICENTE BALBIERAN, RODOLFO BALITBIT, TEODORO Y. BALOBO, DANILO O.
BARBA, BERNARDO BARRO, JUAN A. BASILAN, CEFERINO BATITIS, VIVENCIO C.
BAUAN, GAUDENCIO S. BAUTISTA, LEONARDO BAUTISTA, JOSE D. BAUTISTA,
ROSTICO BAUTISTA, RUPERTO B. BAUTISTA, TEODORO S. BAUTISTA, VIRGILIO
BAUTISTA, JESUS R. BAYA, WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G.
BELIR, ERIC B. BELTRAN, EMELIANO BENALES, JR., RAUL BENITEZ, PERFECTO
BENSAN, IRENEO BERGONIO, ISABELO BERMUDEZ, ROLANDO I. BERMUDEZ,
DANILO BERON, BENJAMIN BERSAMIN, ANGELITO BICOL, ANSELMO BICOL,
CELESTINO BICOL, JR., FRANCISCO BICOL, ROGELIO BICOL, ROMULO L. BICOL,
ROGELIO BILLIONES, TEOFILO N. BITO, FERNANDO BLANCO, AUGUSTO BONDOC,
DOMINGO BONDOC, PEPE S. BOOC, JAMES R. BORJA, WILFREDO BRACEROS,
ANGELES C. BRECINO, EURECLYDON G. BRIONES, AMADO BRUGE, PABLITO
BUDILLO, ARCHIMEDES BUENAVENTURA, BASILIO BUENAVENTURA, GUILLERMO
BUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO BUTIONG, JR., HONESTO P.
CABALLA, DELFIN CABALLERO, BENEDICTO CABANIGAN, MOISES CABATAY,
HERMANELI CABRERA, PEDRO CAGATAN, JOVEN C. CAGAYAT, ROGELIO L.
CALAGOS, REYNALDO V. CALDEJON, OSCAR C. CALDERON, NESTOR D. CALLEJA,
RENATO R. CALMA, NELSON T. CAMACHO, SANTOS T. CAMACHO, ROBERTO
CAMANA, FLORANTE C. CAMANAG EDGARDO M. CANDA, SEVERINO CANTOS,
EPIFANIO A. CAPONPON, ELIAS D. CARILLO, JR., ARMANDO CARREON,
MENANDRO M. CASTAÑEDA, BENIGNO A. CASTILLO, CORNELIO L. CASTILLO,
JOSEPH B. CASTILLO, ANSELMO CASTILLO, JOAQUIN CASTILLO, PABLO L.
CASTILLO, ROMEO P. CASTILLO, SESINANDO CATIBOG, DANILO CASTRO,
PRUDENCIO A. CASTRO, RAMO CASTRO, JR., ROMEO A. DE CASTRO, JAIME B.
CATLI, DURANA D. CEFERINO, RODOLFO B. CELIS, HERMINIGILDO CEREZO,
VICTORIANO CELESTINO, BENJAMIN CHAN, ANTONIO C. CHUA, VIVENCIO B.
CIABAL, RODRIGO CLARETE, AUGUSTO COLOMA, TURIANO CONCEPCION,
TERESITO CONSTANTINO, ARMANDO CORALES, RENATO C. CORCUERA,
APOLINAR CORONADO, ABELARDO CORONEL, FELIX CORONEL, JR., LEONARDO
CORPUZ, JESUS M. CORRALES, CESAR CORTEMPRATO, FRANCISCO O. CORVERA,
FRANCISCO COSTALES, SR., CELEDONIO CREDITO, ALBERTO A. CREUS,
ANACLETO V. CRUZ, DOMINGO DELA CRUZ, AMELIANO DELA CRUZ, JR.,
PANCHITO CRUZ, REYNALDO B. DELA CRUZ, ROBERTO P. CRUZ, TEODORO S.
CRUZ, ZOSIMO DELA CRUZ, DIONISIO A. CUARESMA, FELIMON CUIZON, FERMIN
DAGONDON, RICHARD DAGUINSIN, CRISANTO A. DATAY, NICASIO DANTINGUINOO,
JOSE DATOON, EDUARDO DAVID, ENRICO T. DAVID, FAVIO DAVID, VICTORIANO S.
DAVID, EDGARDO N. DAYACAP, JOSELITO T. DELOSO, CELERINO DE GUZMAN,
ROMULO DE GUZMAN, LIBERATO DE GUZMAN, JOSE DE LEON, JOSELITO L. DE
LUMBAN, NAPOLEON S. DE LUNA, RICARDO DE RAMA, GENEROSO DEL ROSARIO,
ALBERTO DELA CRUZ, JOSE DELA CRUZ, LEONARDO DELOS REYES, ERNESTO F.
DIATA, EDUARDO A. DIAZ, FELIX DIAZ, MELCHOR DIAZ, NICANOR S. DIAZ,
GERARDO C. DIGA, CLEMENTE DIMATULAC, ROLANDO DIONISIO, PHILIPP G.
DISMAYA, BENJAMIN DOCTOLERO, ALBERTO STO. DOMINGO, BENJAMIN E. DOZA,
BENJAMIN DUPA, DANILO C. DURAN, GREGORIO D. DURAN, RENATO A. EDUARTE,
GODOFREDO E. EISMA, ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO,
REYNALDO ENCARNACION, EDGARDO ENGUANCIO, ELIAS EQUIPANO, FELIZARDO
ESCARMOSA, MIGUEL ESCARMOSA, ARMANDO ESCOBAR, ROMEO T. ESCUYOS,
ANGELITO ESPIRITU, EDUARDO S. ESPIRITU, REYNALDO ESPIRITU, ROLANDO
ESPIRITU, JULIAN ESPREGANTE, IGMIDIO ESTANISLAO, ERNESTO M. ESTEBAN,
MELANIO R. ESTRO, ERNESTO M. ESTEVA, CONRADO ESTUAR, CLYDE ESTUYE,
ELISEO FAJARDO, PORFIRIO FALQUEZA, WILFREDO P. FAUSTINO, EMILIO E.
FERNANDEZ, ARTEMIO FERRER, MISAEL M. FIGURACION, ARMANDO F. FLORES,
BENJAMIN FLORES, EDGARDO C. FLORES, BUENAVENTURA FRANCISCO, MANUEL
S. FRANCISCO, ROLANDO FRANCISCO, VALERIANO FRANCISCO, RODOLFO
GABAWAN, ESMERALDO GAHUTAN, CESAR C. GALANG, SANTIAGO N. GALOSO,
GABRIEL GAMBOA, BERNARDO GANDAMON, JUAN GANZON, ANDRES GARCIA,
JR., ARMANDO M. GARCIA, EUGENIO GARCIA, MARCELO L. GARCIA, PATRICIO L.
GARCIA, JR., PONCIANO G. GARCIA, PONCIANO G. GARCIA, JR., RAFAEL P.
GARCIA, ROBERTO S. GARCIA, OSIAS G. GAROFIL, RAYMUNDO C. GARON,
ROLANDO G. GATELA, AVELINO GAYETA, RAYMUNDO GERON, PLACIDO
GONZALES, RUPERTO H. GONZALES, ROGELIO D. GUANIO, MARTIN V. GUERRERO,
JR., ALEXIS GUNO, RICARDO L. GUNO, FRANCISCO GUPIT, DENNIS J. GUTIERREZ,
IGNACIO B. GUTIERREZ, ANGELITO DE GUZMAN, JR., CESAR H. HABANA, RAUL G.
HERNANDEZ, REYNALDO HERNANDEZ, JOVENIANO D. HILADO, JUSTO HILAPO,
ROSTITO HINAHON, FELICISIMO HINGADA, EDUARDO HIPOLITO, RAUL L. IGNACIO,
MANUEL L. ILAGAN, RENATO L. ILAGAN, CONRADO A. INSIONG, GRACIANO G.
ISLA, ARNEL L. JACOB, OSCAR J. JAPITENGA, CIRILO HICBAN, MAXIMIANO
HONRADES, GENEROSO IGNACIO, FELIPE ILAGAN, EXPEDITO N. JACOB, MARIO
JASMIN, BIENVENIDO JAVIER, ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE
JESUS, CARLOS A. JIMENEZ, DANILO E. JIMENEZ, PEDRO C. JOAQUIN, FELIPE W.
JOCSON, FELINO M. JOCSON, PEDRO N. JOCSON, VALENTINO S. JOCSON, PEDRO
B. JOLOYA, ESTEBAN P. JOSE, JR., RAUL JOSE, RICARDO SAN JOSE, GERTRUDO
KABIGTING, EDUARDO S. KOLIMLIM, SR., LAURO J. LABAY, EMMANUEL C.
LABELLA, EDGARDO B. LACERONA, JOSE B. LACSON, MARIO J. LADINES, RUFINO
LAGAC, RODRIGO LAGANAPAN, EFREN M. LAMADRID, GUADENCIO LATANAN,
VIRGILIO LATAYAN, EMILIANO LATOJA, WENCESLAO LAUREL, ALFREDO
LAXAMANA, DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S. LEGASPI,
BENITO DE LEMOS, JR., PEDRO G. DE LEON, MANOLITO C. LILOC, GERARDO
LIMUACO, ERNESTO S. LISING, RENATO LISING, WILFREDO S. LISING, CRISPULO
LONTOC, PEDRO M. LOPERA, ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY
LOPEZ, GARLITO LOPEZ, GEORGE F. LOPEZ, VIRGILIO M. LOPEZ, BERNARDITO G.
LOREJA, DOMINGO B. LORICO, DOMINGO LOYOLA, DANTE LUAGE, ANTONIO M.
LUALHATI, EMMANUEL LUALHATI, JR., LEONIDEZ C. LUALHATI, SEBASTIAN
LUALHATI, FRANCISCO LUBAT, ARMANDO LUCERO, JOSELITO L. DE LUMBAN,
THOMAS VICENTE O. LUNA, NOLI MACALADLAD, ALFREDO MACALINO, RICARDO
MACALINO, ARTURO V. MACARAIG, ERNESTO V. MACARAIG, RODOLFO V.
MACARAIG, BENJAMIN MACATANGAY, HERMOGENES MACATANGAY, RODEL
MACATANGAY, ROMULO MACATANGAY, OSIAS Q. MADLANGBAYAN, NICOLAS P.
MADRID, EDELBERTO G. MAGAT, EFREN C. MAGBANUA, BENJAMIN MAGBUHAT,
ALFREDO C. MAGCALENG, ANTONIO MAGNAYE, ALFONSO MAGPANTAY, RICARDO
C. MAGPANTAY, SIMEON M. MAGPANTAY, ARMANDO M. MAGSINO, MACARIO S.
MAGSINO, ANTONIO MAGTIBAY, VICTOR V. MAGTIBAY, GERONIMO MAHILUM,
MANUEL MALONZO, RICARDO MAMADIS, RODOLFO MANA, BERNARDO A.
MANALILI, MANUEL MANALILI, ANGELO MANALO, AGUILES L. MANALO,
LEOPOLDO MANGAHAS, BAYANI MANIGBAS, ROLANDO C. MANIMTIM, DANIEL
MANONSON, ERNESTO F. MANUEL, EDUARDO MANZANO, RICARDO N. MAPA,
RAMON MAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN, WENCESLAO
MARASIGAN, LEONARDO MARCELO, HENRY F. MARIANO, JOEL MARIDABLE,
SANTOS E. MARINO, NARCISO A. MARQUEZ, RICARDO MARTINEZ, DIEGO
MASICAMPO, AURELIO MATABERDE, RENATO MATILLA, VICTORIANO MATILLA,
VIRGILIO MEDEL, LOLITO M. MELECIO, BENIGNO MELENDEZ, RENER J. MEMIJE,
REYNALDO F. MEMIJE, RODEL MEMIJE, AVELINO MENDOZA, JR., CLARO
MENDOZA, TIMOTEO MENDOZA, GREGORIO MERCADO, ERNANI DELA MERCED,
RICARDO MERCENA, NEMESIO METRELLO, RODEL MEMIJE, GASPAR MINIMO,
BENJAMIN MIRANDA, FELIXBERTO D. MISA, CLAUDIO A. MODESTO, JR., OSCAR
MONDEDO, GENEROSO MONTON, RENATO MORADA, RICARDO MORADA,
RODOLFO MORADA, ROLANDO M. MORALES, FEDERICO M. MORENO, VICTORINO
A. MORTEL, JR., ESPIRITU A. MUNOZ, IGNACIO MUNOZ, ILDEFONSO MUNOZ,
ROGELIO MUNOZ, ERNESTO NAPALAN, MARCELO A. NARCIZO, REYNALDO
NATALIA, FERNANDO C. NAVARETTE, PACIFICO D. NAVARRO, FLORANTE
NAZARENO, RIZAL B. NAZARIO, JOSUE NEGRITE, ALFREDO NEPUMUCENO,
HERBERT G. NG, FLORENCIO NICOLAS, ERNESTO C. NINON, AVELINO NUQUI,
NEMESIO D. OBA, DANILO OCAMPO, EDGARDO OCAMPO, RODRIGO E. OCAMPO,
ANTONIO B. OCCIANO, REYNALDO P. OCSON, BENJAMIN ODESA, ANGEL OLASO,
FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN V. ORALLO, ROMEO S.
ORIGINES, DANILO R. ORTANEZ, WILFREDO OSIAS, VIRGILIO PA-A, DAVID
PAALAN, JESUS N. PACHECO, ALFONSO L. PADILLA, DANILO PAGSANJAN,
NUMERIANO PAGSISIHAN, RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDRO
PALABRICA, QUINCIANO PALO, JOSE PAMATIAN, GONZALO PAN, PORFIRIO PAN,
BIENVENIDO PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA, EDILBERTO
PASIMIO, JR., JOSE V. PASION, ANGELITO M. PENA, DIONISIO PENDRAS, HERMINIO
PERALTA, REYNALDO M. PERALTA, ANTONIO PEREZ, ANTOLIANO E. PEREZ, JUAN
PEREZ, LEON PEREZ, ROMEO E. PEREZ, ROMULO PEREZ, WILLIAM PEREZ,
FERNANDO G. PERINO, FLORENTINO DEL PILAR, DELMAR F. PINEDA, SALVADOR
PINEDA, ELIZALDE PINPIN, WILFREDO PINPIN, ARTURO POBLETE, DOMINADOR R.
PRIELA, BUENAVENTURA PRUDENTE, CARMELITO PRUDENTE, DANTE PUEYO,
REYNALDO Q. PUEYO, RODOLFO O. PULIDO, ALEJANDRO PUNIO, FEDERICO
QUIMAN, ALFREDO L. QUINTO, ROMEO QUINTOS, EDUARDO W. RACABO, RICARDO
C. DE RAMA, RICARDO L. DE RAMA, ROLANDO DE RAMA, FERNANDO A. RAMIREZ,
LITO S. RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V. RAMIREZ, ALBERTO
RAMOS, ANSELMO C. RAMOS, TOBIAS RAMOS, WILLARFREDO RAYMUNDO,
REYNALDO RAQUEDAN, MANUEL F. RAVELAS, WILFREDO D. RAYMUNDO,
ERNESTO E. RECOLASO, ALBERTO REDAZA, ARTHUR REJUSO, TORIBIO M.
RELLAMA, JAIME RELLOSA, EUGENIO A. REMOQUILLO, GERARDO RENTOZA,
REDENTOR C. REY, ALFREDO S. REYES, AMABLE S. REYES, BENEDICTO R. REYES,
GREGORIO B. REYES, JOSE A. REYES, JOSE C. REYES, ROMULO M. REYES,
SERGIO REYES, ERNESTO F. RICO, FERNANDO M. RICO, EMMANUEL RIETA,
RICARDO RIETA, LEO B. ROBLES, RUBEN ROBLES, RODOLFO ROBLEZA, RODRIGO
ROBLEZA, EDUARDO ROCABO, ANTONIO R. RODRIGUEZ, BERNARDO RODRIGUEZ,
ELIGIO RODRIGUEZ, ALMONTE ROMEO, ELIAS RONQUILLO, ELISE RONQUILLO,
LUIS VAL B. RONQUILLO, REYNOSO P. RONQUILLO, RODOLFO RONQUILLO,
ANGEL ROSALES, RAMON ROSALES, ALBERTO DEL ROSARIO, GENEROSO DEL
ROSARIO, TEODORICO DEL ROSARIO, VIRGILIO L. ROSARIO, CARLITO SALVADOR,
JOSE SAMPARADA, ERNESTO SAN PEDRO, ADRIANO V. SANCHA, GERONIMO M.
SANCHA, ARTEMIO B. SANCHEZ, NICASIO SANCHEZ, APOLONIO P. SANTIAGO,
JOSELITO S. SANTIAGO, SERGIO SANTIAGO, EDILBERTO C. SANTOS, EFREN S.
SANTOS, RENATO D. SANTOS, MIGUEL SAPUYOT, ALEX S. SERQUINA,
DOMINADOR P. SERRA, ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D. SILANG,
RODOLFO B. DE SILOS, ANICETO G. SILVA, EDGARDO M. SILVA, ROLANDO C.
SILVERTO, ARTHUR B. SIMBAHON, DOMINGO SOLANO, JOSELITO C. SOLANTE,
CARLITO SOLIS, CONRADO SOLIS, III, EDGARDO SOLIS, ERNESTO SOLIS, ISAGANI
M. SOLIS, EDUARDO L. SOTTO, ERNESTO G. STA. MARIA, VICENTE G. STELLA,
FELIMON SUPANG, PETER TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P.
TALUSIK, FERMIN TARUC, JR., LEVY S. TEMPLO, RODOLFO S. TIAMSON, LEONILO
TIPOSO, ARNEL TOLENTINO, MARIO M. TOLENTINO, FELIPE TORRALBA, JOVITO V.
TORRES, LEONARDO DE TORRES, GAVINO U. TUAZON, AUGUSTO B. TUNGUIA,
FRANCISCO UMALI, SIMPLICIO UNIDA, WILFREDO V. UNTALAN, ANTONIO
VALDERAMA, RAMON VALDERAMA, NILO VALENCIANO, EDGARDO C. VASQUEZ,
ELPIDIO VELASQUEZ, NESTOR DE VERA, WILFREDO D. VERA, BIENVENIDO
VERGARA, ALFREDO VERGARA, RAMON R. VERZOSA, FELICITO P. VICMUNDO,
ALFREDO VICTORIANO, TEOFILO P. VIDALLO, SABINO N. VIERNEZ, JESUS J. VILLA,
JOVEN VILLABLANCO, EDGARDO G. VILLAFLORES, CEFERINO VILLAGERA, ALEX
VILLAHERMOZA, DANILO A. VILLANUEVA, ELITO VILLANUEVA, LEONARDO M.
VILLANUEVA, MANUEL R. VILLANUEVA, NEPTHALI VILLAR, JOSE V. VILLAREAL,
FELICISIMO VILLARINO, RAFAEL VILLAROMAN, CARLOS VILLENA, FERDINAND
VIVO, ROBERTO YABUT, VICENTE YNGENTE, AND ORO C. ZUNIGA, respondents.

Gerardo A. Del Mundo and Associates for petitioners.

Romulo, Mabanta, Sayoc, Buenaventura, De los Angeles Law Offices for BRII/AIBC.

Florante M. De Castro for private respondents in 105029-32.

QUIASON, J.:

The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et. al. v. Philippine
Overseas Employment Administration's Administrator, et. al.," was filed under Rule 65 of the
Revised Rules of Court:

(1) to modify the Resolution dated September 2, 1991 of the National Labor Relations
Commission (NLRC) in POEA Cases Nos.
L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460; (2) to render a new decision: (i)
declaring private respondents as in default; (ii) declaring the said labor cases as a class suit;
(iii) ordering Asia International Builders Corporation (AIBC) and Brown and Root
International Inc. (BRII) to pay the claims of the 1,767 claimants in said labor cases; (iv)
declaring Atty. Florante M. de Castro guilty of forum-shopping; and (v) dismissing POEA
Case No. L-86-05-460; and

(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for
reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-288).

The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et. al., v. Hon.
National Labor Relations Commission, et. al.," was filed under Rule 65 of the Revised Rules
of Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-
06-555, L-85-10-777, L-85-10-799 and
L-86-05-460 insofar as it: (i) applied the three-year prescriptive period under the Labor Code
of the Philippines instead of the ten-year prescriptive period under the Civil Code of the
Philippines; and (ii) denied the
"three-hour daily average" formula in the computation of petitioners' overtime pay; and

(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for
reconsideration of its Resolution dated September 2, 1991 (Rollo, pp. 8-25; 26-220).

The petition in G.R. Nos. 105029-32, entitled "Asia International Builders Corporation, et. al.,
v. National Labor Relations Commission, et. al." was filed under Rule 65 of the Revised
Rules of Court:

(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-
06-555, L-85-10-777, L-85-10-779 and
L-86-05-460, insofar as it granted the claims of 149 claimants; and

(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied the motions
for reconsideration of AIBC and BRII (Rollo, pp. 2-59; 61-230).

The Resolution dated September 2, 1991 of NLRC, which modified the decision of POEA in
four labor cases: (1) awarded monetary benefits only to 149 claimants and (2) directed
Labor Arbiter Fatima J. Franco to conduct hearings and to receive evidence on the claims
dismissed by the POEA for lack of substantial evidence or proof of employment.

Consolidation of Cases

G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R.
Nos. 104911-14 were raffled to the Second Division. In the Resolution dated July 26, 1993,
the Second Division referred G.R. Nos. 104911-14 to the Third Division (G.R. Nos. 104911-
14, Rollo, p. 895).

In the Resolution dated September 29, 1993, the Third Division granted the motion filed in
G.R. Nos. 104911-14 for the consolidation of said cases with G.R. Nos. 104776 and
105029-32, which were assigned to the First Division (G.R. Nos. 104911-14, Rollo, pp. 986-
1,107; G.R. Nos. 105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated October
27, 1993, the First Division granted the motion to consolidate G.R. Nos. 104911-14 with
G.R. No. 104776 (G.R. Nos. 104911-14, Rollo, p. 1109; G.R. Nos. 105029-32, Rollo, p.
1562).

On June 6, 1984, Bienvenido M.. Cadalin, Rolando M. Amul and Donato B. Evangelista, in
their own behalf and on behalf of 728 other overseas contract workers (OCWs) instituted a
class suit by filing an "Amended Complaint" with the Philippine Overseas Employment
Administration (POEA) for money claims arising from their recruitment by AIBC and
employment by BRII (POEA Case No. L-84-06-555). The claimants were represented by
Atty. Gerardo del Mundo.

BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in

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

The amended complaint principally sought the payment of the unexpired portion of the
employment contracts, which was terminated prematurely, and secondarily, the payment of
the interest of the earnings of the Travel and Reserved Fund, interest on all the unpaid
benefits; area wage and salary differential pay; fringe benefits; refund of SSS and premium
not remitted to the SSS; refund of withholding tax not remitted to the BIR; penalties for
committing prohibited practices; as well as the suspension of the license of AIBC and the
accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14).

At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was
given, together with BRII, up to July 5, 1984 to file its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants
to file a bill of particulars within ten days from receipt of the order and the movants to file
their answers within ten days from receipt of the bill of particulars. The POEA Administrator
also scheduled a pre-trial conference on July 25, 1984.

On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23,
1984, AIBC filed a "Motion to Strike Out of the Records", the "Complaint" and the
"Compliance and Manifestation." On July 25, 1984, the claimants filed their "Rejoinder and
Comments," averring, among other matters, the failure of AIBC and BRII to file their answers
and to attend the pre-trial conference on July 25, 1984. The claimants alleged that AIBC and
BRII had waived their right to present evidence and had defaulted by failing to file their
answers and to attend the pre-trial conference.

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

On October 10, 1984, claimants asked for time within which to comply with the Order of
October 2, 1984 and filed an "Urgent Manifestation," praying that the POEA Administrator
direct the parties to submit simultaneously their position papers, after which the case should
be deemed submitted for decision. On the same day, Atty. Florante de Castro filed another
complaint for the same money claims and benefits in behalf of several claimants, some of
whom were also claimants in POEA Case No. L-84-06-555 (POEA Case No. 85-10-779).

On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2,
1984 and an "Urgent Manifestation," praying that the POEA direct the parties to submit
simultaneously their position papers after which the case would be deemed submitted for
decision. On the same day, AIBC asked for time to file its comment on the "Compliance" and
"Urgent Manifestation" of claimants. On November 6, 1984, it filed a second motion for
extension of time to file the comment.

On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension
of time was granted.

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

On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, that
claimants should be ordered to amend their complaint.

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

On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said
order of the POEA Administrator. Claimants opposed the appeal, claiming that it was dilatory
and praying that AIBC and BRII be declared in default.

On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper"
dated March 24, 1985, adding new demands: namely, the payment of overtime pay, extra
night work pay, annual leave differential pay, leave indemnity pay, retirement and savings
benefits and their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On April 15,
1985, the POEA Administrator directed AIBC to file its answer to the amended complaint
(G.R. No. 104776, Rollo, p. 20).

On May 28, 1985, claimants filed an "Urgent Motion for Summary Judgment." On the same
day, the POEA issued an order directing AIBC and BRII to file their answers to the
"Amended Complaint," otherwise, they would be deemed to have waived their right to
present evidence and the case would be resolved on the basis of complainant's evidence.

On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and
Motion for Bill of Particulars Re: Amended Complaint dated March 24, 1985." Claimants
opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to
file their answers in POEA Case No. L-84-06-555.

On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition
for the issuance of a writ of injunction. On September 19, 1985, NLRC enjoined the POEA
Administrator from hearing the labor cases and suspended the period for the filing of the
answers of AIBC and BRII.

On September 19, 1985, claimants asked the POEA Administrator to include additional
claimants in the case and to investigate alleged wrongdoings of BRII, AIBC and their
respective lawyers.

On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case
No. L-85-10-777) against AIBC and BRII with the POEA, demanding monetary claims similar
to those subject of POEA Case No. L-84-06-555. In the same month, Solomon Reyes also
filed his own complaint (POEA Case No. L-85-10-779) against AIBC and BRII.

On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the
substitution of the original counsel of record and the cancellation of the special powers of
attorney given the original counsel.

On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce
attorney's lien.

On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No. 86-
05-460) in behalf of 11 claimants including Bienvenido Cadalin, a claimant in POEA Case
No. 84-06-555.

On December 12, 1986, the NLRC dismissed the two appeals filed on February 27, 1985
and September 18, 1985 by AIBC and BRII.

In narrating the proceedings of the labor cases before the POEA Administrator, it is not
amiss to mention that two cases were filed in the Supreme Court by the claimants, namely
— G.R. No. 72132 on September 26, 1985 and Administrative Case No. 2858 on March 18,
1986. On May 13, 1987, the Supreme Court issued a resolution in Administrative Case No.
2858 directing the POEA Administrator to resolve the issues raised in the motions and
oppositions filed in POEA Cases Nos. L-84-06-555 and L-86-05-460 and to decide the labor
cases with deliberate dispatch.

AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order
dated September 4, 1985 of the POEA Administrator. Said order required BRII and AIBC to
answer the amended complaint in POEA Case No. L-84-06-555. In a resolution dated
November 9, 1987, we dismissed the petition by informing AIBC that all its technical
objections may properly be resolved in the hearings before the POEA.

Complaints were also filed before the Ombudsman. The first was filed on September 22,
1988 by claimant Hermie Arguelles and 18 co-claimants against the POEA Administrator
and several NLRC Commissioners. The Ombudsman merely referred the complaint to the
Secretary of Labor and Employment with a request for the early disposition of POEA Case
No. L-84-06-555. The second was filed on April 28, 1989 by claimants Emigdio P. Bautista
and Rolando R. Lobeta charging AIBC and BRII for violation of labor and social legislations.
The third was filed by Jose R. Santos, Maximino N. Talibsao and Amado B. Bruce
denouncing AIBC and BRII of violations of labor laws.

On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated
December 12, 1986.

On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for
suspension of the period for filing an answer or motion for extension of time to file the same
until the resolution of its motion for reconsideration of the order of the NLRC dismissing the
two appeals. On April 28, 1987, NLRC en banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the same
hearing, the parties were given a period of 15 days from said date within which to submit
their respective position papers. On June 24, 1987 claimants filed their "Urgent Motion to
Strike Out Answer," alleging that the answer was filed out of time. On June 29, 1987,
claimants filed their "Supplement to Urgent Manifestational Motion" to comply with the POEA
Order of June 19, 1987. On February 24, 1988, AIBC and BRII submitted their position
paper. On March 4, 1988, claimants filed their "Ex-Parte Motion to Expunge from the
Records" the position paper of AIBC and BRII, claiming that it was filed out of time.

On September 1, 1988, the claimants represented by Atty. De Castro filed their

memorandum in POEA Case No. L-86-05-460. On September 6, 1988, AIBC and BRII
submitted their Supplemental Memorandum. On September 12, 1988, BRII filed its "Reply to
Complainant's Memorandum." On October 26, 1988, claimants submitted their "Ex-
Parte Manifestational Motion and Counter-Supplemental Motion," together with 446
individual contracts of employments and service records. On October 27, 1988, AIBC and
BRII filed a "Consolidated Reply."

On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No. L-
84-06-555 and the other consolidated cases, which awarded the amount of $824,652.44 in
favor of only 324 complainants.

On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial Appeal"
from the decision of the POEA. On the same day, AIBC also filed its motion for
reconsideration and/or appeal in addition to the "Notice of Appeal" filed earlier on February
6, 1989 by another counsel for AIBC.

On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of
the appeal of AIBC and BRII.

On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal

Memorandum," together with their "newly discovered evidence" consisting of payroll records.

On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among
other matters that there were only 728 named claimants. On April 20, 1989, the claimants
filed their "Counter-Manifestation," alleging that there were 1,767 of them.

On July 27, 1989, claimants filed their "Urgent Motion for Execution" of the Decision dated
January 30, 1989 on the grounds that BRII had failed to appeal on time and AIBC had not
posted the supersedeas bond in the amount of $824,652.44.

On December 23, 1989, claimants filed another motion to resolve the labor cases.

On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767
claimants be awarded their monetary claims for failure of private respondents to file their
answers within the reglamentary period required by law.

On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:

WHEREFORE, premises considered, the Decision of the POEA in these consolidated cases
is modified to the extent and in accordance with the following dispositions:

1. The claims of the 94 complainants identified and listed in Annex "A" hereof are dismissed
for having prescribed;

2. Respondents AIBC and Brown & Root are hereby ordered, jointly and severally, to pay
the 149 complainants, identified and listed in Annex "B" hereof, the peso equivalent, at the
time of payment, of the total amount in US dollars indicated opposite their respective names;

3. The awards given by the POEA to the 19 complainants classified and listed in Annex "C"
hereof, who appear to have worked elsewhere than in Bahrain are hereby set aside.
4. All claims other than those indicated in Annex "B", including those for overtime work and
favorably granted by the POEA, are hereby dismissed for lack of substantial evidence in
support thereof or are beyond the competence of this Commission to pass upon.

In addition, this Commission, in the exercise of its powers and authority under Article 218(c)
of the Labor Code, as amended by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco
of this Commission to summon parties, conduct hearings and receive evidence, as
expeditiously as possible, and thereafter submit a written report to this Commission (First
Division) of the proceedings taken, regarding the claims of the following:

(a) complainants identified and listed in Annex "D" attached and made an integral part of this
Resolution, whose claims were dismissed by the POEA for lack of proof of employment in
Bahrain (these complainants numbering 683, are listed in pages 13 to 23 of the decision of
POEA, subject of the appeals) and,

(b) complainants identified and listed in Annex "E" attached and made an integral part of this
Resolution, whose awards decreed by the POEA, to Our mind, are not supported by
substantial evidence" (G.R. No. 104776; Rollo, pp. 113-115; G.R. Nos. 104911-14, pp. 85-
87; G.R. Nos. 105029-31, pp. 120-122).

On November 27, 1991, claimant Amado S. Tolentino and 12

co-claimants, who were former clients of Atty. Del Mundo, filed a petition for certiorari with
the Supreme Court (G.R. Nos. 120741-44). The petition was dismissed in a resolution dated
January 27, 1992.

Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC were
filed. The first, by the claimants represented by Atty. Del Mundo; the second, by the
claimants represented by Atty. De Castro; and the third, by AIBC and BRII.

In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration.

Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No.
104776), the claimants represented by Atty. De Castro (G.R. Nos. 104911-14) and by AIBC
and BRII (G.R. Nos. 105029-32).

II

Compromise Agreements

Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII have
submitted, from time to time, compromise agreements for our approval and jointly moved for
the dismissal of their respective petitions insofar as the claimants-parties to the compromise
agreements were concerned (See Annex A for list of claimants who signed quitclaims).

Thus the following manifestations that the parties had arrived at a compromise agreement
and the corresponding motions for the approval of the agreements were filed by the parties
and approved by the Court:

1) Joint Manifestation and Motion involving claimant Emigdio Abarquez and 47 co-claimants
dated September 2, 1992 (G.R. Nos. 104911-14, Rollo, pp. 263-406; G.R. Nos. 105029-
32, Rollo, pp.
470-615);

2) Joint Manifestation and Motion involving petitioner Bienvenido Cadalin and 82 co-
petitioners dated September 3, 1992 (G.R. No. 104776, Rollo, pp. 364-507);

3) Joint Manifestation and Motion involving claimant Jose

M. Aban and 36 co-claimants dated September 17, 1992 (G.R. Nos. 105029-32, Rollo, pp.
613-722; G.R. No. 104776, Rollo, pp. 518-626; G.R. Nos. 104911-14, Rollo, pp. 407-516);

4) Joint Manifestation and Motion involving claimant Antonio T. Anglo and 17 co-claimants
dated October 14, 1992 (G.R. Nos.
105029-32, Rollo, pp. 778-843; G.R. No. 104776, Rollo, pp. 650-713; G.R. Nos. 104911-
14, Rollo, pp. 530-590);

5) Joint Manifestation and Motion involving claimant Dionisio Bobongo and 6 co-claimants
dated January 15, 1993 (G.R. No. 104776, Rollo, pp. 813-836; G.R. Nos. 104911-14, Rollo,
pp. 629-652);

6) Joint Manifestation and Motion involving claimant Valerio A. Evangelista and 4 co-
claimants dated March 10, 1993 (G.R. Nos. 104911-14, Rollo, pp. 731-746; G.R. No.
104776, Rollo, pp. 1815-1829);

7) Joint Manifestation and Motion involving claimants Palconeri Banaag and 5 co-claimants
dated March 17, 1993 (G.R. No. 104776, Rollo, pp. 1657-1703; G.R. Nos. 104911-14, Rollo,
pp. 655-675);

8) Joint Manifestation and Motion involving claimant Benjamin Ambrosio and 15 other co-
claimants dated May 4, 1993 (G.R. Nos. 105029-32, Rollo, pp. 906-956; G.R. Nos. 104911-
14, Rollo, pp. 679-729; G.R. No. 104776, Rollo, pp. 1773-1814);

9) Joint Manifestation and Motion involving Valerio Evangelista and 3 co-claimants dated
May 10, 1993 (G.R. No. 104776, Rollo, pp. 1815-1829);

10) Joint Manifestation and Motion involving petitioner Quiterio R. Agudo and 36 co-
claimants dated June 14, 1993 (G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R. Nos.
104911-14, Rollo, pp. 748-864; G.R. No. 104776, Rollo, pp. 1066-1183);

11) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19 co-claimants
dated July 22, 1993 (G.R. No. 104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo,
pp. 1193-1256; G.R. Nos. 104911-14, Rollo, pp. 896-959);

12) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 co-claimants
dated September 7, 1993 (G.R. Nos.
105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254; G.R. Nos.
104911-14, Rollo, pp. 972-984);

13) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37 co-claimants
dated September 8, 1993 (G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-
14, Rollo, pp. 987-1105; G.R. Nos. 105029-32, Rollo, pp. 1280-1397);

14) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-claimants dated
January 10, 1994 (G.R. Nos. 105029-32, Rollo, Vol. II);

15) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimants dated
August 25, 1994 (G.R. Nos. 105029-32; G.R. No. 104776; G.R. Nos. 104911-14).

