SECOND DIVISION

[G.R. No. 124862. December 22, 1998]

FE D. QUITA, petitioner, vs. COURT OF APPEALS and BLANDINA

DANDAN,* respondents.

DECISION

FE D. QUITA and Arturo T. Padlan, both Filipinos, were married in the Philippines on 18 May 1941. They were
not however blessed with children. Somewhere along the way their relationship soured. Eventually Fe sued
Arturo for divorce in San Francisco, California, U.S.A. She submitted in the divorce proceedings a private writing
dated 19 July 1950 evidencing their agreement to live separately from each other and a settlement of their conjugal
properties. On 23 July 1954 she obtained a final judgment of divorce. Three (3) weeks thereafter she married a
certain Felix Tupaz in the same locality but their relationship also ended in a divorce. Still in the U.S.A., she
married for the third time, to a certain Wernimont.

On 16 April 1972 Arturo died. He left no will. On 31 August 1972 Lino Javier Inciong filed a petition with the
Regional Trial Court of Quezon City for issuance of letters of administration concerning the estate of Arturo in
favor of the Philippine Trust Company. Respondent Blandina Dandan (also referred to as Blandina Padlan),
claiming to be the surviving spouse of Arturo Padlan, and Claro, Alexis, Ricardo, Emmanuel, Zenaida and
Yolanda, all surnamed Padlan, named in the petition as surviving children of Arturo Padlan, opposed the petition
and prayed for the appointment instead of Atty. Leonardo Cabasal, which was resolved in favor of the latter. Upon
motion of the oppositors themselves, Atty. Cabasal was later replaced by Higino Castillon. On 30 April 1973 the
oppositors (Blandina and the Padlan children) submitted certified photocopies of the 19 July 1950 private writing
and the final judgment of divorce between petitioner and Arturo. Later Ruperto T. Padlan, claiming to be the sole
surviving brother of the deceased Arturo, intervened.

On 7 October 1987 petitioner moved for the immediate declaration of heirs of the decedent and the distribution
of his estate. At the scheduled hearing on 23 October 1987, private respondent as well as the six (6) Padlan
children and Ruperto failed to appear despite due notice. On the same day, the trial court required the submission
of the records of birth of the Padlan children within ten (10) days from receipt thereof, after which, with or without
the documents, the issue on the declaration of heirs would be considered submitted for resolution. The prescribed
period lapsed without the required documents being submitted.

The trial court invoking Tenchavez v. Escao[1] which held that "a foreign divorce between Filipino citizens sought
and decreed after the effectivity of the present Civil Code (Rep. Act 386) was not entitled to recognition as valid
in this jurisdiction,"[2] disregarded the divorce between petitioner and Arturo. Consequently, it expressed the view
that their marriage subsisted until the death of Arturo in 1972. Neither did it consider valid their extrajudicial
settlement of conjugal properties due to lack of judicial approval.[3] On the other hand, it opined that there was no
showing that marriage existed between private respondent and Arturo, much less was it shown that the alleged
Padlan children had been acknowledged by the deceased as his children with her. As regards Ruperto, it found
that he was a brother of Arturo. On 27 November 1987[4] only petitioner and Ruperto were declared the intestate
heirs of Arturo. Accordingly, equal adjudication of the net hereditary estate was ordered in favor of the two
intestate heirs.[5]

On motion for reconsideration, Blandina and the Padlan children were allowed to present proofs that the
recognition of the children by the deceased as his legitimate children, except Alexis who was recognized as his
illegitimate child, had been made in their respective records of birth. Thus on 15 February 1988[6] partial
reconsideration was granted declaring the Padlan children, with the exception of Alexis, entitled to one-half of
the estate to the exclusion of Ruperto Padlan, and petitioner to the other half.[7] Private respondent was not
declared an heir. Although it was stated in the aforementioned records of birth that she and Arturo were married
on 22 April 1947, their marriage was clearly void since it was celebrated during the existence of his previous
marriage to petitioner.

In their appeal to the Court of Appeals, Blandina and her children assigned as one of the errors allegedly
committed by the trial court the circumstance that the case was decided without a hearing, in violation of Sec. 1,
Rule 90, of the Rules of Court, which provides that if there is a controversy before the court as to who are the
lawful heirs of the deceased person or as to the distributive shares to which each person is entitled under the law,
the controversy shall be heard and decided as in ordinary cases.

Respondent appellate court found this ground alone sufficient to sustain the appeal; hence, on 11 September 1995
it declared null and void the 27 November 1987 decision and 15 February 1988 order of the trial court, and
directed the remand of the case to the trial court for further proceedings. [8] On 18 April 1996 it denied
reconsideration.[9]

Should this case be remanded to the lower court for further proceedings? Petitioner insists that there is no need
because, first, no legal or factual issue obtains for resolution either as to the heirship of the Padlan children or as
to their respective shares in the intestate estate of the decedent; and, second, the issue as to who between petitioner
and private respondent is the proper heir of the decedent is one of law which can be resolved in the present petition
based on established facts and admissions of the parties.

We cannot sustain petitioner. The provision relied upon by respondent court is clear: If there is
a controversy before the court as to who are the lawful heirs of the deceased person or as to the distributive
shares to which each person is entitled under the law, the controversy shall be heard and decided as in ordinary
cases.

We agree with petitioner that no dispute exists either as to the right of the six (6) Padlan children to inherit from
the decedent because there are proofs that they have been duly acknowledged by him and petitioner herself even
recognizes them as heirs of Arturo Padlan;[10] nor as to their respective hereditary shares. But controversy remains
as to who is the legitimate surviving spouse of Arturo.The trial court, after the parties other than petitioner failed
to appear during the scheduled hearing on 23 October 1987 of the motion for immediate declaration of heirs and
distribution of estate, simply issued an order requiring the submission of the records of birth of the Padlan children
within ten (10) days from receipt thereof, after which, with or without the documents, the issue on declaration of
heirs would be deemed submitted for resolution.

We note that in her comment to petitioner's motion private respondent raised, among others, the issue as to
whether petitioner was still entitled to inherit from the decedent considering that she had secured a divorce in the
U.S.A. and in fact had twice remarried. She also invoked the above quoted procedural rule.[11] To this, petitioner
replied that Arturo was a Filipino and as such remained legally married to her in spite of the divorce they
obtained.[12] Reading between the lines, the implication is that petitioner was no longer a Filipino citizen at the
time of her divorce from Arturo. This should have prompted the trial court to conduct a hearing to establish her
citizenship. The purpose of a hearing is to ascertain the truth of the matters in issue with the aid of documentary
and testimonial evidence as well as the arguments of the parties either supporting or opposing the
evidence. Instead, the lower court perfunctorily settled her claim in her favor by merely applying the ruling
in Tenchavez v. Escao.

Then in private respondent's motion to set aside and/or reconsider the lower court's decision she stressed that the
citizenship of petitioner was relevant in the light of the ruling in Van Dorn v. Romillo Jr.[13] that aliens may obtain
divorces abroad, which may be recognized in the Philippines, provided they are valid according to their national
law. She prayed therefore that the case be set for hearing.[14] Petitioner opposed the motion but failed to squarely
address the issue on her citizenship.[15] The trial court did not grant private respondent's prayer for a hearing but
proceeded to resolve her motion with the finding that both petitioner and Arturo were "Filipino citizens and were
married in the Philippines."[16] It maintained that their divorce obtained in 1954 in San Francisco, California,
U.S.A., was not valid in Philippine jurisdiction. We deduce that the finding on their citizenship
pertained solely to the time of their marriage as the trial court was not supplied with a basis to determine
petitioner's citizenship at the time of their divorce. The doubt persisted as to whether she was still a Filipino
citizen when their divorce was decreed. The trial court must have overlooked the materiality of this aspect. Once
proved that she was no longer a Filipino citizen at the time of their divorce, Van Dorn would become applicable
and petitioner could very well lose her right to inherit from Arturo.

