[ G.R. No.

104776, December 05, 1994 ]

BIENVENIDO M. CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, AND THE REST
OF 1,767 NAMED-COMPLAINANTS, THRU AND BY THEIR ATTORNEY-IN-FACT, ATTY.
GERARDO A. DEL MUNDO, PETITIONERS, VS. PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION'S ADMINISTRATOR, NATIONAL LABOR RELATIONS COMMISSION,
BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL BUILDERS
CORPORATION, RESPONDENTS.
[G.R. NOS. 104911-14. DECEMBER 5, 1994]
BIENVENIDO M. CADALIN, ET AL., PETITIONERS, VS. HON. NATIONAL LABOR RELATIONS
COMMISSION, BROWN & ROOT INTERNATIONAL, INC. AND/OR ASIA INTERNATIONAL
BUILDERS CORPORATION, RESPONDENTS.
[G.R. NO. 105029-32. DECEMBER 5, 1994]
ASIA INTERNATIONAL BUILDER CORPORATION AND BROWN & ROOT INTERNATIONAL,
INC., PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION, BIENVENIDO M.
CADALIN, ROLANDO M. AMUL, DONATO B. EVANGELISTA, ROMEO PATAG, RIZALINO
REYES, IGNACIO DE VERA, SOLOMON B. REYES, JOSE M. ABAN, EMIGDIO N. ABARQUEZ,
ANTONIO ACUPAN, ROMEO ACUPAN, BENJAMIN ALEJANDRE, WILFREDO D. ALIGADO,
MARTIN AMISTAD, JR., ROLANDO B. AMUL, AMORSOLO ANADING, ANTONIO T. ANGLO,
VICENTE ARLITA, HERBERT AYO, SILVERIO BALATAZO, ALFREDO BALOBO, FALCONERO
BANAAG, RAMON BARBOSA, FELIX BARCENA, FERNANDO BAS, MARIO BATACLAN,
ROBERTO S. BATICA, ENRICO BELEN, ARISTEO BICOL, LARRY C. BICOL, PETRONILLO
BISCOCHO, FELIX M. BOBIER, DIONISIO BOBONGO, BAYANI S. BRACAMANTE, PABLITO
BUSTILLO, GUILLERMO CABEZAS, BIENVENIDO CADALIN, RODOLFO CAGATAN, AMANTE
CAILAO, IRENEO CANDOR, JOSE CASTILLO, MANUEL CASTILLO, REMAR CASTROJERES,
REYNALDO CAYAS, ROMEO CECILIO, TEODULO CREUS, BAYANI DAYRIT, RICARDO
DAYRIT, ERNESTO T. DELA CRUZ, FRANCISCO DE GUZMAN, ONOFRE DE RAMA, IGNACIO
DE VERA, MODESTO DIZON, REYNALDO DIZON, ANTONIO S. DOMINGUEZ, GILBERT
EBRADA, RICARDO EBRADA, ANTONIO EJERCITO, JR., EDUARTE ERIDAO, ELADIO
ESCOTOTO, JOHN ESGUERRA, EDUARDO ESIRITU, ERNESTO ESPIRITU, RODOLFO
ESPIRITU, NESTOR M. ESTEVA, BENJAMIN ESTRADA, VALERIO EVANGELISTA, OLIGARIO
FRANCISCO, JESUS GABAWAN, ROLANDO GARCIA, ANGEL GUDA, PACITO HERNANDEZ,
ANTONIO HILARIO, HENRY L. JACOB, HONESTO JARDINIANO, ANTONIO JOCSON,
GERARDO LACSAMANA, EFREN U. LIRIO, LORETO LONTOC, ISRAEL LORENZO,
ALENJANDRO LORINO, JOSE MABALAY, HERMIE MARANAN, LEOVIGILDO MARCIAL,
NOEL MARTINEZ, DANTE MATREO, LUCIANO MELENDEZ, RENATO MELO, FRANCIS
MEDIODIA, JOSE C. MILANES, RAYMUNDO C. MILAY, CRESENCIANO MIRANDA,
ILDEFONSO C. MOLINA, ARMANDO B. MONDEJAR, RESURRECCION D. NAZARENO, JUAN
OLINDO, FRANCISCO R. OLIVARES, PEDRO ORBISTA, JR., RICARDO ORDONEZ, ERNIE
PANCHO, JOSE PANCHO, GORGONIO P. PARALA, MODESTO PINPIN, JUANITO PAREA,
ROMEO I. PATAG, FRANCISCO PINPIN, LEONARDO POBLETE, JAIME POLLOS, DOMINGO
PONDALIS, EUGENIO RAMIREZ, LUCIEN M. RESPALL, GAUDENCIO RETANAN, JR., TOMAS
B. RETENER, ALVIN C. REYES, RIZALINO REYES, SOLOMON B. REYES, VIRGILIO G.
RICAZA, RODELIO RIETA, JR., BENITO RIVERA, JR., BERNARDO J. ROBILLOS, PABLO A.
ROBLES, JOSE ROBLEZA, QUIRINO RONQUILLO, AVELINO M. ROQUE, MENANDRO L.
SABINO, PEDRO SALGATAR, EDGARDO SALONGA, NUMERIANO SAN MATEO, FELIZARDO

DE LOS SANTOS, JR., GABRIEL SANTOS, JUANITO SANTOS, PAQUITO SOLANTE, CONRADO
A. SOLIS, JR., RODOLFO SULTAN, ISAIAS TALACTAC, WILLIAM TARUC, MENANDRO
TEMPROSA, BIENVENIDO S. TOLENTINO, BENEDICTO TORRES, MAXIMIANO TORRES,
FRANCISCO G. TRIAS, SERGIO A. URSOLINO, ROGELIO VALDEZ, LEGORIO E. VERGARA,
DELFIN VICTORIA, GILBERT VICTORIA, HERNANE VICTORIANO, FRANCISCO
VILLAFLORES, DOMINGO VILLAHERMOSA, ROLANDO VILLALOBOS, ANTONIO VILLAUZ,
DANILO VILLANUEVA, ROGELIO VILLANUEVA, ANGEL VILLARBA, JUANITO VILLARINO,
FRANCISCO ZARA, ROGELIO AALAGOS, NICANOR B. ABAD, ANDRES ABANES, REYNALDO
ABANES, EDUARDO ABANTE, JOSE ABARRO, JOSEFINO ABARRO, CELSO S. ABELANIO,
HERMINIO ABELLA, MIGUEL ABESTANO, RODRIGO G. ABUBO, JOSE B. ABUSTAN, DANTE
ACERES, REYNALDO S. ACOJIDO, LEOWILIN ACTA, EUGENIO C. ACUEZA, EDUARDO
ACUPAN, REYNALDO ACUPAN, SOLANO ACUPAN, MANUEL P. ADANA, FLORENTINO R.
AGNE, QUITERIO R. AGUDO, MANUEL P. AGUINALDO, DANTE AGUIRRE, HERMINIO
AGUIRRE, GONZALO ALBERTO, JR., CONRADO ALCANTARA, LAMBERTO Q. ALCANTARA,
MARIANITO J. ALCANTARA, BENCIO ALDOVER, EULALIO V. ALEJANDRO, BENJAMIN
ALEJANDRO, EDUARDO L. ALEJANDRO, MAXIMINO ALEJANDRO, ALBERTO ALMENAR,
ARNALDO ALONZO, AMADO ALORIA, CAMILO ALVAREZ, MANUEL C. ALVAREZ, BENJAMIN
R. AMBROCIO, CARLOS AMORES, BERNARD P. ANCHETA, TIMOTEO O. ANCHETA, JEOFREY
ANI, ELINO P. ANTILLON, ARMANDRO B. ANTIPONO, LARRY T. ANTONIO, ANTONIO
APILADO, ARTURO P. APILADO, FRANCISCO APOLINARIO, BARTOLOME M. AQUINO,
ISIDRO AQUINO, PASTOR AQUINO, ROSENDO M. AQUINO, ROBERTO ARANGORIN,
BENJAMIN O. ARATEA, ARTURO V. ARAULLO, PRUDENCIO ARAULLO, ALEXANDER
ARCAIRA, FRANCISCO ARCIAGA, JOSE AREVALO, JUANTO AREVALO, RAMON AREVALO,
RODOLFO AREVALO, EULALIO ARGUELLES, WILFREDO P. ARICA, JOSE M. ADESILLO,
ANTONIO ASUNCION, ARTEMIO M. ASUNCION EDGARDO ASUNCION, REXY M. ASUNCION,
VICENTE AURELIO, ANGEL AUSTRIA, RICARDO P. AVERILLA, JR., VIRGILIO AVILA,
BARTOLOME AXALAN, ALFREDO BABILONIA, FELIMON BACAL, JOSE L. BACANI, ROMULO
R. BALBIERAN, VICENTE BALBIERAN, RODOLFO BALITBIT, TEODORO Y. BALOBO, DANILO
O. BARBA, BERNARDO BARRO, JUAN A. BASILAN, CEFERINO BATITIS, VIVENCIO C. BAUAN,
GAUDENCIO S. BAUTISTA, LEONARDO BAUTISTA, JOSE D. BAUTISTA, ROSTICO BAUTISTA,
RUPERTO B. BAUTISTA, TEODORO S. BAUTISTA, VIRGILIO BAUTISTA, JESUS R. BAYA,
WINIEFREDO BAYACAL, WINIEFREDO BEBIT, BEN G. BELIR, ERIC B. BELTRAN, EMILIANO
BENALES, JR., RAUL BENITEZ, PERFECTO BENSAN, IRENEO BERGONIO, ISABELO
BERMUDEZ, ROLANDO I. BERMUDEZ, DANILO BERON, BENJAMIN BERSAMIN, ANGELITO
BICOL, ANSELMO BICOL, CELESTINO BICOL, JR., FRANCISCO BICOL, ROGELIO BICOL,
ROMULO L. BICOL, ROGELIO BILLIONES, TEOFILO N. BITO, FERNANDO BLANCO,
AUGUSTO BONDOC, DOMINGO BONDOC, PEPE S. BOOC, JAMES R. BORJA, WILFREDO
BRACEROS, ANGELES C. BRECINO, EURECLYDON G. BRIONES, AMADO BRUGE, PABLITO
BUDILLO, ARCHIMEDES BUENAVENTURA, BASILIO BUENAVENTURA, GUILLERMO
BUENCONSEJO, ALEXANDER BUSTAMANTE, VIRGILIO BUTIONG, JR., HONESTO P.
CABALLA, DELFIN CABALLERO, BENEDICTO CABANIGAN, MOISES CABATAY, HERMANELI
CABRERA, PEDRO CAGATAN, JOVEN C. CAGAYAT, ROGELIO L. CALAGOS, REYNALDO V.
CALDEJON, OSCAR C. CALDERON, NESTOR D. CALLEJA, RENATO R. CALMA, NELSON T.
CAMACHO, SANTOS T. CAMACHO, ROBERTO CAMANA, FLORANTE C. CAMANAG,
EDGARDO M. CANDA, SEVERINO CANTOS, EPIFANIO A. CAPONPON, ELIAS D. CARILLO, JR.,
ARMANDO CARREON, MENANDRO M. CASTANEDA, BENIGNO A. CASTILLO, CORNELIO L.
CASTILLO, JOSEPH B. CASTILLO, ANSELMO CASTILLO, JOAQUIN CASTILLO, PABLO L.
CASTILLO, ROMEO P. CASTILLO, SESINANDO CATIBOG, DANILO CASTRO, PRUDENCIO A.
CASTRO, RAMO CASTRO, JR., ROMEO A. DE CASTRO, JAIME B. CATLI, DURANA D.
CEFERINO, RODOLFO B. CELIS, HERMINIGILDO CEREZO, VICTORIANO CELESTINO,
BENJAMIN CHAN, ANTONIO C. CHUA, VIVENCIO B. CIABAL, RODRIGO CLARETE, AUGUSTO
COLOMA, TURIANO CONCEPCION, TERESITO CONSTANTINO, ARMANDO CORALES,

RENATO C. CORCUERA, APOLINAR CORONADO, ABELARDO CORONEL, FELIX CORONEL,

JR., LEONARDO CORPUZ, JESUS M. CORRALES, CESAR CORTEMPRATO, FRANCISCO O.
CORVERA, FRANCISCO COSTALES, SR., CELEDONIO CREDITO, ALBERTO A. CREUS,
ANACLETO V. CRUZ, DOMINGO DELA CRUZ, EMILIANO DELA CRUZ, JR., PANCHITO CRUZ,
REYNALDO B. DELA CRUZ, ROBERTO P. CRUZ, TEODORO S. CRUZ, ZOSIMO DELA CRUZ,
DIONISIO A. CUARESMA, FELIMON CUIZON, FERMIN DAGONDON, RICHARD DAGUINSIN,
CRISANTO A. DATAY, NICASIO DANTINGUINOO, JOSE DATOON, EDUARDO DAVID, ENRICO
T. DAVID, FAVIO DAVID, VICTORIANO S. DAVID, EDGARDO N. DAYACAP, JOSELITO T.
DELOSO, CELERINO DE GUZMAN, ROMULO DE GUZMAN, LIBERATO DE GUZMAN, JOSE DE
LEON, JOSELITO L. DE LUMBAN, NAPOLEON S. DE LUNA, RICARDO DE RAMA, GENEROSO
DEL ROSARIO, ALBERTO DELA CRUZ, JOSE DELA CRUZ, LEONARDO DELOS REYES,
ERNESTO F. DIATA, EDUARDO A. DIAZ, FELIX DIAZ, MELCHOR DIAZ, NICANOR S. DIAZ,
GERARDO C. DIGA, CLEMENTE DIMATULAC, ROLANDO DIONISIO, PHILIPP G. DISMAYA,
BENJAMIN DOCTOLERO, ALBERTO STO. DOMINGO, BENJAMIN E. DOZA, BENJAMIN DUPA,
DANILO C. DURAN, GREGORIO D. DURAN, RENATO A. EDUARTE, GODOFREDO E. EISMA,
ARDON B. ELLO, UBED B. ELLO, JOSEFINO ENANO, REYNALDO ENCARNACION, EDGARDO
ENGUANCIO, ELIAS EQUIPANO, FELIZARDO ESCARMOSA, MIGUEL ESCARMOSA,
ARMANDO ESCOBAR, ROMEO T. ESCUYOS, ANGELITO ESPIRITU, EDUARDO S. ESPIRITU,
REYNALDO ESPIRITU, ROLANDO ESPIRITU, JULIAN ESPREGANTE, IGMIDIO ESTANISLAO,
ERNESTO M. ESTEBAN, MELANIO R. ESTRO, ERNESTO M. ESTEVA, CONRADO ESTUAR,
CLYDE ESTUYE, ELISEO FAJARDO, PORFIRIO FALQUEZA, WILFREDO P. FAUSTINO, EMILIO
E. FERNANDEZ, ARTEMIO FERRER, MISAEL M. FIGURACION, ARMANDO F. FLORES,
BENJAMIN FLORES, EDGARDO C. FLORES, BUENAVENTURA FRANCISCO, MANUEL S.
FRANCISCO, ROLANDO FRANCISCO, VALERIANO FRANCISCO, RODOLFO GABAWAN,
ESMERALDO GAHUTAN, CESAR C. GALANG, SANTIAGO N. GALOSO, GABRIEL GAMBOA,
BERNARDO GANDAMON, JUAN GANZON, ANDRES GARCIA, JR., ARMANDO M. GARCIA,
EUGENIO GARCIA, MARCELO L. GARCIA, PATRICIO L. GARCIA, JR., PONCIANO G. GARCIA,
PONCIANO G. GARCIA, JR., RAFAEL P. GARCIA, ROBERTO S. GARCIA, OSIAS G. GAROFIL,
RAYMUNDO C. GARON, ROLANDO G. GATELA, AVELINO GAYETA, RAYMUNDO GERON,
PLACIDO GONZALES, RUPERTO H. GONZALES, ROGELIO D. GUANIO, MARTIN V.
GUERRERO, JR., ALEXIS GUNO, RICARDO L. GUNO, FRANCISCO GUPIT, DENNIS J.
GUTIERREZ, IGNACIO B. GUTIERREZ, ANGELITO DE GUZMAN, JR., CESAR H. HABANA,
RAUL G. HERNANDEZ, REYNALDO HERNANDEZ, JOVENIANO D. HILADO, JUSTO HILAPO,
ROSTITO HINAHON, FELICISIMO HINGADA, EDUARDO HIPOLITO, RAUL L. IGNACIO,
MANUEL L. ILAGAN, RENATO L. ILAGAN, CONRADO A. INSIONG, GRACIANO G. ISLA,
ARNEL L. JACOB, OSCAR J. JAPITENGA, CIRILOHICBAN, MAXIMIANO HONRADES,
GENEROSO IGNACIO, FELIPE ILAGAN, EXPEDITO N. JACOB, MARIO JASMIN, BIENVENIDO
JAVIER, ROMEO M. JAVIER, PRIMO DE JESUS, REYNALDO DE JESUS, CARLOS A. JIMENEZ,
DANILO E. JIMENEZ, PEDRO C. JOAQUIN, FELIPE W. JOCSON, FELINO M. JOCSON, PEDRO
N. JOCSON, VALENTINO S. JOCSON, PEDRO B. JOLOYA, ESTEBAN P. JOSE, JR., RAUL JOSE,
RICARDO SAN JOSE, GERTRUDO KABIGTING, EDUARDO S. KOLIMLIM, SR., LAURO J.
LABAY, EMMANUEL C. LABELLA, EDGARDO B. LACERONA, JOSE B. LACSON, MARIO J.
LADINES, RUFINO LAGAC, RODRIGO LAGANAPAN, EFREN M. LAMADRID, GAUDENCIO
LATANAN, VIRGILIO LATAYAN, EMILIANO LATOJA, WENCESLAO LAUREL, ALFREDO
LAXAMANA, DANIEL R. LAZARO, ANTONIO C. LEANO, ARTURO S. LEGASPI, BENITO DE
LEMOS, JR., PEDRO G. DE LEON MANOLITO C. LILOC, GERARDO LIMUACO, ERNESTO S.
LISING, RENATO LISING, WILFREDO S. LISING, CRISPULO LONTOC, PEDRO M. LOPERA,
ROGELIO LOPERA, CARLITO M. LOPEZ, CLODY LOPEZ, GARLITO LOPEZ, GEORGE F.
LOPEZ, VIRGILIO M. LOPEZ, BERNARDITO G. LOREJA, DOMINGO B. LORICO, DOMINGO
LOYOLA, DANTE LUAGE, ANTONIO M. LUALHATI, EMMANUEL LUALHATI, JR., LEONIDEZ
C. LUALHATI, SEBASTIAN LUALHATI, FRANCISCO LUBAT, ARMANDO LUCERO, JOSELITO
L. DE LUMBAN, THOMAS VICENTE O. LUNA, NOLI MACALADLAD, ALFREDO MACALINO,

RICARDO MACALINO, ARTURO V. MACARAIG, ERNESTO V. MACARAIG, RODOLFO V.

