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1. Rogelio Batin Caballero vs. COMELEC, G.R. No. 209835, September 22, 20152. Norma Del Socorro vs. Ernst Johan Brinkman van Wilsen, G.R. No. 193707, December 10, 20143. LWV Construction Corporation vs. Marcelo Dupo, G.R. No. 172342, July 13, 20094. Crescent Petroleum, Ltd. vs. M/V Lok Maheshwari, G.R. No. 155014, November 11, 20055. Priscilla Mijares vs. Hon. Santiago Ranada, G.R. No. 139325, April 12, 20056. Philippine Export and Foreign Loan Guarantee Corporation vs. V.P. Eusebio Construction, G.R. No. 140047, July 13, 20047. Bank of America vs. CA, G.R. No. 120135, March 31, 20038. Paula Llorente vs. CA, G.R. No. 124371, November 23, 20009. Bank of America vs. American Realty Corporation, G.R. No. 133876, December 29, 199910. Asiavest Limited vs. CA, G.R. No. 128803, September 25, 1998For those who would like to improve their grade, submit legibly handwritten digests of the above cases in yellow paper on November 22. The case digests are optional but everybody has to read the cases.

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1. Rogelio Batin Caballero vs. COMELEC, G.R. No. 209835, September 22, 2015

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2. Norma Del Socorro vs. Ernst Johan Brinkman van Wilsen, G.R. No. 193707, December 10, 2014G.R. No. 193707, December 10, 2014

NORMA A. DEL SOCORRO, FOR AND IN BEHALF OF HER MINOR CHILD RODERIGO NORJO VAN WILSEM, Petitioner, v. ERNST JOHAN BRINKMAN VAN WILSEM,

Respondent.D E C I S I O N

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to reverse and set aside the Orders1 dated February 19, 2010 and September 1, 2010, respectively, of the Regional Trial Court of Cebu City (RTC-Cebu), which dismissed the criminal case entitled People of the Philippines v. Ernst Johan Brinkman Van Wilsem, docketed as Criminal Case No. CBU-85503, for violation of Republic Act (R.A.) No. 9262, otherwise known as the Anti-Violence Against Women and Their Children Act of 2004.

The following facts are culled from the records:

Petitioner Norma A. Del Socorro and respondent Ernst Johan Brinkman Van Wilsem contracted marriage in Holland on September 25, 1990.2 On January 19, 1994, they were blessed with a son named Roderigo Norjo Van Wilsem, who at the time of the filing of the instant petition was sixteen (16) years of age.3

Unfortunately, their marriage bond ended on July 19, 1995 by virtue of a Divorce Decree issued by the appropriate Court of Holland.4 At that time, their son

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was only eighteen (18) months old.5 Thereafter, petitioner and her son came home to the Philippines.6

According to petitioner, respondent made a promise to provide monthly support to their son in the amount of Two Hundred Fifty (250) Guildene (which is equivalent to Php17,500.00 more or less).7  However, since the arrival of petitioner and her son in the Philippines, respondent never gave support to the son, Roderigo.8

Not long thereafter, respondent came to the Philippines and remarried in Pinamungahan, Cebu, and since then, have been residing thereat.9 Respondent and his new wife established a business known as Paree Catering, located at Barangay Tajao, Municipality of Pinamungahan, Cebu City.10 To date, all the parties, including their son, Roderigo, are presently living in Cebu City.11

On August 28, 2009, petitioner, through her counsel, sent a letter demanding for support from respondent. However, respondent refused to receive the letter.12

Because of the foregoing circumstances, petitioner filed a complaint-affidavit with the Provincial Prosecutor of Cebu City against respondent for violation of Section 5, paragraph E(2) of R.A. No. 9262 for the latter’s unjust refusal to support his minor child with petitioner.13 Respondent submitted his counter-affidavit thereto, to which petitioner also submitted her reply-affidavit.14 Thereafter, the Provincial Prosecutor of Cebu City issued a Resolution recommending the filing of an information for the crime charged against herein respondent.

The information, which was filed with the RTC-Cebu and raffled to Branch 20 thereof, states that:

That sometime in the year 1995 and up to the present, more or less, in the Municipality of Minglanilla, Province of Cebu, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, did then and there wilfully, unlawfully and deliberately deprive,

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refuse and still continue to deprive his son RODERIGO NORJO VAN WILSEM, a fourteen (14) year old minor, of financial support legally due him, resulting in economic abuse to the victim.

CONTRARY TO LAW.15

Upon motion and after notice and hearing, the RTC-Cebu issued a Hold Departure Order against respondent.16  Consequently, respondent was arrested and, subsequently, posted bail.17

Petitioner also filed a Motion/Application of Permanent Protection Order to which respondent filed his Opposition.18 Pending the resolution thereof, respondent was arraigned.19

Subsequently, without the RTC-Cebu having resolved the application of the protection order, respondent filed a Motion to Dismiss on the ground of: (1) lack of jurisdiction over the offense charged; and (2) prescription of the crime charged.20

On February 19, 2010, the RTC-Cebu issued the herein assailed Order,21 dismissing the instant criminal case against respondent on the ground that the facts charged in the information do not constitute an offense with respect to the respondent who is an alien, the dispositive part of which states:

WHEREFORE, the Court finds that the facts charged in the information do not constitute an offense with respect to the accused, he being an alien, and accordingly, orders this case DISMISSED.

The bail bond posted by accused Ernst Johan Brinkman Van Wilsem for his provisional liberty is hereby cancelled (sic) and ordered released.

SO ORDERED.

Cebu City, Philippines, February 19, 2010.22

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Thereafter, petitioner filed her Motion for Reconsideration thereto reiterating respondent’s obligation to support their child under Article 19523 of the Family Code, thus, failure to do so makes him liable under R.A. No. 9262 which “equally applies to all persons in the Philippines who are obliged to support their minor children regardless of the obligor’s nationality.”24

On September 1, 2010, the lower court issued an Order25 denying petitioner’s Motion for Reconsideration and reiterating its previous ruling. Thus:

x x x The arguments therein presented are basically a rehash of those advanced earlier in the memorandum of the prosecution. Thus, the court hereby reiterates its ruling that since the accused is a foreign national he is not subject to our national law (The Family Code) in regard to a parent’s duty and obligation to give support to his child. Consequently, he cannot be charged of violating R.A. 9262 for his alleged failure to support his child. Unless it is conclusively established that R.A. 9262 applies to a foreigner who fails to give support to his child, notwithstanding that he is not bound by our domestic law which mandates a parent to give such support, it is the considered opinion of the court that no prima facie case exists against the accused herein, hence, the case should be dismissed.

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.

SO ORDERED.

Cebu City, Philippines, September 1, 2010.26

Hence, the present Petition for Review on Certiorari raising the following issues:

1. Whether or not a foreign national has an obligation to support his minor child under Philippine law; and

2. Whether or not a foreign national can be held criminally liable under R.A. No.

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9262 for his unjustified failure to support his minor child.27

At the outset, let it be emphasized that We are taking cognizance of the instant petition despite the fact that the same was directly lodged with the Supreme Court, consistent with the ruling in Republic v. Sunvar Realty

Development Corporation,28 which lays down the instances when a ruling of the trial court may be brought on appeal directly to the Supreme Court without violating the doctrine of hierarchy of courts, to wit:

x x x Nevertheless, the Rules do not prohibit any of the parties from filing a Rule 45 Petition with this Court, in case only questions of law are raised or involved. This latter situation was one that petitioners found themselves in when they filed the instant Petition to raise only questions of law.

In Republic v. Malabanan, the Court clarified the three modes of appeal from decisions of the RTC, to wit: (1) by ordinary appeal or appeal by writ of error under Rule 41, whereby judgment was rendered in a civil or criminal action by the RTC in the exercise of its original jurisdiction; (2) by a petition for review under Rule 42, whereby judgment was rendered by the RTC in the exercise of its appellate jurisdiction; and (3) by a petition for review on certiorari before the Supreme Court under Rule 45. “The first mode of appeal is taken to the [Court of Appeals] on questions of fact or mixed questions of fact and law. The second mode of appeal is brought to the CA on questions of fact, of law, or mixed questions of fact and law. The third mode of appeal is elevated to the Supreme Court only on questions of law.” (Emphasis supplied)

There is a question of law when the issue does not call for an examination of the probative value of the evidence presented or of the truth or falsehood of the facts being admitted, and the doubt concerns the correct application of law and jurisprudence on the matter. The resolution of the issue must rest solely on what the law provides on the given set of circumstances.29

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Indeed, the issues submitted to us for resolution involve questions of law – the response thereto concerns the correct application of law and jurisprudence on a given set of facts, i.e., whether or not a foreign national has an obligation to support his minor child under Philippine law; and whether or not he can be held criminally liable under R.A. No. 9262 for his unjustified failure to do so.

It cannot be negated, moreover, that the instant petition highlights a novel question of law concerning the liability of a foreign national who allegedly commits acts and omissions punishable under special criminal laws, specifically in relation to family rights and duties. The inimitability of the factual milieu of the present case, therefore, deserves a definitive ruling by this Court, which will eventually serve as a guidepost for future cases. Furthermore, dismissing the instant petition and remanding the same to the CA would only waste the time, effort and resources of the courts. Thus, in the present case, considerations of efficiency and economy in the administration of justice should prevail over the observance of the hierarchy of courts.

Now, on the matter of the substantive issues, We find the petition meritorious. Nonetheless, we do not fully agree with petitioner’s contentions.

To determine whether or not a person is criminally liable under R.A. No. 9262, it is imperative that the legal obligation to support exists.

Petitioner invokes Article 19530 of the Family Code, which provides the parent’s obligation to support his child. Petitioner contends that notwithstanding the existence of a divorce decree issued in relation to Article 26 of the Family Code,31 respondent is not excused from complying with his obligation to support his minor child with petitioner.

On the other hand, respondent contends that there is no sufficient and clear basis presented by petitioner that she, as well as her minor son, are entitled to financial support.32 Respondent also added that by reason of the

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Divorce Decree, he is not obligated to petitioner for any financial support.33

On this point, we agree with respondent that petitioner cannot rely on Article 19534 of the New Civil Code in demanding support from respondent, who is a foreign citizen, since Article 1535 of the New Civil Code stresses the principle of nationality. In other words, insofar as Philippine laws are concerned, specifically the provisions of the Family Code on support, the same only applies to Filipino citizens. By analogy, the same principle applies to foreigners such that they are governed by their national law with respect to family rights and duties.36

The obligation to give support to a child is a matter that falls under family rights and duties.  Since the respondent is a citizen of Holland or the Netherlands, we agree with the RTC-Cebu that he is subject to the laws of his country, not to Philippine law, as to whether he is obliged to give support to his child, as well as the consequences of his failure to do so.37

In the case of Vivo v. Cloribel,38 the Court held that –Furthermore, being still aliens, they are not in position to invoke the provisions of the Civil Code of the Philippines, for that Code cleaves to the principle that family rights and duties are governed by their personal law, i.e., the laws of the nation to which they belong even when staying in a foreign country (cf. Civil Code, Article 15).39

It cannot be gainsaid, therefore, that the respondent is not obliged to support petitioner’s son under Article 195 of the Family Code as a consequence of the Divorce Covenant obtained in Holland. This does not, however, mean that respondent is not obliged to support petitioner’s son altogether.

In international law, the party who wants to have a foreign law applied to a dispute or case has the burden of proving the foreign law.40  In the present case,

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respondent hastily concludes that being a national of the Netherlands, he is governed by such laws on the matter of provision of and capacity to support.41 While respondent pleaded the laws of the Netherlands in advancing his position that he is not obliged to support his son, he never proved the same.

It is incumbent upon respondent to plead and prove that the national law of the Netherlands does not impose upon the parents the obligation to support their child (either before, during or after the issuance of a divorce decree), because Llorente v. Court of Appeals,42 has already enunciated that:

True, foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them.  Like any other fact, they must be alleged and proved. 43

In view of respondent’s failure to prove the national law of the Netherlands in his favor, the doctrine of processual presumption shall govern. Under this doctrine, if the foreign law involved is not properly pleaded and proved, our courts will presume that the foreign law is the same as our local or domestic or internal law.44 Thus, since the law of the Netherlands as regards the obligation to support has not been properly pleaded and proved in the instant case, it is presumed to be the same with Philippine law, which enforces the obligation of parents to support their children and penalizing the non-compliance therewith.

Moreover, while in Pilapil v. Ibay-Somera',45 the Court held that a divorce obtained in a foreign land as well as its legal effects may be recognized in the Philippines in view of the nationality principle on the matter of status of persons, the Divorce Covenant presented by respondent does not completely show that he is not liable to give support to his son after the divorce decree was issued. Emphasis is placed on petitioner’s allegation that under the second page of the aforesaid covenant, respondent’s obligation to support his child is specifically

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stated,46 which was not disputed by respondent.

We likewise agree with petitioner that notwithstanding that the national law of respondent states that parents have no obligation to support their children or that such obligation is not punishable by law, said law would still not find applicability, in light of the ruling in Bank of

America, NT and SA v. American Realty Corporation,47 to wit:

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.

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.

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.

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

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contract that is obviously unjust negates the fundamental principles of Conflict of Laws.48

Applying the foregoing, even if the laws of the Netherlands neither enforce a parent’s obligation to support his child nor penalize the non-compliance therewith, such obligation is still duly enforceable in the Philippines because it would be of great injustice to the child to be denied of financial support when the latter is entitled thereto.

We emphasize, however, that as to petitioner herself, respondent is no longer liable to support his former wife, in consonance with the ruling in San Luis v. San Luis,49 to wit:

As to the effect of the divorce on the Filipino wife, the Court ruled that she should no longer be considered married to the alien spouse. Further, she should not be required to perform her marital duties and obligations. It held:

To maintain, as private respondent does, that, under our laws, petitioner has to be considered still married to private respondent and still subject to a wife's obligations under Article 109, et. seq. of the Civil Code cannot be just . Petitioner should not be obliged to live together with, observe respect and fidelity, and render support to private respondent. 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. (Emphasis added)50

Based on the foregoing legal precepts, we find that respondent may be made liable under Section 5(e) and (i) of R.A. No. 9262 for unjustly refusing or failing to give support to petitioner’s son, to wit:

SECTION 5. Acts of Violence Against Women and Their Children.- The crime of violence against women and their children is committed through any of the following acts:chanroblesvirtuallawlibrary

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x x x x

(e) Attempting to compel or compelling the woman or her child to engage in conduct which the woman or her child has the right to desist from or desist from conduct which the woman or her child has the right to engage in, or attempting to restrict or restricting the woman's or her child's freedom of movement or conduct by force or threat of force, physical or other harm or threat of physical or other harm, or intimidation directed against the woman or child. This shall include, but not limited to, the following acts committed with the purpose or effect of controlling or restricting the woman's or her child's movement or conduct:

x x x x

(2) Depriving or threatening to deprive the woman or her children of financial support legally due her or her family , or deliberately providing the woman's children insufficient financial support;

x x x x

(i) Causing mental or emotional anguish, public ridicule or humiliation to the woman or her child, including, but not limited to, repeated verbal and emotional abuse, and denial of financial support or custody of minor children of access to the woman's child/children.51

Under the aforesaid special law, the deprivation or denial of financial support to the child is considered an act of violence against women and children.

In addition, considering that respondent is currently living in the Philippines, we find strength in petitioner’s claim that the Territoriality Principle in criminal law, in relation to Article 14 of the New Civil Code, applies to the instant case, which provides that:“[p]enal laws and those of public security and safety shall be obligatory upon all

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who live and sojourn in Philippine territory, subject to the principle of public international law and to treaty stipulations.”  On this score, it is indisputable that the alleged continuing acts of respondent in refusing to support his child with petitioner is committed here in the Philippines as all of the parties herein are residents of the Province of Cebu City.  As such, our courts have territorial jurisdiction over the offense charged against respondent. It is likewise irrefutable that jurisdiction over the respondent was acquired upon his arrest.

Finally, we do not agree with respondent’s argument that granting, but not admitting, that there is a legal basis for charging violation of R.A. No. 9262 in the instant case, the criminal liability has been extinguished on the ground of prescription of crime52 under Section 24 of R.A. No. 9262, which provides that:

SECTION 24. Prescriptive Period. – Acts falling under Sections 5(a) to 5(f) shall prescribe in twenty (20) years. Acts falling under Sections 5(g) to 5(I) shall prescribe in ten (10) years.

The act of denying support to a child under Section 5(e)(2) and (i) of R.A. No. 9262 is a continuing offense,53 which started in 1995 but is still ongoing at present. Accordingly, the crime charged in the instant case has clearly not prescribed.

Given, however, that the issue on whether respondent has provided support to petitioner’s child calls for an examination of the probative value of the evidence presented, and the truth and falsehood of facts being admitted, we hereby remand the determination of this issue to the RTC-Cebu which has jurisdiction over the case.

WHEREFORE, the petition is GRANTED. The Orders dated February 19, 2010 and September 1, 2010, respectively, of the Regional Trial Court of the City of Cebu are hereby REVERSED and SET ASIDE. The case is REMANDED to the same court to conduct further proceedings based on the merits of the case.

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SO ORDERED.

Velasco, Jr., (Chairperson), Villarama, Jr., Mendoza,*and Reyes, JJ., concur.

3. LWV Construction Corporation vs. Marcelo Dupo, G.R. No. 172342, July 13, 2009

SECOND DIVISIONLWV CONSTRUCTION CORPORATION,

Petitioner,

- versus -

MARCELO B. DUPO,

Respondent.

G.R. No. 172342Present:

QUISUMBING, J., Chairperson,

CARPIO MORALES,

CHICO-NAZARIO,*

LEONARDO-DE CASTRO,** and

BRION, JJ.

Promulgated:

July 13, 2009x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.:

Petitioner LWV Construction Corporation appeals the Decision[1] dated of the Court of Appeals in CA-G.R. SP No. 76843 and its Resolution[2] dated , denying the motion for reconsideration. The Court of Appeals had ruled that under Article 87 of the Saudi Labor and Workmen Law (Saudi Labor Law), respondent Marcelo Dupo is entitled to a service award or longevity pay amounting to US$12,640.33.

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The antecedent facts are as follows:

Petitioner, a domestic corporation which recruits Filipino workers, hired respondent as Civil Structural Superintendent to work in for its principal, Mohammad Al-Mojil Group/Establishment (MMG). On , respondent signed his first overseas employment contract, renewable after one year. It was renewed five times on the following dates: , , , , and . All were fixed-period contracts for one year. The sixth and last contract stated that respondents employment starts upon reporting to work and ends when he leaves the work site. Respondent left on and arrived in the on .

On , respondent informed MMG, through the petitioner, that he needs to extend his vacation because his son was hospitalized. He also sought a promotion with salary adjustment.[3] In reply, MMG informed respondent that his promotion is subject to managements review; that his services are still needed; that he was issued a plane ticket for his return flight to on ; and that his decision regarding his employment must be made within seven days, otherwise, MMG will be compelled to cancel [his] slot.[4]

On , respondent resigned. In his letter to MMG, he also stated:

x x x x

I am aware that I still have to do a final settlement with the company and hope that during my more than seven (7) [years] services, as the Saudi Law stated, I am entitled for a long service award.[5] (Emphasis supplied.)

x x x x

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According to respondent, when he followed up his claim for long service award on , petitioner informed him that MMG did not respond.[6]

On , respondent filed a complaint[7] for payment of service award against petitioner before the National Labor Relations Commission (NLRC), Regional Arbitration Branch, Cordillera Administrative Region, Baguio . In support of his claim, respondent averred in his position paper that:

x x x x

Under the Law of Saudi Arabia, an employee who rendered at least five (5) years in a company within the jurisdiction of , is entitled to the so-called long service award which is known to others as longevity pay of at least one half month pay for every year of service. In excess of five years an employee is entitled to one month pay for every year of service. In both cases inclusive of all benefits and allowances.

This benefit was offered to complainant before he went on vacation, hence, this was engrained in his mind. He reconstructed the computation of his long service award or longevity pay and he arrived at the following computation exactly the same with the amount he was previously offered [which is US$12,640.33].[8] (Emphasis supplied.)

x x x xRespondent said that he did not grab the offer for he intended to return after his vacation.

For its part, petitioner offered payment and prescription as defenses. Petitioner maintained that MMG pays its workers their Service Award or Severance Pay every conclusion of their Labor Contracts pursuant to Article 87 of the [Saudi Labor Law]. Under Article 87, payment of

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the award is at the end or termination of the Labor Contract concluded for a specific period. Based on the payroll,[9] respondent was already paid his service award or severance pay for his latest (sixth) employment contract.

Petitioner added that under Article 13[10] of the Saudi Labor Law, the action to enforce payment of the service award must be filed within one year from the termination of a labor contract for a specific period. Respondents six contracts ended when he left on the following dates: , , , , and . Petitioner concluded that the one-year prescriptive period had lapsed because respondent filed his complaint on or one year and seven months after his sixth contract ended.[11]

In his June 18, 2001 Decision,[12] the Labor Arbiter ordered petitioner to pay respondent longevity pay of US$12,640.33 or P648,562.69 and attorneys fees of P64,856.27 or a total of P713,418.96.[13]

The Labor Arbiter ruled that respondents seven-year employment with MMG had sufficiently oriented him on the benefits given to workers; that petitioner was unable to convincingly refute respondents claim that MMG offered him longevity pay before he went on vacation on May 1, 1999; and that respondents claim was not barred by prescription since his claim on July 6, 1999, made a month after his cause of action accrued, interrupted the prescriptive period under the Saudi Labor Law until his claim was categorically denied.

Petitioner appealed. However, the NLRC dismissed the appeal and affirmed the Labor Arbiters decision.[14] The NLRC ruled that respondent is entitled to longevity pay

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which is different from severance pay.

Aggrieved, petitioner brought the case to the Court of Appeals through a petition for certiorari under Rule 65 of the Rules of Court. The Court of Appeals denied the petition and affirmed the NLRC. The Court of Appeals ruled that service award is the same as longevity pay, and that the severance pay received by respondent cannot be equated with service award. The dispositive portion of the Court of Appeals decision reads:

WHEREFORE, finding no grave abuse of discretion amounting to lack or in (sic) excess of jurisdiction on the part of public respondent NLRC, the petition is denied. The NLRC decision dated as well as and (sic) its Resolution are hereby AFFIRMED in toto.

SO ORDERED.[15]

After its motion for reconsideration was denied, petitioner filed the instant petition raising the following issues:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING NO GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION ON THE PART OF PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION.

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE SERVICE AWARD OF THE RESPONDENT [HAS] NOT PRESCRIBED WHEN HIS COMPLAINT WAS FILED ON .

III.

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WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING IN THE CASE AT BAR [ARTICLE 1155 OF THE CIVIL CODE].

IV.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN APPLYING ARTICLE NO. 7 OF THE SAUDI LABOR AND WORKMEN LAW TO SUPPORT ITS FINDING THAT THE BASIS OF THE SERVICE AWARD IS LONGEVITY [PAY] OR LENGTH OF SERVICE RENDERED BY AN EMPLOYEE.[16]

Essentially, the issue is whether the Court of Appeals erred in ruling that respondent is entitled to a service award or longevity pay of US$12,640.33 under the provisions of the Saudi Labor Law. Related to this issue are petitioners defenses of payment and prescription.