Respondent again raised in her appeal the issue on petitioner's citizenship; [17] it did not merit enlightenment
however from petitioner.[18] In the present proceeding, petitioner's citizenship is brought anew to the fore by
private respondent. She even furnishes the Court with the transcript of stenographic notes taken on 5 May 1995
during the hearing for the reconstitution of the original of a certain transfer certificate title as well as the issuance
of new owner's duplicate copy thereof before another trial court. When asked whether she was an American
citizen petitioner answered that she was since 1954.[19] Significantly, the decree of divorce of petitioner and Arturo
was obtained in the same year. Petitioner however did not bother to file a reply memorandum to erase the
uncertainty about her citizenship at the time of their divorce, a factual issue requiring hearings to be conducted
by the trial court. Consequently, respondent appellate court did not err in ordering the case returned to the trial
court for further proceedings.

We emphasize however that the question to be determined by the trial court should be limited only to the right of
petitioner to inherit from Arturo as his surviving spouse. Private respondent's claim to heirship was already
resolved by the trial court. She and Arturo were married on 22 April 1947 while the prior marriage of petitioner
and Arturo was subsisting thereby resulting in a bigamous marriage considered void from the beginning under
Arts. 80 and 83 of the Civil Code. Consequently, she is not a surviving spouse that can inherit from him as this
status presupposes a legitimate relationship.[20]

As regards the motion of private respondent for petitioner and her counsel to be declared in contempt of court and
that the present petition be dismissed for forum shopping,[21] the same lacks merit. For forum shopping to exist
the actions must involve the same transactions and same essential facts and circumstances. There must also be
identical causes of action, subject matter and issue.[22]The present petition deals with declaration of heirship while
the subsequent petitions filed before the three (3) trial courts concern the issuance of new owner's duplicate copies
of titles of certain properties belonging to the estate of Arturo. Obviously, there is no reason to declare the
existence of forum shopping.

WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals ordering the remand of
the case to the court of origin for further proceedings and declaring null and void its decision holding petitioner
Fe D. Quita and Ruperto T. Padlan as intestate heirs is AFFIRMED. The order of the appellate court modifying
its previous decision by granting one-half (1/2) of the net hereditary estate to the Padlan children, namely, Claro,
Ricardo, Emmanuel, Zenaida and Yolanda, with the exception of Alexis, all surnamed Padlan, instead of Arturo's
brother Ruperto Padlan, is likewise AFFIRMED. The Court however emphasizes that the reception of evidence
by the trial court should be limited to the hereditary rights of petitioner as the surviving spouse of Arturo Padlan.

The motion to declare petitioner and her counsel in contempt of court and to dismiss the present petition for forum
shopping is DENIED.

SO ORDERED.
*
The name of private respondent Blandina Dandan appears as shall not take place save in virtue of a judicial order. Quite in
Blandina Padlan in the proceedings before the lower courts. relation thereto, then Art. 191, par. 4 of the same Code provided
[1]
No. L-19671, 29 November 1965, 15 SCRA 355. that the husband and the wife may agree upon the dissolution of
[2]
Id., p. 367. the conjugal partnership during the marriage, subject to judicial
[3]
Then Art. 190 of the Civil Code provided that in the absence approval.
of an express declaration in the marriage settlement, the
separation of property between spouses during the marriage
[4] [9]
Decision penned by Judge Tomas V. Tadeo Jr. of RTC-Br. Id., p. 42.
[10]
105, Quezon City; Appendix "A" of Brief for the Oppositors- Id., p. 180.
[11]
Appellants; CA Rollo, p. 15. Rollo, p. 196.
[5] [12]
Article 1001 of the Civil Code provides that should brothers CA Rollo, p. 29.
[13]
and sisters or their children survive with the widow or widower, G. R. No. 68470, 8 October 1985, 139 SCRA 139.
[14]
the latter shall be entitled to one-half of the inheritance and the CA Rollo, p. 30.
[15]
brothers and sisters or their children to the other half. Record on Appeal, pp. 24-26.
[6] [16]
Appendix "B" of Brief for the Oppositors-Appellants; See Rollo, p. 206.
[17]
Note 4. Brief of Oppositors-Appellants, p. 13; CA Rollo, p. 15.
[7] [18]
Article 998 of the Civil Code provides that if a widow or Brief of Appellee; Id., p. 17.
[19]
widower survives with illegitimate children, such widow or Rollo, pp. 225-226.
[20]
widower shall be entitled to one-half of the inheritance, and the Arturo M. Tolentino, Commentaries and Jurisprudence on
illegitimate children or their descendants, whether legitimate or the Civil Code of the Philippines, 1979 Ed., Vol. III, p. 264.
[21]
illegitimate, to the other half. Rollo, pp. 129-132.
[8] [22]
Decision penned by Justice Pacita Caizares-Nye with the Professional Regulation Commission v. Court of Appeals,
concurrence of Justices Romeo J. Callejo Jr. and Delilah G. R. No. 117817, 9 July 1998.
Vidallon-Magtolis; Rollo, p. 39.

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Unson v. Navarro

189 Phil. 143

Petition for certiorari to have the order of respondent judge of December 28, 1979 ordering petitioner to produce
the child, Maria Teresa Unson, his daughter barely eight years of age, with private respondent Edita N. Araneta
and return her to the custody of the latter, further obliging petitioner to "continue his support of said daughter by
providing for her education and medical needs," allegedly issued without a "hearing" and the reception of
testimony in violation of Section 6 of Rule 99.

Petitioner and private respondent were married on April 19, 1971[1] and out of that marriage the child in question,
Teresa, was born on December 1, 1971. However, as stated in a decision rendered on August 23, 1974 in Civil
Case No. 7716 of respondent judge himself, on July 13, 1974 they executed an agreement for the separation of
their properties and to live separately, as they have in fact been living separately since June 1972. The agreement
was approved by the Court.

The parties are agreed that no specific provision was contained in said agreement about the custody of the child
because the husband and wife would have their own private arrangement in that respect. Thus, according to the
affidavit of petitioner attached to his supplement to petition, submitted in compliance with the directive of this
Court during the hearing of this case, he affirms that:

"xxx xxx xxx

"(8) That when Maria Teresa started preschool in 1976 at the Early Learning Center in San Lorenzo, very near
petitioner's residence, and later when she started school at Assumption College, Maria Teresa would stay with
petitioner during school days and spend weekends with her mother, but there were times when her mother
wouldn't even bother to pick her up during non-school days;

(9) That during the early part of 1978 petitioner personally acquired knowledge that his wife Edita Araneta has
been living with her brother-in-law Agustin F. Reyes, in an apartment at C. Palma St., Makati, Metro Manila, and
so petitioner tightened his custody over his daughter, especially after:

a. he found out that Agustin F. Reyes was confined at the Makati Medical Center from October 13 up to December
3, 1977 for "Manic Depressive" under the care of Dr. Baltazar Reyes;
b. he found out that his wife Edita Araneta delivered a child fathered by Agustin F. Reyes on September 24,
1978. (Please see Birth Certificate attached hereto as Annex "A-1");

c. he found out that Agustin F. Reyes had been confined again for the same ailment at the Makati Medical Center
from June 27 up to August 29, 1978 under the care of the same doctor;
(10) That on May 21, 1980 Edita Araneta delivered another child fathered by Agustin F. Reyes. (Please see Birth
Certificate attached hereto as Annex "A-2");
(11) That aside from the foregoing circumstances, the following militate against custody of Maria Teresa in favor
of Edita Araneta:

a. Agustin F. Reyes is the child's godfather/baptismal sponsor;

b. Agustin F. Reyes and Edita Araneta have left the Roman Catholic Church and have embraced a protestant sect
(Please see Annex "A-2" hereof, which lists the occupation of Agustin F. Reyes as a seminarian);
(12) That Maria Teresa is almost nine (9) years old, born and reared under the Roman Catholic faith,
impressionable, and should not be exposed to an environment alien to the Catholic way of life, which is the
upbringing and training petitioner, as her father is committed to;
(13) That petitioner is executing this affidavit for all legal purposes." (Pp. 81-82 of Record)
Upon the other hand, private respondent affirms in her affidavit Annex "A" aforementioned that:

"xxx xxx xxx

Since the birth of Maria Teresa, she has always lived with affiant, her mother, who has reared and brought
"6. up the child to the best of her ability. Affiant has not in any way spoken ill of nor turned the child against
her father, herein petitioner;

In fact, it was affiant who was always insistent that petitioner have custody of Maria Teresa every week end
7. and half of summer and Christmas vacation so that the child could establish a healthy and viable relationship
with her father, herein petitioner;

This was especially so when affiant noticed that petitioner's parents showed more interest in the child than
8. petitioner; since it was petitioner's parents who would more often pick up Maria Teresa and bring her back
to and from affiant's home;

This fact was even noticed by the child; thus affiant immediately requested petitioner to spend more time
9.
with Maria Teresa;

From 1972 to 1978, affiant had always exercised full custody of Maria Teresa. It was affiant who voluntarily
gave custody of the child to petitioner on weekends and half of the summer and Christmas vacations. In
10.
view of this amicable arrangement, no specific terms were agreed and stipulated upon by affiant and
petitioner regarding custody of the child in their petition for separation of property before the lower court;

From 1972 to September, 1979, affiant and petitioner have always had a cordial and amicable relationship.
Even from 1973 when affiant started living with her brother-in-law, Agustin F. Reyes at San Lorenzo,
11. Makati, affiant and petitioner retained a cordial relationship. Petitioner, since 1973, always knew about
affiant's relationship with Agustin F. Reyes. In fact, petitioner would visit Maria Teresa at affiant's home.
Petitioner was always welcome to pick up Maria Teresa at any time.
 When petitioner left for Australia in 1974 for a period of one year, petitioner left Maria Teresa to stay with
12. affiant at San Lorenzo. During this time, Maria Teresa was always allowed to visit with and to be picked up
at any time by petitioner's parents;

Petitioner, his family, affiants family (Mr. and Mrs. Teodoro Araneta), affiant's relatives and friends, since
13. 1973, have long known of and accepted the circumstances involving private respondent and Agustin F.
Reyes;

Affiant admits that her present circumstances at first impression might seem socially if not morally
unacceptable; but in reality this is not so. Maria Teresa has been reared and brought up in an atmosphere of
14.
christian love, affection and honesty to the import of the situation. Further, the quality and capacity of affiant
of being a good mother has always remained;" (Pars. 6 to 14 of Annex "A" of Record)

It is axiomatic in Our jurisprudence that in all controversies regarding the custody of minors, the sole and foremost
consideration is the physical, education, social and moral welfare of the child concerned, taking into account the
respective resources and social and moral situations of the contending parents. Never has this Court diverted
from that criterion.

With this premise in view, the Court finds no difficulty in this case in seeing that it is in the best interest of the
child Teresa to be freed from the obviously unwholesome, not to say immoral influence, that the situation in
which private respondent has placed herself, as admitted by her, might create in the moral and social outlook of
Teresa who is now in her formative and most impressionable stage in her life. The fact, that petitioner might have
been tolerant about her stay with her mother in the past when she was still too young to distinguish between right
and wrong and have her own correct impressions or notions about the unusual and peculiar relationship of her
mother with her own uncle-in-law, the husband of her sister's mother, is hardly of any consequence now that she
has reached a perilous stage in her life. No respectable father, properly concerned with the moral well-being of
his child, specially a girl, can be expected to have a different attitude than petitioner's in this case. Under the
circumstances thus shown in the record, the Court finds no alternative than to grant private respondent no more
than visitorial rights over the child in question. Anyway, decisions even of this Supreme Court on the custody of
minor children are always open to adjustment as the circumstances relevant to the matter may demand in the light
of the inflexible criterion We have mentioned above. We deem it a grave abuse of discretion on the part of
respondent judge to have acted precipitably in issuing his order of December 28, 1979 here in question.

As to the issue of jurisdiction, that is, whether or not, after the decision on separation of properties had become
final, the matter of the custody of the child should be the subject of a separate proceeding under Rule 99. We are
inclined to agree with respondents that, considering that in the decision on the separation of properties mention
is made of support for the child, to avoid multiplicity of proceedings, and since under Section 6 of Rule 99, the
matter of the custody of children of separated spouses may be brought before the Court of First Instance by
petition or as an incident to any other proceeding, the respondent court had jurisdiction to decide the question of
custody here. And as regards the petitioner's claim of denial of hearing and due process before the issuance by
respondent judge of his order of December 28, 1979, We find that petitioner was given sufficient time and
opportunity to be heard, as, in fact, he filed his written opposition. With the facts in this case practically
uncontroverted, We do not see the need for the calling of witnesses and the hearing of testimony in open court.

WHEREFORE, the order of respondent judge is hereby set aside, the restraining order heretofore issued is made
permanent and the parties are ordered to submit to this Court within fifteen (15) days from notice hereof their
own agreement as to the visitorial rights of private respondent, otherwise, the Court will take it upon itself to fix
the terms and conditions thereof. No costs.

[1]
In her affidavit attached as Annex "A" of comment on "Roman Catholic Church annulment of the marriage"
supplement to petition, private respondent states that there is a evidenced by Annex "A" of said decision rendered by
Matrimonial Tribunal of the Diocese of Bacolod on April 4, Court prefers not to make any pronouncement, as anyway,
1976, on the legal effect of which, for purposes of this case, the private respondent is not actually relying thereon.

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EN BANC

G.R. No. L-11622 January 28, 1961

THE COLLECTOR OF INTERNAL REVENUE, petitioner,

vs.
DOUGLAS FISHER AND BETTINA FISHER, and the COURT OF TAX APPEALS, respondents.

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

G.R. No. L-11668 January 28, 1961.

DOUGLAS FISHER AND BETTINA FISHER, petitioner,

vs.
THE COLLECTOR OF INTERNAL REVENUE, and the COURT OF TAX APPEALS, respondents.