MACARAIG, BENJAMIN MACATANGAY, HERMOGENES MACATANGAY, RODEL
MACATANGAY, ROMULO MACATANGAY, OSIAS Q. MADLANGBAYAN, NICOLAS P. MADRID,
EDELBERTO G. MAGAT, EFREN C. MAGBANUA, BENJAMIN MAGBUHAT, ALFREDO C.
MAGCALENG, ANTONIO MAGNAYE, ALFONSO MAGPANTAY, RICARDO C. MAGPANTAY,
SIMEON M. MAGPANTAY, ARMANDO M. MAGSINO, MACARIO S. MAGSINO, ANTONIO
MAGTIBAY, VICTOR V. MAGTIBAY, GERONIMO MAHILUM, MANUEL MALONZO, RICARDO
MAMADIS, RODOLFO MANA, BERNARDO A. MANALILI, MANUEL MANALILI, ANGELO
MANALO, AGUILES L. MANALO, LEOPOLDO MANGAHAS, BAYANI MANIGBAS, ROLANDO C.
MANIMTIM, DANIEL MANONSON, ERNESTO F. MANUEL, EDUARDO MANZANO, RICARDO N.
MAPA, RAMON MAPILE, ROBERTO C. MARANA, NEMESIO MARASIGAN, WENCESLAO
MARASIGAN, LEONARDO MARCELO, HENRY F. MARIANO, JOEL MARIDABLE, SANTOS E.
MARINO, NARCISO A. MARQUEZ, RICARDO MARTINEZ, DIEGO MASICAMPO, AURELIO
MATABERDE, RENATO MATILLA, VICTORIANO MATILLA, VIRGILIO MEDEL, LOLITO M.
MELECIO, BENIGNO MELENDEZ, RENER J. MEMIJE, REYNALDO F. MEMIJE, RODEL
MEMIJE, AVELINO MENDOZA, JR., CLARO MENDOZA, TIMOTEO MENDOZA, GREGORIO
MERCADO, ERNANI DELA MERCED, RICARDO MERCENA, NEMESIO METRELLO; RODEL
MEMIJE, GASPAR MINIMO, BENJAMIN MIRANDA, FELIXBERTO D. MISA, CLAUDIO A.
MODESTO, JR., OSCAR MONDEDO, GENEROSO MONTON, RENATO MORADA, RICARDO
MORADA, RODOLFO MORADA, ROLANDO M. MORALES, FEDERICO M. MORENO,
VICTORINO A. MORTEL, JR., ESPIRITU A. MUNOZ, IGNACIO MUNOZ, ILDEFONSO MUNOZ,
ROGELIO MUNOZ, ERNESTO NAPALAN, MARCELO A. NARCIZO, REYNALDO NATALIA,
FERNANDO C. NAVARETTE, PACIFICO D. NAVARRO, FLORANTE NAZARENO, RIZAL B.
NAZARIO, JOSUE NEGRITE, ALFREDO NEPUMUCENO, HERBERT G. NG, FLORENCIO
NICOLAS, ERNESTO C. NINON, AVELINO NUQUI, NEMESIO D. OBA, DANILO OCAMPO,
EDGARDO OCAMPO, RODRIGO E. OCAMPO, ANTONIO B. OCCIANO, REYNALDO P. OCSON,
BENJAMIN ODESA, ANGEL OLASO, FRANCISCO OLIGARIO, ZOSIMO OLIMBO, BENJAMIN V.
ORALLO, ROMEO S. ORIGINES, DANILO R. ORTANEZ, WILFREDO OSIAS, VIRGILIO PA-A,
DAVID PAALAN, JESUS N. PACHECO, ALFONSO L. PADILLA, DANILO PAGSANJAN,
NUMERIANO PAGSISIHAN, RICARDO T. PAGUIO, EMILIO PAKINGAN, LEANDRO
PALABRICA, QUINCIANO PALO, JOSE PAMATIAN, GONZALO PAN, PORFIRIO PAN,
BIENVENIDO PANGAN, ERNESTO PANGAN, FRANCISCO V. PASIA, EDILBERTO PASIMIO, JR.,
JOSE V. PASION, ANGELITO M. PENA, DIONISIO PENDRAS, HERMINIO PERALTA, REYNALDO
M. PERALTA, ANTONIO PEREZ, ANTOLIANO E. PEREZ, JUAN PEREZ, LEON PEREZ, ROMEO
E. PEREZ, ROMULO PEREZ, WILLIAM PEREZ, FERNANDO G. PERINO, FLORENTINO DEL
PILAR, DELMAR F. PINEDA, SALVADOR PINEDA, ELIZALDE PINPIN, WILFREDO PINPIN,
ARTURO POBLETE, DOMINADOR R. PRIELA, BUENAVENTURA PRUDENTE, CARMELITO
PRUDENTE, DANTE PUEYO, REYNALDO Q. PUEYO, RODOLFO O. PULIDO, ALEJANDRO
PUNIO, FEDERICO QUIMAN, ALFREDO L. QUINTO, ROMEO QUINTOS, EDUARDO W.
RACABO, RICARDO C. DE RAMA, RICARDOL. DE RAMA, ROLANDO DE RAMA, FERNANDO A.
RAMIREZ, LITO S. RAMIREZ, RICARDO G. RAMIREZ, RODOLFO V. RAMIREZ, ALBERTO
RAMOS, ANSELMO C. RAMOS, TOBIAS RAMOS, WILLARFREDO RAYMUNDO, REYNADO
RAQUEDAN, MANUEL F. RAVELAS, WILFREDO D. RAYMUNDO, ERNESTO E. RECOLASO,
ALBERTO REDAZA, ARTHUR REJUSO, TORIBIO M. RELLAMA, JAIME RELLOSA, EUGENIO
A. REMOQUILLO, GERARDO RENTOZA, REDENTOR C. REY, ALFREDO S. REYES, AMABLE S.
REYES, BENEDICTO R. REYES, GREGORIO B. REYES, JOSE A. REYES, JOSE C. REYES,
ROMULO M. REYES, SERGIO REYES, ERNESTO F. RICO, FERNANDO M. RICO, EMMANUEL
RIETA, RICARDO RIETA, LEO B. ROBLES, RUBEN ROBLES, RODOLFO ROBLEZA, RODRIGO
ROBLEZA, EDUARDO ROCABO, ANTONIO R. RODRIGUEZ, BERNARDO RODRIGUEZ, ELIGIO
RODRIGUEZ, ALMONTE ROMEO, ELIAS RONQUILLO, ELISE RONQUILLO, LUIS VAL B.
RONQUILLO, REYNOSO P. RONQUILLO, RODOLFO RONQUILLO, ANGEL ROSALES, RAMON
ROSALES, ALBERTO DEL ROSARIO, GENEROSO DEL ROSARIO, TEODORICO DEL ROSARIO,

VIRGILIO L. ROSARIO, CARLITO SALVADOR, JOSE SAMPARADA, ERNESTO SAN PEDRO,

ADRIANO V. SANCHA, GERONIMO M. SANCHA, ARTEMIO B. SANCHEZ, NICASIO SANCHEZ,
APOLONIO P. SANTIAGO, JOSELITO S. SANTIAGO, SERGIO SANTIAGO, EDILBERTO C.
SANTOS, EFREN S. SANTOS, RENATO D. SANTOS, MIGUEL SAPUYOT, ALEX S. SERQUINA,
DOMINADOR P. SERRA, ROMEO SIDRO, AMADO M. SILANG, FAUSTINO D. SILANG,
RODOLFO B. DE SILOS, ANICETO G. SILVA, EDGARDO M. SILVA, ROLANDO C. SILVERTO,
ARTHUR B. SIMBAHON, DOMINGO SOLANO, JOSELITO C. SOLANTE, CARLITO SOLIS,
CONRADO SOLIS, III, EDGARDO SOLIS, ERNESTO SOLIS, ISAGANI M. SOLIS, EDUARDO L.
SOTTO, ERNESTO G. STA. MARIA, VICENTE G. STELLA, FELIMON SUPANG, PETER
TANGUINOO, MAXIMINO TALIBSAO, FELICISMO P. TALUSIK, FERMIN TARUC, JR., LEVY S.
TEMPLO, RODOLFO S. TIAMSON, LEONILO TIPOSO, ARNEL TOLENTINO, MARIO M.
TOLENTINO, FELIPE TORRALBA, JOVITO V. TORRES, LEONARDO DE TORRES, GAVINO U.
TUAZON, AUGUSTO B. TUNGUIA, FRANCISCO UMALI, SIMPLICIO UNIDA, WILFREDO V.
UNTALAN, ANTONIO VALDERAMA, RAMON VALDERAMA, NILO VALENCIANO, EDGARDO C.
VASQUEZ, ELPIDIO VELASQUEZ, NESTOR DE VERA, WILFREDO D. VERA, BIENVENIDO
VERGARA, ALFREDO VERGARA, RAMON R. VERZOSA, FELICITO P. VICMUNDO, ALFREDO
VICTORIANO, TEOFILO P. VIDALLO, SABINO N. VIERNEZ, JESUS J. VILLA, JOVEN
VILLABLANCO, EDGARDO G. VILLAFLORES, CEFERINO VILLAGERA, ALEX
VILLAHERMOZA, DANILO A. VILLANUEVA, ELITO VILLANUEVA, LEONARDO M.
VILLANUEVA, MANUEL R. VILLANUEVA, NEPTHALI VILLAR, JOSE V. VILLAREAL,
FELICISIMO VILLARINO, RAFAEL VILLAROMAN, CARLOS VILLENA, FERDINAND VIVO,
ROBERTO YABUT, VICENTE YNGENTE, AND ORO C. ZUNIGA, RESPONDENTS.
DECISION
QUIASON, J.:
The petition in G.R. No. 104776, entitled "Bienvenido M. Cadalin, et al., v. Philippine Overseas Employment
Administration's Administrator, et al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to modify the Resolution dated September 2, 1991 of the National Labor Relations Commission (NLRC) in
POEA Cases Nos. L-84-06-555, L-85-10-777, L-85-10-779 and L-86-05-460;
(2) to render a new decision: (i) declaring private respondents as in default; (ii) declaring the said labor cases as a
class suit; (iii) ordering Asia International Builders Corporation (AIBC) and Brown & Root International Inc.
(BRII) to pay the claims of the 1,767 claimants in said labor cases; (iv) declaring Atty. Florante M. de Castro
guilty of forum-shopping; and (v) dismissing POEA Case No. L-86-05-460; and
(3) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its
Resolution dated September 2, 1991 (Rollo, pp. 8-288).
The petition in G.R. Nos. 104911-14, entitled "Bienvenido M. Cadalin, et al., v. Hon. National Labor Relations
Commission, et al.," was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L85-10-799 and L-86-05-460 insofar as it: (i) applied the three-year prescriptive period under the Labor Code of
the Philippines instead of the ten-year prescriptive period under the Civil Code of the Philippines; and (ii) denied
the "three-hour daily average" formula in the computation of petitioners' overtime pay; and
(2) to reverse the Resolution dated March 24, 1992 of NLRC, denying the motion for reconsideration of its
Resolution dated September 2, 1991 (Rollo, pp. 8-25; 26-220).

The petition in G.R. Nos.105029-32, entitled "Asia International Builders Corporation, et al., v. National Labor Relations
Commission, et al." was filed under Rule 65 of the Revised Rules of Court:
(1) to reverse the Resolution dated September 2, 1991 of NLRC in POEA Cases Nos. L-84-06-555, L-85-10-777, L85-10-779 and L-86-05-460, insofar as it granted the claims of 149 claimants; and
(2) to reverse the Resolution dated March 21, 1992 of NLRC insofar as it denied the motions for reconsideration of
AIBC and BRII (Rollo, pp. 2-59; 61-230).
The Resolution dated September 2, 1991 of NLRC, which modified the decision of the POEA in the four labor cases: (1)
awarded monetary benefits only to 149 claimants and (2) directed Labor Arbiter Fatima J. Franco to conduct hearings and
to receive evidence on the claims dismissed by the POEA for lack of substantial evidence or proof of employment.
Consolidation of Cases
G.R. Nos. 104776 and 105029-32 were originally raffled to the Third Division while G.R. Nos. 104911-14 were raffled to
the Second Division. In the Resolution dated July 26, 1993, the Second Division referred G.R. Nos. 104911-14 to the
Third Division (G.R. No. 104911-14, Rollo, p. 895).
In the Resolution dated September 29, 1993, the Third Division granted the motion filed in G.R. Nos. 104911-14 for the
consolidation of said cases with G.R. Nos. 104776 and 105029-32, which were assigned to the First Division (G.R. Nos.
104911-14, Rollo, pp. 986, 1,107; G.R. Nos. 105029-30, Rollo, pp. 369-377, 426-432). In the Resolution dated October
27, 1993, the First Division granted the motion to consolidate G.R. Nos. 104911-14 with G.R. No. 104776 (G.R. Nos.
104911-14, Rollo, p. 1109; G.R. No. 105029-32, Rollo, p. 1562).
I
On June 6, 1984, Bienvenido M. Cadalin, Rolando M. Amul and Donato B. Evangelista, in their own behalf and on behalf
of 728 other overseas contract workers (OCWs) instituted a class suit by filing an "Amended Complaint" with the
Philippine Overseas Employment Administration (POEA) for money claims arising from their recruitment by AIBC and
employment by BRII (POEA Case No. L-84-06-555). The claimants were represented by Atty. Gerardo del Mundo.
BRII is a foreign corporation with headquarters in Houston, Texas, and is engaged in construction; while AIBC is a
domestic corporation licensed as a service contractor to recruit, mobilize and deploy Filipino workers for overseas
employment on behalf of its foreign principals.
The amended complaint principally sought the payment of the unexpired portion of the employment contracts, which was
terminated prematurely, and secondarily, the payment of the interest of the earnings of the Travel and Reserved Fund;
interest on all the unpaid benefits; area wage and salary differential pay; fringe benefits; refund of SSS and premium not
remitted to the SSS; refund of withholding tax not remitted to the BIR; penalties for committing prohibited practices; as
well as the suspension of the license of AIBC and the accreditation of BRII (G.R. No. 104776, Rollo, pp. 13-14).
At the hearing on June 25, 1984, AIBC was furnished a copy of the complaint and was given, together with BRII, up to
July 5, 1984 to file its answer.
On July 3, 1984, POEA Administrator, upon motion of AIBC and BRII, ordered the claimants to file a bill of particulars
within ten days from receipt of the order and the movants to file their answers within ten days from receipt of the bill of
particulars. The POEA Administrator also scheduled a pre-trial conference on July 25, 1984.
On July 13, 1984, the claimants submitted their "Compliance and Manifestation." On July 23, 1984, AIBC filed a "Motion
to Strike Out of the Records" the "Complaint" and the "Compliance and Manifestation." On July 25, 1984, the claimants
filed their "Rejoinder and Comments," averring, among other matters, the failure of AIBC and BRII to file their answers
and to attend the pre-trial conference on July 25, 1984. The claimants alleged that AIBC and BRII had waived their right
to present evidence and had defaulted by failing to file their answers and to attend the pre trial conference.

On October 2, 1984, the POEA Administrator denied the "Motion to Strike Out of the Records" filed by AIBC but
required the claimants to correct the deficiencies in the complaint pointed out in the order.
On October 10, 1984, claimants asked for time within which to comply with the Order of October 2, 1984 and filed an
"Urgent Manifestation," praying that the POEA Administrator direct the parties to submit simultaneously their position
papers, after which the case should be deemed submitted for decision. On the same day, Atty. Florante de Castro filed
another complaint for the same money claims and benefits in behalf of several claimants, some of whom were also
claimants in POEA Case No. L-84-06-555 (POEA Case No. 85-10-779).
On October 19, 1984, claimants filed their "Compliance" with the Order dated October 2, 1984 and an "Urgent
Manifestation, praying that the POEA direct the parties to submit simultaneously their position papers after which the
case would be deemed submitted for decision. On the same day, AIBC asked for time to file its comment on the
"Compliance" and "Urgent Manifestation" of claimants. On November 6, 1984, it filed a second motion for extension of
time to file the comment.
On November 8, 1984, the POEA Administrator informed AIBC that its motion for extension of time was granted.
On November 14, 1984, claimants filed an opposition to the motions for extension of time and asked that AIBC and BRII
be declared in default for failure to file their answers.
On November 20, 1984, AIBC and BRII filed a "Comment" praying, among other reliefs, that claimants should be ordered
to amend their complaint.
On December 27, 1984, the POEA Administrator issued an order directing AIBC and BRII to file their answers within ten
days from receipt of the order.
On February 27, 1985, AIBC and BRII appealed to NLRC seeking the reversal of the said order of the POEA
Administrator. Claimants opposed the appeal, claiming that it was dilatory and praying that AIBC and BRII be declared in
default.
On April 2, 1985, the original claimants filed an "Amended Complaint and/or Position Paper" dated March 24, 1985,
adding new demands: namely, the payment of overtime pay, extra night work pay, annual leave differential pay, leave
indemnity pay, retirement and savings benefits and their share of forfeitures (G.R. No. 104776, Rollo, pp. 14-16). On
April 15, 1985, the POEA Administrator directed AIBC to file its answer to the amended complaint (G.R. No. 104776,
Rollo, p. 20).
On May 28, 1985, claimants filed an "Urgent Motion For Summary Judgment." On the same day, the POEA issued an
order directing AIBC and BRII to file their answers to the "Amended Complaint," otherwise, they would be deemed to
have waived their right to present evidence and the case would be resolved on the basis of complainants' evidence.
On June 5, 1985, AIBC countered with a "Motion to Dismiss as Improper Class Suit and Motion for Bill of Particulars Re:
Amended Complaint dated March 24, 1985." Claimants opposed the motions.
On September 4, 1985, the POEA Administrator reiterated his directive to AIBC and BRII to file their answers in POEA
Case No. L-84-06-555.
On September 18, 1985, AIBC filed its second appeal to the NLRC, together with a petition for the issuance of a writ of
injunction. On September 19, 1985, NLRC enjoined the POEA Administrator from hearing the labor cases and suspended
the period for the filing of the answers of AIBC and BRII.
On September 19, 1985, claimants asked the POEA Administrator to include additional claimants in the case and to
investigate alleged wrongdoings of BRII, AIBC and their respective lawyers.

On October 10, 1985, Romeo Patag and two co-claimants filed a complaint (POEA Case No. L-85-10-777) against AIBC
and BRII with the POEA, demanding monetary claims similar to those subject of POEA Case No. L-84-06-555. In the
same month, Solomon Reyes also filed his own complaint (POEA Case No. L-85-10-779) against AIBC and BRII.
On October 17, 1985, the law firm of Florante M. de Castro & Associates asked for the substitution of the original counsel
of record and the cancellation of the special powers of attorney given the original counsel.
On December 12, 1985, Atty. Del Mundo filed in NLRC a notice of the claim to enforce attorney's lien.
On May 29, 1986, Atty. De Castro filed a complaint for money claims (POEA Case No. 86-05-460) in behalf of 11
claimants including Bienvenido Cadalin, a claimant in POEA Case No. 84-06-555.
On December 12, 1986, NLRC dismissed the two appeals filed on February 27, 1985 and September 18, 1985 by AIBC
and BRII.
In narrating the proceedings of the labor cases before the POEA Administrator, it is not amiss to mention that two cases
were filed in the Supreme Court by the claimants, namely - G.R. No. 72132 on September 26, 1985 and Administrative
Case No. 2858 on March 18, 1986. On May 13, 1987, the Supreme Court issued a resolution in Administrative Case No.
2858 directing the POEA Administrator to resolve the issues raised in the motions and oppositions filed in POEA Cases
Nos. L-84-06-555 and L-86-05-460 and to decide the labor cases with deliberate dispatch.
AIBC also filed a petition in the Supreme Court (G.R. No. 78489), questioning the Order dated September 4, 1985 of the
POEA Administrator. Said order required BRII and AIBC to answer the amended complaint in POEA Case No. L-84-06555. In a resolution dated November 9, 1987, we dismissed the petition by informing AIBC that all its technical objections
may properly be resolved in the hearings before the POEA.
Complaints were also filed before the Ombudsman. The first was filed on September 22, 1988 by claimant Hermie
Arguellas and 18 co-claimants against the POEA Administrator and several NLRC Commissioners. The Ombudsman
merely referred the complaint to the Secretary of Labor and Employment with a request for the early disposition of POEA
Case No. L-84-06-555. The second was filed on April 28, 1989 by claimants Emigdio P. Bautista and Rolando R. Lobeta
charging AIBC and BRII for violation of labor and social legislations. The third was filed by Jose R. Santos, Maximino N.
Talibsao and Amado B. Bruce denouncing AIBC and BRII of violations of labor laws.
On January 13, 1987, AIBC filed a motion for reconsideration of the NLRC Resolution dated December 12, 1986.
On January 14, 1987, AIBC reiterated before the POEA Administrator its motion for suspension of the period for filing an
answer or motion for extension of time to file the same until the resolution of its motion for reconsideration of the order of
the NLRC dismissing the two appeals. On April 28, 1987, NLRC en banc denied the motion for reconsideration.
At the hearing on June 19, 1987, AIBC submitted its answer to the complaint. At the same hearing, the parties were given
a period of 15 days from said date within which to submit their respective position papers. On June 24, 1987, claimants
filed their "Urgent Motion to Strike Out Answer," alleging that the answer was filed out of time. On June 29, 1987,
claimants filed their "Supplement to Urgent Manifestational Motion" to comply with the POEA Order of June 19, 1987.
On February 24, 1988, AIBC and BRII submitted their position paper. On March 4, 1988, claimants filed their "Ex-Parte
Motion to Expunge from the Records" the position paper of AIBC and BRII, claiming that it was filed out of time.
On September 1, 1988, the claimants represented by Atty. De Castro filed their memorandum in POEA Case No. L-86-05460. On September 6, 1988, AIBC and BRII submitted their Supplemental Memorandum. On September 12, 1988, BRII
filed its "Reply to Complainant's Memorandum." On October 26, 1988, claimants submitted their "Ex-Parte
Manifestational Motion and Counter-Supplemental Motion," together with 446 individual contracts of employments and
service records. On October 27, 1988, AIBC and BRII filed a "Consolidated Reply."
On January 30, 1989, the POEA Administrator rendered his decision in POEA Case No. L-84-06-555 and the other
consolidated cases, which awarded the amount of $824,652.44 in favor of only 324 complainants.