III

The facts as found by the NLRC are as follows:

We have taken painstaking efforts to sift over the more than fifty volumes now comprising
the records of these cases. From the records, it appears that the complainants-appellants
allege that they were recruited by respondent-appellant AIBC for its accredited foreign
principal, Brown & Root, on various dates from 1975 to 1983. They were all deployed at
various projects undertaken by Brown & Root in several countries in the Middle East, such
as Saudi Arabia, Libya, United Arab Emirates and Bahrain, as well as in Southeast Asia, in
Indonesia and Malaysia.

Having been officially processed as overseas contract workers by the Philippine

Government, all the individual complainants signed standard overseas employment
contracts (Records, Vols. 25-32. Hereafter, reference to the records would be sparingly
made, considering their chaotic arrangement) with AIBC before their departure from the
Philippines. These overseas employment contracts invariably contained the following
relevant terms and conditions.
PART B —

(1) Employment Position Classification :—————————

(Code) :—————————

(2) Company Employment Status :—————————

(3) Date of Employment to Commence on :—————————
(4) Basic Working Hours Per Week :—————————
(5) Basic Working Hours Per Month :—————————
(6) Basic Hourly Rate :—————————
(7) Overtime Rate Per Hour :—————————
(8) Projected Period of Service
(Subject to C(1) of this [sic]) :—————————
Months and/or
Job Completion

xxx xxx xxx

3. HOURS OF WORK AND COMPENSATION

a) The Employee is employed at the hourly rate and overtime rate as set out in Part B of this
Document.

b) The hours of work shall be those set forth by the Employer, and Employer may, at his
sole option, change or adjust such hours as maybe deemed necessary from time to time.

4. TERMINATION

a) Notwithstanding any other terms and conditions of this agreement, the Employer may, at
his sole discretion, terminate employee's service with cause, under this agreement at any
time. If the Employer terminates the services of the Employee under this Agreement
because of the completion or termination, or suspension of the work on which the
Employee's services were being utilized, or because of a reduction in force due to a
decrease in scope of such work, or by change in the type of construction of such work. The
Employer will be responsible for his return transportation to his country of origin. Normally on
the most expeditious air route, economy class accommodation.

xxx xxx xxx

10. VACATION/SICK LEAVE BENEFITS

a) After one (1) year of continuous service and/or satisfactory completion of contract,
employee shall be entitled to 12-days vacation leave with pay. This shall be computed at the
basic wage rate. Fractions of a year's service will be computed on a pro-rata basis.

b) Sick leave of 15-days shall be granted to the employee for every year of service for non-
work connected injuries or illness. If the employee failed to avail of such leave benefits, the
same shall be forfeited at the end of the year in which said sick leave is granted.

11. BONUS

A bonus of 20% (for offshore work) of gross income will be accrued and payable only upon
satisfactory completion of this contract.

12. OFFDAY PAY

The seventh day of the week shall be observed as a day of rest with 8 hours regular pay. If
work is performed on this day, all hours work shall be paid at the premium rate. However,
this offday pay provision is applicable only when the laws of the Host Country require
payments for rest day.
In the State of Bahrain, where some of the individual complainants were deployed, His
Majesty Isa Bin Salman Al Kaifa, Amir of Bahrain, issued his Amiri Decree No. 23 on June
16, 1976, otherwise known as the Labour Law for the Private Sector (Records, Vol. 18). This
decree took effect on August 16, 1976. Some of the provisions of Amiri Decree No. 23 that
are relevant to the claims of the complainants-appellants are as follows (italics supplied only
for emphasis):

Art. 79: . . . A worker shall receive payment for each extra hour equivalent to his wage
entitlement increased by a minimum of twenty-five per centum thereof for hours worked
during the day; and by a minimum of fifty per centum thereof for hours worked during the
night which shall be deemed to being from seven o'clock in the evening until seven o'clock
in the morning. . . .

Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.

. . . an employer may require a worker, with his consent, to work on his weekly day of rest if
circumstances so require and in respect of which an additional sum equivalent to 150% of
his normal wage shall be paid to him. . . .

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

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

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

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

Art. 111: . . . the employer concerned shall pay to such worker, upon termination of
employment, a leaving indemnity for the period of his employment calculated on the basis of
fifteen days' wages for each year of the first three years of service and of one month's
wages for each year of service thereafter. Such worker shall be entitled to payment of
leaving indemnity upon a quantum meruit in proportion to the period of his service
completed within a year.

All the individual complainants-appellants have already been repatriated to the Philippines at
the time of the filing of these cases (R.R. No. 104776, Rollo, pp. 59-65).

IV

The issues raised before and resolved by the NLRC were:

First: — Whether or not complainants are entitled to the benefits provided by Amiri Decree
No. 23 of Bahrain;

(a) Whether or not the complainants who have worked in Bahrain are entitled to the above-
mentioned benefits.

(b) Whether or not Art. 44 of the same Decree (allegedly prescribing a more favorable
treatment of alien employees) bars complainants from enjoying its benefits.

Second: — Assuming that Amiri Decree No. 23 of Bahrain is applicable in these cases,
whether or not complainants' claim for the benefits provided therein have prescribed.
Third: — Whether or not the instant cases qualify as a class suit.

Fourth: — Whether or not the proceedings conducted by the POEA, as well as the decision
that is the subject of these appeals, conformed with the requirements of due process;

(a) Whether or not the respondent-appellant was denied its right to due process;

(b) Whether or not the admission of evidence by the POEA after these cases were
submitted for decision was valid;

(c) Whether or not the POEA acquired jurisdiction over Brown & Root International, Inc.;

(d) Whether or not the judgment awards are supported by substantial evidence;

(e) Whether or not the awards based on the averages and formula presented by the
complainants-appellants are supported by substantial evidence;

(f) Whether or not the POEA awarded sums beyond what the complainants-appellants
prayed for; and, if so, whether or not these awards are valid.

Fifth: — Whether or not the POEA erred in holding respondents AIBC and Brown & Root
jointly are severally liable for the judgment awards despite the alleged finding that the former
was the employer of the complainants;

(a) Whether or not the POEA has acquired jurisdiction over Brown & Root;

(b) Whether or not the undisputed fact that AIBC was a licensed construction contractor
precludes a finding that Brown & Root is liable for complainants claims.

Sixth: — Whether or not the POEA Administrator's failure to hold respondents in default
constitutes a reversible error.

Seventh: — Whether or not the POEA Administrator erred in dismissing the following claims:

a. Unexpired portion of contract;

b. Interest earnings of Travel and Reserve Fund;

c. Retirement and Savings Plan benefits;

d. War Zone bonus or premium pay of at least 100% of basic pay;

e. Area Differential Pay;

f. Accrued interests on all the unpaid benefits;

g. Salary differential pay;

h. Wage differential pay;

i. Refund of SSS premiums not remitted to SSS;

j. Refund of withholding tax not remitted to BIR;

k. Fringe benefits under B & R's "A Summary of Employee Benefits" (Annex "Q" of Amended
Complaint);

l. Moral and exemplary damages;

m. Attorney's fees of at least ten percent of the judgment award;

n. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and the
accreditation of B & R issued by POEA;

o. Penalty for violations of Article 34 (prohibited practices), not excluding reportorial

requirements thereof.

Eighth: — Whether or not the POEA Administrator erred in not dismissing POEA Case No.
(L) 86-65-460 on the ground of multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29,
51-55).

Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on
Evidence governing the pleading and proof of a foreign law and admitted in evidence a
simple copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour Law for the Private
Sector). NLRC invoked Article 221 of the Labor Code of the Philippines, vesting on the
Commission ample discretion to use every and all reasonable means to ascertain the facts
in each case without regard to the technicalities of law or procedure. NLRC agreed with the
POEA Administrator that the Amiri Decree No. 23, being more favorable and beneficial to
the workers, should form part of the overseas employment contract of the complainants.

NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who
worked in Bahrain, and set aside awards of the POEA Administrator in favor of the
claimants, who worked elsewhere.

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

On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot
be treated as a class suit for the simple reason that not all the complainants worked in
Bahrain and therefore, the subject matter of the action, the claims arising from the Bahrain
law, is not of common or general interest to all the complainants.

On the fourth issue, NLRC found at least three infractions of the cardinal rules of
administrative due process: namely, (1) the failure of the POEA Administrator to consider
the evidence presented by AIBC and BRII; (2) some findings of fact were not supported by
substantial evidence; and (3) some of the evidence upon which the decision was based
were not disclosed to AIBC and BRII during the hearing.

On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC
are solidarily liable for the claims of the complainants and held that BRII was the actual
employer of the complainants, or at the very least, the indirect employer, with AIBC as the
labor contractor.

NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through
the summons served on AIBC, its local agent.

On the sixth issue, NLRC held that the POEA Administrator was correct in denying the
Motion to Declare AIBC in default.

On the seventh issue, which involved other money claims not based on the Amiri Decree
No. 23, NLRC ruled:

(1) that the POEA Administrator has no jurisdiction over the claims for refund of the SSS
premiums and refund of withholding taxes and the claimants should file their claims for said
refund with the appropriate government agencies;

(2) the claimants failed to establish that they are entitled to the claims which are not based
on the overseas employment contracts nor the Amiri Decree No. 23 of 1976;

(3) that the POEA Administrator has no jurisdiction over claims for moral and exemplary
damages and nonetheless, the basis for granting said damages was not established;
(4) that the claims for salaries corresponding to the unexpired portion of their contract may
be allowed if filed within the three-year prescriptive period;

(5) that the allegation that complainants were prematurely repatriated prior to the expiration
of their overseas contract was not established; and

(6) that the POEA Administrator has no jurisdiction over the complaint for the suspension or
cancellation of the AIBC's recruitment license and the cancellation of the accreditation of
BRII.

NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460
should have been dismissed on the ground that the claimants in said case were also
claimants in POEA Case No. (L) 84-06-555. Instead of dismissing POEA Case No. (L) 86-
65-460, the POEA just resolved the corresponding claims in POEA Case No. (L) 84-06-555.
In other words, the POEA did not pass upon the same claims twice.

G.R. No. 104776

Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds:

(1) that they were deprived by NLRC and the POEA of their right to a speedy disposition of
their cases as guaranteed by Section 16, Article III of the 1987 Constitution. The POEA
Administrator allowed private respondents to file their answers in two years (on June 19,
1987) after the filing of the original complaint (on April 2, 1985) and NLRC, in total disregard
of its own rules, affirmed the action of the POEA Administrator;

(2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default
and should have rendered summary judgment on the basis of the pleadings and evidence
submitted by claimants;

(3) the NLRC and POEA Administrator erred in not holding that the labor cases filed by
AIBC and BRII cannot be considered a class suit;

(4) that the prescriptive period for the filing of the claims is ten years; and

(5) that NLRC and the POEA Administrator should have dismissed POEA Case No. L-86-
05-460, the case filed by Atty. Florante de Castro (Rollo, pp. 31-40).

AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:

(1) that they were not responsible for the delay in the disposition of the labor cases,
considering the great difficulty of getting all the records of the more than 1,500 claimants,
the piece-meal filing of the complaints and the addition of hundreds of new claimants by
petitioners;

(2) that considering the number of complaints and claimants, it was impossible to prepare
the answers within the ten-day period provided in the NLRC Rules, that when the motion to
declare AIBC in default was filed on July 19, 1987, said party had already filed its answer,
and that considering the staggering amount of the claims (more than US$50,000,000.00)
and the complicated issues raised by the parties, the ten-day rule to answer was not fair and
reasonable;

(3) that the claimants failed to refute NLRC's finding that

there was no common or general interest in the subject matter of the controversy — which
was the applicability of the Amiri Decree No. 23. Likewise, the nature of the claims varied,
some being based on salaries pertaining to the unexpired portion of the contracts while
others being for pure money claims. Each claimant demanded separate claims peculiar only
to himself and depending upon the particular circumstances obtaining in his case;
(4) that the prescriptive period for filing the claims is that prescribed by Article 291 of the
Labor Code of the Philippines (three years) and not the one prescribed by Article 1144 of the
Civil Code of the Philippines (ten years); and

(5) that they are not concerned with the issue of whether POEA Case No. L-86-05-460
should be dismissed, this being a private quarrel between the two labor lawyers (Rollo, pp.
292-305).

Attorney's Lien

On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint
manifestations and motions of AIBC and BRII dated September 2 and 11, 1992, claiming
that all the claimants who entered into the compromise agreements subject of said
manifestations and motions were his clients and that Atty. Florante M. de Castro had no
right to represent them in said agreements. He also claimed that the claimants were paid
less than the award given them by NLRC; that Atty. De Castro collected additional attorney's
fees on top of the 25% which he was entitled to receive; and that the consent of the
claimants to the compromise agreements and quitclaims were procured by fraud (G.R. No.
104776, Rollo, pp. 838-810). In the Resolution dated November 23, 1992, the Court denied
the motion to strike out the Joint Manifestations and Motions dated September 2 and 11,
1992 (G.R. Nos. 104911-14, Rollo, pp. 608-609).

On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's
Lien," alleging that the claimants who entered into compromise agreements with AIBC and
BRII with the assistance of Atty. De Castro, had all signed a retainer agreement with his law
firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535).

Contempt of Court

On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De
Castro and Atty. Katz Tierra for contempt of court and for violation of Canons 1, 15 and 16 of
the Code of Professional Responsibility. The said lawyers allegedly misled this Court, by
making it appear that the claimants who entered into the compromise agreements were
represented by Atty. De Castro, when in fact they were represented by Atty. Del Mundo
(G.R. No. 104776, Rollo, pp. 1560-1614).

On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro for
unethical practices and moved for the voiding of the quitclaims submitted by some of the
claimants.

G.R. Nos. 104911-14

The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that
NLRC gravely abused its discretion when it: (1) applied the three-year prescriptive period
under the Labor Code of the Philippines; and (2) it denied the claimant's formula based on
an average overtime pay of three hours a day (Rollo, pp. 18-22).

The claimants argue that said method was proposed by BRII itself during the negotiation for
an amicable settlement of their money claims in Bahrain as shown in the Memorandum
dated April 16, 1983 of the Ministry of Labor of Bahrain (Rollo, pp. 21-22).

BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the
prescriptive period in the Labor Code of the Philippines, a special law, prevails over that
provided in the Civil Code of the Philippines, a general law.

As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the
overtime pay, BRII and AIBC claimed that they were not bound by what appeared therein,
because such memorandum was proposed by a subordinate Bahrain official and there was
no showing that it was approved by the Bahrain Minister of Labor. Likewise, they claimed
that the averaging method was discussed in the course of the negotiation for the amicable
settlement of the dispute and any offer made by a party therein could not be used as an
admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32

In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when
it: (1) enforced the provisions of the Amiri Decree No. 23 of 1976 and not the terms of the
employment contracts; (2) granted claims for holiday, overtime and leave indemnity pay and
other benefits, on evidence admitted in contravention of petitioner's constitutional right to
due process; and (3) ordered the POEA Administrator to hold new hearings for the 683
claimants whose claims had been dismissed for lack of proof by the POEA Administrator or
NLRC itself. Lastly, they allege that assuming that the Amiri Decree No. 23 of 1976 was
applicable, NLRC erred when it did not apply the one-year prescription provided in said law
(Rollo, pp. 29-30).

VI

G.R. No. 104776; G.R. Nos. 104911-14; G.R. Nos. 105029-32

All the petitions raise the common issue of prescription although they disagreed as to the
time that should be embraced within the prescriptive period.

To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of
the Civil Code of the Philippines. NLRC believed otherwise, fixing the prescriptive period at
three years as provided in Article 291 of the Labor Code of the Philippines.

The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds,
insisted that NLRC erred in ruling that the prescriptive period applicable to the claims was
three years, instead of ten years, as found by the POEA Administrator.

The Solicitor General expressed his personal view that the prescriptive period was one year
as prescribed by the Amiri Decree No. 23 of 1976 but he deferred to the ruling of NLRC that
Article 291 of the Labor Code of the Philippines was the operative law.

The POEA Administrator held the view that:

These money claims (under Article 291 of the Labor Code) refer to those arising from the
employer's violation of the employee's right as provided by the Labor Code.

In the instant case, what the respondents violated are not the rights of the workers as
provided by the Labor Code, but the provisions of the Amiri Decree No. 23 issued in
Bahrain, which ipso facto amended the worker's contracts of employment. Respondents
consciously failed to conform to these provisions which specifically provide for the increase
of the worker's rate. It was only after June 30, 1983, four months after the brown builders
brought a suit against B & R in Bahrain for this same claim, when respondent AIBC's
contracts have undergone amendments in Bahrain for the new hires/renewals
(Respondent's Exhibit 7).

Hence, premises considered, the applicable law of prescription to this instant case is Article
1144 of the Civil Code of the Philippines, which provides:

Art. 1144. The following actions may be brought within ten years from the time the cause of
action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

Thus, herein money claims of the complainants against the respondents shall prescribe in
ten years from August 16, 1976. Inasmuch as all claims were filed within the ten-year
prescriptive period, no claim suffered the infirmity of being prescribed (G.R. No.
104776, Rollo, 89-90).

In overruling the POEA Administrator, and holding that the prescriptive period is three years
as provided in Article 291 of the Labor Code of the Philippines, the NLRC argued as follows:
The Labor Code provides that "all money claims arising from employer-employee
relations . . . shall be filed within three years from the time the cause of action accrued;
otherwise they shall be forever barred" (Art. 291, Labor Code, as amended). This three-year
prescriptive period shall be the one applied here and which should be reckoned from the
date of repatriation of each individual complainant, considering the fact that the case is
having (sic) filed in this country. We do not agree with the POEA Administrator that this
three-year prescriptive period applies only to money claims specifically recoverable under
the Philippine Labor Code. Article 291 gives no such indication. Likewise, We can not
consider complainants' cause/s of action to have accrued from a violation of their
employment contracts. There was no violation; the claims arise from the benefits of the law
of the country where they worked. (G.R. No. 104776, Rollo, pp.
90-91).

Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree
No. 23 of 1976, NLRC opined that the applicability of said law was one of characterization,
i.e., whether to characterize the foreign law on prescription or statute of limitation as
"substantive" or "procedural." NLRC cited the decision in Bournias v. Atlantic Maritime
Company (220 F. 2d. 152, 2d Cir. [1955], where the issue was the applicability of the
Panama Labor Code in a case filed in the State of New York for claims arising from said
Code. In said case, the claims would have prescribed under the Panamanian Law but not
under the Statute of Limitations of New York. The U.S. Circuit Court of Appeals held that the
Panamanian Law was procedural as it was not "specifically intended to be substantive,"
hence, the prescriptive period provided in the law of the forum should apply. The Court
observed:

. . . And where, as here, we are dealing with a statute of limitations of a foreign country, and
it is not clear on the face of the statute that its purpose was to limit the enforceability, outside
as well as within the foreign country concerned, of the substantive rights to which the statute
pertains, we think that as a yardstick for determining whether that was the purpose this test
is the most satisfactory one. It does not lead American courts into the necessity of
examining into the unfamiliar peculiarities and refinements of different foreign legal systems.
..

The court further noted:

xxx xxx xxx

Applying that test here it appears to us that the libelant is entitled to succeed, for the
respondents have failed to satisfy us that the Panamanian period of limitation in question
was specifically aimed against the particular rights which the libelant seeks to enforce. The
Panama Labor Code is a statute having broad objectives, viz: "The present Code regulates
the relations between capital and labor, placing them on a basis of social justice, so that,
without injuring any of the parties, there may be guaranteed for labor the necessary
conditions for a normal life and to capital an equitable return to its investment." In pursuance
of these objectives the Code gives laborers various rights against their employers. Article
623 establishes the period of limitation for all such rights, except certain ones which are
enumerated in Article 621. And there is nothing in the record to indicate that the
Panamanian legislature gave special consideration to the impact of Article 623 upon the
particular rights sought to be enforced here, as distinguished from the other rights to which
that Article is also applicable. Were we confronted with the question of whether the limitation
period of Article 621 (which carves out particular rights to be governed by a shorter limitation
period) is to be regarded as "substantive" or "procedural" under the rule of "specifity" we
might have a different case; but here on the surface of things we appear to be dealing with a
"broad," and not a "specific," statute of limitations (G.R. No. 104776, Rollo, pp.
92-94).

Claimants in G.R. Nos. 104911-14 are of the view that Article 291 of the Labor Code of the
Philippines, which was applied by NLRC, refers only to claims "arising from the employer's
violation of the employee's right as provided by the Labor Code." They assert that their
claims are based on the violation of their employment contracts, as amended by the Amiri
Decree No. 23 of 1976 and therefore the claims may be brought within ten years as
provided by Article 1144 of the Civil Code of the Philippines (Rollo, G.R. Nos. 104911-14,
pp.
18-21). To bolster their contention, they cite PALEA v. Philippine Airlines, Inc., 70 SCRA
244 (1976).

AIBC and BRII, insisting that the actions on the claims have prescribed under the Amiri
Decree No. 23 of 1976, argue that there is in force in the Philippines a "borrowing law,"
which is Section 48 of the Code of Civil Procedure and that where such kind of law exists, it
takes precedence over the common-law conflicts rule (G.R. No. 104776, Rollo, pp. 45-46).

First to be determined is whether it is the Bahrain law on prescription of action based on the
Amiri Decree No. 23 of 1976 or a Philippine law on prescription that shall be the governing
law.

Article 156 of the Amiri Decree No. 23 of 1976 provides:

A claim arising out of a contract of employment shall not be actionable after the lapse of one
year from the date of the expiry of the contract. (G.R. Nos. 105029-31, Rollo, p. 226).

As a general rule, a foreign procedural law will not be applied in the forum. Procedural
matters, such as service of process, joinder of actions, period and requisites for appeal, and
so forth, are governed by the laws of the forum. This is true even if the action is based upon
a foreign substantive law (Restatement of the Conflict of Laws, Sec. 685; Salonga, Private
International Law, 131 [1979]).

A law on prescription of actions is sui generis in Conflict of Laws in the sense that it may be
viewed either as procedural or substantive, depending on the characterization given such a
law.

Thus in Bournias v. Atlantic Maritime Company, supra, the American court applied the
statute of limitations of New York, instead of the Panamanian law, after finding that there
was no showing that the Panamanian law on prescription was intended to be substantive.
Being considered merely a procedural law even in Panama, it has to give way to the law of
the forum on prescription of actions.

However, the characterization of a statute into a procedural or substantive law becomes

irrelevant when the country of the forum has a "borrowing statute." Said statute has the
practical effect of treating the foreign statute of limitation as one of substance (Goodrich,
Conflict of Laws 152-153 [1938]). A "borrowing statute" directs the state of the forum to
apply the foreign statute of limitations to the pending claims based on a foreign law (Siegel,
Conflicts, 183 [1975]). While there are several kinds of "borrowing statutes," one form
provides that an action barred by the laws of the place where it accrued, will not be enforced
in the forum even though the local statute has not run against it (Goodrich and Scoles,
Conflict of Laws, 152-153 [1938]). Section 48 of our Code of Civil Procedure is of this kind.
Said Section provides:

If by the laws of the state or country where the cause of action arose, the action is barred, it
is also barred in the Philippines Islands.

Section 48 has not been repealed or amended by the Civil Code of the Philippines. Article
2270 of said Code repealed only those provisions of the Code of Civil Procedures as to
which were inconsistent with it. There is no provision in the Civil Code of the Philippines,
which is inconsistent with or contradictory to Section 48 of the Code of Civil Procedure
(Paras, Philippine Conflict of Laws 104 [7th ed.]).

In the light of the 1987 Constitution, however, Section 48 cannot be enforced  ex proprio
vigore insofar as it ordains the application in this jurisdiction of Section 156 of the Amiri
Decree No. 23 of 1976.

The courts of the forum will not enforce any foreign claim obnoxious to the forum's public
policy (Canadian Northern Railway Co. v. Eggen, 252 U.S. 553, 40 S. Ct. 402, 64 L. ed. 713
[1920]). To enforce the one-year prescriptive period of the Amiri Decree No. 23 of 1976 as
regards the claims in question would contravene the public policy on the protection to labor.

In the Declaration of Principles and State Policies, the 1987 Constitution emphasized that:
The state shall promote social justice in all phases of national development. (Sec. 10).

The state affirms labor as a primary social economic force. It shall protect the rights of
workers and promote their welfare (Sec. 18).

In article XIII on Social Justice and Human Rights, the 1987 Constitution provides:

Sec. 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.

Having determined that the applicable law on prescription is the Philippine law, the next
question is whether the prescriptive period governing the filing of the claims is three years,
as provided by the Labor Code or ten years, as provided by the Civil Code of the
Philippines.

The claimants are of the view that the applicable provision is Article 1144 of the Civil Code
of the Philippines, which provides:

The following actions must be brought within ten years from the time the right of action
accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

NLRC, on the other hand, believes that the applicable provision is Article 291 of the Labor
Code of the Philippines, which in pertinent part provides:

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

xxx xxx xxx

The case of Philippine Air Lines Employees Association v. Philippine Air Lines, Inc., 70
SCRA 244 (1976) invoked by the claimants in G.R. Nos. 104911-14 is inapplicable to the
cases at bench (Rollo, p. 21). The said case involved the correct computation of overtime
pay as provided in the collective bargaining agreements and not the Eight-Hour Labor Law.

As noted by the Court: "That is precisely why petitioners did not make any reference as to
the computation for overtime work under the Eight-Hour Labor Law (Secs. 3 and 4, CA No.
494) and instead insisted that work computation provided in the collective bargaining
agreements between the parties be observed. Since the claim for pay differentials is
primarily anchored on the written contracts between the litigants, the ten-year prescriptive
period provided by Art. 1144(1) of the New Civil Code should govern."

Section 7-a of the Eight-Hour Labor Law (CA No. 444 as amended by R.A. No. 19933)
provides:

Any action to enforce any cause of action under this Act shall be commenced within three
years after the cause of action accrued otherwise such action shall be forever barred, . . . .

The court further explained:

The three-year prescriptive period fixed in the Eight-Hour Labor Law (CA No. 444 as
amended) will apply, if the claim for differentials for overtime work is solely based on said
law, and not on a collective bargaining agreement or any other contract. In the instant case,
the claim for overtime compensation is not so much because of Commonwealth Act No.
444, as amended but because the claim is demandable right of the employees, by reason of
the above-mentioned collective bargaining agreement.
Section 7-a of the Eight-Hour Labor Law provides the prescriptive period for filing "actions to
enforce any cause of action under said law." On the other hand, Article 291 of the Labor
Code of the Philippines provides the prescriptive period for filing "money claims arising from
employer-employee relations." The claims in the cases at bench all arose from the
employer-employee relations, which is broader in scope than claims arising from a specific
law or from the collective bargaining agreement.

The contention of the POEA Administrator, that the three-year prescriptive period under
Article 291 of the Labor Code of the Philippines applies only to money claims specifically
recoverable under said Code, does not find support in the plain language of the provision.
Neither is the contention of the claimants in G.R. Nos. 104911-14 that said Article refers only
to claims "arising from the employer's violation of the employee's right," as provided by the
Labor Code supported by the facial reading of the provision.

VII

G.R. No. 104776

A. As to the first two grounds for the petition in G.R. No. 104776, claimants aver: (1) that
while their complaints were filed on June 6, 1984 with POEA, the case was decided only on
January 30, 1989, a clear denial of their right to a speedy disposition of the case; and (2)
that NLRC and the POEA Administrator should have declared AIBC and BRII in default
(Rollo, pp.
31-35).

Claimants invoke a new provision incorporated in the 1987 Constitution, which provides:

Sec. 16. All persons shall have the right to a speedy disposition of their cases before all
judicial, quasi-judicial, or administrative bodies.

It is true that the constitutional right to "a speedy disposition of cases" is not limited to the
accused in criminal proceedings but extends to all parties in all cases, including civil and
administrative cases, and in all proceedings, including judicial and quasi-judicial hearings.
Hence, under the Constitution, any party to a case may demand expeditious action on all
officials who are tasked with the administration of justice.

However, as held in Caballero v. Alfonso, Jr., 153 SCRA 153 (1987), "speedy disposition of
cases" is a relative term. Just like the constitutional guarantee of "speedy trial" accorded to
the accused in all criminal proceedings, "speedy disposition of cases" is a flexible concept. It
is consistent with delays and depends upon the circumstances of each case. What the
Constitution prohibits are unreasonable, arbitrary and oppressive delays which render rights
nugatory.

Caballero laid down the factors that may be taken into consideration in determining whether
or not the right to a "speedy disposition of cases" has been violated, thus:

In the determination of whether or not the right to a "speedy trial" has been violated, certain
factors may be considered and balanced against each other. These are length of delay,
reason for the delay, assertion of the right or failure to assert it, and prejudice caused by the
delay. The same factors may also be considered in answering judicial inquiry whether or not
a person officially charged with the administration of justice has violated the speedy
disposition of cases.

Likewise, in Gonzales v. Sandiganbayan, 199 SCRA 298, (1991), we held:

It must be here emphasized that the right to a speedy disposition of a case, like the right to
speedy trial, is deemed violated only when the proceeding is attended by vexatious,
capricious, and oppressive delays; or when unjustified postponements of the trial are asked
for and secured, or when without cause or justified motive a long period of time is allowed to
elapse without the party having his case tried.

Since July 25, 1984 or a month after AIBC and BRII were served with a copy of the
amended complaint, claimants had been asking that AIBC and BRII be declared in default
for failure to file their answers within the ten-day period provided in Section 1, Rule III of
Book VI of the Rules and Regulations of the POEA. At that time, there was a pending motion
of AIBC and BRII to strike out of the records the amended complaint and the "Compliance"
of claimants to the order of the POEA, requiring them to submit a bill of particulars.

The cases at bench are not of the run-of-the-mill variety, such that their final disposition in
the administrative level after seven years from their inception, cannot be said to be attended
by unreasonable, arbitrary and oppressive delays as to violate the constitutional rights to a
speedy disposition of the cases of complainants.

The amended complaint filed on June 6, 1984 involved a total of 1,767 claimants. Said
complaint had undergone several amendments, the first being on April 3, 1985.

The claimants were hired on various dates from 1975 to 1983. They were deployed in
different areas, one group in and the other groups outside of, Bahrain. The monetary claims
totalling more than US$65 million according to Atty. Del Mundo, included:

1. Unexpired portion of contract;

2. Interest earnings of Travel and Fund;

3. Retirement and Savings Plan benefit;

4. War Zone bonus or premium pay of at least 100% of basic pay;

5. Area Differential pay;

6. Accrued Interest of all the unpaid benefits;

7. Salary differential pay;

8. Wage Differential pay;

9. Refund of SSS premiums not remitted to Social Security System;

10. Refund of Withholding Tax not remitted to Bureau of Internal Revenue (B.I.R.);

11. Fringe Benefits under Brown & Root's "A Summary of Employees Benefits consisting of
43 pages (Annex "Q" of Amended Complaint);

12. Moral and Exemplary Damages;

13. Attorney's fees of at least ten percent of amounts;

14. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and issued
by the POEA; and

15. Penalty for violation of Article 34 (Prohibited practices) not excluding reportorial
requirements thereof (NLRC Resolution, September 2, 1991, pp. 18-19; G.R. No.
104776, Rollo, pp. 73-74).

Inasmuch as the complaint did not allege with sufficient definiteness and clarity of some
facts, the claimants were ordered to comply with the motion of AIBC for a bill of particulars.
When claimants filed their "Compliance and Manifestation," AIBC moved to strike out the
complaint from the records for failure of claimants to submit a proper bill of particulars. While
the POEA Administrator denied the motion to strike out the complaint, he ordered the
claimants "to correct the deficiencies" pointed out by AIBC.

Before an intelligent answer could be filed in response to the complaint, the records of
employment of the more than 1,700 claimants had to be retrieved from various countries in
the Middle East. Some of the records dated as far back as 1975.
The hearings on the merits of the claims before the POEA Administrator were interrupted
several times by the various appeals, first to NLRC and then to the Supreme Court.

Aside from the inclusion of additional claimants, two new cases were filed against AIBC and
BRII on October 10, 1985 (POEA Cases Nos.
L-85-10-777 and L-85-10-779). Another complaint was filed on May 29, 1986 (POEA Case
No. L-86-05-460). NLRC, in exasperation, noted that the exact number of claimants had
never been completely established (Resolution, Sept. 2, 1991, G.R. No. 104776, Rollo, p.
57). All the three new cases were consolidated with POEA Case No. L-84-06-555.

NLRC blamed the parties and their lawyers for the delay in terminating the proceedings,
thus:

These cases could have been spared the long and arduous route towards resolution had the
parties and their counsel been more interested in pursuing the truth and the merits of the
claims rather than exhibiting a fanatical reliance on technicalities. Parties and counsel have
made these cases a litigation of emotion. The intransigence of parties and counsel is
remarkable. As late as last month, this Commission made a last and final attempt to bring
the counsel of all the parties (this Commission issued a special order directing respondent
Brown & Root's resident agent/s to appear) to come to a more conciliatory stance. Even this
failed (Rollo,
p. 58).