Petitioner points out that the Labor Arbiter awarded longevity pay although the Saudi Labor Law grants no such benefit, and the NLRC confused longevity pay and service award. Petitioner maintains that the benefit granted by Article 87 of the Saudi Labor Law is service award which was already paid by MMG each time respondents contract ended.

Petitioner insists that prescription barred respondents claim for service award as the complaint was filed one year and seven months after the sixth contract ended. Petitioner alleges that the Court of Appeals erred in ruling that respondents claim interrupted the running of the prescriptive period. Such ruling is contrary to Article 13 of the Saudi Labor Law which provides that no case or claim relating to any of the rights provided for under said law shall be heard after the lapse of 12 months from the date of the termination of the contract.

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Respondent counters that he is entitled to longevity pay under the provisions of the Saudi Labor Law and quotes extensively the decision of the Court of Appeals. He points out that petitioner has not refuted the Labor Arbiters finding that MMG offered him longevity pay of US$12,640.33 before his one-month vacation in the in 1999. Thus, he submits that such offer indeed exists as he sees no reason for MMG to offer the benefit if no law grants it.

After a careful study of the case, we are constrained to reverse the Court of Appeals. We find that respondents service award under Article 87 of the Saudi Labor Law has already been paid. Our computation will show that the severance pay received by respondent was his service award.

Article 87 clearly grants a service award. It reads:

Article 87

Where the term of a labor contract concluded for a specified period comes to an end or where the employer cancels a contract of unspecified period, the employer shall pay to the workman an award for the period of his service to be computed on the basis of half a months pay for each of the first five years and one months pay for each of the subsequent years. The last rate of pay shall be taken as basis for the computation of the award. For fractions of a year, the workman shall be entitled to an award which is proportionate to his service period during that year. Furthermore, the workman shall be entitled to the service award provided for at the beginning of this article in the following cases:

A.                If he is called to military service.B.                 If a workman resigns because of marriage or childbirth.

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C.                 If the workman is leaving the work as a result of a force majeure beyond his control.[17] (Emphasis supplied.)

Respondent, however, has called the benefit other names such as long service award and longevity pay. On the other hand, petitioner claimed that the service award is the same as severance pay. Notably, the Labor Arbiter was unable to specify any law to support his award of longevity pay.[18] He anchored the award on his finding that respondents allegations were more credible because his seven-year employment at MMG had sufficiently oriented him on the benefits given to workers. To the NLRC, respondent is entitled to service award or longevity pay under Article 87 and that longevity pay is different from severance pay. The Court of Appeals agreed.

Considering that Article 87 expressly grants a service award, why is it correct to agree with respondent that service award is the same as longevity pay, and wrong to agree with petitioner that service award is the same as severance pay? And why would it be correct to say that service award is severance pay, and wrong to call service award as longevity pay?

We found the answer in the pleadings and evidence presented. Respondents position paper mentioned how his long service award or longevity pay is computed: half-months pay per year of service and one-months pay per year after five years of service. Article 87 has the same formula to compute the service award.

The payroll submitted by petitioner showed that respondent received severance pay of SR2,786 for his

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sixth employment contract covering the period to .[19] The computation below shows that respondents severance pay of SR2,786 was his service award under Article 87.

Service Award = (SR5,438)[20] + (9 days/365 days)[21] x (SR5,438)

Service Award = SR2,786.04

Respondents service award for the sixth contract is equivalent only to half-months pay plus the proportionate amount for the additional nine days of service he rendered after one year. Respondents employment contracts expressly stated that his employment ended upon his departure from work. Each year he departed from work and successively new contracts were executed before he reported for work anew. His service was not cumulative. Pertinently, in Brent School, Inc. v. Zamora,[22] we said that a fixed term is an essential and natural appurtenance of overseas employment contracts,[23] as in this case. We also said in that case that under American law, [w]here a contract specifies the period of its duration, it terminates on the expiration of such period. A contract of employment for a definite period terminates by its own terms at the end of such period.[24] As it is, Article 72 of the Saudi Labor Law is also of similar import. It reads:

A labor contract concluded for a specified period shall terminate upon the expiry of its term. If both parties continue to enforce the contract, thereafter, it shall be considered renewed for an unspecified period.[25]

Regarding respondents claim that he was offered US$12,640.33 as longevity pay before he returned to the on , we find that he was not candid on this particular

CONFLICTS CASES2 Page 27

point. His categorical assertion about the offer being engrained in his mind such that he reconstructed the computation and arrived at the computation exactly the same with the amount he was previously offered is not only beyond belief. Such assertion is also a stark departure from his letter to MMG where he could only express his hope that he was entitled to a long service award and where he never mentioned the supposed previous offer. Moreover, respondents claim that his monthly compensation is SR10,248.92[26] is belied by the payroll which shows that he receives SR5,438 per month.

We therefore emphasize that such payroll should have prompted the lower tribunals to examine closely respondents computation of his supposed longevity pay before adopting that computation as their own.

On the matter of prescription, however, we cannot agree with petitioner that respondents action has prescribed under Article 13 of the Saudi Labor Law. What applies is Article 291 of our Labor Code which reads:

ART. 291. 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.x x x xIn Cadalin v. POEAs Administrator,[27] we held that Article 291 covers all money claims from employer-employee relationship and is broader in scope than claims arising from a specific law. It is not limited to money claims recoverable under the Labor Code, but applies also to claims of overseas contract workers.[28] The following ruling in Cadalin v. POEAs Administrator is

CONFLICTS CASES2 Page 28

instructive:

First to be determined is whether it is the 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 x x x.

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.

x x x x

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

CONFLICTS CASES2 Page 29

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 Philippine Islands.

Section 48 has not been repealed or amended by the Civil Code of the . Article 2270 of said Code repealed only those provisions of the Code of Civil Procedure 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 [of the Code of Civil Procedure] cannot be enforced ex proprio vigore insofar as it ordains the application in this jurisdiction of [Article] 156 of the Amiri Decree No. 23 of 1976.

The courts of the forum will not enforce any foreign claim obnoxious to the forums public policy x x x. 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.[29]

x x x xThus, in our considered view, respondents complaint was filed well within the three-year prescriptive period under Article 291 of our Labor Code. This point, however, has already been mooted by our finding that respondents service award had been paid, albeit the payroll termed such payment as severance pay.

WHEREFORE, the petition is GRANTED. The assailed Decision dated and Resolution dated , of the Court of Appeals in CA-G.R. SP No. 76843, as well as the Decision dated of the Labor Arbiter in NLRC Case No. RAB-CAR-12-

CONFLICTS CASES2 Page 30

0649-00 and the Decision dated and Resolution dated of the NLRC in NLRC CA No. 028994-01 (NLRC RAB-CAR-12-0649-00) are REVERSED and SET ASIDE. The Complaint of respondent is hereby DISMISSED.

No pronouncement as to costs.

4. Crescent Petroleum, Ltd. vs. M/V Lok Maheshwari, G.R. No. 155014, November 11, 2005   SECOND DIVISION

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

Petitioner,

Present:

Puno, J.,

- versus - Chairman,

Austria-Martinez,

Callejo, Sr.,

Tinga, and

*Chico-Nazario, JJ.

M/V LOK MAHESHWARI,

THE SHIPPING CORPORATION

OF INDIA, and PORTSERV LIMITED Promulgated:

and/or TRANSMAR SHIPPING, INC.,

Respondents. November 11, 2005

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

 DECISION

CONFLICTS CASES2 Page 31

 PUNO, J.:

This petition for review on certiorari under Rule 45 seeks

the (a) reversal of the November 28, 2001 Decision of

the Court of Appeals in CA-G.R. No. CV-54920,[1] which

dismissed for want of jurisdiction the instant case, and

the September 3, 2002 Resolution of the same appellate

court,[2] which denied petitioners motion for

reconsideration, and (b) reinstatement of the July 25,

1996 Decision[3] of the Regional Trial Court (RTC) in Civil

Case No. CEB-18679, which held that respondents were

solidarily liable to pay petitioner the sum prayed for in

the complaint.

The facts are as follows: Respondent M/V Lok

Maheshwari (Vessel) is an oceangoing vessel of Indian

registry that is owned by respondent Shipping

Corporation of India (SCI), a corporation organized and

existing under the laws of India and principally owned by

the Government of India. It was time-chartered by

respondent SCI to Halla Merchant Marine Co. Ltd. (Halla),

a South Korean company. Halla, in turn, sub-chartered

the Vessel through a time charter to Transmar Shipping,

Inc. (Transmar). Transmar further sub-chartered the

Vessel to Portserv Limited (Portserv). Both Transmar and

Portserv are corporations organized and existing under

the laws of Canada.

CONFLICTS CASES2 Page 32

On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum, Ltd. (Crescent), a corporation organized and existing under the laws of Canada that is engaged in the business of selling petroleum and oil products for the use and operation of oceangoing vessels, to deliver marine fuel oils (bunker fuels) to the Vessel. Petitioner Crescent granted and confirmed the request through an advice via facsimile dated November 2, 1995. As security for the payment of the bunker fuels and related services, petitioner Crescent received two (2) checks in the amounts of US$100,000.00 and US$200,000.00. Thus, petitioner Crescent contracted with its supplier, Marine Petrobulk Limited (Marine Petrobulk), another Canadian corporation, for the physical delivery of the bunker fuels to the Vessel.

On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels amounting to US$103,544 inclusive of barging and demurrage charges to the Vessel at the port of Pioneer Grain, Vancouver, Canada. The Chief Engineer Officer of the Vessel duly acknowledged and received the delivery receipt. Marine Petrobulk issued an invoice to petitioner Crescent for the US$101,400.00 worth of the bunker fuels. Petitioner Crescent issued a check for the same amount in favor of Marine Petrobulk, which check was duly encashed.

Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated November 21, 1995 to Portserv Limited, and/or the Master, and/or Owners, and/or Operators, and/or Charterers of M/V Lok Maheshwari in the amount of US$103,544.00 with instruction to remit the amount on or before December 1, 1995. The period lapsed and several demands were made but no payment was received. Also, the checks issued to petitioner Crescent as security for the payment of the bunker fuels were dishonored for insufficiency of funds. As a consequence, petitioner Crescent incurred additional expenses of US$8,572.61 for interest, tracking fees, and legal fees.On May 2, 1996, while the Vessel was docked at the port of Cebu City, petitioner Crescent instituted before the RTC of Cebu City an action for a sum of money with

CONFLICTS CASES2 Page 33

prayer for temporary restraining order and writ of preliminary attachment against respondents Vessel and SCI, Portserv and/or Transmar. The case was raffled to Branch 10 and docketed as Civil Case No. CEB-18679.On May 3, 1996, the trial court issued a writ of attachment against the Vessel with bond at P2,710,000.00. Petitioner Crescent withdrew its prayer for a temporary restraining order and posted the required bond.

On May 18, 1996, summonses were served to

respondents Vessel and SCI, and Portserv and/or

Transmar through the Master of the Vessel. On May 28,

1996, respondents Vessel and SCI, through Pioneer

Insurance and Surety Corporation (Pioneer), filed an

urgent ex-parte motion to approve Pioneers letter of

undertaking, to consider it as counter-bond and to

discharge the attachment. On May 29, 1996, the trial

court granted the motion; thus, the letter of undertaking

was approved as counter-bond to discharge the

attachment.

For failing to file their respective answers and upon

motion of petitioner Crescent, the trial court declared

respondents Vessel and SCI, Portserv and/or Transmar in

default. Petitioner Crescent was allowed to present its

evidence ex-parte.

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

favor of petitioner Crescent, thus:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff [Crescent] and against the

CONFLICTS CASES2 Page 34

defendants [Vessel, SCI, Portserv and/or Transmar]. Consequently, the latter are hereby ordered to pay plaintiff jointly and solidarily, the following: 

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

(b) interest of US$10,978.50 as of July 3, 1996, plus additional interest at 18% per annum for the period thereafter, until the principal account is fully paid;

(c) attorneys fees of P300,000.00; and

(d) P200,000.00 as litigation expenses.

 SO ORDERED. 

On August 19, 1996, respondents Vessel and SCI

appealed to the Court of Appeals. They attached copies

of the charter parties between respondent SCI and Halla,

between Halla and Transmar, and between Transmar and

Portserv. They pointed out that Portserv was a time

charterer and that there is a clause in the time charters

between respondent SCI and Halla, and between Halla

and Transmar, which states that the Charterers shall

provide and pay for all the fuel except as otherwise

agreed. They submitted a copy of Part II of the Bunker

CONFLICTS CASES2 Page 35

Fuel Agreement between petitioner Crescent and

Portserv containing a stipulation that New York law

governs the construction, validity and performance of

the contract. They likewise submitted certified copies of

the Commercial Instruments and Maritime Lien Act of

the United States (U.S.), some U.S. cases, and some

Canadian cases to support their defense.

On November 28, 2001, the Court of Appeals issued its assailed Decision, which reversed that of the trial court, viz: WHEREFORE, premises considered, the Decision dated July 25, 1996, issued by the Regional Trial Court of Cebu City, Branch 10, is hereby REVERSED and SET ASIDE, and a new one is entered DISMISSING the instant case for want of jurisdiction. 

The appellate court denied petitioner Crescents motion for reconsideration explaining that it dismissed the instant action primarily on the ground of forum non conveniens considering that the parties are foreign corporations which are not doing business in the Philippines.

Hence, this petition submitting the following issues for

resolution, viz:

1.                  Philippine courts have jurisdiction over a foreign vessel found inside Philippine waters for the enforcement of a maritime lien against said vessel and/or its owners and operators; 2.                  The principle of forum non conveniens is inapplicable to the instant case;

CONFLICTS CASES2 Page 36

 3.                  The trial court acquired jurisdiction over the subject matter of the instant case, as well as over the res and over the persons of the parties;

 4.                  The enforcement of a maritime lien on the subject vessel is expressly granted by law. The Ship Mortgage Acts as well as the Code of Commerce provides for relief to petitioner for its unpaid claim;

 5.                  The arbitration clause in the contract was not rigid or inflexible but expressly allowed petitioner to enforce its maritime lien in Philippine courts provided the vessel was in the Philippines;

 6.                  The law of the state of New York is inapplicable to the present controversy as the same has not been properly pleaded and proved;

 7.                  Petitioner has legal capacity to sue before Philippine courts as it is suing upon an isolated business transaction;

 8.                  Respondents were duly served summons although service of summons upon respondents is not a jurisdictional requirement, the action being a suit quasi in rem;

 9.                  The trial courts decision has factual and legal bases; and,

 10.              The respondents should

CONFLICTS CASES2 Page 37

be held jointly and solidarily liable. 

In a nutshell, this case is for the satisfaction of

unpaid supplies furnished by a foreign supplier in a

foreign port to a vessel of foreign registry that is owned,

chartered and sub-chartered by foreign entities.

Under Batas Pambansa Bilang 129, as amended by Republic Act No. 7691, RTCs exercise exclusive original jurisdiction (i)n all actions in admiralty and maritime where the demand or claim exceeds two hundred thousand pesos (P200,000) or in Metro Manila, where such demand or claim exceeds four hundred thousand pesos (P400,000). Two (2) tests have been used to determine whether a case involving a contract comes within the admiralty and maritime jurisdiction of a court - the locational test and the subject matter test. The English rule follows the locational test wherein maritime and admiralty jurisdiction, with a few exceptions, is exercised only on contracts made upon the sea and to be executed thereon. This is totally rejected under the American rule where the criterion in determining whether a contract is maritime depends on the nature and subject matter of the contract, having reference to maritime service and transactions.[4] In International Harvester Company of the Philippines v. Aragon,[5] we adopted the American rule and held that (w)hether or not a contract is maritime depends not on the place where the contract is made and is to be executed, making the locality the test, but on the subject matter of the contract, making the true criterion a maritime service or a maritime transaction.

A contract for furnishing supplies like the one involved in this case is maritime and within the jurisdiction of admiralty.[6] It may be invoked before our courts through an action in rem or quasi in rem or an action in personam. Thus: [7]

x x x

CONFLICTS CASES2 Page 38

Articles 579 and 584 [of the Code of Commerce] provide a method of collecting or enforcing not only the liens created under Section 580 but also for the collection of any kind of lien whatsoever.[8] In the Philippines, we have a complete legislation, both substantive and adjective, under which to bring an action in rem against a vessel for the purpose of enforcing liens. The substantive law is found in Article 580 of the Code of Commerce. The procedural law is to be found in Article 584 of the same Code. The result is, therefore, that in the Philippines any vessel even though it be a foreign vessel found in any port of this Archipelago may be attached and sold under the substantive law which defines the right, and the procedural law contained in the Code of Commerce by which this right is to be enforced.[9] x x x. But where neither the law nor the contract between the parties creates any lien or charge upon the vessel, the only way in which it can be seized before judgment is by pursuing the remedy relating to attachment under Rule 59 [now Rule 57] of the Rules of Court.[10]

 

But, is petitioner Crescent entitled to a maritime lien under our laws? Petitioner Crescent bases its claim of a maritime lien on Sections 21, 22 and 23 of Presidential Decree No. 1521 (P.D. No. 1521), also known as the Ship Mortgage Decree of 1978, viz:Sec. 21. Maritime Lien for Necessaries; persons entitled to such lien. - Any person furnishing repairs, supplies, towage, use of dry dock or maritime railway, or other necessaries, to any vessel, whether foreign or domestic, upon the order of the owner of such vessel, or of a person authorized by the owner, shall have a maritime lien on the vessel, which may be enforced by suit in rem, and it shall be necessary to allege or prove that credit was given to the vessel. 

Sec. 22. Persons Authorized to Procure Repairs, Supplies and Necessaries. - The following persons shall be presumed to have authority from the owner to procure repairs, supplies, towage, use of dry dock

CONFLICTS CASES2 Page 39

or marine railway, and other necessaries for the vessel: The managing owner, ships husband, master or any person to whom the management of the vessel at the port of supply is entrusted. No person tortuously or unlawfully in possession or charge of a vessel shall have authority to bind the vessel. Sec. 23. Notice to Person Furnishing Repairs, Supplies and Necessaries. - The officers and agents of a vessel specified in Section 22 of this Decree shall be taken to include such officers and agents when appointed by a charterer, by an owner pro hac vice, or by an agreed purchaser in possession of the vessel; but nothing in this Decree shall be construed to confer a lien when the furnisher knew, or by exercise of reasonable diligence could have ascertained, that because of the terms of a charter party, agreement for sale of the vessel, or for any other reason, the person ordering the repairs, supplies, or other necessaries was without authority to bind the vessel therefor.

 

Petitioner Crescent submits that these provisions apply to both domestic and foreign vessels, as well as domestic and foreign suppliers of necessaries. It contends that the use of the term any person in Section 21 implies that the law is not restricted to domestic suppliers but also includes all persons who supply provisions and necessaries to a vessel, whether foreign or domestic. It points out further that the law does not indicate that the supplies or necessaries must be furnished in the Philippines in order to give petitioner the right to seek enforcement of the lien with a Philippine court.[11]

Respondents Vessel and SCI, on the other hand, maintain that Section 21 of the P.D. No. 1521 or the Ship Mortgage Decree of 1978 does not apply to a foreign supplier like

CONFLICTS CASES2 Page 40

petitioner Crescent as the provision refers only to a situation where the person furnishing the supplies is situated inside the territory of the Philippines and not where the necessaries were furnished in a foreign jurisdiction like Canada.[12]

We find against petitioner Crescent.

I.

P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted to accelerate the growth and development of the shipping industry and to extend the benefits accorded to overseas shipping under Presidential Decree No. 214 to domestic shipping.[13] It is patterned closely from the U.S. Ship Mortgage Act of 1920 and the Liberian Maritime Law relating to preferred mortgages.[14] Notably, Sections 21, 22 and 23 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 are identical to Subsections P, Q, and R, respectively, of the U.S. Ship Mortgage Act of 1920, which is part of the Federal Maritime Lien Act. Hence, U.S. jurisprudence finds relevance to determining whether P.D. No. 1521 or the Ship Mortgage Decree of 1978 applies in the present case.

The various tests used in the U.S. to determine whether a maritime lien exists are the following:

One. In a suit to establish and enforce a maritime lien for supplies furnished to a vessel in a foreign port, whether such lien exists, or whether the court has or will exercise jurisdiction, depends on the law of the country where the supplies were furnished, which must be pleaded and proved.[15] This principle was laid down in the 1888 case of The Scotia,[16] reiterated in The Kaiser Wilhelm II[17] (1916), in The Woudrichem[18] (1921) and in The City of Atlanta[19] (1924).

Two. The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor methodologies as the law of the place of supply.[20]

CONFLICTS CASES2 Page 41

In Lauritzen v. Larsen,[21] a Danish seaman, while temporarily in New York, joined the crew of a ship of Danish flag and registry that is owned by a Danish citizen. He signed the ships articles providing that the rights of the crew members would be governed by Danish law and by the employers contract with the Danish Seamens Union, of which he was a member. While in Havana and in the course of his employment, he was negligently injured. He sued the shipowner in a federal district court in New York for damages under the Jones Act. In holding that Danish law and not the Jones Act was applicable, the Supreme Court adopted a multiple-contact test to determine, in the absence of a specific Congressional directive as to the statutes reach, which jurisdictions law should be applied. The following factors were considered: (1) place of the wrongful act; (2) law of the flag; (3) allegiance or domicile of the injured; (4) allegiance of the defendant shipowner; (5) place of contract; (6) inaccessibility of foreign forum; and (7) law of the forum.

Several years after Lauritzen, the U.S. Supreme Court in the case of Romero v. International Terminal Operating Co.[22] again considered a foreign seamans personal injury claim under both the Jones Act and the general maritime law. The Court held that the factors first announced in the case of Lauritzen were applicable not only to personal injury claims arising under the Jones Act but to all matters arising under maritime law in general.[23]

Hellenic Lines, Ltd. v. Rhoditis[24] was also a suit under the Jones Act by a Greek seaman injured aboard a ship of Greek registry while in American waters. The ship was operated by a Greek corporation which has its largest office in New York and another office in New Orleans and whose stock is more than 95% owned by a U.S. domiciliary who is also a Greek citizen. The ship was engaged in regularly scheduled runs between various ports of the U.S. and the Middle East, Pakistan, and India, with its entire income coming from either originating or terminating in the U.S. The contract of employment provided that Greek law and a Greek collective bargaining agreement would apply between the

CONFLICTS CASES2 Page 42

employer and the seaman and that all claims arising out of the employment contract were to be adjudicated by a Greek court. The U.S. Supreme Court observed that of the seven factors listed in the Lauritzen test, four were in favor of the shipowner and against jurisdiction. In arriving at the conclusion that the Jones Act applies, it ruled that the application of the Lauritzen test is not a mechanical one. It stated thus: [t]he significance of one or more factors must be considered in light of the national interest served by the assertion of Jones Act jurisdiction. (footnote omitted) Moreover, the list of seven factors in Lauritzen was not intended to be exhaustive. x x x [T]he shipowners base of operations is another factor of importance in determining whether the Jones Act is applicable; and there well may be others.