On February 10, 1989, claimants submitted their "Appeal Memorandum For Partial Appeal" from the decision of the
POEA. On the same day, AIBC also filed its motion for reconsideration and/or appeal in addition to the "Notice of
Appeal" filed earlier on February 6, 1989 by another counsel for AIBC.
On February 17, 1989, claimants filed their "Answer to Appeal," praying for the dismissal of the appeal of AIBC and
BRII.
On March 15, 1989, claimants filed their "Supplement to Complainants' Appeal Memorandum," together with their
"newly discovered evidence" consisting of payroll records.
On April 5, 1989, AIBC and BRII submitted to NLRC their "Manifestation," stating among other matters that there were
only 728 named claimants. On April 20, 1989, the claimants filed their "Counter-Manifestation," alleging that there were
1,767 of them.
On July 27, 1989, claimants filed their "Urgent Motion For Execution" of the Decision dated January 30, 1989 on the
grounds that BRII had failed to appeal on time and AIBC had not posted the supersedeas bond in the amount of
$824,652.44.
On December 23, 1989, claimants filed another motion to resolve the labor cases.
On August 21, 1990, claimants filed their "Manifestational Motion," praying that all the 1,767 claimants be awarded their
monetary claims for failure of private respondents to file their answers within the reglementary period required by law.
On September 2, 1991, NLRC promulgated its Resolution, disposing as follows:
"WHEREFORE, premises considered, the Decision of the POEA in these consolidated cases is modified to the extent and
in accordance with the following dispositions:
1. The claims of the 94 complainants identified and listed in Annex "A" hereof are dismissed for having
prescribed;
2. Respondents AIBC and Brown & Root are hereby ordered, jointly and severally, to pay the 149
complainants, identified and listed in Annex "B" hereof, the peso equivalent, at the time of payment, of
the total amount in US dollars indicated opposite their respective names;
3. The awards given by the POEA to the 19 complainants classified and listed in Annex "C" hereof, who
appear to have worked elsewhere than in Bahrain are hereby set aside.
4. All claims other than those indicated in Annex "B", including those for overtime work and favorably
granted by the POEA, are hereby dismissed for lack of substantial evidence in support thereof or are
beyond the competence of this Commission to pass upon.
In addition, this Commission, in the exercise of its powers and authority under Article 218 (c) of the Labor Code, as
amended by R.A. 6715, hereby directs Labor Arbiter Fatima J. Franco of this Commission to summon parties, conduct
hearings and receive evidence, as expeditiously as possible, and thereafter submit a written report to this Commission
(First Division) of the proceedings taken, regarding the claims of the following:
(a) complainants identified and listed in Annex "D" attached and made an integral part of this Resolution,
whose claims were dismissed by the POEA for lack of proof of employment in Bahrain (these
complainants numbering 683, are listed in pages 13 to 23 of the decision of POEA, subject of the
appeals) and,
(b) complainants identified and listed in Annex "E" attached and made an integral part of this Resolution,
whose awards decreed by the POEA, to Our mind, are not supported by substantial evidence" (G.R.
No. 104776; Rollo, pp. 113-115; G.R. Nos. 104911-14, pp. 85-87; G.R. Nos. 105029-31, pp. 120-122).

On November 27, 1991, claimant Amado S. Tolentino and 12 co-claimants, who were former clients of Atty. Del Mundo,
filed a petition for certiorari with the Supreme Court (G.R. Nos. 120741-44). The petition was dismissed in a resolution
dated January 27, 1992.
Three motions for reconsideration of the September 2, 1991 Resolution of the NLRC were filed. The first, by the
claimants represented by Atty. Del Mundo; the second, by the claimants represented by Atty. De Castro; and the third, by
AIBC and BRII.
In its Resolution dated March 24, 1992, NLRC denied all the motions for reconsideration.
Hence, these petitions filed by the claimants represented by Atty. Del Mundo (G.R. No. 104776), the claimants
represented by Atty. De Castro (G.R. Nos. 104911-14) and by AIBC and BRII (G.R. Nos. 105029-32).
II
Compromise Agreements
Before this Court, the claimants represented by Atty. De Castro and AIBC and BRII have submitted, from time to time,
compromise agreements for our approval and jointly moved for the dismissal of their respective petitions insofar as the
claimants-parties to the compromise agreements were concerned (See Annex A for list of claimants who signed
quitclaims).
Thus the following manifestations that the parties had arrived at a compromise agreement and the corresponding motions
for the approval of the agreements were filed by the parties and approved by the Court:
1.)

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

2.)

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

3.)

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

4.)

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

5.)

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

6.)

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

7.)

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

8.)

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

9.)

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

10.) Joint Manifestation and Motion involving petitioner Quiterio R. Agudo and 36 co-claimants dated June 14,
1993 (G.R. Nos. 105029-32, Rollo, pp. 974-1190; G.R. Nos. 104911-14, Rollo, pp. 748-864; G.R. No. 104776,
Rollo, pp. 1066-1183);
11.) Joint Manifestation and Motion involving claimant Arnaldo J. Alonzo and 19 co-claimants dated July 22, 1993
(G.R. No. 104776, Rollo, pp. 1173-1235; G.R. Nos. 105029-32, Rollo, pp. 1193-1256; G.R. Nos. 104911-14;
pp. 896-959);
12.) Joint Manifestation and Motion involving claimant Ricardo C. Dayrit and 2 co-claimants dated September 7,
1993 (G.R. Nos. 105029-32, Rollo, pp. 1266-1278; G.R. No. 104776, Rollo, pp. 1243-1254; G.R. Nos.
104911-14, Rollo, pp. 972-984);
13.) Joint Manifestation and Motion involving claimant Dante C. Aceres and 37 co-claimants dated September 8,
1993 (G.R. No. 104776, Rollo, pp. 1257-1375; G.R. Nos. 104911-14, Rollo, pp. 987-1105; G.R. Nos. 10502932, Rollo, pp. 1280-1397);
14.) Joint Manifestation and Motion involving Vivencio V. Abella and 27 co-claimants dated January 10, 1994
(G.R. Nos. 105029-32, Rollo, Vol. II);
15.) Joint Manifestation and Motion involving Domingo B. Solano and six co-claimants dated August 25, 1994
(G.R. Nos. 105029-32; G.R. No. 104776; G.R. No. 104911-14).
III
The facts as found by the NLRC are as follows:
"We have taken painstaking efforts to sift over the more than fifty volumes now comprising the records of these cases.
From the records, it appears that the complainants-appellants allege that they were recruited by respondent-appellant
AIBC for its accredited foreign principal, Brown & Root, on various dates from 1975 to 1983. They were all deployed at
various projects undertaken by Brown & Root in several countries in the Middle East, such as Saudi Arabia, Libya, United
Arab Emirates and Bahrain, as well as in Southeast Asia, in Indonesia and Malaysia.
Having been officially processed as overseas contract workers by the Philippine Government, all the individual
complainants signed standard overseas employment contracts (Records, Vols. 25-32. Hereafter, reference to the records
would be sparingly made, considering their chaotic arrangement) with AIBC before their departure from the Philippines.
These overseas employment contracts invariably contained the following relevant terms and conditions.
PART B (1) Employment Position
Classification
(Code)

:
:

(2) Company Employment

Status

(3) Date of Employment

to Commence on

(4) Basic Working

Hours Per Week

(5) Basic Working

Hours per Month
(6) Basic Hourly Rate :

(7) Overtime Rate

Per Hour

(8) Projected Period

of Service (Subject toC (1)
of this [sic])
:
Months and/or
Job Completion
xxx
3. HOURS OF WORK AND COMPENSATION
a) The Employee is employed at the hourly rate and overtime rate as set out in Part B of this Document.
b) The hours of work shall be those set forth by the Employer, and Employer may, at his sole option, change or adjust
such hours as maybe deemed necessary from time to time.
4. TERMINATION
a) Notwithstanding any other terms and conditions of this agreement, the Employer may, at his sole discretion, terminate
employee's service with cause, under this agreement at any time. If the Employer terminates the services of the Employee
under this Agreement because of the completion or termination, or suspension of the work on which the Employee's
services were being utilized, or because of a reduction in force due to a decrease in scope of such work, or by change in
the type of construction of such work. The Employer will be responsible for his return transportation to his country of
origin. Normally on the most expeditious air route, economy class accommodation.
xxx
10. VACATION/SICK LEAVE BENEFITS
a) After one (1) year of continuous service and/or satisfactory completion of contract, employee shall be entitled to 12days vacation leave with pay. This shall be computed at the basic wage rate. Fractions of a year's service will be computed
on a pro-rata basis.
b) Sick leave of 15-days shall be granted to the employee for every year of service for non-work connected injuries or
illness. If the employee failed to avail of such leave benefits, the same shall be forfeited at the end of the year in which
said sick leave is granted.
11. BONUS
A bonus of 20% (for offshore work) of gross income will be accrued and payable only upon satisfactory completion of
this contract.
12. OFFDAY PAY
The seventh day of the week shall be observed as a day of rest with 8 hours regular pay. If work is performed on this day,
all hours work shall be paid at the premium rate. However, this offday pay provision is applicable only when the laws of
the Host Country require payments for rest day.
In the State of Bahrain, where some of the individual complainants were deployed, His Majesty Isa Bin Salman Al Kaifa,
Amir of Bahrain, issued his Amiri Decree No. 23 on June 16, 1976, otherwise known as the Labour Law for the Private
Sector (Records, Vol. 18). This decree took effect on August 16, 1976. Some of the provisions of Amiri Decree No. 23 that
are relevant to the claims of the complainants-appellants are as follows (underscoring supplied only for emphasis):
Art. 79: x x x A worker shall receive payment for each extra hour equivalent to his wage entitlement increased by a
minimum of twenty-five per centum thereof for hours worked during the day; and by a minimum of fifty per centum
thereof for hours worked during the night which shall be deemed to being from seven o'clock in the evening until seven
o'clock in the morning x x x."
Art. 80: Friday shall be deemed to be a weekly day of rest on full pay.
x x x an employer may require a worker, with his consent, to work on his weekly day of rest if circumstances so require
and in respect of which an additional sum equivalent to 150% of his normal wage shall be paid to him x x x."

Art. 81: x x x When conditions of work require the worker to work on any official holiday, he shall be paid an additional
sum equivalent to 150% of his normal wage."
Art. 84: Every worker who has completed one year's continuous service with his employer shall be entitled to leave on
full pay for a period of not less than 21 days for each year increased to a period not less than 28 days after five continuous
years of service."
A worker shall be entitled to such leave upon a quantum meruit in respect of the proportion of his service in that year."
Art. 107: A contract of employment made for a period of indefinite duration may be terminated by either party thereto
after giving the other party thirty days' prior notice before such termination, in writing, in respect of monthly paid workers
and fifteen days' notice in respect of other workers. The party terminating a contract without giving the required notice
shall pay to the other party compensation equivalent to the amount of wages payable to the worker for the period of such
notice or the unexpired portion thereof."
Art. 111: x x x the employer concerned shall pay to such worker, upon termination of employment, a leaving indemnity
for the period of his employment calculated on the basis of fifteen days' wages for each year of the first three years of
service and of one month's wages for each year of service thereafter. Such worker shall be entitled to payment of leaving
indemnity upon a quantum meruit in proportion to the period of his service completed within a year."
All the individual complainants-appellants have already been repatriated to the Philippines at the time of the filing of
these cases (R.R. No. 104776, Rollo, pp. 59-65).
IV
The issues raised before and resolved by the NLRC were:
First: - Whether or not complainants are entitled to the benefits provided by Amiri Decree No. 23 of Bahrain;
(a) Whether or not the complainants who have worked in Bahrain are entitled to the above-mentioned benefits.
(b) Whether or not Art. 44 of the same Decree (allegedly prescribing a more favorable treatment of alien
employees) bars complainants from enjoying its benefits.
Second: - Assuming that Amiri Decree No. 23 of Bahrain is applicable in these cases, whether or not complainants' claim
for the benefits provided therein have prescribed.
Third: - Whether or not the instant cases qualify as a class suit.
Fourth: - Whether or not the proceedings conducted by the POEA, as well as the decision that is the subject of these
appeals, conformed with the requirements of due process;
(a) Whether or not the respondent-appellant was denied its right to due process;
(b) Whether or not the admission of evidence by the POEA after these cases were submitted for decision was
valid;
(c) Whether or not the POEA acquired jurisdiction over Brown Root International, Inc.;
(d) Whether or not the judgment awards are supported by substantial evidence;
(e) Whether or not the awards based on the averages and formula presented by the complainants-appellants are
supported by substantial evidence;
(f) Whether or not the POEA awarded sums beyond what the complainants-appellants prayed for; and, if so,
whether or not these awards are valid.

Fifth: - Whether or not the POEA erred in holding respondents AIBC and Brown & Root jointly and severally liable for
the judgment awards despite the alleged finding that the former was the employer of the complainants;
(a) Whether or not the POEA has acquired jurisdiction over Brown & Root;
(b) Whether or not the undisputed fact that AIBC was a licensed construction contractor precludes a finding that
Brown & Root is liable for complainants claims.
Sixth: - Whether or not the POEA Administrator's failure to hold respondents in default constitutes a reversible error.
Seventh: - Whether or not the POEA Administrator erred in dismissing the following claims:
a. Unexpired portion of contract;
b. Interest earnings of Travel and Reserve Fund;
c. Retirement and Savings Plan benefits;
d. War Zone bonus or premium pay of at least 100% of basic pay;
e. Area Differential Pay;
f. Accrued interests on all the unpaid benefits;
g. Salary differential pay;
h. Wage differential pay;
i. Refund of SSS premiums not remitted to SSS;
j. Refund of withholding tax not remitted to BIR;
k. Fringe benefits under B & R's "A Summary of Employee Benefits" (Annex "Q" of Amended Complaint);
l. Moral and exemplary damages;
m. Attorney's fees of at least ten percent of the judgment award;
n. Other reliefs, like suspending and/or cancelling the license to recruit of AIBC and the accreditation of B & R
issued by POEA;
o. Penalty for violations of Article 34 (prohibited practices), not excluding reportorial requirements thereof.
Eighth: - Whether or not the POEA Administrator erred in not dismissing POEA Case No. (L) 86-65-460 on the ground of
multiplicity of suits (G.R. Nos. 104911-14, Rollo, pp. 25-29, 51-55).
Anent the first issue, NLRC set aside Section 1, Rule 129 of the 1989 Revised Rules on Evidence governing the pleading
and proof of a foreign law and admitted in evidence a simple copy of the Bahrain's Amiri Decree No. 23 of 1976 (Labour
Law for the Private Sector). NLRC invoked Article 221 of the Labor Code of the Philippines, vesting on the Commission
ample discretion to use every and all reasonable means to ascertain the facts in each case without regard to the
technicalities of law or procedure. NLRC agreed with the POEA Administrator that the Amiri Decree No. 23, being more
favorable and beneficial to the workers, should form part of the overseas employment contract of the complainants.
NLRC, however, held that the Amiri Decree No. 23 applied only to the claimants, who worked in Bahrain, and set aside
awards of the POEA Administrator in favor of the claimants, who worked elsewhere.

On the second issue, NLRC ruled that the prescriptive period for the filing of the claims of the complainants was three
years, as provided in Article 291 of the Labor Code of the Philippines, and not ten years as provided in Article 1144 of the
Civil Code of the Philippines nor one year as provided in the Amiri Decree No. 23 of 1976.
On the third issue, NLRC agreed with the POEA Administrator that the labor cases cannot be treated as a class suit for the
simple reason that not all the complainants worked in Bahrain and therefore, the subject matter of the action, the claims
arising from the Bahrain law, is not of common or general interest to all the complainants.
On the fourth issue, NLRC found at least three infractions of the cardinal rules of administrative due process: namely, (1)
the failure of the POEA Administrator to consider the evidence presented by AIBC and BRII; (2) some findings of fact
were not supported by substantial evidence; and (3) some of the evidence upon which the decision was based were not
disclosed to AIBC and BRII during the hearing.
On the fifth issue, NLRC sustained the ruling of the POEA Administrator that BRII and AIBC are solidarily liable for the
claims of the complainants and held that BRII was the actual employer of the complainants, or at the very least, the
indirect employer, with AIBC as the labor contractor.
NLRC also held that jurisdiction over BRII was acquired by the POEA Administrator through the summons served on
AIBC, its local agent.
On the sixth issue, NLRC held that the POEA Administrator was correct in denying the Motion to Declare AIBC in
default.
On the seventh issue, which involved other money claims not based on the Amiri Decree No. 23, NLRC ruled:
(1) that the POEA Administrator has no jurisdiction over the claims for refund of the SSS premiums and refund of
withholding taxes and the claimants should file their claims for said refund with the appropriate government
agencies;
(2) that claimants failed to establish that they are entitled to the claims which are not based on the overseas
employment contracts nor the Amiri Decree No. 23 of 1976;
(3) that the POEA Administrator has no jurisdiction over claims for moral and exemplary damages and nonetheless,
the basis for granting said damages was not established;
(4) that the claims for salaries corresponding to the unexpired portion of their contract may be allowed if filed within
the three-year prescriptive period;
(5) that the allegation that complainants were prematurely repatriated prior to the expiration of their overseas
contract was not established; and
(6) that the POEA Administrator has no jurisdiction over the complaint for the suspension or cancellation of the
AIBC's recruitment license and the cancellation of the accreditation of BRII.
NLRC passed sub silencio the last issue, the claim that POEA Case No. (L) 86-65-460 should have been dismissed on the
ground that the claimants in said case were also claimants in POEA Case No. (L) 84-06-555. Instead of dismissing POEA
Case No. (L) 86-65- 460, the POEA just resolved the corresponding claims in POEA Case No. (L) 84-06-555. In other
words, the POEA did not pass upon the same claims twice.
V
G.R. No. 104776
Claimants in G.R. No. 104776 based their petition for certiorari on the following grounds:

(1) that they were deprived by NLRC and the POEA of their right to a speedy disposition of their cases as
guaranteed by Section 16, Article III of the 1987 Constitution. The POEA Administrator allowed private
respondents to file their answers in two years (on June 19, 1987) after the filing of the original complaint (on
April 2, 1985) and NLRC, in total disregard of its own rules, affirmed the action of the POEA Administrator;
(2) that NLRC and the POEA Administrator should have declared AIBC and BRII in default and should have
rendered summary judgment on the basis of the pleadings and evidence submitted by claimants;
(3) that NLRC and POEA Administrator erred in not holding that the labor cases filed by AIBC and BRII cannot be
considered a class suit;
(4) that the prescriptive period for the filing of the claims is ten years; and
(5) that NLRC and the POEA Administrator should have dismissed POEA Case No. L-86-05-460, the case filed by
Atty. Florante de Castro (Rollo, pp. 31-40).
AIBC and BRII, commenting on the petition in G.R. No. 104776, argued:
(1) that they were not responsible for the delay in the disposition of the labor cases, considering the great difficulty
of getting all the records of the more than 1,500 claimants, the piece-meal filing of the complaints and the
addition of hundreds of new claimants by petitioners;
(2) that considering the number of complaints and claimants, it was impossible to prepare the answers within the
ten-day period provided in the NLRC Rules, that when the motion to declare AIBC in default was filed on July
19, 1987, said party had already filed its answer, and that considering the staggering amount of the claims (more
than US$50,000,000.00) and the complicated issues raised by the parties, the ten-day rule to answer was not fair
and reasonable;
(3) that the claimants failed to refute NLRC's finding that there was no common or general interest in the subject
matter of the controversy - which was the applicability of the Amiri Decree No. 23. Likewise, the nature of the
claims varied, some being based on salaries pertaining to the unexpired portion of the contracts while others
being for pure money claims. Each claimant demanded separate claims peculiar only to himself and depending
upon the particular circumstances obtaining in his case;
(4) that the prescriptive period for filing the claims is that prescribed by Article 291 of the Labor Code of the
Philippines (three years) and not the one prescribed by Article 1144 of the Civil Code of the Philippines (ten
years); and
(5) that they are not concerned with the issue of whether POEA Case No. L-86-05-460 should be dismissed, this
being a private quarrel between the two labor lawyers (Rollo, pp. 292-305).
Attorney's Lien
On November 12, 1992, Atty. Gerardo A. del Mundo moved to strike out the joint manifestations and motions of AIBC
and BRII dated September 2 and 11, 1992, claiming that all the claimants who entered into the compromise agreements
subject of said manifestations and motions were his clients and that Atty. Florante M. de Castro had no right to represent
them in said agreements. He also claimed that the claimants were paid less than the award given them by NLRC; that Atty.
De Castro collected additional attorney's fees on top of the 25% which he was entitled to receive; and that the consent of
the claimants to the compromise agreements and quitclaims were procured by fraud (G.R. No. 104776, Rollo, pp. 838810). In the Resolution dated November 23, 1992, the Court denied the motion to strike out the Joint Manifestations and
Motions dated September 2 and 11, 1992 (G.R. No. 104911-14, Rollo, pp. 608-609).
On December 14, 1992, Atty. Del Mundo filed a "Notice and Claim to Enforce Attorney's Lien," alleging that the
claimants who entered into compromise agreements with AIBI and BRII with the assistance of Atty. De Castro, had all
signed a retainer agreement with his law firm (G.R. No. 104776, Rollo, pp. 623-624; 838-1535).