The squabble between the lawyers of claimants added to the delay in the disposition of the
cases, to the lament of NLRC, which complained:

It is very evident from the records that the protagonists in these consolidated cases appear
to be not only the individual complainants, on the one hand, and AIBC and Brown & Root,
on the other hand. The two lawyers for the complainants, Atty. Gerardo Del Mundo and Atty.
Florante De Castro, have yet to settle the right of representation, each one persistently
claiming to appear in behalf of most of the complainants. As a result, there are two appeals
by the complainants. Attempts by this Commission to resolve counsels' conflicting claims of
their respective authority to represent the complainants prove futile. The bickerings by these
two counsels are reflected in their pleadings. In the charges and countercharges of
falsification of documents and signatures, and in the disbarment proceedings by one against
the other. All these have, to a large extent, abetted in confounding the issues raised in these
cases, jumble the presentation of evidence, and even derailed the prospects of an amicable
settlement. It would not be far-fetched to imagine that both counsel, unwittingly, perhaps,
painted a rainbow for the complainants, with the proverbial pot of gold at its end containing
more than US$100 million, the aggregate of the claims in these cases. It is, likewise, not
improbable that their misplaced zeal and exuberance caused them to throw all caution to the
wind in the matter of elementary rules of procedure and evidence (Rollo, pp. 58-59).

Adding to the confusion in the proceedings before NLRC, is the listing of some of the
complainants in both petitions filed by the two lawyers. As noted by NLRC, "the problem
created by this situation is that if one of the two petitions is dismissed, then the parties and
the public respondents would not know which claim of which petitioner was dismissed and
which was not."

B. Claimants insist that all their claims could properly be consolidated in a "class suit"
because "all the named complainants have similar money claims and similar rights sought
irrespective of whether they worked in Bahrain, United Arab Emirates or in Abu Dhabi, Libya
or in any part of the Middle East" (Rollo, pp. 35-38).

A class suit is proper where the subject matter of the controversy is one of common or
general interest to many and the parties are so numerous that it is impracticable to bring
them all before the court (Revised Rules of Court, Rule 3, Sec. 12).

While all the claims are for benefits granted under the Bahrain Law, many of the claimants
worked outside Bahrain. Some of the claimants were deployed in Indonesia and Malaysia
under different terms and conditions of employment.
NLRC and the POEA Administrator are correct in their stance that inasmuch as the first
requirement of a class suit is not present (common or general interest based on the Amiri
Decree of the State of Bahrain), it is only logical that only those who worked in Bahrain shall
be entitled to file their claims in a class suit.

While there are common defendants (AIBC and BRII) and the nature of the claims is the
same (for employee's benefits), there is no common question of law or fact. While some
claims are based on the Amiri Law of Bahrain, many of the claimants never worked in that
country, but were deployed elsewhere. Thus, each claimant is interested only in his own
demand and not in the claims of the other employees of defendants. The named claimants
have a special or particular interest in specific benefits completely different from the benefits
in which the other named claimants and those included as members of a "class" are
claiming (Berses v. Villanueva, 25 Phil. 473 [1913]). It appears that each claimant is only
interested in collecting his own claims. A claimants has no concern in protecting the
interests of the other claimants as shown by the fact, that hundreds of them have
abandoned their co-claimants and have entered into separate compromise settlements of
their respective claims. A principle basic to the concept of "class suit" is that plaintiffs
brought on the record must fairly represent and protect the interests of the others (Dimayuga
v. Court of Industrial Relations, 101 Phil. 590 [1957]). For this matter, the claimants who
worked in Bahrain can not be allowed to sue in a class suit in a judicial proceeding. The
most that can be accorded to them under the Rules of Court is to be allowed to join as
plaintiffs in one complaint (Revised Rules of Court, Rule 3, Sec. 6).

The Court is extra-cautious in allowing class suits because they are the exceptions to the
condition sine qua non, requiring the joinder of all indispensable parties.

In an improperly instituted class suit, there would be no problem if the decision secured is
favorable to the plaintiffs. The problem arises when the decision is adverse to them, in which
case the others who were impleaded by their self-appointed representatives, would surely
claim denial of due process.

C. The claimants in G.R. No. 104776 also urged that the POEA Administrator and NLRC
should have declared Atty. Florante De Castro guilty of "forum shopping, ambulance chasing
activities, falsification, duplicity and other unprofessional activities" and his appearances as
counsel for some of the claimants as illegal (Rollo, pp. 38-40).

The Anti-Forum Shopping Rule (Revised Circular No. 28-91) is intended to put a stop to the
practice of some parties of filing multiple petitions and complaints involving the same issues,
with the result that the courts or agencies have to resolve the same issues. Said Rule,
however, applies only to petitions filed with the Supreme Court and the Court of Appeals. It
is entitled "Additional Requirements For Petitions Filed with the Supreme Court and the
Court of Appeals To Prevent Forum Shopping or Multiple Filing of Petitioners and
Complainants." The first sentence of the circular expressly states that said circular applies to
an governs the filing of petitions in the Supreme Court and the Court of Appeals.

While Administrative Circular No. 04-94 extended the application of the anti-forum shopping
rule to the lower courts and administrative agencies, said circular took effect only on April 1,
1994.

POEA and NLRC could not have entertained the complaint for unethical conduct against
Atty. De Castro because NLRC and POEA have no jurisdiction to investigate charges of
unethical conduct of lawyers.

Attorney's Lien

The "Notice and Claim to Enforce Attorney's Lien" dated December 14, 1992 was filed by
Atty. Gerardo A. Del Mundo to protect his claim for attorney's fees for legal services
rendered in favor of the claimants (G.R. No. 104776, Rollo, pp. 841-844).

A statement of a claim for a charging lien shall be filed with the court or administrative
agency which renders and executes the money judgment secured by the lawyer for his
clients. The lawyer shall cause written notice thereof to be delivered to his clients and to the
adverse party (Revised Rules of Court, Rule 138, Sec. 37). The statement of the claim for
the charging lien of Atty. Del Mundo should have been filed with the administrative agency
that rendered and executed the judgment.

Contempt of Court

The complaint of Atty. Gerardo A. Del Mundo to cite Atty. Florante De Castro and Atty. Katz
Tierra for violation of the Code of Professional Responsibility should be filed in a separate
and appropriate proceeding.

G.R. No. 104911-14

Claimants charge NLRC with grave abuse of discretion in not accepting their formula of
"Three Hours Average Daily Overtime" in computing the overtime payments. They claim that
it was BRII itself which proposed the formula during the negotiations for the settlement of
their claims in Bahrain and therefore it is in estoppel to disclaim said offer (Rollo, pp. 21-22).

Claimants presented a Memorandum of the Ministry of Labor of Bahrain dated April 16,
1983, which in pertinent part states:

After the perusal of the memorandum of the Vice President and the Area Manager, Middle
East, of Brown & Root Co. and the Summary of the compensation offered by the Company
to the employees in respect of the difference of pay of the wages of the overtime and the
difference of vacation leave and the perusal of the documents attached thereto i.e., minutes
of the meetings between the Representative of the employees and the management of the
Company, the complaint filed by the employees on 14/2/83 where they have claimed as
hereinabove stated, sample of the Service Contract executed between one of the
employees and the company through its agent in (sic) Philippines, Asia International
Builders Corporation where it has been provided for 48 hours of work per week and an
annual leave of 12 days and an overtime wage of 1 & 1/4 of the normal hourly wage.

xxx xxx xxx

The Company in its computation reached the following averages:

A. 1. The average duration of the actual service of the employee is 35 months for the
Philippino (sic) employees . . . .

2. The average wage per hour for the Philippino (sic) employee is US$2.69 . . . .

3. The average hours for the overtime is 3 hours plus in all public holidays and weekends.

4. Payment of US$8.72 per months (sic) of service as compensation for the difference of the
wages of the overtime done for each Philippino (sic) employee . . . (Rollo, p.22).

BRII and AIBC countered: (1) that the Memorandum was not prepared by them but by a
subordinate official in the Bahrain Department of Labor; (2) that there was no showing that
the Bahrain Minister of Labor had approved said memorandum; and (3) that the offer was
made in the course of the negotiation for an amicable settlement of the claims and therefore
it was not admissible in evidence to prove that anything is due to the claimants.

While said document was presented to the POEA without observing the rule on presenting
official documents of a foreign government as provided in Section 24, Rule 132 of the 1989
Revised Rules on Evidence, it can be admitted in evidence in proceedings before an
administrative body. The opposing parties have a copy of the said memorandum, and they
could easily verify its authenticity and accuracy.

The admissibility of the offer of compromise made by BRII as contained in the memorandum
is another matter. Under Section 27, Rule 130 of the 1989 Revised Rules on Evidence, an
offer to settle a claim is not an admission that anything is due.

Said Rule provides:

Offer of compromise not admissible. — In civil cases, an offer of compromise is not an
admission of any liability, and is not admissible in evidence against the offeror.

This Rule is not only a rule of procedure to avoid the cluttering of the record with unwanted
evidence but a statement of public policy. There is great public interest in having the
protagonists settle their differences amicable before these ripen into litigation. Every effort
must be taken to encourage them to arrive at a settlement. The submission of offers and
counter-offers in the negotiation table is a step in the right direction. But to bind a party to his
offers, as what claimants would make this Court do, would defeat the salutary purpose of the
Rule.

G.R. Nos. 105029-32

A. NLRC applied the Amiri Decree No. 23 of 1976, which provides for greater benefits than
those stipulated in the overseas-employment contracts of the claimants. It was of the belief
that "where the laws of the host country are more favorable and beneficial to the workers,
then the laws of the host country shall form part of the overseas employment contract." It
quoted with approval the observation of the POEA Administrator that ". . . in labor
proceedings, all doubts in the implementation of the provisions of the Labor Code and its
implementing regulations shall be resolved in favor of labor" (Rollo, pp. 90-94).

AIBC and BRII claim that NLRC acted capriciously and whimsically when it refused to
enforce the overseas-employment contracts, which became the law of the parties. They
contend that the principle that a law is deemed to be a part of a contract applies only to
provisions of Philippine law in relation to contracts executed in the Philippines.

The overseas-employment contracts, which were prepared by AIBC and BRII themselves,
provided that the laws of the host country became applicable to said contracts if they offer
terms and conditions more favorable that those stipulated therein. It was stipulated in said
contracts that:

The Employee agrees that while in the employ of the Employer, he will not engage in any
other business or occupation, nor seek employment with anyone other than the Employer;
that he shall devote his entire time and attention and his best energies, and abilities to the
performance of such duties as may be assigned to him by the Employer; that he shall at all
times be subject to the direction and control of the Employer; and that the benefits provided
to Employee hereunder are substituted for and in lieu of all other benefits provided by any
applicable law, provided of course, that total remuneration and benefits do not fall below
that of the host country regulation or custom, it being understood that should applicable laws
establish that fringe benefits, or other such benefits additional to the compensation herein
agreed cannot be waived, Employee agrees that such compensation will be adjusted
downward so that the total compensation hereunder, plus the non-waivable benefits shall be
equivalent to the compensation herein agreed (Rollo, pp. 352-353).

The overseas-employment contracts could have been drafted more felicitously. While a part
thereof provides that the compensation to the employee may be "adjusted downward so that
the total computation (thereunder) plus the non-waivable benefits shall be equivalent to the
compensation" therein agreed, another part of the same provision categorically states "that
total remuneration and benefits do not fall below that of the host country regulation and
custom."

Any ambiguity in the overseas-employment contracts should be interpreted against AIBC

and BRII, the parties that drafted it (Eastern Shipping Lines, Inc. v. Margarine-Verkaufs-
Union, 93 SCRA 257 [1979]).

Article 1377 of the Civil Code of the Philippines provides:

The interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity.

Said rule of interpretation is applicable to contracts of adhesion where there is already a

prepared form containing the stipulations of the employment contract and the employees
merely "take it or leave it." The presumption is that there was an imposition by one party
against the other and that the employees signed the contracts out of necessity that reduced
their bargaining power (Fieldmen's Insurance Co., Inc. v. Songco, 25 SCRA 70 [1968]).

Applying the said legal precepts, we read the overseas-employment contracts in question as
adopting the provisions of the Amiri Decree No. 23 of 1976 as part and parcel thereof.

The parties to a contract may select the law by which it is to be governed (Cheshire, Private
International Law, 187 [7th ed.]). In such a case, the foreign law is adopted as a "system" to
regulate the relations of the parties, including questions of their capacity to enter into the
contract, the formalities to be observed by them, matters of performance, and so forth (16
Am Jur 2d,
150-161).

Instead of adopting the entire mass of the foreign law, the parties may just agree that
specific provisions of a foreign statute shall be deemed incorporated into their contract "as a
set of terms." By such reference to the provisions of the foreign law, the contract does not
become a foreign contract to be governed by the foreign law. The said law does not operate
as a statute but as a set of contractual terms deemed written in the contract (Anton, Private
International Law, 197 [1967]; Dicey and Morris, The Conflict of Laws, 702-703, [8th ed.]).

A basic policy of contract is to protect the expectation of the parties (Reese, Choice of Law
in Torts and Contracts, 16 Columbia Journal of Transnational Law 1, 21 [1977]). Such party
expectation is protected by giving effect to the parties' own choice of the applicable law
(Fricke v. Isbrandtsen Co., Inc., 151 F. Supp. 465, 467 [1957]). The choice of law must,
however, bear some relationship to the parties or their transaction (Scoles and Hayes,
Conflict of Law 644-647 [1982]). There is no question that the contracts sought to be
enforced by claimants have a direct connection with the Bahrain law because the services
were rendered in that country.

In Norse Management Co. (PTE) v. National Seamen Board, 117 SCRA 486 (1982), the
"Employment Agreement," between Norse Management Co. and the late husband of the
private respondent, expressly provided that in the event of illness or injury to the employee
arising out of and in the course of his employment and not due to his own misconduct,
"compensation shall be paid to employee in accordance with and subject to the limitation of
the Workmen's Compensation Act of the Republic of the Philippines or the Worker's
Insurance Act of registry of the vessel, whichever is greater." Since the laws of Singapore,
the place of registry of the vessel in which the late husband of private respondent served at
the time of his death, granted a better compensation package, we applied said foreign law in
preference to the terms of the contract.

The case of Bagong Filipinas Overseas Corporation v. National Labor Relations

Commission, 135 SCRA 278 (1985), relied upon by AIBC and BRII is inapposite to the facts
of the cases at bench. The issue in that case was whether the amount of the death
compensation of a Filipino seaman should be determined under the shipboard employment
contract executed in the Philippines or the Hongkong law. Holding that the shipboard
employment contract was controlling, the court differentiated said case from Norse
Management Co. in that in the latter case there was an express stipulation in the
employment contract that the foreign law would be applicable if it afforded greater
compensation.

B. AIBC and BRII claim that they were denied by NLRC of their right to due process when
said administrative agency granted Friday-pay differential, holiday-pay differential, annual-
leave differential and leave indemnity pay to the claimants listed in Annex B of the
Resolution. At first, NLRC reversed the resolution of the POEA Administrator granting these
benefits on a finding that the POEA Administrator failed to consider the evidence presented
by AIBC and BRII, that some findings of fact of the POEA Administrator were not supported
by the evidence, and that some of the evidence were not disclosed to AIBC and BRII ( Rollo,
pp. 35-36; 106-107). But instead of remanding the case to the POEA Administrator for a new
hearing, which means further delay in the termination of the case, NLRC decided to pass
upon the validity of the claims itself. It is this procedure that AIBC and BRII complain of as
being irregular and a "reversible error."
They pointed out that NLRC took into consideration evidence submitted on appeal, the same
evidence which NLRC found to have been "unilaterally submitted by the claimants and not
disclosed to the adverse parties" (Rollo, pp. 37-39).

NLRC noted that so many pieces of evidentiary matters were submitted to the POEA
administrator by the claimants after the cases were deemed submitted for resolution and
which were taken cognizance of by the POEA Administrator in resolving the cases. While
AIBC and BRII had no opportunity to refute said evidence of the claimants before the POEA
Administrator, they had all the opportunity to rebut said evidence and to present their
counter-evidence before NLRC. As a matter of fact, AIBC and BRII themselves were able to
present before NLRC additional evidence which they failed to present before the POEA
Administrator.

Under Article 221 of the Labor Code of the Philippines, NLRC is enjoined to "use every and
all reasonable means to ascertain the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all in the interest of due process."

In deciding to resolve the validity of certain claims on the basis of the evidence of both
parties submitted before the POEA Administrator and NLRC, the latter considered that it
was not expedient to remand the cases to the POEA Administrator for that would only
prolong the already protracted legal controversies.

Even the Supreme Court has decided appealed cases on the merits instead of remanding
them to the trial court for the reception of evidence, where the same can be readily
determined from the uncontroverted facts on record (Development Bank of the Philippines v.
Intermediate Appellate Court, 190 SCRA 653 [1990]; Pagdonsalan v. National Labor
Relations Commission, 127 SCRA 463 [1984]).

C. AIBC and BRII charge NLRC with grave abuse of discretion when it ordered the POEA
Administrator to hold new hearings for 683 claimants listed in Annex D of the Resolution
dated September 2, 1991 whose claims had been denied by the POEA Administrator "for
lack of proof" and for 69 claimants listed in Annex E of the same Resolution, whose claims
had been found by NLRC itself as not "supported by evidence" (Rollo, pp. 41-45).

NLRC based its ruling on Article 218(c) of the Labor Code of the Philippines, which
empowers it "[to] conduct investigation for the determination of a question, matter or
controversy, within its jurisdiction, . . . ."

It is the posture of AIBC and BRII that NLRC has no authority under Article 218(c) to remand
a case involving claims which had already been dismissed because such provision
contemplates only situations where there is still a question or controversy to be resolved
(Rollo, pp. 41-42).

A principle well embedded in Administrative Law is that the technical rules of procedure and
evidence do not apply to the proceedings conducted by administrative agencies (First Asian
Transport & Shipping Agency, Inc. v. Ople, 142 SCRA 542 [1986]; Asiaworld Publishing
House, Inc. v. Ople, 152 SCRA 219 [1987]). This principle is enshrined in Article 221 of the
Labor Code of the Philippines and is now the bedrock of proceedings before NLRC.

Notwithstanding the non-applicability of technical rules of procedure and evidence in

administrative proceedings, there are cardinal rules which must be observed by the hearing
officers in order to comply with the due process requirements of the Constitution. These
cardinal rules are collated in Ang Tibay v. Court of Industrial Relations, 69 Phil. 635 (1940).

VIII

The three petitions were filed under Rule 65 of the Revised Rules of Court on the grounds
that NLRC had committed grave abuse of discretion amounting to lack of jurisdiction in
issuing the questioned orders. We find no such abuse of discretion.

WHEREFORE, all the three petitions are DISMISSED.

G.R. No. 137378               October 12, 2000

PHILIPPINE ALUMINUM WHEELS, INC., petitioner,

vs.
FASGI ENTERPRISES, INC., respondent.

DECISION

VITUG, J.:

On 01 June 1978, FASGI Enterprises Incorporated ("FASGI"), a corporation organized and

existing under and by virtue of the laws of the State of California, United States of America,
entered into a distributorship arrangement with Philippine Aluminum Wheels, Incorporated
("PAWI"), a Philippine corporation, and Fratelli Pedrini Sarezzo S.P.A. ("FPS"), an Italian
corporation. The agreement provided for the purchase, importation and distributorship in the
United States of aluminum wheels manufactured by PAWI. Pursuant to the contract, PAWI
shipped to FASGI a total of eight thousand five hundred ninety four (8,594) wheels, with an
FOB value of US$216,444.30 at the time of shipment, the first batch arriving in two
containers and the second in three containers. Thereabouts, FASGI paid PAWI the FOB
value of the wheels. Unfortunately, FASGI later found the shipment to be defective and in
non-compliance with stated requirements, viz;

"A. contrary to the terms of the Distributorship Agreement and in violation of U.S. law, the
country of origin (the Philippines) was not stamped on the wheels;

"B. the wheels did not have weight load limits stamped on them as required to avoid
mounting on excessively heavy vehicles, resulting in risk of damage or bodily injury to
consumers arising from possible shattering of the wheels;

"C. many of the wheels did not have an indication as to which models of automobile they
would fit;

"D. many of the wheels did not fit the model automobiles for which they were purportedly
designed;

"E. some of the wheels did not fit any model automobile in use in the United States;

"F. most of the boxes in which the wheels were packed indicated that the wheels were
approved by the Specialty Equipment Manufacturer's Association (hereafter, `SEMA'); in fact
no SEMA approval has been obtained and this indication was therefore false and could
result in fraud upon retail customers purchasing the wheels." 1

On 21 September 1979, FASGI instituted an action against PAWI and FPS for breach of
contract and recovery of damages in the amount of US$2,316,591.00 before the United
States District Court for the Central District of California. In January 1980, during the
pendency of the case, the parties entered into a settlement, entitled "Transaction" with the
corresponding Italian translation "Convenzione Transsativa," where it was stipulated that
FPS and PAWI would accept the return of not less than 8,100 wheels after restoring to
FASGI the purchase price of US$268,750.00 via four (4) irrevocable letters of credit ("LC").
The rescission of the contract of distributorship was to be effected within the period starting
January up until April 1980.2

In a telex message, dated 02 March 1980, PAWI president Romeo Rojas expressed the
company's inability to comply with the foregoing agreement and proposed a revised
schedule of payment. The message, in part, read:

"We are most anxious in fulfilling all our obligations under compromise agreement executed
by our Mr. Giancarlo Dallera and your Van Curen. We have tried our best to comply with our
commitments, however, because of the situation as mentioned in the foregoing and currency
regulations and restrictions imposed by our government on the outflow, of foreign currency
from our country, we are constrained to request for a revised schedule of shipment and
opening of L/Cs.

"After consulting with our bank and government monetary agencies and on the assumption
that we submit the required pro-forma invoices we can open the letters of credit in your favor
under the following schedule:

"A) First L/C - it will be issued in April 1980 payable 90 days thereafter

"B) Second L/C - it will be issued in June 1980 payable 90 days thereafter

"C) Third L/C - it will be issued in August 1980 payable 90 days thereafter

"D) Fourth L/C - it will be issued in November 1980 payable 90 days thereafter

"We understand your situation regarding the lease of your warehouse. For this reason, we
are willing to defray the extra storage charges resulting from this new schedule. If you
cannot renew the lease [of] your present warehouse, perhaps you can arrange to transfer to
another warehouse and storage charges transfer thereon will be for our account. We hope
you understand our position. The delay and the revised schedules were caused by
circumstances totally beyond our control." 3

On 21 April 1980, again through a telex message, PAWI informed FASGI that it was
impossible to open a letter of credit on or before April 1980 but assured that it would do its
best to comply with the suggested schedule of payments. In its telex reply of 29 April 1980,
4 

FASGI insisted that PAWI should meet the terms of the proposed schedule of payments,
specifically its undertaking to open the first LC within April of 1980, and that "If the letter of
credit is not opened by April 30, 1980, then x x x [it would] immediately take all necessary
legal action to protect [its] position."
5

Despite its assurances, and FASGI's insistence, PAWI failed to open the first LC in April
1980 allegedly due to Central Bank "inquiries and restrictions," prompting FASGI to pursue
its complaint for damages against PAWI before the California district court. Pre-trial
conference was held on 24 November 1980. In the interim, the parties, realizing the
protracted process of litigation, resolved to enter into another arrangement, this time entitled
"Supplemental Settlement Agreement," on 26 November 1980. In substance, the covenant
provided that FASGI would deliver to PAWI a container of wheels for every LC opened and
paid by PAWI:

"3. Agreement

"3.1 Sellers agree to pay FASGI Two Hundred Sixty-Eight Thousand, Seven Hundred Fifty
and 00/100 Dollars ($268,750.00), plus interest and storage costs as described below.
Sellers shall pay such amount by delivering to FASGI the following four (4) irrevocable
letters of credit, confirmed by Crocker Bank, Main Branch, Fresno, California, as set forth
below:

"(i) on or before June 30, 1980, a documentary letter of credit in the amount of (a) Sixty-Five
Thousand, Three Hundred Sixty-nine and 00/100 Dollars ($65,369.00), (b) plus interest on
that amount at the annual rate of 16.25% from January 1, 1980 until July 31, 1980, (c) plus
Two Thousand Nine Hundred Forty Dollars and 00/100 ($2,940.00) and (d) with interest on
that sum at the annual rate of 16.25% from May 1, 1980 to July 31, 1980, payable on or
after August 31, 1980;

"(ii) on or before September 1, 1980, a documentary letter of credit in the amount of (a)
Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents
($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars ($2,940.00),
plus (c) interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in
effect from time to time, plus two percent on the amount in (a) from January 1, 1980 until
December 21, 1980, and on the amount set forth in (b) from May 1, 1980 until December 21,
1980, payable ninety days after the date of the bill of lading under the letter of credit;

"(iii) on or before November 1, 1980, a documentary letter of credit in the amount of (a)
Sixty-Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents
($67,793.67) plus (b) Two Thousand, Nine Hundred Forty and 00/100 Dollars ($2,490.00),
plus (c) interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in
effect from time to time, plus two percent on the amount in (a) from January 1, 1980 until
February 21, 1981, and on the amount set forth in (b) from May 1, 1980 until February 21,
1981, payable ninety days after the date of the bill of lading under the latter of credit;

"(iv) on or before January 1, 1981, a documentary letter of credit in the amount of (a) Sixty-
Seven Thousand, Seven Hundred Ninety-Three Dollars and Sixty-Seven Cents ($67,793.67)
plus (b) Five Thousand, Eight Hundred Eighty and 00/100 Dollars ($5,880.00), plus (c)
interest at an annual rate equal to the prime rate of Crocker Bank, San Francisco, in effect
from time to time, plus two percent on the amount in (a) from January 1, 1980 until April 21,
1981, and on the amount set forth in (b) from May 1, 1980 until April 21, 1981, payable
ninety days after the date of the bill of lading under the latter of credit."
6

Anent the wheels still in the custody of FASGI, the supplemental settlement agreement
provided that -
"3.4 (a) Upon execution of this Supplemental Settlement Agreement, the obligations of
FASGI to store or maintain the Containers and Wheels shall be limited to (i) storing the
Wheels and Containers in their present warehouse location and (ii) maintaining in effect
FASGI's current insurance in favor of FASGI, insuring against usual commercial risks for
such storage in the principal amount of the Letters of Credit described in Paragraph 3.1.
FASGI shall bear no liability, responsibility or risk for uninsurable risks or casualties to the
Containers or Wheels.

"x x x           x x x          x x x

"(e) From and after February 28, 1981, unless delivery of the Letters of Credit are delayed
past such date pursuant to the penultimate Paragraph 3.1, in which case from and after
such later date, FASGI shall have no obligation to maintain, store or deliver any of the
Containers or Wheels." 7

The deal allowed FASGI to enter before the California court the foregoing stipulations in the
event of the failure of PAWI to make good the scheduled payments; thus -

"3.5 Concurrently with execution and delivery hereof, the parties have executed and
delivered a Mutual Release (the `Mutual Release'), and a Stipulation for Judgment (the
`Stipulation for Judgment') with respect to the Action. In the event of breach of this
Supplemental Settlement Agreement by Sellers, FASGI shall have the right to apply
immediately to the Court for entry of Judgment pursuant to the Stipulation for Judgment in
the full amount thereof, less credit for any payments made by Sellers pursuant to this
Supplemental Settlement Agreement. FASGI shall have the right thereafter to enforce the
Judgment against PAWI and FPS in the United States and in any other country where
assets of FPS or PAWI may be located, and FPS and PAWI hereby waive all defenses in
any such country to execution or enforcement of the Judgment by FASGI. Specifically, FPS
and PAWI each consent to the jurisdiction of the Italian and Philippine courts in any action
brought by FASGI to seek a judgment in those countries based upon a judgment against
FPS or PAWI in the Action." 8

In accordance with the aforementioned paragraph 3.5 of the agreement, the parties made
the following stipulation before the California court:

"The undersigned parties hereto, having entered into a Supplemental Settlement Agreement
in this action,

"IT IS HEREBY STIPULATED by and between plaintiff FASGI Enterprises, Inc. (`FASGI')
and defendants Philippine Aluminum Wheels, Inc., (`PAWI'), and each of them, that
judgment may be entered in favor of plaintiff FASGI and against PAWI, in the amount of Two
Hundred Eighty Three Thousand Four Hundred Eighty And 01/100ths Dollars ($283,480.01).

"Plaintiff FASGI shall also be entitled to its costs of suit, and to reasonable attorneys' fees as
determined by the Court added to the above judgment amount." 9

The foregoing supplemental settlement agreement, as well as the motion for the entry of
judgment, was executed by FASGI president Elena Buholzer and PAWI counsel Mr.
Thomas Ready.

PAWI, again, proved to be remiss in its obligation under the supplemental settlement
agreement. While it opened the first LC on 19 June 1980, it, however, only paid on it nine (9)
months after, or on 20 March 1981, when the letters of credit by then were supposed to
have all been already posted. This lapse, notwithstanding, FASGI promptly shipped to PAWI
the first container of wheels. Again, despite the delay incurred by PAWI on the second LC,
FASGI readily delivered the second container. Later, PAWI totally defaulted in opening and
paying the third and the fourth LCs, scheduled to be opened on or before, respectively, 01
September 1980 and 01 November 1980, and each to be paid ninety (90) days after the
date of the bill of lading under the LC. As so expressed in their affidavits, FASGI counsel
Frank Ker and FASGI president Elena Buholzer were more inclined to believe that PAWI's
failure to pay was due not to any restriction by the Central Bank or any other cause than its
inability to pay. These doubts were based on the telex message of PAWI president Romeo
Rojas who attached a copy of a communication from the Central Bank notifying PAWI of the
bank's approval of PAWI's request to open LCs to cover payment for the re-importation of
the wheels. The communication having been sent to FASGI before the supplemental
settlement agreement was executed, FASGI speculated that at the time PAWI subsequently
entered into the supplemental settlement agreement, its request to open LCs had already
been approved by the Central Bank. Irked by PAWI's persistent default, FASGI filed with the
US District Court of the Central District of California the following stipulation for judgment
against PAWI.

"PLEASE TAKE NOTICE that on May 17, 1982 at 10:00 A.M. in the Courtroom of the
Honorable Laughlin E. Waters of the above Court, plaintiff FASGI ENTERPRISES, INC.
(hereinafter `FASGI') will move the Court for entry of Judgment against defendant
PHILIPPINE ALUMINUM WHEELS, INC. (hereinafter `PAWI'), pursuant to the Stipulation for
Judgment filed concurrently herewith, executed on behalf of FASGI and PAWI by their
respective attorneys, acting as their authorized agents.

"Judgment will be sought in the total amount of P252,850.60, including principal and interest
accrued through May 17, 1982, plus the sum of $17,500.00 as reasonable attorneys' fees for
plaintiff in prosecuting this action.

"The Motion will be made under Rule 54 of the Federal Rules of Civil Procedure, pursuant to
and based upon the Stipulation for Judgment, the Supplemental Settlement Agreement filed
herein on or about November 21, 1980, the Memorandum of Points and Authorities and
Affidavits of Elena Buholzer, Franck G. Ker and Stan Cornwell all filed herewith, and upon all
the records, files and pleadings in this action.

"The Motion is made on the grounds that defendant PAWI has breached its obligations as
set forth in the Supplemental Settlement Agreement, and that the Supplemental Settlement
Agreement expressly permits FASGI to enter the Stipulation for Judgment in the event that
PAWI has not performed under the Supplemental Settlement Agreement." 10

On 24 August 1982, FASGI filed a notice of entry of judgment. A certificate of finality of

judgment was issued, on 07 September 1982, by the US District Judge of the District Court
for the Central District of California. PAWI, by this time, was approximately twenty (20)
months in arrears in its obligation under the supplemental settlement agreement.

Unable to obtain satisfaction of the final judgment within the United States, FASGI filed a
complaint for "enforcement of foreign judgment" in February 1983, before the Regional Trial
Court, Branch 61, of Makati, Philippines. The Makati court, however, in an order of 11
September 1990, dismissed the case, thereby denying the enforcement of the foreign
judgment within Philippine jurisdiction, on the ground that the decree was tainted with
collusion, fraud, and clear mistake of law and fact. The lower court ruled that the foreign
11 

judgment ignored the reciprocal obligations of the parties. While the assailed foreign
judgment ordered the return by PAWI of the purchase amount, no similar order was made
requiring FASGI to return to PAWI the third and fourth containers of wheels. This situation,
12 

the trial court maintained, amounted to an unjust enrichment on the part of FASGI.
Furthermore, the trial court said, the supplemental settlement agreement and the
subsequent motion for entry of judgment upon which the California court had based its
judgment were a nullity for having been entered into by Mr. Thomas Ready, counsel for
PAWI, without the latter's authorization.

FASGI appealed the decision of the trial court to the Court of Appeals. In a decision, dated
13 

30 July 1997, the appellate court reversed the decision of the trial court and ordered the full
enforcement of the California judgment.

Hence this appeal.

Generally, in the absence of a special compact, no sovereign is bound to give effect within
its dominion to a judgment rendered by a tribunal of another country; however, the rules of
14 

comity, utility and convenience of nations have established a usage among civilized states
by which final judgments of foreign courts of competent jurisdiction are reciprocally
respected and rendered efficacious under certain conditions that may vary in different
countries.15
In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar
as the immediate parties and the underlying cause of action are concerned so long as it is
convincingly shown that there has been an opportunity for a full and fair hearing before a
court of competent jurisdiction; that trial upon regular proceedings has been conducted,
following due citation or voluntary appearance of the defendant and under a system of
jurisprudence likely to secure an impartial administration of justice; and that there is nothing
to indicate either a prejudice in court and in the system of laws under which it is sitting or
fraud in procuring the judgment. A foreign judgment is presumed to be valid and binding in
16 

the country from which it comes, until a contrary showing, on the basis of a presumption of
regularity of proceedings and the giving of due notice in the foreign forum. Rule 39, section
48 of the Rules of Court of the Philippines provides:

Sec. 48. Effect of foreign judgments or final orders - The effect of a judgment or final order
of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is
as follows:

xxxx

(b) In case of a judgment or final order against a person, the judgment or final order is
presumptive evidence of a right as between the parties and their successors-in-interest by a
subsequent title.