This case relates to the determination and settlement of the hereditary estate left by the deceased Walter G.
Stevenson, and the laws applicable thereto. Walter G. Stevenson (born in the Philippines on August 9, 1874 of
British parents and married in the City of Manila on January 23, 1909 to Beatrice Mauricia Stevenson another
British subject) died on February 22, 1951 in San Francisco, California, U.S.A. whereto he and his wife moved
and established their permanent residence since May 10, 1945. In his will executed in San Francisco on May 22,
1947, and which was duly probated in the Superior Court of California on April 11, 1951, Stevenson instituted
his wife Beatrice as his sole heiress to the following real and personal properties acquired by the spouses while
residing in the Philippines, described and preliminary assessed as follows:

Gross Estate
Real Property — 2 parcels of land in
Baguio, covered by T.C.T. Nos. 378 and
379 P43,500.00
Personal Property
(1) 177 shares of stock of Canacao Estate
at P10.00 each 1,770.00
(2) 210,000 shares of stock of Mindanao
Mother Lode Mines, Inc. at P0.38 per
share 79,800.00
(3) Cash credit with Canacao Estate Inc. 4,870.88
(4) Cash, with the Chartered Bank of
India, Australia & China 851.97
Total Gross Assets P130,792.85

On May 22, 1951, ancillary administration proceedings were instituted in the Court of First Instance of Manila
for the settlement of the estate in the Philippines. In due time Stevenson's will was duly admitted to probate by
our court and Ian Murray Statt was appointed ancillary administrator of the estate, who on July 11, 1951, filed a
preliminary estate and inheritance tax return with the reservation of having the properties declared therein finally
appraised at their values six months after the death of Stevenson. Preliminary return was made by the ancillary
administrator in order to secure the waiver of the Collector of Internal Revenue on the inheritance tax due on the
210,000 shares of stock in the Mindanao Mother Lode Mines Inc. which the estate then desired to dispose in the
United States. Acting upon said return, the Collector of Internal Revenue accepted the valuation of the personal
properties declared therein, but increased the appraisal of the two parcels of land located in Baguio City by fixing
their fair market value in the amount of P52.200.00, instead of P43,500.00. After allowing the deductions claimed
by the ancillary administrator for funeral expenses in the amount of P2,000.00 and for judicial and administration
expenses in the sum of P5,500.00, the Collector assessed the state the amount of P5,147.98 for estate tax and
P10,875,26 or inheritance tax, or a total of P16,023.23. Both of these assessments were paid by the estate on June
6, 1952.

On September 27, 1952, the ancillary administrator filed in amended estate and inheritance tax return in pursuance
f his reservation made at the time of filing of the preliminary return and for the purpose of availing of the right
granted by section 91 of the National Internal Revenue Code.

In this amended return the valuation of the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. was
reduced from 0.38 per share, as originally declared, to P0.20 per share, or from a total valuation of P79,800.00 to
P42,000.00. This change in price per share of stock was based by the ancillary administrator on the market
notation of the stock obtaining at the San Francisco California) Stock Exchange six months from the death of
Stevenson, that is, As of August 22, 1931. In addition, the ancillary administrator made claim for the following
deductions:

Funeral expenses ($1,04326) P2,086.52

Judicial Expenses:
(a) Administrator's Fee P1,204.34
(b) Attorney's Fee 6.000.00
(c) Judicial and Administration
expenses as of August 9, 1952 1,400.05
8,604.39
Real Estate Tax for 1951 on Baguio
real properties (O.R. No. B-1
686836) 652.50
Claims against the estate:
($5,000.00) P10,000.00 P10,000.00
Plus: 4% int. p.a. from Feb. 2 to 22,
1951 22.47 10,022.47
Sub-Total P21,365.88

In the meantime, on December 1, 1952, Beatrice Mauricia Stevenson assigned all her rights and interests in the
estate to the spouses, Douglas and Bettina Fisher, respondents herein.

On September 7, 1953, the ancillary administrator filed a second amended estate and inheritance tax return (Exh.
"M-N"). This return declared the same assets of the estate stated in the amended return of September 22, 1952,
except that it contained new claims for additional exemption and deduction to wit: (1) deduction in the amount
of P4,000.00 from the gross estate of the decedent as provided for in Section 861 (4) of the U.S. Federal Internal
Revenue Code which the ancillary administrator averred was allowable by way of the reciprocity granted by
Section 122 of the National Internal Revenue Code, as then held by the Board of Tax Appeals in case No. 71
entitled "Housman vs. Collector," August 14, 1952; and (2) exemption from the imposition of estate and
inheritance taxes on the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. also pursuant to the
reciprocity proviso of Section 122 of the National Internal Revenue Code. In this last return, the estate claimed
that it was liable only for the amount of P525.34 for estate tax and P238.06 for inheritance tax and that, as a
consequence, it had overpaid the government. The refund of the amount of P15,259.83, allegedly overpaid, was
accordingly requested by the estate. The Collector denied the claim. For this reason, action was commenced in
the Court of First Instance of Manila by respondents, as assignees of Beatrice Mauricia Stevenson, for the
recovery of said amount. Pursuant to Republic Act No. 1125, the case was forwarded to the Court of Tax Appeals
which court, after hearing, rendered decision the dispositive portion of which reads as follows:

In fine, we are of the opinion and so hold that: (a) the one-half (½) share of the surviving spouse in the
conjugal partnership property as diminished by the obligations properly chargeable to such property
should be deducted from the net estate of the deceased Walter G. Stevenson, pursuant to Section 89-C of
the National Internal Revenue Code; (b) the intangible personal property belonging to the estate of said
Stevenson is exempt from inheritance tax, pursuant to the provision of section 122 of the National Internal
Revenue Code in relation to the California Inheritance Tax Law but decedent's estate is not entitled to an
exemption of P4,000.00 in the computation of the estate tax; (c) for purposes of estate and inheritance
taxation the Baguio real estate of the spouses should be valued at P52,200.00, and 210,000 shares of stock
in the Mindanao Mother Lode Mines, Inc. should be appraised at P0.38 per share; and (d) the estate shall
be entitled to a deduction of P2,000.00 for funeral expenses and judicial expenses of P8,604.39.

From this decision, both parties appealed.

The Collector of Internal Revenue, hereinafter called petitioner assigned four errors allegedly committed by the
trial court, while the assignees, Douglas and Bettina Fisher hereinafter called respondents, made six assignments
of error. Together, the assigned errors raise the following main issues for resolution by this Court:

(1) Whether or not, in determining the taxable net estate of the decedent, one-half (½) of the net estate should be
deducted therefrom as the share of tile surviving spouse in accordance with our law on conjugal partnership and
in relation to section 89 (c) of the National Internal revenue Code;

(2) Whether or not the estate can avail itself of the reciprocity proviso embodied in Section 122 of the National
Internal Revenue Code granting exemption from the payment of estate and inheritance taxes on the 210,000 shares
of stock in the Mindanao Mother Lode Mines Inc.;

(3) Whether or not the estate is entitled to the deduction of P4,000.00 allowed by Section 861, U.S. Internal
Revenue Code in relation to section 122 of the National Internal Revenue Code;

(4) Whether or not the real estate properties of the decedent located in Baguio City and the 210,000 shares of
stock in the Mindanao Mother Lode Mines, Inc., were correctly appraised by the lower court;

(5) Whether or not the estate is entitled to the following deductions: P8,604.39 for judicial and administration
expenses; P2,086.52 for funeral expenses; P652.50 for real estate taxes; and P10,0,22.47 representing the amount
of indebtedness allegedly incurred by the decedent during his lifetime; and

(6) Whether or not the estate is entitled to the payment of interest on the amount it claims to have overpaid the
government and to be refundable to it.

In deciding the first issue, the lower court applied a well-known doctrine in our civil law that in the absence of
any ante-nuptial agreement, the contracting parties are presumed to have adopted the system of conjugal
partnership as to the properties acquired during their marriage. The application of this doctrine to the instant case
is being disputed, however, by petitioner Collector of Internal Revenue, who contends that pursuant to Article
124 of the New Civil Code, the property relation of the spouses Stevensons ought not to be determined by the
Philippine law, but by the national law of the decedent husband, in this case, the law of England. It is alleged by
petitioner that English laws do not recognize legal partnership between spouses, and that what obtains in that
jurisdiction is another regime of property relation, wherein all properties acquired during the marriage pertain and
belong Exclusively to the husband. In further support of his stand, petitioner cites Article 16 of the New Civil
Code (Art. 10 of the old) to the effect that in testate and intestate proceedings, the amount of successional rights,
among others, is to be determined by the national law of the decedent.