Contempt of Court
On February 18, 1993, an omnibus motion was filed by Atty. Del Mundo to cite Atty. De Castro and Atty. Katz Tierra for
contempt of court and for violation of Canons 1, 15 and 16 of the Code of Professional Responsibility. The said lawyers
allegedly misled this Court, by making it appear that the claimants who entered into the compromise agreements were
represented by Atty. De Castro, when in fact they were represented by Atty. Del Mundo (G.R. No. 104776, Rollo, pp.
1560-1614).
On September 23, 1994, Atty. Del Mundo reiterated his charges against Atty. De Castro for unethical practices and moved
for the voiding of the quitclaims submitted by some of the claimants.
G.R. Nos. 104911-14
The claimants in G.R. Nos. 104911-14 based their petition for certiorari on the grounds that NLRC gravely abused its
discretion when it: (1) applied the three-year prescriptive period under the Labor Code of the Philippines; and (2) it denied
the claimant's formula based on an average overtime pay of three hours a day (Rollo, pp. 18-22).
The claimants argue that said method was proposed by BRII itself during the negotiation for an amicable settlement of
their money claims in Bahrain as shown in the Memorandum dated April 16, 1983 of the Ministry of Labor of Bahrain
(Rollo, pp. 21-22).
BRII and AIBC, in their Comment, reiterated their contention in G.R. No. 104776 that the prescriptive period in the Labor
Code of the Philippines, a special law, prevails over that provided in the civil Code of the Philippines, a general law.
As to the memorandum of the Ministry of Labor of Bahrain on the method of computing the overtime pay, BRII and
AIBC claimed that they were not bound by what appeared therein, because such memorandum was proposed by a
subordinate Bahrain official and there was no showing that it was approved by the Bahrain Minister of Labor. Likewise,
they claimed that the averaging method was discussed in the course of the negotiation for the amicable settlement of the
dispute and any offer made by a party therein could not be used as an admission by him (Rollo, pp. 228-236).
G.R. Nos. 105029-32
In G.R. Nos. 105029-32, BRII and AIBC claim that NLRC gravely abused its discretion when it: (1) enforced the
provisions of the Amiri Decree No. 23 of 1976 and not the terms of the employment contracts; (2) granted claims for
holiday, overtime and leave indemnity pay and other benefits, on evidence admitted in contravention of petitioners'
constitutional right to due process; and (3) ordered the POEA Administrator to hold new hearings for the 683 claimants
whose claims had been dismissed for lack of proof by the POEA Administrator or NLRC itself. Lastly, they allege that
assuming that the Amiri Decree No. 23 of 1976 was applicable, NLRC erred when it did not apply the one-year
prescription provided in said law (Rollo, pp. 29- 30).
VI
G.R. No. 104776
G.R. Nos. 104911-14
G.R. Nos. 105029-32
All the petitions raise the common issue of prescription although they disagreed as to the time that should be embraced
within the prescriptive period.
To the POEA Administrator, the prescriptive period was ten years, applying Article 1144 of the Civil Code of the
Philippines. NLRC believed otherwise, fixing the prescriptive period at three years as provided in Article 291 of the Labor
Code of the Philippines.

The claimants in G.R. No. 104776 and G.R. Nos. 104911-14, invoking different grounds, insisted that NLRC erred in
ruling that the prescriptive period applicable to the claims was three years, instead of ten years, as found by the POEA
Administrator.
The Solicitor General expressed his personal view that the prescriptive period was one year as prescribed by the Amiri
Decree No. 23 of 1976 but he deferred to the ruling of NLRC that Article 291 of the Labor Code of the Philippines was
the operative law.
The POEA Administrator held the view that:
"These money claims (under Article 291 of the Labor Code) refer to those arising from the employer's violation of the
employee's right as provided by the Labor Code.
In the instant case, what the respondents violated are not the rights of the workers as provided by the Labor Code, but the
provisions of the Amiri Decree No. 23 issued in Bahrain, which ipso facto amended the workers' contracts of
employment. Respondents consciously failed to conform to these provisions which specifically provide for the increase of
the workers' rate. It was only after June 30, 1983, four months after the brown builders brought a suit against B & R in
Bahrain for this same claim, when respondent AIBC's contracts have undergone amendments in Bahrain for the new
hires/renewals (Respondent's Exhibit 7).
Hence, premises considered, the applicable law of prescription to this instant case is Article 1144 of the Civil Code of the
Philippines, which provides:
Article 1144. The following actions may be brought within ten years from the time the cause of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;'
Thus, herein money claims of the complainants against the respondents shall prescribe in ten years from August 16, 1976.
Inasmuch as all claims were filed within the ten-year prescriptive period, no claim suffered the infirmity of being
prescribed" (G. R. No. 104776, Rollo, pp. 89-90).
In overruling the POEA Administrator, and holding that the prescriptive period is three years as provided in Article 291 of
the Labor Code of the Philippines, the NLRC argued as follows:
"The Labor Code provides that 'all money claims arising from employer-employee relations xxx shall be filed within three
years from the time the cause of action accrued; otherwise they shall be forever barred' (Art. 291, Labor Code, as
amended). This three-year prescriptive period shall be the one applied here and which should be reckoned from the date of
repatriation of each individual complainant, considering the fact that the case is having (sic) filed in this country. We do
not agree with the POEA Administrator that this three-year prescriptive period applies only to money claims specifically
recoverable under the Philippine Labor Code. Article 291 gives no such indication. Likewise, We can not consider
complainants' cause/s of action to have accrued from a violation of their employment contracts. There was no violation;
the claims arise from the benefits of the law of the country where they worked" (G. R. No. 104776, Rollo, pp. 90-91).
Anent the applicability of the one-year prescriptive period as provided by the Amiri Decree No. 23 of 1976, NLRC opined
that the applicability of said law was one of characterization, i.e., whether to characterize the foreign law on prescription
or statute of limitation as "substantive" or "procedural." NLRC cited the decision in Bournias v. Atlantic Maritime
Company (220 F. 2d. 152, 2d Cir. [1955]), where the issue was the applicability of the Panama Labor Code in a case filed
in the State of New York for claims arising from said Code. In said case, the claims would have prescribed under the
Panamanian Law but not under the Statute of Limitations of New York. The U.S. Circuit Court of Appeals held that the
Panamanian Law was procedural as it was not "specifically intended to be substantive," hence, the prescriptive period
provided in the law of the forum should apply. The Court observed:
... And where, as here, we are dealing with a statute of limitations of a foreign country, and it is not clear on the face of
the statute that its purpose was to limit the enforceability, outside as well as within the foreign country concerned, of the

substantive rights to which the statute pertains, we think that as a yardstick for determining whether that was the purpose
this test is the most satisfactory one. It does not lead American courts into the necessity of examining into the unfamiliar
peculiarities and refinements of different foreign legal systems..."
The Court further noted:
xxx

xxx

xxx

"Applying that test here it appears to us that the libelant is entitled to succeed, for the respondents have failed to satisfy us
that the Panamanian period of limitation in question was specifically aimed against the particular rights which the libelant
seeks to enforce. The Panama Labor Code is a statute having broad objectives, viz: 'The present Code regulates the
relations between capital and labor, placing them on a basis of social justice, so that, without injuring any of the parties,
there may be guaranteed for labor the necessary conditions for a normal life and to capital an equitable return to its
investment.' In pursuance of these objectives the Code gives laborers various rights against their employers. Article 623
establishes the period of limitation for all such rights, except certain ones which are enumerated in Article 621. And there
is nothing in the record to indicate that the Panamanian legislature gave special consideration to the impact of Article 623
upon the particular rights sought to be enforced here, as distinguished from the other rights to which that
432 Phil. 160

FIRST DIVISION
[ G.R. No. 128314, May 29, 2002 ]
RODOLFO V. JAO, PETITIONER, VS. COURT OF APPEALS AND PERICO V. JAO,
RESPONDENTS.
DECISION
YNARES-SANTIAGO, J.:
Rodolfo and Perico Jao were the only sons of the spouses Ignacio Jao Tayag and Andrea V. Jao, who died intestate in 1988
and 1989, respectively. The decedents left real estate, cash, shares of stock and other personal properties.
On April 17, 1991, Perico instituted a petition for issuance of letters of administration before the Regional Trial Court of
Quezon City, Branch 99, over the estate of his parents, docketed as Special Proceedings No. Q-91-8507. [1] Pending the
appointment of a regular administrator, Perico moved that he be appointed as special administrator. He alleged that his
brother, Rodolfo, was gradually dissipating the assets of the estate. More particularly, Rodolfo was receiving rentals from
real properties without rendering any accounting, and forcibly opening vaults belonging to their deceased parents and
disposing of the cash and valuables therein.
Rodolfo moved for the dismissal of the petition on the ground of improper venue. [2] He argued that the deceased spouses
did not reside in Quezon City either during their lifetime or at the time of their deaths. The decedents actual residence
was in Angeles City, Pampanga, where his late mother used to run and operate a bakery. As the health of his parents
deteriorated due to old age, they stayed in Rodolfos residence at 61 Scout Gandia Street, Quezon City, solely for the
purpose of obtaining medical treatment and hospitalization. Rodolfo submitted documentary evidence previously
executed by the decedents, consisting of income tax returns, voters affidavits, statements of assets and liabilities, real
estate tax payments, motor vehicle registration and passports, all indicating that their permanent residence was in Angeles
City, Pampanga.
In his opposition,[3] Perico countered that their deceased parents actually resided in Rodolfos house in Quezon City at the
time of their deaths. As a matter of fact, it was conclusively declared in their death certificates that their last residence
before they died was at 61 Scout Gandia Street, Quezon City.[4] Rodolfo himself even supplied the entry appearing on the
death certificate of their mother, Andrea, and affixed his own signature on the said document.

Rodolfo filed a rejoinder, stating that he gave the information regarding the decedents residence on the death certificates
in good faith and through honest mistake. He gave his residence only as reference, considering that their parents were
treated in their late years at the Medical City General Hospital in Mandaluyong, Metro Manila. Their stay in his house
was merely transitory, in the same way that they were taken at different times for the same purpose to Pericos residence at
Legaspi Towers in Roxas Boulevard. The death certificates could not, therefore, be deemed conclusive evidence of the
decedents residence in light of the other documents showing otherwise. [5]
The court required the parties to submit their respective nominees for the position. [6] Both failed to comply, whereupon the
trial court ordered that the petition be archived. [7]
Subsequently, Perico moved that the intestate proceedings be revived. [8] After the parties submitted the names of their
respective nominees, the trial court designated Justice Carlos L. Sundiam as special administrator of the estate of Ignacio
Jao Tayag and Andrea Jao.[9]
On April 6, 1994, the motion to dismiss filed by petitioner Rodolfo was denied, to wit:
A mere perusal of the death certificates of the spouses issued separately in 1988 and 1989, respectively, confirm the fact
that Quezon City was the last place of residence of the decedents. Surprisingly, the entries appearing on the death
certificate of Andrea V. Jao were supplied by movant, Rodolfo V. Jao, whose signature appears in said document.
Movant, therefore, cannot disown his own representation by taking an inconsistent position other than his own admission.
xxx xxx xxx.
WHEREFORE, in view of the foregoing consideration, this court DENIES for lack of merit movants motion to dismiss.
SO ORDERED.[10]
Rodolfo filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 35908. On
December 11, 1996, the Court of Appeals rendered the assailed decision, the dispositive portion of which reads:
WHEREFORE, no error, much less any grave abuse of discretion of the court a quo having been shown, the petition for
certiorari is hereby DISMISSED. The questioned order of the respondent Judge is affirmed in toto.
SO ORDERED.[11]
Rodolfos motion for reconsideration was denied by the Court of Appeals in the assailed resolution dated February 17,
1997.[12] Hence, this petition for review, anchored on the following grounds:
I
RESPONDENT COURT HAD DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORD WITH THE
LAW AND IS DIRECTLY CONTRADICTORY TO THE APPLICABLE DECISION ALREADY RENDERED BY THIS
HONORABLE COURT.
II
RESPONDENT COURT ERRED IN DISREGARDING THE RULING OF THIS HONORABLE COURT IN THE CASE
OF EUSEBIO VS. EUSEBIO, 100 PHILS. 593, WHICH CLEARLY INTERPRETED WHAT IS MEANT BY
RESIDENCE IN SEC. 1 OF RULE 73 OF THE RULES OF COURT.
III
RESPONDENT COURT ERRED IN HOLDING THAT PHYSICAL PRESENCE IN A PLACE AT THE TIME OF
DEATH IS DETERMINATIVE OF DECEDENTS RESIDENCE RATHER THAN THE INTENTION OF THE
DECEDENTS TO ESTABLISH THEIR PERMANENT RESIDENCE IN ANOTHER PLACE.
IV
RESPONDENT COURT ERRED IN APPLYING BY ANALOGY THE RESIDENCE CONTEMPLATED IN SEC. 2 OF
RULE 4 FOR THE PURPOSE OF SERVING SUMMONS TO A DEFENDANT IN A PERSONAL ACTION TO THE
RESIDENCE CONTEMPLATED IN SEC. 1 OF RULE 73 FOR THE PURPOSE OF DETERMINING VENUE IN THE
SETTLEMENT OF THE ESTATE OF A DECEASED.

V
RESPONDENT COURT ERRED IN GIVING MORE WEIGHT TO THE ENTRY OF PETITIONER AND PRIVATE
RESPONDENT IN THE RESPECTIVE DEATH CERTIFICATES OF THE DECEDENTS RATHER THAN THE
OVERWHELMING EVIDENCE SHOWING THE CLEAR INTENTION OF THE DECEDENTS TO ESTABLISH
THEIR PERMANENT RESIDENCE IN ANGELES CITY.
VI
RESPONDENT COURT ERRED IN APPLYING THE PRINCIPLE OF ESTOPPEL AS AGAINST PETITIONER
WHICH CAN NOT BE MORE PERSUASIVE THAN THE CLEAR INTENTION OF THE DECEDENTS
THEMSELVES TO ESTABLISH PERMANENT RESIDENCE IN ANGELES CITY.
VII
RESPONDENT COURT ERRED IN DISMISSING THE PETITION FOR CERTIORARI DESPITE THE CLEAR
ABUSE OF DISCRETION ON THE PART OF THE TRIAL COURT IN INSISTING TO TAKE COGNIZANCE OF SP.
PROCEEDING NO. Q-91-8507.[13]
The main issue before us is: where should the settlement proceedings be had --- in Pampanga, where the decedents had
their permanent residence, or in Quezon City, where they actually stayed before their demise?
Rule 73, Section 1 of the Rules of Court states:
Where estate of deceased persons be settled. If the decedent is an inhabitant of the Philippines at the time of his death,
whether a citizen or an alien, his will shall be proved, or letters of administration granted, and his estate settled, in the
Court of First Instance in the province in which he resides at the time of his death, and if he is an inhabitant of a foreign
country, the Court of First Instance of any province in which he had estate. The court first taking cognizance of the
settlement of the estate of a decedent shall exercise jurisdiction to the exclusion of all other courts. The jurisdiction
assumed by a court, so far as it depends on the place of residence of the decedent, or of the location of his estate, shall not
be contested in a suit or proceeding, except in an appeal from that court, in the original case, or when the want of
jurisdiction appears on the record. (underscoring ours)
Clearly, the estate of an inhabitant of the Philippines shall be settled or letters of administration granted in the proper court
located in the province where the decedent resides at the time of his death.
Petitioner Rodolfo invokes our ruling in the case of Eusebio v. Eusebio, et al.,[14] where we held that the situs of settlement
proceedings shall be the place where the decedent had his permanent residence or domicile at the time of death. In
determining residence at the time of death, the following factors must be considered, namely, the decedent had: (a)
capacity to choose and freedom of choice; (b) physical presence at the place chosen; and (c) intention to stay therein
permanently.[15] While it appears that the decedents in this case chose to be physically present in Quezon City for medical
convenience, petitioner avers that they never adopted Quezon City as their permanent residence.
The contention lacks merit.
The facts in Eusebio were different from those in the case at bar. The decedent therein, Andres Eusebio, passed away
while in the process of transferring his personal belongings to a house in Quezon City. He was then suffering from a heart
ailment and was advised by his doctor/son to purchase a Quezon City residence, which was nearer to his doctor. While he
was able to acquire a house in Quezon City, Eusebio died even before he could move therein. In said case, we ruled that
Eusebio retained his domicile --- and hence, residence --- in San Fernando, Pampanga. It cannot be said that Eusebio
changed his residence because, strictly speaking, his physical presence in Quezon City was just temporary.
In the case at bar, there is substantial proof that the decedents have transferred to petitioners Quezon City residence.
Petitioner failed to sufficiently refute respondents assertion that their elderly parents stayed in his house for some three to
four years before they died in the late 1980s.
Furthermore, the decedents respective death certificates state that they were both residents of Quezon City at the time of
their demise. Significantly, it was petitioner himself who filled up his late mothers death certificate. To our mind, this
unqualifiedly shows that at that time, at least, petitioner recognized his deceased mothers residence to be Quezon City.
Moreover, petitioner failed to contest the entry in Ignacios death certificate, accomplished a year earlier by respondent.