In either case, the judgment or final order may be repelled by evidence a want of jurisdiction,
want of notice to the party, collusion, fraud, or clear mistake of law or fact.

In Soorajmull Nagarmull vs. Binalbagan-Isabela Sugar Co. Inc., one of the early Philippine
17 

cases on the enforcement of foreign judgments, this Court has ruled that a judgment for a
sum of money rendered in a foreign court is presumptive evidence of a right between the
parties and their successors-in-interest by subsequent title, but when suit for its enforcement
is brought in a Philippine court, such judgment may be repelled by evidence of want of
jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact. In
Northwest Orient Airlines, Inc., vs. Court of Appeals, the Court has said that a party
18 

attacking a foreign judgment is tasked with the burden of overcoming its presumptive
validity.

PAWI claims that its counsel, Mr. Ready, has acted without its authority. Verily, in this
jurisdiction, it is clear that an attorney cannot, without a client's authorization, settle the
action or subject matter of the litigation even when he honestly believes that such a
settlement will best serve his client's interest.
19

In the instant case, the supplemental settlement agreement was signed by the parties,
including Mr. Thomas Ready, on 06 October 1980. The agreement was lodged in the
California case on 26 November 1980 or two (2) days after the pre-trial conference held on
24 November 1980.  If Mr. Ready was indeed not authorized by PAWI to enter into the
1âwphi1

supplemental settlement agreement, PAWI could have forthwith signified to FASGI a

disclaimer of the settlement. Instead, more than a year after the execution of the
supplemental settlement agreement, particularly on 09 October 1981, PAWI President
Romeo S. Rojas sent a communication to Elena Buholzer of FASGI that failed to mention
Mr. Ready's supposed lack of authority. On the contrary, the letter confirmed the terms of
the agreement when Mr. Rojas sought forbearance for the impending delay in the opening of
the first letter of credit under the schedule stipulated in the agreement.

It is an accepted rule that when a client, upon becoming aware of the compromise and the
judgment thereon, fails to promptly repudiate the action of his attorney, he will not afterwards
be heard to complain about it. 20

Nor could PAWI claim any prejudice by the settlement. PAWI was spared from possibly
paying FASGI substantial amounts of damages and incurring heavy litigation expenses
normally generated in a full-blown trial. PAWI, under the agreement was afforded time to
reimburse FASGI the price it had paid for the defective wheels. PAWI, should not, after its
opportunity to enjoy the benefits of the agreement, be allowed to later disown the
arrangement when the terms thereof ultimately would prove to operate against its hopeful
expectations.
PAWI assailed not only Mr. Ready's authority to sign on its behalf the Supplemental
Settlement Agreement but denounced likewise his authority to enter into a stipulation for
judgment before the California court on 06 August 1982 on the ground that it had by then
already terminated the former's services. For his part, Mr. Ready admitted that while he did
receive a request from Manuel Singson of PAWI to withdraw from the motion of judgment,
the request unfortunately came too late. In an explanatory telex, Mr. Ready told Mr. Singson
that under American Judicial Procedures when a motion for judgment had already been filed
a counsel would not be permitted to withdraw unilaterally without a court order. From the
time the stipulation for judgment was entered into on 26 April 1982 until the certificate of
finality of judgment was issued by the California court on 07 September 1982, no notification
was issued by PAWI to FASGI regarding its termination of Mr. Ready's services. If PAWI
were indeed hoodwinked by Mr. Ready who purportedly acted in collusion with FASGI, it
should have aptly raised the issue before the forum which issued the judgment in line with
the principle of international comity that a court of another jurisdiction should refrain, as a
matter of propriety and fairness, from so assuming the power of passing judgment on the
correctness of the application of law and the evaluation of the facts of the judgment issued
by another tribunal. 21

Fraud, to hinder the enforcement within this jurisdiction of a foreign judgment, must be
extrinsic, i.e., fraud based on facts not controverted or resolved in the case where judgment
is rendered, or that which would go to the jurisdiction of the court or would deprive the party
22 

against whom judgment is rendered a chance to defend the action to which he has a
meritorious case or defense. In fine, intrinsic fraud, that is, fraud which goes to the very
existence of the cause of action - such as fraud in obtaining the consent to a contract - is
deemed already adjudged, and it, therefore, cannot militate against the recognition or
enforcement of the foreign judgment. 23

Even while the US judgment was against both FPS and PAWI, FASGI had every right to
seek enforcement of the judgment solely against PAWI or, for that matter, only against FPS.
FASGI, in its complaint, explained:

"17. There exists, and at all times relevant herein there existed, a unity of interest and
ownership between defendant PAWI and defendant FPS, in that they are owned and
controlled by the same shareholders and managers, such that any individuality and
separateness between these defendants has ceased, if it ever existed, and defendant FPS
is the alter ego of defendant PAWI. The two entities are used interchangeably by their
shareholders and managers, and plaintiff has found it impossible to ascertain with which
entity it is dealing at any one time. Adherence to the fiction of separate existence of these
defendant corporations would permit an abuse of the corporate privilege and would promote
injustice against this plaintiff because assets can easily be shifted between the two
companies thereby frustrating plaintiff's attempts to collect on any judgment rendered by this
Court." 24

Paragraph 14 of the Supplemental Settlement Agreement fixed the liability of PAWI and FPS
to be "joint and several" or solidary. The enforcement of the judgment against PAWI alone
would not, of course, preclude it from pursuing and recovering whatever contributory liability
FPS might have pursuant to their own agreement.

PAWI would argue that it was incumbent upon FASGI to first return the second and the third
containers of defective wheels before it could be required to return to FASGI the purchase
price therefor, relying on their original agreement (the "Transaction"). Unfortunately, PAWI
25  26 

defaulted on its covenants thereunder that thereby occasioned the subsequent execution of
the supplemental settlement agreement. This time the parties agreed, under paragraph
3.4(e) thereof, that any further default by PAWI would release FASGI from any obligation to
27 

maintain, store or deliver the rejected wheels. The supplemental settlement agreement
evidently superseded, at the very least on this point, the previous arrangements made by
the parties.

PAWI cannot, by this petition for review, seek refuge over a business dealing and decision
gone awry. Neither do the courts function to relieve a party from the effects of an unwise or
unfavorable contract freely entered into. As has so aptly been explained by the appellate
court, the over-all picture might, indeed, appear to be onerous to PAWI but it should bear
emphasis that the settlement which has become the basis for the foreign judgment has not
been the start of a business venture but the end of a failed one, and each party, naturally,
has had to negotiate from either position of strength or weakness depending on its own
perception of who might have to bear the blame for the failure and the consequence of loss.
28

Altogether, the Court finds no reversible error on the part of the appellate court in its
appealed judgment.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED. No costs.

SO ORDERED.

G.R. No. L-22470 May 28, 1970

SOORAJMULL NAGARMULL, plaintiff-appellee,
vs.
BINALBAGAN-ISABELA SUGAR COMPANY, INC., defendant-appellant.

S. Emiliano Calma for plaintiff-appellee.

Salonga, Ordoñez & Associates for defendant-appellant.

 

DIZON, J.:

Appeal taken by Binalbagan-Isabela Sugar Company, Inc. from the decision of the Court of
First Instance of Manila in Civil Case No. 41103 entitled Soorajmull Nagarmull vs.
Binalbagan-Isabela Sugar Company, Inc." of the following tenor:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in favor of the plaintiff,
Soorajmull Nagarmull, ordering the defendant, Binalbagan-Isabela Sugar Co., Inc. to pay
said plaintiff the sum of 18,562 rupees and 8 annas, with reservation for the plaintiff to prove
its equivalent in Philippine pesos on the date of the filing of the complaint, plus the costs of
suit.

The parties submitted to the trial court the following, stipulation of facts:

1. Under Contract G/14370 dated May 6, 1949, plaintiff, a foreign corporation with offices at
No. 8 Dalhousie Square (East) Calcutta, India, agreed to sell to defendant, a domestic
corporation with offices at the Chronicle Building, Aduana Street, Manila, 1,700,000 pieces
of Hessian bags at $26.20 per 100 bags, C.I.F. Iloilo. Shipment of these bags was to be
made in equal installments of 425,000 pcs. or 425 bales (1,000 pcs. to a bale during each of
the months of July, August, September and October, 1949. A copy of this contract marked
Annex 'A' and the Calcutta Jute Fabrics Shippers Association Form 1935 which was made a
part of the contract and marked as Annex 'A-l' are hereto attached.

2. This agreement was confirmed in a letter by the plaintiff to the defendant on May 7, 1949,
copy of which is attached hereto and made a part hereof as Annex 'B'; .

3. On September 8, 1949, plaintiff advised defendant that of the 850 bales scheduled for
shipment in July and August, the former was able to ship only 310 bales owing to the
alleged failure of the Adamjee Jute Mills to supply the goods in due time. Copy of plaintiff's
letter is attached hereto as Annex 'C' and made an integral part hereof; "4. In a letter dated
September 29, 1949, defendant requested plaintiff to ship 100 bales of the 540 bales
defaulted from the July and August shipments. A copy of this letter marked Annex 'D' is
hereto attached. In this connection, it may also be mentioned that of the 425 bales
scheduled for shipment in September, 54 bales were likewise defaulted resulting in a total of
154 bales which is now the object of the controversy.

5. Defendant requested plaintiff to pay 5% of the value of the 154 bales defaulted as penalty
which plaintiff did.

6. Meanwhile, on October 1, 1949, the Government of India increased the export duty of jute
bags from 80 to 350 rupees per ton, and on October 5, 1949, plaintiff requested defendant
to increase its letter of credit to cover the enhanced rate of export duty imposed upon the
goods that were to be shipped in October, reminding the latter that under their agreement,
any alteration in export duty was to be for the buyer's account. Copy of plaintiff's letter is
attached hereto as Annex 'E';

7. On October 25, 1949, defendant, in compliance with plaintiff's request, increased the
amount of its letter of credit by $10,986.25 to cover the increase in export duty on 425 bales
scheduled under the contract for the shipment in October, 1949. A copy of defendants letter
marked Annex 'F' is hereto attached;

8. On October 27, 1949, plaintiff wrote to defendant for a further increase of $4,000.00 in its
letter of credit to cover the shipment of 154 bales which under the contract should have
been included in the July, August and September shipments. A copy of said letter is
attached hereto as Annex 'G';

9. On November 17, 1949, plaintiff wrote defendant a letter reiterating its claim for $4,000.00
corresponding to the increased export taxes on the 154 bales delivered to defendant from
the defaulted shipments for the months of July, August and September, 1949. A copy of said
letter is attached hereto as Annex 'H';
10. On February 6, 1951, defendant received notification from the Bengal Chamber of
Commerce Tribunal of Arbitration in Calcutta, India, advising it that on December 28, 1950,
Plaintiff applied to said Tribunal for arbitration regarding their claim. The Tribunal requested
the defendant to send them its version of the case. This, defendant did on March 1, 1951,
thru the then Government Corporate Counsel, former Justice Pompeyo Diaz. A copy of the
letter of authority is attached as Annex 'I';

11. The case was heard by the Tribunal of Arbitration on July 5, 1951. Having previously
requested the Secretary Foreign Affairs for Assistance, defendant was represented at the
hearing by the Philippine Consulate General in Calcutta, India, by Consul Jose Moreno. A
copy of the authority, consisting of the letter of Government Corporate Counsel Pompeyo
Diaz, dated March 1, 1951, and 1st Indorsement thereon, dated March 2, 1951, are attached
hereto as Annexes 'J' and 'J-1';

12. As presented to the Tribunal of Arbitration, the whole case revolved on the question of
whether or not defendant is liable to the plaintiff for the payment of increased export taxes
imposed by the Indian Government on the shipments of jute sacks. Defendant contended
that if the jute sacks in question were delivered by plaintiff in the months of July, August, and
September, 1949, pursuant to the terms of the contract, then there would have been no
increased export taxes to pay because said increased taxes became effective only on
October 1, 1949, while on the other hand, plaintiff argued that the contract between the
parties and all papers and documents made parts thereto should prevail, including
defendant's letter of September 29, 1949;

13. The Bengal Chamber of Commerce, Tribunal of Arbitration, refused to sustain

defendant's contention and decided in favor of the plaintiff, ordering the defendant to pay to
the plaintiff the sum of 18,562 rupees and 8 annas. This award was thereafter referred to the
Calcutta High Court which issued a decree affirming the award;

14. For about two years, the plaintiff attempted to enforce the said award through the
Philippine Charge de'Affaires in Calcutta, the Indian Legation here in the Philippines, and the
Department of Foreign Affairs. On September 22, 1952, plaintiff, thru the Department of
Foreign Affairs, sought to enforce its claim to which letter defendant replied on August 11,
1952, saying that they are not bound by the decision of the Bengal Chamber of Commerce
and consequently are not obligated to pay the claim in question. Copies of said letters are
attached hereto as Annexes 'K' and 'L', respectively;

15. For more than three years thereafter, no communication was received by defendant from
the plaintiff regarding their claim until January 26, 1956, when Atty. S. Emiliano Calma wrote
the defendant a letter of demand, copy of which is attached hereto as Annex 'M';

16. On February 3, 1956, defendant's counsel replied informing Atty. S. Emiliano Calma that
it refuses to pay plaintiff's claim because the same has no foundation in law and in fact. A
copy of this letter is attached hereto as Annex 'N';

17. Thereafter, no communication was received by defendant from plaintiff or its lawyers
regarding their claim until June, 1959, when the present complaint was filed.

FINALLY, parties thru their respective counsel, state that much as they have endeavored to
agree on all matters of fact, they have failed to do so on certain points. It is, therefore
respectfully prayed of this Honorable Court that parties be allowed to present evidence on
the disputed facts.

Thereafter the parties submitted additional evidence pursuant to the reservation they made
in the above stipulation.

The appeal was elevated to the Court of Appeals but the latter, by its resolution of January
27, 1964, elevated it to this Court because the additional documents and oral evidence
presented by the parties did not raise any factual issue, and said court further found that "the
three assigned errors quoted above all pose questions of law."

As may be gathered from the pleadings and the facts stipulated, the action below was for
the enforcement of a foreign judgment: the decision rendered by the Tribunal of Arbitration
of the Bengal Chamber of Commerce in Calcutta, India, as affirmed by the High Court of
Judicature of Calcutta. The appealed decision provides for its enforcement subject to the
right reserved to appellee to present evidence on the equivalent in Philippine currency of the
amount adjudged in Indian currency. The record does not disclose any evidence presented
for that purpose subsequent to the rendition of judgment.

To secure a reversal of the appealed decision appellant claims that the lower court
committed the following errors:

THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF-APPELLEE, A FOREIGN

CORPORATION NOT LICENSED TO TRANSACT BUSINESS IN THE PHILIPPINES, HAS
THE RIGHT TO SUE IN PHILIPPINE COURTS.

II

THE LOWER COURT ERRED WHEN IT FAILED TO CONSIDER PLAINTIFF-APPELLEE'S

DEFAULT, AND INSTEAD RELIED SOLELY ON THE AWARD OF THE BENGAL
CHAMBER OF COMMERCE TRIBUNAL OF ARBITRATION.

III

THE LOWER COURT ERRED WHEN IT HELD THAT PLAINTIFF-APPELLEE WAS NOT
GUILTY OF LACHES.

The main issue to be resolved is whether or not the decision of the Tribunal of Arbitration of
the Bengal Chamber of Commerce, as affirmed by the High Court of Judicature of Calcutta,
is enforceable in the Philippines.

For the purpose of this decision We shall assume that appellee — contrary to appellant's
contention — has the right to sue in Philippine courts and that, as far as the instant case is
concerned, it is not guilty of laches. This notwithstanding, We are constrained to reverse the
appealed decision upon the ground that it is based upon a clear mistake of law and its
enforcement will give rise to a patent injustice.

It is true that under the provisions of Section 50 of Rule 39, Rules of Court, a judgment for a
sum of money rendered by a foreign court "is presumptive evidence of a right as between
the parties and their successors in interest by a subsequent title", but when suit for its
enforcement is brought in a Philippine court, said judgment "may be repelled by evidence of
a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or
fact" (Emphasis supplied.)

Upon the facts of record, We are constrained to hold that the decision sought to be enforced
was rendered upon a "clear mistake of law" and because of that it makes appellant — an
innocent party — suffer the consequences of the default or breach of contract committed by
appellee.

There is no question at all that appellee was guilty of a breach of contract when it failed to
deliver one-hundred fifty-four Hessian bales which, according to the contract entered into
with appellant, should have been delivered to the latter in the months of July, August and
September, all of the year 1949. It is equally clear beyond doubt that had these one-hundred
fifty-four bales been delivered in accordance with the contract aforesaid, the increase in the
export tax due upon them would not have been imposed because said increased export tax
became effective only on October 1, 1949.

To avoid its liability for the aforesaid increase in the export tax, appellee claims that
appellant should be held liable therefor on the strength of its letter of September 29, 1949
asking appellee to ship the shortage. This argument is unavailing because it is not only
illogical but contrary to known principles of fairness and justice. When appellant demanded
that appellee deliver the shortage of 154 bales it did nothing more than to demand that to
which it was entitled as a matter of right. The breach of contract committed by appellee gave
appellant, under the law and even under general principles of fairness, the right to rescind
the contract or to ask for its specific performance, in either case with right to demand
damages. Part of the damages appellant was clearly entitled to recover from appellee
growing out of the latter's breach of the contract consists precisely of the amount of the
increase decreed in the export tax due on the shortage — which, because of appellee's
fault, had to be delivered after the effectivity of the increased export tax.

To the extent, therefore, that the decisions of the Tribunal of Arbitration of the Bengal
Chamber of Commerce and of the High Court of Judicature of Calcutta fail to apply to the
facts of this case fundamental principles of contract, the same may be impeached, as they
have been sufficiently impeached by appellant, on the ground of "clear mistake of law". We
agree in this regard with the majority opinion in Ingenohl vs. Walter E. Olsen & Co. (47 Phil.
189), although its view was reversed by the Supreme Court of the United States (273 U.S.
541, 71 L. ed. 762) which at that time had jurisdiction to review by certiorari decisions of this
Court. We can not sanction a clear mistake of law that would work an obvious injustice upon
appellant.

WHEREFORE, the appealed judgment is reversed and set aside, with costs.

G.R. No. 47517             June 27, 1941

IDONAH SLADE PERKINS, petitioner,

vs.
MAMERTO ROXAS, ET AL., respondents.

Alva J. Hill for petitioner.

DeWitt, Perkins & Ponce Enrile for respondent Judge and respondent Perkins.
Ross, Lawrence, Selph & Carrascoso, Jr., for respondent Benguet Consolidated Mining Co.
LAUREL, J.:

On July 5, 1938, the respondent Eugene Arthur Perkins, filed a complaint in the Court of
First Instance of Manila against the Benguet Consolidated Mining Company for the recovery
of the sum of P71,379.90, consisting of dividends which have been declared and made
payable on 52,874 shares of stock registered in his name, payment of which was being
withheld by the company, and for the recognition of his right to the control and disposal of
said shares, to the exclusion of all others. To the complaint, the company filed its answer,
alleging, by way of defense, that the withholding of plaintiff's right to the disposal and control
of the shares was due to certain demands made with respect to said shares by the petitioner
herein. Idonah Slade Perkins, and by one George H. Engelhard. The answer prays that the
adverse claimants be made parties to the action and served with notice thereof by
publication, and that thereafter all such parties be required to interplead and settle the rights
among themselves.

On September 5, 1938, the trial court ordered the respondent, Eugene Arthur Perkins, to
include in his complaint as parties defendants petitioner, Idonah Slade Perkins, and George
H. Engelhard. The complaint was accordingly amended and in addition to the relief prayed
for in the original complaint, respondent Perkins prayed that petitioner Idonah Slade Perkins
and George H. Engelhard be adjudged without interest in the shares of stock in question
and excluded from any claim they assert thereon. Thereafter, summons by publication were
served upon the non-resident defendants, Idonah Slade Perkins and George H. Engelhard,
pursuant to the order of the trial court. On December 9, 1938, Engelhard filed his answer to
the amended complaint, and on January 8, 1940, petitioner's objection to the court's
jurisdiction over her person having been overruled by the trial court and by this court in G. R.
No. 46831, petitioner filed her answer with a cross-complaint in which she sets up a
judgment allegedly obtained by her against respondent, Eugene Arthur Perkins, from the
Supreme Court of the State of New York, wherein it is declared that she is the sole legal
owner and entitled to the possession and control of the shares of stock in question together
with all the cash dividends declared thereon by the Benguet Consolidated Mining Company,
and prays for various affirmative reliefs against the respondent. To the answer and cross-
complaint thus filed, the respondent, Eugene Arthur Perkins, filed a reply and an answer in
which he sets up several defenses to the enforcement in this jurisdiction of the judgment of
the Supreme Court of the State of New York above alluded to. Instead of demurring to the
reply on either of the two grounds specified in section 100 of the Code of Civil Procedure,
petitioner, Idonah Slade Perkins, on June 5, 1940, filed a demurrer thereto on the ground
that "the court has no jurisdiction of the subject of the action," because the alleged judgment
of the Supreme Court of the State of New York is res judicata.

Petitioner's demurrer having been overruled, she now filed in this court a petition entitled
"Certiorari, Prohibition and Mandamus," alleging that "the respondent judge is about to and
will render judgment in the above-mentioned case disregarding the constitutional rights of
this petitioner; contrary to and annulling the final, subsisting, valid judgment rendered and
entered in this petitioner's favor by the courts of the State of New York, ... which decision
is res judicata on all the questions constituting the subject matter of civil case No. 53317, of
the Court of First Instance of Manila; and which New York judgment the Court of First
Instance of Manila is without jurisdiction to annul, amend, reverse, or modify in any respect
whatsoever"; and praying that the order of the respondent judge overruling the demurrer be
annulled, and that he and his successors be permanently prohibited from taking any action
on the case, except to dismiss the same.

The only question here to be determined, therefore, is whether or not, in view of the alleged
judgment entered in favor of the petitioner by the Supreme Court of New York, and which is
claimed by her to be res judicata on all questions raised by the respondent, Eugene Arthur
Perkins, in civil case No. 53317 of the Court of First Instace of Manila, the local court has
jurisdiction over the subject matter of the action in the said case. By jurisdiction over the
subject matter is meant the nature of the cause of action and of the relief sought, and this is
conferred by the sovereign authority which organizes the court, and is to be sought for in
general nature of its powers, or in authority specially conferred. In the present case, the
amended complaint filed by the respondent, Eugene Arthur Perkins, in the court below
alleged the ownership in himself of the conjugal partnership between him and his wife,
Idonah Slade Perkins; that the petitioner, Idonah Slade Perkins, and George H. Engelhard
assert claims to and interests in the said stock adverse to Eugene Arthur Perkins; that such
claims are invalid, unfounded, and made only for the purpose of vexing, hindering and
delaying Eugene Arthur Perkins in the exercise of the lawful control over and use of said
shares and dividends accorded to him and by law and by previous orders and decrees of
this court; and the said amended complaint prays, inter alia, "that defendant Benguet
Consolidated Mining Company be required and ordered to recognize the right of the plaintiff
to the control and disposal of said shares so standing in his name to the exclusion of all
others; that the additional defendants, Idonah Slade Perkins and George H. Engelhard, be
each held to have no interest or claim in the subject matter of the controversy between
plaintiff and defendant Benguet Consolidated Mining Company, or in or under the judgment
to be rendered herein and that by said judgment they, and each of them be excluded
therefrom; and that the plaintiff be awarded the costs of this suit and general relief." The
respondent's action, therefore, calls for the adjudication of title to certain shares of stock of
the Benguet Consolidated Mining Company, and the granting of affirmative reliefs, which fall
within the general jurisdiction of the Court of First Instance of Manila. (Vide: sec. 146, et
seq., Adm. Code, as amended by Commonwealth Act No. 145; sec. 56, Act No. 136, as
amended by Act No. 400.)

Similarly, the Court of First Instance of Manila is empowered to adjudicate the several
demands contained in petitioner's cross-complaint. The cross-complaint sets up a judgment
allegedly recovered by Idonah Slade Perkins against Eugene Arthur Perkins in the Supreme
Court of New York and by way of relief prays:

(1) Judgment against the plaintiff Eugene Arthur Perkins in the sum of one hundred eighty-
five thousand and four hundred dollars ($185,400), representing cash dividends paid to him
by defendant Benguet Consolidated Mining Co. from February, 1930, up to and including the
dividend of March 30, 1937.

(2) That plaintiff Eugene Arthur Perkins be required to deliver to this defendant the
certificates representing the 48,000 shares of capital stock of Benguet Consolidated Mining
Co. issued as a stock dividend on the 24,000 shares owned by this defendant as described
in the judgment Exhibit 1-A.

(3) That this defendant recover under that judgment Exhibit 1-A interest upon the amount of
each cash dividend referred to in that judgment received by plaintiff Eugene Arthur Perkins
from February, 1930, to and including the dividend of March 30, 1937, from the date of
payment of each of such dividends at the rate of 7 per cent per annum until paid.

(4) That this defendant recover of plaintiff her costs and disbursements in that New York
action amounting to the sum of one thousand five hundred eighty-four and 20/00 dollars
($1,584.20), and the further sum of two thousand dollars ($2,000) granted her in that
judgment Exhibit 1-A as an extra allowance, together with interest.

(5) For an order directing an execution to be issued in favor of this defendant and against
the plaintiff for amounts sufficient to satisfy the New York judgment Exhibit 1-A in its entirety,
and against the plaintiff and the defendant Benguet Consolidated Mining Co. for such other
amounts prayed for herein as this court may find to be due and payable by each of them;
and ordering them to comply with all other orders which this court may issue in favor of the
defendant in this case.

(6) For the costs of this action, and

(7) For such other relief as may be appropriate and proper in the premises.

In other words, Idonah Slade Perkins in her cross-complaint brought suit against Eugene
Arthur Perkins and the Benguet Consolidated Mining Company upon the alleged judgment
of the Supreme Court of the State of New York and asked the court below to render
judgment enforcing that New York judgment, and to issue execution thereon. This is a form
of action recognized by section 309 of the Code of Civil Procedure (now section 47, Rule 39,
Rules of Court) and which falls within the general jurisdiction of the Court of First Instance of
Manila, to adjudicate, settled and determine.

The petitioner expresses the fear that the respondent judge may render judgment "annulling
the final, subsisting, valid judgment rendered and entered in this petitioner's favor by the
courts of the State of New York, ... which decision is res judicata on all the questions
constituting the subject matter of civil case No. 53317," and argues on the assumption that
the respondent judge is without jurisdiction to take cognizance of the cause. Whether or not
the respondent judge in the course of the proceedings will give validity and efficacy to the
New York judgment set up by the petitioner in her cross-complaint is a question that goes to
the merits of the controversy and relates to the rights of the parties as between each other,
and not to the jurisdiction or power of the court. The test of jurisdiction is whether or not the
tribunal has power to enter upon the inquiry, not whether its conclusion in the course of it is
right or wrong. If its decision is erroneous, its judgment case be reversed on appeal; but its
determination of the question, which the petitioner here anticipates and seeks to prevent, is
the exercise by that court — and the rightful exercise — of its jurisdiction.

The petition is, therefore, hereby denied, with costs against the petitioner. So ordered.

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,   the 1

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   wherein it was held that "the process of the court has no
4

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.  Being the party challenging the judgment rendered by the
7

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.  In 8

this case, it is the procedural law of Japan where the judgment was rendered that
determines the validity of the extraterritorial service of process on SHARP. As to what this
law is is a question of fact, not of law. It may not be taken judicial notice of and must be
pleaded and proved like any other fact.  Sections 24 and 25, Rule 132 of the Rules of Court
9

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   may
10

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   and Section 190 of the Insurance Code   clearly contemplate two situations: (1) if the
13 14

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   does not
15

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.   The Tokyo District Court requested the Supreme Court of Japan to
16

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   where this Court held:
18

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.

xxx xxx xxx

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   and Dial 19

Corp. vs. Soriano,   as well as the principle laid down by the Iowa Supreme Court in the
20

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   that domicile in the state is alone sufficient to bring an absent
22

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.   In a strict
24

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.,   to wit:
26

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.

G.R. No. L-45193 April 5, 1939

EMILIE ELMIRA RENEE, RAYMOND ANTONIN, GINETTE
ROSE ADELAIDE and MONIQUE VICTOIRE, ALL
SURNAMED BOUDARD vs. STEWART EDDIE TAIT

FACTS: The appellant Emilie Boudard, in her capacity as widow of

Marie Theodore Boudard and as guardian of her coappellants, her
children born during her marriage with the deceased, obtained a
judgment in their favor from the civil division of the CFI of Hanoi,
French Indo-China for a sum, plus interest. The judgment was rendered
against Stewart Tait who had been declared in default for his failure to
appear at the trial before said court.

The judgment, was based on the fact that Marie Theodore Boudard, who
was an employee of Stewart Eddie Tait, was killed in Hanoi by other
employees of said Tait, although “outside of the fulfillment of a duty”.

Trial court (in the Philippines) dismissed the action for enforcement of
the Hanoi decision based principally on the lack of jurisdiction of the
Court of Hanoi to render the judgment in question, for the execution of
which this action was instituted in this jurisdiction. The lack of
jurisdiction was discovered in the decision itself of the Court of Hanoi
which states that the appellee was not a resident of, nor had a known
domicile in, that country.

The evidence adduced at the trial conclusively proves that neither the
appellee nor his agent or employees were ever in Hanoi, French Indo-
China; and that the deceased Marie Theodore Boudard had never, at
any time, been his employee. The appellee’s first intimation of his
having been sued and sentenced to pay a huge sum by the civil division
of the Court of First Instance of Hanoi was when he was served with
summons in the present case.

ISSUE: WON the decision in Hanoi can be executed here.

HELD: NO

The appellants failed to show that the proceedings against the appellee
in the Court of Hanoi were in accordance with the laws of France then
in force; and as to the second point, it appears that said documents are
not of the nature mentioned in sections 304 and 305 of Act No. 190.
They are not copies of the judicial record of the proceedings against the
appellee in the Court of Hanoi, duly certified by the proper authorities
there, whose signatures should be authenticated by the Consul or some
consular agent of the United States in said country.

Moreover, the evidence of record shows that the appellee was not in
Hanoi during the time mentioned in the complaint of the appellants,
nor were his employees or representatives. The rule in matters of this
nature is that judicial proceedings in a foreign country, regarding
payment of money, are only effective against a party if summons is duly
served on him within such foreign country before the proceedings.

It can not be said that the decision rendered by the Court of Hanoi
should be conclusive to such an extent that it cannot be contested, for it
merely constitutes, from the viewpoint of our laws, prima facie evidence
of the justness of appellants’ claim, and, as such, naturally admits proof
to the contrary.

G.R. No. 186571               August 11, 2010

GERBERT R. CORPUZ, Petitioner,
vs.
DAISYLYN TIROL STO. TOMAS and The SOLICITOR GENERAL, Respondents.

DECISION

BRION, J.:

Before the Court is a direct appeal from the decision 1 of the Regional Trial Court (RTC) of
Laoag City, Branch 11, elevated via a petition for review on certiorari 2 under Rule 45 of the
Rules of Court (present petition).

Petitioner Gerbert R. Corpuz was a former Filipino citizen who acquired Canadian
citizenship through naturalization on November 29, 2000. 3 On January 18, 2005, Gerbert
married respondent Daisylyn T. Sto. Tomas, a Filipina, in Pasig City. 4 Due to work and other
professional commitments, Gerbert left for Canada soon after the wedding. He returned to
the Philippines sometime in April 2005 to surprise Daisylyn, but was shocked to discover
that his wife was having an affair with another man. Hurt and disappointed, Gerbert returned
to Canada and filed a petition for divorce. The Superior Court of Justice, Windsor, Ontario,
Canada granted Gerbert’s petition for divorce on December 8, 2005. The divorce decree
took effect a month later, on January 8, 2006. 5

Two years after the divorce, Gerbert has moved on and has found another Filipina to love.
Desirous of marrying his new Filipina fiancée in the Philippines, Gerbert went to the Pasig
City Civil Registry Office and registered the Canadian divorce decree on his and Daisylyn’s
marriage certificate. Despite the registration of the divorce decree, an official of the National
Statistics Office (NSO) informed Gerbert that the marriage between him and Daisylyn still
subsists under Philippine law; to be enforceable, the foreign divorce decree must first be
judicially recognized by a competent Philippine court, pursuant to NSO Circular No. 4, series
of 1982.6

Accordingly, Gerbert filed a petition for judicial recognition of foreign divorce and/or
declaration of marriage as dissolved (petition) with the RTC. Although summoned, Daisylyn
did not file any responsive pleading but submitted instead a notarized letter/manifestation to
the trial court. She offered no opposition to Gerbert’s petition and, in fact, alleged her desire
to file a similar case herself but was prevented by financial and personal circumstances.
She, thus, requested that she be considered as a party-in-interest with a similar prayer to
Gerbert’s.

In its October 30, 2008 decision, 7 the RTC denied Gerbert’s petition. The RTC concluded
that Gerbert was not the proper party to institute the action for judicial recognition of the
foreign divorce decree as he is a naturalized Canadian citizen. It ruled that only the Filipino
spouse can avail of the remedy, under the second paragraph of Article 26 of the Family
Code,8 in order for him or her to be able to remarry under Philippine law. 9 Article 26 of the
Family Code reads:

Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in
force in the country where they were solemnized, and valid there as such, shall also be valid
in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to
remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine law.

This conclusion, the RTC stated, is consistent with the legislative intent behind the
enactment of the second paragraph of Article 26 of the Family Code, as determined by the
Court in Republic v. Orbecido III; 10 the provision was enacted to "avoid the absurd situation
where the Filipino spouse remains married to the alien spouse who, after obtaining a
divorce, is no longer married to the Filipino spouse." 11

THE PETITION

From the RTC’s ruling,12 Gerbert filed the present petition.13

Gerbert asserts that his petition before the RTC is essentially for declaratory relief, similar to
that filed in Orbecido; he, thus, similarly asks for a determination of his rights under the
second paragraph of Article 26 of the Family Code. Taking into account the rationale behind
the second paragraph of Article 26 of the Family Code, he contends that the provision
applies as well to the benefit of the alien spouse. He claims that the RTC ruling unduly
stretched the doctrine in Orbecido by limiting the standing to file the petition only to the
Filipino spouse – an interpretation he claims to be contrary to the essence of the second
paragraph of Article 26 of the Family Code. He considers himself as a proper party, vested
with sufficient legal interest, to institute the case, as there is a possibility that he might be
prosecuted for bigamy if he marries his Filipina fiancée in the Philippines since two marriage
certificates, involving him, would be on file with the Civil Registry Office. The Office of the
Solicitor General and Daisylyn, in their respective Comments, 14 both support Gerbert’s
position.