The principles enunciated in these maritime tort cases have been extended to cases involving unpaid supplies and necessaries such as the

CONFLICTS CASES2 Page 43

cases of Forsythe International U.K., Ltd. v. M/V Ruth Venture,[25] and Comoco Marine Services v. M/V El Centroamericano.[26]

Three. The factors provided in Restatement (Second) of Conflicts of Law have also been applied, especially in resolving cases brought under the Federal Maritime Lien Act. Their application suggests that in the absence of an effective choice of law by the parties, the forum contacts to be considered include: (a) the place of contracting; (b) the place of negotiation of the contract; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties.[27]

In Gulf Trading and Transportation Co. v. The Vessel Hoegh Shield,[28] an admiralty action in rem was brought by an American supplier against a vessel of Norwegian flag owned by a Norwegian Company and chartered by a London time charterer for unpaid fuel oil and marine diesel oil delivered while the vessel was in U.S. territory. The contract was executed in London. It was held that because the bunker fuel was delivered to a foreign flag vessel within the jurisdiction of the U.S., and because the invoice specified payment in the U.S., the admiralty and maritime law of the U.S. applied. The U.S. Court of Appeals recognized the modern approach to maritime conflict of law problems introduced in the Lauritzen case. However, it observed that Lauritzen involved a torts claim under the Jones Act while the present claim involves an alleged maritime lien arising from unpaid supplies. It made a disclaimer that its conclusion is limited to the unique circumstances surrounding a maritime lien as well as the statutory directives found in the Maritime Lien Statute and that the initial choice of law determination is significantly affected by the statutory policies surrounding a maritime lien. It ruled that the facts in the case call for the application of the Restatement (Second) of Conflicts of Law. The U.S. Court gave much significance to the congressional intent in enacting the Maritime Lien Statute to protect the interests of

CONFLICTS CASES2 Page 44

American supplier of goods, services or necessaries by making maritime liens available where traditional services are routinely rendered. It concluded that the Maritime Lien Statute represents a relevant policy of the forum that serves the needs of the international legal system as well as the basic policies underlying maritime law. The court also gave equal importance to the predictability of result and protection of justified expectations in a particular field of law. In the maritime realm, it is expected that when necessaries are furnished to a vessel in an American port by an American supplier, the American Lien Statute will apply to protect that supplier regardless of the place where the contract was formed or the nationality of the vessel.

The same principle was applied in the case of Swedish Telecom Radio v. M/V Discovery I[29] where the American court refused to apply the Federal Maritime Lien Act to create a maritime lien for goods and services supplied by foreign companies in foreign ports. In this case, a Swedish company supplied radio equipment in a Spanish port to refurbish a Panamanian vessel damaged by fire. Some of the contract negotiations occurred in Spain and the agreement for supplies between the parties indicated Swedish companys willingness to submit to Swedish law. The ship was later sold under a contract of purchase providing for the application of New York law and was arrested in the U.S. The U.S. Court of Appeals also held that while the contacts-based framework set forth in Lauritzen was useful in the analysis of all maritime choice of law situations, the factors were geared towards a seamans injury claim. As in Gulf Trading, the lien arose by operation of law because the ships owner was not a party to the contract under which the goods were supplied. As a result, the court found it more appropriate to consider the factors contained in Section 6 of the Restatement (Second) of Conflicts of Law. The U.S. Court held that the primary concern of the Federal Maritime Lien Act is the protection of American suppliers of goods and services.

The same factors were applied in the case of Ocean Ship Supply, Ltd. v. M/V Leah.[30]

CONFLICTS CASES2 Page 45

II.

Finding guidance from the foregoing decisions, the Court cannot sustain petitioner Crescents insistence on the application of P.D. No. 1521 or the Ship Mortgage Decree of 1978 and hold that a maritime lien exists.

First. Out of the seven basic factors listed in the case of Lauritzen, Philippine law only falls under one the law of the forum. All other elements are foreign Canada is the place of the wrongful act, of the allegiance or domicile of the injured and the place of contract; India is the law of the flag and the allegiance of the defendant shipowner. Balancing these basic interests, it is inconceivable that the Philippine court has any interest in the case that outweighs the interests of Canada or India for that matter.

Second. P.D. No. 1521 or the Ship Mortgage Decree of 1978 is inapplicable following the factors under Restatement (Second) of Conflict of Laws. Like the Federal Maritime Lien Act of the U.S., P.D. No. 1521 or the Ship Mortgage Decree of 1978 was enacted primarily to protect Filipino suppliers and was not intended to create a lien from a contract for supplies between foreign entities delivered in a foreign port.

Third. Applying P.D. No. 1521 or the Ship Mortgage Decree of 1978 and rule that a maritime lien exists would not promote the public policy behind the enactment of the law to develop the domestic shipping industry. Opening up our courts to foreign suppliers by granting them a maritime lien under our laws even if they are not entitled to a maritime lien under their laws will encourage forum shopping.

Finally. The submission of petitioner is not in keeping with the reasonable expectation of the parties to the contract. Indeed, when the parties entered into a contract for supplies in Canada, they could not have intended the laws of a remote country like the Philippines to determine the creation of a lien by the mere accident of the Vessels being in Philippine territory.

CONFLICTS CASES2 Page 46

III.

But under which law should petitioner Crescent prove

the existence of its maritime lien?

In light of the interests of the various foreign elements

involved, it is clear that Canada has the most significant

interest in this dispute. The injured party is a Canadian

corporation, the sub-charterer which placed the orders

for the supplies is also Canadian, the entity which

physically delivered the bunker fuels is in Canada, the

place of contracting and negotiation is in Canada, and

the supplies were delivered in Canada.

The arbitration clause contained in the Bunker Fuel Agreement which states that New York law governs the construction, validity and performance of the contract is only a factor that may be considered in the choice-of-law analysis but is not conclusive. As in the cases of Gulf Trading and Swedish Telecom, the lien that is the subject matter of this case arose by operation of law and not by contract because the shipowner was not a party to the contract under which the goods were supplied.

It is worthy to note that petitioner Crescent never alleged and proved Canadian law as basis for the existence of a maritime lien. To the end, it insisted on its theory that Philippine law applies. Petitioner contends that even if foreign law applies, since the same was not properly pleaded and proved, such foreign law must be presumed to be the same as Philippine law pursuant to the doctrine of processual presumption.

Thus, we are left with two choices: (1) dismiss the case for petitioners failure to establish a cause of action[31] or (2) presume that Canadian law is the same as

CONFLICTS CASES2 Page 47

Philippine law. In either case, the case has to be dismissed.

It is well-settled that a party whose cause of action or defense depends upon a foreign law has the burden of proving the foreign law. Such foreign law is treated as a question of fact to be properly pleaded and proved.[32] Petitioner Crescents insistence on enforcing a maritime lien before our courts depended on the existence of a maritime lien under the proper law. By erroneously claiming a maritime lien under Philippine law instead of proving that a maritime lien exists under Canadian law, petitioner Crescent failed to establish a cause of action.[33]

Even if we apply the doctrine of processual presumption, the result will still be the same. Under P.D. No. 1521 or the Ship Mortgage Decree of 1978, the following are the requisites for maritime liens on necessaries to exist: (1) the necessaries must have been furnished to and for the benefit of the vessel; (2) the necessaries must have been necessary for the continuation of the voyage of the vessel; (3) the credit must have been extended to the vessel; (4) there must be necessity for the extension of the credit; and (5) the necessaries must be ordered by persons authorized to contract on behalf of the vessel.[34] These do not avail in the instant case.

First. It was not established that benefit was extended to the vessel. While this is presumed when the master of the ship is the one who placed the order, it is not disputed that in this case it was the sub-charterer Portserv which placed the orders to petitioner Crescent.[35] Hence, the presumption does not arise and it is incumbent upon petitioner Crescent to prove that benefit was extended to the vessel. Petitioner did not.

Second. Petitioner Crescent did not show any proof that the marine products were necessary for the continuation of the vessel.

Third. It was not established that credit was extended to the vessel. It is presumed that in the absence of fraud or collusion, where advances are made to a captain in a

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foreign port, upon his request, to pay for necessary repairs or supplies to enable his vessel to prosecute her voyage, or to pay harbor dues, or for pilotage, towage and like services rendered to the vessel, that they are made upon the credit of the vessel as well as upon that of her owners.[36] In this case, it was the sub-charterer Portserv which requested for the delivery of the bunker fuels. The issuance of two checks amounting to US$300,000 in favor of petitioner Crescent prior to the delivery of the bunkers as security for the payment of the obligation weakens petitioner Crescents contention that credit was extended to the Vessel.

We also note that when copies of the charter parties were submitted by respondents in the Court of Appeals, the time charters between respondent SCI and Halla and between Halla and Transmar were shown to contain a clause which states that the Charterers shall provide and pay for all the fuel except as otherwise agreed. This militates against petitioner Crescents position that Portserv is authorized by the shipowner to contract for supplies upon the credit of the vessel.

Fourth. There was no proof of necessity of credit. A necessity of credit will be presumed where it appears that the repairs and supplies were necessary for the ship and that they were ordered by the master. This presumption does not arise in this case since the fuels were not ordered by the master and there was no proof of necessity for the supplies.

Finally. The necessaries were not ordered by persons authorized to contract in behalf of the vessel as provided under Section 22 of P.D. No. 1521 or the Ship Mortgage Decree of 1978 - the managing owner, the ships husband, master or any person with whom the management of the vessel at the port of supply is entrusted. Clearly, Portserv, a sub-charterer under a time charter, is not someone to whom the management of the vessel has been entrusted. A time charter is a contract for the use of a vessel for a specified period of time or for the duration of one or more specified voyages wherein the owner of the time-chartered vessel retains possession and control through the master and crew who remain his employees.[37] Not enjoying the

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presumption of authority, petitioner Crescent should have proved that Portserv was authorized by the shipowner to contract for supplies. Petitioner failed.

A discussion on the principle of forum non conveniens is unnecessary.

IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. No. CV 54920, dated November 28, 2001, and its subsequent Resolution of September 3, 2002 are AFFIRMED. The instant petition for review on certiorari is DENIED for lack of merit. Cost against petitioner. 5. Priscilla Mijares vs. Hon. Santiago Ranada, G.R. No. 139325, April 12, 2005G.R. No. 139325             April 12, 2005

PRISCILLA C. MIJARES, LORETTA ANN P. ROSALES, HILDA B. NARCISO, SR. MARIANI DIMARANAN, SFIC, and JOEL C. LAMANGAN in their behalf and on behalf of the Class Plaintiffs in Class Action No. MDL 840, United States District Court of Hawaii, Petitioner, vs.HON. SANTIAGO JAVIER RANADA, in his capacity as Presiding Judge of Branch 137, Regional Trial Court, Makati City, and the ESTATE OF FERDINAND E. MARCOS, through its court appointed legal representatives in Class Action MDL 840, United States District Court of Hawaii, namely: Imelda R. Marcos and Ferdinand Marcos, Jr., Respondents.

D E C I S I O NTINGA, J.:

Our martial law experience bore strange unwanted fruits, and we have yet to finish weeding out its bitter crop. While the restoration of freedom and the fundamental structures and processes of democracy have been much lauded, according to a significant number, the changes, however, have not sufficiently healed the colossal damage wrought under the oppressive conditions of the martial law period. The cries of justice for the tortured, the murdered, and the desaparecidos arouse outrage and sympathy in the hearts of the fair-minded, yet the

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dispensation of the appropriate relief due them cannot be extended through the same caprice or whim that characterized the ill-wind of martial rule. The damage done was not merely personal but institutional, and the proper rebuke to the iniquitous past has to involve the award of reparations due within the confines of the restored rule of law.The petitioners in this case are prominent victims of human rights violations1 who, deprived of the opportunity to directly confront the man who once held absolute rule over this country, have chosen to do battle instead with the earthly representative, his estate. The clash has been for now interrupted by a trial court ruling, seemingly comported to legal logic, that required the petitioners to pay a whopping filing fee of over Four Hundred Seventy-Two Million Pesos (P472,000,000.00) in order that they be able to enforce a judgment awarded them by a foreign court.  There is an understandable temptation to cast the struggle within the simplistic confines of a morality tale, and to employ short-cuts to arrive at what might seem the desirable solution. But easy, reflexive resort to the equity principle all too often leads to a result that may be morally correct, but legally wrong.Nonetheless, the application of the legal principles involved in this case will comfort those who maintain that our substantive and procedural laws, for all their perceived ambiguity and susceptibility to myriad interpretations, are inherently fair and just. The relief sought by the petitioners is expressly mandated by our laws and conforms to established legal principles. The granting of this petition for certiorari is warranted in order to correct the legally infirm and unabashedly unjust ruling of the respondent judge.The essential facts bear little elaboration. On 9 May 1991, a complaint was filed with the United States District Court (US District Court), District of Hawaii, against the Estate of former Philippine President Ferdinand E. Marcos (Marcos Estate). The action was brought forth by ten Filipino citizens2 who each alleged having suffered human rights abuses such as arbitrary detention, torture and rape in the hands of police or

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military forces during the Marcos regime.3 The Alien Tort Act was invoked as basis for the US District Court's jurisdiction over the complaint, as it involved a suit by aliens for tortious violations of international law.4 These plaintiffs brought the action on their own behalf and on behalf of a class of similarly situated individuals, particularly consisting of all current civilian citizens of the Philippines, their heirs and beneficiaries, who between 1972 and 1987 were tortured, summarily executed or had disappeared while in the custody of military or paramilitary groups. Plaintiffs alleged that the class consisted of approximately ten thousand (10,000) members; hence, joinder of all these persons was impracticable.The institution of a class action suit was warranted under Rule 23(a) and (b)(1)(B) of the US Federal Rules of Civil Procedure, the provisions of which were invoked by the plaintiffs. Subsequently, the US District Court certified the case as a class action and created three (3) sub-classes of torture, summary execution and disappearance victims.5 Trial ensued, and subsequently a jury rendered a verdict and an award of compensatory and exemplary damages in favor of the plaintiff class.  Then, on 3 February 1995, the US District Court, presided by Judge Manuel L. Real, rendered a Final Judgment (Final Judgment) awarding the plaintiff class a total of One Billion Nine Hundred Sixty Four Million Five Thousand Eight Hundred Fifty Nine Dollars and Ninety Cents ($1,964,005,859.90). The Final Judgment was eventually affirmed by the US Court of Appeals for the Ninth Circuit, in a decision rendered on 17 December 1996.6

On 20 May 1997, the present petitioners filed Complaint with the Regional Trial Court, City of Makati (Makati RTC) for the enforcement of the Final Judgment.  They alleged that they are members of the plaintiff class in whose favor the US District Court awarded damages.7 They argued that since the Marcos Estate failed to file a petition for certiorari with the US Supreme Court after the Ninth Circuit Court of Appeals had affirmed the Final Judgment, the decision of the US District Court had become final and executory, and hence should be

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recognized and enforced in the Philippines, pursuant to Section 50, Rule 39 of the Rules of Court then in force.8

On 5 February 1998, the Marcos Estate filed a motion to dismiss, raising, among others, the non-payment of the correct filing fees.  It alleged that petitioners had only paid Four Hundred Ten Pesos (P410.00) as docket and filing fees, notwithstanding the fact that they sought to enforce a monetary amount of damages in the amount of over Two and a Quarter Billion US Dollars (US$2.25 Billion).  The Marcos Estate cited Supreme Court Circular No. 7, pertaining to the proper computation and payment of docket fees.  In response, the petitioners claimed that an action for the enforcement of a foreign judgment is not capable of pecuniary estimation; hence, a filing fee of only Four Hundred Ten Pesos (P410.00) was proper, pursuant to Section 7(c) of Rule 141.9

On 9 September 1998, respondent Judge Santiago Javier Ranada10 of the Makati RTC issued the subject Order dismissing the complaint without prejudice. Respondent judge opined that contrary to the petitioners' submission, the subject matter of the complaint was indeed capable of pecuniary estimation, as it involved a judgment rendered by a foreign court ordering the payment of definite sums of money, allowing for easy determination of the value of the foreign judgment. On that score, Section 7(a) of Rule 141 of the Rules of Civil Procedure would find application, and the RTC estimated the proper amount of filing fees was approximately Four Hundred Seventy Two Million Pesos, which obviously had not been paid.Not surprisingly, petitioners filed a Motion for Reconsideration, which Judge Ranada denied in an Order dated 28 July 1999. From this denial, petitioners filed a Petition for Certiorari under Rule 65 assailing the twin orders of respondent judge.11 They prayed for the annulment of the questioned orders, and an order directing the reinstatement of Civil Case No. 97-1052 and the conduct of appropriate proceedings thereon.Petitioners submit that their action is incapable of pecuniary estimation as the subject matter of the suit is the enforcement of a foreign judgment, and not an

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action for the collection of a sum of money or recovery of damages.  They also point out that to require the class plaintiffs to pay Four Hundred Seventy Two Million Pesos (P472,000,000.00) in filing fees would negate and render inutile the liberal construction ordained by the Rules of Court, as required by Section 6, Rule 1 of the Rules of Civil Procedure, particularly the inexpensive disposition of every action.Petitioners invoke Section 11, Article III of the Bill of Rights of the Constitution, which provides that "Free access to the courts and quasi-judicial bodies and adequate legal assistance shall not be denied to any person by reason of poverty," a mandate which is essentially defeated by the required exorbitant filing fee. The adjudicated amount of the filing fee, as arrived at by the RTC, was characterized as indisputably unfair, inequitable, and unjust.The Commission on Human Rights (CHR) was permitted to intervene in this case.12 It urged that the petition be granted and a judgment rendered, ordering the enforcement and execution of the District Court judgment in accordance with Section 48, Rule 39 of the 1997 Rules of Civil Procedure. For the CHR, the Makati RTC erred in interpreting the action for the execution of a foreign judgment as a new case, in violation of the principle that once a case has been decided between the same parties in one country on the same issue with finality, it can no longer be relitigated again in another country.13 The CHR likewise invokes the principle of comity, and of vested rights.The Court's disposition on the issue of filing fees will prove a useful jurisprudential guidepost for courts confronted with actions enforcing foreign judgments, particularly those lodged against an estate. There is no basis for the issuance a limited pro hac vice ruling based on the special circumstances of the petitioners as victims of martial law, or on the emotionally-charged allegation of human rights abuses.An examination of Rule 141 of the Rules of Court readily evinces that the respondent judge ignored the clear letter of the law when he concluded that the filing fee be computed based on the total sum claimed or the stated

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value of the property in litigation.In dismissing the complaint, the respondent judge relied on Section 7(a), Rule 141 as basis for the computation of the filing fee of over P472 Million.  The provision states:

SEC. 7. Clerk of Regional Trial Court.- (a) For filing an action or a permissive counterclaim or money claim against an estate not based on judgment, or for filing with leave of court a third-party, fourth-party, etc., complaint, or a complaint in intervention, and for all clerical services in the same time, if the total sum claimed, exclusive of interest, or the started value of the property in litigation, is:

1. Less than P 100,00.00 – P 500.00

2. P 100,000.00 or more but less than P 150,000.00

– P 800.00

3. P 150,000.00 or more but less than P 200,000.00

– P 1,000.00

4. P 200,000.00 or more but less than P 250,000.00

– P 1,500.00

5. P 250,000.00 or more but less than P 300,00.00

– P 1,750.00

6. P 300,000.00 or more but not more than P 400,000.00

– P 2,000.00

7. P 350,000.00 or more but not more than P400,000.00

– P 2,250.00

8. For each P 1,000.00 in excess of P 400,000.00 – P 10.00

(Emphasis supplied)Obviously, the above-quoted provision covers, on one hand, ordinary actions, permissive counterclaims, third-party, etc. complaints and complaints-in-interventions,

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and on the other, money claims against estates which are not based on judgment.  Thus, the relevant question for purposes of the present petition is whether the action filed with the lower court is a "money claim against an estate not based on judgment."Petitioners' complaint may have been lodged against an estate, but it is clearly based on a judgment, the Final Judgment of the US District Court. The provision does not make any distinction between a local judgment and a foreign judgment, and where the law does not distinguish, we shall not distinguish.A reading of Section 7 in its entirety reveals several instances wherein the filing fee is computed on the basis of the amount of the relief sought, or on the value of the property in litigation. The filing fee for requests for extrajudicial foreclosure of mortgage is based on the amount of indebtedness or the mortgagee's claim.14 In special proceedings involving properties such as for the allowance of wills, the filing fee is again based on the value of the property.15 The aforecited rules evidently have no application to petitioners' complaint.Petitioners rely on Section 7(b), particularly the proviso on actions where the value of the subject matter cannot be estimated. The provision reads in full:

SEC. 7. Clerk of Regional Trial Court.-(b) For filing

1.          Actions where the valueof the subject mattercannot be estimated             ---           P 600.00

2.          Special civil actions exceptjudicial foreclosure which shall be governed by paragraph (a) above          ---           P 600.00

3.          All other actions not involving property           ---           P 600.00

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In a real action, the assessed value of the property, or if there is none, the estimated value, thereof shall be alleged by the claimant and shall be the basis in computing the fees.It is worth noting that the provision also provides that in real actions, the assessed value or estimated value of the property shall be alleged by the claimant and shall be the basis in computing the fees. Yet again, this provision does not apply in the case at bar. A real action is one where the plaintiff seeks the recovery of real property or an action affecting title to or recovery of possession of real property.16 Neither the complaint nor the award of damages adjudicated by the US District Court involves any real property of the Marcos Estate.Thus, respondent judge was in clear and serious error when he concluded that the filing fees should be computed on the basis of the schematic table of Section 7(a), as the action involved pertains to a claim against an estate based on judgment. What provision, if any, then should apply in determining the filing fees for an action to enforce a foreign judgment?To resolve this question, a proper understanding is required on the nature and effects of a foreign judgment in this jurisdiction.The rules of comity, utility and convenience of nations have established a usage among civilized states by which final judgments of foreign courts of competent jurisdiction are reciprocally respected and rendered efficacious under certain conditions that may vary in different countries.17 This principle was prominently affirmed in the leading American case of Hilton v.

Guyot18 and expressly recognized in our jurisprudence beginning with Ingenholl v. Walter E. Olsen & Co.19 The conditions required by the Philippines for recognition and enforcement of a foreign judgment were originally contained in Section 311 of the Code of Civil Procedure, which was taken from the California Code of Civil Procedure which, in turn, was derived from the California Act of March 11, 1872.20 Remarkably, the procedural rule now outlined in Section 48, Rule 39 of the Rules of Civil Procedure has remained unchanged down to the

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last word in nearly a century. Section 48 states:SEC. 48.          Effect of foreign judgments. — The effect of a judgment of a tribunal of a foreign country, having jurisdiction to pronounce the judgment is as follows:

(a) In case of a judgment upon a specific thing, the judgment is conclusive upon the title to the thing;(b) In case of a judgment against a person, the judgment is presumptive evidence of a right as between the parties and their successors in interest by a subsequent title;

In either case, the judgment or final order may be repelled by evidence of a want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.