The recitals in the death certificates, which are admissible in evidence, were thus properly considered and presumed to be
correct by the court a quo. We agree with the appellate courts observation that since the death certificates were
accomplished even before petitioner and respondent quarreled over their inheritance, they may be relied upon to reflect
the true situation at the time of their parents death.
The death certificates thus prevailed as proofs of the decedents residence at the time of death, over the numerous
documentary evidence presented by petitioner. To be sure, the documents presented by petitioner pertained not to
residence at the time of death, as required by the Rules of Court, but to permanent residence or domicile. In GarciaFule v. Court of Appeals,[16] we held:
xxx xxx xxx the term resides connotes ex vi termini actual residence as distinguished from legal residence or
domicile. This term resides, like the terms residing and residence, is elastic and should be interpreted in the light
of the object or purpose of the statute or rule in which it is employed. In the application of venue statutes and rules
Section 1, Rule 73 of the Revised Rules of Court is of such nature residence rather than domicile is the significant
factor. Even where the statute uses the word domicile still it is construed as meaning residence and not domicile in the
technical sense. Some cases make a distinction between the terms residence and domicile but as generally used in
statutes fixing venue, the terms are synonymous, and convey the same meaning as the term inhabitant. In other words,
resides should be viewed or understood in its popular sense, meaning, the personal, actual or physical habitation of a
person, actual residence or place of abode. It signifies physical presence in a place and actual stay thereat. In this popular
sense, the term means merely residence, that is, personal residence, not legal residence or domicile. Residence simply
requires bodily presence as an inhabitant in a given place, while domicile requires bodily presence in that place and also
an intention to make it ones domicile. No particular length of time of residence is required though; however, the
residence must be more than temporary.[17]
Both the settlement court and the Court of Appeals found that the decedents have been living with petitioner at the time of
their deaths and for some time prior thereto. We find this conclusion to be substantiated by the evidence on record. A
close perusal of the challenged decision shows that, contrary to petitioners assertion, the court below considered not only
the decedents physical presence in Quezon City, but also other factors indicating that the decedents stay therein was
more than temporary. In the absence of any substantial showing that the lower courts factual findings stemmed from an
erroneous apprehension of the evidence presented, the same must be held to be conclusive and binding upon this Court.
Petitioner strains to differentiate between the venue provisions found in Rule 4, Section 2, [18] on ordinary civil actions, and
Rule 73, Section 1, which applies specifically to settlement proceedings. He argues that while venue in the former
understandably refers to actual physical residence for the purpose of serving summons, it is the permanent residence of the
decedent which is significant in Rule 73, Section 1. Petitioner insists that venue for the settlement of estates can only
refer to permanent residence or domicile because it is the place where the records of the properties are kept and where
most of the decedents properties are located.
Petitioners argument fails to persuade.
It does not necessarily follow that the records of a persons properties are kept in the place where he permanently resides.
Neither can it be presumed that a persons properties can be found mostly in the place where he establishes his domicile.
It may be that he has his domicile in a place different from that where he keeps his records, or where he maintains
extensive personal and business interests. No generalizations can thus be formulated on the matter, as the question of
where to keep records or retain properties is entirely dependent upon an individuals choice and peculiarities.
At any rate, petitioner is obviously splitting straws when he differentiates between venue in ordinary civil actions and
venue in special proceedings. In Raymond v. Court of Appeals[19] and Bejer v. Court of Appeals,[20] we ruled that venue for
ordinary civil actions and that for special proceedings have one and the same meaning. As thus defined, residence, in
the context of venue provisions, means nothing more than a persons actual residence or place of abode, provided he
resides therein with continuity and consistency.[21] All told, the lower court and the Court of Appeals correctly held that
venue for the settlement of the decedents intestate estate was properly laid in the Quezon City court.
WHEREFORE, in view of the foregoing, the petition is DENIED, and the decision of the Court of Appeals in CA-G.R.
SP No. 35908 is AFFIRMED.
SO ORDERED.

Davide, Jr., C.J., (Chairman), Puno, Kapunan, and Austria-Martinez, JJ., concur.

[1]

Rollo, p. 87.

[2]

Ibid., p. 91.

[3]

Id., p. 95.

[4]

CA Rollo, pp. 34 & 35.

[5]

Rollo, p. 101.

[6]

Record, p. 50.

[7]

Ibid., p. 51.

[8]

Id., p. 55.

[9]

Id., p. 108.

[10]

Rollo, p. 110; penned by Presiding Judge Felix M. de Guzman.

[11]

Ibid., p. 71; penned by Associate Justice Corona Ibay-Somera; concurred in by Associate Justices Jaime M. Lantin and
Salvador J. Valdez, Jr.
[12]

Id., p. 73.

[13]

Id., pp. 23-24.

[14]

100 Phil., 593 (1956).

[15]

Ibid., at 596, citing Minor, Conflict of Laws, pp. 109-110; Goodrich, Conflict of Laws, p. 169; Velilla v. Posadas, 62
Phil., 624; and Zuellig v. Republic of the Philippines, 46 O.G. Supp. No. 11, p. 220.
[16]

74 SCRA 189 (1976).

[17]

Ibid., at 199-200.

[18]

SEC. 2. Venue of personal actions. All other actions may be commenced and tried where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a nonresident defendant, where he may be found, at the election of the plaintiff.
[19]

166 SCRA 50 (1988).

[20]

169 SCRA 566 (1989).

[21]

Ibid., at 571, citing Garcia-Fule v. Court of Appeals, supra, and Dangwa Transportation Co., Inc. v. Sarmiento et al., 75
SCRA 124 (1977).

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585

FIRST DIVISION
[ G.R. NO. 159507, April 19, 2006 ]
ANICETO G. SALUDO, JR., PETITIONER, VS. AMERICAN EXPRESS INTERNATIONAL, INC.,
AND/OR IAN T. FISH AND DOMINIC MASCRINAS, RESPONDENTS.
DECISION
CALLEJO, SR., J.:
Before the Court is the Petition for Review on Certiorari filed by Aniceto G. Saludo, Jr. seeking to reverse and set aside
the Decision[1] dated May 22, 2003 of the Court of Appeals in CA-G.R. SP No. 69553. The assailed decision directed the
Regional Trial Court (RTC) of Maasin City, Southern Leyte, Branch 25 thereof, to vacate and set aside its Orders dated
September 10, 2001 and January 2, 2002 in Civil Case No. R-3172, and enjoined the presiding judge [2] thereof from
conducting further proceedings in said case, except to dismiss the complaint filed therewith on ground of improper venue.
The petition also seeks to reverse and set aside the appellate court's Resolution dated August 14, 2003 denying the motion
for reconsideration of the assailed decision.
The factual and procedural antecedents are as follows:
Aniceto G. Saludo, Jr. filed a complaint for damages against the American Express International, Inc. (AMEX) and/or its
officers Ian T. Fish, Vice-President and Country Manager, and Dominic Mascrinas, Head of Operations, with the RTC of
Maasin City, Southern Leyte. The case was raffled to Branch 25 of the said court.
The complaint alleged, inter alia, that plaintiff (herein petitioner Saludo) "is a Filipino citizen, of legal age, and a member
of the House of Representatives and a resident of Ichon, Macrohon, Southern Leyte, Philippines." On the other hand,
defendant (herein respondent AMEX, Inc.) "is a corporation doing business in the Philippines and engaged in providing
credit and other credit facilities and allied services with office address at 4th floor, ACE Building, Rada Street, Legaspi
Village, Makati City." The other defendants (herein respondents Fish and Mascrinas) are officers of respondent AMEX,
and may be served with summons and other court processes at their office address.
The complaint's cause of action stemmed from the alleged wrongful dishonor of petitioner Saludo's AMEX credit card and
the supplementary card issued to his daughter. The first dishonor happened when petitioner Saludo's daughter used her
supplementary credit card to pay her purchases in the United States some time in April 2000. The second dishonor
occurred when petitioner Saludo used his principal credit card to pay his account at the Hotel Okawa in Tokyo, Japan
while he was there with other delegates from the Philippines to attend the Congressional Recognition in honor of Mr.
Hiroshi Tanaka.
The dishonor of these AMEX credit cards were allegedly unjustified as they resulted from respondents' unilateral act of
suspending petitioner Saludo's account for his failure to pay its balance covering the period of March 2000. Petitioner
Saludo denied having received the corresponding statement of account. Further, he was allegedly wrongfully charged for
late payment in June 2000. Subsequently, his credit card and its supplementary cards were canceled by respondents on
July 20, 2000.
Petitioner Saludo claimed that he suffered great inconvenience, wounded feelings, mental anguish, embarrassment,
humiliation and besmirched political and professional standing as a result of respondents' acts which were committed in
gross and evident bad faith, and in wanton, reckless and oppressive manner. He thus prayed that respondents be adjudged

to pay him, jointly and severally, actual, moral and exemplary damages, and attorney's fees.
In their answer, respondents specifically denied the allegations in the complaint. Further, they raised the affirmative
defenses of lack of cause of action and improper venue. On the latter, respondents averred that the complaint should be
dismissed on the ground that venue was improperly laid because none of the parties was a resident of Leyte. They alleged
that respondents were not residents of Southern Leyte. Moreover, notwithstanding the claim in his complaint, petitioner
Saludo was not allegedly a resident thereof as evidenced by the fact that his community tax certificate, which was
presented when he executed the complaint's verification and certification of non-forum shopping, was issued at Pasay
City. To buttress their contention, respondents pointed out that petitioner Saludo's complaint was prepared in Pasay City
and signed by a lawyer of the said city. Respondents prayed for the dismissal of the complaint a quo.
Thereafter, respondents filed an Opposition to Ex-Parte Motion (to Set Case for Pre-Trial) and Motion for Preliminary
Hearing (on Affirmative Defense of Improper Venue) to which petitioner Saludo filed his Comments and/or Objections to
the Affirmative Defense of Improper Venue. He asserted that any allegation refuting his residency in Southern Leyte was
baseless and unfounded considering that he was the congressman of the lone district thereof at the time of the filing of his
complaint. He urged the court a quo to take judicial notice of this particular fact. As a member of Congress, he possessed
all the qualifications prescribed by the Constitution including that of being a resident of his district. He was also a member
of the Integrated Bar of the Philippines-Southern Leyte Chapter, and has been such ever since his admission to the Bar.
His community tax certificate was issued at Pasay City only because he has an office thereat and the office messenger
obtained the same in the said city. In any event, the community tax certificate is not determinative of one's residence.
In the Order dated September 10, 2001, the court a quo denied the affirmative defenses interposed by respondents. It
found the allegations of the complaint sufficient to constitute a cause of action against respondents. The court a quo
likewise denied respondents' affirmative defense that venue was improperly laid. It reasoned, thus:
x x x [T]he fact alone that the plaintiff at the time he filed the complaint was and still is, the incumbent Congressman of
the Lone District of Southern Leyte with residence at Ichon, Macrohon, Southern Leyte, is enough to dispell any and all
doubts about his actual residence. As a high-ranking government official of the province, his residence there can be taken
judicial notice of. As such his personal, actual and physical habitation or his actual residence or place of abode can never
be in some other place but in Ichon, Macrohon, Southern Leyte. It is correctly stated by the plaintiff, citing the case of
Core v. Core, 100 Phil. 321 that, "residence, for purposes of fixing venue of an action, is synonymous with domicile. This
is defined as the permanent home, the place to which, whenever absent for business or pleasure, one intends to return, and
depends on the facts and circumstances, in the sense that they disclose intent. A person can have but one domicile at a
time. A man can have but one domicile for one and the same purpose at any time, but he may have numerous places of
residence. Venue could be at place of his residence. (Masa v. Mison, 200 SCRA 715 [1991]) [3]
Respondents sought the reconsideration thereof but the court a quo denied the same in the Order dated January 2, 2002.
They then filed with the appellate court a petition for certiorari and prohibition alleging grave abuse of discretion on the
part of the presiding judge of the court a quo in issuing the September 10, 2001 and January 2, 2002 Orders. Upon
respondents' posting of a bond, the appellate court issued on March 14, 2002 a temporary restraining order which enjoined
the presiding judge of the court a quo from conducting further proceedings in Civil Case No. R-3172.
On May 22, 2003, the appellate court rendered the assailed decision granting respondents' petition for certiorari as it
found that venue was improperly laid. It directed the court a quo to vacate and set aside its Orders dated September 10,
2001 and January 2, 2002, and enjoined the presiding judge thereof from further proceeding in the case, except to dismiss
the complaint.
The appellate court explained that the action filed by petitioner Saludo against respondents is governed by Section 2, Rule
4 of the Rules of Court. The said rule on venue of personal actions basically provides that personal actions may be
commenced and tried where plaintiff or any of the principal plaintiffs resides, or where defendant or any of the principal
defendants resides, at the election of plaintiff.
Venue was improperly laid in the court a quo, according to the appellate court, because not one of the parties was a
resident of Southern Leyte. Specifically, it declared that petitioner Saludo was not a resident thereof. The appellate court
pronounced that, for purposes of venue, the residence of a person is his personal, actual or physical habitation, or his
actual residence or place of abode, which may not necessarily be his legal residence or domicile provided he resides
therein with continuity and consistency.[4]

The appellate court quoted the following discussion in Koh v. Court of Appeals[5] where the Court distinguished the terms
"residence" and "domicile" in this wise:
x x x [T]he term domicile is not exactly synonymous in legal contemplation with the term residence, for it is [an]
established principle in Conflict of Laws that domicile refers to the relatively more permanent abode of a person while
residence applies to a temporary stay of a person in a given place. In fact, this distinction is very well emphasized in those
cases where the Domiciliary Theory must necessarily supplant the Nationality Theory in cases involving stateless persons.
xxxx
"There is a difference between domicile and residence. Residence is used to indicate a place of abode, whether permanent
or temporary; domicile denotes a fixed permanent residence to which when absent, one has the intention of returning. A
man may have a residence in one place and a domicile in another. Residence is not domicile, but domicile is residence
coupled with intention to remain for an unlimited time. A man can have but one domicile for one and the same purpose at
any time, but he may have numerous places of residence. His place of residence generally is his place of domicile, but is
not by any means, necessarily so since no length of residence without intention of remaining will constitute domicile." [6]
(Italicized for emphasis)
In holding that petitioner Saludo is not a resident of Maasin City, Southern Leyte, the appellate court referred to his
community tax certificate, as indicated in his complaint's verification and certification of non-forum shopping, which was
issued at Pasay City. Similarly, it referred to the same community tax certificate, as indicated in his complaint for
deportation filed against respondents Fish and Mascrinas. Under Republic Act No. 7160, [7] the community tax certificate
shall be paid in the place of residence of the individual, or in the place where the principal office of the juridical entity is
located.[8] It also pointed out that petitioner Saludo's law office, which was also representing him in the present case, is in
Pasay City. The foregoing circumstances were considered by the appellate court as judicial admissions of petitioner
Saludo which are conclusive upon him and no longer required proof.
The appellate court chided the court a quo for stating that as incumbent congressman of the lone district of Southern
Leyte, judicial notice could be taken of the fact of petitioner Saludo's residence thereat. No evidence had yet been adduced
that petitioner Saludo was then the congressman of Southern Leyte and actual resident of Ichon, Macrohon of the said
province.
The appellate court held that, based on his complaint, petitioner Saludo was actually residing in Pasay City. It faulted him
for filing his complaint with the court a quo when the said venue is inconvenient to the parties to the case. It opined that
under the rules, the possible choices of venue are Pasay City or Makati City, or any place in the National Capital Judicial
Region, at the option of petitioner Saludo.
It stressed that while the choice of venue is given to plaintiff, said choice is not left to his caprice and cannot deprive a
defendant of the rights conferred upon him by the Rules of Court. [9] Further, fundamental in the law governing venue of
actions that the situs for bringing real and personal civil actions is fixed by the rules to attain the greatest possible
convenience to the party litigants by taking into consideration the maximum accessibility to them - i.e., to both plaintiff
and defendant, not only to one or the other - of the courts of justice. [10]
The appellate court concluded that the court a quo should have given due course to respondents' affirmative defense of
improper venue in order to avoid any suspicion that petitioner Saludo's motive in filing his complaint with the court a quo
was only to vex and unduly inconvenience respondents or even to wield influence in the outcome of the case, petitioner
Saludo being a powerful and influential figure in the said province. The latter circumstance could be regarded as a "specie
of forum shopping" akin to that in Investors Finance Corp. v. Ebarle[11] where the Court mentioned that the filing of the
civil action before the court in Pagadian City "was a specie of forum shopping" considering that plaintiff therein was an
influential person in the locality.
The decretal portion of the assailed Decision dated May 22, 2003 of the appellate court reads:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the challenged orders must be, as they hereby are, VACATED
and SET ASIDE and the respondent judge, or any one acting in his place or stead, is instructed and enjoined to desist from
further proceeding in the case, except to dismiss it. The temporary restraining order earlier issued is hereby converted into
a writ of preliminary injunction, upon the posting this time by petitioners [herein respondents], within five (5) days from
receipt of this decision, of a bond in the amount of Five Million Pesos (P5,000,000.00), to answer for all damages that
private respondent [herein petitioner] may sustain by reason of the issuance of such injunction should the Court finally

decide that petitioners are not entitled thereto. Private respondent, if he so minded, may refile his case for damages before
the Regional Trial Court of Makati City or Pasay City, or any of the Regional Trial Courts of the National Capital Judicial
Region. Without costs.
SO ORDERED.[12]
Petitioner Saludo sought the reconsideration of the said decision but the appellate court, in the Resolution dated August
14, 2003, denied his motion for reconsideration. Hence, he filed the instant petition for review with the Court alleging
that:
The Court of Appeals, (Special Fourth Division), in promulgating the afore-mentioned Decision and Resolution, has
decided a question of substance in a way probably not in accord with law or with applicable decisions of this Honorable
Court.
(a) the Court of Appeals erred in not taking judicial notice of the undisputed fact that herein petitioner is the incumbent
congressman of the lone district of Southern Leyte and as such, he is a residence (sic) of said district;
(b) the Court of Appeals erred in dismissing the complaint on the basis of improper venue due to the alleged judicial
admission of herein petitioner;
(c) the Court of Appeals in dismissing the complaint ignored applicable decisions of this Honorable Court; and
(d) the Court of Appeals erred in deciding that herein petitioner violated the rules on venue, and even speculated that
herein petitioner's motive in filing the complaint in Maasin City was only to vex the respondents. [13]
In gist, the sole substantive issue for the Court's resolution is whether the appellate court committed reversible error in
holding that venue was improperly laid in the court a quo in Civil Case No. R-3172 because not one of the parties,
including petitioner Saludo, as plaintiff therein, was a resident of Southern Leyte at the time of filing of the complaint.
The petition is meritorious.
Petitioner Saludo's complaint for damages against respondents before the court a quo is a personal action. As such, it is
governed by Section 2, Rule 4 of the Rules of Courts which reads:
SEC. 2. Venue of personal actions. - All other actions may be commenced and tried where the plaintiff or any of the
principal plaintiffs resides, or where the defendant or any of the principal defendants resides, or in the case of a nonresident defendant where he may be found, at the election of the plaintiff.
The choice of venue for personal actions cognizable by the RTC is given to plaintiff but not to plaintiff's caprice because
the matter is regulated by the Rules of Court.[14] The rule on venue, like other procedural rules, is designed to insure a just
and orderly administration of justice, or the impartial and evenhanded determination of every action and proceeding. [15]
The option of plaintiff in personal actions cognizable by the RTC is either the place where defendant resides or may be
found, or the place where plaintiff resides. If plaintiff opts for the latter, he is limited to that place. [16]
Following this rule, petitioner Saludo, as plaintiff, had opted to file his complaint with the court a quo which is in Maasin
City, Southern Leyte. He alleged in his complaint that he was a member of the House of Representatives and a resident of
Ichon, Macrohon, Southern Leyte to comply with the residency requirement of the rule.
However, the appellate court, adopting respondents' theory, made the finding that petitioner Saludo was not a resident of
Southern Leyte at the time of the filing of his complaint. It hinged the said finding mainly on the fact that petitioner
Saludo's community tax certificate, indicated in his complaint's verification and certification of non-forum shopping, was
issued at Pasay City. That his law office is in Pasay City was also taken by the appellate court as negating petitioner
Saludo's claim of residence in Southern Leyte.
The appellate court committed reversible error in finding that petitioner Saludo was not a resident of Southern Leyte at the
time of the filing of his complaint, and consequently holding that venue was improperly laid in the court a quo. In
Dangwa Transportation Co., Inc. v. Sarmiento,[17] the Court had the occasion to explain at length the meaning of the term
"resides" for purposes of venue, thus:
In Koh v. Court of Appeals, we explained that the term "resides" as employed in the rule on venue on personal actions
filed with the courts of first instance means the place of abode, whether permanent or temporary, of the plaintiff or the
defendant, as distinguished from "domicile" which denotes a fixed permanent residence to which, when absent, one has

the intention of returning.