Essentially, the petition raises the issue of whether the second paragraph of Article 26 of the
Family Code extends to aliens the right to petition a court of this jurisdiction for the
recognition of a foreign divorce decree.

THE COURT’S RULING

The alien spouse can claim no right under the second paragraph of Article 26 of the Family
Code as the substantive right it establishes is in favor of the Filipino spouse

The resolution of the issue requires a review of the legislative history and intent behind the
second paragraph of Article 26 of the Family Code.

The Family Code recognizes only two types of defective marriages – void 15 and
voidable16 marriages. In both cases, the basis for the judicial declaration of absolute nullity or
annulment of the marriage exists before or at the time of the marriage. Divorce, on the other
hand, contemplates the dissolution of the lawful union for cause arising after the
marriage.17 Our family laws do not recognize absolute divorce between Filipino citizens. 18

Recognizing the reality that divorce is a possibility in marriages between a Filipino and an
alien, President Corazon C. Aquino, in the exercise of her legislative powers under the
Freedom Constitution,19 enacted Executive Order No. (EO) 227, amending Article 26 of the
Family Code to its present wording, as follows:

Art. 26. All marriages solemnized outside the Philippines, in accordance with the laws in
force in the country where they were solemnized, and valid there as such, shall also be valid
in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to
remarry, the Filipino spouse shall likewise have capacity to remarry under Philippine law.

Through the second paragraph of Article 26 of the Family Code, EO 227 effectively
incorporated into the law this Court’s holding in Van Dorn v. Romillo, Jr. 20 and Pilapil v. Ibay-
Somera.21 In both cases, the Court refused to acknowledge the alien spouse’s assertion of
marital rights after a foreign court’s divorce decree between the alien and the Filipino. The
Court, thus, recognized that the foreign divorce had already severed the marital bond
between the spouses. The Court reasoned in Van Dorn v. Romillo that:

To maintain x x x that, under our laws, [the Filipino spouse] has to be considered still
married to [the alien spouse] and still subject to a wife's obligations x x x cannot be just. [The
Filipino spouse] should not be obliged to live together with, observe respect and fidelity, and
render support to [the alien spouse]. The latter should not continue to be one of her heirs
with possible rights to conjugal property. She should not be discriminated against in her own
country if the ends of justice are to be served.22

As the RTC correctly stated, the provision was included in the law "to avoid the absurd
situation where the Filipino spouse remains married to the alien spouse who, after obtaining
a divorce, is no longer married to the Filipino spouse." 23 The legislative intent is for the
benefit of the Filipino spouse, by clarifying his or her marital status, settling the doubts
created by the divorce decree. Essentially, the second paragraph of Article 26 of the Family
Code provided the Filipino spouse a substantive right to have his or her marriage to the alien
spouse considered as dissolved, capacitating him or her to remarry. 24 Without the second
paragraph of Article 26 of the Family Code, the judicial recognition of the foreign decree of
divorce, whether in a proceeding instituted precisely for that purpose or as a related issue in
another proceeding, would be of no significance to the Filipino spouse since our laws do not
recognize divorce as a mode of severing the marital bond; 25 Article 17 of the Civil Code
provides that the policy against absolute divorces cannot be subverted by judgments
promulgated in a foreign country. The inclusion of the second paragraph in Article 26 of the
Family Code provides the direct exception to this rule and serves as basis for recognizing
the dissolution of the marriage between the Filipino spouse and his or her alien spouse.

Additionally, an action based on the second paragraph of Article 26 of the Family Code is
not limited to the recognition of the foreign divorce decree. If the court finds that the decree
capacitated the alien spouse to remarry, the courts can declare that the Filipino spouse is
likewise capacitated to contract another marriage. No court in this jurisdiction, however, can
make a similar declaration for the alien spouse (other than that already established by the
decree), whose status and legal capacity are generally governed by his national law. 26

Given the rationale and intent behind the enactment, and the purpose of the second
paragraph of Article 26 of the Family Code, the RTC was correct in limiting the applicability
of the provision for the benefit of the Filipino spouse. In other words, only the Filipino spouse
can invoke the second paragraph of Article 26 of the Family Code; the alien spouse can
claim no right under this provision.

The foreign divorce decree is presumptive evidence of a right that clothes the party with
legal interest to petition for its recognition in this jurisdiction

We qualify our above conclusion – i.e., that the second paragraph of Article 26 of the Family
Code bestows no rights in favor of aliens – with the complementary statement that this
conclusion is not sufficient basis to dismiss Gerbert’s petition before the RTC. In other
words, the unavailability of the second paragraph of Article 26 of the Family Code to aliens
does not necessarily strip Gerbert of legal interest to petition the RTC for the recognition of
his foreign divorce decree. The foreign divorce decree itself, after its authenticity and
conformity with the alien’s national law have been duly proven according to our rules of
evidence, serves as a presumptive evidence of right in favor of Gerbert, pursuant to Section
48, Rule 39 of the Rules of Court which provides for the effect of foreign judgments. This
Section states:

SEC. 48. Effect of foreign judgments or final orders.—The effect of a judgment or final order
of a tribunal of a foreign country, having jurisdiction to render the judgment or final order is
as follows:

(a) In case of a judgment or final order upon a specific thing, the judgment or final order is
conclusive upon the title of the thing; and

(b) In case of a judgment or final order against a person, the judgment or final order is
presumptive evidence of a right as between the parties and their successors in interest by a
subsequent title.

In either case, the judgment or final order may be repelled by evidence of a want of
jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

To our mind, direct involvement or being the subject of the foreign judgment is sufficient to
clothe a party with the requisite interest to institute an action before our courts for the
recognition of the foreign judgment. In a divorce situation, we have declared, no less, that
the divorce obtained by an alien abroad may be recognized in the Philippines, provided the
divorce is valid according to his or her national law.27

The starting point in any recognition of a foreign divorce judgment is the acknowledgment
that our courts do not take judicial notice of foreign judgments and laws. Justice Herrera
explained that, as a rule, "no sovereign is bound to give effect within its dominion to a
judgment rendered by a tribunal of another country." 28 This means that the foreign judgment
and its authenticity must be proven as facts under our rules on evidence, together with the
alien’s applicable national law to show the effect of the judgment on the alien himself or
herself.29 The recognition may be made in an action instituted specifically for the purpose or
in another action where a party invokes the foreign decree as an integral aspect of his claim
or defense.

In Gerbert’s case, since both the foreign divorce decree and the national law of the alien,
recognizing his or her capacity to obtain a divorce, purport to be official acts of a sovereign
authority, Section 24, Rule 132 of the Rules of Court comes into play. This Section requires
proof, either by (1) official publications or (2) copies attested by the officer having legal
custody of the documents. If the copies of official records are not kept in the Philippines,
these must be (a) accompanied by a certificate issued by the proper diplomatic or consular
officer in the Philippine foreign service stationed in the foreign country in which the record is
kept and (b) authenticated by the seal of his office.

The records show that Gerbert attached to his petition a copy of the divorce decree, as well
as the required certificates proving its authenticity, 30 but failed to include a copy of the
Canadian law on divorce.31 Under this situation, we can, at this point, simply dismiss the
petition for insufficiency of supporting evidence, unless we deem it more appropriate to
remand the case to the RTC to determine whether the divorce decree is consistent with the
Canadian divorce law.

We deem it more appropriate to take this latter course of action, given the Article 26
interests that will be served and the Filipina wife’s (Daisylyn’s) obvious conformity with the
petition. A remand, at the same time, will allow other interested parties to oppose the foreign
judgment and overcome a petitioner’s presumptive evidence of a right by proving want of
jurisdiction, want of notice to a party, collusion, fraud, or clear mistake of law or fact.
Needless to state, every precaution must be taken to ensure conformity with our laws before
a recognition is made, as the foreign judgment, once recognized, shall have the effect of res
judicata32 between the parties, as provided in Section 48, Rule 39 of the Rules of Court. 33

In fact, more than the principle of comity that is served by the practice of reciprocal
recognition of foreign judgments between nations, the res judicata effect of the foreign
judgments of divorce serves as the deeper basis for extending judicial recognition and for
considering the alien spouse bound by its terms. This same effect, as discussed above, will
not obtain for the Filipino spouse were it not for the substantive rule that the second
paragraph of Article 26 of the Family Code provides.

Considerations beyond the recognition of the foreign divorce decree

As a matter of "housekeeping" concern, we note that the Pasig City Civil Registry Office has
already recorded the divorce decree on Gerbert and Daisylyn’s marriage certificate based
on the mere presentation of the decree. 34 We consider the recording to be legally improper;
hence, the need to draw attention of the bench and the bar to what had been done.

Article 407 of the Civil Code states that "[a]cts, events and judicial decrees concerning the
civil status of persons shall be recorded in the civil register." The law requires the entry in
the civil registry of judicial decrees that produce legal consequences touching upon a
person’s legal capacity and status, i.e., those affecting "all his personal qualities and
relations, more or less permanent in nature, not ordinarily terminable at his own will, such as
his being legitimate or illegitimate, or his being married or not." 35

A judgment of divorce is a judicial decree, although a foreign one, affecting a person’s legal
capacity and status that must be recorded. In fact, Act No. 3753 or the Law on Registry of
Civil Status specifically requires the registration of divorce decrees in the civil registry:

Sec. 1. Civil Register. – A civil register is established for recording the civil status of persons,
in which shall be entered:

(a) births;

(b) deaths;
(c) marriages;

(d) annulments of marriages;

(e) divorces;

(f) legitimations;

(g) adoptions;

(h) acknowledgment of natural children;

(i) naturalization; and

(j) changes of name.

xxxx

Sec. 4. Civil Register Books. — The local registrars shall keep and preserve in their offices
the following books, in which they shall, respectively make the proper entries concerning the
civil status of persons:

(1) Birth and death register;

(2) Marriage register, in which shall be entered not only the marriages solemnized but also
divorces and dissolved marriages.

(3) Legitimation, acknowledgment, adoption, change of name and naturalization register.

But while the law requires the entry of the divorce decree in the civil registry, the law and the
submission of the decree by themselves do not ipso facto authorize the decree’s
registration. The law should be read in relation with the requirement of a judicial recognition
of the foreign judgment before it can be given res judicata effect. In the context of the
present case, no judicial order as yet exists recognizing the foreign divorce decree. Thus,
the Pasig City Civil Registry Office acted totally out of turn and without authority of law when
it annotated the Canadian divorce decree on Gerbert and Daisylyn’s marriage certificate, on
the strength alone of the foreign decree presented by Gerbert.

Evidently, the Pasig City Civil Registry Office was aware of the requirement of a court
recognition, as it cited NSO Circular No. 4, series of 1982, 36 and Department of Justice
Opinion No. 181, series of 1982 37 – both of which required a final order from a competent
Philippine court before a foreign judgment, dissolving a marriage, can be registered in the
civil registry, but it, nonetheless, allowed the registration of the decree. For being contrary to
law, the registration of the foreign divorce decree without the requisite judicial recognition is
patently void and cannot produce any legal effect. 1avvphi1

Another point we wish to draw attention to is that the recognition that the RTC may extend to
the Canadian divorce decree does not, by itself, authorize the cancellation of the entry in the
civil registry. A petition for recognition of a foreign judgment is not the proper proceeding,
contemplated under the Rules of Court, for the cancellation of entries in the civil registry.

Article 412 of the Civil Code declares that "no entry in a civil register shall be changed or
corrected, without judicial order." The Rules of Court supplements Article 412 of the Civil
Code by specifically providing for a special remedial proceeding by which entries in the civil
registry may be judicially cancelled or corrected. Rule 108 of the Rules of Court sets in detail
the jurisdictional and procedural requirements that must be complied with before a
judgment, authorizing the cancellation or correction, may be annotated in the civil registry. It
also requires, among others, that the verified petition must be filed with the RTC of the
province where the corresponding civil registry is located; 38 that the civil registrar and all
persons who have or claim any interest must be made parties to the proceedings; 39 and that
the time and place for hearing must be published in a newspaper of general circulation. 40 As
these basic jurisdictional requirements have not been met in the present case, we cannot
consider the petition Gerbert filed with the RTC as one filed under Rule 108 of the Rules of
Court.

We hasten to point out, however, that this ruling should not be construed as requiring two
separate proceedings for the registration of a foreign divorce decree in the civil registry –
one for recognition of the foreign decree and another specifically for cancellation of the entry
under Rule 108 of the Rules of Court. The recognition of the foreign divorce decree may be
made in a Rule 108 proceeding itself, as the object of special proceedings (such as that in
Rule 108 of the Rules of Court) is precisely to establish the status or right of a party or a
particular fact. Moreover, Rule 108 of the Rules of Court can serve as the appropriate
adversarial proceeding41 by which the applicability of the foreign judgment can be measured
and tested in terms of jurisdictional infirmities, want of notice to the party, collusion, fraud, or
clear mistake of law or fact.

WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the October
30, 2008 decision of the Regional Trial Court of Laoag City, Branch 11, as well as its
February 17, 2009 order. We order the REMAND of the case to the trial court for further
proceedings in accordance with our ruling above. Let a copy of this Decision be furnished
the Civil Registrar General. No costs.

SO ORDERED.
G.R. No. 110263       July 20, 2001

ASIAVEST MERCHANT BANKERS (M) BERHAD, petitioner,

vs.
COURT OF APPEALS and PHILIPPINE NATIONAL CONSTRUCTION
CORPORATION, respondents.

DELEON, JR., J.:

Before us is a petition for review on certiorari of the Decision 1 of the Court of Appeals dated
May 19,1993 in CA-G.R. CY No. 35871 affirming the Decision 2 dated October 14,1991 of the
Regional Trial Court of Pasig, Metro Manila, Branch 168 in Civil Case No. 56368 which
dismissed the complaint of petitioner Asiavest Merchant Bankers (M) Berhad for the
enforcement of the money of the judgment of the High Court of Malaysia in Kuala Lumpur
against private respondent Philippine National Construction Corporation. 1âwphi1.nêt

The petitioner Asiavest Merchant Bankers (M) Berhad is a corporation organized under the
laws of Malaysia while private respondent Philippine National Construction Corporation is a
corporation duly incorporated and existing under Philippine laws.

It appears that sometime in 1983, petitioner initiated a suit for collection against private
respondent, then known as Construction and Development Corporation of the Philippines,
before the High Court of Malaya in Kuala Lumpur entitled "Asiavest Merchant Bankers (M)
Berhad v. Asiavest CDCP Sdn. Bhd. and Construction and Development Corporation of the
Philippines."3

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

On September 13, 1985, the High Court of Malaya (Commercial Division) rendered
judgment in favor of the petitioner and against the private respondent which is also
designated therein as the "2nd Defendant. "

The judgment reads in full:

SUIT NO. C638 of 1983

Between

Asiavest Merchant Bankers (M) Berhad Plaintiffs

And

1. Asiavest -CDCP Sdn. Bhd. Defenda

nt

2. Construction & Development Corporation of the

Philippines

JUDGMENT
The 2nd Defendant having entered appearance herein and the Court having under Order
14, rule 3 ordered that judgment as hereinafter provided be entered for the Plaintiffs against
the 2nd Defendant.

IT IS THIS DAY ADJUDGED that the 2nd defendant do pay the Plaintiffs the sum of $5,
108,290.23 (Ringgit Five million one hundred and eight thousand two hundred and ninety
and Sen twenty-three) together with interest at the rate of 12% per annum on

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and

(ii) the sum of $2,521,423.32 from the 11th day of March 1983 to the date of payment; and
$350.00 (Ringgit Three Hundred and Fifty) costs.

Dated the 13th day of September, 1985.

Senior Assistant Registrar, High Court, Kuala Lumpur

This Judgment is filed by Messrs. Skrine & Co., 3 rd Floor, Straits Trading Building, No.4,
Leboh Pasar, Besar, Kuala Lumpur, Solicitors for the Plaintiffs abovenamed.
(VP/Ong/81194.7/83)4

On the same day, September 13, 1985, the High Court of Malaya issued an Order directing
the private respondent (also designated therein as the "2nd Defendant") to pay petitioner
interest on the sums covered by the said Judgment, thus:

SUIT NO. C638 of 1983

Between

Asiavest Merchant Bankers (M) Berhad Plaintiffs

And

1. Asiavest -CDCP Sdn. Bhd. Defendants

2. Construction & Development Corporation of the

Philippines

BEFORE THE SENIOR ASSISTANT REGISTRAR

CIK SUSILA S. PARAM THIS 13th DAY OF IN

SEPTEMBER 1985 CHAMBERS

ORDER

Upon the application of Asiavest Merchant Bankers (M) Berhad, the Plaintiffs in this
action AND UPON READING the Summons in Chambers dated the 16th day of August,
1984 and the Affidavit of Lee Foong Mee affirmed on the 14th day of August 1984 both filed
herein AND UPON HEARING Mr. T. Thomas of Counsel for the Plaintiffs and Mr. Khaw
Chay Tee of Counsel for the 2nd Defendant abovenamed on the 26th day of December
1984 IT WAS ORDERED that the Plaintiffs be at liberty to sign final judgment against the
2nd Defendant for the sum of $5,108,290.23 AND IT WAS ORDERED that the 2nd
Defendant do pay the Plaintiffs the costs of suit at $350.00 AND IT WAS FURTHER
ORDERED that the plaintiffs be at liberty to apply for payment of interest AND upon the
application of the Plaintiffs for payment of interest coming on for hearing on the 1st day of
August in the presence of Mr. Palpanaban Devarajoo of Counsel for the Plaintiffs and Mr.
Khaw Chay Tee of Counsel for the 2nd Defendant above-named AND UPON
HEARING Counsel as aforesaid BY CONSENT IT WAS ORDERED that the 2nd Defendant
do pay the Plaintiffs interest at a rate to be assessed AND the same coming on for
assessment this day in the presence of Mr. Palpanaban Devarajoo of Counsel for the
Plaintiffs and Mr. Khaw Chay Tee of Counsel for the 2nd Defendant AND UPON HEARING
Counsel as aforesaid BY CONSENT IT IS ORDERED that the 2nd Defendant do pay the
Plaintiffs interest at the rate of 12% per annum on:

(i) the sum of $2,586,866.91 from the 2nd day of March 1983 to the date of payment; and

(ii) the sum Of $2,521,423.32 from the 11th day of March 1983 to the date of Payment.

Dated the 13th day of September,1985.

Senior Assistant Registrar, High Court, Kuala Lumpur. 5

Following unsuccessful attempts6 to secure payment from private respondent under the

judgment, petitioner initiated on September 5, 1988 the complaint before Regional Trial
Court of Pasig, Metro Manila, to enforce the judgment of the High Court of Malaya. 7

Private respondent sought the dismissal of the case via a Motion to Dismiss filed on
October 5, 1988, contending that the alleged judgment of the High Court of Malaya
should be denied recognition or enforcement since on in face, it is tainted with want of
jurisdiction, want of notice to private respondent, collusion and/or fraud, and there is a clear
mistake of law or fact.8 Dismissal was, however, denied by the trial court considering that the
grounds relied upon are not the proper grounds in a motion to dismiss under Rule 16 of the
Revised Rules of Court. 9

On May 22, 1989, private respondent filed its Answer with Compulsory Counter

claim's10 and therein raised the grounds it brought up in its motion to dismiss. In its Reply
filed11 on June 8, 1989, the petitioner contended that the High Court of Malaya acquired
jurisdiction over the Person of private respondent by its voluntary submission the court's
jurisdiction through its appointed counsel, Mr. Khay Chay Tee. Furthermore, private
respondent's counsel waived any and all objections to the High Court's jurisdiction in a
pleading filed before the court.

In due time, the trial court rendered its Decision dated October 14, 1991 dismissing
petitioner's complaint. Petitioner interposed an appeal with the Court of Appeals, but the
appellate court dismissed the same and affirmed the decision of the trial court in a Decision
dated May 19, 1993.

Hence, the instant Petition which is anchored on two (2) assigned errors, 12 to wit:

THE COURT OF APPEALS ERRED IN HOLDING THAT THE MALAYSIAN COURT DID
NOT ACQUIRE PERSONAL JURISDICTION OVER PNCC, NOTWITHSTANDING THAT (a)
THE FOREIGN COURT HAD SERVED SUMMONS ON PNCC AT ITS MALAYSlA OFFICE,
AND (b) PNCC ITSELF APPEARED BY COUNSEL IN THE CASE BEFORE THAT COURT.

II

THE COURT OF APPEALS ERRED IN DENYING RECOGNITION AND ENFORCEMENT

TO (SIC) THE MALAYSIAN COURT JUDGMENT.

Generally, in the absence of a special compact, no sovereign is bound to give effect within
its dominion to a judgment rendered by a tribunal of another country; 13 however, the rules of
comity, utility and convenience of nations have established a usage among civilized states
by which final judgments of foreign courts of competent jurisdiction are reciprocally
respected and rendered efficacious under certain conditions that may vary in different
countries.14

In this jurisdiction, a valid judgment rendered by a foreign tribunal may be recognized insofar
as the immediate parties and the underlying cause of action are concerned so long as it is
convincingly shown that there has been an opportunity for a full and fair hearing before a
court of competent jurisdiction; that the trial upon regular proceedings has been conducted,
following due citation or voluntary appearance of the defendant and under a system of
jurisprudence likely to secure an impartial administration of justice; and that there is nothing
to indicate either a prejudice in court and in the system of laws under which it is sitting or
fraud in procuring the judgment.15

A foreign judgment is presumed to be valid and binding in the country from which it comes,
until a contrary showing, on the basis of a presumption of regularity of proceedings and the
giving of due notice in the foreign forum Under Section 50(b), 16 Rule 39 of the Revised Rules
of Court, which was the governing law at the time the instant case was decided by the trial
court and respondent appellate court, a judgment, against a person, of a tribunal of a foreign
country having jurisdiction to pronounce the same is presumptive evidence of a right as
between the parties and their successors in interest by a subsequent title. The judgment
may, however, be assailed by evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact. In addition, under Section 3(n), Rule 131 of
the Revised Rules of Court, a court, whether in the Philippines or elsewhere, enjoys the
presumption that it was acting in the lawful exercise of its jurisdiction. Hence, once the
authenticity of the foreign judgment is proved, the party attacking a foreign judgment, is
tasked with the burden of overcoming its presumptive validity.

In the instant case, petitioner sufficiently established the existence of the money judgment of
the High Court of Malaya by the evidence it offered. Vinayak Prabhakar Pradhan, presented
as petitioner's sole witness, testified to the effect that he is in active practice of the law
profession in Malaysia;17 that he was connected with Skrine and Company as Legal
Assistant up to 1981; 18 that private respondent, then known as Construction and
Development Corporation of the Philippines, was sued by his client, Asiavest Merchant
Bankers (M) Berhad, in Kuala Lumpur; 19 that the writ of summons were served on March 17,
1983 at the registered office of private respondent and on March 21, 1983 on Cora S. Deala,
a financial planning officer of private respondent for Southeast Asia operations; 20 that upon
the filing of the case, Messrs. Allen and Gledhill, Advocates and Solicitors, with address at
24th Floor, UMBC Building, Jalan Sulaiman, Kuala Lumpur, entered their conditional
appearance for private respondent questioning the regularity of the service of the writ of
summons but subsequently withdrew the same when it realized that the writ was properly
served;21 that because private respondent failed to file a statement of defense within two (2)
weeks, petitioner filed an application for summary judgment and submitted affidavits and
documentary evidence in support of its claim; 22 that the matter was then heard before the
High Court of Kuala Lumpur in a series of dates where private respondent was represented
by counsel; 23 and that the end result of all these proceedings is the judgment sought to be
enforced.

In addition to the said testimonial evidence, petitioner offered the following documentary
evidence:

(a) A certified and authenticated copy of the Judgment promulgated by the Malaysian High
Court dated September 13, 1985 directing private respondent to pay petitioner the sum of
$5,108,290.23 Malaysian Ringgit plus interests from March 1983 until fully paid; 24

(b) A certified and authenticated copy of the Order dated September 13,1985 issued by the
Malaysian High Court in Civil Suit No. C638 of 1983; 25

(c) Computation of principal and interest due as of January 31, 1990 on the amount
adjudged payable to petitioner by private respondent; 26

(d) Letter and Statement of Account of petitioner's counsel in Malaysia indicating the costs
for prosecuting and implementing the Malaysian High Court's Judgment; 27

(e) Letters between petitioner's Malaysian counsel, Skrine and Co., and its local counsel,
Sycip Salazar Law Offices, relative to institution of the action in the Philippines; 28

(f) Billing Memorandum of Sycip Salazar Law Offices dated January 2, 1990 showing
attorney's fees paid by and due from petitioner; 29
(g) Statement of Claim, Writ of Summons and Affidavit of Service of such writ in petitioner's
suit against private respondent before the Malaysian High Court; 30

(h) Memorandum of Conditional Appearance dated March 28, 1983 filed by counsel for
private respondent with the Malaysian High Court; 31

(i) Summons in Chambers and Affidavit of Khaw Chay Tee, cotmsel for private respondent,
submitted during the proceedings before the Malaysian High Court; 32

(j) Record of the Court's Proceedings in Civil Case No. C638 of 1983. 33

(k) Petitioner 's verified Application for Summary Judgment dated August 14, 1984; 34 and

(l) Letter dated November 6, 1985 from petitioner's Malaysian Counsel to private
respondent's counsel in Malaysia.35

Having thus proven, through the foregoing evidence, the existence and authenticity of the
foreign judgment, said foreign judgment enjoys presumptive validity and the burden then fell
upon the party who disputes its validity, herein private respondent, to prove otherwise.

Private respondent failed to sufficiently discharge the burden that fell upon it - to prove by
clear and convincing evidence the grounds which it relied upon to prevent enforcement of
the Malaysian High Court judgment, namely, (a) that jurisdiction was not acquired by the
Malaysian Court over the person of private respondent due to alleged improper service of
summons upon private respondent and the alleged lack of authority of its counsel to appear
and represent private respondent in the suit; (b) the foreign judgment is allegedly tainted by
evident collusion, fraud and clear mistake of fact or law; and (c) not only were the requisites
for enforcement or recognition allegedly not complied with but also that the Malaysian
judgment is allegedly contrary to the Constitutional prescription that the "every decision must
state the facts and law on which it is based."36

Private respondent relied solely on the testimony of its two (2) witnesses, namely, Mr.
Alfredo. Calupitan, an accountant of private respondent, and Virginia Abelardo, Executive
Secretary and a member of the staff of the Corporate Secretariat Section of the Corporate
Legal Division, of private respondent, both of whom failed to shed light and amplify its
defense or claim for non-enforcement of the foreign judgment against it.

Mr. Calupitan's testimony centered on the following: that from January to December 1982 he
was assigned in Malaysia as Project Comptroller of the Pahang Project Package A and B for
road construction under the joint venture of private respondent and Asiavest Holdings; 37 that
under the joint venture, Asiavest Holdings would handle the financial aspect of the project,
which is fifty-one percent (51 %) while private respondent would handle the technical aspect
of the project, or forty-nine percent (49%); 38 and, that Cora Deala was not authorized to
receive summons for and in behalf of the private respondent. 39 Ms. Abelardo's testimony, on
the other hand, focused on the following: that there was no board resolution authorizing
Allen and Gledhill to admit all the claims of petitioner in the suit brought before the High
Court of Malaya,40 though on cross-examination she admitted that Allen and Gledhill were
the retained lawyers of private respondent in Malaysia. 41

The foregoing reasons or grounds relied upon by private respondent in preventing

enforcement and recognition of the Malaysian judgment primarily refer to matters of remedy
and procedure taken by the Malaysian High Court relative to the suit for collection initiated
by petitioner. Needless to stress, the recognition to be accorded a foreign judgment is not
necessarily affected by the fact that the procedure in the courts of the country in which such
judgment was rendered differs from that of the courts of the country in which the judgment is
relied on.42 Ultimately, matters of remedy and procedure such as those relating to the service
of summons or court process upon the defendant, the authority of counsel to appear and
represent a defendant and the formal requirements in a decision are governed by the lex
fori or the internal law of the forum,43 i.e., the law of Malaysia in this case.

In this case, it is the procedural law of Malaysia where the judgment was rendered that
determines the validity of the service of court process on private respondent as well as other
matters raised by it. As to what the Malaysian procedural law is, remains a question of fact,
not of law. It may not be taken judicial notice of and must be pleaded and proved like any
other fact. Sections 24 and 25 of Rule 132 of the Revised Rules of Court provide that it may
be evidenced by an official publication or by a duly attested or authenticated copy thereof. It
was then incumbent upon private respondent to present evidence as to what that Malaysian
procedural law is and to show that under it, the assailed service of summons upon a
financial officer of a corporation, as alleged by it, is invalid. It did not. Accordingly, the
presumption of validity and regularity of service of summons and the decision thereafter
rendered by the High Court of Malaya must stand. 44

On the matter of alleged lack of authority of the law firm of Allen and Gledhill to represent
private respondent, not only did the private respondent's witnesses admit that the said law
firm of Allen and Gledhill were its counsels in its transactions in Malaysia, 45 but of greater
significance is the fact that petitioner offered in evidence relevant Malaysian
jurisprudence46 to the effect that (a) it is not necessary under Malaysian law for counsel
appearing before the Malaysian High Court to submit a special power of attorney authorizing
him to represent a client before said court, (b) that counsel appearing before the Malaysian
High Court has full authority to compromise the suit, and (c) that counsel appearing before
the Malaysian High Court need not comply with certain pre-requisites as required under
Philippine law to appear and compromise judgments on behalf of their clients before said
court.47

Furthermore, there is no basis for or truth to the appellate court's conclusion that the
conditional appearance of private respondent's counsel who was allegedly not authorized to
appear and represent, cannot be considered as voluntary submission to the jurisdiction of
the High Court of Malaya, inasmuch as said conditional appearance was not premised on
the alleged lack of authority of said counsel but the conditional appearance was entered to
question the regularity of the service of the writ of summons. Such conditional appearance
was in fact subsequently withdrawn when counsel realized that the writ was properly
served.48

On the ground that collusion, fraud and, clear mistake of fact and law tainted the judgment of
the High Court of Malaya, no clear evidence of the same was adduced or shown. The facts
which the trial court found "intriguing" amounted to mere conjectures and specious
observations. The trial court's finding on the absence of judgment against Asiavest-CDCP
Sdn. Bhd. is contradicted by evidence on record that recovery was also sought against
Asiavest-CDCP Sdn. Bhd. but the same was found insolvent. 49 Furthermore, even when the
foreign judgment is based on the drafts prepared by counsel for the successful party, such is
not per se indicative of collusion or fraud. Fraud to hinder the enforcement within the
jurisdiction of a foreign judgment must be extrinsic, i.e., fraud based on facts not
controverted or resolved in the case where judgment is rendered, 50 or that which would go to
the jurisdiction of the court or would deprive the party against whom judgment is rendered a
chance to defend the action to which he has a meritorious defense. 51 Intrinsic fraud is one
which goes to the very existence of the cause of action is deemed already adjudged, and it,
therefore, cannot militate against the recognition or enforcement of the foreign
judgment.52 Evidence is wanting on the alleged extrinsic fraud. Hence, such unsubstantiated
allegation cannot give rise to liability therein.

Lastly, there is no merit to the argument that the foreign judgment is not enforceable in view
of the absence of any statement of facts and law upon which the award in favor of the
petitioner was based. As aforestated, the lex fori or the internal law of the forum governs
matters of remedy and procedure. 53 Considering that under the procedural rules of the High
Court of Malaya, a valid judgment may be rendered even without stating in the judgment
every fact and law upon which the judgment is based, then the same must be accorded
respect and the courts in the jurisdiction cannot invalidate the judgment of the foreign court
simply because our rules provide otherwise.

All in all, private respondent had the ultimate duty to demonstrate the alleged invalidity of
such foreign judgment, being the party challenging the judgment rendered by the High Court
of Malaya. But instead of doing so, private respondent merely argued, to which the trial court
agreed, that the burden lay upon petitioner to prove the validity of the money judgment.
Such is clearly erroneous and would render meaningless the presumption of validity
accorded a foreign judgment were the party seeking to enforce it be required to first
establish its validity.54
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals
dated May 19,1993 in CA-G.R CY No. 35871 sustaining the Decision dated October 14,
1991 in Civil Case No. 56368 of the Regional Trial Court of Pasig, Branch 168 denying the
enforcement of the Judgment dated September 13, 1985 of the High Court of Malaya in
Kuala Lumpur is REVERSED and SET ASIDE, and another in its stead is hereby
rendered ORDERING private respondent Philippine National Construction Corporation to
pay petitioner Asiavest Merchant Bankers (M) Berhad the amounts adjudged in the said
foreign Judgment, subject of the said case.

Costs against the private respondent.

SO ORDERED.

G.R. No. L-40163 June 19, 1982

LEVITON INDUSTRIES, NENA DE LA CRUZ LIM, DOMINGO GO, and LIM

KIAT, petitioners,
vs.
HON. SERAFIN SALVADOR, Judge, Court of First Instance of Rizal, Caloocan City,
Branch XIV and LEVITON MANUFACTURING CO., INC., respondents.

ESCOLIN, J:

Challenged in this petition for certiorari and prohibition is the order of the respondent Judge
Serafin Salvador in Civil Case No. C-2891 of the Court of First Instance of Rizal, sustaining
the legal capacity of a foreign corporation to maintain a suit for unfair competition under
Section 21-A of Republic Act No. 166, as amended, otherwise known as the Trademark
Law.