In this connection, let it be noted that since the mariage of the Stevensons in the Philippines took place in 1909,
the applicable law is Article 1325 of the old Civil Code and not Article 124 of the New Civil Code which became
effective only in 1950. It is true that both articles adhere to the so-called nationality theory of determining the
property relation of spouses where one of them is a foreigner and they have made no prior agreement as to the
administration disposition, and ownership of their conjugal properties. In such a case, the national law of the
husband becomes the dominant law in determining the property relation of the spouses. There is, however, a
difference between the two articles in that Article 1241 of the new Civil Code expressly provides that it shall be
applicable regardless of whether the marriage was celebrated in the Philippines or abroad while Article 13252 of
the old Civil Code is limited to marriages contracted in a foreign land.

It must be noted, however, that what has just been said refers to mixed marriages between a Filipino citizen and
a foreigner. In the instant case, both spouses are foreigners who married in the Philippines. Manresa, 3 in his
Commentaries, has this to say on this point:

La regla establecida en el art. 1.315, se refiere a las capitulaciones otorgadas en Espana y entre espanoles.
El 1.325, a las celebradas en el extranjero cuando alguno de los conyuges es espanol. En cuanto a la regla
procedente cuando dos extranjeros se casan en Espana, o dos espanoles en el extranjero hay que atender
en el primer caso a la legislacion de pais a que aquellos pertenezean, y en el segundo, a las reglas generales
consignadas en los articulos 9 y 10 de nuestro Codigo. (Emphasis supplied.)

If we adopt the view of Manresa, the law determinative of the property relation of the Stevensons, married in
1909, would be the English law even if the marriage was celebrated in the Philippines, both of them being
foreigners. But, as correctly observed by the Tax Court, the pertinent English law that allegedly vests in the
decedent husband full ownership of the properties acquired during the marriage has not been proven by petitioner.
Except for a mere allegation in his answer, which is not sufficient, the record is bereft of any evidence as to what
English law says on the matter. In the absence of proof, the Court is justified, therefore, in indulging in what
Wharton calls "processual presumption," in presuming that the law of England on this matter is the same as our
law.4

Nor do we believe petitioner can make use of Article 16 of the New Civil Code (art. 10, old Civil Code) to bolster
his stand. A reading of Article 10 of the old Civil Code, which incidentally is the one applicable, shows that it
does not encompass or contemplate to govern the question of property relation between spouses. Said article
distinctly speaks of amount of successional rights and this term, in speaks in our opinion, properly refers to the
extent or amount of property that each heir is legally entitled to inherit from the estate available for distribution.
It needs to be pointed out that the property relation of spouses, as distinguished from their successional rights, is
governed differently by the specific and express provisions of Title VI, Chapter I of our new Civil Code (Title
III, Chapter I of the old Civil Code.) We, therefore, find that the lower court correctly deducted the half of the
conjugal property in determining the hereditary estate left by the deceased Stevenson.

On the second issue, petitioner disputes the action of the Tax Court in the exempting the respondents from paying
inheritance tax on the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. in virtue of the reciprocity
proviso of Section 122 of the National Internal Revenue Code, in relation to Section 13851 of the California
Revenue and Taxation Code, on the ground that: (1) the said proviso of the California Revenue and Taxation
Code has not been duly proven by the respondents; (2) the reciprocity exemptions granted by section 122 of the
National Internal Revenue Code can only be availed of by residents of foreign countries and not of residents of a
state in the United States; and (3) there is no "total" reciprocity between the Philippines and the state of California
in that while the former exempts payment of both estate and inheritance taxes on intangible personal properties,
the latter only exempts the payment of inheritance tax..

To prove the pertinent California law, Attorney Allison Gibbs, counsel for herein respondents, testified that as an
active member of the California Bar since 1931, he is familiar with the revenue and taxation laws of the State of
California. When asked by the lower court to state the pertinent California law as regards exemption of intangible
personal properties, the witness cited article 4, section 13851 (a) and (b) of the California Internal and Revenue
Code as published in Derring's California Code, a publication of the Bancroft-Whitney Company inc. And as part
of his testimony, a full quotation of the cited section was offered in evidence as Exhibits "V-2" by the respondents.

It is well-settled that foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to
take judicial notice of them.5 Like any other fact, they must be alleged and proved.6

Section 41, Rule 123 of our Rules of Court prescribes the manner of proving foreign laws before our tribunals.
However, although we believe it desirable that these laws be proved in accordance with said rule, we held in the
case of Willamette Iron and Steel Works v. Muzzal, 61 Phil. 471, that "a reading of sections 300 and 301 of our
Code of Civil Procedure (now section 41, Rule 123) will convince one that these sections do not exclude the
presentation of other competent evidence to prove the existence of a foreign law." In that case, we considered the
testimony of an attorney-at-law of San Francisco, California who quoted verbatim a section of California Civil
Code and who stated that the same was in force at the time the obligations were contracted, as sufficient evidence
to establish the existence of said law. In line with this view, we find no error, therefore, on the part of the Tax
Court in considering the pertinent California law as proved by respondents' witness.

We now take up the question of reciprocity in exemption from transfer or death taxes, between the State of
California and the Philippines.F

Section 122 of our National Internal Revenue Code, in pertinent part, provides:

... And, provided, further, That no tax shall be collected under this Title in respect of intangible personal
property (a) if the decedent at the time of his death was a resident of a foreign country which at the time
of his death did not impose a transfer of tax or death tax of any character in respect of intangible personal
property of citizens of the Philippines not residing in that foreign country, or (b) if the laws of the foreign
country of which the decedent was a resident at the time of his death allow a similar exemption from
transfer taxes or death taxes of every character in respect of intangible personal property owned by citizens
of the Philippines not residing in that foreign country." (Emphasis supplied).

On the other hand, Section 13851 of the California Inheritance Tax Law, insofar as pertinent, reads:.

"SEC. 13851, Intangibles of nonresident: Conditions. Intangible personal property is exempt from the tax
imposed by this part if the decedent at the time of his death was a resident of a territory or another State
of the United States or of a foreign state or country which then imposed a legacy, succession, or death tax
in respect to intangible personal property of its own residents, but either:.

(a) Did not impose a legacy, succession, or death tax of any character in respect to intangible personal
property of residents of this State, or

(b) Had in its laws a reciprocal provision under which intangible personal property of a non-resident was
exempt from legacy, succession, or death taxes of every character if the Territory or other State of the
United States or foreign state or country in which the nonresident resided allowed a similar exemption in
respect to intangible personal property of residents of the Territory or State of the United States or foreign
state or country of residence of the decedent." (Id.)
It is clear from both these quoted provisions that the reciprocity must be total, that is, with respect to transfer or
death taxes of any and every character, in the case of the Philippine law, and to legacy, succession, or death taxes
of any and every character, in the case of the California law. Therefore, if any of the two states collects or imposes
and does not exempt any transfer, death, legacy, or succession tax of any character, the reciprocity does not work.
This is the underlying principle of the reciprocity clauses in both laws.

In the Philippines, upon the death of any citizen or resident, or non-resident with properties therein, there are
imposed upon his estate and its settlement, both an estate and an inheritance tax. Under the laws of California,
only inheritance tax is imposed. On the other hand, the Federal Internal Revenue Code imposes an estate tax on
non-residents not citizens of the United States,7 but does not provide for any exemption on the basis of reciprocity.
Applying these laws in the manner the Court of Tax Appeals did in the instant case, we will have a situation
where a Californian, who is non-resident in the Philippines but has intangible personal properties here, will the
subject to the payment of an estate tax, although exempt from the payment of the inheritance tax. This being the
case, will a Filipino, non-resident of California, but with intangible personal properties there, be entitled to the
exemption clause of the California law, since the Californian has not been exempted from every character of
legacy, succession, or death tax because he is, under our law, under obligation to pay an estate tax? Upon the
other hand, if we exempt the Californian from paying the estate tax, we do not thereby entitle a Filipino to be
exempt from a similar estate tax in California because under the Federal Law, which is equally enforceable in
California he is bound to pay the same, there being no reciprocity recognized in respect thereto. In both instances,
the Filipino citizen is always at a disadvantage. We do not believe that our legislature has intended such an unfair
situation to the detriment of our own government and people. We, therefore, find and declare that the lower court
erred in exempting the estate in question from payment of the inheritance tax.