"It is fundamental in the law governing venue of actions (Rule 4 of the Rules of Court) that the situs for bringing real and
personal civil actions are fixed by the rules to attain the greatest convenience possible to the parties-litigants by taking into
consideration the maximum accessibility to them of the courts of justice. It is, likewise, undeniable that the term domicile
is not exactly synonymous in legal contemplation with the term residence, for it is an established principle in Conflict of
Laws that domicile refers to the relatively more permanent abode of a person while residence applies to a temporary stay
of a person in a given place. In fact, this distinction is very well emphasized in those cases where the Domiciliary Theory
must necessarily supplant the Nationality Theory in cases involving stateless persons.
"This Court held in the case of Uytengsu v. Republic, 50 O.G. 4781, October, 1954, reversing its previous stand in Larena
v. Ferrer, 61 Phil. 36, and Nuval v. Guray, 52 Phil. 645, that "
"There is a difference between domicile and residence. Residence is used to indicate a place of abode, whether permanent
or temporary; domicile denotes a fixed permanent residence to which when absent, one has the intention of returning. A
man may have a residence in one place and a domicile in another. Residence is not domicile, but domicile is residence
coupled with the intention to remain for an unlimited time. A man can have but one domicile for one and the same purpose
at any time, but he may have numerous places of residence. His place of residence generally is his place of domicile, but
is not by any means, necessarily so since no length of residence without intention of remaining will constitute domicile."
(Italicized for emphasis)
"We note that the law on venue in Courts of First Instance (Section 2, of Rule 4, Rules of Court) in referring to the parties
utilizes the words "resides or may be found," and not "is domiciled," thus:
"Sec. 2(b) Personal actions - All other actions may be commenced and tried where the defendant or any of the defendants
resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff." (Italicized
for emphasis)
"Applying the foregoing observation to the present case, We are fully convinced that private respondent Coloma's
protestations of domicile in San Nicolas, Ilocos Norte, based on his manifested intention to return there after the
retirement of his wife from government service to justify his bringing of an action for damages against petitioner in the
C.F.I. of Ilocos Norte, is entirely of no moment since what is of paramount importance is where he actually resided or
where he may be found at the time he brought the action, to comply substantially with the requirements of Sec. 2(b) of
Rule 4, Rules of Court, on venue of personal actions." (Koh v. Court of Appeals, supra, pp. 304-305.)
The same construction of the word "resides" as used in Section 1, Rule 73, of the Revised Rules of Court, was enunciated
in Fule v. Court of Appeals, et al. (G.R. No. L-40502) and Fule v. Hon. Ernani C. Pao, et al. (G.R. No. L-42670),
decided on November 29, 1976. Thus, this Court, in the aforecited cases, stated:
"2. But, the far-ranging question is this: What does the term "resides" mean? Does it refer to the actual residence or
domicile of the decedent at the time of his death? We lay down the doctrinal rule that the term "resides" connotes ex vi
termini "actual residence" as distinguished from "legal residence or domicile." This term "resides," like the terms
"residing" and "residence" is elastic and should be interpreted in the light of the object or purposes of the statute or rule in
which it is employed. In the application of venue statutes and rules - Section 1, Rule 73 of the Revised Rules of Court is
of such nature - residence rather than domicile is the significant factor. Even where the statute uses the word "domicile"
still it is construed as meaning residence and not domicile in the technical sense. Some cases make a distinction between
the terms "residence" and "domicile" but as generally used in statutes fixing venue, the terms are synonymous, and convey
the same meaning as the term "inhabitant." In other words, "resides" should be viewed or understood in its popular sense,
meaning, the personal, actual or physical habitation of a person, actual residence or place of abode. It signifies physical
presence in a place and actual stay thereat. In this popular sense, the term means merely residence, that is, personal
residence, not legal residence or domicile. Residence simply requires bodily presence as an inhabitant in a given place,
while domicile requires bodily presence in that place and also an intention to make it one's domicile. No particular length
of time of residence is required though; however, the residence must be more than temporary." [18]
There is no dispute that petitioner Saludo was the congressman or the representative of the lone district of Southern Leyte
at the time of filing of his complaint with the court a quo. Even the appellate court admits this fact as it states that "it may
be conceded that private respondent ever so often travels to Maasin City, Southern Leyte, because he is its representative
in the lower house."[19]

As a member of the House of Representatives, petitioner Saludo was correctly deemed by the court a quo as possessing
the requirements for the said position,[20] including that he was then a resident of the district which he was representing,
i.e., Southern Leyte. Significantly, for purposes of election law, the term "residence" is synonymous with "domicile," thus:
x x x [T]he Court held that "domicile" and "residence" are synonymous. The term "residence," as used in the election law,
imports not only an intention to reside in a fixed place but also personal presence in that place, coupled with conduct
indicative of such intention. "Domicile" denotes a fixed permanent residence to which when absent for business or
pleasure, or for like reasons, one intends to return. x x x [21]
It can be readily gleaned that the definition of "residence" for purposes of election law is more stringent in that it is
equated with the term "domicile." Hence, for the said purpose, the term "residence" imports "not only an intention to
reside in a fixed place but also personal presence in that place, coupled with conduct indicative of such intention." [22]
When parsed, therefore, the term "residence" requires two elements: (1) intention to reside in the particular place; and (2)
personal or physical presence in that place, coupled with conduct indicative of such intention. As the Court elucidated,
"the place where a party actually or constructively has a permanent home, where he, no matter where he may be found at
any given time, eventually intends to return and remain, i.e., his domicile, is that to which the Constitution refers when it
speaks of residence for the purposes of election law." [23]
On the other hand, for purposes of venue, the less technical definition of "residence" is adopted. Thus, it is understood to
mean as "the personal, actual or physical habitation of a person, actual residence or place of abode. It signifies physical
presence in a place and actual stay thereat. In this popular sense, the term means merely residence, that is, personal
residence, not legal residence or domicile. Residence simply requires bodily presence as an inhabitant in a given place,
while domicile requires bodily presence in that place and also an intention to make it one's domicile." [24]
Since petitioner Saludo, as congressman or the lone representative of the district of Southern Leyte, had his residence (or
domicile) therein as the term is construed in relation to election laws, necessarily, he is also deemed to have had his
residence therein for purposes of venue for filing personal actions. Put in another manner, Southern Leyte, as the domicile
of petitioner Saludo, was also his residence, as the term is understood in its popular sense. This is because "residence is
not domicile, but domicile is residence coupled with the intention to remain for an unlimited time."
Reliance by the appellate court on Koh v. Court of Appeals[25] is misplaced. Contrary to its holding,[26] the facts of the
present case are not similar to the facts therein. In Koh, the complaint was filed with the Court of First Instance in San
Nicolas, Ilocos Norte by plaintiff who admitted that he was a resident of Kamias, Quezon City. Save for the fact that he
grew up in San Nicolas, Ilocos Norte and that he manifested the intent to return there after retirement, plaintiff therein had
not established that he was actually a resident therein at the time of the filing of his complaint. Neither did he establish
that he had his domicile therein because although he manifested the intent to go back there after retirement, the element of
personal presence in that place was lacking. To reiterate, domicile or residence, as the terms are taken as synonyms,
imports "not only an intention to reside in a fixed place but also personal presence in that place, coupled with conduct
indicative of such intention."[27]
In contrast, petitioner Saludo was the congressman or representative of Southern Leyte at the time of filing of his
complaint with the court a quo. Absent any evidence to the contrary, he is deemed to possess the qualifications for the said
position, including that he was a resident therein. And following the definition of the term "residence" for purposes of
election law, petitioner Saludo not only had the intention to reside in Southern Leyte, but he also had personal presence
therein, coupled with conduct indicative of such intention. The latter element, or his bodily presence as an inhabitant in
Southern Leyte, was sufficient for petitioner Saludo to be considered a resident therein for purposes of venue.
The following ratiocination of the court a quo is apt:
Residence in civil law is a material fact, referring to the physical presence of a person in a place. A person can have two or
more residences, such as a country residence and a city residence. (Quetulio v. Ruiz, S.C. Off. Gaz. 156, Commentaries
and Jurisprudence in Civil Law, Vol. 1, page 211, Tolentino). Residence is acquired by living in a place; on the other hand,
domicile can exist without actually living in the place. The important thing for domicile is that, once residence has been
established in one place, there be an intention to stay there permanently, even if residence is also established in some other
place.
Thus, if a person lives with his family habitually in Quezon City, he would have his domicile in Quezon City. If he also
has a house for vacation purposes in the City of Baguio, and another house in connection with his business in the City of

Manila, he would have residence in all three places (Tolentino, Commentaries and Jurisprudence on Civil Law, Vol. 1,
Page 212, 1990 Edition) so that one[']s legal residence or domicile can also be his actual, personal or physical residence or
habitation or place of abode if he stays there with intention to stay there permanently.
In the instant case, since plaintiff has a house in Makati City for the purpose of exercising his profession or doing business
and also a house in Ichon, Macrohon, Southern Leyte, for doing business and/or for election or political purposes where
he also lives or stays physically, personally and actually then he can have residences in these two places. Because it would
then be preposterous to acknowledge and recognize plaintiff Aniceto G. Saludo, Jr. as congressman of Southern Leyte
without also recognizing him as actually, personally and physically residing thereat, when such residence is required by
law.[28]
The fact then that petitioner Saludo's community tax certificate was issued at Pasay City is of no moment because
granting arguendo that he could be considered a resident therein, the same does not preclude his having a residence in
Southern Leyte for purposes of venue. A man can have but one domicile for one and the same purpose at any time, but he
may have numerous places of residence.[29]
That petitioner Saludo was the congressman or representative of the lone district of Southern Leyte at the time of the
filing of his complaint was admitted as a fact by the court a quo. In this connection, it consequently held that, as such,
petitioner Saludo's residence in Southern Leyte, the district he was the representing, could be taken judicial notice of. The
court a quo cannot be faulted for doing so because courts are allowed "to take judicial notice of matters which are of
public knowledge, or are capable of unquestionable demonstration, or ought to be known to judges because of their
judicial functions."[30] Courts are likewise bound to take judicial notice, without the introduction of evidence, of the law in
force in the Philippines,[31] including its Constitution.
The concept of "facts of common knowledge" in the context of judicial notice has been explained as those facts that are
"so commonly known in the community as to make it unprofitable to require proof, and so certainly known to as to make
it indisputable among reasonable men."[32] Moreover, "though usually facts of "common knowledge" will be generally
known throughout the country, it is sufficient as a basis for judicial notice that they be known in the local community
where the trial court sits."[33] Certainly, the fact of petitioner Saludo being the duly elected representative of Southern
Leyte at the time could be properly taken judicial notice of by the court a quo, the same being a matter of common
knowledge in the community where it sits.
Further, petitioner Saludo's residence in Southern Leyte could likewise be properly taken judicial notice of by the court a
quo. It is bound to know that, under the Constitution, one of the qualifications of a congressman or representative to the
House of Representatives is having a residence in the district in which he shall be elected.
In fine, petitioner Saludo's act of filing his complaint with the court a quo cannot be characterized as a "specie of forumshopping" or capricious on his part because, under the rules, as plaintiff, he is precisely given this option.
Finally, respondents' claim that the instant petition for review was not properly verified by petitioner Saludo deserves
scant consideration.
Section 4, Rule 7 of the Rules of Court reads:
Sec. 4. Verification. - Except when otherwise specifically required by law or rule, pleadings need not be under oath,
verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and
correct of his personal knowledge or based on authentic records.
A pleading required to be verified which contains a verification based on "information and belief," or upon "knowledge,
information and belief," or lacks proper verification, shall be treated as an unsigned pleading.
Petitioner Saludo's verification and certification of non-forum shopping states that he has "read the contents thereof
[referring to the petition] and the same are true and correct of my own personal knowledge and belief and on the basis of
the records at hand." The same clearly constitutes substantial compliance with the above requirements of the Rules of
Court.
WHEREFORE, premises considered, the petition is GRANTED. The Decision dated May 22, 2003 and Resolution

dated August 14, 2003 of the Court of Appeals in CA-G.R. SP No. 69553 are REVERSED and SET ASIDE. The Orders
dated September 10, 2001 and January 2, 2002 of the Regional Trial Court of Maasin City, Southern Leyte, Branch 25
thereof, in Civil Case No. R-3172 are REINSTATED.
SO ORDERED.
Panganiban, C.J. (Chairperson), Ynares-Santiago, Austria-Martinez, and Chico-Nazario, JJ., concur.

[1]

Penned by Associate Justice Renato C. Dacudao, with Associate Justices Godardo A. Jacinto (Chairman) and Rodrigo
V. Cosico, concurring; rollo, pp. 24-30.
[2]

Honorable Romeo M. Gomez.

[3]

Rollo, pp. 104-105.

[4]

Citing Boleyley v. Hon. Villanueva, 373 Phil. 141, 146 (1999).

[5]

G.R. No. L-40428, March 31, 1976, 70 SCRA 298.

[6]

Id. at 305.

[7]

Local Government Code of 1991.

[8]

Id., Section 160 thereof.

[9]

Citing, among others, Baritua v. Court of Appeals, 335 Phil. 12, 18 (1997).

[10]

Koh v. Court of Appeals, supra note 5.

[11]

G.R. No. L-70640, June 29, 1988, 163 SCRA 60.

[12]

Rollo, p. 30.

[13]

Id. at 10.

[14]

Escuerte v. Court of Appeals, G.R. No. 53485, February 6, 1991, 193 SCRA 541.

[15]

Id. at 544.

[16]

Id.

[17]

G.R. No. L-22795, January 31, 1977, 75 SCRA 124.

[18]

Id. at 127-129.

[19]

CA Decision, p. 5; rollo, p. 26.

[20]

Section 6, Article VI of the Constitution reads:

No person shall be a Member of the House of Representatives unless he is a natural-born citizen of the Philippines and, on
the day of the election, is at least twenty-five years of age, able to read and write, and, except the party-list
representatives, a registered voter in the district in which he shall be elected, and a resident thereof for a period of not less
than one year immediately preceding the day of the election.
[21]
Papandayan, Jr. v. Commission on Elections, 430 Phil. 754, 770 (2002).
[22]

Id..

[23]

Perez v. Commission on Elections, 375 Phil. 1106, 1117 (1999).

[24]

Dangwa Transportation Co., Inc. v. Sarmiento, supra note 17, at 129.

[25]

Supra note 5.

[26]

In its Resolution dated August 14, 2003 denying petitioner's motion for reconsideration, the appellate court stated that
the pertinent facts in the case are similar to Koh; rollo, p. 38.
[27]

See, for example, Dangwa Transportation Co., Inc. v. Sarmiento, supra note 17, at 127.

[28]

Order dated January 2, 2002 of the court a quo; rollo, p. 116.

[29]

Dangwa Transportation Co., Inc. v. Sarmiento, supra note 17, at 128.

[30]

Section 2, Rule 129, Rules of Court.

[31]

HERRERA, IV REMEDIAL LAW 78 (1999 ed.), citing 5 MORAN 58 (1980 ed.). Section 1, Rule 129 of the Rules of
Court reads:
Judicial notice, when mandatory. - A court shall take judicial notice, without the introduction of evidence, of the existence
and territorial extent of states, their political history, forms of government and symbols of nationality, the law of nations,
the admiralty and maritime courts of the world and their seals, the political constitution and history of the Philippines, the
official acts of the legislative, executive and judicial departments of the Philippines, the laws of nature, the measure of
time, and the geographical divisions.
[32]
Id. at 81, citing MCCORMICK, EVIDENCE, 4th ed.
[33]

Id.

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Supreme Court E-Library120 Phil.

1031

[ G.R. No. L-19596, October 30, 1964 ]

LAVERN R. DILWEG, PLAINTIFF AND APPELLANT VS. ROBERT 0. PHILIPPS, INOCENTES
DINEROS AND ISAAC S. ECETA, DEFENDANTS AND APPELLEES.
DECISION
Reyes, J. B. L. J.:
Direct appeal on pure question of law from an order rendered by the Court of First Instance of Rizal Branch II in its Civil
Case No. 4850, dismissing plaintiffs complaint as well as from the order denying a motion to reconsider said order of
dismissal.

The record disclosed that on 7 February 1958 plaintiff Lavern R. Dilweg, a nonresident American citizen, through
counsel, instituted the complaint at bar consisting of six causes of action against defendants Robert O. Phillips, Inocentes
G. Dineros, and Isaac S. Eceta, claiming civil damages arising out of alleged libelous and defamatory statements uttered
and published in the Philippines by the latter. On 24 February 1958 the first two named defendants presented a motion to
dismiss the complaint. Plaintiff interposed an opposition thereto on 7 March 1958.
On 13 May 1958 the trial court, acting on this motion, denied the same; consequently, on 17 May 1958, the two
defendants filed their joint answer with six causes of action as counterclaims for damages against the plaintiff. On 24 May
1958, plaintiff answered the defendants' counter-claims.
On 11 June 1958, defendant Isaac S. Eceta, who was represented by a different counsel, filed his answer adopting in toto
as his own the answer as well as the counterclaims of his co-defendants. On 26 June 1958, plaintiff answered defendant
Eceta's counterclaims.
The trial court, in its order dated 17 September 1958, scheduled the hearing of the case for 10 and 11 December 1958.
On 8 March 1961, in the course of the trial on the merits defendants Robert O. Phillips and Inocentes G. Dineros
presented a written motion for reconsideration of the order dated 13 May 1958 denying their motion to dismiss the
plaintiff's complaint. An opposition thereto was interposed by plaintiff on 7 April 1961.
On 11 May 1961 the trial court issued an order, which is the subject of the present appeal, the pertinent portion of which is
as follows:
"This action is one for damages by reason of alleged libelous statements uttered in the Philippines by the defendants
against the plaintiff. In other words, it is an action bared on a tort or act, which under the law of the Philippines, is defined
as a criminal offense. At the time the said libelous statements were uttered, the plaintiff was in Washington, D.C. where,
he was and has always been a resident. There is no allegation in the complaint that plaintiff has ever been in the
Philippines or has resided at anytime therein.
"The general rule in this jurisdiction is that a court acquires jurisdiction over the person of the plaintiff by the filing of his
complaint (Manila Railroad Co. vs. .Attorney General, 23 Phil. 523). In King Mau Wu vs.. Sycip, 94 Phil., 784, 50 Off.
Gaz., page 5366, April 23, 1954, it was contended that as the plaintiff therein has never been a resident of the Philippines,
the courts of this country have not acquired jurisdiction to take cognizance of his action bared on a contract which was
executed in the State of New York, U.S.A. The Supreme Court held that a non-resident may sue a resident on the courts of
his country for the collection of money arising from a contract notwithstanding the fact that said contract was execute
outside the country. In Western Equipment and supply Co. vs. Reyes, 51 Phil. 116 it was held that a foreign corporation
which has never done any business in the Philippines and which is unlicensed and unregistered to do business here, may
sue in the courts of the Philippines for the purpose of restraining certain resident and inhabitants of the Philippines from
organizing a corporation in this country bearing the same name as that of the plaintiff because the action involves the use
of a tradename and hence, it is one in rem.
"The instant case is however different because it is a personal action based on an act defined as a crime under Philippine
Law. It is therefor of first impression. Defendants contents that if a counterclaim is filed against the plaintiff for damages,
it cannot be enforced because the Court has not acquired jurisdiction over his person as he has never been and is not now
present in this country. It may be stated in addition, that in such a case, if a judgment is rendered against him by this Court
since he has no property in the Philippines the decision cannot be enforced because the decision of a court of this country
is not enforceable outside of Philippine jurisdiction.
"In some European countries, it is a requirement that before a non-resident alien may file an action, he must file a bond,
the so-called 'Judicatum Solvi,' in order to protect the interest of residents from unwarranted actions. There is no law of
this kind in this jurisdiction,
"As there are no doctrines in this jurisdiction covering the issue raised by the defendants, this Court is bound to rely on
American doctrines for the reason that our rules on jurisdiction have been copied and patterned upon American laws and

statutes. The following are some of the doctrines which have some hearing on the case, aside from those cited by the
movants:
"A difficulty may sometimes arise, in determining whether a particular law applied to the citizen of a foreign country, and
(is) intended to subject him to its provision. But if the law applies to him, and embraces his case, it is unquestionably
binding upon him when he is within the jurisdiction of the United States." (Brown vs. Duchesne, Mass. 19 How., U.S. 194,
51 L. Ed. 595.) (Ibid).
"While the presence of the res or property within the territorial limits of the sovereignty under which the court acts may
confer jurisdiction in rem on the court, in personal actions jurisdiction both of the subject matter and of the person or any
party whose rights are to be effected are essential, and a state court can acquire no jurisdiction where neither the person
nor any property of defendant can be found within the state. (Emmanuel vs. Ferris, 41 S.E. 20, 63 S. C. 104). If a court
having jurisdiction of the subject matter acquires jurisdiction of the person it has the right and power to hear and
determine the particular case; and unless jurisdiction of the subject matter and of the person exist it is the duty of the court
to decline to do more than ascertain and declare that it has no power to examine or to decide the merits of the case . . .
While a court may have general jurisdiction of the subject matter of a class of action, it does not necessarily follow that it
may hear and determine a particular case submitted for its consideration. (21 C.J.S. 43-44)
"In El Banco Espanol Filipino vs. Palanca, 37 Phil 921, and Perkins vs. Dizon, 69 Phil. 189, it has been also held that in
order that the court may validly, try a case, it must have jurisdiction over the subject matter and over the persons of the
parties. Jurisdiction over the persons of the parties is acquired by their voluntary appearance in court and their submission
to its authority, or by the coercive power of legal process exerted over their persons.
"Applying the principles laid down in the above-quoted doctrines and those cited in the motion for reconsideration the
defendants, the Court has come to conclusion that in order that it may validly try this care, it must have jurisdiction not
only over the persons of the parties and over the subject matter and the plaintiff must be a resident within the territorial of
this Court in order that jurisdiction over his person can be acquired, otherwise the Court will not be able to render a valid
judgment against him.
"IN VIEW OF TIIE FOREGOING CONSIDERATIONS and of the fact that the question of jurisdiction may be raised at
any time, the Court hereby grants the motion for reconsideration: sets aside the former order denying defendants motion
to dismiss and hereby dismisses this case, without costs.
So ORDERED." (Rec. on Appeal, pp. 99-103)
On 28, June 1961, a motion to have the above-quoted order reconsidered was presented by the plaintiff and an opposition
thereto was filed by the defendants on 10 July 196l. Plaintiff, in turn, submitted a reply to said opposition on 22 July 1961.
On 7 November 1961, the trial court, acting on said motion, denied it; hence, the present appeal.
The sole issue posed in the present appeal is whether or not our Philippine courts can rightfully refuse to assume
jurisdiction over a personal action instituted by a nonresident alien who is not within the territorial jurisdiction of our
courts.
In refusing to assume jurisdiction over this case, the court below upheld defendants contention that in a personal action it
can only acquire jurisdiction over the person of the plaintiff if he resides within our territorial jurisdiction. We believe and
hold that the trial court is in error in this point. In fact, this Court only recently has upheld the right of nonresidents to
maintain personal actions against our residents in Philippine courts (Sharuff vs. Bubla, G.R. No. L-17029, Scptember 30,
1964).
In an .American case with facts similar to those obtaining in the case at bar, and in which the same identical issue was
raised, the Court of Appeals of New York held:
"There is no objection to the maintenance of the action in our courts in the fact that the plaintiff was an English subject or
he was a non-resident. As a personal action sounding in tort, it was transitory in its nature, following the person of the
defendant. Our courts were open to the plaintiff for redress of any personal injury suffered by reason of defendants acts.