On April 17, 1973, private respondent Leviton Manufacturing Co., Inc. filed a complaint for
unfair competition against petitioners Leviton Industries, Nena de la Cruz Lim, Domingo Go
and Lim Kiat before the Court of First Instance of Rizal, Branch XXXIII, presided by
respondent Judge Serafin Salvador. The complaint substantially alleges that plaintiff is a
foreign corporation organized and existing under the laws of the State of New York, United
States of America, with office located at 236 Greenpoint Avenue, Brooklyn City, State of
New York, U.S.A.; that defendant Leviton Industries is a partnership organized and existing
under the laws of the Philippines with principal office at 382 10th Avenue, Grace Park,
Caloocan City; while defendants Nena de la Cruz Lim, Domingo Go and Lim Kiat are the
partners, with defendant Domingo Go acting as General Manager of defendant Leviton
Industries; that plaintiff, founded in 1906 by Isidor Leviton, is the largest manufacturer of
electrical wiring devices in the United States under the trademark Leviton, which various
electrical wiring devices bearing the trademark Leviton and trade name Leviton
Manufacturing Co., Inc. had been exported to the Philippines since 1954; that due to the
superior quality and widespread use of its products by the public, the same are well known
to Filipino consumers under the trade name Leviton Manufacturing Co., Inc. and trademark
Leviton; that long subsequent to the use of plaintiff's trademark and trade name in the
Philippines, defendants began manufacturing and selling electrical ballast, fuse and oval
buzzer under the trademark Leviton and trade name Leviton Industries Co.; that Domingo
Go, partner and general manager of defendant partnership, had registered with the
Philippine Patent Office the trademarks Leviton Label and Leviton with respect to ballast and
fuse under Certificate of Registration Nos. SR-1132 and 15517, respectively, which
registration was contrary to paragraphs (d) and (e) of Section 4 of RA 166, as amended, and
violative of plaintiff's right over the trademark Leviton; that defendants not only used the
trademark Leviton but likewise copied the design used by plaintiff in distinguishing its
trademark; and that the use thereof by defendants of its products would cause confusion in
the minds of the consumers and likely to deceive them as to the source of origin, thereby
enabling defendants to pass off their products as those of plaintiff's. Invoking the provisions
of Section 21-A of Republic Act No. 166, plaintiff prayed for damages. It also sought the
issuance of a writ of injunction to prohibit defendants from using the trade name Leviton
Industries, Co. and the trademark Leviton.

Defendants moved to dismiss the complaint for failure to state a cause of action, drawing
attention to the plaintiff's failure to allege therein its capacity to sue under Section 21-A of
Republic Act No. 166, as amended. After the filing of the plaintiff's opposition and the
defendant's reply, the respondent judge denied the motion on the ground that the same did
not appear to be indubitable. On September 21, 1973, defendants filed their answer,
reiterating the ground supporting their motion to dismiss. Thereafter, defendants served
upon plaintiff a request for admission under Rule 26 of the Rules of Court, of the following
matters of fact, to wit:

(1) That the plaintiff is not actually manufacturing, selling and/or distributing ballasts
generally used in flourescent lighting;

(2) That plaintiff has no registered trademark or trade name in the Philippine Patent Office of
any of its products; and

(3) That plaintiff has no license to do business in the Philippines under and by virtue of the
provision of Act No. 1459, better known as the Philippine Corporation Law, at the time it filed
the complaint. 1

Complying with the said request, plaintiff admitted:

That it does not manufacture ballasts; that it has not registered its trademark in the
Philippine Patent Office, but has filed with the same office an application of its trade mark on
April 16, 1971; and that it has no license to do business in the Philippines. 2

On the basis of these admissions, defendants filed an Urgent Supplemental Motion to

Dismiss. This was followed by the plaintiff's opposition, and the defendant's rejoinder, after
which respondent judge issued the questioned order 3 denying the motion, thus:

Acting on the Urgent Supplemental Motion to Dismiss, dated July 2, 1974, filed by counsels
for the defendants, as well as the oppositions thereto, the Court after a careful consideration
of the reasons adduced for and against said motion, is of the opinion that the same should
be, as it is hereby DENIED.

SO ORDERED.

The motion for reconsideration having likewise been denied, defendants instituted the
instant petition for certiorari and prohibition, charging respondent judge with grave abuse of
discretion in denying their motion to dismiss.

We agree with petitioners that respondent Leviton Marketing Co., Inc. had failed to allege
the essential facts bearing upon its capacity to sue before Philippine courts. Private
respondent's action is squarely founded on Section 21-A of Republic Act No. 166, as
amended, which we quote:

Sec. 21-A. Any foreign corporation or juristic person to which a mark or tradename has been
registered or assigned under this Act may bring an action hereunder for infringement, for
unfair competition, or false designation of origin and false description, whether or not it has
been licensed to do business in the Philippines under Act numbered Fourteen Hundred and
Fifty-Nine, as amended, otherwise known as the Corporation Law, at the time it brings the
complaint; Provided, That the country of which the said foreign corporation or juristic person
is a citizen, or in which it is domiciled, by treaty, convention or law, grants a similar privilege
to corporate or juristic persons of the Philippines. (As amended by R.A. No. 638)

Undoubtedly, the foregoing section grants to a foreign corporation, whether or not licensed
to do business in the Philippines, the right to seek redress for unfair competition before
Philippine courts. But the said law is not without qualifications. Its literal tenor indicates as a
condition sine qua non the registration of the trade mark of the suing foreign corporation with
the Philippine Patent Office or, in the least, that it be an asignee of such registered
trademark. The said section further requires that the country, of which the plaintiff foreign
corporation or juristic person is a citizen or domicilliary, grants to Filipino corporations or
juristic entities the same reciprocal treatment, either thru treaty, convention or law,

All that is alleged in private respondent's complaint is that it is a foreign corporation. Such
bare averment not only fails to comply with the requirements imposed by the aforesaid
Section 21-A but violates as well the directive of Section 4, Rule 8 of the Rules of Court that
"facts showing the capacity of a party to sue or be sued or the authority of a party to sue or
be sued in a representative capacity or the legal existence of an organized association of
persons that is made a party, must be averred "

In the case at bar, private respondent has chosen to anchor its action under the Trademark
Law of the Philippines, a law which, as pointed out, explicitly sets down the conditions
precedent for the successful prosecution thereof. It is therefore incumbent upon private
respondent to comply with these requirements or aver its exemption therefrom, if such be
the case. It may be that private respondent has the right to sue before Philippine courts, but
our rules on pleadings require that the necessary qualifying circumstances which clothe it
with such right be affirmatively pleaded. And the reason therefor, as enunciated in "Atlantic
Mutual Insurance Co., et al. versus Cebu Stevedoring Co., Inc." 4 is that —

these are matters peculiarly within the knowledge of appellants alone, and it would be unfair
to impose upon appellees the burden of asserting and proving the contrary. It is enough that
foreign corporations are allowed by law to seek redress in our courts under certain
conditions: the interpretation of the law should not go so far as to include, in effect, an
inference that those conditions had been met from the mere fact that the party sued is a
foreign corporation.

It was indeed in the light of this and other considerations that this Court has seen fit to
amend the former rule by requiring in the revised rules (Section 4, Rule 8) that "facts
showing the capacity of a party to sue or be sued or the authority of a party to sue or be
sued in a representative capacity or the legal existence of an organized association of
persons that is made a party, must be averred,

IN VIEW OF THE FOREGOING, the instant petition is hereby granted and, accordingly, the
order of the respondent judge dated September 27, 1974 denying petitioner's motion to
dismiss is hereby set aside. The Court of First Instance of Rizal (Caloocan City), the court of
origin, is hereby restrained from conducting further proceedings in Civil Case No. C-2891,
except to dismiss the same. No costs.

SO ORDERED.
G.R. No. L-5270             January 15, 1910

THE UNITED STATES, plaintiff-appellee,

vs.
H. N. BULL, defendant-appellant.

Bruce & Lawrence, for appellant.

Office of the Solicitor-General Harvey, for appellee.

ELLIOTT, J.:

The appellant was convicted in the Court of First Instance of a violation of section 1 of Act
No. 55, as amended by section 1 of Act No. 275, and from the judgment entered thereon
appealed to this court, where under proper assignments of error he contends: (1) that the
complaint does not state facts sufficient to confer jurisdiction upon the court; (2) that under
the evidence the trial court was without jurisdiction to hear and determine the case; (3) that
Act No. 55 as amended is in violation of certain provisions of the Constitution of the United
States, and void as applied to the facts of this case; and (4) that the evidence is insufficient
to support the conviction.

The information alleges:

That on and for many months prior to the 2d day of December, 1908, the said H. N. Bull was
then and there master of a steam sailing vessel known as the steamship  Standard, which
vessel was then and there engaged in carrying and transporting cattle, carabaos, and other
animals from a foreign port and city of Manila, Philippine Islands; that the said accused H. N.
Bull, while master of said vessel, as aforesaid, on or about the 2d day of December, 1908,
did then and there willfully, unlawfully, and wrongly carry, transport, and bring into the port
and city of Manila, aboard said vessel, from the port of Ampieng, Formosa, six hundred and
seventy-seven (677) head of cattle and carabaos, without providing suitable means for
securing said animals while in transit, so as to avoid cruelty and unnecessary suffering to
the said animals, in this, to wit, that the said H. N. Bull, master, as aforesaid, did then and
there fail to provide stalls for said animals so in transit and suitable means for trying and
securing said animals in a proper manner, and did then and there cause some of said
animals to be tied by means of rings passed through their noses, and allow and permit
others to be transported loose in the hold and on the deck of said vessel without being tied
or secured in stalls, and all without bedding; that by reason of the aforesaid neglect and
failure of the accused to provide suitable means for securing said animals while so in transit,
the noses of some of said animals were cruelly torn, and many of said animals were tossed
about upon the decks and hold of said vessel, and cruelly wounded, bruised, and killed.

All contrary to the provisions of Acts No. 55 and No. 275 of the Philippine Commission.

Section 1 of Act No. 55, which went into effect January 1, 1901, provides that —

The owners or masters of steam, sailing, or other vessels, carrying or transporting cattle,
sheep, swine, or other animals, from one port in the Philippine Islands to another, or from
any foreign port to any port within the Philippine Islands, shall carry with them, upon the
vessels carrying such animals, sufficient forage and fresh water to provide for the suitable
sustenance of such animals during the ordinary period occupied by the vessel in passage
from the port of shipment to the port of debarkation, and shall cause such animals to be
provided with adequate forage and fresh water at least once in every twenty-four hours from
the time that the animals are embarked to the time of their final debarkation.

By Act No. 275, enacted October 23, 1901, Act No. 55 was amended by adding to section 1
thereof the following:

The owners or masters of steam, sailing, or other vessels, carrying or transporting cattle,
sheep, swine, or other animals from one port in the Philippine Islands to another, or from
any foreign port to any port within the Philippine Islands, shall provide suitable means for
securing such animals while in transit so as to avoid all cruelty and unnecessary suffering to
the animals, and suitable and proper facilities for loading and unloading cattle or other
animals upon or from vessels upon which they are transported, without cruelty or
unnecessary suffering. It is hereby made unlawful to load or unload cattle upon or from
vessels by swinging them over the side by means of ropes or chains attached to the thorns.

Section 3 of Act No. 55 provides that —

Any owner or master of a vessel, or custodian of such animals, who knowingly and willfully
fails to comply with the provisions of section one, shall, for every such failure, be liable to
pay a penalty of not less that one hundred dollars nor more that five hundred dollars, United
States money, for each offense. Prosecution under this Act may be instituted in any Court of
First Instance or any provost court organized in the province or port in which such animals
are disembarked.

1. It is contended that the information is insufficient because it does not state that the court
was sitting at a port where the cattle were disembarked, or that the offense was committed
on board a vessel registered and licensed under the laws of the Philippine Islands.

Act No. 55 confers jurisdiction over the offense created thereby on Courts of First Instance
or any provost court organized in the province or port in which such animals are
disembarked, and there is nothing inconsistent therewith in Act No. 136, which provides
generally for the organization of the courts of the Philippine Islands. Act No. 400 merely
extends the general jurisdiction of the courts over certain offenses committed on the high
seas, or beyond the jurisdiction of any country, or within any of the waters of the Philippine
Islands on board a ship or water craft of any kind registered or licensed in the Philippine
Islands, in accordance with the laws thereof. (U.S. vs. Fowler, 1 Phil. Rep., 614.) This
jurisdiction may be exercised by the Court of First Instance in any province into which such
ship or water upon which the offense or crime was committed shall come after the
commission thereof. Had this offense been committed upon a ship carrying a Philippine
registry, there could have been no doubt of the Jurisdiction of the court, because it is
expressly conferred, and the Act is in accordance with well recognized and established
public law. But the Standard was a Norwegian vessel, and it is conceded that it was not
registered or licensed in the Philippine Islands under the laws thereof. We have then the
question whether the court had jurisdiction over an offense of this character, committed on
board a foreign ship by the master thereof, when the neglect and omission which constitutes
the offense continued during the time the ship was within the territorial waters of the United
States. No court of the Philippine Islands had jurisdiction over an offenses or crime
committed on the high seas or within the territorial waters of any other country, but when she
came within 3 miles of a line drawn from the headlines which embrace the entrance to
Manila Bay, she was within territorial waters, and a new set of principles became applicable.
(Wheaton, Int. Law (Dana ed.), p. 255, note 105; Bonfils, Le Droit Int., sec 490 et seq.;
Latour, La Mer Ter., ch. 1.) The ship and her crew were then subject to the jurisdiction of the
territorial sovereign subject through the proper political agency. This offense was committed
within territorial waters. From the line which determines these waters the Standard must
have traveled at least 25 miles before she came to anchor. During that part of her voyage
the violation of the statue continued, and as far as the jurisdiction of the court is concerned,
it is immaterial that the same conditions may have existed while the vessel was on the high
seas. The offense, assuming that it originated at the port of departure in Formosa, was a
continuing one, and every element necessary to constitute it existed during the voyage
across the territorial waters. The completed forbidden act was done within American waters,
and the court therefore had jurisdiction over the subject-matter of the offense and the person
of the offender.

The offense then was thus committed within the territorial jurisdiction of the court, but the
objection to the jurisdiction raises the further question whether that jurisdiction is restricted
by the fact of the nationality of the ship. Every. Every state has complete control and
jurisdiction over its territorial waters. According to strict legal right, even public vessels may
not enter the ports of a friendly power without permission, but it is now conceded that in the
absence of a prohibition such ports are considered as open to the public ship of all friendly
powers. The exemption of such vessels from local jurisdiction while within such waters was
not established until within comparatively recent times. In 1794, Attorney-General Bradford,
and in 1796 Attorney-General Lee, rendered opinions to the effect that "the laws of nations
invest the commander of a foreign ship of war with no exemption from the jurisdiction of the
country into which he comes." (1, Op. U.S. Attys. Gen., 46, 87.) This theory was also
supported by Lord Stowell in an opinion given by him to the British Government as late as
1820. In the leading case of the Schooner Exchange vs. McFadden (7 Cranch (U.S.), 116,
144), Chief Justice Marshall said that the implied license under which such vessels enter a
friendly port may reasonably be construed as "containing exemption from the jurisdiction of
the sovereign within whose territory she claims the rights of hospitality." The principle was
accepted by the Geneva Arbitration Tribunal, which announced that "the priviledge of
exterritoriality accorded to vessels of war has been admitted in the law of nations; not as an
absolute right, but solely as a proceeding founded on the principle of courtesy and mutual
deference between nations."
(2 Moore, Int. Law Dig., secs. 252 and 254; Hall, Int. Law, sec. 55; Taylor, Int. Law, sec.
256; Ortolan, Dip de la Mer, 2. C.X.)

Such vessels are therefore permitted during times of peace to come and go freely. Local
official exercise but little control over their actions, and offenses committed by their crew are
justiciable by their own officers acting under the laws to which they primarily owe allegiance.
This limitation upon the general principle of territorial sovereignty is based entirely upon
comity and convenience, and finds its justification in the fact that experience shows that
such vessels are generally careful to respect local laws and regulation which are essential to
the health, order, and well-being of the port. But comity and convenience does not require
the extension of the same degree of exemption to merchant vessels. There are two well-
defined theories as to extent of the immunities ordinarily granted to them, According to the
French theory and practice, matters happening on board a merchant ship which do not
concern the tranquillity of the port or persons foreign to the crew, are justiciable only by the
court of the country to which the vessel belongs. The French courts therefore claim
exclusive jurisdiction over crimes committed on board French merchant vessels in foreign
ports by one member of the crew against another. (See Bonfils, Le Droit Int. (quat. ed.),
secs. 624-628; Martens, Le Droit Int., tome 2, pp. 338, 339; Ortolan, Dip. de la Mer, tit. 1, p.
292; Masse, Droit Int., tome 2, p. 63.) Such jurisdiction has never been admitted or claim by
Great Britain as a right, although she has frequently conceded it by treaties. (Halleck, Int.
Law (Baker's ed.), vol. 1, 231; British Territorial Waters Act, 1878.) Writers who consider
exterritoriality as a fact instead of a theory have sought to restrict local jurisdiction, but Hall,
who is doubtless the leading English authority, says that —

It is admitted by the most thoroughgoing asserters of the territoriality of merchant vessels

that so soon as the latter enter the ports of a foreign state they become subject to the local
jurisdiction on all points in which the interests of the country are touched. (Hall, Int. Law, p.
263.)

The United States has adhered consistently to the view that when a merchant vessel enters
a foreign port it is subject to the jurisdiction of the local authorities, unless the local
sovereignty has by act of acquiescence or through treaty arrangements consented to waive
a portion of such jurisdiction. (15 Op. Attys. Gen., U. S., 178; 2 Moore, Int. Law Dig., sec.
204; article by Dean Gregory, Mich. Law Review, Vol. II, No. 5.) Chief Justice Marshall, in
the case of the Exchange, said that —

When merchant vessels enter for the purpose of trade, in would be obviously in convinient
and dangerous to society and would subject the laws to continual infraction and the
government to degradation if such individual merchants did not owe temporary and local
allegiance, and were not amendable to the jurisdiction of the country.

The Supreme Court of the United States has recently said that the merchant vessels of one
country visiting the ports of another for the purpose of trade, subject themselves to the laws
which govern the ports they visit, so long as they remain; and this as well in war as in peace,
unless otherwise provided by treaty. (U. S. vs. Diekelman, 92 U. S., 520-525.)

Certain limitations upon the jurisdiction of the local courts are imposed by article 13 of the
treaty of commerce and navigation between Sweden and Norway and the United States, of
July 4, 1827, which concedes to the consul, vice-consuls, or consular agents of each
country "The right to sit as judges and arbitrators in such differences as may arise between
the captains and crews of the vessels belonging to the nation whose interests are committed
to their charge, without the interference of the local authorities, unless the conduct of the
crews or of the captains should disturb the order or tranquillity of the country." (Comp. of
Treaties in Force, 1904, p. 754.) This exception applies to controversies between the
members of the ship's company, and particularly to disputes regarding wages. (2 Moore, Int.
Law Dig., sec. 206, p. 318; Tellefsen vs. Fee, 168 Mass., 188.) The order and tranquillity of
the country are affected by many events which do not amount to a riot or general public
disturbance. Thus an assault by one member of the crew upon another, committed upon the
ship, of which the public may have no knowledge whatever, is not by this treaty withdrawn
from the cognizance of the local authorities.

In 1876 the mates of the Swedish bark Frederike and Carolina engaged in a "quarrel" on

board the vessel in the port of Galveston, Texas. They were prosecuted before a justice of
the peace, but the United States district attorney was instructed by the Government to take
the necessary steps to have the proceedings dismissed, and the aid of the governor of
Texas was invoked with the view to "guard against a repetition of similar proceedings." (Mr.
Fish, Secretary of State, to Mr. Grip, Swedish and Norwegian charged, May 16, 1876;
Moore, Int. Law Dig.) It does not appear that this "quarrel" was of such a nature as to
amount to a breach of the criminal laws of Texas, but when in 1879 the mate for the
Norwegian bark Livingston was prosecuted in the courts of Philadelphia County for an
assault and battery committed on board the ship while lying in the port of Philadelphia, it was
held that there was nothing in the treaty which deprived the local courts of jurisdiction.
(Commonwealth vs. Luckness, 14 Phila. (Pa.), 363.) Representations were made through
diplomatic channels to the State Department, and on July 30, 1880, Mr. Evarts, Secretary of
State, wrote to Count Lewenhaupt, the Swedish and Norwegian minister, as follows:

I have the honor to state that I have given the matter careful consideration in connection with
the views and suggestion of your note and the provisions of the thirteenth article of the treaty
of 1827 between the United States and Sweden and Norway. The stipulations contained in
the last clause of that article . . . are those under which it is contended by you that
jurisdiction is conferred on the consular officers, not only in regard to such differences of a
civil nature growing out of the contract of engagement of the seamen, but also as to
disposing of controversies resulting from personal violence involving offense for which the
party may be held amenable under the local criminal law.

This Government does not view the article in question as susceptible of such broad
interpretation. The jurisdiction conferred upon the consuls is conceived to be limited to their
right to sit as judges or abitrators in such differences as may arise between captains and
crews of the vessels, where such differences do not involve on the part of the captain or
crew a disturbance of the order or tranquillity of the country. When, however, a complaint is
made to a local magistrate, either by the captain or one or more of the crew of the vessel,
involving the disturbance of the order or tranquillity of the country, it is competent for such
magistrate to take cognizance of the matter in furtherance of the local laws, and under such
circumstances in the United States it becomes a public duty which the judge or magistrate is
not at liberty voluntarily to forego. In all such cases it must necessarily be left to the local
judicial authorities whether the procedure shall take place in the United States or in Sweden
to determine if in fact there had been such disturbance of the local order and tranquillity, and
if the complaint is supported by such proof as results in the conviction of the party accused,
to visit upon the offenders such punishment as may be defined against the offense by the
municipal law of the place." (Moore, Int. Law Dig., vol. 2, p. 315.)

The treaty does not therefore deprive the local courts of jurisdiction over offenses committed
on board a merchant vessel by one member of the crew against another which amount to a
disturbance of the order or tranquillity of the country, and a fair and reasonable construction
of the language requires un to hold that any violation of criminal laws disturbs the order or
traquillity of the country. The offense with which the appellant is charged had nothing to so
with any difference between the captain and the crew. It was a violation by the master of the
criminal law of the country into whose port he came. We thus find that neither by reason of
the nationality of the vessel, the place of the commission of the offense, or the prohibitions
of any treaty or general principle of public law, are the court of the Philippine Islands
deprived of jurisdiction over the offense charged in the information in this case.

It is further contended that the complaint is defective because it does not allege that the
animals were disembarked at the port of Manila, an allegation which it is claimed is essential
to the jurisdiction of the court sitting at that port. To hold with the appellant upon this issue
would be to construe the language of the complaint very strictly against the Government.
The disembarkation of the animals is not necessary in order to constitute the completed
offense, and a reasonable construction of the language of the statute confers jurisdiction
upon the court sitting at the port into which the animals are bought. They are then within the
territorial jurisdiction of the court, and the mere fact of their disembarkation is immaterial so
far as jurisdiction is concerned. This might be different if the disembarkation of the animals
constituted a constitutional element in the offense, but it does not.

It is also contended that the information is insufficient because it fails to allege that the
defendant knowingly and willfully failed to provide suitable means for securing said animals
while in transit, so as to avoid cruelty and unnecessary suffering. The allegation of the
complaint that the act was committed willfully includes the allegation that it was committed
knowingly. As said in Woodhouse vs. Rio Grande R.R. Company (67 Texas, 416), "the word
'willfully' carries the idea, when used in connection with an act forbidden by law, that the act
must be done knowingly or intentionally; that, with knowledge, the will consented to,
designed, and directed the act." So in Wong vs. City of Astoria (13 Oregon, 538), it was said:
"The first one is that the complaint did not show, in the words of the ordinance, that the
appellant 'knowingly' did the act complained of. This point, I think, was fully answered by the
respondent's counsel — that the words 'willfully' and 'knowingly' conveyed the same
meaning. To 'willfully' do an act implies that it was done by design — done for a certain
purpose; and I think that it would necessarily follow that it was 'knowingly' done." To the
same effect is Johnson vs. The People (94 Ill., 505), which seems to be on all fours with the
present case.

The evidence shows not only that the defendant's acts were knowingly done, but his
defense rests upon the assertion that "according to his experience, the system of carrying
cattle loose upon the decks and in the hold is preferable and more secure to the life and
comfort of the animals." It was conclusively proven that what was done was done knowingly
and intentionally.

In charging an offense under section 6 of General Orders, No. 58, paragraph 3, it is only
necessary to state the act or omission complained of as constituting a crime or public
offense in ordinary and concise language, without repitition. It need not necessarily be in the
words of the statute, but it must be in such form as to enable a person of common
understanding to know what is intended and the court to pronounce judgment according to
right. A complaint which complies with this requirement is good. (U.S. vs. Sarabia, 4 Phil.
Rep., 556.)
The Act, which is in the English language, impose upon the master of a vessel the duty to
"provide suitable means for securing such animals while in transit, so as to avoid all cruelty
and unnecessary suffering to the animals." The allegation of the complaint as it reads in
English is that the defendant willfully, unlawfully, and wrongfully carried the cattle "without
providing suitable means for securing said animals while in transit, so as to avoid cruelty and
unnecessary suffering to the said animals in this . . . that by reason of the aforesaid neglect
and failure of the accused to provide suitable means for securing said animals were cruelty
torn, and many of said animals were tossed about upon the decks and hold of said vessels,
and cruelty wounded, bruised, and killed."

The appellant contends that the language of the Spanish text of the information does not
charge him with failure to provide "sufficient" and "adequate" means. The words used are
"medios suficientes" and "medios adecuados." In view of the fact that the original complaint
was prepared in English, and that the word "suitable" is translatable by the words
"adecuado," "suficiente," and "conveniente," according to the context and circumstances, we
determine this point against the appellant, particularly in view of the fact that the objection
was not made in the court below, and that the evidence clearly shows a failure to provide
"suitable means for the protection of the animals."

2. The appellant's arguments against the constitutionality of Act No. 55 and the amendment
thereto seems to rest upon a fundamentally erroneous conception of the constitutional law of
these Islands. The statute penalizes acts and ommissions incidental to the transportation of
live stock between foreign ports and ports of the Philippine Islands, and had a similar statute
regulating commerce with its ports been enacted by the legislature of one of the States of
the Union, it would doubtless have been in violation of Article I, section 3, of the Constitution
of the United States. (Stubbs vs. People (Colo.), 11 L. R. A., N. S., 1071.)

But the Philippine Islands is not a State, and its relation to the United States is controlled by
constitutional principles different from those which apply to States of the Union. The
importance of the question thus presented requires a statement of the principles which
govern those relations, and consideration of the nature and extent of the legislative power of
the Philippine Commission and the Legislature of the Philippines. After much discussion and
considerable diversity of opinion certain applicable constitutional doctrines are established.

The Constitution confers upon the United States the express power to make war and
treaties, and it has the power possessed by all nations to acquire territory by conquest or
treaty. Territory thus acquired belongs to the United States, and to guard against the
possibility of the power of Congress to provide for its government being questioned, the
framers of the Constitution provided in express terms that Congress should have the power
"to dispose of and make all needful rules and regulations respecting territory and other
property belonging to the United States." (Art. IV, sec. 3, par. 3.) Upon the acquisition of the
territory by the United States, and until it is formally incorporated into the Union, the duty of
providing a government therefor devolves upon Congress. It may govern the territory by its
direct acts, or it may create a local government, and delegate thereto the ordinary powers
required for local government. (Binns vs. U. S., 194 U. S., 486.) This has been the usual
procedure. Congress has provided such governments for territories which were within the
Union, and for newly acquired territory not yet incorporated therein. It has been customary to
organize a government with the ordinary separation of powers into executive, legislative,
and judicial, and to prescribe in an organic act certain general conditions in accordance with
which the local government should act. The organic act thus became the constitution of the
government of the territory which had not been formally incorporated into the Union, and the
validity of legislation enacted by the local legislature was determined by its conformity with
the requirements of such organic act. (National Bank vs. Yankton, 11 Otto (U. S.), 129.) To
the legislative body of the local government Congress has delegated that portion of
legislative power which in its wisdom it deemed necessary for the government of the
territory, reserving, however, the right to annul the action of the local legislature and itself
legislate directly for the territory. This power has been exercised during the entire period of
the history of the United States. The right of Congress to delegate such legislative power
can no longer be seriously questioned. (Dorr vs. U. S., 195 U. S., 138; U. S. vs. Heinszen,
206 U. S., 370, 385.)

The Constitution of the United States does not by its own force operate within such territory,
although the liberality of Congress in legislating the Constitution into contiguous territory
tended to create an impression upon the minds of many people that it went there by its own
force. (Downes vs. Bidwell, 182 U. S., 289.) In legislating with reference to this territory, the
power of Congress is limited only by those prohibitions of the Constitution which go to the
very root of its power to act at all, irrespective of time or place. In all other respects it is
plenary. (De Lima vs. Bidwell, 182 U. S., 1; Downes vs. Bidwell, 182 U. S., 244;
Hawaii vs. Mankichi, 190 U. S., 197; Dorr vs. U. S., 195 U. S., 138; Rassmussen vs. U. S.,
197 U. S., 516.)

This power has been exercised by Congress throughout the whole history of the United
States, and legislation founded on the theory was enacted long prior to the acquisition of the
present Insular possessions. Section 1891 of the Revised Statutes of 1878 provides that
"The Constitution and all laws of the United States which are not locally inapplicable shall
have the same force and effect within all the organized territories, and in every Territory
hereafter organized, as elsewhere within the United States." When Congress organized a
civil government for the Philippines, it expressly provided that this section of the Revised
Statutes should not apply to the Philippine Islands. (Sec. 1, Act of 1902.)

In providing for the government of the territory which was acquired by the United States as a
result of the war with Spain, the executive and legislative authorities have consistently
proceeded in conformity with the principles above state. The city of Manila was surrendered
to the United States on August 13, 1898, and the military commander was directed to hold
the city, bay, and harbor, pending the conclusion of a peace which should determine the
control, disposition, and government of the Islands. The duty then devolved upon the
American authorities to preserve peace and protect person and property within the occupied
territory. Provision therefor was made by proper orders, and on August 26 General Merritt
assumed the duties of military governor. The treaty of peace was signed December 10,
1898. On the 22d of December, 1898, the President announced that the destruction of the
Spanish fleet and the surrender of the city had practically effected the conquest of the
Philippine Islands and the suspension of the Spanish sovereignty therein, and that by the
treaty of peace the future control, disposition, and government of the Islands had been
ceded to the United States. During the periods of strict military occupation, before the treaty
of peace was ratified, and the interim thereafter, until Congress acted (Santiago vs. Noueral,
214 U.S., 260), the territory was governed under the military authority of the President as
commander in chief. Long before Congress took any action, the President organized a civil
government which, however, had its legal justification, like the purely military government
which it gradually superseded, in the war power. The military power of the President
embraced legislative, executive personally, or through such military or civil agents as he
chose to select. As stated by Secretary Root in his report for 1901 —

The military power in exercise in a territory under military occupation includes executive,
legislative, and judicial authority. It not infrequently happens that in a single order of a
military commander can be found the exercise of all three of these different powers — the
exercise of the legislative powers by provisions prescribing a rule of action; of judicial power
by determination of right; and the executive power by the enforcement of the rules
prescribed and the rights determined.

President McKinley desired to transform military into civil government as rapidly as

conditions would permit. After full investigation, the organization of civil government was
initiated by the appointment of a commission to which civil authority was to be gradually
transferred. On September 1, 1900, the authority to exercise, subject to the approval of the
President. "that part of the military power of the President in the Philippine Islands which is
legislative in its character" was transferred from the military government to the Commission,
to be exercised under such rules and regulations as should be prescribed by the Secretary
of War, until such time as complete civil government should be established, or congress
otherwise provided. The legislative power thus conferred upon the Commission was
declared to include "the making of rules and orders having the effect of law for the raising of
revenue by taxes, customs duties, and imposts; the appropriation and expenditure of public
funds of the Islands; the establishment of an educational system to secure an efficient civil
service; the organization and establishment of courts; the organization and establishment of
municipal and departmental government, and all other matters of a civil nature which the
military governor is now competent to provide by rules or orders of a legislative character."
This grant of legislative power to the Commission was to be exercised in conformity with
certain declared general principles, and subject to certain specific restrictions for the
protection of individual rights. The Commission were to bear in mind that the government to
be instituted was "not for our satisfaction or for the expression of our theoretical views, but
for the happiness, peace, and prosperity of the people of the Philippine Island, and the
measures adopted should be made to conforms to their customs, their habits, and even their
prejudices, to the fullest extent consistent with the accomplishment of the indispensable
requisites of just and effective government." The specific restrictions upon legislative power
were found in the declarations that "no person shall be deprived of life, liberty, or property
without due process of law; that private property shall not be taken for public use without just
compensation; that in all criminal prosecutions the accused shall enjoy the right to a speedy
and public trial, to be informed of the nature and cause of the accusation, to be confronted
with the witnesses against him, to have compulsory process for obtaining witnesses in his
favor, and to have the assistance of counsel for his defense; that excessive bail shall not be
required, nor excessive fines imposed, nor cruel and unusual punishment inflicted; that no
person shall be put twice in jeopardy for the same offense or be compelled in any criminal
case to be a witness against himself; that the right to be secure against unreasonable
searches and seizures shall not be violated; that neither slavery nor involuntary servitude
shall exist except as a punishment for crime; that no bill of attainder or ex post facto law
shall be passed; that no law shall be passed abridging the freedom of speech or of the press
or of the rights of the people to peaceably assemble and petition the Government for a
redress of grievances; that no law shall be made respecting an establishment of religion or
prohibiting the free exercise thereof, and that the free exercise and enjoyment of religious
profession and worship without discrimination or preference shall forever be allowed."

To prevent any question as to the legality of these proceedings being raised, the Spooner
amendment to the Army Appropriation Bill passed March 2, 1901, provided that "all military,
civil, and judicial powers necessary to govern the Philippine Islands . . . shall until otherwise
provided by Congress be vested in such person and persons, and shall be exercised in such
manner, as the President of the United States shall direct, for the establishment of civil
government, and for maintaining and protecting the inhabitants of said Islands in the free
enjoyment of their liberty, property, and religion." Thereafter, on July 4, 1901, the authority,
which had been exercised previously by the military governor, was transferred to that official.
The government thus created by virtue of the authority of the President as Commander in
Chief of the Army and Navy continued to administer the affairs of the Islands under the
direction of the President until by the Act of July 1, 1902, Congress assumed control of the
situation by the enactment of a law which, in connection with the instructions of April 7,
1900, constitutes the organic law of the Philippine Islands.

