PHILSEC VS.

CA
PHILSEC
INVESTMENT
et
al
vs.CA
et
al
G.R.
No.
103493
June 19, 1997
FACTS: Private respondent Ducat obtained separate loans from
petitioners Ayala International Finance Limited (AYALA) and Philsec
Investment Corp (PHILSEC), secured by shares of stock owned by
Ducat.
In order to facilitate the payment of the loans, private respondent
1488, Inc., through its president, private respondent Daic, assumed
Ducats obligation under an Agreement, whereby 1488, Inc.
executed a Warranty Deed with Vendors Lien by which it sold to
petitioner Athona Holdings, N.V. (ATHONA) a parcel of land in
Texas, U.S.A., while PHILSEC and AYALA extended a loan to
ATHONA as initial payment of the purchase price. The balance was
to be paid by means of a promissory note executed by ATHONA in
favor of 1488, Inc. Subsequently, upon their receipt of the money
from 1488, Inc., PHILSEC and AYALA released Ducat from his
indebtedness and delivered to 1488, Inc. all the shares of stock in
their possession belonging to Ducat.
As ATHONA failed to pay the interest on the balance, the entire
amount covered by the note became due and demandable.
Accordingly, private respondent 1488, Inc. sued petitioners
PHILSEC, AYALA, and ATHONA in the United States for payment of
the balance and for damages for breach of contract and for fraud
allegedly perpetrated by petitioners in misrepresenting the
marketability of the shares of stock delivered to 1488, Inc. under the
Agreement.
While the Civil Case was pending in the United States, petitioners
filed a complaint For Sum of Money with Damages and Writ of
Preliminary Attachment against private respondents in the RTC
Makati. The complaint reiterated the allegation of petitioners in their
respective counterclaims in the Civil Action in the United States
District Court of Southern Texas that private respondents committed
fraud by selling the property at a price 400 percent more than its
true value.
Ducat moved to dismiss the Civil Case in the RTC-Makati on the
grounds of (1) litis pendentia, vis-a-vis the Civil Action in the U.S.,
(2) forum non conveniens, and (3) failure of petitioners PHILSEC
and BPI-IFL to state a cause of action.
The trial court granted Ducats MTD, stating that the evidentiary
requirements of the controversy may be more suitably tried before
the forum of the litis pendentia in the U.S., under the principle in
private international law of forum non conveniens, even as it noted
that Ducat was not a party in the U.S. case.
Petitioners appealed to the CA, arguing that the trial court erred in
applying the principle of litis pendentia and forum non conveniens.
The CA affirmed the dismissal of Civil Case against Ducat, 1488,
Inc., and Daic on the ground of litis pendentia.
ISSUE: is the Civil Case in the RTC-Makati barred by the judgment
of the U.S. court?
HELD: CA reversed. Case remanded to RTC-Makati
NO
While this Court has given the effect of res judicata to foreign
judgments in several cases, it was after the parties opposed to the
judgment had been given ample opportunity to repel them on
grounds allowed under the law. This is because in this jurisdiction,
with respect to actions in personam, as distinguished from actions in
rem, a foreign judgment merely constitutes prima facie evidence of
the justness of the claim of a party and, as such, is subject to proof
to the contrary. Rule 39, 50 provides:
Sec. 50. Effect of foreign judgments. The effect of a judgment of
a tribunal of a foreign country, having jurisdiction to pronounce the
judgment is as follows:
(a) In case of a judgment upon a specific thing, the judgment is
conclusive
upon
the
title
to
the
thing;
(b) In case of a judgment against a person, the judgment is
presumptive evidence of a right as between the parties and their
successors in interest by a subsequent title; but the judgment may
be repelled by evidence of a want of jurisdiction, want of notice to
the party, collusion, fraud, or clear mistake of law or fact.
In the case at bar, it cannot be said that petitioners were given the
opportunity to challenge the judgment of the U.S. court as basis for

declaring it res judicata or conclusive of the rights of private

respondents. The proceedings in the trial court were summary.
Neither the trial court nor the appellate court was even furnished
copies of the pleadings in the U.S. court or apprised of the evidence
presented thereat, to assure a proper determination of whether the
issues then being litigated in the U.S. court were exactly the issues
raised in this case such that the judgment that might be rendered
would constitute res judicata.
Second. Nor is the trial courts refusal to take cognizance of the
case justifiable under the principle of forum non conveniens:
First, a MTD is limited to the grounds under Rule 16, sec.1, which
does not include forum non conveniens. The propriety of dismissing
a case based on this principle requires a factual determination,
hence, it is more properly considered a matter of defense.
Second, while it is within the discretion of the trial court to abstain
from assuming jurisdiction on this ground, it should do so only after
vital facts are established, to determine whether special
circumstances require the courts desistance.
Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437
(1952)
Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437
(1952) was a United States Supreme Court case which held that an
Ohio state court could exercise general personal jurisdiction over a
foreign corporation on the basis of that company's "continuous and
systematic" contacts with the state of Ohio.[1] Benguet Consolidated
Mining Co. was a Philippine mining corporation that temporarily
stopped its mining operations and relocated its president to Ohio
during the World War II Japanese occupation of the Philippines. The
Court held that the president's use of his office in Ohio to carry on
continuous business activities during this period allowed Ohio to
properly assert general jurisdiction over his company.
The Supreme Court case consolidated the two original suits into
one. One suit had been brought by the petitioner Ms. Perkins for
approximately $68,400 in dividends that she alleged were due her
as a stockholder. The second suit was for $2,500,000 damages
claimed as a result of the company's failure to issue to her
certificates for 120,000 shares of its stock.
The trial court had sustained a motion to quash the summons in
each case because the defendant was a foreign corporation and, as
such, the Court did not have personal jurisdiction over it. Neither its
corporate headquarters nor its principal place of business were in
Ohio, and it had not applied for the required license to transact
business in Ohio nor appointed an agent for service of process in
state. Additionally, the claims Ms. Perkins sued upon did not arise
from anything the defendant did in the state of Ohio. The Ohio State
Supreme Court affirmed the decision and the plaintiff appeal to the
U.S. Supreme Court.
The Supreme Court reversed on the basis of the defendant
president's "continuous and systematic supervision of the
necessarily limited wartime activities of the company" [1] in Ohio. It
was thus not a violation of the Fourteenth Amendment due process
clause for Ohio to assert general jurisdiction over the company on
the plaintiff's claim, even though the claim arose from activities
conducted outside the forum state and entirely distinct from those
activities conducted inside the forum state.
The judgment of the Supreme Court of Ohio was vacated and the
cause of action remanded for further proceedings consistent with
the opinion.

This is a notable United States civil procedure case in the area of

general jurisdiction. It represents one of the rare instances in which
a state's exercise of general (as opposed to specific) personal
jurisdiction over a non-resident will be deemed to comport with the

requirements of due process, due to the non-resident's extensive

activities within the state.