Storys Conflict of Laws. Sec. 625; Whartons Conflict of Laws, Secs. 478, 707, 743; Cardner vs. Thomas, 14 Johrs. 134,
7 Am. Dec. 445; De Witt vs. Puchapan, 54 Barb. 31. (Crashley vs. Press Pub. Co., 71 N. E. 258, 259).
This position is supported by practically unanimous American authority (3 Am. Jur. 2d, Aliens, Sec. 43, p. 895; 21 C.J.S.
(Courts), sec. 75, pp. 112-113).
It is thus evident that, contrary to the conclusion reached by the court below, it is not indispensable for a foreigner to
establish a residence, nor need he be physically present in a state of which he is not a resident or citizen in order that he
may initiate or maintain a personal action against a resident or citizen of that ether state for rights of action arising in, or
for violations of laws committed within, the territorial jurisdiction of that other state. In this jurisdiction, no general law
has come to our knowledge or notice which restricts the right of nonresident aliens to sue in our courts. It is not disputed
that plaintiff's causes of action arose in, and that the defendants are within, our territorial jurisdiction. It is conceded by
both parties that the law under which the instant case falls is silent on the matter of the right of an Alien to sue in our
courts. On the other hand the particular law evidently availed of by the plaintiff in filing his complaint is Article 33 of the
Civil Code of the Philippines, which provides:
"In cases of defamation, fraud, and physical injuries, a civil action for damages entirely separate and distinct from the
criminal action may be brought by the injured party. Such civil action shall proceed independently of the criminal
prosecution and shall require only preponderance of evidence."
The above-quoted provision of law does not make any distinction as to whether the "injured party." who may maintain an
action for damages based on defamation, is a Filipino citizen or resident or an alien.
The American decisions cited in the order of 11 May 1961 are not applicable to the case at bar because there the
defendants invoked the issue of lack of jurisdiction over their own persons and not against the person of the plaintiff.
The fact that there are counterclaims against the non-resident plaintiff does not alter the case. The Rules of Court provide
for remedies against nonresident defendants. Wherefore, the order appealed from is set aside, and the case is ordered
remanded to the court below for further proceeding consonant with this opinion. Costs against respondents Phillips,
Dineros and Eceta.
Bengzon C. J., Bautista Angelo, Concepcion, Barrera, Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar,
JJ., concur.

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Supreme Court E-Library

SECOND DIVISION

[ G.R. No. 205487, November 12, 2014 ]

ORION SAVINGS BANK, PETITIONER, VS. SHIGEKANE SUZUKI, RESPONDENT.
DECISION

BRION, J.:
Before us is the Petition for Review on Certiorari[1] filed by petitioner Orion Savings Bank (Orion) under Rule 45 of the
Rules of Court, assailing the decision[2] dated August 23, 2012 and the resolution[3] dated January 25, 2013 of the Court of
Appeals (CA) in CA-G.R. CV No. 94104.
The Factual Antecedents
In the first week of August 2003, respondent Shigekane Suzuki (Suzuki), a Japanese national, met with Ms. Helen Soneja
(Soneja) to inquire about a condominium unit and a parking slot at Cityland Pioneer, Mandaluyong City, allegedly owned
by Yung Sam Kang (Kang), a Korean national and a Special Resident Retirees Visa (SRRV) holder.
At the meeting, Soneja informed Suzuki that Unit No. 536 [covered by Condominium Certificate of Title (CCT) No.
18186][4] and Parking Slot No. 42 [covered by CCT No. 9118][5] were for sale for P3,000,000.00. Soneja likewise assured
Suzuki that the titles to the unit and the parking slot were clean. After a brief negotiation, the parties agreed to reduce the
price to P2,800,000.00.
On August 5, 2003, Suzuki issued Kang a Bank of the Philippine Island (BPI) Check No. 83349[6] for One Hundred
Thousand Pesos (P100,000.00) as reservation fee.[7] On August 21, 2003, Suzuki issued Kang another check, BPI Check
No. 83350,[8] this time for P2,700,000.00 representing the remaining balance of the purchase price. Suzuki and Kang then
executed a Deed of Absolute Sale dated August 26, 2003[9] covering Unit No. 536 and Parking Slot No. 42. Soon after,
Suzuki took possession of the condominium unit and parking lot, and commenced the renovation of the interior of the
condominium unit.
Kang thereafter made several representations with Suzuki to deliver the titles to the properties, which were then allegedly
in possession of Alexander Perez (Perez, Orions Loans Officer) for safekeeping. Despite several verbal demands, Kang
failed to deliver the documents. Suzuki later on learned that Kang had left the country, prompting Suzuki to verify the
status of the properties with the Mandaluyong City Registry of Deeds.
Before long, Suzuki learned that CCT No. 9118 representing the title to the Parking Slot No. 42 contained no annotations
although it remained under the name of Cityland Pioneer. This notwithstanding, Cityland Pioneer, through Assistant Vice
President Rosario D. Perez, certified that Kang had fully paid the purchase price of Unit. No. 536 [10] and Parking Slot No.
42.[11]
CCT No. 18186 representing the title to the condominium unit had no existing encumbrance, except for an annotation
under Entry No. 73321/C-10186 which provided that any conveyance or encumbrance of CCT No. 18186 shall be subject
to approval by the Philippine Retirement Authority (PRA). Although CCT No. 18186 contained Entry No. 66432/C-10186
dated February 2, 1999 representing a mortgage in favor of Orion for a P1,000,000.00 loan, that annotation was
subsequently cancelled on June 16, 2000 by Entry No. 73232/T. No. 10186. Despite the cancellation of the mortgage to
Orion, the titles to the properties remained in possession of Perez.
To protect his interests, Suzuki then executed an Affidavit of Adverse Claim [12] dated September 8, 2003, with the Registry
of Deeds of Mandaluyong City, annotated as Entry No. 3292/C-No. 18186 in CCT No. 18186. Suzuki then demanded the
delivery of the titles.[13] Orion, (through Perez), however, refused to surrender the titles, and cited the need to consult
Orions legal counsel as its reason.
On October 14, 2003, Suzuki received a letter from Orions counsel dated October 9, 2003, stating that Kang obtained
another loan in the amount of P1,800,000.00. When Kang failed to pay, he executed a Dacion en Pago dated February 2,
2003, in favor of Orion covering Unit No. 536. Orion, however, did not register the Dacion en Pago, until October 15,
2003.
On October 28, 2003, Suzuki executed an Affidavit of Adverse Claim over Parking Slot No. 42 (covered by CCT No.
9118) and this was annotated as Entry No. 4712/C-No. 9118 in the parking lots title.
On January 27, 2004, Suzuki filed a complaint for specific performance and damages against Kang and Orion. At the pretrial, the parties made the following admissions and stipulations:

1. That as of August 26, 2003, Kang was the registered owner of Unit No. 536 and Parking Slot No. 42;
2. That the mortgage in favor of Orion supposedly executed by Kang, with Entry No. 66432/C-10186 dated
February 2, 1999, was subsequently cancelled by Entry No. 73232/T No. 10186 dated June 16, 2000;
3. That the alleged Dacion en Pago was never annotated in CCT Nos. 18186 and 9118;
4. That Orion only paid the appropriate capital gains tax and the documentary stamp tax for the alleged Dacion en
Pago on October 15, 2003;
5. That Parking Slot No. 42, covered by CCT No. 9118, was never mortgaged to Orion; and
6. That when Suzuki bought the properties, he went to Orion to obtain possession of the titles.
The RTC Ruling
In its decision[14] dated June 29, 2009, the Regional Trial Court (RTC), Branch 213, Mandaluyong City ruled in favor of
Suzuki and ordered Orion to deliver the CCT Nos. 18186 and 9118 to Suzuki.
The court found that Suzuki was an innocent purchaser for value whose rights over the properties prevailed over Orions.
The RTC further noted that Suzuki exerted efforts to verify the status of the properties but he did not find any existing
encumbrance in the titles. Although Orion claims to have purchased the property by way of a Dacion en Pago, Suzuki
only learned about it two (2) months after he bought the properties because Orion never bothered to register or annotate
the Dacion en Pago in CCT Nos. 18186 and 9116.
The RTC further ordered Orion and Kang to jointly and severally pay Suzuki moral damages, exemplary damages,
attorneys fees, appearance fees, expenses for litigation and cost of suit. Orion timely appealed the RTC decision with the
CA.
The CA Ruling
On August 23, 2012, the CA partially granted Orions appeal and sustained the RTC insofar as it upheld Suzukis right
over the properties. The CA further noted that Entry No. 73321/C-10186 pertaining to the withdrawal of investment of an
SRRV only serves as a warning to an SRRV holder about the implications of a conveyance of a property investment. It
deviated from the RTC ruling, however, by deleting the award for moral damages, exemplary damages, attorneys fees,
expenses for litigation and cost of suit.
Orion sought a reconsideration of the CA decision but the CA denied the motion in its January 25, 2013 resolution. Orion
then filed a petition for review on certiorari under Rule 45 with this Court.
The Petition and Comment
Orions petition is based on the following grounds/arguments:[15]
1. The Deed of Sale executed by Kang in favor of Suzuki is null and void. Under Korean law, any conveyance of a
conjugal property should be made with the consent of both spouses;
2. Suzuki is not a buyer in good faith for he failed to check the owners duplicate copies of the CCTs;
3. Knowledge of the PRA restriction under Entry No. 73321/C-10186, which prohibits any conveyance or
encumbrance of the property investment, defeats the alleged claim of good faith by Suzuki; and
4. Orion should not be faulted for exercising due diligence.

In his Comment,[16] Suzuki asserts that the issue on spousal consent was belatedly raised on appeal. Moreover, proof of
acquisition during the marital coverture is a condition sine qua non for the operation of the presumption of conjugal
ownership.[17] Suzuki additionally maintains that he is a purchaser in good faith, and is thus entitled to the protection of the
law.
The Courts Ruling
We deny the petition for lack of merit.
The Court may inquire into
conclusions of fact when the
inference made is manifestly
mistaken
In a Rule 45 petition, the latitude of judicial review generally excludes a factual and evidentiary re-evaluation, and the
Court ordinarily abides by the uniform factual conclusions of the trial court and the appellate court.[18] In the present
case, while the courts below both arrived at the same conclusion, there appears to be an incongruence in their factual
findings and the legal principle they applied to the attendant factual circumstances. Thus, we are compelled to examine
certain factual issues in the exercise of our sound discretion to correct any mistaken inference that may have been made. [19]
Philippine Law governs the
transfer of real property
Orion believes that the CA erred in not ruling on the issue of spousal consent. We cannot uphold this position, however,
because the issue of spousal consent was only raised on appeal to the CA. It is a well-settled principle that points of law,
theories, issues, and arguments not brought to the attention of the trial court cannot be raised for the first time on appeal
and considered by a reviewing court.[20] To consider these belated arguments would violate basic principles of fair play,
justice, and due process.
Having said these, we shall nonetheless discuss the issues Orion belatedly raised, if only to put an end to lingering
doubts on the correctness of the denial of the present petition.
It is a universal principle that real or immovable property is exclusively subject to the laws of the country or state where it
is located.[21] The reason is found in the very nature of immovable property its immobility. Immovables are part of the
country and so closely connected to it that all rights over them have their natural center of gravity there. [22]
Thus, all matters concerning the title and disposition of real property are determined by what is known as the lex loci rei
sitae, which can alone prescribe the mode by which a title can pass from one person to another, or by which an interest
therein can be gained or lost.[23] This general principle includes all rules governing the descent, alienation and transfer of
immovable property and the validity, effect and construction of wills and other conveyances. [24]
This principle even governs the capacity of the person making a deed relating to immovable property, no matter what its
nature may be. Thus, an instrument will be ineffective to transfer title to land if the person making it is incapacitated by
the lex loci rei sitae, even though under the law of his domicile and by the law of the place where the instrument is
actually made, his capacity is undoubted.[25]
On the other hand, property relations between spouses are governed principally by the national law of the spouses. [26]
However, the party invoking the application of a foreign law has the burden of proving the foreign law. The foreign law is
a question of fact to be properly pleaded and proved as the judge cannot take judicial notice of a foreign law. [27] He is
presumed to know only domestic or the law of the forum. [28]
To prove a foreign law, the party invoking it must present a copy thereof and comply with Sections 24 and 25 of Rule 132
of the Revised Rules of Court which reads:
SEC. 24. Proof of official record. The record of public documents referred to in paragraph (a) of Section 19, when
admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having

the legal custody of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate
may be made by a secretary of the embassy or legation, consul general, consul, vice consul, or consular agent or by any
officer in the foreign service of the Philippines stationed in the foreign country in which the record is kept, and
authenticated by the seal of his office. (Emphasis supplied)
SEC. 25. What attestation of copy must state. Whenever a copy of a document or record is attested for the purpose of
the evidence, 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. The attestation must be under the official seal of the attesting officer, if there be any, or if he
be the clerk of a court having a seal, under the seal of such court.
Accordingly, matters concerning the title and disposition of real property shall be governed by Philippine law while
issues pertaining to the conjugal nature of the property shall be governed by South Korean law, provided it is proven as a
fact.
In the present case, Orion, unfortunately failed to prove the South Korean law on the conjugal ownership of property. It
merely attached a Certification from the Embassy of the Republic of Korea [29] to prove the existence of Korean Law.
This certification, does not qualify as sufficient proof of the conjugal nature of the property for there is no showing that
it was properly authenticated by the seal of his office, as required under Section 24 of Rule 132.[30]
Accordingly, the International Law doctrine of presumed-identity approach or processual presumption comes into play,
i.e., where a foreign law is not pleaded or, even if pleaded, is not proven, the presumption is that foreign law is the same
as Philippine Law.[31]
Under Philippine Law, the phrase "Yung Sam Kang married to' Hyun Sook Jung is merely descriptive of the civil
status of Kang.[32] In other words, the import from the certificates of title is that Kang is the owner of the properties as
they are registered in his name alone, and that he is married to Hyun Sook Jung.
We are not unmindful that in numerous cases we have held that registration of the property in the name of only one spouse
does not negate the possibility of it being conjugal or community property.[33] In those cases, however, there was proof that
the properties, though registered in the name of only one spouse, were indeed either conjugal or community properties. [34]
Accordingly, we see no reason to declare as invalid Kangs conveyance in favor of Suzuki for the supposed lack of
spousal consent.
The petitioner failed to adduce sufficient
evidence to prove the due execution of the
Dacion en Pago
Article 1544 of the New Civil Code of the Philippines provides that:
ART. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person
who may have first taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recorded it
in the Registry of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and,
in the absence thereof, to the person who presents the oldest title, provided there is good faith.
The application of Article 1544 of the New Civil Code presupposes the existence of two or more duly executed
contracts of sale. In the present case, the Deed of Sale dated August 26, 2003 [35] between Suzuki and Kang was admitted
by Orion[36] and was properly identified by Suzukis witness Ms. Mary Jane Samin (Samin).[37]
It is not disputed, too, that the Deed of Sale dated August 26, 2003 was consummated. In a contract of sale, the seller
obligates himself to transfer the ownership of the determinate thing sold, and to deliver the same to the buyer, who
obligates himself to pay a price certain to the seller.[38] The execution of the notarized deed of sale and the actual transfer

of possession amounted to delivery that produced the legal effect of transferring ownership to Suzuki. [39]
On the other hand, although Orion claims priority in right under the principle of prius tempore, potior jure (i.e., first in
time, stronger in right), it failed to prove the existence and due execution of the Dacion en Pago in its favor.
At the outset, Orion offered the Dacion en Pago as Exhibit 5 with submarkings 5-a to 5-c to prove the existence
of the February 6, 2003 transaction in its Formal Offer dated July 20, 2008. Orion likewise offered in evidence the
supposed promissory note dated September 4, 2002 as Exhibit 12 to prove the existence of the additional P800,000.00
loan. The RTC, however, denied the admission of Exhibits 5 and 12, among others, in its order dated August 19,
2008 since the same [were] not identified in court by any witness.[40]
Despite the exclusion of its most critical documentary evidence, Orion failed to make a tender of excluded evidence, as
provided under Section 40, Rule 132 of the Rules of Court. For this reason alone, we are prevented from seriously
considering Exhibit 5 and its submarkings and Exhibit 12 in the present petition.
Moreover, even if we consider Exhibit 5 and its submarkings and Exhibit 12 in the present petition, the copious
inconsistencies and contradictions in the testimonial and documentary evidence of Orion, militate against the conclusion
that the Dacion en Pago was duly executed.
First, there appears to be no due and demandable obligation when the Dacion en Pago was executed, contrary to the
allegations of Orion. Orions witness Perez tried to impress upon the RTC that Kang was in default in his P1,800,000.00
loan. During his direct examination, he stated:
ATTY. CRUZAT:
Q:
Okay, so this loan of P1.8 million, what happened to this loan, Mr. Witness?
A:
Well it became past due, there has been delayed interest payment by Mr. Kang and...
Q:
So what did you do after there were defaults[?]
A:
We have to secure the money or the investment of the bank through loans and we have executed a dacion en
pago because Mr. Kang said he has no money. So we just execute[d] the dacion en pago rather than going
through the Foreclosure proceedings.
xxxx
Q:
Can you tell the court when was this executed?
A:
February 6, 2003, your Honor.[41]
A reading of the supposed promissory note, however, shows that there was no default to speak of when the supposed
Dacion en Pago was executed.
Based on the promissory note, Kangs loan obligation would mature only on August 27, 2003. Neither can Orion claim
that Kang had been in default in his installment payments because the wordings of the promissory note provide that [t]he
principal of this loan and its interest and other charges shall be paid by me/us in accordance hereunder: SINGLE
PAYMENT LOANS.[42] There was thus no due and demandable loan obligation when the alleged Dacion en Pago
was executed.
Second, Perez, the supposed person who prepared the Dacion en Pago, appears to only have a vague idea of the
transaction he supposedly prepared. During his cross-examination, he testified:
ATTY. DE CASTRO:
Q:
And were you the one who prepared this [dacion en pago] Mr. witness?
A:
Yes, sir. I personally prepared this.
xxxx
Q:
So this 1.8 million pesos is already inclusive of all the penalties, interest and surcharge due from Mr. Yung
Sam Kang?
A:
Its just the principal, sir.
Q:
So you did not state the interest [and] penalties?
A:
In the [dacion en pago], we do not include interest, sir. We may actually include that but....
Q:
Can you read the Second Whereas Clause, Mr. Witness?
A:
Whereas the first party failed to pay the said loan to the second party and as of February 10, 2003, the
outstanding obligation which is due and demandable principal and interest and other charges included

amounts to P1,800,000.00 pesos, sir.