The Act of July 1, 1902, made no substancial changes in the form of government which the
President had erected. Congress adopted the system which was in operation, and approved
the action of the President in organizing the government. Substantially all the limitations
which had been imposed on the legislative power by the President's instructions were
included in the law, Congress thus extending to the Islands by legislative act nor the
Constitution, but all its provisions for the protection of the rights and privileges of individuals
which were appropriate under the conditions. The action of the President in creating the
Commission with designated powers of government, in creating the office of the Governor-
General and Vice-Governor-General, and through the Commission establishing certain
executive departments, was expressly approved and ratified. Subsequently the action of the
President in imposing a tariff before and after the ratification of the treaty of peace was also
ratified and approved by Congress. (Act of March 8, 1902; Act of July 1, 1902;
U.S. vs. Heinszen, 206 U.S., 370; Lincoln vs. U.S., 197 U.S., 419.) Until otherwise provided
by law the Islands were to continue to be governed "as thereby and herein provided." In the
future the enacting clause of all statutes should read "By authority of the United States"
instead of "By the authority of the President." In the course of time the legislative authority of
the Commission in all parts of the Islands not inhabited by Moros or non-Christian tribes was
to be transferred to a legislature consisting of two houses — the Philippine Commission and
the Philippine Assembly. The government of the Islands was thus assumed by Congress
under its power to govern newly acquired territory not incorporated into the United States.

This Government of the Philippine Islands is not a State or a Territory, although its form and
organization somewhat resembles that of both. It stands outside of the constitutional relation
which unites the States and Territories into the Union. The authority for its creation and
maintenance is derived from the Constitution of the United States, which, however, operates
on the President and Congress, and not directly on the Philippine Government. It is the
creation of the United States, acting through the President and Congress, both deriving
power from the same source, but from different parts thereof. For its powers and the
limitations thereon the Government of the Philippines looked to the orders of the President
before Congress acted and the Acts of Congress after it assumed control. Its organic laws
are derived from the formally and legally expressed will of the President and Congress,
instead of the popular sovereign constituency which lies upon any subject relating to the
Philippines is primarily in Congress, and when it exercise such power its act is from the
viewpoint of the Philippines the legal equivalent of an amendment of a constitution in the
United States.

Within the limits of its authority the Government of the Philippines is a complete
governmental organism with executive, legislative, and judicial departments exercising the
functions commonly assigned to such departments. The separation of powers is as
complete as in most governments. In neither Federal nor State governments is this
separation such as is implied in the abstract statement of the doctrine. For instance, in the
Federal Government the Senate exercises executive powers, and the President to some
extent controls legislation through the veto power. In a State the veto power enables him to
exercise much control over legislation. The Governor-General, the head of the executive
department in the Philippine Government, is a member of the Philippine Commission, but as
executive he has no veto power. The President and Congress framed the government on
the model with which Americans are familiar, and which has proven best adapted for the
advancement of the public interests and the protection of individual rights and priviliges.

In instituting this form of government of intention must have been to adopt the general
constitutional doctrined which are inherent in the system. Hence, under it the Legislature
must enact laws subject to the limitations of the organic laws, as Congress must act under
the national Constitution, and the States under the national and state constitutions. The
executive must execute such laws as are constitutionally enacted. The judiciary, as in all
governments operating under written constitutions, must determine the validity of legislative
enactments, as well as the legality of all private and official acts. In performing these
functions it acts with the same independence as the Federal and State judiciaries in the
United States. Under no other constitutional theory could there be that government of laws
and not of men which is essential for the protection of rights under a free and orderly
government.

Such being the constitutional theory of the Government of the Philippine Islands, it is
apparent that the courts must consider the question of the validity of an act of the Philippine
Commission or the Philippine Legislature, as a State court considers an act of the State
legislature. The Federal Government exercises such powers only as are expressly or
impliedly granted to it by the Constitution of the United States, while the States exercise all
powers which have not been granted to the central government. The former operates under
grants, the latter subject to restrictions. The validity of an Act of Congress depends upon
whether the Constitution of the United States contains a grant of express or implied authority
to enact it. An act of a State legislature is valid unless the Federal or State constitution
expressly or impliedly prohibits its enaction. An Act of the legislative authority of the
Philippines Government which has not been expressly disapproved by Congress is valid
unless its subject-matter has been covered by congressional legislation, or its enactment
forbidden by some provision of the organic laws.

The legislative power of the Government of the Philippines is granted in general terms
subject to specific limitations. The general grant is not alone of power to legislate on certain
subjects, but to exercise the legislative power subject to the restrictions stated. It is true that
specific authority is conferred upon the Philippine Government relative to certain subjects of
legislation, and that Congress has itself legislated upon certain other subjects. These,
however, should be viewed simply as enactments on matters wherein Congress was fully
informed and ready to act, and not as implying any restriction upon the local legislative
authority in other matters. (See Opinion of Atty. Gen. of U. S., April 16, 1908.)

The fact that Congress reserved the power to annul specific acts of legislation by the
Government of the Philippine tends strongly to confirm the view that for purposes of
construction the Government of the Philippines should be regarded as one of general
instead of enumerated legislative powers. The situation was unusual. The new government
was to operate far from the source of its authority. To relieve Congress from the necessity of
legislating with reference to details, it was thought better to grant general legislative power to
the new government, subject to broad and easily understood prohibitions, and reserve to
Congress the power to annul its acts if they met with disapproval. It was therefore provided
"that all laws passed by the Government of the Philippine Islands shall be reported to
Congress, which hereby reserves the power and authority to annul the same." (Act of
Congress, July 1, 1902, sec. 86.) This provision does not suspend the acts of the
Legislature of the Philippines until approved by Congress, or when approved, expressly or
by acquiescence, make them the laws of Congress. They are valid acts of the Government
of the Philippine Islands until annulled. (Miners Bank vs. Iowa, 12 How. (U. S.), 1.)

In order to determine the validity of Act No. 55 we must then ascertain whether the
Legislature has been expressly or implication forbidden to enact it. Section 3, Article IV, of
the Constitution of the United States operated only upon the States of the Union. It has no
application to the Government of the Philippine Islands. The power to regulate foreign
commerce is vested in Congress, and by virtue of its power to govern the territory belonging
to the United States, it may regulate foreign commerce with such territory. It may do this
directly, or indirectly through a legislative body created by it, to which its power in this
respect if delegate. Congress has by direct legislation determined the duties which shall be
paid upon goods imported into the Philippines, and it has expressly authorized the
Government of the Philippines to provide for the needs of commerce by improving harbors
and navigable waters. A few other specific provisions relating to foreign commerce may be
found in the Acts of Congress, but its general regulation is left to the Government of the
Philippines, subject to the reserved power of Congress to annul such legislation as does not
meet with its approval. The express limitations upon the power of the Commission and
Legislature to legislate do not affect the authority with respect to the regulation of commerce
with foreign countries. Act No. 55 was enacted before Congress took over the control of the
Islands, and this act was amended by Act No. 275 after the Spooner amendment of March
2, 1901, was passed. The military government, and the civil government instituted by the
President, had the power, whether it be called legislative or administrative, to regulate
commerce between foreign nations and the ports of the territory. (Cross vs. Harrison, 16
How. (U.S.), 164, 190; Hamilton vs. Dillin, 21 Wall. (U.S.), 73, 87.) This Act has remained in
force since its enactment without annulment or other action by Congress, and must be
presumed to have met with its approval. We are therefore satisfied that the Commission
had, and the Legislature now has, full constitutional power to enact laws for the regulation of
commerce between foreign countries and the ports of the Philippine Islands, and that Act
No. 55, as amended by Act No. 275, is valid.

3. Whether a certain method of handling cattle is suitable within the meaning of the Act can
not be left to the judgment of the master of the ship. It is a question which must be
determined by the court from the evidence. On December 2, 1908, the defendant Bull
brought into and disembarked in the port and city of Manila certain cattle, which came from
the port of Ampieng, Formosa, without providing suitable means for securing said animals
while in transit, so as to avoid cruelty and unnecessary suffering to said animals, contrary to
the provisions of section 1 of Act No. 55, as amended by section 1 of Act No. 275. The trial
court found the following facts, all of which are fully sustained by the evidence:

That the defendant, H. N. Bull, as captain and master of the Norwegian steamer known as
the Standard, for a period of six months or thereabouts prior to the 2d day of December,
1908, was engaged in the transportation of cattle and carabaos from Chines and Japanese
ports to and into the city of Manila, Philippine Islands.

That on the 2d day of December, 1908, the defendant, as such master and captain as
aforesaid, brought into the city of Manila, aboard said ship, a large number of cattle, which
ship was anchored, under the directions of the said defendant, behind the breakwaters in
front of the city of Manila, in Manila Bay, and within the jurisdiction of this court; and that
fifteen of said cattle then and there had broken legs and three others of said cattle were
dead, having broken legs; and also that said cattle were transported and carried upon said
ship as aforesaid by the defendant, upon the deck and in the hold of said ship, without
suitable precaution and care for the transportation of said animals, and to avoid danger and
risk to their lives and security; and further that said cattle were so transported abroad said
ship by the defendant and brought into the said bay, and into the city of Manila, without any
provisions being made whatever upon said decks of said ship and in the hold thereof to
maintain said cattle in a suitable condition and position for such transportation.

That a suitable and practicable manner in which to transport cattle abroad steamship coming
into Manila Bay and unloading in the city of Manila is by way of individual stalls for such
cattle, providing partitions between the cattle and supports at the front sides, and rear
thereof, and cross-cleats upon the floor on which they stand and are transported, of that in
case of storms, which are common in this community at sea, such cattle may be able to
stand without slipping and pitching and falling, individually or collectively, and to avoid the
production of panics and hazard to the animals on account or cattle were transported in this
case. Captain Summerville of the steamship Taming, a very intelligent and experienced
seaman, has testified, as a witness in behalf of the Government, and stated positively that
since the introduction in the ships with which he is acquainted of the stall system for the
transportation of animals and cattle he has suffered no loss whatever during the last year.
The defendant has testified, as a witness in his own behalf, that according to his experience
the system of carrying cattle loose upon the decks and in the hold is preferable and more
secure to the life and comfort of the animals, but this theory of the case is not maintainable,
either by the proofs or common reason. It can not be urged with logic that, for instance,
three hundred cattle supports for the feet and without stalls or any other protection for them
individually can safely and suitably carried in times of storm upon the decks and in the holds
of ships; such a theory is against the law of nature. One animal falling or pitching, if he is
untied or unprotected, might produce a serious panic and the wounding of half the animals
upon the ship if transported in the manner found in this case.

The defendant was found guilty, and sentenced to pay a fine of two hundred and fifty pesos,
with subsidiary imprisonment in case of insolvency, and to pay the costs. The sentence and
judgment is affirmed. So ordered.

G.R. No. 104235 November 18, 1993

SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners,

vs.
HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents.

Sycip, Salazar, Hernandez, Gatmaitan for petitioners.

Quisumbing, Torres & Evangelista for private-respondent.

NOCON, J.:

Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007
departing from New York to Los Angeles on June 6, 1984 despite possession of confirmed
tickets, petitioners filed an action for damages before the Regional Trial Court of Makati,
Metro Manila, Branch 145. Advocating petitioner's position, the trial court categorically ruled
that respondent TransWorld Airlines (TWA) breached its contract of carriage with petitioners
and that said breach was "characterized by bad faith." On appeal, however, the appellate
court found that while there was a breach of contract on respondent TWA's part, there was
neither fraud nor bad faith because under the Code of Federal Regulations by the Civil
Aeronautics Board of the United States of America it is allowed to overbook flights.
The factual backdrop of the case is as follows:

Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana
Zalamea, purchased three (3) airline tickets from the Manila agent of respondent
TransWorld Airlines, Inc. for a flight to New York to Los Angeles on June 6, 1984. The
tickets of petitioners-spouses were purchased at a discount of 75% while that of their
daughter was a full fare ticket. All three tickets represented confirmed reservations.

While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their
reservations for said flight. On the appointed date, however, petitioners checked in at 10:00
a.m., an hour earlier than the scheduled flight at 11:00 a.m. but were placed on the wait-list
because the number of passengers who had checked in before them had already taken all
the seats available on the flight. Liana Zalamea appeared as the No. 13 on the wait-list while
the two other Zalameas were listed as "No. 34, showing a party of two." Out of the 42 names
on the wait list, the first 22 names were eventually allowed to board the flight to Los Angeles,
including petitioner Cesar Zalamea. The two others, on the other hand, at No. 34, being
ranked lower than 22, were not able to fly. As it were, those holding full-fare tickets were
given first priority among the wait-listed passengers. Mr. Zalamea, who was holding the full-
fare ticket of his daughter, was allowed to board the plane; while his wife and daughter, who
presented the discounted tickets were denied boarding. According to Mr. Zalamea, it was
only later when he discovered the he was holding his daughter's full-fare ticket.

Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be
accommodated because it was also fully booked. Thus, they were constrained to book in
another flight and purchased two tickets from American Airlines at a cost of Nine Hundred
Eighteen ($918.00) Dollars.

Upon their arrival in the Philippines, petitioners filed an action for damages based on breach
of contract of air carriage before the Regional Trial Court of Makati, Metro Manila, Branch
145. As aforesaid, the lower court ruled in favor of petitioners in its decision   dated January
1

9, 1989 the dispositive portion of which states as follows:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs the
following amounts:

(1) US $918.00, or its peso equivalent at the time of payment representing the price of the
tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to
Los Angeles from New York City;

(2) US $159.49, or its peso equivalent at the time of payment, representing the price of
Suthira Zalamea's ticket for TWA Flight 007;

(3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50,
Philippine Currency, representing the price of Liana Zalamea's ticket for TWA Flight 007,

(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral
damages for all the plaintiffs'

(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for attorney's
fees; and

(6) The costs of suit.

SO ORDERED.  2

On appeal, the respondent Court of Appeals held that moral damages are recoverable in a
damage suit predicated upon a breach of contract of carriage only where there is fraud or
bad faith. Since it is a matter of record that overbooking of flights is a common and accepted
practice of airlines in the United States and is specifically allowed under the Code of Federal
Regulations by the Civil Aeronautics Board, no fraud nor bad faith could be imputed on
respondent TransWorld Airlines.
Moreover, while respondent TWA was remiss in not informing petitioners that the flight was
overbooked and that even a person with a confirmed reservation may be denied
accommodation on an overbooked flight, nevertheless it ruled that such omission or
negligence cannot under the circumstances be considered to be so gross as to amount to
bad faith.

Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with
forty-eight (48) other passengers where full-fare first class tickets were given priority over
discounted tickets.

The dispositive portion of the decision of respondent Court of Appeals  dated October 25,
3

1991 states as follows:

WHEREFORE, in view of all the foregoing, the decision under review is hereby MODIFIED
in that the award of moral and exemplary damages to the plaintiffs is eliminated, and the
defendant-appellant is hereby ordered to pay the plaintiff the following amounts:

(1) US$159.49, or its peso equivalent at the time of the payment, representing the price of
Suthira Zalamea's ticket for TWA Flight 007;

(2) US$159.49, or its peso equivalent at the time of the payment, representing the price of
Cesar Zalamea's ticket for TWA Flight 007;

(3) P50,000.00 as and for attorney's fees.

(4) The costs of suit.

SO ORDERED. 4

Not satisfied with the decision, petitioners raised the case on petition for review
on certiorari and alleged the following errors committed by the respondent Court of Appeals,
to wit:

I.

. . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART OF

RESPONDENT TWA BECAUSE IT HAS A RIGHT TO OVERBOOK FLIGHTS.

II.

. . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.

III.

. . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND

PAYMENT FOR THE AMERICAN AIRLINES
TICKETS. 5

That there was fraud or bad faith on the part of respondent airline when it did not allow
petitioners to board their flight for Los Angeles in spite of confirmed tickets cannot be
disputed. The U.S. law or regulation allegedly authorizing overbooking has never been
proved. Foreign laws do not prove themselves nor can the courts take judicial notice of
them. Like any other fact, they must be alleged and proved.  Written law may be evidenced
6

by an official publication thereof or by a copy attested by the officer having the legal custody
of the record, or by his deputy, and accompanied with a certificate that such officer has
custody. The certificate may be made by a secretary of an embassy or legation, consul
general, consul, vice-consul, or consular agent or by any officer in the foreign service of the
Philippines stationed in the foreign country in which the record is kept, and authenticated by
the seal of his office. 7

Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer
service agent, in her deposition dated January 27, 1986 that the Code of Federal
Regulations of the Civil Aeronautics Board allows overbooking. Aside from said statement,
no official publication of said code was presented as evidence. Thus, respondent court's
finding that overbooking is specifically allowed by the US Code of Federal Regulations has
no basis in fact.

Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable
to the case at bar in accordance with the principle of lex loci contractus which require that
the law of the place where the airline ticket was issued should be applied by the court where
the passengers are residents and nationals of the forum and the ticket is issued in such
State by the defendant airline.  Since the tickets were sold and issued in the Philippines, the
8

applicable law in this case would be Philippine law.

Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the
passengers concerned to an award of moral damages. In Alitalia Airways v. Court of
Appeals,  where passengers with confirmed bookings were refused carriage on the last
9

minute, this Court held that when an airline issues a ticket to a passenger confirmed on a
particular flight, on a certain date, a contract of carriage arises, and the passenger has every
right to expect that he would fly on that flight and on that date. If he does not, then the carrier
opens itself to a suit for breach of contract of carriage. Where an airline had deliberately
overbooked, it took the risk of having to deprive some passengers of their seats in case all
of them would show up for the check in. For the indignity and inconvenience of being
refused a confirmed seat on the last minute, said passenger is entitled to an award of moral
damages.

Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals,   where private respondent was
10

not allowed to board the plane because her seat had already been given to another
passenger even before the allowable period for passengers to check in had lapsed despite
the fact that she had a confirmed ticket and she had arrived on time, this Court held that
petitioner airline acted in bad faith in violating private respondent's rights under their contract
of carriage and is therefore liable for the injuries she has sustained as a result.

In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage
amounts to bad faith. In Pan American World Airways, Inc. v. Intermediate Appellate
Court,   where a would-be passenger had the necessary ticket, baggage claim and
11

clearance from immigration all clearly and unmistakably showing that she was, in fact,
included in the passenger manifest of said flight, and yet was denied accommodation in said
flight, this Court did not hesitate to affirm the lower court's finding awarding her damages.

A contract to transport passengers is quite different in kind and degree from any other
contractual relation. So ruled this Court in Zulueta v. Pan American World Airways,
Inc.   This is so, for a contract of carriage generates a relation attended with public duty — a
12

duty to provide public service and convenience to its passengers which must be paramount
to self-interest or enrichment. Thus, it was also held that the switch of planes from Lockheed
1011 to a smaller Boeing 707 because there were only 138 confirmed economy class
passengers who could very well be accommodated in the smaller planes, thereby sacrificing
the comfort of its first class passengers for the sake of economy, amounts to bad faith. Such
inattention and lack of care for the interest of its passengers who are entitled to its utmost
consideration entitles the passenger to an award of moral damages.  13

Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad
faith in not informing its passengers beforehand that it could breach the contract of carriage
even if they have confirmed tickets if there was overbooking. Respondent TWA should have
incorporated stipulations on overbooking on the tickets issued or to properly inform its
passengers about these policies so that the latter would be prepared for such eventuality or
would have the choice to ride with another airline.

Respondent TWA contends that Exhibit I, the detached flight coupon upon which were
written the name of the passenger and the points of origin and destination, contained such a
notice. An examination of Exhibit I does not bear this out. At any rate, said exhibit was not
offered for the purpose of showing the existence of a notice of overbooking but to show that
Exhibit I was used for flight 007 in first class of June 11, 1984 from New York to Los
Angeles.
Moreover, respondent TWA was also guilty of not informing its passengers of its alleged
policy of giving less priority to discounted tickets. While the petitioners had checked in at the
same time, and held confirmed tickets, yet, only one of them was allowed to board the plane
ten minutes before departure time because the full-fare ticket he was holding was given
priority over discounted tickets. The other two petitioners were left behind.

It is respondent TWA's position that the practice of overbooking and the airline system of
boarding priorities are reasonable policies, which when implemented do not amount to bad
faith. But the issue raised in this case is not the reasonableness of said policies but whether
or not said policies were incorporated or deemed written on petitioners' contracts of carriage.
Respondent TWA failed to show that there are provisions to that effect. Neither did it present
any argument of substance to show that petitioners were duly apprised of the overbooked
condition of the flight or that there is a hierarchy of boarding priorities in booking
passengers. It is evident that petitioners had the right to rely upon the assurance of
respondent TWA, thru its agent in Manila, then in New York, that their tickets represented
confirmed seats without any qualification. The failure of respondent TWA to so inform them
when it could easily have done so thereby enabling respondent to hold on to them as
passengers up to the last minute amounts to bad faith. Evidently, respondent TWA placed
its self-interest over the rights of petitioners under their contracts of carriage. Such
conscious disregard of petitioners' rights makes respondent TWA liable for moral damages.
To deter breach of contracts by respondent TWA in similar fashion in the future, we adjudge
respondent TWA liable for exemplary damages, as well.

Petitioners also assail the respondent court's decision not to require the refund of Liana
Zalamea's ticket because the ticket was used by her father. On this score, we uphold the
respondent court. Petitioners had not shown with certainty that the act of respondent TWA in
allowing Mr. Zalamea to use the ticket of her daughter was due to inadvertence or deliberate
act. Petitioners had also failed to establish that they did not accede to said agreement. The
logical conclusion, therefore, is that both petitioners and respondent TWA agreed, albeit
impliedly, to the course of action taken.

The respondent court erred, however, in not ordering the refund of the American Airlines
tickets purchased and used by petitioners Suthira and Liana. The evidence shows that
petitioners Suthira and Liana were constrained to take the American Airlines flight to Los
Angeles not because they "opted not to use their TWA tickets on another TWA flight" but
because respondent TWA could not accommodate them either on the next TWA flight which
was also fully booked.   The purchase of the American Airlines tickets by petitioners Suthira
14

and Liana was the consequence of respondent TWA's unjustifiable breach of its contracts of
carriage with petitioners. In accordance with Article 2201, New Civil Code, respondent TWA
should, therefore, be responsible for all damages which may be reasonably attributed to the
non-performance of its obligation. In the previously cited case of Alitalia Airways v. Court of
Appeals,   this Court explicitly held that a passenger is entitled to be reimbursed for the cost
15

of the tickets he had to buy for a flight to another airline. Thus, instead of simply being
refunded for the cost of the unused TWA tickets, petitioners should be awarded the actual
cost of their flight from New York to Los Angeles. On this score, we differ from the trial
court's ruling which ordered not only the reimbursement of the American Airlines tickets but
also the refund of the unused TWA tickets. To require both prestations would have enabled
petitioners to fly from New York to Los Angeles without any fare being paid.

The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil
Code which allows recovery when the defendant's act or omission has compelled plaintiff to
litigate or to incur expenses to protect his interest. However, the award for moral damages
and exemplary damages by the trial court is excessive in the light of the fact that only
Suthira and Liana Zalamea were actually "bumped off." An award of P50,000.00 moral
damages and another P50,000.00 exemplary damages would suffice under the
circumstances obtaining in the instant case.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of
Appeals is hereby MODIFIED to the extent of adjudging respondent TransWorld Airlines to
pay damages to petitioners in the following amounts, to wit:

(1) US$918.00 or its peso equivalent at the time of payment representing the price of the
tickets bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to
Los Angeles from New York City;
(2) P50,000.00 as moral damages;

(3) P50,000.00 as exemplary damages;

(4) P50,000.00 as attorney's fees; and

(5) Costs of suit.

SO ORDERED.

G.R. No. L-24006      November 25, 1967

JOSEFINA JUANA DE DIOS RAMIREZ MARCAIDA, petitioner-appellant,

vs.
LEONCIO V. AGLUBAT, in his capacity as Deputy Local Civil Registrar of
Manila, respondent-appellee.

Jose W. Diokno for petitioner-appellant.

Office of the Solicitor General for respondent-appellee.

SANCHEZ, J.:

Refusal of the Local Civil Registrar of Manila to record an Escritura de Adopcion executed in

Madrid, Spain, is now challenged before this Court on appeal by registrant-adoptee from a
judgment of the Court of First Instance of Manila confirmatory of such refusal.

The disputed deed of adoption had its inception, thus: Prior to October 21, 1958,
proceedings for adoption were started before the Court of First Instance of Madrid, Spain by
Maria Garnier Garreau, then 84 years of age, adopting Josefina Juana de Dios Ramirez
Marcaida, 55 years, a citizen of the Philippines. Both were residents of Madrid, Spain. On
that date, October 21, 1958, the court granted the application for adoption and gave the
necessary judicial authority, once the judgment becomes final, to execute the corresponding
adoption document "con arreglo al articulo 177 del Codigo Civil." The adoption document
became necessary for the reason that under Article 177 of the Civil Code of Spain,
"[a]probada definitivamente la adopcion por el Juez, se otorgara escritura, expresando en
ella las condiciones con que se haya hecho, y se inscribira en el Registro Civil
correspondiente." In compliance, on November 29, 1958, the notarial document of adoption
— which embodies the court order of adoption — whereunder Maria Garnier Garreau
formally adopted petitioner, was executed before Notary Public Braulio Velasco
Carrasquedo of Madrid. In that document, Maria Gernier Garreau instituted petitioner,
amongst other conditions as here unica y universal heredera de todos sus bienes, derechos
y acciones, presentes y futuros.

In conformity with our law, this escritura de adopcion was, on December 10, 1953,

authenticated by Emilio S. Martinez, Philippine Vice Consul, Philippine Embassy, Madrid,
who issued the corresponding certificate of authentication. 1

The document of adoption was filed in the Office of the Local Civil Registrar of Manila on
January 15, 1959. The Registrar, however, refused to register that document upon the
ground that under Philippine law, adoption can only be had through judicial proceeding. And
since the notarial document of adoption is not a judicial proceeding, it is not entitled to
registration.

Failing in her move to reconsider, petitioner went to the Court of First Instance of Manila
on mandamus.2 As adverted to earlier, the mandamus petition did not prosper. The lower
court in its decision of February 28, 1964, dismissed said petition.

Petitioner's lone assignment of error reads: "The lower court erred in declaring the 'escritura
de adopcion' as authenticated by the Philippine Vice Consul in Madrid, Spain, as not
registrable in the Philippines."

1. Act 3753 of the Philippine Legislature, entitled "An Act to establish a civil register," in
Section 1 thereof, recites that a "civil register is established for recording the civil status of
persons, in which shall be entered," amongst others, "(g) adoptions." It provides for local civil
registrars. Complementary thereto are Article 407 of our Civil Code which commands that
"[a]cts, events and judicial decrees concerning the civil status of persons shall be recorded
in the civil register;" and Article 408 of the same Code which, in language similar, directs that
"[t]he following shall be entered in the civil register: . . . (8) adoptions; . . ." The law is clear.
The compulsory tenor of the word "shall" leaves no alternative. It is a command.

2. But the Solicitor General, hewing to the line drawn by the court below, argues that
petitioner's case does not come within the purview of Article 409 of the Civil Code, which
states that:

Art. 409. In cases of legal separation, adoption, naturalization and other judicial orders
mentioned in the preceding article it shall be the duty of the clerk of the court which issued
the decree to ascertain whether the same has been registered, and if this has not been
done, to send a copy of said decree to the civil registry of the city or municipality where the
court is functioning.

and Section 11 of Act 3753, which reads:

Sec. 11. Duties of clerks of court to register certain decisions. — In cases of legitimation,

acknowledgment, adoption, naturalization, and change of given or family name, or both,
upon the decree of the court becoming final, it shall be the duty of the clerk of the court
which issued the decree to ascertain whether the same has been registered, and if this has
not been done, to have said decree recorded in the office of the civil registrar of the
municipality where the court is functioning.

It is at once apparent that the cited legal provisions refer to adoptions effected in the
Philippines. For, indeed, Article 409 of the Civil Code and Section 10 of the Registry Law
speak of adoption which shall be registered in the municipality or city where the court issuing
the adoption decree is functioning. But, the trial court concluded that what is registrable
is only adoption obtained through a judgment rendered by a Philippine court.

We are not persuaded to adopt the Government's theory. We are at a loss to understand
how it could be concluded that the structure of the law did not authorize registration of
foreign adoptions. We perceive that Article 409 and Section 10 aforesaid were incorporated
into the statute books merely to give effect to our law 3 which required judicial proceedings for
adoption. Limitation of registration of adoptions to those granted by Philippine courts is a
misconception which a broader view allows us now to correct. For, if registration is to be
narrowed down to local adoptions, it is the function of Congress, not of this Court, to spell
out such limitation. We cannot carve out a prohibition where the law does not so state.
Excessive rigidity serves no purpose. And, by Articles 407 and 408 of our Civil Code, the
disputed document of adoption is registrable.

3. No suggestion there is in the record that prejudice to State and adoptee, or any other
person for that matter, would ensue from the adoption here involved. The validity thereof is
not under attack. At any rate, whatever may be the effect of adoption, the rights of the State
and adoptee and other persons interested are fully safeguarded by Article 15 of our Civil
Code which, in terms explicit, provides that: "Laws relating to family rights and duties, or to
the status, condition and legal capacity of persons are binding upon citizens of the
Philippines even though living abroad."

4. Private international law offers no obstacle to recognition of foreign adoption. This rests
on the principle that the status of adoption, created by the law of a State having jurisdiction
to create it, will be given the same effect in another state as is given by the latter state to the
status of adoption when created by its own law. 4It is quite obvious then that the status of
adoption, once created under the proper foreign law, will be recognized in this country,
except where public policy or the interests of its inhabitants forbid its enforcement and
demand the substitution of the lex fori. Indeed, implicit in Article 15 of our Civil Code just
quoted, is that the exercise of incidents to foreign adoption "remains subject to local law." 5

It is high time for this Court to formulate a rule on the registration of foreign adoptions. We
hold that an adoption created under the law of a foreign country is entitled to registration in
the corresponding civil register of the Philippines. It is to be understood, however, that the
effects of such adoption shall be governed by the laws of this country. 6

Conformably to the foregoing, the lower court's decision of February 28, 1964 dismissing
the mandamus petition appealed from, is hereby reversed; and the Local Civil Registrar of
Manila is hereby directed to register the deed of adoption (Escritura de Adopcion) by Maria
Garnier Garreau in favor of petitioner Josefina de Dios Ramirez Marcaida.

No costs. So ordered.

G.R. No. L-18924             October 19, 1922

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellant,

vs.
WONG CHENG (alias WONG CHUN), defendant-appellee.

Attorney-General Villa-Real for appellant.

Eduardo Gutierrez Repide for appellee.

ROMUALDEZ, J.:

In this appeal the Attorney-General urges the revocation of the order of the Court of First
Instance of Manila, sustaining the demurrer presented by the defendant to the information
that initiated this case and in which the appellee is accused of having illegally smoked
opium, aboard the merchant vessel Changsa of English nationality while said vessel was
anchored in Manila Bay two and a half miles from the shores of the city.
The demurrer alleged lack of jurisdiction on the part of the lower court, which so held and
dismissed the case.

The question that presents itself for our consideration is whether such ruling is erroneous or
not; and it will or will not be erroneous according as said court has or has no jurisdiction over
said offense.

The point at issue is whether the courts of the Philippines have jurisdiction over crime, like
the one herein involved, committed aboard merchant vessels anchored in our jurisdiction
waters. 1awph![Link]

There are two fundamental rules on this particular matter in connection with International
Law; to wit, the French rule, according to which crimes committed aboard a foreign
merchant vessels should not be prosecuted in the courts of the country within whose
territorial jurisdiction they were committed, unless their commission affects the peace and
security of the territory; and the English rule, based on the territorial principle and followed in
the United States, according to which, crimes perpetrated under such circumstances are in
general triable in the courts of the country within territory they were committed. Of this two
rules, it is the last one that obtains in this jurisdiction, because at present the theories and
jurisprudence prevailing in the United States on this matter are authority in the Philippines
which is now a territory of the United States.

In the cases of The Schooner Exchange vs. M'Faddon and Others (7 Cranch [U. S.], 116),
Chief Justice Marshall said:

. . . When merchant vessels enter for the purposes of trade, it would be obviously
inconvenient and dangerous to society, and would subject the laws to continual infraction,
and the government to degradation, if such individuals or merchants did not owe temporary
and local allegiance, and were not amenable to the jurisdiction of the country. . . .

In United States vs. Bull (15 Phil., 7), this court held:

. . . No court of the Philippine Islands had jurisdiction over an offense or crime committed on
the high seas or within the territorial waters of any other country, but when she came within
three miles of a line drawn from the headlands, which embrace the entrance to Manila Bay,
she was within territorial waters, and a new set of principles became applicable. (Wheaton,
International Law [Dana ed.], p. 255, note 105; Bonfils, Le Droit Int., secs. 490  et seq.;
Latour, La Mer Ter., ch. 1.) The ship and her crew were then subject to the jurisdiction of the
territorial sovereign subject to such limitations as have been conceded by that sovereignty
through the proper political agency. . . .

It is true that in certain cases the comity of nations is observed, as in Mali and Wildenhus vs.
Keeper of the Common Jail (120 U.., 1), wherein it was said that:

. . . The principle which governs the whole matter is this: Disorder which disturb only the
peace of the ship or those on board are to be dealt with exclusively by the sovereignty of the
home of the ship, but those which disturb the public peace may be suppressed, and, if need
be, the offenders punished by the proper authorities of the local jurisdiction. It may not be
easy at all times to determine which of the two jurisdictions a particular act of disorder
belongs. Much will undoubtedly depend on the attending circumstances of the particular
case, but all must concede that felonious homicide is a subject for the local jurisdiction, and
that if the proper authorities are proceeding with the case in the regular way the consul has
no right to interfere to prevent it.

Hence in United States vs. Look Chaw (18 Phil., 573), this court held that:

Although the mere possession of an article of prohibited use in the Philippine Islands,
aboard a foreign vessel in transit in any local port, does not, as a general rule, constitute a
crime triable by the courts of the Islands, such vessels being considered as an extension of
its own nationality, the same rule does not apply when the article, the use of which is
prohibited in the Islands, is landed from the vessels upon Philippine soil; in such a case an
open violation of the laws of the land is committed with respect to which, as it is a violation of
the penal law in force at the place of the commission of the crime, no court other than that
established in the said place has jurisdiction of the offense, in the absence of an agreement
under an international treaty.