We are not unaware of our ruling in the case of Collector of Internal Revenue vs. Lara (G.R. Nos. L-9456 & L-
9481, prom. January 6, 1958, 54 O.G. 2881) exempting the estate of the deceased Hugo H. Miller from payment
of the inheritance tax imposed by the Collector of Internal Revenue. It will be noted, however, that the issue of
reciprocity between the pertinent provisions of our tax law and that of the State of California was not there
squarely raised, and the ruling therein cannot control the determination of the case at bar. Be that as it may, we
now declare that in view of the express provisions of both the Philippine and California laws that the exemption
would apply only if the law of the other grants an exemption from legacy, succession, or death taxes of every
character, there could not be partial reciprocity. It would have to be total or none at all.

With respect to the question of deduction or reduction in the amount of P4,000.00 based on the U.S. Federal
Estate Tax Law which is also being claimed by respondents, we uphold and adhere to our ruling in the Lara case
(supra) that the amount of $2,000.00 allowed under the Federal Estate Tax Law is in the nature of a deduction
and not of an exemption regarding which reciprocity cannot be claimed under the provision of Section 122 of our
National Internal Revenue Code. Nor is reciprocity authorized under the Federal Law. .

On the issue of the correctness of the appraisal of the two parcels of land situated in Baguio City, it is contended
that their assessed values, as appearing in the tax rolls 6 months after the death of Stevenson, ought to have been
considered by petitioner as their fair market value, pursuant to section 91 of the National Internal Revenue Code.
It should be pointed out, however, that in accordance with said proviso the properties are required to be appraised
at their fair market value and the assessed value thereof shall be considered as the fair market value only when
evidence to the contrary has not been shown. After all review of the record, we are satisfied that such evidence
exists to justify the valuation made by petitioner which was sustained by the tax court, for as the tax court aptly
observed:

"The two parcels of land containing 36,264 square meters were valued by the administrator of the estate
in the Estate and Inheritance tax returns filed by him at P43,500.00 which is the assessed value of said
properties. On the other hand, defendant appraised the same at P52,200.00. It is of common knowledge,
and this Court can take judicial notice of it, that assessments for real estate taxation purposes are very
much lower than the true and fair market value of the properties at a given time and place. In fact one year
 after decedent's death or in 1952 the said properties were sold for a price of P72,000.00 and there is no
showing that special or extraordinary circumstances caused the sudden increase from the price of
P43,500.00, if we were to accept this value as a fair and reasonable one as of 1951. Even more, the counsel
for plaintiffs himself admitted in open court that he was willing to purchase the said properties at P2.00
per square meter. In the light of these facts we believe and therefore hold that the valuation of P52,200.00
of the real estate in Baguio made by defendant is fair, reasonable and justified in the premises." (Decision,
p. 19).

In respect to the valuation of the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc., (a domestic
corporation), respondents contend that their value should be fixed on the basis of the market quotation obtaining
at the San Francisco (California) Stock Exchange, on the theory that the certificates of stocks were then held in
that place and registered with the said stock exchange. We cannot agree with respondents' argument. The situs of
the shares of stock, for purposes of taxation, being located here in the Philippines, as respondents themselves
concede and considering that they are sought to be taxed in this jurisdiction, consistent with the exercise of our
government's taxing authority, their fair market value should be taxed on the basis of the price prevailing in our
country.

Upon the other hand, we find merit in respondents' other contention that the said shares of stock commanded a
lesser value at the Manila Stock Exchange six months after the death of Stevenson. Through Atty. Allison Gibbs,
respondents have shown that at that time a share of said stock was bid for at only P.325 (p. 103, t.s.n.).
Significantly, the testimony of Atty. Gibbs in this respect has never been questioned nor refuted by petitioner
either before this court or in the court below. In the absence of evidence to the contrary, we are, therefore,
constrained to reverse the Tax Court on this point and to hold that the value of a share in the said mining company
on August 22, 1951 in the Philippine market was P.325 as claimed by respondents..

It should be noted that the petitioner and the Tax Court valued each share of stock of P.38 on the basis of the
declaration made by the estate in its preliminary return. Patently, this should not have been the case, in view of
the fact that the ancillary administrator had reserved and availed of his legal right to have the properties of the
estate declared at their fair market value as of six months from the time the decedent died..

On the fifth issue, we shall consider the various deductions, from the allowance or disallowance of which by the
Tax Court, both petitioner and respondents have appealed..

Petitioner, in this regard, contends that no evidence of record exists to support the allowance of the sum of
P8,604.39 for the following expenses:.

1) Administrator's fee P1,204.34

2) Attorney's fee 6,000.00
3) Judicial and Administrative expenses 2,052.55
Total Deductions P8,604.39

An examination of the record discloses, however, that the foregoing items were considered deductible by the Tax
Court on the basis of their approval by the probate court to which said expenses, we may presume, had also been
presented for consideration. It is to be supposed that the probate court would not have approved said items were
they not supported by evidence presented by the estate. In allowing the items in question, the Tax Court had
before it the pertinent order of the probate court which was submitted in evidence by respondents. (Exh. "AA-2",
p. 100, record). As the Tax Court said, it found no basis for departing from the findings of the probate court, as it
must have been satisfied that those expenses were actually incurred. Under the circumstances, we see no ground
to reverse this finding of fact which, under Republic Act of California National Association, which it would
appear, that while still living, Walter G. Stevenson obtained we are not inclined to pass upon the claim of
respondents in respect to the additional amount of P86.52 for funeral expenses which was disapproved by the
court a quo for lack of evidence.

In connection with the deduction of P652.50 representing the amount of realty taxes paid in 1951 on the decedent's
two parcels of land in Baguio City, which respondents claim was disallowed by the Tax Court, we find that this
claim has in fact been allowed. What happened here, which a careful review of the record will reveal, was that
the Tax Court, in itemizing the liabilities of the estate, viz:

1) Administrator's fee P1,204.34

2) Attorney's fee 6,000.00
3) Judicial and Administration expenses as of
August 9, 1952 2,052.55
Total P9,256.89

added the P652.50 for realty taxes as a liability of the estate, to the P1,400.05 for judicial and administration
expenses approved by the court, making a total of P2,052.55, exactly the same figure which was arrived at by the
Tax Court for judicial and administration expenses. Hence, the difference between the total of P9,256.98 allowed
by the Tax Court as deductions, and the P8,604.39 as found by the probate court, which is P652.50, the same
amount allowed for realty taxes. An evident oversight has involuntarily been made in omitting the P2,000.00 for
funeral expenses in the final computation. This amount has been expressly allowed by the lower court and there
is no reason why it should not be. .

We come now to the other claim of respondents that pursuant to section 89(b) (1) in relation to section 89(a) (1)
(E) and section 89(d), National Internal Revenue Code, the amount of P10,022.47 should have been allowed the
estate as a deduction, because it represented an indebtedness of the decedent incurred during his lifetime. In
support thereof, they offered in evidence a duly certified claim, presented to the probate court in California by the
Bank of California National Association, which it would appear, that while still living, Walter G. Stevenson
obtained a loan of $5,000.00 secured by pledge on 140,000 of his shares of stock in the Mindanao Mother Lode
Mines, Inc. (Exhs. "Q-Q4", pp. 53-59, record). The Tax Court disallowed this item on the ground that the local
probate court had not approved the same as a valid claim against the estate and because it constituted an
indebtedness in respect to intangible personal property which the Tax Court held to be exempt from inheritance
tax.