There is an evident distinction between a foreign judgment in an action in rem and one in personam. For an action in rem, the foreign judgment is deemed conclusive upon the title to the thing, while in an action in personam, the foreign judgment is presumptive, and not conclusive, of a right as between the parties and their successors in interest by a subsequent title.21 However, in both cases, the foreign judgment is susceptible to impeachment in our local courts on the grounds of want of jurisdiction or notice to the party,22

collusion, fraud,23 or clear mistake of law or fact.24 Thus, the party aggrieved by the foreign judgment is entitled to defend against the enforcement of such decision in the local forum. It is essential that there should be an opportunity to challenge the foreign judgment, in order for the court in this jurisdiction to properly determine its efficacy.25

It is clear then that it is usually necessary for an action to be filed in order to enforce a foreign judgment26, even if such judgment has conclusive effect as in the case of in rem actions, if only for the purpose of allowing the losing party an opportunity to challenge the foreign judgment, and in order for the court to properly determine its efficacy.27 Consequently, the party attacking a foreign

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judgment has the burden of overcoming the presumption of its validity.28

The rules are silent as to what initiatory procedure must be undertaken in order to enforce a foreign judgment in the Philippines. But there is no question that the filing of a civil complaint is an appropriate measure for such purpose. A civil action is one by which a party sues another for the enforcement or protection of a right,29 and clearly an action to enforce a foreign judgment is in essence a vindication of a right prescinding either from a "conclusive judgment upon title" or the "presumptive evidence of a right."30 Absent perhaps a statutory grant of jurisdiction to a quasi-judicial body, the claim for enforcement of judgment must be brought before the regular courts.31

There are distinctions, nuanced but discernible, between the cause of action arising from the enforcement of a foreign judgment, and that arising from the facts or allegations that occasioned the foreign judgment.  They may pertain to the same set of facts, but there is an essential difference in the right-duty correlatives that are sought to be vindicated. For example, in a complaint for damages against a tortfeasor, the cause of action emanates from the violation of the right of the complainant through the act or omission of the respondent. On the other hand, in a complaint for the enforcement of a foreign judgment awarding damages from the same tortfeasor, for the violation of the same right through the same manner of action, the cause of action derives not from the tortious act but from the foreign judgment itself.More importantly, the matters for proof are different. Using the above example, the complainant will have to establish before the court the tortious act or omission committed by the tortfeasor, who in turn is allowed to rebut these factual allegations or prove extenuating circumstances.  Extensive litigation is thus conducted on the facts, and from there the right to and amount of damages are assessed. On the other hand, in an action to enforce a foreign judgment, the matter left for proof is the foreign judgment itself, and not the facts from which it prescinds.

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As stated in Section 48, Rule 39, the actionable issues are generally restricted to a review of jurisdiction of the foreign court, the service of personal notice, collusion, fraud, or mistake of fact or law.  The limitations on review is in consonance with a strong and pervasive policy in all legal systems to limit repetitive litigation on claims and issues.32 Otherwise known as the policy of preclusion, it seeks to protect party expectations resulting from previous litigation, to safeguard against the harassment of defendants, to insure that the task of courts not be increased by never-ending litigation of the same disputes, and – in a larger sense – to promote what Lord Coke in the Ferrer's Case of 1599 stated to be the goal of all law: "rest and quietness."33 If every judgment of a foreign court were reviewable on the merits, the plaintiff would be forced back on his/her original cause of action, rendering immaterial the previously concluded litigation.34

Petitioners appreciate this distinction, and rely upon it to support the proposition that the subject matter of the complaintthe enforcement of a foreign judgmentis incapable of pecuniary estimation. Admittedly the proposition, as it applies in this case, is counter-intuitive, and thus deserves strict scrutiny. For in all practical intents and purposes, the matter at hand is capable of pecuniary estimation, down to the last cent. In the assailed Order, the respondent judge pounced upon this point without equivocation:

The Rules use the term "where the value of the subject matter cannot be estimated." The subject matter of the present case is the judgment rendered by the foreign court ordering defendant to pay plaintiffs definite sums of money, as and for compensatory damages. The Court finds that the value of the foreign judgment can be estimated; indeed, it can even be easily determined. The Court is not minded to distinguish between the enforcement of a judgment and the amount of said judgment, and separate the two, for purposes of determining the correct filing fees. Similarly, a plaintiff suing on promissory note for P1 million cannot be allowed to pay only P400 filing fees (sic), on the reasoning that the subject matter of

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his suit is not the P1 million, but the enforcement of the promissory note, and that the value of such "enforcement" cannot be estimated.35

The jurisprudential standard in gauging whether the subject matter of an action is capable of pecuniary estimation is well-entrenched. The Marcos Estate cites Singsong v. Isabela Sawmill and Raymundo v. Court of Appeals, which ruled:

[I]n determining whether an action is one the subject matter of which is not capable of pecuniary estimation this Court has adopted the criterion of first ascertaining the nature of the principal action or remedy sought.  If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary estimation, and whether jurisdiction is in the municipal courts or in the courts of first instance would depend on the amount of the claim.  However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively by courts of first instance (now Regional Trial Courts).

On the other hand, petitioners cite the ponencia of Justice JBL Reyes in Lapitan v. Scandia,36 from which the rule in Singsong and Raymundo actually derives, but which incorporates this additional nuance omitted in the latter cases:

xxx However, where the basic issue is something other than the right to recover a sum of money, where the money claim is purely incidental to, or a consequence of, the principal relief sought, like in suits to have the defendant perform his part of the contract (specific performance) and in actions for support, or for annulment of judgment or to foreclose a mortgage, this Court has considered such actions as cases where the subject of the litigation may not be estimated in terms of money, and are cognizable exclusively

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by courts of first instance.37

Petitioners go on to add that among the actions the Court has recognized as being incapable of pecuniary estimation include legality of conveyances and money deposits,38 validity of a mortgage,39 the right to support,40 validity of documents,41 rescission of contracts,42 specific performance,43 and validity or annulment of judgments.44 It is urged that an action for enforcement of a foreign judgment belongs to the same class.This is an intriguing argument, but ultimately it is self-evident that while the subject matter of the action is undoubtedly the enforcement of a foreign judgment, the effect of a providential award would be the adjudication of a sum of money. Perhaps in theory, such an action is primarily for "the enforcement of the foreign judgment," but there is a certain obtuseness to that sort of argument since there is no denying that the enforcement of the foreign judgment will necessarily result in the award of a definite sum of money.But before we insist upon this conclusion past beyond the point of reckoning, we must examine its possible ramifications. Petitioners raise the point that a declaration that an action for enforcement of foreign judgment may be capable of pecuniary estimation might lead to an instance wherein a first level court such as the Municipal Trial Court would have jurisdiction to enforce a foreign judgment. But under the statute defining the jurisdiction of first level courts, B.P. 129, such courts are not vested with jurisdiction over actions for the enforcement of foreign judgments.

Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in civil cases. — Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts shall exercise:(1) Exclusive original jurisdiction over civil actions and probate proceedings, testate and intestate, including the grant of provisional remedies in proper cases, where the value of the personal property, estate, or amount of the demand does

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not exceed One hundred thousand pesos (P100,000.00) or, in Metro Manila where such personal property, estate, or amount of the demand does not exceed Two hundred thousand pesos (P200,000.00) exclusive of interest damages of whatever kind, attorney's fees, litigation expenses, and costs, the amount of which must be specifically alleged: Provided, That  where there are several claims or causes of action between the same or different parties, embodied in the same complaint, the amount of the demand shall be the totality of the claims in all the causes of action, irrespective of whether the causes of action arose out of the same or different transactions;(2) Exclusive original jurisdiction over cases of forcible entry and unlawful detainer: Provided, That when, in such cases, the defendant raises the question of ownership in his pleadings and the question of possession cannot be resolved without deciding the issue of ownership, the issue of ownership shall be resolved only to determine the issue of possession.(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of, real property, or any interest therein where the assessed value of the property or interest therein does not exceed Twenty thousand pesos (P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos (P50,000.00) exclusive of interest, damages of whatever kind, attorney's fees, litigation expenses and costs: Provided, That value of such property shall be determined by the assessed value of the adjacent lots.45

Section 33 of B.P. 129 refers to instances wherein the cause of action or subject matter pertains to an assertion of rights and interests over property or a sum of money. But as earlier pointed out, the subject matter of an action to enforce a foreign judgment is the foreign judgment itself, and the cause of action arising from the adjudication of such judgment.An examination of Section 19(6), B.P. 129 reveals that

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the instant complaint for enforcement of a foreign judgment, even if capable of pecuniary estimation, would fall under the jurisdiction of the Regional Trial Courts, thus negating the fears of the petitioners. Indeed, an examination of the provision indicates that it can be relied upon as jurisdictional basis with respect to actions for enforcement of foreign judgments, provided that no other court or office is vested jurisdiction over such complaint:

Sec. 19. Jurisdiction in civil cases. — Regional Trial Courts shall exercise exclusive original jurisdiction:

xxx(6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising jurisdiction or any court, tribunal, person or body exercising judicial or quasi-judicial functions.

Thus, we are comfortable in asserting the obvious, that the complaint to enforce the US District Court judgment is one capable of pecuniary estimation. But at the same time, it is also an action based on judgment against an estate, thus placing it beyond the ambit of Section 7(a) of Rule 141. What provision then governs the proper computation of the filing fees over the instant complaint? For this case and other similarly situated instances, we find that it is covered by Section 7(b)(3), involving as it does, "other actions not involving property."Notably, the amount paid as docket fees by the petitioners on the premise that it was an action incapable of pecuniary estimation corresponds to the same amount required for "other actions not involving property." The petitioners thus paid the correct amount of filing fees, and it was a grave abuse of discretion for respondent judge to have applied instead a clearly inapplicable rule and dismissed the complaint.There is another consideration of supreme relevance in this case, one which should disabuse the notion that the doctrine affirmed in this decision is grounded solely on the letter of the procedural rule.  We earlier adverted to the the internationally recognized policy of preclusion,46 as well as the principles of comity, utility and convenience of nations47 as the basis for the evolution

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of the rule calling for the recognition and enforcement of foreign judgments. The US Supreme Court in Hilton v.

Guyot48 relied heavily on the concept of comity, as especially derived from the landmark treatise of Justice Story in his Commentaries on the Conflict of Laws of 1834.49 Yet the notion of "comity" has since been criticized as one "of dim contours"50 or suffering from a number of fallacies.51 Other conceptual bases for the recognition of foreign judgments have evolved such as the vested rights theory or the modern doctrine of obligation.52

There have been attempts to codify through treaties or multilateral agreements the standards for the recognition and enforcement of foreign judgments, but these have not borne fruition. The members of the European Common Market accede to the Judgments Convention, signed in 1978, which eliminates as to participating countries all of such obstacles to recognition such as reciprocity and révision au fond.53 The most ambitious of these attempts is the Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, prepared in 1966 by the Hague Conference of International Law.54 While it has not received the ratifications needed to have it take effect,55 it is recognized as representing current scholarly thought on the topic.56 Neither the Philippines nor the United States are signatories to the Convention.Yet even if there is no unanimity as to the applicable theory behind the recognition and enforcement of foreign judgments or a universal treaty rendering it obligatory force, there is consensus that the viability of such recognition and enforcement is essential. Steiner and Vagts note:

.  .  . The notion of unconnected bodies of national law on private international law, each following a quite separate path, is not one conducive to the growth of a transnational community encouraging travel and commerce among its members. There is a contemporary resurgence of writing stressing the identity or similarity of the values that

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systems of public and private international law seek to further – a community interest in common, or at least reasonable, rules on these matters in national legal systems. And such generic principles as reciprocity play an important role in both fields.57

Salonga, whose treatise on private international law is of worldwide renown, points out:

Whatever be the theory as to the basis for recognizing foreign judgments, there can be little dispute that the end is to protect the reasonable expectations and demands of the parties. Where the parties have submitted a matter for adjudication in the court of one state, and proceedings there are not tainted with irregularity, they may fairly be expected to submit, within the state or elsewhere, to the enforcement of the judgment issued by the court.58

There is also consensus as to the requisites for recognition of a foreign judgment and the defenses against the enforcement thereof. As earlier discussed, the exceptions enumerated in Section 48, Rule 39 have remain unchanged since the time they were adapted in this jurisdiction from long standing American rules. The requisites and exceptions as delineated under Section 48 are but a restatement of generally accepted principles of international law. Section 98 of The Restatement, Second, Conflict of Laws, states that "a valid judgment rendered in a foreign nation after a fair trial in a contested proceeding will be recognized in the United States," and on its face, the term "valid" brings into play requirements such notions as valid jurisdiction over the subject matter and parties.59 Similarly, the notion that fraud or collusion may preclude the enforcement of a foreign judgment finds affirmation with foreign jurisprudence and commentators,60 as well as the doctrine that the foreign judgment must not constitute "a clear mistake of law or fact."61 And finally, it has been recognized that "public policy" as a defense to the recognition of judgments serves as an umbrella for a variety of concerns in international practice which may

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lead to a denial of recognition.62

The viability of the public policy defense against the enforcement of a foreign judgment has been recognized in this jurisdiction.63 This defense allows for the application of local standards in reviewing the foreign judgment, especially when such judgment creates only a presumptive right, as it does in cases wherein the judgment is against a person.64 The defense is also recognized within the international sphere, as many civil law nations adhere to a broad public policy exception which may result in a denial of recognition when the foreign court, in the light of the choice-of-law rules of the recognizing court, applied the wrong law to the case.65 The public policy defense can safeguard against possible abuses to the easy resort to offshore litigation if it can be demonstrated that the original claim is noxious to our constitutional values.There is no obligatory rule derived from treaties or conventions that requires the Philippines to recognize foreign judgments, or allow a procedure for the enforcement thereof.  However, generally accepted principles of international law, by virtue of the incorporation clause of the Constitution, form part of the laws of the land even if they do not derive from treaty obligations.66 The classical formulation in international law sees those customary rules accepted as binding result from the combination two elements: the established, widespread, and consistent practice on the part of States; and a psychological element known as the opinion juris sive necessitates (opinion as to law or necessity). Implicit in the latter element is a belief that the practice in question is rendered obligatory by the existence of a rule of law requiring it.67

While the definite conceptual parameters of the recognition and enforcement of foreign judgments have not been authoritatively established, the Court can assert with certainty that such an undertaking is among those generally accepted principles of international law.68 As earlier demonstrated, there is a widespread practice among states accepting in principle the need for such recognition and enforcement, albeit subject to

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limitations of varying degrees. The fact that there is no binding universal treaty governing the practice is not indicative of a widespread rejection of the principle, but only a disagreement as to the imposable specific rules governing the procedure for recognition and enforcement.Aside from the widespread practice, it is indubitable that the procedure for recognition and enforcement is embodied in the rules of law, whether statutory or jurisprudential, adopted in various foreign jurisdictions. In the Philippines, this is evidenced primarily by Section 48, Rule 39 of the Rules of Court which has existed in its current form since the early 1900s. Certainly, the Philippine legal system has long ago accepted into its jurisprudence and procedural rules the viability of an action for enforcement of foreign judgment, as well as the requisites for such valid enforcement, as derived from internationally accepted doctrines.  Again, there may be distinctions as to the rules adopted by each particular state,69 but they all prescind from the premise that there is a rule of law obliging states to allow for, however generally, the recognition and enforcement of a foreign judgment. The bare principle, to our mind, has attained the status of opinio juris in international practice.This is a significant proposition, as it acknowledges that the procedure and requisites outlined in Section 48, Rule 39 derive their efficacy not merely from the procedural rule, but by virtue of the incorporation clause of the Constitution.  Rules of procedure are promulgated by the Supreme Court,70 and could very well be abrogated or revised by the high court itself. Yet the Supreme Court is obliged, as are all State components, to obey the laws of the land, including generally accepted principles of international law which form part thereof, such as those ensuring the qualified recognition and enforcement of foreign judgments.71

Thus, relative to the enforcement of foreign judgments in the Philippines, it emerges that there is a general right recognized within our body of laws, and affirmed by the Constitution, to seek recognition and enforcement of foreign judgments, as well as a right to defend against

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such enforcement on the grounds of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact.The preclusion of an action for enforcement of a foreign judgment in this country merely due to an exhorbitant assessment of docket fees is alien to generally accepted practices and principles in international law. Indeed, there are grave concerns in conditioning the amount of the filing fee on the pecuniary award or the value of the property subject of the foreign decision. Such pecuniary award will almost certainly be in foreign denomination, computed in accordance with the applicable laws and standards of the forum.72 The vagaries of inflation, as well as the relative low-income capacity of the Filipino, to date may very well translate into an award virtually unenforceable in this country, despite its integral validity, if the docket fees for the enforcement thereof were predicated on the amount of the award sought to be enforced. The theory adopted by respondent judge and the Marcos Estate may even lead to absurdities, such as if applied to an award involving real property situated in places such as the United States or Scandinavia where real property values are inexorably high. We cannot very well require that the filing fee be computed based on the value of the foreign property as determined by the standards of the country where it is located.As crafted, Rule 141 of the Rules of Civil Procedure avoids unreasonableness, as it recognizes that the subject matter of an action for enforcement of a foreign judgment is the foreign judgment itself, and not the right-duty correlatives that resulted in the foreign judgment.  In this particular circumstance, given that the complaint is lodged against an estate and is based on the US District Court's Final Judgment, this foreign judgment may, for purposes of classification under the governing procedural rule, be deemed as subsumed under Section 7(b)(3) of Rule 141, i.e., within the class of "all other actions not involving property." Thus, only the blanket filing fee of minimal amount is required.Finally, petitioners also invoke Section 11, Article III of the Constitution, which states that "[F]ree access to the courts and quasi-judicial bodies and adequate legal

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assistance shall not be denied to any person by reason of poverty." Since the provision is among the guarantees ensured by the Bill of Rights, it certainly gives rise to a demandable right. However, now is not the occasion to elaborate on the parameters of this constitutional right. Given our preceding discussion, it is not necessary to utilize this provision in order to grant the relief sought by the petitioners. It is axiomatic that the constitutionality of an act will not be resolved by the courts if the controversy can be settled on other grounds73 or unless the resolution thereof is indispensable for the determination of the case.74

One more word.  It bears noting that Section 48, Rule 39 acknowledges that the Final Judgment is not conclusive yet, but presumptive evidence of a right of the petitioners against the Marcos Estate. Moreover, the Marcos Estate is not precluded to present evidence, if any, of want of jurisdiction, want of notice to the party, collusion, fraud, or clear mistake of law or fact. This ruling, decisive as it is on the question of filing fees and no other, does not render verdict on the enforceability of the Final Judgment before the courts under the jurisdiction of the Philippines, or for that matter any other issue which may legitimately be presented before the trial court.  Such issues are to be litigated before the trial court, but within the confines of the matters for proof as laid down in Section 48, Rule 39. On the other hand, the speedy resolution of this claim by the trial court is encouraged, and contumacious delay of the decision on the merits will not be brooked by this Court.WHEREFORE, the petition is GRANTED. The assailed orders are NULLIFIED and SET ASIDE, and a new order REINSTATING Civil Case No. 97-1052 is hereby issued. No costs.SO ORDERED.

6. Philippine Export and Foreign Loan Guarantee Corporation vs. V.P. Eusebio Construction, G.R. No. 140047, July 13, 2004G.R. No. 140047             July 13, 2004

PHILIPPINE EXPORT AND FOREIGN LOAN

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GUARANTEE CORPORATION, petitioner, vs.V.P. EUSEBIO CONSTRUCTION, INC.; 3-PLEX INTERNATIONAL, INC.; VICENTE P. EUSEBIO; SOLEDAD C. EUSEBIO; EDUARDO E. SANTOS; ILUMINADA SANTOS; AND FIRST INTEGRATED BONDING AND INSURANCE COMPANY, INC., respondents.