As to whether the United States has ever consented by treaty or otherwise to renouncing
such jurisdiction or a part thereof, we find nothing to this effect so far as England is
concerned, to which nation the ship where the crime in question was committed belongs.
Besides, in his work "Treaties, Conventions, etc.," volume 1, page 625, Malloy says the
following:

There shall be between the territories of the United States of America, and all the territories
of His Britanic Majesty in Europe, a reciprocal liberty of commerce. The inhabitants of the
two countries, respectively, shall have liberty freely and securely to come with their ships
and cargoes to all such places, ports and rivers, in the territories aforesaid, to which other
foreigners are permitted to come, to enter into the same, and to remain and reside in any
parts of the said territories, respectively; also to hire and occupy houses and warehouses for
the purposes of their commerce; and, generally, the merchants and traders of each nation
respectively shall enjoy the most complete protection and security for their commerce, but
subject always to the laws and statutes of the two countries, respectively. (Art. 1, Commerce
and Navigation Convention.)

We have seen that the mere possession of opium aboard a foreign vessel in transit was held
by this court not triable by or courts, because it being the primary object of our Opium Law to
protect the inhabitants of the Philippines against the disastrous effects entailed by the use of
this drug, its mere possession in such a ship, without being used in our territory, does not
being about in the said territory those effects that our statute contemplates avoiding. Hence
such a mere possession is not considered a disturbance of the public order.

But to smoke opium within our territorial limits, even though aboard a foreign merchant ship,
is certainly a breach of the public order here established, because it causes such drug to
produce its pernicious effects within our territory. It seriously contravenes the purpose that
our Legislature has in mind in enacting the aforesaid repressive statute. Moreover, as the
Attorney-General aptly observes:

. . . The idea of a person smoking opium securely on board a foreign vessel at anchor in the
port of Manila in open defiance of the local authorities, who are impotent to lay hands on
him, is simply subversive of public order. It requires no unusual stretch of the imagination to
conceive that a foreign ship may come into the port of Manila and allow or solicit Chinese
residents to smoke opium on board.

The order appealed from is revoked and the cause ordered remanded to the court of origin
for further proceedings in accordance with law, without special findings as to costs. So
ordered.

G.R. No. 101949 December 1, 1994

THE HOLY SEE, petitioner,

vs.
THE HON. ERIBERTO U. ROSARIO, JR., as Presiding Judge of the Regional Trial
Court of Makati, Branch 61 and STARBRIGHT SALES ENTERPRISES,
INC., respondents.

Padilla Law Office for petitioner.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

QUIASON, J.:
This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and
set aside the Orders dated June 20, 1991 and September 19, 1991 of the Regional Trial
Court, Branch 61, Makati, Metro Manila in Civil Case No. 90-183.

The Order dated June 20, 1991 denied the motion of petitioner to dismiss the complaint in
Civil Case No. 90-183, while the Order dated September 19, 1991 denied the motion for
reconsideration of the June 20,1991 Order.

Petitioner is the Holy See who exercises sovereignty over the Vatican City in Rome, Italy,
and is represented in the Philippines by the Papal Nuncio.

Private respondent, Starbright Sales Enterprises, Inc., is a domestic corporation engaged in

the real estate business.

This petition arose from a controversy over a parcel of land consisting of 6,000 square
meters (Lot 5-A, Transfer Certificate of Title No. 390440) located in the Municipality of
Parañaque, Metro Manila and registered in the name of petitioner.

Said Lot 5-A is contiguous to Lots 5-B and 5-D which are covered by Transfer Certificates of
Title Nos. 271108 and 265388 respectively and registered in the name of the Philippine
Realty Corporation (PRC).

The three lots were sold to Ramon Licup, through Msgr. Domingo A. Cirilos, Jr., acting as
agent to the sellers. Later, Licup assigned his rights to the sale to private respondent.

In view of the refusal of the squatters to vacate the lots sold to private respondent, a dispute
arose as to who of the parties has the responsibility of evicting and clearing the land of
squatters. Complicating the relations of the parties was the sale by petitioner of Lot 5-A to
Tropicana Properties and Development Corporation (Tropicana).

On January 23, 1990, private respondent filed a complaint with the Regional Trial Court,
Branch 61, Makati, Metro Manila for annulment of the sale of the three parcels of land, and
specific performance and damages against petitioner, represented by the Papal Nuncio, and
three other defendants: namely, Msgr. Domingo A. Cirilos, Jr., the PRC and Tropicana (Civil
Case No.
90-183).

The complaint alleged that: (1) on April 17, 1988, Msgr. Cirilos, Jr., on behalf of petitioner
and the PRC, agreed to sell to Ramon Licup Lots 5-A, 5-B and 5-D at the price of P1,240.00
per square meters; (2) the agreement to sell was made on the condition that earnest money
of P100,000.00 be paid by Licup to the sellers, and that the sellers clear the said lots of
squatters who were then occupying the same; (3) Licup paid the earnest money to Msgr.
Cirilos; (4) in the same month, Licup assigned his rights over the property to private
respondent and informed the sellers of the said assignment; (5) thereafter, private
respondent demanded from Msgr. Cirilos that the sellers fulfill their undertaking and clear
the property of squatters; however, Msgr. Cirilos informed private respondent of the
squatters' refusal to vacate the lots, proposing instead either that private respondent
undertake the eviction or that the earnest money be returned to the latter; (6) private
respondent counterproposed that if it would undertake the eviction of the squatters, the
purchase price of the lots should be reduced from P1,240.00 to P1,150.00 per square meter;
(7) Msgr. Cirilos returned the earnest money of P100,000.00 and wrote private respondent
giving it seven days from receipt of the letter to pay the original purchase price in cash; (8)
private respondent sent the earnest money back to the sellers, but later discovered that on
March 30, 1989, petitioner and the PRC, without notice to private respondent, sold the lots
to Tropicana, as evidenced by two separate Deeds of Sale, one over Lot 5-A, and another
over Lots 5-B and 5-D; and that the sellers' transfer certificate of title over the lots were
cancelled, transferred and registered in the name of Tropicana; (9) Tropicana induced
petitioner and the PRC to sell the lots to it and thus enriched itself at the expense of private
respondent; (10) private respondent demanded the rescission of the sale to Tropicana and
the reconveyance of the lots, to no avail; and (11) private respondent is willing and able to
comply with the terms of the contract to sell and has actually made plans to develop the lots
into a townhouse project, but in view of the sellers' breach, it lost profits of not less than
P30,000.000.00.

Private respondent thus prayed for: (1) the annulment of the Deeds of Sale between
petitioner and the PRC on the one hand, and Tropicana on the other; (2) the reconveyance
of the lots in question; (3) specific performance of the agreement to sell between it and the
owners of the lots; and (4) damages.

On June 8, 1990, petitioner and Msgr. Cirilos separately moved to dismiss the complaint —
petitioner for lack of jurisdiction based on sovereign immunity from suit, and Msgr. Cirilos for
being an improper party. An opposition to the motion was filed by private respondent.

On June 20, 1991, the trial court issued an order denying, among others, petitioner's motion
to dismiss after finding that petitioner "shed off [its] sovereign immunity by entering into the
business contract in question" (Rollo, pp. 20-21).

On July 12, 1991, petitioner moved for reconsideration of the order. On August 30, 1991,
petitioner filed a "Motion for a Hearing for the Sole Purpose of Establishing Factual
Allegation for claim of Immunity as a Jurisdictional Defense." So as to facilitate the
determination of its defense of sovereign immunity, petitioner prayed that a hearing be
conducted to allow it to establish certain facts upon which the said defense is based. Private
respondent opposed this motion as well as the motion for reconsideration.

On October 1, 1991, the trial court issued an order deferring the resolution on the motion for
reconsideration until after trial on the merits and directing petitioner to file its answer (Rollo,
p. 22).

Petitioner forthwith elevated the matter to us. In its petition, petitioner invokes the privilege of
sovereign immunity only on its own behalf and on behalf of its official representative, the
Papal Nuncio.

On December 9, 1991, a Motion for Intervention was filed before us by the Department of
Foreign Affairs, claiming that it has a legal interest in the outcome of the case as regards the
diplomatic immunity of petitioner, and that it "adopts by reference, the allegations contained
in the petition of the Holy See insofar as they refer to arguments relative to its claim of
sovereign immunity from suit" (Rollo, p. 87).

Private respondent opposed the intervention of the Department of Foreign Affairs. In

compliance with the resolution of this Court, both parties and the Department of Foreign
Affairs submitted their respective memoranda.

II

A preliminary matter to be threshed out is the procedural issue of whether the petition
for certiorari under Rule 65 of the Revised Rules of Court can be availed of to question the
order denying petitioner's motion to dismiss. The general rule is that an order denying a
motion to dismiss is not reviewable by the appellate courts, the remedy of the movant being
to file his answer and to proceed with the hearing before the trial court. But the general rule
admits of exceptions, and one of these is when it is very clear in the records that the trial
court has no alternative but to dismiss the complaint (Philippine National Bank v. Florendo,
206 SCRA 582 [1992]; Zagada v. Civil Service Commission, 216 SCRA 114 [1992]. In such
a case, it would be a sheer waste of time and energy to require the parties to undergo the
rigors of a trial.

The other procedural question raised by private respondent is the personality or legal
interest of the Department of Foreign Affairs to intervene in the case in behalf of the Holy
See (Rollo, pp. 186-190).

In Public International Law, when a state or international agency wishes to plead sovereign
or diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it
is sued to convey to the court that said defendant is entitled to immunity.
In the United States, the procedure followed is the process of "suggestion," where the
foreign state or the international organization sued in an American court requests the
Secretary of State to make a determination as to whether it is entitled to immunity. If the
Secretary of State finds that the defendant is immune from suit, he, in turn, asks the
Attorney General to submit to the court a "suggestion" that the defendant is entitled to
immunity. In England, a similar procedure is followed, only the Foreign Office issues a
certification to that effect instead of submitting a "suggestion" (O'Connell, I International Law
130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations,
50 Yale Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign government or the international organization
to first secure an executive endorsement of its claim of sovereign or diplomatic immunity.
But how the Philippine Foreign Office conveys its endorsement to the courts varies.
In International Catholic Migration Commission v. Calleja, 190 SCRA 130 (1990), the
Secretary of Foreign Affairs just sent a letter directly to the Secretary of Labor and
Employment, informing the latter that the respondent-employer could not be sued because it
enjoyed diplomatic immunity. In World Health Organization v. Aquino, 48 SCRA 242 (1972),
the Secretary of Foreign Affairs sent the trial court a telegram to that effect. In Baer v. Tizon,
57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to request the
Solicitor General to make, in behalf of the Commander of the United States Naval Base at
Olongapo City, Zambales, a "suggestion" to respondent Judge. The Solicitor General
embodied the "suggestion" in a Manifestation and Memorandum as amicus curiae.

In the case at bench, the Department of Foreign Affairs, through the Office of Legal Affairs
moved with this Court to be allowed to intervene on the side of petitioner. The Court allowed
the said Department to file its memorandum in support of petitioner's claim of sovereign
immunity.

In some cases, the defense of sovereign immunity was submitted directly to the local courts
by the respondents through their private counsels (Raquiza v. Bradford, 75 Phil. 50 [1945];
Miquiabas v. Philippine-Ryukyus Command, 80 Phil. 262 [1948]; United States of America v.
Guinto, 182 SCRA 644 [1990] and companion cases). In cases where the foreign states
bypass the Foreign Office, the courts can inquire into the facts and make their own
determination as to the nature of the acts and transactions involved.

III

The burden of the petition is that respondent trial court has no jurisdiction over petitioner,
being a foreign state enjoying sovereign immunity. On the other hand, private respondent
insists that the doctrine of non-suability is not anymore absolute and that petitioner has
divested itself of such a cloak when, of its own free will, it entered into a commercial
transaction for the sale of a parcel of land located in the Philippines.

A. The Holy See

Before we determine the issue of petitioner's non-suability, a brief look into its status as a
sovereign state is in order.

Before the annexation of the Papal States by Italy in 1870, the Pope was the monarch and
he, as the Holy See, was considered a subject of International Law. With the loss of the
Papal States and the limitation of the territory under the Holy See to an area of 108.7 acres,
the position of the Holy See in International Law became controversial (Salonga and Yap,
Public International Law 36-37 [1992]).

In 1929, Italy and the Holy See entered into the Lateran Treaty, where Italy recognized the
exclusive dominion and sovereign jurisdiction of the Holy See over the Vatican City. It also
recognized the right of the Holy See to receive foreign diplomats, to send its own diplomats
to foreign countries, and to enter into treaties according to International Law (Garcia,
Questions and Problems In International Law, Public and Private 81 [1948]).

The Lateran Treaty established the statehood of the Vatican City "for the purpose of
assuring to the Holy See absolute and visible independence and of guaranteeing to it
indisputable sovereignty also in the field of international relations" (O'Connell, I International
Law 311 [1965]).

In view of the wordings of the Lateran Treaty, it is difficult to determine whether the
statehood is vested in the Holy See or in the Vatican City. Some writers even suggested that
the treaty created two international persons — the Holy See and Vatican City (Salonga and
Yap, supra, 37).

The Vatican City fits into none of the established categories of states, and the attribution to it
of "sovereignty" must be made in a sense different from that in which it is applied to other
states (Fenwick, International Law 124-125 [1948]; Cruz, International Law 37 [1991]). In a
community of national states, the Vatican City represents an entity organized not for political
but for ecclesiastical purposes and international objects. Despite its size and object, the
Vatican City has an independent government of its own, with the Pope, who is also head of
the Roman Catholic Church, as the Holy See or Head of State, in conformity with its
traditions, and the demands of its mission in the world. Indeed, the world-wide interests and
activities of the Vatican City are such as to make it in a sense an "international state"
(Fenwick, supra., 125; Kelsen, Principles of International Law 160 [1956]).

One authority wrote that the recognition of the Vatican City as a state has significant
implication — that it is possible for any entity pursuing objects essentially different from
those pursued by states to be invested with international personality (Kunz, The Status of
the Holy See in International Law, 46 The American Journal of International Law 308
[1952]).

Inasmuch as the Pope prefers to conduct foreign relations and enter into transactions as the
Holy See and not in the name of the Vatican City, one can conclude that in the Pope's own
view, it is the Holy See that is the international person.

The Republic of the Philippines has accorded the Holy See the status of a foreign sovereign.
The Holy See, through its Ambassador, the Papal Nuncio, has had diplomatic
representations with the Philippine government since 1957 (Rollo, p. 87). This appears to be
the universal practice in international relations.

B. Sovereign Immunity

As expressed in Section 2 of Article II of the 1987 Constitution, we have adopted the

generally accepted principles of International Law. Even without this affirmation, such
principles of International Law are deemed incorporated as part of the law of the land as a
condition and consequence of our admission in the society of nations (United States of
America v. Guinto, 182 SCRA 644 [1990]).

There are two conflicting concepts of sovereign immunity, each widely held and firmly
established. According to the classical or absolute theory, a sovereign cannot, without its
consent, be made a respondent in the courts of another sovereign. According to the newer
or restrictive theory, the immunity of the sovereign is recognized only with regard to public
acts or acts jure imperii of a state, but not with regard to private acts or acts jure gestionis
(United States of America v. Ruiz, 136 SCRA 487 [1987]; Coquia and Defensor-Santiago,
Public International Law 194 [1984]).

Some states passed legislation to serve as guidelines for the executive or judicial
determination when an act may be considered as jure gestionis. The United States passed
the Foreign Sovereign Immunities Act of 1976, which defines a commercial activity as "either
a regular course of commercial conduct or a particular commercial transaction or act."
Furthermore, the law declared that the "commercial character of the activity shall be
determined by reference to the nature of the course of conduct or particular transaction or
act, rather than by reference to its purpose." The Canadian Parliament enacted in 1982 an
Act to Provide For State Immunity in Canadian Courts. The Act defines a "commercial
activity" as any particular transaction, act or conduct or any regular course of conduct that by
reason of its nature, is of a "commercial character."

The restrictive theory, which is intended to be a solution to the host of problems involving the
issue of sovereign immunity, has created problems of its own. Legal treatises and the
decisions in countries which follow the restrictive theory have difficulty in characterizing
whether a contract of a sovereign state with a private party is an act jure gestionis or an
act jure imperii.

The restrictive theory came about because of the entry of sovereign states into purely
commercial activities remotely connected with the discharge of governmental functions. This
is particularly true with respect to the Communist states which took control of nationalized
business activities and international trading.

This Court has considered the following transactions by a foreign state with private parties
as acts jure imperii: (1) the lease by a foreign government of apartment buildings for use of
its military officers (Syquia v. Lopez, 84 Phil. 312 [1949]; (2) the conduct of public bidding for
the repair of a wharf at a United States Naval Station (United States of America v.
Ruiz, supra.); and (3) the change of employment status of base employees (Sanders v.
Veridiano, 162 SCRA 88 [1988]).

On the other hand, this Court has considered the following transactions by a foreign state
with private parties as acts jure gestionis: (1) the hiring of a cook in the recreation center,
consisting of three restaurants, a cafeteria, a bakery, a store, and a coffee and pastry shop
at the John Hay Air Station in Baguio City, to cater to American servicemen and the general
public (United States of America v. Rodrigo, 182 SCRA 644 [1990]); and (2) the bidding for
the operation of barber shops in Clark Air Base in Angeles City (United States of America v.
Guinto, 182 SCRA 644 [1990]). The operation of the restaurants and other facilities open to
the general public is undoubtedly for profit as a commercial and not a governmental activity.
By entering into the employment contract with the cook in the discharge of its proprietary
function, the United States government impliedly divested itself of its sovereign immunity
from suit.

In the absence of legislation defining what activities and transactions shall be considered
"commercial" and as constituting acts jure gestionis, we have to come out with our own
guidelines, tentative they may be.

Certainly, the mere entering into a contract by a foreign state with a private party cannot be
the ultimate test. Such an act can only be the start of the inquiry. The logical question is
whether the foreign state is engaged in the activity in the regular course of business. If the
foreign state is not engaged regularly in a business or trade, the particular act or transaction
must then be tested by its nature. If the act is in pursuit of a sovereign activity, or an incident
thereof, then it is an act jure imperii, especially when it is not undertaken for gain or profit.

As held in United States of America v. Guinto, (supra):

There is no question that the United States of America, like any other state, will be deemed
to have impliedly waived its non-suability if it has entered into a contract in its proprietary or
private capacity. It is only when the contract involves its sovereign or governmental capacity
that no such waiver may be implied.

In the case at bench, if petitioner has bought and sold lands in the ordinary course of a real
estate business, surely the said transaction can be categorized as an act jure gestionis.
However, petitioner has denied that the acquisition and subsequent disposal of Lot 5-A were
made for profit but claimed that it acquired said property for the site of its mission or the
Apostolic Nunciature in the Philippines. Private respondent failed to dispute said claim.

Lot 5-A was acquired by petitioner as a donation from the Archdiocese of Manila. The
donation was made not for commercial purpose, but for the use of petitioner to construct
thereon the official place of residence of the Papal Nuncio. The right of a foreign sovereign
to acquire property, real or personal, in a receiving state, necessary for the creation and
maintenance of its diplomatic mission, is recognized in the 1961 Vienna Convention on
Diplomatic Relations (Arts. 20-22). This treaty was concurred in by the Philippine Senate
and entered into force in the Philippines on November 15, 1965.

In Article 31(a) of the Convention, a diplomatic envoy is granted immunity from the civil and
administrative jurisdiction of the receiving state over any real action relating to private
immovable property situated in the territory of the receiving state which the envoy holds on
behalf of the sending state for the purposes of the mission. If this immunity is provided for a
diplomatic envoy, with all the more reason should immunity be recognized as regards the
sovereign itself, which in this case is the Holy See.

The decision to transfer the property and the subsequent disposal thereof are likewise
clothed with a governmental character. Petitioner did not sell Lot
5-A for profit or gain. It merely wanted to dispose off the same because the squatters living
thereon made it almost impossible for petitioner to use it for the purpose of the donation.
The fact that squatters have occupied and are still occupying the lot, and that they
stubbornly refuse to leave the premises, has been admitted by private respondent in its
complaint (Rollo, pp. 26, 27).

The issue of petitioner's non-suability can be determined by the trial court without going to
trial in the light of the pleadings, particularly the admission of private respondent. Besides,
the privilege of sovereign immunity in this case was sufficiently established by the
Memorandum and Certification of the Department of Foreign Affairs. As the department
tasked with the conduct of the Philippines' foreign relations (Administrative Code of 1987,
Book IV, Title I, Sec. 3), the Department of Foreign Affairs has formally intervened in this
case and officially certified that the Embassy of the Holy See is a duly accredited diplomatic
mission to the Republic of the Philippines exempt from local jurisdiction and entitled to all the
rights, privileges and immunities of a diplomatic mission or embassy in this country (Rollo,
pp. 156-157). The determination of the executive arm of government that a state or
instrumentality is entitled to sovereign or diplomatic immunity is a political question that is
conclusive upon the courts (International Catholic Migration Commission v. Calleja, 190
SCRA 130 [1990]). Where the plea of immunity is recognized and affirmed by the executive
branch, it is the duty of the courts to accept this claim so as not to embarrass the executive
arm of the government in conducting the country's foreign relations (World Health
Organization v. Aquino, 48 SCRA 242 [1972]). As in International Catholic Migration
Commission and in World Health Organization, we abide by the certification of the
Department of Foreign Affairs.

Ordinarily, the procedure would be to remand the case and order the trial court to conduct a
hearing to establish the facts alleged by petitioner in its motion. In view of said certification,
such procedure would however be pointless and unduly circuitous (Ortigas & Co. Ltd.
Partnership v. Judge Tirso Velasco, G.R. No. 109645, July 25, 1994).

IV

Private respondent is not left without any legal remedy for the redress of its grievances.
Under both Public International Law and Transnational Law, a person who feels aggrieved
by the acts of a foreign sovereign can ask his own government to espouse his cause
through diplomatic channels.

Private respondent can ask the Philippine government, through the Foreign Office, to
espouse its claims against the Holy See. Its first task is to persuade the Philippine
government to take up with the Holy See the validity of its claims. Of course, the Foreign
Office shall first make a determination of the impact of its espousal on the relations between
the Philippine government and the Holy See (Young, Remedies of Private Claimants
Against Foreign States, Selected Readings on Protection by Law of Private Foreign
Investments 905, 919 [1964]). Once the Philippine government decides to espouse the
claim, the latter ceases to be a private cause.

According to the Permanent Court of International Justice, the forerunner of the International
Court of Justice:

By taking up the case of one of its subjects and by reporting to diplomatic action or
international judicial proceedings on his behalf, a State is in reality asserting its own rights —
its right to ensure, in the person of its subjects, respect for the rules of international law (The
Mavrommatis Palestine Concessions, 1 Hudson, World Court Reports 293, 302 [1924]).

WHEREFORE, the petition for certiorari is GRANTED and the complaint in Civil Case No.
90-183 against petitioner is DISMISSED.
G.R. No. 154380 October 5, 2005

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
CIPRIANO ORBECIDO III, Respondent.

DECISION

QUISUMBING, J.:
Given a valid marriage between two Filipino citizens, where one party is later naturalized as
a foreign citizen and obtains a valid divorce decree capacitating him or her to remarry, can
the Filipino spouse likewise remarry under Philippine law?

Before us is a case of first impression that behooves the Court to make a definite ruling on
this apparently novel question, presented as a pure question of law.

In this petition for review, the Solicitor General assails the Decision1 dated May 15, 2002, of
the Regional Trial Court of Molave, Zamboanga del Sur, Branch 23 and
its Resolution2 dated July 4, 2002 denying the motion for reconsideration. The court a
quo had declared that herein respondent Cipriano Orbecido III is capacitated to remarry.
The fallo of the impugned Decision reads:

WHEREFORE, by virtue of the provision of the second paragraph of Art. 26 of the Family
Code and by reason of the divorce decree obtained against him by his American wife, the
petitioner is given the capacity to remarry under the Philippine Law.

IT IS SO ORDERED.3

The factual antecedents, as narrated by the trial court, are as follows.

On May 24, 1981, Cipriano Orbecido III married Lady Myros M. Villanueva at the United
Church of Christ in the Philippines in Lam-an, Ozamis City. Their marriage was blessed with
a son and a daughter, Kristoffer Simbortriz V. Orbecido and Lady Kimberly V. Orbecido.

In 1986, Cipriano’s wife left for the United States bringing along their son Kristoffer. A few
years later, Cipriano discovered that his wife had been naturalized as an American citizen.

Sometime in 2000, Cipriano learned from his son that his wife had obtained a divorce
decree and then married a certain Innocent Stanley. She, Stanley and her child by him
currently live at 5566 A. Walnut Grove Avenue, San Gabriel, California.

Cipriano thereafter filed with the trial court a petition for authority to remarry invoking
Paragraph 2 of Article 26 of the Family Code. No opposition was filed. Finding merit in the
petition, the court granted the same. The Republic, herein petitioner, through the Office of
the Solicitor General (OSG), sought reconsideration but it was denied.

In this petition, the OSG raises a pure question of law:

WHETHER OR NOT RESPONDENT CAN REMARRY UNDER ARTICLE 26 OF THE

FAMILY CODE4

The OSG contends that Paragraph 2 of Article 26 of the Family Code is not applicable to the
instant case because it only applies to a valid mixed marriage; that is, a marriage celebrated
between a Filipino citizen and an alien. The proper remedy, according to the OSG, is to file a
petition for annulment or for legal separation. 5 Furthermore, the OSG argues there is no law
that governs respondent’s situation. The OSG posits that this is a matter of legislation and
not of judicial determination.6

For his part, respondent admits that Article 26 is not directly applicable to his case but insists
that when his naturalized alien wife obtained a divorce decree which capacitated her to
remarry, he is likewise capacitated by operation of law pursuant to Section 12, Article II of
the Constitution.7

At the outset, we note that the petition for authority to remarry filed before the trial court
actually constituted a petition for declaratory relief. In this connection, Section 1, Rule 63 of
the Rules of Court provides:

RULE 63

DECLARATORY RELIEF AND SIMILAR REMEDIES

Section 1. Who may file petition—Any person interested under a deed, will, contract or other
written instrument, or whose rights are affected by a statute, executive order or regulation,
ordinance, or other governmental regulation may, before breach or violation thereof, bring
an action in the appropriate Regional Trial Court to determine any question of construction
or validity arising, and for a declaration of his rights or duties, thereunder.

...

The requisites of a petition for declaratory relief are: (1) there must be a justiciable
controversy; (2) the controversy must be between persons whose interests are adverse; (3)
that the party seeking the relief has a legal interest in the controversy; and (4) that the issue
is ripe for judicial determination.8

This case concerns the applicability of Paragraph 2 of Article 26 to a marriage between two
Filipino citizens where one later acquired alien citizenship, obtained a divorce decree, and
remarried while in the U.S.A. The interests of the parties are also adverse, as petitioner
representing the State asserts its duty to protect the institution of marriage while respondent,
a private citizen, insists on a declaration of his capacity to remarry. Respondent, praying for
relief, has legal interest in the controversy. The issue raised is also ripe for judicial
determination inasmuch as when respondent remarries, litigation ensues and puts into
question the validity of his second marriage.

Coming now to the substantive issue, does Paragraph 2 of Article 26 of the Family Code
apply to the case of respondent? Necessarily, we must dwell on how this provision had
come about in the first place, and what was the intent of the legislators in its enactment?

Brief Historical Background

On July 6, 1987, then President Corazon Aquino signed into law Executive Order No. 209,
otherwise known as the "Family Code," which took effect on August 3, 1988. Article 26
thereof states:

All marriages solemnized outside the Philippines in accordance with the laws in force in the
country where they were solemnized, and valid there as such, shall also be valid in this
country, except those prohibited under Articles 35, 37, and 38.

On July 17, 1987, shortly after the signing of the original Family Code, Executive Order No.
227 was likewise signed into law, amending Articles 26, 36, and 39 of the Family Code. A
second paragraph was added to Article 26. As so amended, it now provides:

ART. 26. All marriages solemnized outside the Philippines in accordance with the laws in
force in the country where they were solemnized, and valid there as such, shall also be valid
in this country, except those prohibited under Articles 35(1), (4), (5) and (6), 36, 37 and 38.

Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a
divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to
remarry, the Filipino spouse shall have capacity to remarry under Philippine law. (Emphasis
supplied)

On its face, the foregoing provision does not appear to govern the situation presented by the
case at hand. It seems to apply only to cases where at the time of the celebration of the
marriage, the parties are a Filipino citizen and a foreigner. The instant case is one where at
the time the marriage was solemnized, the parties were two Filipino citizens, but later on, the
wife was naturalized as an American citizen and subsequently obtained a divorce granting
her capacity to remarry, and indeed she remarried an American citizen while residing in the
U.S.A.

Noteworthy, in the Report of the Public Hearings 9 on the Family Code, the Catholic Bishops’
Conference of the Philippines (CBCP) registered the following objections to Paragraph 2 of
Article 26:
1. The rule is discriminatory. It discriminates against those whose spouses are Filipinos who
divorce them abroad. These spouses who are divorced will not be able to re-marry, while
the spouses of foreigners who validly divorce them abroad can.

2. This is the beginning of the recognition of the validity of divorce even for Filipino citizens.
For those whose foreign spouses validly divorce them abroad will also be considered to be
validly divorced here and can re-marry. We propose that this be deleted and made into law
only after more widespread consultation. (Emphasis supplied.)

Legislative Intent

Records of the proceedings of the Family Code deliberations showed that the intent of
Paragraph 2 of Article 26, according to Judge Alicia Sempio-Diy, a member of the Civil Code
Revision Committee, is to avoid the absurd situation where the Filipino spouse remains
married to the alien spouse who, after obtaining a divorce, is no longer married to the
Filipino spouse.

Interestingly, Paragraph 2 of Article 26 traces its origin to the 1985 case of Van Dorn v.
Romillo, Jr.10 The Van Dorn case involved a marriage between a Filipino citizen and a
foreigner. The Court held therein that a divorce decree validly obtained by the alien spouse
is valid in the Philippines, and consequently, the Filipino spouse is capacitated to remarry
under Philippine law.

Does the same principle apply to a case where at the time of the celebration of the marriage,
the parties were Filipino citizens, but later on, one of them obtains a foreign citizenship by
naturalization?

The jurisprudential answer lies latent in the 1998 case of Quita v. Court of
Appeals.11 In Quita, the parties were, as in this case, Filipino citizens when they got married.
The wife became a naturalized American citizen in 1954 and obtained a divorce in the same
year. The Court therein hinted, by way of obiter dictum, that a Filipino divorced by his
naturalized foreign spouse is no longer married under Philippine law and can thus remarry.

Thus, taking into consideration the legislative intent and applying the rule of reason, we hold
that Paragraph 2 of Article 26 should be interpreted to include cases involving parties who,
at the time of the celebration of the marriage were Filipino citizens, but later on, one of them
becomes naturalized as a foreign citizen and obtains a divorce decree. The Filipino spouse
should likewise be allowed to remarry as if the other party were a foreigner at the time of the
solemnization of the marriage. To rule otherwise would be to sanction absurdity and
injustice. Where the interpretation of a statute according to its exact and literal import would
lead to mischievous results or contravene the clear purpose of the legislature, it should be
construed according to its spirit and reason, disregarding as far as necessary the letter of
the law. A statute may therefore be extended to cases not within the literal meaning of its
terms, so long as they come within its spirit or intent.12

If we are to give meaning to the legislative intent to avoid the absurd situation where the
Filipino spouse remains married to the alien spouse who, after obtaining a divorce is no
longer married to the Filipino spouse, then the instant case must be deemed as coming
within the contemplation of Paragraph 2 of Article 26.

In view of the foregoing, we state the twin elements for the application of Paragraph 2 of
Article 26 as follows:

1. There is a valid marriage that has been celebrated between a Filipino citizen and a
foreigner; and

2. A valid divorce is obtained abroad by the alien spouse capacitating him or her to remarry.

The reckoning point is not the citizenship of the parties at the time of the celebration of the
marriage, but their citizenship at the time a valid divorce is obtained abroad by the alien
spouse capacitating the latter to remarry.
In this case, when Cipriano’s wife was naturalized as an American citizen, there was still a
valid marriage that has been celebrated between her and Cipriano. As fate would have it,
the naturalized alien wife subsequently obtained a valid divorce capacitating her to remarry.
Clearly, the twin requisites for the application of Paragraph 2 of Article 26 are both present in
this case. Thus Cipriano, the "divorced" Filipino spouse, should be allowed to remarry.

We are also unable to sustain the OSG’s theory that the proper remedy of the Filipino
spouse is to file either a petition for annulment or a petition for legal separation. Annulment
would be a long and tedious process, and in this particular case, not even feasible,
considering that the marriage of the parties appears to have all the badges of validity. On
the other hand, legal separation would not be a sufficient remedy for it would not sever the
marriage tie; hence, the legally separated Filipino spouse would still remain married to the
naturalized alien spouse.

However, we note that the records are bereft of competent evidence duly submitted by
respondent concerning the divorce decree and the naturalization of respondent’s wife. It is
settled rule that one who alleges a fact has the burden of proving it and mere allegation is
not evidence.13

Accordingly, for his plea to prosper, respondent herein must prove his allegation that his wife
was naturalized as an American citizen. Likewise, before a foreign divorce decree can be
recognized by our own courts, the party pleading it must prove the divorce as a fact and
demonstrate its conformity to the foreign law allowing it. 14 Such foreign law must also be
proved as our courts cannot take judicial notice of foreign laws. Like any other fact, such
laws must be alleged and proved. 15 Furthermore, respondent must also show that the
divorce decree allows his former wife to remarry as specifically required in Article 26.
Otherwise, there would be no evidence sufficient to declare that he is capacitated to enter
into another marriage.

Nevertheless, we are unanimous in our holding that Paragraph 2 of Article 26 of the Family
Code (E.O. No. 209, as amended by E.O. No. 227), should be interpreted to allow a Filipino
citizen, who has been divorced by a spouse who had acquired foreign citizenship and
remarried, also to remarry. However, considering that in the present petition there is no
sufficient evidence submitted and on record, we are unable to declare, based on
respondent’s bare allegations that his wife, who was naturalized as an American citizen, had
obtained a divorce decree and had remarried an American, that respondent is now
capacitated to remarry. Such declaration could only be made properly upon respondent’s
submission of the aforecited evidence in his favor.

ACCORDINGLY, the petition by the Republic of the Philippines is GRANTED. The assailed

Decision dated May 15, 2002, and Resolution dated July 4, 2002, of the Regional Trial Court
of Molave, Zamboanga del Sur, Branch 23, are hereby SET ASIDE.

No pronouncement as to costs.

SO ORDERED.