For two reasons, we uphold the action of the lower court in disallowing the deduction.

Firstly, we believe that the approval of the Philippine probate court of this particular indebtedness of the decedent
is necessary. This is so although the same, it is averred has been already admitted and approved by the
corresponding probate court in California, situs of the principal or domiciliary administration. It is true that we
have here in the Philippines only an ancillary administration in this case, but, it has been held, the distinction
between domiciliary or principal administration and ancillary administration serves only to distinguish one
administration from the other, for the two proceedings are separate and independent.8 The reason for the ancillary
administration is that, a grant of administration does not ex proprio vigore, have any effect beyond the limits of
the country in which it was granted. Hence, we have the requirement that before a will duly probated outside of
the Philippines can have effect here, it must first be proved and allowed before our courts, in much the same
manner as wills originally presented for allowance therein.9 And the estate shall be administered under letters
testamentary, or letters of administration granted by the court, and disposed of according to the will as probated,
after payment of just debts and expenses of administration.10 In other words, there is a regular administration
under the control of the court, where claims must be presented and approved, and expenses of administration
allowed before deductions from the estate can be authorized. Otherwise, we would have the actuations of our own
probate court, in the settlement and distribution of the estate situated here, subject to the proceedings before the
foreign court over which our courts have no control. We do not believe such a procedure is countenanced or
contemplated in the Rules of Court.

Another reason for the disallowance of this indebtedness as a deduction, springs from the provisions of Section
89, letter (d), number (1), of the National Internal Revenue Code which reads:

(d) Miscellaneous provisions — (1) No deductions shall be allowed in the case of a non-resident not a
citizen of the Philippines unless the executor, administrator or anyone of the heirs, as the case may be,
includes in the return required to be filed under section ninety-three the value at the time of his death of
that part of the gross estate of the non-resident not situated in the Philippines."

In the case at bar, no such statement of the gross estate of the non-resident Stevenson not situated in the Philippines
appears in the three returns submitted to the court or to the office of the petitioner Collector of Internal Revenue.
The purpose of this requirement is to enable the revenue officer to determine how much of the indebtedness may
be allowed to be deducted, pursuant to (b), number (1) of the same section 89 of the Internal Revenue Code which
provides:

(b) Deductions allowed to non-resident estates. — In the case of a non-resident not a citizen of the
Philippines, by deducting from the value of that part of his gross estate which at the time of his death is
situated in the Philippines —

(1) Expenses, losses, indebtedness, and taxes. — That proportion of the deductions specified in paragraph
(1) of subjection (a) of this section11 which the value of such part bears the value of his entire gross estate
wherever situated;"

In other words, the allowable deduction is only to the extent of the portion of the indebtedness which is equivalent
to the proportion that the estate in the Philippines bears to the total estate wherever situated. Stated differently, if
the properties in the Philippines constitute but 1/5 of the entire assets wherever situated, then only 1/5 of the
indebtedness may be deducted. But since, as heretofore adverted to, there is no statement of the value of the estate
situated outside the Philippines, no part of the indebtedness can be allowed to be deducted, pursuant to Section
89, letter (d), number (1) of the Internal Revenue Code.

For the reasons thus stated, we affirm the ruling of the lower court disallowing the deduction of the alleged
indebtedness in the sum of P10,022.47.

In recapitulation, we hold and declare that:

(a) only the one-half (1/2) share of the decedent Stevenson in the conjugal partnership property constitutes
his hereditary estate subject to the estate and inheritance taxes;

(b) the intangible personal property is not exempt from inheritance tax, there existing no complete total
reciprocity as required in section 122 of the National Internal Revenue Code, nor is the decedent's estate
entitled to an exemption of P4,000.00 in the computation of the estate tax;

(c) for the purpose of the estate and inheritance taxes, the 210,000 shares of stock in the Mindanao Mother
Lode Mines, Inc. are to be appraised at P0.325 per share; and

(d) the P2,000.00 for funeral expenses should be deducted in the determination of the net asset of the
deceased Stevenson.

In all other respects, the decision of the Court of Tax Appeals is affirmed.
Respondent's claim for interest on the amount allegedly overpaid, if any actually results after a recomputation on
the basis of this decision is hereby denied in line with our recent decision in Collector of Internal Revenue v. St.
Paul's Hospital (G.R. No. L-12127, May 29, 1959) wherein we held that, "in the absence of a statutory provision
clearly or expressly directing or authorizing such payment, and none has been cited by respondents, the National
Government cannot be required to pay interest."

WHEREFORE, as modified in the manner heretofore indicated, the judgment of the lower court is hereby
affirmed in all other respects not inconsistent herewith. No costs. So ordered.
Footnotes
1
ART. 124. If the marriage is between a citizen of the
Philippines and a foreigner, whether celebrated in the
Philippines or abroad, the following rules shall prevail: (1) If
the husband is a citizen of the Philippines while the wife is a
foreigner, the provisions of this Code shall govern their
property relations; (2) If the husband is a foreigner and the wife
is a citizen of the Philippines, the laws of the husband's country
shall be followed, without prejudice to the provisions of this
Code with regard to immovable property."
2 7
ART. 1325. Should the marriage be contracted in a foreign
country, between a Spaniard and a foreign woman or between a
foreigner and a Spanish woman, and the contracting parties
should not make any statement or stipulation with respect to
their property, it shall be understood, when the husband is a
Spaniard, that he marries under the system of the legal conjugal
partnership, and when the wife is a Spaniard, that she marries
under the system of law in force in the husband's country, all
without prejudice to the provisions of this code with respect to
real property. .
3
IX Manresa, Comentarios al Codigo Civil Espanol, p. 209. .
4
Yam Ka Lim vs. Collector of Customs, 30 Phil. 46; Lim &
Lim vs. Collector of Customs, 36 Phil. 472; International
Harvester Co. vs. Hamburg-American Line, 42 Phil. 845; Beam
vs. Yatco, 46 O.G. No. 2, p. 530.).
5
Lim vs. Collector of Customs, supra; International Harvester
Co. vs. Hamburg-American Line, supra; Phil. Manufacturing
Co. vs. Union Ins. Society of Canton, 42 Phil. 378; Adong vs.
Cheong Seng Gee, Phil. 53.
6
Sy Joc Leing vs. Sy Quia, 16 Phil. 138; Ching Huat vs. Co
Heong, 77 Phil. 985; Adong vs. Cheong supra.
See Sec. 860, Internal Revenue Code of 1939, 26 USCA 408.
8
In the matter of the testate estate of Basil Gordon Butler, G.R.
No. L-3677, Nov. 29, 1951. .
9
Rule 78, Sees. 1, 2 and 3, Rules of Court. See also Hix vs.
Fluemer, 54 Phil. 610. .
10
Rule 78, See. 4, lbid.
11
Expense, losses, indebtedness, and taxes which may be
deducted to determine the net estate of a citizen or resident of
the Philippines.

---------------------------------------------------------------------------------------------------------------------------------------

EN BANC

G.R. No. L-23678 June 6, 1967

TESTATE ESTATE OF AMOS G. BELLIS, deceased.

PEOPLE'S BANK and TRUST COMPANY, executor.
MARIA CRISTINA BELLIS and MIRIAM PALMA BELLIS, oppositors-appellants,
vs.
EDWARD A. BELLIS, ET AL., heirs-appellees.