xxxx
Q:
A:

You are now changing your answer[.] [I]t now includes interest and other charges, based on this document?
Yes, based on that document, sir.[43]

Third, the Dacion en Pago, mentioned that the P1,800,000.00 loan was secured by a real estate mortgage. However, no
document was ever presented to prove this real estate mortgage aside from it being mentioned in the Dacion en Pago
itself.
ATTY. DE CASTRO:
Q:
Would you know if there is any other document like a supplement to that Credit Line Agreement referring to
this 1.8 million peso loan by Mr. Yung Sam Kang which says that there was a subsequent collateralization or
security given by Mr. Yung [Sam] Kang for the loan?
xxxx
A:
The [dacion en pago], sir.[44]
Fourth, the Dacion en Pago was first mentioned only two (2) months after Suzuki and Samin demanded the delivery of
the titles sometime in August 2003, and after Suzuki caused the annotation of his affidavit of adverse claim. Records
show that it was only on October 9, 2003, when Orion, through its counsel, Cristobal Balbin Mapile & Associates
first spoke of the Dacion en Pago.[45] Not even Perez mentioned any Dacion en Pago on October 1, 2003, when he
personally received a letter demanding the delivery of the titles. Instead, Perez refused to accept the letter and opted to
first consult with his lawyer.[46]
Notably, even the October 9, 2003 letter contained material inconsistencies in its recital of facts surrounding the execution
of the Dacion en Pago. In particular, it mentioned that on [September 4, 2002], after paying the original loan, [Kang]
applied and was granted a new Credit Line Facility by [Orion] x x x for ONE MILLION EIGHT HUNDRED THOUSAND
PESOS (P1,800,000.00). Perez, however, testified that there was no cash movement in the original P1,000,000.00
loan. In his testimony, he said:
COURT:
Q:
A:
Q:
A:
Q:
A:
Q:
A:
Q:
A:
Q:
A:

xxxx
Would you remember what was the subject matter of that real estate mortgage for that first P1,000,000.00
loan?
Its a condominium Unit in Cityland, sir.
xxxx
Would you recall if there was any payment by Mr. Yung Sam Kang of this P1,000,000.00 loan?
None sir.
No payments?
None sir.
And from 1999 to 2002, there was no payment, either by way of payment to the principal, by way of
payment of interest, there was no payment by Mr. Yung Sam Kang of this loan?
Literally, there was no actual cash movement, sir.
There was no actual cash?
Yes, sir.
And yet despite no payment, the bank Orion Savings Bank still extended an P800,000.00 additional right?
Yes, sir.[47]

Fifth, it is undisputed that notwithstanding the supposed execution of the Dacion en Pago on February 2, 2003, Kang
remained in possession of the condominium unit. In fact, nothing in the records shows that Orion even bothered to take
possession of the property even six (6) months after the supposed date of execution of the Dacion en Pago. Kang was
even able to transfer possession of the condominium unit to Suzuki, who then made immediate improvements thereon. If
Orion really purchased the condominium unit on February 2, 2003 and claimed to be its true owner, why did it not assert
its ownership immediately after the alleged sale took place? Why did it have to assert its ownership only after Suzuki
demanded the delivery of the titles? These gaps have remained unanswered and unfilled.
In Suntay v. CA,[48] we held that the most prominent index of simulation is the complete absence of an attempt on the part
of the vendee to assert his rights of ownership over the property in question. After the sale, the vendee should have entered

the land and occupied the premises. The absence of any attempt on the part of Orion to assert its right of dominion
over the property allegedly sold to it is a clear badge of fraud. That notwithstanding the execution of the Dacion en
Pago, Kang remained in possession of the disputed condominium unit from the time of the execution of the
Dacion en Pago until the propertys subsequent transfer to Suzuki unmistakably strengthens the fictitious nature
of the Dacion en Pago.
These circumstances, aside from the glaring inconsistencies in the documents and testimony of Orions witness,
indubitably prove the spurious nature of the Dacion en Pago.
The fact that the Dacion en Pago is a notarized
document does not support the conclusion that
the sale it embodies is a true conveyance
Public instruments are evidence of the facts that gave rise to their execution and are to be considered as containing all the
terms of the agreement.[49] While a notarized document enjoys this presumption, the fact that a deed is notarized is not a
guarantee of the validity of its contents.[50] The presumption of regularity of notarized documents is not absolute and may
be rebutted by clear and convincing evidence to the contrary.[51]
In the present case, the presumption cannot apply because the regularity in the execution of the Dacion en Pago and the
loan documents was challenged in the proceedings below where their prima facie validity was overthrown by the highly
questionable circumstances surrounding their execution. [52]
Effect of the PRA restriction on
the validity of Suzukis title to the
property
Orion argues that the PRA restriction in CCT No. 18186 affects the conveyance to Suzuki. In particular, Orion assails the
status of Suzuki as a purchaser in good faith in view of the express PRA restriction contained in CCT No. 18186. [53]
We reject this suggested approach outright because, to our mind, the PRA restriction cannot affect the conveyance in favor
of Suzuki. On this particular point, we concur with the following findings of the CA:
x x x the annotation merely serves as a warning to the owner who holds a Special Resident Retirees Visa (SRRV) that he
shall lose his visa if he disposes his property which serves as his investment in order to qualify for such status. Section 14
of the Implementing Investment Guidelines under Rule VIII-A of the Rules and Regulations Implementing Executive Order
No. 1037, Creating the Philippine Retirement Park System Providing Funds Therefor and For Other Purpose ( otherwise
known as the Philippine Retirement Authority) states:
Section 14. Should the retiree-investor withdraw his investment from the Philippines, or transfer the same to another
domestic enterprise, or sell, convey or transfer his condominium unit or units to another person, natural or juridical
without the prior approval of the Authority, the Special Resident Retirees Visa issued to him, and/or unmarried minor
child or children[,] may be cancelled or revoked by the Philippine Government, through the appropriate government
department or agency, upon recommendation of the Authority.[54]
Moreover, Orion should not be allowed to successfully assail the good faith of Suzuki on the basis of the PRA restriction.
Orion knew of the PRA restriction when it transacted with Kang. Incidentally, Orion admitted accommodating
Kangs request to cancel the mortgage annotation despite the lack of payment to circumvent the PRA restriction.
Orion, thus, is estopped from impugning the validity of the conveyance in favor of Suzuki on the basis of the PRA
restriction that Orion itself ignored and attempted to circumvent.
With the conclusion that Orion failed to prove the authenticity of the Dacion en Pago, we see no reason for the application
of the rules on double sale under Article 1544 of the New Civil Code. Suzuki, moreover, successfully adduced sufficient
evidence to establish the validity of conveyance in his favor.
WHEREFORE, premises considered, we DENY the petition for lack of merit. Costs against petitioner Orion Savings
Bank.

SO ORDERED.
Carpio, (Chairperson), Del Castillo, Mendoza, and Leonen, JJ., concur.

[1]

Rollo, pp. 8-31.

[2]

Id. at 35-51; penned by Associate Justice Agnes Reyes-Carpio, with Associate Justices Rosalinda Asuncion-Vicente and
Priscilla J. Baltazar-Padilla, concurring.
[3]

Id. at 53-55.

[4]

Records, Vol. I, pp. 257-258.

[5]

Id. at 259-260.

[6]

Id. at 250.

[7]

Id. at 251.

[8]

Id. at 252.

[9]

Id. at 253-254.

[10]

Id. at 270

[11]

Id. at 271.

[12]

Id. at 262.

[13]

Id. at 263-264.

[14]

Id. at 92-135.

[15]

Id. at 8-31.

[16]

Id. at 65-89.

[17]

Id.

[18]

Century Iron Works, Inc. v. Banas, G.R. No. 184116, June 19, 2013, 699 SCRA 157, 166.

[19]

Luna v. Linatoc, 74 Phil. 15 (1942). See also New City Builders, Inc. v. NLRC, 499 Phil. 207, 212-213 (2005), citing
Insular Life Assurance Company, Ltd. v. CA, G.R. No. 126850, April 28, 2004, 401 SCRA 79, the Supreme Court
recognized several exceptions to this rule, to wit: "(1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting;
(6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the
findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioners main and reply briefs are not disputed by the respondent; (10) when the findings of
fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered,
would justify a different conclusion.

[20]

Hubert Nuez v. SLTEAS Phoenix Solutions, Inc., G.R. No. 180542, April 12, 2010, 368 SCRA 134, 145.

[21]

Agpalo, Ruben E., Conflict of Laws, 2004 Ed., p. 182.

[22]

Salonga, Jovito R., Private International Law, 1995 Ed., p. 132, citing Wolff 515.

[23]

Agpalo, Ruben E., Conflict of Laws, 2004 Ed., p. 183.

[24]

Id.

[25]

Id.

[26]

Family Code of the Philippines, Art. 80. In the absence of a contrary stipulation in a marriage settlement, the property
relations of the spouses shall be governed by Philippine laws, regardless of the place of the celebration of the marriage
and their residence.
This rule shall not apply:
(1) Where both spouses are aliens;
(2) With respect to the extrinsic validity of contracts affecting property not situated in the Philippines and executed in the
country where the property is located; and
(3) With respect to the extrinsic validity of contracts entered into in the Philippines but affecting property situated in a
foreign country whose laws require different formalities for its extrinsic validity.
[27]

ATCI Overseas Corporation v. Echin, G.R. No. 178551, October 11, 2010, 632 SCRA 528, 534.

[28]

Id.

[29]

Rollo, pp. 57-58.

[30]

Id.

[31]

Supra note 26.

[32]

Stuart v. Yatco, 114 Phil. 1083, 1084-1085 (1962); Magallon v. Montejo, 230 Phil. 366, 377 (1986).

[33]

Bucoy v. Paulino, 131 Phil. 790 (1968).

[34]

See Mendoza v. Reyes, 209 Phil. 120 (1983).

[35]

Records, Vol. I, pp. 213-214.

[36]

Id. at 291.

[37]

TSN, February 28, 2005, pp. 29-36.

[38]

NEW CIVIL CODE, Article 1458.

[39]

Id., Article 1496 in relation to Article 1498.

[40]

Records, Vol. II, p. 395.

[41]

TSN, June 1, 2007, pp. 32-33, emphasis supplied.

[42]

Records, Vol. II, p. 369. In fact, so important was the single payment arrangement that Orion only allowed installment
payments upon additional payment of Two Percent (2.00%) per annum service fee and a written notice to Orion of not less
than thirty (30) days prior to the proposed payment.
[43]

TSN, December 17, 2007, pp. 29-32, emphasis supplied.

[44]

Id. at. 22.

[45]

Records, Vol. II, pp. 371-372.

[46]

Records, Vol. I, pp. 263-267.

[47]

TSN, December 17, 2007, pp. 14-16, emphasis supplied.

[48]

321 Phil. 809, 831-832 (1995).

[49]

Bough v. Cantiveros, 40 Phil. 209, 215 (1919).

[50]

Nazareno v. Court of Appeals, 397 Phil. 707, 725 (2000); San Juan v. Offril, G.R. No. 154609, April 24, 2009, 586
SCRA 439, 445-446.
[51]

Lazaro v. Agustin, G.R. No. 152364, April 15, 2010, 618 SCRA 298, 309; Potenciano v. Reynoso, 449 Phil. 396, 406
(2003).
[52]

San Juan v. Offril, supra note 50.

[53]

Entry No. 73321/C-10186-RESTRICTIONS: IN an instrument duly subscribed and sworn to, VERNETTE UMALIPACO,CESO II, Phil. Retirement Authority, states that the property described herein is subject to the following restriction:
The sale, transfer, or encumbrance of this property is subject to the approval of the Philippine Retirement Authority, the
owner-named herein being a holder of Special Resident Retirees Visa (SRRV), and is therefore, subject to the provision
of Executive Order No. 1037 and it0`s implementing Rules and Regulations. (Doc. No. 68, p. 14, Bk.XIV, s. of 2000 of
Not. Pub. For Mand. City, Eddie Fernandez, dated June 23, 2000.) Date of Inscription-June 23, 2000-1:33 p.m.
[54]

Rollo, p. 47.

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269

FIRST DIVISION
[ G.R. No. 140047, July 13, 2004 ]
PHILIPPINE EXPORT AND FOREIGN LOAN 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.

DECISION
DAVIDE JR., 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 Corporation [1] (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 TherapyMedical 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 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 guarantee[8] 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 ID271,808/610 and Letter
of Guarantee No. 81-195-F[11] (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 Undertaking [12] 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 bond[13] 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 petitioners 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 contract [15] 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. Petitioners 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 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 governments lack of foreign
exchange with which to pay its (VPECIs) accomplishments and (2) SOBs 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 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 VPECIs 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% attorneys 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 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 owners violations of the contract which
rendered impossible the joint venture contractors 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 attorneys 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 courts 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 injustice that will result from its payment of the full amount of the performance guarantee, as evident in
PHILGUARANTEEs 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 courts 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 COUNTERGUARANTEE.
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 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.

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 petitioners 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 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 principals 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 petitioners 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 petitioners 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 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 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 SOB[54] 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 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;
478 Phil. 269

FIRST DIVISION

[ G.R. No. 140047, July 13, 2004 ]

PHILIPPINE EXPORT AND FOREIGN LOAN 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.
DECISION
DAVIDE JR., 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 Corporation [1] (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 TherapyMedical 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 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 guarantee[8] 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 ID271,808/610 and Letter
of Guarantee No. 81-195-F[11] (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 Undertaking [12] 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 bond[13] 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 petitioners 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 contract [15] 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. Petitioners 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 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 governments lack of foreign
exchange with which to pay its (VPECIs) accomplishments and (2) SOBs 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 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 VPECIs 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% attorneys 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 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 owners violations of the contract which
rendered impossible the joint venture contractors 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 attorneys 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 courts 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 injustice that will result from its payment of the full amount of the performance guarantee, as evident in
PHILGUARANTEEs 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 courts 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 COUNTERGUARANTEE.
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 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.

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 petitioners 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 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 principals 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 petitioners 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 petitioners 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 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 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 SOB[54] 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 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 currency loan, through the facilities of Circle International S.A., the Contractors 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 LAssicurazione Del Credito AllExportazione (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 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, petitioners
Executive Vice-President Jesus M. Taedo 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 banks 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 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.

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 contractors 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 SOBs 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 Banks 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 VPECIs bid for government intervention for the amicable termination of the contract and
release of the performance guarantee. [66]
But surprisingly, though fully cognizant of SOBs violations of the service contract and VPECIs 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?
As a rule, a guarantor who pays for a debtor should be indemnified by the latter [67] 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 petitioners guaranty, the petitioner is precluded from enforcing the
same by reason of the petitioners 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 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.
SO ORDERED.
Panganiban, Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

[1]

Now known as the Trade Investment Development Corporation of the Philippines.

[2]

Exhibit V and 2-3, Original Record, vol. III (hereinafter OR III), 395.

[3]

Exh. 12-E, OR III, 433.

[4]

Exh. 12-E, OR III, 433.

[5]

Exh. 9-A, OR III, 416.

[6]

Exh. 12-G, OR III, 435.

[7]

Exh. V, OR III, 395.

[8]

Exh. 13-V, OR III, 447.

[9]

CA Decision, 3.

[10]

Exh. A, OR III, 49.

[11]

Exh. B, OR III, 64.

[12]

Exh. 11, OR III, 421.

[13]

Exh. 12, OR III, 81.

[14]

Exh. E-1, OR III, 83.

[15]

Exh. 1, OR III, 276.

[16]

Exh. 1-J, OR III, 282.

[17]

Exh. A-1, OR III, 51.

[18]

Exh. E-2, OR III, 84.

[19]

Exhs. A-2 to A-13, OR III, 51-63.

[20]

Exhs. B-2 to B-4, OR III, 67-69.

[21]

Exhs. E to E-12, OR III, 84.

[22]

TSN, 10 April 1992, 41-44.

[23]

Exh. 22, OR III, 344-345.

[24]

Exh.40, OR III, 366.

[25]

Exh. 16, OR III, 220.

[26]

Exh. G-12-a, OR III, 207.

[27]

Exh. 7-A, OR III, 306.

[28]

Exh. G-12-g, OR III, 213.

[29]

Exh. I, OR III, 230.

[30]

Exh.G-12-h, OR III, 214.

[31]

Exhs. G-13-d to G-13-f, OR III, 220-222; Exh.G-12-h, OR III, 214.

[32]

Exhs. Q to T, OR III, 254-263.

[33]

Per Judge Zosimo Z. Angeles. Rollo, 72-79.

[34]

Per Associate Justice Martin S. Villarama, Jr. with Associate Justices Angelina Sandoval-Gutierrez (now Supreme
Court Associate Justice) and Romeo A. Brawner concurring. Rollo, 48-71.
[35]

Rollo, 61-68.

[36]

Id., 293-294.

[37]

Article 2047, Civil Code.

[38]

E. Zobel Inc. v. CA, G.R. No. 113931, 6 May 1998, 290 SCRA 1; VI Ambrosio Padilla, Civil Law 497-498 (5th ed.
1969)(hereinafter Padilla) .
[39]

Exh. A, OR III, 49-50.

[40]

VI Padilla 494.

[41]

Blacks Law Dictionary 635 (5th ed. 1979).

[42]

Art. 2047, Civil Code.

[43]

Alba v. Court of Appeals, G.R. No. 120066, 9 September 1999, 314 SCRA 36.

[44]

Development Bank of the Philippines v. Court of Appeals, G.R. No. 119712, 29 January 1999, 302 SCRA 362.

[45]

DISEDERIO P. JURADO, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS 49 (7TH

Revised ed. 1980) (hereinafter JURADO ).
[46]

JOVITO R. SALONGA, PRIVATE INTERNATIONAL LAW 350 (1995 ed.) (hereinafter SALONGA).

[47]

EDGARDO L. PARAS, PHILIPPINE CONFLICT OF LAWS 414 (6th ed. 1984).

[48]

SALONGA, 356.

[49]

Id., 355.

[50]

JORGE R. COQUIA & ELIZABETH A. PANGALANGAN, CONFLICT OF LAWS 418 (1995 ed.).

[51]

Lim v. Collector of Customs, 36 Phil. 472 (1917); International Harvester Co. v. Hamburg-American Line, 42 Phil.
845; Miciano v. Brimo, 50 Phil. 867 (1924).
[52]

IV ARTURO M. TOLENTINO, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE

PHILIPPINES 101 (hereinafter TOLENTINO).
[53]

JURADO, 50.

[54]

Exhs. 16 to 16-O,OR III, 454-469.

[55]

See Court of Appeals Decision, 19, Rollo, 66; RTCs Decision, 22, Rollo, 93.

[56]

RTCs Decision, 22; Rollo, 93.

[57]

Exhs. 4-A to 4-D, OR III, 296-298.

[58]

Exh. 25, OR III, 352.

[59]

IV Tolentino 110.

[60]

Id.,102.

[61]

Id.,110.

[62]

Art. 2058, Civil Code.

[63]

Art.1280, Civil Code.

[64]

Exh. 23, OR III, 348-349.

[65]

Exh. 25-E, OR III, 355.

[66]

Exh. 5, OR III, 303-304.

[67]

Art. 2066, Civil Code.

[68]

Arts. 1302(3) and 2067, Civil Code.

[69]

Art. 1236, second par., Civil Code.

[70]

VI PADILLA, 545.

[71]

V TOLENTINO, 521.

[72]

4th Whereas Clause of Executive Order No. 185, which took effect on 5 June 1987.