D E C I S I O N

DAVIDE, JR., C.J.:

This case is an offshoot of a service contract entered into by a Filipino construction firm with the Iraqi Government for the construction of the Institute of Physical Therapy-Medical Center, Phase II, in Baghdad, Iraq, at a time when the Iran-Iraq war was ongoing.In a complaint filed with the Regional Trial Court of Makati City, docketed as Civil Case No. 91-1906 and assigned to Branch 58, petitioner Philippine Export and Foreign Loan Guarantee Corporation1 (hereinafter Philguarantee) sought reimbursement from the respondents of the sum of money it paid to Al Ahli Bank of Kuwait pursuant to a guarantee it issued for respondent V.P. Eusebio Construction, Inc. (VPECI).The factual and procedural antecedents in this case are as follows:On 8 November 1980, the State Organization of Buildings (SOB), Ministry of Housing and Construction, Baghdad, Iraq, awarded the construction of the Institute of Physical Therapy–Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, (hereinafter the Project) to Ajyal Trading and Contracting Company (hereinafter Ajyal), a firm duly licensed with the Kuwait Chamber of Commerce for a total contract price of ID5,416,089/046 (or about US$18,739,668).2

On 7 March 1981, respondent spouses Eduardo and Iluminada Santos, in behalf of respondent 3-Plex International, Inc. (hereinafter 3-Plex), a local contractor engaged in construction business, entered into a joint

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venture agreement with Ajyal wherein the former undertook the execution of the entire Project, while the latter would be entitled to a commission of 4% of the contract price.3 Later, or on 8 April 1981, respondent 3-Plex, not being accredited by or registered with the Philippine Overseas Construction Board (POCB), assigned and transferred all its rights and interests under the joint venture agreement to VPECI, a construction and engineering firm duly registered with the POCB.4 However, on 2 May 1981, 3-Plex and VPECI entered into an agreement that the execution of the Project would be under their joint management.5

The SOB required the contractors to submit (1) a performance bond of ID271,808/610 representing 5% of the total contract price and (2) an advance payment bond of ID541,608/901 representing 10% of the advance payment to be released upon signing of the contract.6 To comply with these requirements, respondents 3-Plex and VPECI applied for the issuance of a guarantee with petitioner Philguarantee, a government financial institution empowered to issue guarantees for qualified Filipino contractors to secure the performance of approved service contracts abroad.7

Petitioner Philguarantee approved respondents' application. Subsequently, letters of guarantee8 were issued by Philguarantee to the Rafidain Bank of Baghdad covering 100% of the performance and advance payment bonds, but they were not accepted by SOB. What SOB required was a letter-guarantee from Rafidain Bank, the government bank of Iraq. Rafidain Bank then issued a performance bond in favor of SOB on the condition that another foreign bank, not Philguarantee, would issue a counter-guarantee to cover its exposure. Al Ahli Bank of Kuwait was, therefore, engaged to provide a counter-guarantee to Rafidain Bank, but it required a similar counter-guarantee in its favor from the petitioner. Thus, three layers of guarantees had to be arranged.9

Upon the application of respondents 3-Plex and VPECI, petitioner Philguarantee issued in favor of Al Ahli Bank of Kuwait Letter of Guarantee No. 81-194-F 10 (Performance Bond Guarantee) in the amount of

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ID271,808/610 and Letter of Guarantee No. 81-195-F11 (Advance Payment Guarantee) in the amount of ID541,608/901, both for a term of eighteen months from 25 May 1981. These letters of guarantee were secured by (1) a Deed of Undertaking12 executed by respondents VPECI, Spouses Vicente P. Eusebio and Soledad C. Eusebio, 3-Plex, and Spouses Eduardo E. Santos and Iluminada Santos; and (2) a surety bond13 issued by respondent First Integrated Bonding and Insurance Company, Inc. (FIBICI). The Surety Bond was later amended on 23 June 1981 to increase the amount of coverage from P6.4 million to P6.967 million and to change the bank in whose favor the petitioner's guarantee was issued, from Rafidain Bank to Al Ahli Bank of Kuwait.14

On 11 June 1981, SOB and the joint venture VPECI and Ajyal executed the service contract15 for the construction of the Institute of Physical Therapy – Medical Rehabilitation Center, Phase II, in Baghdad, Iraq, wherein the joint venture contractor undertook to complete the Project within a period of 547 days or 18 months. Under the Contract, the Joint Venture would supply manpower and materials, and SOB would refund to the former 25% of the project cost in Iraqi Dinar and the 75% in US dollars at the exchange rate of 1 Dinar to 3.37777 US Dollars.16

The construction, which was supposed to start on 2 June 1981, commenced only on the last week of August 1981. Because of this delay and the slow progress of the construction work due to some setbacks and difficulties, the Project was not completed on 15 November 1982 as scheduled. But in October 1982, upon foreseeing the impossibility of meeting the deadline and upon the request of Al Ahli Bank, the joint venture contractor worked for the renewal or extension of the Performance Bond and Advance Payment Guarantee. Petitioner's Letters of Guarantee Nos. 81-194-F (Performance Bond) and 81-195-F (Advance Payment Bond) with expiry date of 25 November 1982 were then renewed or extended to 9 February 1983 and 9 March 1983, respectively.17 The surety bond was also extended for another period of one

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year, from 12 May 1982 to 12 May 1983.18 The Performance Bond was further extended twelve times with validity of up to 8 December 1986,19 while the Advance Payment Guarantee was extended three times more up to 24 May 1984 when the latter was cancelled after full refund or reimbursement by the joint venture contractor.20 The surety bond was likewise extended to 8 May 1987.21

As of March 1986, the status of the Project was 51% accomplished, meaning the structures were already finished. The remaining 47% consisted in electro-mechanical works and the 2%, sanitary works, which both required importation of equipment and materials.22

On 26 October 1986, Al Ahli Bank of Kuwait sent a telex call to the petitioner demanding full payment of its performance bond counter-guarantee.Upon receiving a copy of that telex message on 27 October 1986, respondent VPECI requested Iraq Trade and Economic Development Minister Mohammad Fadhi Hussein to recall the telex call on the performance guarantee for being a drastic action in contravention of its mutual agreement with the latter that (1) the imposition of penalty would be held in abeyance until the completion of the project; and (2) the time extension would be open, depending on the developments on the negotiations for a foreign loan to finance the completion of the project.23 It also wrote SOB protesting the call for lack of factual or legal basis, since the failure to complete the Project was due to (1) the Iraqi government's lack of foreign exchange with which to pay its (VPECI's) accomplishments and (2) SOB's noncompliance for the past several years with the provision in the contract that 75% of the billings would be paid in US dollars.24 Subsequently, or on 19 November 1986, respondent VPECI advised the petitioner not to pay yet Al Ahli Bank because efforts were being exerted for the amicable settlement of the Project.25

On 14 April 1987, the petitioner received another telex message from Al Ahli Bank stating that it had already

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paid to Rafidain Bank the sum of US$876,564 under its letter of guarantee, and demanding reimbursement by the petitioner of what it paid to the latter bank plus interest thereon and related expenses.26

Both petitioner Philguarantee and respondent VPECI sought the assistance of some government agencies of the Philippines. On 10 August 1987, VPECI requested the Central Bank to hold in abeyance the payment by the petitioner "to allow the diplomatic machinery to take its course, for otherwise, the Philippine government , through the Philguarantee and the Central Bank, would become instruments of the Iraqi Government in consummating a clear act of injustice and inequity committed against a Filipino contractor."27

On 27 August 1987, the Central Bank authorized the remittance for its account of the amount of US$876,564 (equivalent to ID271, 808/610) to Al Ahli Bank representing full payment of the performance counter-guarantee for VPECI's project in Iraq. 28

On 6 November 1987, Philguarantee informed VPECI that it would remit US$876,564 to Al Ahli Bank, and reiterated the joint and solidary obligation of the respondents to reimburse the petitioner for the advances made on its counter-guarantee.29

The petitioner thus paid the amount of US$876,564 to Al Ahli Bank of Kuwait on 21 January 1988.30 Then, on 6 May 1988, the petitioner paid to Al Ahli Bank of Kuwait US$59,129.83 representing interest and penalty charges demanded by the latter bank.31

On 19 June 1991, the petitioner sent to the respondents separate letters demanding full payment of the amount of P47,872,373.98 plus accruing interest, penalty charges, and 10% attorney's fees pursuant to their joint and solidary obligations under the deed of undertaking and surety bond.32 When the respondents failed to pay, the petitioner filed on 9 July 1991 a civil case for collection of a sum of money against the respondents before the RTC of Makati City.After due trial, the trial court ruled against Philguarantee

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and held that the latter had no valid cause of action against the respondents. It opined that at the time the call was made on the guarantee which was executed for a specific period, the guarantee had already lapsed or expired. There was no valid renewal or extension of the guarantee for failure of the petitioner to secure respondents' express consent thereto. The trial court also found that the joint venture contractor incurred no delay in the execution of the Project. Considering the Project owner's violations of the contract which rendered impossible the joint venture contractor's performance of its undertaking, no valid call on the guarantee could be made. Furthermore, the trial court held that no valid notice was first made by the Project owner SOB to the joint venture contractor before the call on the guarantee. Accordingly, it dismissed the complaint, as well as the counterclaims and cross-claim, and ordered the petitioner to pay attorney's fees of P100,000 to respondents VPECI and Eusebio Spouses and P100,000 to 3-Plex and the Santos Spouses, plus costs. 33

In its 14 June 1999 Decision,34 the Court of Appeals affirmed the trial court's decision, ratiocinating as follows:

First, appellant cannot deny the fact that it was fully aware of the status of project implementation as well as the problems besetting the contractors, between 1982 to 1985, having sent some of its people to Baghdad during that period. The successive renewals/extensions of the guarantees in fact, was prompted by delays, not solely attributable to the contractors, and such extension understandably allowed by the SOB (project owner) which had not anyway complied with its contractual commitment to tender 75% of payment in US Dollars, and which still retained overdue amounts collectible by VPECI.

…Second, appellant was very much aware of the violations committed by the SOB of its contractual undertakings with VPECI, principally, the payment of foreign currency (US$) for 75% of the total contract price, as well as of the complications and

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injustice that will result from its payment of the full amount of the performance guarantee, as evident in PHILGUARANTEE's letter dated 13 May 1987 ….

…Third, appellant was fully aware that SOB was in fact still obligated to the Joint Venture and there was still an amount collectible from and still being retained by the project owner, which amount can be set-off with the sum covered by the performance guarantee.

…Fourth, well-apprised of the above conditions obtaining at the Project site and cognizant of the war situation at the time in Iraq, appellant, though earlier has made representations with the SOB regarding a possible amicable termination of the Project as suggested by VPECI, made a complete turn-around and insisted on acting in favor of the unjustified "call" by the foreign banks.35

The petitioner then came to this Court via Rule 45 of the Rules of Court claiming that the Court of Appeals erred in affirming the trial court's ruling that

I…RESPONDENTS ARE NOT LIABLE UNDER THE DEED OF UNDERTAKING THEY EXECUTED IN FAVOR OF PETITIONER IN CONSIDERATION FOR THE ISSUANCE OF ITS COUNTER-GUARANTEE AND THAT PETITIONER CANNOT PASS ON TO RESPONDENTS WHAT IT HAD PAID UNDER THE SAID COUNTER-GUARANTEE.

II…PETITIONER CANNOT CLAIM SUBROGATION.

III…IT IS INIQUITOUS AND UNJUST FOR PETITIONER TO HOLD RESPONDENTS LIABLE UNDER THEIR DEED OF UNDERTAKING.36

The main issue in this case is whether the petitioner is

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entitled to reimbursement of what it paid under Letter of Guarantee No. 81-194-F it issued to Al Ahli Bank of Kuwait based on the deed of undertaking and surety bond from the respondents.The petitioner asserts that since the guarantee it issued was absolute, unconditional, and irrevocable the nature and extent of its liability are analogous to those of suretyship. Its liability accrued upon the failure of the respondents to finish the construction of the Institute of Physical Therapy Buildings in Baghdad.By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. If a person binds himself solidarily with the principal debtor, the contract is called suretyship. 37

Strictly speaking, guaranty and surety are nearly related, and many of the principles are common to both. In both contracts, there is a promise to answer for the debt or default of another. However, in this jurisdiction, they may be distinguished thus:

1. A surety is usually bound with his principal by the same instrument executed at the same time and on the same consideration. On the other hand, the contract of guaranty is the guarantor's own separate undertaking often supported by a consideration separate from that supporting the contract of the principal; the original contract of his principal is not his contract.2. A surety assumes liability as a regular party to the undertaking; while the liability of a guarantor is conditional depending on the failure of the primary debtor to pay the obligation.3. The obligation of a surety is primary, while that of a guarantor is secondary.4. A surety is an original promissor and debtor from the beginning, while a guarantor is charged on his own undertaking.5. A surety is, ordinarily, held to know every default of his principal; whereas a guarantor is not bound to take notice of the non-performance of his principal.

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6. Usually, a surety will not be discharged either by the mere indulgence of the creditor to the principal or by want of notice of the default of the principal, no matter how much he may be injured thereby. A guarantor is often discharged by the mere indulgence of the creditor to the principal, and is usually not liable unless notified of the default of the principal. 38

In determining petitioner's status, it is necessary to read Letter of Guarantee No. 81-194-F, which provides in part as follows:

In consideration of your issuing the above performance guarantee/counter-guarantee, we hereby unconditionally and irrevocably guarantee, under our Ref. No. LG-81-194 F to pay you on your first written or telex demand Iraq Dinars Two Hundred Seventy One Thousand Eight Hundred Eight and fils six hundred ten (ID271,808/610) representing 100% of the performance bond required of V.P. EUSEBIO for the construction of the Physical Therapy Institute, Phase II, Baghdad, Iraq, plus interest and other incidental expenses related thereto.In the event of default by V.P. EUSEBIO, we shall pay you 100% of the obligation unpaid but in no case shall such amount exceed Iraq Dinars (ID) 271,808/610 plus interest and other incidental expenses…. (Emphasis supplied)39

Guided by the abovementioned distinctions between a surety and a guaranty, as well as the factual milieu of this case, we find that the Court of Appeals and the trial court were correct in ruling that the petitioner is a guarantor and not a surety. That the guarantee issued by the petitioner is unconditional and irrevocable does not make the petitioner a surety. As a guaranty, it is still characterized by its subsidiary and conditional quality because it does not take effect until the fulfillment of the condition, namely, that the principal obligor should fail in his obligation at the time and in the form he bound himself.40 In other words, an unconditional guarantee is still subject to the condition that the principal debtor should default in his obligation first before resort to the

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guarantor could be had. A conditional guaranty, as opposed to an unconditional guaranty, is one which depends upon some extraneous event, beyond the mere default of the principal, and generally upon notice of the principal's default and reasonable diligence in exhausting proper remedies against the principal.41

It appearing that Letter of Guarantee No. 81-194-F merely stated that in the event of default by respondent VPECI the petitioner shall pay, the obligation assumed by the petitioner was simply that of an unconditional guaranty, not conditional guaranty. But as earlier ruled the fact that petitioner's guaranty is unconditional does not make it a surety. Besides, surety is never presumed. A party should not be considered a surety where the contract itself stipulates that he is acting only as a guarantor. It is only when the guarantor binds himself solidarily with the principal debtor that the contract becomes one of suretyship.42

Having determined petitioner's liability as guarantor, the next question we have to grapple with is whether the respondent contractor has defaulted in its obligations that would justify resort to the guaranty. This is a mixed question of fact and law that is better addressed by the lower courts, since this Court is not a trier of facts.It is a fundamental and settled rule that the findings of fact of the trial court and the Court of Appeals are binding or conclusive upon this Court unless they are not supported by the evidence or unless strong and cogent reasons dictate otherwise.43 The factual findings of the Court of Appeals are normally not reviewable by us under Rule 45 of the Rules of Court except when they are at variance with those of the trial court. 44 The trial court and the Court of Appeals were in unison that the respondent contractor cannot be considered to have defaulted in its obligations because the cause of the delay was not primarily attributable to it.A corollary issue is what law should be applied in determining whether the respondent contractor has defaulted in the performance of its obligations under the service contract. The question of whether there is a breach of an agreement, which includes default or

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mora,45 pertains to the essential or intrinsic validity of a contract. 46

No conflicts rule on essential validity of contracts is expressly provided for in our laws. The rule followed by most legal systems, however, is that the intrinsic validity of a contract must be governed by the lex contractus or "proper law of the contract." This is the law voluntarily agreed upon by the parties (the lex loci voluntatis) or the law intended by them either expressly or implicitly (the lex loci intentionis). The law selected may be implied from such factors as substantial connection with the transaction, or the nationality or domicile of the parties.47 Philippine courts would do well to adopt the first and most basic rule in most legal systems, namely, to allow the parties to select the law applicable to their contract, subject to the limitation that it is not against the law, morals, or public policy of the forum and that the chosen law must bear a substantive relationship to

the transaction. 48

It must be noted that the service contract between SOB and VPECI contains no express choice of the law that would govern it. In the United States and Europe, the two rules that now seem to have emerged as "kings of the hill" are (1) the parties may choose the governing law; and (2) in the absence of such a choice, the applicable law is that of the State that "has the most significant relationship to the transaction and the parties."49 Another authority proposed that all matters relating to the time, place, and manner of performance and valid excuses for non-performance are determined by the law of the place of performance or lex loci solutionis, which is useful because it is undoubtedly always connected to the contract in a significant way.50

In this case, the laws of Iraq bear substantial connection to the transaction, since one of the parties is the Iraqi Government and the place of performance is in Iraq. Hence, the issue of whether respondent VPECI defaulted in its obligations may be determined by the laws of Iraq. However, since that foreign law was not properly pleaded or proved, the presumption of identity or similarity, otherwise known as the processual

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presumption, comes into play. Where foreign law is not pleaded or, even if pleaded, is not proved, the presumption is that foreign law is the same as ours.51

Our law, specifically Article 1169, last paragraph, of the Civil Code, provides: "In reciprocal obligations, neither party incurs in delay if the other party does not comply or is not ready to comply in a proper manner with what is incumbent upon him."Default or mora on the part of the debtor is the delay in the fulfillment of the prestation by reason of a cause imputable to the former. 52 It is the non-fulfillment of an obligation with respect to time.53

It is undisputed that only 51.7% of the total work had been accomplished. The 48.3% unfinished portion consisted in the purchase and installation of electro-mechanical equipment and materials, which were available from foreign suppliers, thus requiring US Dollars for their importation. The monthly billings and payments made by SOB54 reveal that the agreement between the parties was a periodic payment by the Project owner to the contractor depending on the percentage of accomplishment within the period. 55 The payments were, in turn, to be used by the contractor to finance the subsequent phase of the work. 56 However, as explained by VPECI in its letter to the Department of Foreign Affairs (DFA), the payment by SOB purely in Dinars adversely affected the completion of the project; thus:

4. Despite protests from the plaintiff, SOB continued paying the accomplishment billings of the Contractor purely in Iraqi Dinars and which payment came only after some delays.5. SOB is fully aware of the following:…5.2 That Plaintiff is a foreign contractor in Iraq and as such, would need foreign currency (US$), to finance the purchase of various equipment, materials, supplies, tools and to pay for the cost of project management, supervision and skilled labor

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not available in Iraq and therefore have to be imported and or obtained from the Philippines and other sources outside Iraq.5.3 That the Ministry of Labor and Employment of the Philippines requires the remittance into the Philippines of 70% of the salaries of Filipino workers working abroad in US Dollars;

…5.5 That the Iraqi Dinar is not a freely convertible currency such that the same cannot be used to purchase equipment, materials, supplies, etc. outside of Iraq;5.6 That most of the materials specified by SOB in the CONTRACT are not available in Iraq and therefore have to be imported;5.7 That the government of Iraq prohibits the bringing of local currency (Iraqui Dinars) out of Iraq and hence, imported materials, equipment, etc., cannot be purchased or obtained using Iraqui Dinars as medium of acquisition.

…8. Following the approved construction program of the CONTRACT, upon completion of the civil works portion of the installation of equipment for the building, should immediately follow, however, the CONTRACT specified that these equipment which are to be installed and to form part of the PROJECT have to be procured outside Iraq since these are not being locally manufactured. Copy f the relevant portion of the Technical Specification is hereto attached as Annex "C" and made an integral part hereof;

…10. Due to the lack of Foreign currency in Iraq for this purpose, and if only to assist the Iraqi government in completing the PROJECT, the Contractor without any obligation on its part to do so but with the knowledge and consent of SOB and the Ministry of Housing & Construction of Iraq, offered to arrange on behalf of SOB, a foreign

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currency loan, through the facilities of Circle International S.A., the Contractor's Sub-contractor and SACE MEDIO CREDITO which will act as the guarantor for this foreign currency loan.Arrangements were first made with Banco di Roma. Negotiation started in June 1985. SOB is informed of the developments of this negotiation, attached is a copy of the draft of the loan Agreement between SOB as the Borrower and Agent. The Several Banks, as Lender, and counter-guaranteed by Istituto Centrale Per II Credito A Medio Termine (Mediocredito) Sezione Speciale Per L'Assicurazione Del Credito All'Exportazione (Sace). Negotiations went on and continued until it suddenly collapsed due to the reported default by Iraq in the payment of its obligations with Italian government, copy of the news clipping dated June 18, 1986 is hereto attached as Annex "D" to form an integral part hereof;15. On September 15, 1986, Contractor received information from Circle International S.A. that because of the news report that Iraq defaulted in its obligations with European banks, the approval by Banco di Roma of the loan to SOB shall be deferred indefinitely, a copy of the letter of Circle International together with the news clippings are hereto attached as Annexes "F" and "F-1", respectively.57

As found by both the Court of Appeals and the trial court, the delay or the non-completion of the Project was caused by factors not imputable to the respondent contractor. It was rather due mainly to the persistent violations by SOB of the terms and conditions of the contract, particularly its failure to pay 75% of the accomplished work in US Dollars. Indeed, where one of the parties to a contract does not perform in a proper manner the prestation which he is bound to perform under the contract, he is not entitled to demand the performance of the other party. A party does not incur in delay if the other party fails to perform the obligation incumbent upon him.The petitioner, however, maintains that the payments by

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SOB of the monthly billings in purely Iraqi Dinars did not render impossible the performance of the Project by VPECI. Such posture is quite contrary to its previous representations. In his 26 March 1987 letter to the Office of the Middle Eastern and African Affairs (OMEAA), DFA, Manila, petitioner's Executive Vice-President Jesus M. Tañedo stated that while VPECI had taken every possible measure to complete the Project, the war situation in Iraq, particularly the lack of foreign exchange, was proving to be a great obstacle; thus:

VPECI has taken every possible measure for the completion of the project but the war situation in Iraq particularly the lack of foreign exchange is proving to be a great obstacle. Our performance counterguarantee was called last 26 October 1986 when the negotiations for a foreign currency loan with the Italian government through Banco de Roma bogged down following news report that Iraq has defaulted in its obligation with major European banks. Unless the situation in Iraq is improved as to allay the bank's apprehension, there is no assurance that the project will ever be completed. 58

In order that the debtor may be in default it is necessary that the following requisites be present: (1) that the obligation be demandable and already liquidated; (2) that the debtor delays performance; and (3) that the creditor requires the performance because it must appear that the tolerance or benevolence of the creditor must have ended. 59

As stated earlier, SOB cannot yet demand complete performance from VPECI because it has not yet itself performed its obligation in a proper manner, particularly the payment of the 75% of the cost of the Project in US Dollars. The VPECI cannot yet be said to have incurred in delay. Even assuming that there was delay and that the delay was attributable to VPECI, still the effects of that delay ceased upon the renunciation by the creditor, SOB, which could be implied when the latter granted several extensions of time to the former. 60 Besides, no demand has yet been made by SOB against the respondent contractor. Demand is generally necessary even if a

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period has been fixed in the obligation. And default generally begins from the moment the creditor demands judicially or extra-judicially the performance of the obligation. Without such demand, the effects of default will not arise.61

Moreover, the petitioner as a guarantor is entitled to the benefit of excussion, that is, it cannot be compelled to pay the creditor SOB unless the property of the debtor VPECI has been exhausted and all legal remedies against the said debtor have been resorted to by the creditor.62 It could also set up compensation as regards what the creditor SOB may owe the principal debtor VPECI.63 In this case, however, the petitioner has clearly waived these rights and remedies by making the payment of an obligation that was yet to be shown to be rightfully due the creditor and demandable of the principal debtor.As found by the Court of Appeals, the petitioner fully knew that the joint venture contractor had collectibles from SOB which could be set off with the amount covered by the performance guarantee. In February 1987, the OMEAA transmitted to the petitioner a copy of a telex dated 10 February 1987 of the Philippine Ambassador in Baghdad, Iraq, informing it of the note verbale sent by the Iraqi Ministry of Foreign Affairs stating that the past due obligations of the joint venture contractor from the petitioner would "be deducted from the dues of the two contractors."64

Also, in the project situationer attached to the letter to the OMEAA dated 26 March 1987, the petitioner raised as among the arguments to be presented in support of the cancellation of the counter-guarantee the fact that the amount of ID281,414/066 retained by SOB from the Project was more than enough to cover the counter-guarantee of ID271,808/610; thus:

6.1 Present the following arguments in cancelling the counterguarantee:

· The Iraqi Government does not have the foreign exchange to fulfill its contractual obligations of paying 75% of progress billings in US dollars.

…

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· It could also be argued that the amount of ID281,414/066 retained by SOB from the proposed project is more than the amount of the outstanding counterguarantee.65

In a nutshell, since the petitioner was aware of the contractor's outstanding receivables from SOB, it should have set up compensation as was proposed in its project situationer.Moreover, the petitioner was very much aware of the predicament of the respondents. In fact, in its 13 May 1987 letter to the OMEAA, DFA, Manila, it stated:

VPECI also maintains that the delay in the completion of the project was mainly due to SOB's violation of contract terms and as such, call on the guarantee has no basis.While PHILGUARANTEE is prepared to honor its commitment under the guarantee, PHILGUARANTEE does not want to be an instrument in any case of inequity committed against a Filipino contractor. It is for this reason that we are constrained to seek your assistance not only in ascertaining the veracity of Al Ahli Bank's claim that it has paid Rafidain Bank but possibly averting such an event. As any payment effected by the banks will complicate matters, we cannot help underscore the urgency of VPECI's bid for government intervention for the amicable termination of the contract and release of the performance guarantee. 66

But surprisingly, though fully cognizant of SOB's violations of the service contract and VPECI's outstanding receivables from SOB, as well as the situation obtaining in the Project site compounded by the Iran-Iraq war, the petitioner opted to pay the second layer guarantor not only the full amount of the performance bond counter-guarantee but also interests and penalty charges.This brings us to the next question: May the petitioner as a guarantor secure reimbursement from the respondents for what it has paid under Letter of Guarantee No. 81-194-F?

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As a rule, a guarantor who pays for a debtor should be indemnified by the latter67 and would be legally subrogated to the rights which the creditor has against the debtor.68 However, a person who makes payment without the knowledge or against the will of the debtor has the right to recover only insofar as the payment has been beneficial to the debtor.69 If the obligation was subject to defenses on the part of the debtor, the same defenses which could have been set up against the creditor can be set up against the paying guarantor.70

From the findings of the Court of Appeals and the trial court, it is clear that the payment made by the petitioner guarantor did not in any way benefit the principal debtor, given the project status and the conditions obtaining at the Project site at that time. Moreover, the respondent contractor was found to have valid defenses against SOB, which are fully supported by evidence and which have been meritoriously set up against the paying guarantor, the petitioner in this case. And even if the deed of undertaking and the surety bond secured petitioner's guaranty, the petitioner is precluded from enforcing the same by reason of the petitioner's undue payment on the guaranty. Rights under the deed of undertaking and the surety bond do not arise because these contracts depend on the validity of the enforcement of the guaranty.The petitioner guarantor should have waited for the natural course of guaranty: the debtor VPECI should have, in the first place, defaulted in its obligation and that the creditor SOB should have first made a demand from the principal debtor. It is only when the debtor does not or cannot pay, in whole or in part, that the guarantor should pay.71 When the petitioner guarantor in this case paid against the will of the debtor VPECI, the debtor VPECI may set up against it defenses available against the creditor SOB at the time of payment. This is the hard lesson that the petitioner must learn.As the government arm in pursuing its objective of providing "the necessary support and assistance in order to enable … [Filipino exporters and contractors to operate viably under the prevailing economic and

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business conditions,"72 the petitioner should have exercised prudence and caution under the circumstances. As aptly put by the Court of Appeals, it would be the height of inequity to allow the petitioner to pass on its losses to the Filipino contractor VPECI which had sternly warned against paying the Al Ahli Bank and constantly apprised it of the developments in the Project implementation.WHEREFORE, the petition for review on certiorari is hereby DENIED for lack of merit, and the decision of the Court of appeals in CA-G.R. CV No. 39302 is AFFIRMED.No pronouncement as to costs.

7. Bank of America vs. CA, G.R. No. 120135, March 31, 2003G.R. No. 120135            March 31, 2003

BANK OF AMERICA NT & SA, BANK OF AMERICA INTERNATIONAL, LTD., petitioners, vs.COURT OF APPEALS, HON. MANUEL PADOLINA, EDUARDO LITONJUA, SR., and AURELIO K. LITONJUA, JR., respondents.AUSTRIA-MARTINEZ, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the November 29, 1994 decision of the Court of Appeals1 and the April 28, 1995 resolution denying petitioners' motion for reconsideration.The factual background of the case is as follows:On May 10, 1993, Eduardo K. Litonjua, Sr. and Aurelio J. Litonjua (Litonjuas, for brevity) filed a Complaint2 before the Regional Trial Court of Pasig against the Bank of America NT&SA and Bank of America International, Ltd. (defendant banks for brevity) alleging that: they were engaged in the shipping business; they owned two vessels: Don Aurelio and El Champion, through their wholly-owned corporations; they deposited their revenues from said business together with other funds with the branches of said banks in the United Kingdom

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and Hongkong up to 1979; with their business doing well, the defendant banks induced them to increase the number of their ships in operation, offering them easy loans to acquire said vessels;3 thereafter, the defendant banks acquired, through their (Litonjuas') corporations as the borrowers: (a) El Carrier4; (b) El General5; (c) El Challenger6; and (d) El Conqueror7; the vessels were registered in the names of their corporations; the operation and the funds derived therefrom were placed under the complete and exclusive control and disposition of the petitioners;8 and the possession the vessels was also placed by defendant banks in the hands of persons selected and designated by them (defendant banks).9

The Litonjuas claimed that defendant banks as trustees did not fully render an account of all the income derived from the operation of the vessels as well as of the proceeds of the subsequent foreclosure sale;10 because of the breach of their fiduciary duties and/or negligence of the petitioners and/or the persons designated by them in the operation of private respondents' six vessels, the revenues derived from the operation of all the vessels declined drastically; the loans acquired for the purchase of the four additional vessels then matured and remained unpaid, prompting defendant banks to have all the six vessels, including the two vessels originally owned by the private respondents, foreclosed and sold at public auction to answer for the obligations incurred for and in behalf of the operation of the vessels; they (Litonjuas) lost sizeable amounts of their own personal funds equivalent to ten percent (10%) of the acquisition cost of the four vessels and were left with the unpaid balance of their loans with defendant banks.11 The Litonjuas prayed for the accounting of the revenues derived in the operation of the six vessels and of the proceeds of the sale thereof at the foreclosure proceedings instituted by petitioners; damages for breach of trust; exemplary damages and attorney's fees.12

Defendant banks filed a Motion to Dismiss on grounds of forum non conveniens and lack of cause of action against them.13

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On December 3, 1993, the trial court issued an Order denying the Motion to Dismiss, thus:

"WHEREFORE, and in view of the foregoing consideration, the Motion to Dismiss is hereby DENIED. The defendant is therefore, given a period of ten (10) days to file its Answer to the complaint.

"SO ORDERED."14

Instead of filing an answer the defendant banks went to the Court of Appeals on a "Petition for Review on Certiorari"15 which was aptly treated by the appellate court as a petition for certiorari. They assailed the above-quoted order as well as the subsequent denial of their Motion for Reconsideration.16 The appellate court dismissed the petition and denied petitioners' Motion for Reconsideration.17

Hence, herein petition anchored on the following grounds:

"1. RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT THE SEPARATE PERSONALITIES OF THE PRIVATE RESPONDENTS (MERE STOCKHOLDERS) AND THE FOREIGN CORPORATIONS (THE REAL BORROWERS) CLEARLY SUPPORT, BEYOND ANY DOUBT, THE PROPOSITION THAT THE PRIVATE RESPONDENTS HAVE NO PERSONALITIES TO SUE."2. THE RESPONDENT COURT OF APPEALS FAILED TO REALIZE THAT WHILE THE PRINCIPLE OF FORUM NON CONVENIENS IS NOT MANDATORY, THERE ARE, HOWEVER, SOME GUIDELINES TO FOLLOW IN DETERMINING WHETHER THE CHOICE OF FORUM SHOULD BE DISTURBED. UNDER THE CIRCUMSTANCES SURROUNDING THE INSTANT CASE, DISMISSAL OF THE COMPLAINT ON THE GROUND OF FORUM NON-CONVENIENS IS MORE APPROPRIATE AND PROPER."3. THE PRINCIPLE OF RES JUDICATA IS NOT LIMITED TO FINAL JUDGMENT IN THE PHILIPPINES. IN FACT, THE PENDENCY OF FOREIGN ACTION MAY BE THE LEGAL BASIS FOR THE DISMISSAL OF THE COMPLAINT FILED BY THE PRIVATE RESPONDENT.

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COROLLARY TO THIS, THE RESPONDENT COURT OF APPEALS FAILED TO CONSIDER THE FACT THAT PRIVATE RESPONDENTS ARE GUILTY OF FORUM SHOPPING." 18

As to the first assigned error: Petitioners argue that the borrowers and the registered owners of the vessels are the foreign corporations and not private respondents Litonjuas who are mere stockholders; and that the revenues derived from the operations of all the vessels are deposited in the accounts of the corporations. Hence, petitioners maintain that these foreign corporations are the legal entities that have the personalities to sue and not herein private respondents; that private respondents, being mere shareholders, have no claim on the vessels as owners since they merely have an inchoate right to whatever may remain upon the dissolution of the said foreign corporations and after all creditors have been fully paid and satisfied;19 and that while private respondents may have allegedly spent amounts equal to 10% of the acquisition costs of the vessels in question, their 10% however represents their investments as stockholders in the foreign corporations.20

Anent the second assigned error, petitioners posit that while the application of the principle of forum non conveniens is discretionary on the part of the Court, said discretion is limited by the guidelines pertaining to the private as well as public interest factors in determining whether plaintiffs' choice of forum should be disturbed, as elucidated in Gulf Oil Corp. vs. Gilbert21 and Piper

Aircraft Co. vs. Reyno,22 to wit:"Private interest factors include: (a) the relative ease of access to sources of proof; (b) the availability of compulsory process for the attendance of unwilling witnesses; (c) the cost of obtaining attendance of willing witnesses; or (d) all other practical problems that make trial of a case easy, expeditious and inexpensive. Public interest factors include: (a) the administrative difficulties flowing from court congestion; (b) the local interest in having localized controversies decided at home; (c) the avoidance of unnecessary

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problems in conflict of laws or in the application of foreign law; or (d) the unfairness of burdening citizens in an unrelated forum with jury duty."23

In support of their claim that the local court is not the proper forum, petitioners allege the following:

"i) The Bank of America Branches involved, as clearly mentioned in the Complaint, are based in Hongkong and England. As such, the evidence and the witnesses are not readily available in the Philippines; "ii) The loan transactions were obtained, perfected, performed, consummated and partially paid outside the Philippines;"iii) The monies were advanced outside the Philippines. Furthermore, the mortgaged vessels were part of an offshore fleet, not based in the Philippines;"iv) All the loans involved were granted to the Private Respondents' foreign CORPORATIONS;"v) The Restructuring Agreements were ALL governed by the laws of England;"vi) The subsequent sales of the mortgaged vessels and the application of the sales proceeds occurred and transpired outside the Philippines, and the deliveries of the sold mortgaged vessels were likewise made outside the Philippines;"vii) The revenues of the vessels and the proceeds of the sales of these vessels were ALL deposited to the Accounts of the foreign CORPORATIONS abroad; and"viii) Bank of America International Ltd. is not licensed nor engaged in trade or business in the Philippines."24

Petitioners argue further that the loan agreements, security documentation and all subsequent restructuring agreements uniformly, unconditionally and expressly provided that they will be governed by the laws of England;25 that Philippine Courts would then have to apply English law in resolving whatever issues may be

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presented to it in the event it recognizes and accepts herein case; that it would then be imposing a significant and unnecessary expense and burden not only upon the parties to the transaction but also to the local court. Petitioners insist that the inconvenience and difficulty of applying English law with respect to a wholly foreign transaction in a case pending in the Philippines may be avoided by its dismissal on the ground of forum non

conveniens. 26

Finally, petitioners claim that private respondents have already waived their alleged causes of action in the case at bar for their refusal to contest the foreign civil cases earlier filed by the petitioners against them in Hongkong and England, to wit:

"1.) Civil action in England in its High Court of Justice, Queen's Bench Division Commercial Court (1992-Folio No. 2098) against (a) LIBERIAN TRANSPORT NAVIGATION. SA.; (b) ESHLEY COMPANIA NAVIERA SA., (c) EL CHALLENGER SA; (d) ESPRIONA SHIPPING CO. SA; (e) PACIFIC NAVIGATOS CORP. SA; (f) EDDIE NAVIGATION CORP. SA; (g) EDUARDO K. LITONJUA & (h) AURELIO K. LITONJUA."2.) Civil action in England in its High Court of Justice, Queen's Bench Division, Commercial Court (1992-Folio No. 2245) against (a) EL CHALLENGER S.A., (b) ESPRIONA SHIPPING COMPANY S.A., (c) EDUARDO KATIPUNAN LITONJUA and (d) AURELIO KATIPUNAN LITONJUA."3.) Civil action in the Supreme Court of Hongkong High Court (Action No. 4039 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA, JR., and (h) EDUARDO KATIPUNAN LITONJUA."4.) A civil action in the Supreme Court of Hong Kong High Court (Action No. 4040 of 1992), against (a) ESHLEY COMPANIA NAVIERA S.A., (b) EL

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CHALLENGER S.A., (c) ESPRIONA SHIPPING COMPANY S.A., (d) PACIFIC NAVIGATORS CORPORATION (e) EDDIE NAVIGATION CORPORATION S.A., (f) LITONJUA CHARTERING (EDYSHIP) CO., INC., (g) AURELIO KATIPUNAN LITONJUA, RJ., and (h) EDUARDO KATIPUNAN LITONJUA."

and that private respondents' alleged cause of action is already barred by the pendency of another action or by litis pendentia as shown above.27

On the other hand, private respondents contend that certain material facts and pleadings are omitted and/or misrepresented in the present petition for certiorari; that the prefatory statement failed to state that part of the security of the foreign loans were mortgages on a 39-hectare piece of real estate located in the Philippines;28 that while the complaint was filed only by the stockholders of the corporate borrowers, the latter are wholly-owned by the private respondents who are Filipinos and therefore under Philippine laws, aside from the said corporate borrowers being but their alter-egos, they have interests of their own in the vessels.29 Private respondents also argue that the dismissal by the Court of Appeals of the petition for certiorari was justified because there was neither allegation nor any showing whatsoever by the petitioners that they had no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law from the Order of the trial judge denying their Motion to Dismiss; that the remedy available to the petitioners after their Motion to Dismiss was denied was to file an Answer to the complaint;30 that as upheld by the Court of Appeals, the decision of the trial court in not applying the principle of forum non

conveniens is in the lawful exercise of its discretion.31 Finally, private respondents aver that the statement of petitioners that the doctrine of res judicata also applies to foreign judgment is merely an opinion advanced by them and not based on a categorical ruling of this Court;32 and that herein private respondents did not actually participate in the proceedings in the foreign courts.33

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We deny the petition for lack of merit.It is a well-settled rule that the order denying the motion to dismiss cannot be the subject of petition for certiorari. Petitioners should have filed an answer to the complaint, proceed to trial and await judgment before making an appeal. As repeatedly held by this Court:

"An order denying a motion to dismiss is interlocutory and cannot be the subject of the extraordinary petition for certiorari or mandamus. The remedy of the aggrieved party is to file an answer and to interpose as defenses the objections raised in his motion to dismiss, proceed to trial, and in case of an adverse decision, to elevate the entire case by appeal in due course. xxx Under certain situations, recourse to certiorari or mandamus is considered appropriate, i.e., (a) when the trial court issued the order without or in excess of jurisdiction; (b) where there is patent grave abuse of discretion by the trial court; or (c) appeal would not prove to be a speedy and adequate remedy as when an appeal would not promptly relieve a defendant from the injurious effects of the patently mistaken order maintaining the plaintiff's baseless action and compelling the defendant needlessly to go through a protracted trial and clogging the court dockets by another futile case."34

Records show that the trial court acted within its jurisdiction when it issued the assailed Order denying petitioners' motion to dismiss. Does the denial of the motion to dismiss constitute a patent grave abuse of discretion? Would appeal, under the circumstances, not prove to be a speedy and adequate remedy? We will resolve said questions in conjunction with the issues raised by the parties.First issue. Did the trial court commit grave abuse of discretion in refusing to dismiss the complaint on the ground that plaintiffs have no cause of action against defendants since plaintiffs are merely stockholders of the corporations which are the registered owners of the vessels and the borrowers of petitioners?No. Petitioners' argument that private respondents,

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being mere stockholders of the foreign corporations, have no personalities to sue, and therefore, the complaint should be dismissed, is untenable. A case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-in-interest. Lack of personality to sue can be used as a ground for a Motion to Dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action.35 In San Lorenzo Village Association, Inc. vs. Court of

Appeals,36 this Court clarified that a complaint states a cause of action where it contains three essential elements of a cause of action, namely: (1) the legal right of the plaintiff, (2) the correlative obligation of the defendant, and (3) the act or omission of the defendant in violation of said legal right. If these elements are absent, the complaint becomes vulnerable to a motion to dismiss on the ground of failure to state a cause of action.37 To emphasize, it is not the lack or absence of cause of action that is a ground for dismissal of the complaint but rather the fact that the complaint states no cause of action.38 "Failure to state a cause of action" refers to the insufficiency of allegation in the pleading, unlike "lack of cause of action" which refers to the insufficiency of factual basis for the action. "Failure to state a cause of action" may be raised at the earliest stages of an action through a motion to dismiss the complaint, while "lack of cause of action" may be raised any time after the questions of fact have been resolved on the basis of stipulations, admissions or evidence presented.39

In the case at bar, the complaint contains the three elements of a cause of action. It alleges that: (1) plaintiffs, herein private respondents, have the right to demand for an accounting from defendants (herein petitioners), as trustees by reason of the fiduciary relationship that was created between the parties involving the vessels in question; (2) petitioners have the obligation, as trustees, to render such an accounting; and (3) petitioners failed to do the same.Petitioners insist that they do not have any obligation to the private respondents as they are mere stockholders of the corporation; that the corporate entities have juridical

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personalities separate and distinct from those of the private respondents. Private respondents maintain that the corporations are wholly owned by them and prior to the incorporation of such entities, they were clients of petitioners which induced them to acquire loans from said petitioners to invest on the additional ships.We agree with private respondents. As held in the San Lorenzo case,40

"xxx assuming that the allegation of facts constituting plaintiffs' cause of action is not as clear and categorical as would otherwise be desired, any uncertainty thereby arising should be so resolved as to enable a full inquiry into the merits of the action."

As this Court has explained in the San Lorenzo case, such a course, would preclude multiplicity of suits which the law abhors, and conduce to the definitive determination and termination of the dispute. To do otherwise, that is, to abort the action on account of the alleged fatal flaws of the complaint would obviously be indecisive and would not end the controversy, since the institution of another action upon a revised complaint would not be foreclosed.41

Second Issue. Should the complaint be dismissed on the ground of forum non-conveniens?No. The doctrine of forum non-conveniens, literally meaning 'the forum is inconvenient', emerged in private international law to deter the practice of global forum shopping,42 that is to prevent non-resident litigants from choosing the forum or place wherein to bring their suit for malicious reasons, such as to secure procedural advantages, to annoy and harass the defendant, to avoid overcrowded dockets, or to select a more friendly venue. Under this doctrine, a court, in conflicts of law cases, may refuse impositions on its jurisdiction where it is not the most "convenient" or available forum and the parties are not precluded from seeking remedies elsewhere.43

Whether a suit should be entertained or dismissed on the basis of said doctrine depends largely upon the facts of the particular case and is addressed to the sound

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discretion of the trial court.44 In the case of Communication Materials and Design, Inc. vs. Court of

Appeals,45 this Court held that "xxx [a Philippine Court may assume jurisdiction over the case if it chooses to do so; provided, that the following requisites are met: (1) that the Philippine Court is one to which the parties may conveniently resort to; (2) that the Philippine Court is in a position to make an intelligent decision as to the law and the facts; and, (3) that the Philippine Court has or is likely to have power to enforce its decision."46 Evidently, all these requisites are present in the instant case.Moreover, this Court enunciated in Philsec. Investment

Corporation vs. Court of Appeals,47 that the doctrine of forum non conveniens should not be used as a ground for a motion to dismiss because Sec. 1, Rule 16 of the Rules of Court does not include said doctrine as a ground. This Court further ruled that while it is within the discretion of the trial court to abstain from assuming jurisdiction on this ground, it should do so only after vital facts are established, to determine whether special circumstances require the court's desistance; and that the propriety of dismissing a case based on this principle of forum non conveniens requires a factual determination, hence it is more properly considered a matter of defense.48 Third issue. Are private respondents guilty of forum shopping because of the pendency of foreign action?No. Forum shopping exists where the elements of litis pendentia are present and where a final judgment in one case will amount to res judicata in the other.49 Parenthetically, for litis pendentia to be a ground for the dismissal of an action there must be: (a) identity of the parties or at least such as to represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same acts; and (c) the identity in the two cases should be such that the judgment which may be rendered in one would, regardless of which party is successful, amount to res

judicata in the other.50

In case at bar, not all the requirements for litis pendentia are present. While there may be identity of parties,

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notwithstanding the presence of other respondents,51 as well as the reversal in positions of plaintiffs and defendants52, still the other requirements necessary for litis pendentia were not shown by petitioner. It merely mentioned that civil cases were filed in Hongkong and England without however showing the identity of rights asserted and the reliefs sought for as well as the presence of the elements of res judicata should one of the cases be adjudged.As the Court of Appeals aptly observed:

"xxx [T]he petitioners, by simply enumerating the civil actions instituted abroad involving the parties herein xxx, failed to provide this Court with relevant and clear specifications that would show the presence of the above-quoted elements or requisites for res judicata. While it is true that the petitioners in their motion for reconsideration (CA Rollo, p. 72), after enumerating the various civil actions instituted abroad, did aver that "Copies of the foreign judgments are hereto attached and made integral parts hereof as Annexes 'B', 'C', 'D' and 'E'", they failed, wittingly or inadvertently, to include a single foreign judgment in their pleadings submitted to this Court as annexes to their petition. How then could We have been expected to rule on this issue even if We were to hold that foreign judgments could be the basis for the application of the aforementioned principle of res judicata?"53

Consequently, both courts correctly denied the dismissal of herein subject complaint.WHEREFORE, the petition is DENIED for lack of merit.Costs against petitioners.SO ORDERED.

8. Paula Llorente vs. CA, G.R. No. 124371, November 23, 2000FIRST DIVISION[G.R. No. 124371. November 23, 2000]

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PAULA T. LLORENTE, petitioner, vs. COURT OF APPEALS and ALICIA F. LLORENTE, respondents.

D E C I S I O NPARDO, J.:The CaseThe case raises a conflict of laws issue.What is before us is an appeal from the decision of the Court of Appeals[1] modifying that of the Regional Trial Court, Camarines Sur, Branch 35, Iriga City[2] declaring respondent Alicia F. Llorente (herinafter referred to as Alicia), as co-owners of whatever property she and the deceased Lorenzo N. Llorente (hereinafter referred to as Lorenzo) may have acquired during the twenty-five (25) years that they lived together as husband and wife.The FactsThe deceased Lorenzo N. Llorente was an enlisted serviceman of the United States Navy from March 10, 1927 to September 30, 1957.[3]On February 22, 1937, Lorenzo and petitioner Paula Llorente (hereinafter referred to as Paula) were married before a parish priest, Roman Catholic Church, in Nabua, Camarines Sur.[4]Before the outbreak of the Pacific War, Lorenzo departed for the United States and Paula stayed in the conjugal home in barrio Antipolo, Nabua, Camarines Sur.[5]On November 30, 1943, Lorenzo was admitted to United States citizenship and Certificate of Naturalization No. 5579816 was issued in his favor by the United States District Court, Southern District of New York.[6]Upon the liberation of the Philippines by the American Forces in 1945, Lorenzo was granted an accrued leave by the U. S. Navy, to visit his wife and he visited the Philippines.[7] He discovered that his wife Paula was pregnant and was living in and having an adulterous relationship with his brother, Ceferino Llorente.[8]On December 4, 1945, Paula gave birth to a boy registered in the Office of the Registrar of Nabua as Crisologo Llorente, with the certificate stating that the child was not legitimate and the line for the fathers

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name was left blank.[9]Lorenzo refused to forgive Paula and live with her. In fact, on February 2, 1946, the couple drew a written agreement to the effect that (1) all the family allowances allotted by the United States Navy as part of Lorenzos salary and all other obligations for Paulas daily maintenance and support would be suspended; (2) they would dissolve their marital union in accordance with judicial proceedings; (3) they would make a separate agreement regarding their conjugal property acquired during their marital life; and (4) Lorenzo would not prosecute Paula for her adulterous act since she voluntarily admitted her fault and agreed to separate from Lorenzo peacefully. The agreement was signed by both Lorenzo and Paula and was witnessed by Paulas father and stepmother. The agreement was notarized by Notary Public Pedro Osabel.[10]Lorenzo returned to the United States and on November 16, 1951 filed for divorce with the Superior Court of the State of California in and for the County of San Diego. Paula was represented by counsel, John Riley, and actively participated in the proceedings. On November 27, 1951, the Superior Court of the State of California, for the County of San Diego found all factual allegations to be true and issued an interlocutory judgment of divorce.[11]On December 4, 1952, the divorce decree became final.[12]In the meantime, Lorenzo returned to the Philippines.On January 16, 1958, Lorenzo married Alicia F. Llorente in Manila.[13] Apparently, Alicia had no knowledge of the first marriage even if they resided in the same town as Paula, who did not oppose the marriage or cohabitation.[14]From 1958 to 1985, Lorenzo and Alicia lived together as husband and wife.[15] Their twenty-five (25) year union produced three children, Raul, Luz and Beverly, all surnamed Llorente.[16]On March 13, 1981, Lorenzo executed a Last Will and Testament. The will was notarized by Notary Public Salvador M. Occiano, duly signed by Lorenzo with

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attesting witnesses Francisco Hugo, Francisco Neibres and Tito Trajano. In the will, Lorenzo bequeathed all his property to Alicia and their three children, to wit:(1) I give and bequeath to my wife ALICIA R. FORTUNO exclusively my residential house and lot, located at San Francisco, Nabua, Camarines Sur, Philippines, including ALL the personal properties and other movables or belongings that may be found or existing therein;(2) I give and bequeath exclusively to my wife Alicia R. Fortuno and to my children, Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, all my real properties whatsoever and wheresoever located, specifically my real properties located at Barangay Aro-Aldao, Nabua, Camarines Sur; Barangay Paloyon, Nabua, Camarines Sur; Barangay Baras, Sitio Puga, Nabua, Camarines Sur; and Barangay Paloyon, Sitio Nalilidong, Nabua, Camarines Sur;(3) I likewise give and bequeath exclusively unto my wife Alicia R. Fortuno and unto my children, Raul F. Llorente, Luz F. Llorente and Beverly F. Llorente, in equal shares, my real properties located in Quezon City Philippines, and covered by Transfer Certificate of Title No. 188652; and my lands in Antipolo, Rizal, Philippines, covered by Transfer Certificate of Title Nos. 124196 and 165188, both of the Registry of Deeds of the province of Rizal, Philippines;(4) That their respective shares in the above-mentioned properties, whether real or personal properties, shall not be disposed of, ceded, sold and conveyed to any other persons, but could only be sold, ceded, conveyed and disposed of by and among themselves;(5) I designate my wife ALICIA R. FORTUNO to be the sole executor of this my Last Will and Testament, and in her default or incapacity of the latter to act, any of my children in the order of age, if of age;(6) I hereby direct that the executor named herein or her lawful substitute should served (sic) without bond; (7) I hereby revoke any and all my other wills, codicils, or testamentary dispositions heretofore executed, signed, or published, by me;(8) It is my final wish and desire that if I die, no relatives

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of mine in any degree in the Llorentes Side should ever bother and disturb in any manner whatsoever my wife Alicia R. Fortunato and my children with respect to any real or personal properties I gave and bequeathed respectively to each one of them by virtue of this Last Will and Testament.[17]On December 14, 1983, Lorenzo filed with the Regional Trial Court, Iriga, Camarines Sur, a petition for the probate and allowance of his last will and testament wherein Lorenzo moved that Alicia be appointed Special Administratrix of his estate.[18]On January 18, 1984, the trial court denied the motion for the reason that the testator Lorenzo was still alive.[19]On January 24, 1984, finding that the will was duly executed, the trial court admitted the will to probate.[20]On June 11, 1985, before the proceedings could be terminated, Lorenzo died.[21]On September 4, 1985, Paula filed with the same court a petition[22] for letters of administration over Lorenzos estate in her favor. Paula contended (1) that she was Lorenzos surviving spouse, (2) that the various property were acquired during their marriage, (3) that Lorenzos will disposed of all his property in favor of Alicia and her children, encroaching on her legitime and 1/2 share in the conjugal property.[23]On December 13, 1985, Alicia filed in the testate proceeding (Sp. Proc. No. IR-755), a petition for the issuance of letters testamentary.[24]On October 14, 1985, without terminating the testate proceedings, the trial court gave due course to Paulas petition in Sp. Proc. No. IR-888.[25]On November 6, 13 and 20, 1985, the order was published in the newspaper Bicol Star.[26]On May 18, 1987, the Regional Trial Court issued a joint decision, thus:Wherefore, considering that this court has so found that the divorce decree granted to the late Lorenzo Llorente is void and inapplicable in the Philippines, therefore the marriage he contracted with Alicia Fortunato on January

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16, 1958 at Manila is likewise void. This being so the petition of Alicia F. Llorente for the issuance of letters testamentary is denied. Likewise, she is not entitled to receive any share from the estate even if the will especially said so her relationship with Lorenzo having gained the status of paramour which is under Art. 739 (1).On the other hand, the court finds the petition of Paula Titular Llorente, meritorious, and so declares the intrinsic disposition of the will of Lorenzo Llorente dated March 13, 1981 as void and declares her entitled as conjugal partner and entitled to one-half of their conjugal properties, and as primary compulsory heir, Paula T. Llorente is also entitled to one-third of the estate and then one-third should go to the illegitimate children, Raul, Luz and Beverly, all surname (sic) Llorente, for them to partition in equal shares and also entitled to the remaining free portion in equal shares.Petitioner, Paula Llorente is appointed legal administrator of the estate of the deceased, Lorenzo Llorente. As such let the corresponding letters of administration issue in her favor upon her filing a bond in the amount (sic) of P100,000.00 conditioned for her to make a return to the court within three (3) months a true and complete inventory of all goods, chattels, rights, and credits, and estate which shall at any time come to her possession or to the possession of any other person for her, and from the proceeds to pay and discharge all debts, legacies and charges on the same, or such dividends thereon as shall be decreed or required by this court; to render a true and just account of her administration to the court within one (1) year, and at any other time when required by the court and to perform all orders of this court by her to be performed.On the other matters prayed for in respective petitions for want of evidence could not be granted.SO ORDERED.[27]In time, Alicia filed with the trial court a motion for reconsideration of the aforequoted decision.[28]On September 14, 1987, the trial court denied Alicias motion for reconsideration but modified its earlier decision, stating that Raul and Luz Llorente are not

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children legitimate or otherwise of Lorenzo since they were not legally adopted by him.[29] Amending its decision of May 18, 1987, the trial court declared Beverly Llorente as the only illegitimate child of Lorenzo, entitling her to one-third (1/3) of the estate and one-third (1/3) of the free portion of the estate.[30]On September 28, 1987, respondent appealed to the Court of Appeals.[31]On July 31, 1995, the Court of Appeals promulgated its decision, affirming with modification the decision of the trial court in this wise:WHEREFORE, the decision appealed from is hereby AFFIRMED with the MODIFICATION that Alicia is declared as co-owner of whatever properties she and the deceased may have acquired during the twenty-five (25) years of cohabitation.SO ORDERED.[32]On August 25, 1995, petitioner filed with the Court of Appeals a motion for reconsideration of the decision.[33]On March 21, 1996, the Court of Appeals,[34] denied the motion for lack of merit.Hence, this petition.[35]The IssueStripping the petition of its legalese and sorting through the various arguments raised,[36] the issue is simple. Who are entitled to inherit from the late Lorenzo N. Llorente?We do not agree with the decision of the Court of Appeals. We remand the case to the trial court for ruling on the intrinsic validity of the will of the deceased.The Applicable LawThe fact that the late Lorenzo N. Llorente became an American citizen long before and at the time of: (1) his divorce from Paula; (2) marriage to Alicia; (3) execution of his will; and (4) death, is duly established, admitted and undisputed.Thus, as a rule, issues arising from these incidents are necessarily governed by foreign law.

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The Civil Code clearly provides:Art. 15. 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.Art. 16. Real property as well as personal property is subject to the law of the country where it is situated.However, intestate and testamentary succession, both with respect to the order of succession and to the amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated by the national law of the person whose succession is under consideration, whatever may be the nature of the property and regardless of the country wherein said property may be found. (emphasis ours)True, foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial notice of them. Like any other fact, they must be alleged and proved.[37]While the substance of the foreign law was pleaded, the Court of Appeals did not admit the foreign law. The Court of Appeals and the trial court called to the fore the renvoi doctrine, where the case was referred back to the law of the decedents domicile, in this case, Philippine law.We note that while the trial court stated that the law of New York was not sufficiently proven, in the same breath it made the categorical, albeit equally unproven statement that American law follows the domiciliary theory hence, Philippine law applies when determining the validity of Lorenzos will.[38]First, there is no such thing as one American law. The "national law" indicated in Article 16 of the Civil Code cannot possibly apply to general American law. There is no such law governing the validity of testamentary provisions in the United States. Each State of the union has its own law applicable to its citizens and in force only within the State. It can therefore refer to no other than the law of the State of which the decedent was a resident.[39] Second, there is no showing that the application of the renvoi doctrine is called for or required

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by New York State law.The trial court held that the will was intrinsically invalid since it contained dispositions in favor of Alice, who in the trial courts opinion was a mere paramour. The trial court threw the will out, leaving Alice, and her two children, Raul and Luz, with nothing.The Court of Appeals also disregarded the will. It declared Alice entitled to one half (1/2) of whatever property she and Lorenzo acquired during their cohabitation, applying Article 144 of the Civil Code of the Philippines.The hasty application of Philippine law and the complete disregard of the will, already probated as duly executed in accordance with the formalities of Philippine law, is fatal, especially in light of the factual and legal circumstances here obtaining.Validity of the Foreign DivorceIn Van Dorn v. Romillo, Jr.[40] we held that owing to the nationality principle embodied in Article 15 of the Civil Code, only Philippine nationals are covered by the policy against absolute divorces, the same being considered contrary to our concept of public policy and morality. In the same case, the Court ruled that aliens may obtain divorces abroad, provided they are valid according to their national law.Citing this landmark case, the Court held in Quita v. Court of Appeals,[41] that once proven that respondent was no longer a Filipino citizen when he obtained the divorce from petitioner, the ruling in Van Dorn would become applicable and petitioner could very well lose her right to inherit from him.In Pilapil v. Ibay-Somera,[42] we recognized the divorce obtained by the respondent in his country, the Federal Republic of Germany. There, we stated that divorce and its legal effects may be recognized in the Philippines insofar as respondent is concerned in view of the nationality principle in our civil law on the status of persons.For failing to apply these doctrines, the decision of the Court of Appeals must be reversed.[43] We hold that the divorce obtained by Lorenzo H. Llorente from his first

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wife Paula was valid and recognized in this jurisdiction as a matter of comity. Now, the effects of this divorce (as to the succession to the estate of the decedent) are matters best left to the determination of the trial court.Validity of the WillThe Civil Code provides:Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed.

When the acts referred to are executed before the diplomatic or consular officials of the Republic of the Philippines in a foreign country, the solemnities established by Philippine laws shall be observed in their execution. (underscoring ours)The clear intent of Lorenzo to bequeath his property to his second wife and children by her is glaringly shown in the will he executed. We do not wish to frustrate his wishes, since he was a foreigner, not covered by our laws on family rights and duties, status, condition and legal capacity.[44]Whether the will is intrinsically valid and who shall inherit from Lorenzo are issues best proved by foreign law which must be pleaded and proved. Whether the will was executed in accordance with the formalities required is answered by referring to Philippine law. In fact, the will was duly probated.As a guide however, the trial court should note that whatever public policy or good customs may be involved in our system of legitimes, Congress did not intend to extend the same to the succession of foreign nationals. Congress specifically left the amount of successional rights to the decedent's national law.[45]Having thus ruled, we find it unnecessary to pass upon the other issues raised.The FalloWHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G. R. SP No. 17446 promulgated on July 31, 1995 is SET ASIDE.In lieu thereof, the Court REVERSES the decision of the Regional Trial Court and RECOGNIZES as VALID the

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decree of divorce granted in favor of the deceased Lorenzo N. Llorente by the Superior Court of the State of California in and for the County of San Diego, made final on December 4, 1952.Further, the Court REMANDS the cases to the court of origin for determination of the intrinsic validity of Lorenzo N. Llorentes will and determination of the parties successional rights allowing proof of foreign law with instructions that the trial court shall proceed with all deliberate dispatch to settle the estate of the deceased within the framework of the Rules of Court.No costs.SO ORDERED.Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Ynares-Santiago, JJ., concur.

[1] In CA-G. R. SP. No. 17446, promulgated on July 31, 1995, Lipana-Reyes+, J., ponente, Torres, Jr. and Hofilena, JJ., concurring.[2] In Spec. Proc. No. IR-755 (In the Matter of the Probate and Allowance of the Last Will and Testament of Lorenzo N. Llorente, Lorenzo N. Llorente, Petitioner) and Spec. Proc. No. IR-888 (Petition for the Grant of Letters of Administration for the Estate of Lorenzo N. Llorente, Paula T. Llorente, Petitioner), dated May 18, 1987, Judge Esteban B. Abonal, presiding.[3] Decision, Court of Appeals, Rollo, p. 51. [4] Exh. B, Trial Court Folder of Exhibits, p. 61. [5] Ibid. [6] This was issued pursuant to Lorenzos petition, Petition No. 4708849, filed with the U.S. Court. Exhs. H and H-3 Trial Court Folder of Exhibits, p. 157, 159. [7] Decision, Court of Appeals, Rollo, p. 51; Exh. B, Trial Court Folder of Exhibits, p. 61.[8] Ibid. [9] Exh. A, Trial Court Folder of Exhibits, p. 60.

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[10] Exh. B-1 Trial Court Folder of Exhibits, p. 62. [11] Exh. D, Trial Court Folder of Exhibits, pp. 63-64. [12] Exh. E, Trial Court Folder of Exhibits, p. 69. [13] Exh. F, Trial Court Folder of Exhibits, p. 148. [14] Decision, Court of Appeals, Rollo, p. 52. [15] Comment, Rollo, p. 147. [16] Decision, Court of Appeals, Rollo, p. 52. [17] Exh. A, Trial Court Folder of Exhibits, pp. 3-4; Decision, Court of Appeals, Rollo, p. 52. [18] Docketed as Spec. Proc. No. IR-755. [19] Decision, RTC, Rollo, p. 37.[20] Ibid.[21] Ibid.[22] Docketed as Spec. Proc. No. IR-888.[23] Decision, RTC, Rollo, p. 38.[24] Decision, Court of Appeals, Rollo, p. 52.[25] Ibid., pp. 52-53.[26] Ibid., p. 53.[27] RTC Decision, Rollo, p. 37.[28] Order, Regional Trial Court in Spec. Proc. Nos. IR-755 and 888, Rollo, p. 46.[29] Citing Article 335 of the Civil Code, which states, The following cannot adopt: xxx(3) a married person, without the consent of the other spouse; xxx, the trial court reasoned that since the divorce obtained by Lorenzo did not dissolve his first marriage with Paula, then the adoption of Raul and Luz was void, as Paula did not give her consent to it.[30] Order, Regional Trial Court, Rollo, p. 47.[31] Docketed as CA-G. R. SP No. 17446.[32] Decision, Court of Appeals, Rollo, p. 56.[33] On August 31, 1995, petitioner also filed with this Court a verified complaint against the members of the

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Special Thirteenth Division, Court of Appeals, Associate Justices Justo P. Torres, Jr., Celia Lipana-Reyes + and Hector Hofilena for gross ignorance of the law, manifest incompetence and extreme bias (Rollo, p. 15).

[34] Again with Associate Justice Celia Lipana-Reyes+, ponente, concurred in by Associate Justices Justo P. Torres, Jr. and Hector Hofilena (Former Special Thirteenth Division).[35] Filed on May 10, 1996, Rollo, pp. 9-36.[36] Petitioner alleges (1) That the Court of Appeals lost its jurisdiction over the case when it issued the resolution denying the motion for reconsideration; (2) That Art. 144 of the Civil Case has been repealed by Arts. 253 and 147 of the Family Code and (3) That Alicia and her children not are entitled to any share in the estate of the deceased (Rollo, p. 19).[37] Collector of Internal Revenue v. Fisher, 110 Phil. 686 (1961).[38] Joint Record on Appeal, p. 255; Rollo, p. 40.[39] In Re: Estate of Edward Christensen, Aznar v. Helen Garcia, 117 Phil. 96 (1963).[40] 139 SCRA 139 (1985).[41] 300 SCRA 406 (1998).[42] 174 SCRA 653 (1989).[43] The ruling in the case of Tenchavez v. Escano (122 Phil. 752 [1965]) that provides that a foreign divorce between Filipino citizens sought and decreed after the effectivity of the present civil code is not entitled to recognition as valid in this jurisdiction is NOT applicable in the case at bar as Lorenzo was no longer a Filipino citizen when he obtained the divorce.[44] Article 15, Civil Code provides 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. (Underscoring ours)[45] Bellis v. Bellis, 126 Phil. 726 (1967).

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9. Bank of America vs. American Realty Corporation, G.R. No. 133876, December 29, 1999G.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 1 of public respondent Court of Appeals in CA G.R. CV No. 51094, promulgated on 30 September 1997 and its resolution, 2 dated 22 May 1998, denying 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 privaterespondent. 3

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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, 4 dated 17 February 1983 and 20 July 1984, over its parcels of land 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 5 before foreign courts for the collection of 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

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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; andd) 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 6 of real estate mortgage.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 8 against the petitioner, for the latter's act of foreclosing extrajudicially the real estate mortgages despite the pendency of civil suits before foreign courts for the collection of the principal loan.

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In its answer 9 petitioner alleged that the rule prohibiting the mortgagee from foreclosing the 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 forsuspension 10 of the redemption period on the ground that "it cannot exercise said right of 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 11 dated 28 January 1994, the trial court granted the private respondent's motion 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.

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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). 12 Accordingly, Transfer Certificate of Title Nos. T-187781(m), T-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 13 in favor of private respondent ARC dated 12 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); and3) 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.

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

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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 15 and similar cases adjudicated thereafter, thus:

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

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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, 16 this Court, reiterating jurisprudence enunciated in Manila Trading and Supply

Co vs. Co Kim 17 and Movido vs.

RFC, 18 invariably held:. . . 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

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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, 22 we agreed with the petitioner in said case, that the 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

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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, 23 a case relied upon by 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

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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

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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 25 of the trial court, in the present case, thus:

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.

xxx xxx xxxIn 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)

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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. 27 Again, petitioner tried to fit a square peg in a round hole. It must be stressed that far 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.

xxx xxx xxxThus, 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

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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. 30 Thus, if the foreign law involved is not properly pleaded and proved, our courts will presume that the foreign law is the same as our local or domestic or internallaw. 31 This is what we refer to as the doctrine of processual presumption.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, 32 said foreign law would still not find applicability.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

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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. 36 Indeed, the 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. 37 The opinions of men vary so much 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

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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. 40 The time-tested 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. 42 Besides, trial courts are in a better

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position to examine real evidence as well as 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. 44 In the case at bar, we see no reason that would justify this 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 45, to wit:

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

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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. 46 Applying the foregoing principle, we therefore hold 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. 47 As the records show, Flores 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.

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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

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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. 49 citing Northern Cement Corporation vs. Intermediate

Appellate Court 50 is enlightening: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

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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

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

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10. Asiavest Limited vs. CA, G.R. No. 128803, September 25, 1998

FG.R. No. 128803 September 25, 1998

ASIAVEST LIMITED, petitioner, vs.THE COURT OF APPEALS and ANTONIO HERAS, respondents. DAVIDE, JR., J.:

In issue is the enforceability in the Philippines of a foreign judgment. The antecedents are summarized in the 24 August 1990 Decision 1 of Branch 107 of the Regional Trial Court of Quezon City in Civil Case No. Q-52452; thus:

The plaintiff Asiavest Limited filed a complaint on December 3, 1987 against the defendant Antonio Heras praying that said defendant be ordered to pay to the plaintiff the amounts awarded by the Hong Kong Court Judgment dated December 28, 1984 and amended on April 13, 1987, to wit:

1) US$1,810,265.40 or its equivalent in Hong Kong currency at the time of payment with legal interest from December 28, 1984 until fully paid;2) interest on the sum of US$1,500.00 at 9.875% per annum from October 31, 1984 to December 28, 1984; and

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3) HK$905.00 at fixed cost in the action; and4) at least $80,000.00 representing attorney's fees, litigation expenses and cost, with interest thereon from the date of the judgment until fully paid.

On March 3, 1988, the defendant filed a Motion to Dismiss. However, before the court could resolve the said motion, a fire which partially razed the Quezon City Hall Building on June 11, 1988 totally destroyed the office of this Court, together with all its records, equipment and properties. On July 26, 1988, the plaintiff, through counsel filed a Motion for Reconstitution of Case Records. The Court, after allowing the defendant to react thereto, granted the said Motion and admitted the annexes attached thereto as the reconstituted records of this case per Order dated September 6, 1988. Thereafter, the Motion to Dismiss, the resolution of which had been deferred; was denied by the Court in its Order of October 4, 1988.On October 19, 1988, defendant filed his Answer. The case was then set for pre-trial conference. At the conference, the parties could not arrive at any settlement. However, they agreed on the following stipulations of facts:

1. The defendant admits the existence of the judgment dated December 28, 1984 as well as its amendment dated

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April 13, 1987, but not necessarily the authenticity or validity thereof;2. The plaintiff is not doing business and is not licensed to do business in the Philippines;3. The residence of defendant, Antonio Heras, is New Manila, Quezon City.

The only issue for this Court to determine is, whether or not the judgment of the Hong Kong Court has been repelled by evidence of want of jurisdiction, want of notice to the party, collusion, fraud or clear mistake of law or fact, such as to overcome the presumption established in Section 50, Rule 39 of the Rules of Court in favor of foreign judgments.In view of the admission by the defendant of the existence of the aforementioned judgment (Pls. See Stipulations of Facts in the Order dated January 5, 1989 as amended by the Order of January 18, 1989), as well as the legal presumption in favor of the plaintiff as provided for in paragraph (b); Sec. 50, (Ibid.), the plaintiff presented only documentary evidence to show rendition, existence, and authentication of such judgment by the proper officials concerned (Pls. See Exhibits "A" thru "B", with their submarkings). In addition, the plaintiff presented testimonial and documentary evidence to show its entitlement to attorney's fees and other expenses of litigation. . . . .

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On the other hand, the defendant presented two witnesses, namely. Fortunata dela Vega and Russel Warren Lousich.The gist of Ms. dela Vega's testimony is to the effect that no writ of summons or copy of a statement of claim of Asiavest Limited was ever served in the office of the Navegante Shipping Agency Limited and/or for Mr. Antonio Heras, and that no service of the writ of summons was either served on the defendant at his residence in New Manila, Quezon City. Her knowledge is based on the fact that she was the personal secretary of Mr. Heras during his JD Transit days up to the latter part of 1972 when he shifted or diversified to shipping business in Hong Kong; that she was in-charge of all his letters and correspondence, business commitments, undertakings, conferences and appointments, until October 1984 when Mr. Heras left Hong Kong for good; that she was also the Officer-in-Charge or Office Manager of Navegante Shipping Agency LTD, a Hong Kong registered and based company acting as ships agent, up to and until the company closed shop sometime in the first quarter of 1985, when shipping business collapsed worldwide; that the said company held office at 34-35 Connaught Road, Central Hong Kong and later transferred to Carton House at Duddel Street, Hong Kong, until the company closed shop in 1985; and that she was certain of such facts because she held office at Caxton House up to the first quarter of 1985.Mr. Lousich was presented as an expert on the laws of Hong Kong, and as a representative of the law office of the defendant's counsel who made a verification of the record of the case filed by the plaintiff in Hong Kong against the defendant, as well as the procedure in serving Court processes in Hong Kong.

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In his affidavit (Exh. "2") which constitutes his direct testimony, the said witness stated that:

The defendant was sued on the basis of his personal guarantee of the obligations of Compania Hermanos de Navegacion S.A. There is no record that a writ of summons was served on the person of the defendant in Hong Kong, or that any such attempt at service was made. Likewise, there is no record that a copy of the judgment of the High Court was furnished or served on the defendant; anyway, it is not a legal requirement to do so under Hong Kong laws;

a) The writ of summons or claim can be served by the solicitor (lawyer) of the claimant or plaintiff. In Hong Kong there are no Court personnel who serve writs of summons and/or most other processes.b) If the writ of summons or claim (or complaint) is not contested, the claimant or the plaintiff is not required to present proof of his claim or complaint nor present evidence

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under oath of the claim in order to obtain a Judgment.c) There is no legal requirement that such a Judgment or decision rendered by the Court in Hong Kong [to] make a recitation of the facts or the law upon which the claim is based.d) There is no necessity to furnish the defendant with a copy of the Judgment or decision rendered against him.e) In an action based on a guarantee, there is no established legal requirement or obligation under Hong Kong laws that the creditor must first bring proceedings against the principal debtor. The creditor can immediately go against the guarantor.

On cross examination, Mr. Lousich stated that before he was commissioned by the law firm of the defendant's counsel as an expert witness and to verify the records of the Hong Kong case, he had been acting as

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counsel for the defendant in a number of commercial matters; that there was an application for service of summons upon the defendant outside the jurisdiction of Hong Kong; that there was an order of the Court authorizing service upon Heras outside of Hong Kong, particularly in Manila or any other place in the Philippines (p. 9, TSN, 2/14/90); that there must be adequate proof of service of summons, otherwise the Hong Kong Court will refuse to render judgment (p. 10, ibid); that the mere fact that the Hong Kong Court rendered judgment, it can be presumed that there was service of summons; that in this case, it is not just a presumption because there was an affidavit stating that service was effected in [sic] a particular man here in Manila; that such affidavit was filed by one Jose R. Fernandez of the firm Sycip Salazar on the 21st of December 1984, and stated in essence that "on Friday, the 23rd of November 1984 he served the 4th defendant at No. 6 First Street, Quezon City by leaving it at that address with Mr. Dionisio Lopez, the son-in-law of the 4th defendant the copy of the writ and Mr. Lopez informed me and I barely believed that he would bring the said writ to the attention of the 4th defendant" (pp. 11-12, ibid.); that upon filing of that affidavit, the Court was asked and granted judgment against the 4th defendant; and that if the summons or claim is not contested, the claimant of the plaintiff is not required to present proof of his claim or complaint or present evidence under oath of the claim in order to obtain judgment; and that such judgment can be enforced in the same manner as a judgment rendered after full hearing.

The trial court held that since the Hong Kong court judgment had been duly proved, it is a presumptive evidence of a right as between the parties; hence, the party impugning it had the burden to prove want of

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jurisdiction over his person. HERAS failed to discharge that burden. He did not testify to state categorically and under oath that he never received summons. Even his own witness Lousich admitted that HERAS was served with summons in his Quezon City residence. As to De la Vega's testimony regarding non-service of summons, the same was hearsay and had no probative value.As to HERAS' contention that the Hong Kong court judgment violated the Constitution and the procedural laws of the Philippines because it contained no statements of the facts and the law on which it was based, the trial court ruled that since the issue relate to procedural matters, the law of the forum, i.e., Hong Kong laws, should govern. As testified by the expert witness Lousich, such legalities were not required under Hong Kong laws. The trial Court also debunked HERAS' contention that the principle of excussion under Article 2058 of the Civil Code of the Philippines was violated. It declared that matters of substance are subject to the law of the place where the transaction occurred; in this case, Hong Kong laws must govern.The trial court concluded that the Hong Kong court judgment should be recognized and given effect in this jurisdiction for failure of HERAS to overcome the legal presumption in favor of the foreign judgment. It then decreed; thus:

WHEREFORE, judgment is hereby rendered ordering defendant to pay to the plaintiff the following sums or their equivalents in Philippine currency at the time of payment: US$1,810,265.40 plus interest on the sum of US$1,500,000.00 at 9.875% per annum from October 31, 1984 to December 28, 1984, and HK$905 as fixed cost, with legal interests on the aggregate amount from December 28, 1984, and to pay attorney's fees in the sum of P80,000.00.

ASIAVEST moved for the reconsideration of the decision. It sought an award of judicial costs and an increase in attorney's fees in the amount of US$19,346.45 with interest until full payment of the said obligations. On the other hand, HERAS no longer opposed the motion and instead appealed the decision to the Court of Appeals,

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which docketed the appeal as CA-G.R. CV No. 29513.

In its order 2 of 2 November 1990, the trial court granted ASIAVEST's motion for reconsideration by increasing the award of attorney's fees to "US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE CURRENCY, AND TO PAY THE COSTS OF THIS SUIT," provided that ASIAVEST would pay the corresponding filing fees for the increase. ASIAVEST appealed the order requiring prior payment of filing fees. However, it later withdrew its appeal and paid the additional filing fees.On 3 April 1997, the Court of Appeals rendered its decision 3 reversing the decision of the trial court and dismissing ASIAVEST's complaint without prejudice. It underscored the fact that a foreign judgment does not of itself have any extraterritorial application. For it to be given effect, the foreign tribunal should have acquired jurisdiction over the person and the subject matter. If such tribunal has not acquired jurisdiction, its judgment is void.The Court of Appeals agreed with the trial court that matters of remedy and procedure, such as those relating to service of summons upon the defendant are governed by the lex fori, which was, in this case, the law of Hong Kong. Relative thereto, it gave weight to Lousich's testimony that under the Hong Kong law, the substituted service of summons upon HERAS effected in the Philippines by the clerk of Sycip Salazar Hernandez & Gatmaitan firm would be valid provided that it was done in accordance with Philippine laws. It then stressed that where the action is in personam and the defendant is in the Philippines, the summons should be personally served on the defendant pursuant to Section 7, Rule 14 of the Rules of Court. 4 Substituted service may only be availed of where the defendant cannot be promptly served in person, the fact of impossibility of personal service should be explained in the proof of service. It also found as persuasive HERAS' argument that instead of directly using the clerk of the Sycip Salazar Hernandez & Gatmaitan law office, who was not authorized by the judge of the court issuing the summons, ASIAVEST should have asked for leave of the local courts to have the foreign summons served by the sheriff or other court

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officer of the place where service was to be made, or for special reasons by any person authorized by the judge.The Court of Appeals agreed with HERAS that "notice sent outside the state to a non-resident is unavailing to give jurisdiction in an action against him personally for money recovery." Summons should have been personally served on HERAS in Hong Kong, for, as claimed by ASIAVEST, HERAS was physically present in Hong Kong for nearly 14 years. Since there was not even an attempt to serve summons on HERAS in Hong Kong, the Hong Kong Supreme Court did not acquire jurisdiction over HERAS. Nonetheless it did not totally foreclose the claim of ASIAVEST; thus:

While We are not fully convinced that [HERAS] has a meritorious defense against [ASIAVEST's] claims or that [HERAS] ought to be absolved of any liability, nevertheless, in view of the foregoing discussion, there is a need to deviate front the findings of the lower court in the interest of justice and fair play. This, however, is without prejudice to whatever action [ASIAVEST] might deem proper in order to enforce its claims against [HERAS].

Finally, the Court of Appeals also agreed with HERAS that it was necessary that evidence supporting the validity of the foreign judgment be submitted, and that our courts are not bound to give effect to foreign judgments which contravene our laws and the principle of sound morality and public policy.ASIAVEST forthwith filed the instant petition alleging that the Court of Appeals erred in ruling that

I.. . . IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT EVIDENCE "SUPPORTING THE VALIDITY OF THE JUDGMENT";

II.. . . THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER PHILIPPINES LAW;

III.

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. . . SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN HONG KONG;

IV.. . . THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH LEAVE OF PHILIPPINE COURTS;

V.. . . THE FOREIGN JUDGMENT "CONTRAVENES PHILIPPINE LAWS, THE PRINCIPLES OF SOUND MORALITY, AND THE PUBLIC POLICY OF THE PHILIPPINES.

Being interrelated, we shall take up together the assigned errors.Under paragraph (b) of Section 50, Rule 39 of the Rules of Court, 5 which was the governing law at the time this case was decided by the trial court and respondent Court of Appeals, a foreign judgment against a person rendered by a court having jurisdiction to pronounce the judgment is presumptive evidence of a right as between the parties and their successors in interest by the subsequent title. However, the 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.Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that in the absence of proof to the contrary, a court, or judge acting as such, whether in the Philippines or elsewhere, is presumed to have acted in the lawful exercise of jurisdiction.Hence, once the authenticity of the foreign judgment is proved, the burden to repel it on grounds provided for in paragraph (b) of Section 50, Rule 39 of the Rules of Court is on the party challenging the foreign judgment — HERAS in this case.At the pre-trial conference, HERAS admitted the existence of the Hong Kong judgment. On the other hand, ASIAVEST presented evidence to prove rendition, existence, and authentication of the judgment by the proper officials. The judgment is thus presumed to be

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valid and binding in the country from which it comes, until the contrary is shown. 6 Consequently, the first ground relied upon by ASIAVEST has merit. The presumption of validity accorded foreign judgment would be rendered meaningless were the party seeking to enforce it be required to first establish its validity.The main argument raised against the Hong Kong judgment is that the Hong Kong Supreme Court did not acquire jurisdiction over the person of HERAS. This involves the issue of whether summons was properly and validly served on HERAS. It is settled that matters of remedy and procedure such as those relating to the service of process upon the defendant are governed by the lex fori or the law of the forum, 7 i.e., the law of Hong Kong in this case. HERAS insisted that according to his witness Mr. Lousich, who was presented as an expert on Hong Kong laws, there was no valid service of summons on him.

In his counter-affidavit, 8 which served as his direct testimony per agreement of the parties, 9 Lousich declared that the record of the Hong Kong case failed to show that a writ of summons was served upon HERAS in Hong Kong or that any such attempt was made. Neither did the record show that a copy of the judgment of the court was served on HERAS. He stated further that under Hong Kong laws (a) a writ of summons could be served by the solicitor of the claimant or plaintiff; and (b) where the said writ or claim was not contested, the claimant or plaintiff was not required to present proof under oath in order to obtain judgment.On cross-examination by counsel for ASIAVEST, Lousich' testified that the Hong Kong court authorized service of summons on HERAS outside of its jurisdiction, particularly in the Philippines. He admitted also the existence of an affidavit of one Jose R. Fernandez of the Sycip Salazar Hernandez & Gatmaitan law firm stating that he (Fernandez) served summons on HERAS on 13 November 1984 at No. 6, 1st St., Quezon City, by leaving a copy with HERAS's son-in-law Dionisio Lopez. 10 On redirect examination, Lousich declared that such service of summons would be valid under Hong Kong laws provided that it was in accordance with Philippine laws.

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11

We note that there was no objection on the part of ASIAVEST on the qualification of Mr. Lousich as an expert on the Hong Kong law. Under Sections 24 and 25, Rule 132 of the New Rules of Evidence, the record of public documents of a sovereign authority, tribunal, official body, or public officer may be proved by (1) an official publication thereof or (2) a copy attested by the officer having the legal custody thereof, which must be accompanied, if the record is not kept in the Philippines, with a certificate that such officer has the custody. The certificate may be issued by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent, or any officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his office. The attestation must state, in substance, that the copy is a correct copy of the original, or a specific part thereof, as the case may be, and must be under the official seal of the attesting officer.Nevertheless, the testimony of an expert witness may be allowed to prove a foreign law. An authority 12 on private international law thus noted:

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Although it is desirable that foreign law be proved in accordance with the above rule, however, the Supreme Court held in the case of Willamette Iron and Steel Works v.

Muzzal, 13 that Section 41, Rule 123 (Section 25, Rule 132 of the Revised Rules of Court) does not exclude the presentation of other competent evidence to prove the existence of a foreign law. In that case, the Supreme Court considered the testimony under oath of an attorney-at-law of San Francisco, California, who quoted verbatim a section of California Civil Code and who stated that the same was in force at the time the obligations were contracted, as sufficient evidence to establish the existence of said law. Accordingly, in line with this view, the Supreme Court in the Collector of Internal Revenue v. Fisher et al., 14 upheld the Tax Court in considering the pertinent law of California as proved by the respondents' witness. In that case, the counsel for respondent "testified that as an active member of the California Bar since 1951, he is familiar with the revenue and taxation laws of the State of California. When asked by the lower court to state the pertinent California law as regards exemption of intangible personal properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the California Internal and Revenue Code as published in Derring's California Code, a publication of Bancroft-Whitney Co., Inc. And as part of his testimony, a full quotation of the cited section was offered in evidence by respondents." Likewise, in several naturalization cases, it was held by the Court that evidence of the law of a foreign country on reciprocity regarding the acquisition of citizenship, although not meeting the prescribed rule of practice, may be allowed and used as basis for favorable action, if, in the light of all the circumstances, the Court is "satisfied of the

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authenticity of the written proof offered." 15 Thus, in, a number of decisions, mere authentication of the Chinese Naturalization Law by the Chinese Consulate General of Manila was held to be competent proof of that law. 16

There is, however, nothing in the testimony of Mr. Lousich that touched on the specific law of Hong Kong in respect of service of summons either in actions in rem or in personam, and where the defendant is either a resident or nonresident of Hong Kong. In view of the absence of proof of the Hong Kong law on this particular issue, the presumption of identity or similarity or the so-called processual presumption shall come into play. It will thus be presumed that the Hong Kong law on the matter is similar to the Philippine law. 17

As stated in Valmonte vs. Court of Appeals, 18 it will be helpful to determine first whether the action is in personam, in rem, or quasi in rem because the rules on service of summons under Rule 14 of the Rules of Court of the Philippines apply according to the nature of the action.An action in personam is an action against a person on the basis of his personal liability. An action in rem is an action against the thing itself instead of against the person. 19 An action quasi in rem is one wherein an individual is named as defendant and the purpose of the proceeding is to subject his interest therein to the obligation or lien burdening the property. 20

In an action in personam, jurisdiction over the person of the defendant is necessary for the court to validly try and decide the case. Jurisdiction over the person of a resident defendant who does not voluntarily appear in court can be acquired by personal service of summons as provided under Section 7, Rule 14 of the Rules of Court. If he cannot be personally served with summons within a reasonable time, substituted service may be made in accordance with Section 8 of said Rule. If he is temporarily out of the country, any of the following modes of service may be resorted to: (1) substituted service set forth in Section 8; 21 (2) personal service

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outside the country, with leave of court; (3) service by publication, also with leave of court; 22 or (4) any other manner the court may deem sufficient. 23

However, in an action in personam wherein the defendant is a non-resident who does not voluntarily submit himself to the authority of the court, personal service of summons within the state is essential to the acquisition of jurisdiction over her person. 24 This method of service is possible if such defendant is physically present in the country. If he is not found therein, the court cannot acquire jurisdiction over his person and therefore cannot validly try and decide the case against him. 25 An exception was laid down in Gemperle v. Schenker 26 wherein a non-resident was served with summons through his wife, who was a resident of the Philippines and who was his representatives and attorney-in-fact in a prior civil case filed by him; moreover, the second case was a mere offshoot of the first case.On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant is not a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over the res. Nonetheless summons must be served upon the defendant not for the purpose of vesting the court with jurisdiction but merely for satisfying the due process requirements. 27 Thus, where the defendant is a non-resident who is not found in the Philippines and (1) the action affects the personal status of the plaintiff; (2) the action relates to, or the subject matter of which is property in the Philippines in which the defendant has or claims a lien or interest; (3) the action seeks the exclusion of the defendant from any interest in the property located in the Philippines; or (4) the property of the defendant has been attached in the Philippines — service of summons may be effected by (a) personal service out of the country, with leave of court; (b) publication, also with leave of court, or (c) any other manner the court may deem sufficient. 28

In the case at bar, the action filed in Hong Kong against HERAS was in personam, since it was based on his

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personal guarantee of the obligation of the principal debtor. Before we can apply the foregoing rules, we must determine first whether HERAS was a resident of Hong Kong.Fortunata de la Vega, HERAS's personal secretary in Hong Kong since 1972 until 1985, 29 testified that HERAS was the President and part owner of a shipping company in Hong Kong during all those times that she served as his secretary. He had in his employ a staff of twelve. 30 He had "business commitments, undertakings, conferences, and appointments until October 1984 when [he] left Hong Kong for good," 31 HERAS's other witness, Russel Warren Lousich, testified that he had acted as counsel for HERAS "for a number of commercial matters." 32 ASIAVEST then infers that HERAS was a resident of Hong Kong because he maintained a business there.

It must be noted that in his Motion to Dismiss, 33 as well as in hisAnswer 34 to ASIAVEST's complaint for the enforcement of the Hong Kong court judgment, HERAS maintained that the Hong Kong court did not have jurisdiction over him because the fundamental rule is that jurisdiction in personam over non-resident defendants, so as to sustain a money judgment, must be based upon personal service of summons within the state which renders the judgment. 35

For its part, ASIAVEST, in its Opposition to the Motion to Dismiss 36 contended: "The question of Hong Kong court's 'want of jurisdiction' is therefore a triable issue if it is to be pleaded by the defendant to 'repel' the foreign judgment. Facts showing jurisdictional lack (e.g. that the Hong Kong suit was in personam, that defendant was not a resident of Hong Kong when the suit was filed or that he did not voluntarily submit to the Hong Kong court's jurisdiction) should be alleged and proved by the defendant." 37

In his Reply (to the Opposition to Motion to Dismiss), 38 HERAS argued that the lack of jurisdiction over his person was corroborated by ASIAVEST's allegation in the

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complaint that he "has his residence at No. 6, 1st St., New Manila, Quezon City, Philippines." He then concluded that such judicial admission amounted to evidence that he was and is not a resident of Hong Kong.Significantly, in the pre-trial conference, the parties came up with stipulations of facts, among which was that "the residence of defendant, Antonio Heras, is New Manila, Quezon City." 39

We note that the residence of HERAS insofar as the action for the enforcement of the Hong Kong court judgment is concerned, was never in issue. He never challenged the service of summons on him through a security guard in his Quezon City residence and through a lawyer in his office in that city. In his Motion to Dismiss, he did not question the jurisdiction of the Philippine court over his person on the ground of invalid service of summons. What was in issue was his residence as far as the Hong Kong suit was concerned. We therefore conclude that the stipulated fact that HERAS "is a resident of New Manila, Quezon City, Philippines" refers to his residence at the time jurisdiction over his person was being sought by the Hong Kong court. With that stipulation of fact, ASIAVEST cannot now claim that HERAS was a resident of Hong Kong at the time.Accordingly, since HERAS was not a resident of Hong Kong and the action against him was, indisputably, one in personam, summons should have been personally served on him in Hong Kong. The extraterritorial service in the Philippines was therefore invalid and did not confer on the Hong Kong court jurisdiction over his person. It follows that the Hong Kong court judgment cannot be given force and effect here in the Philippines for having been rendered without jurisdiction.Even assuming that HERAS was formerly a resident of Hong Kong, he was no longer so in November 1984 when the extraterritorial service of summons was attempted to be made on him. As declared by his secretary, which statement was not disputed by ASIAVEST, HERAS left Hong Kong in October 1984 "for good." 40 His absence in Hong Kong must have been the reason why summons was not served on him therein; thus, ASIAVEST was constrained to apply for leave to effect service in the

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Philippines, and upon obtaining a favorable action on the matter, it commissioned the Sycip Salazar Hernandez & Gatmaitan law firm to serve the summons here in the Philippines.

In Brown v. Brown, 41 the defendant was previously a resident of the Philippines. Several days after a criminal action for concubinage was filed against him, he abandoned the Philippines. Later, a proceeding quasi in rem was instituted against him. Summons in the latter case was served on the defendant's attorney-in-fact at the latter's address. The Court held that under the facts of the case, it could not be said that the defendant was "still a resident of the Philippines because he ha[d] escaped to his country and [was] therefore an absentee in the Philippines." As such, he should have been "summoned in the same manner as one who does not reside and is not found in the Philippines."Similarly, HERAS, who was also an absentee, should have been served with summons in the same manner as a non-resident not found in Hong Kong. Section 17, Rule 14 of the Rules of Court providing for extraterritorial service will not apply because the suit against him was in personam. Neither can we apply Section 18, which allows extraterritorial service on a resident defendant who is temporarily absent from the country, because even if HERAS be considered as a resident of Hong Kong, the undisputed fact remains that he left Hong Kong not only "temporarily" but "for good."IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING the petition in this case and AFFIRMING the assailed judgment of the Court of Appeals in CA-G.R. CV No. 29513.No costs.or those who would like to improve their grade, submit legibly handwritten digests of the above cases in yellow paper on November 22. The case digests are optional but everybody has to read the cases.