This is a direct appeal to Us, upon a question purely of law, from an order of the Court of First Instance of Manila
dated April 30, 1964, approving the project of partition filed by the executor in Civil Case No. 37089
therein.1äwphï1.ñët

The facts of the case are as follows:

Amos G. Bellis, born in Texas, was "a citizen of the State of Texas and of the United States." By his first wife,
Mary E. Mallen, whom he divorced, he had five legitimate children: Edward A. Bellis, George Bellis (who pre-
deceased him in infancy), Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman; by his second wife, Violet
Kennedy, who survived him, he had three legitimate children: Edwin G. Bellis, Walter S. Bellis and Dorothy
Bellis; and finally, he had three illegitimate children: Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma
Bellis.
On August 5, 1952, Amos G. Bellis executed a will in the Philippines, in which he directed that after all taxes,
obligations, and expenses of administration are paid for, his distributable estate should be divided, in trust, in the
following order and manner: (a) $240,000.00 to his first wife, Mary E. Mallen; (b) P120,000.00 to his three
illegitimate children, Amos Bellis, Jr., Maria Cristina Bellis, Miriam Palma Bellis, or P40,000.00 each and (c)
after the foregoing two items have been satisfied, the remainder shall go to his seven surviving children by his
first and second wives, namely: Edward A. Bellis, Henry A. Bellis, Alexander Bellis and Anna Bellis Allsman,
Edwin G. Bellis, Walter S. Bellis, and Dorothy E. Bellis, in equal shares.

Subsequently, or on July 8, 1958, Amos G. Bellis died a resident of San Antonio, Texas, U.S.A. His will was
admitted to probate in the Court of First Instance of Manila on September 15, 1958.

The People's Bank and Trust Company, as executor of the will, paid all the bequests therein including the amount
of $240,000.00 in the form of shares of stock to Mary E. Mallen and to the three (3) illegitimate children, Amos
Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis, various amounts totalling P40,000.00 each in
satisfaction of their respective legacies, or a total of P120,000.00, which it released from time to time according
as the lower court approved and allowed the various motions or petitions filed by the latter three requesting partial
advances on account of their respective legacies.

On January 8, 1964, preparatory to closing its administration, the executor submitted and filed its "Executor's
Final Account, Report of Administration and Project of Partition" wherein it reported, inter alia, the satisfaction
of the legacy of Mary E. Mallen by the delivery to her of shares of stock amounting to $240,000.00, and the
legacies of Amos Bellis, Jr., Maria Cristina Bellis and Miriam Palma Bellis in the amount of P40,000.00 each or
a total of P120,000.00. In the project of partition, the executor — pursuant to the "Twelfth" clause of the testator's
Last Will and Testament — divided the residuary estate into seven equal portions for the benefit of the testator's
seven legitimate children by his first and second marriages.

On January 17, 1964, Maria Cristina Bellis and Miriam Palma Bellis filed their respective oppositions to the
project of partition on the ground that they were deprived of their legitimes as illegitimate children and, therefore,
compulsory heirs of the deceased.

Amos Bellis, Jr. interposed no opposition despite notice to him, proof of service of which is evidenced by the
registry receipt submitted on April 27, 1964 by the executor.1

After the parties filed their respective memoranda and other pertinent pleadings, the lower court, on April 30,
1964, issued an order overruling the oppositions and approving the executor's final account, report and
administration and project of partition. Relying upon Art. 16 of the Civil Code, it applied the national law of the
decedent, which in this case is Texas law, which did not provide for legitimes.

Their respective motions for reconsideration having been denied by the lower court on June 11, 1964, oppositors-
appellants appealed to this Court to raise the issue of which law must apply — Texas law or Philippine law.

In this regard, the parties do not submit the case on, nor even discuss, the doctrine of renvoi, applied by this Court
in Aznar v. Christensen Garcia, L-16749, January 31, 1963. Said doctrine is usually pertinent where the decedent
is a national of one country, and a domicile of another. In the present case, it is not disputed that the decedent was
both a national of Texas and a domicile thereof at the time of his death.2 So that even assuming Texas has a
conflict of law rule providing that the domiciliary system (law of the domicile) should govern, the same would
not result in a reference back (renvoi) to Philippine law, but would still refer to Texas law. Nonetheless, if Texas
has a conflicts rule adopting the situs theory (lex rei sitae) calling for the application of the law of the place where
the properties are situated, renvoi would arise, since the properties here involved are found in the Philippines. In
the absence, however, of proof as to the conflict of law rule of Texas, it should not be presumed different from
ours.3 Appellants' position is therefore not rested on the doctrine of renvoi. As stated, they never invoked nor even
mentioned it in their arguments. Rather, they argue that their case falls under the circumstances mentioned in the
third paragraph of Article 17 in relation to Article 16 of the Civil Code.

Article 16, par. 2, and Art. 1039 of the Civil Code, render applicable the national law of the decedent, in intestate
or testamentary successions, with regard to four items: (a) the order of succession; (b) the amount of successional
rights; (e) the intrinsic validity of the provisions of the will; and (d) the capacity to succeed. They provide that —

ART. 16. Real property as well as personal property is subject to the law of the country where it is situated.

However, intestate and testamentary successions, both with respect to the order of succession and to the
amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated
by the national law of the person whose succession is under consideration, whatever may he the nature of
the property and regardless of the country wherein said property may be found.

ART. 1039. Capacity to succeed is governed by the law of the nation of the decedent.

Appellants would however counter that Art. 17, paragraph three, of the Civil Code, stating that —

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

prevails as the exception to Art. 16, par. 2 of the Civil Code afore-quoted. This is not correct. Precisely,
Congress deleted the phrase, "notwithstanding the provisions of this and the next preceding article" when they
incorporated Art. 11 of the old Civil Code as Art. 17 of the new Civil Code, while reproducing without substantial
change the second paragraph of Art. 10 of the old Civil Code as Art. 16 in the new. It must have been their purpose
to make the second paragraph of Art. 16 a specific provision in itself which must be applied in testate and intestate
succession. As further indication of this legislative intent, Congress added a new provision, under Art. 1039,
which decrees that capacity to succeed is to be governed by the national law of the decedent.

It is therefore evident that whatever public policy or good customs may be involved in our System of legitimes,
Congress has not intended to extend the same to the succession of foreign nationals. For it has specifically chosen
to leave, inter alia, the amount of successional rights, to the decedent's national law. Specific provisions must
prevail over general ones.

Appellants would also point out that the decedent executed two wills — one to govern his Texas estate and the
other his Philippine estate — arguing from this that he intended Philippine law to govern his Philippine estate.
Assuming that such was the decedent's intention in executing a separate Philippine will, it would not alter the law,
for as this Court ruled in Miciano v. Brimo, 50 Phil. 867, 870, a provision in a foreigner's will to the effect that
his properties shall be distributed in accordance with Philippine law and not with his national law, is illegal and
void, for his national law cannot be ignored in regard to those matters that Article 10 — now Article 16 — of the
Civil Code states said national law should govern.

The parties admit that the decedent, Amos G. Bellis, was a citizen of the State of Texas, U.S.A., and that under
the laws of Texas, there are no forced heirs or legitimes. Accordingly, since the intrinsic validity of the provision
of the will and the amount of successional rights are to be determined under Texas law, the Philippine law on
legitimes cannot be applied to the testacy of Amos G. Bellis.

Wherefore, the order of the probate court is hereby affirmed in toto, with costs against appellants. So ordered.
1
Footnotes He later filed a motion praying that as a legal heir he be
included in this case as one of the oppositors-appellants; to file
 2
or adopt the opposition of his sisters to the project of partition; San Antonio, Texas was his legal residence.
3
to submit his brief after paying his proportionate share in the Lim vs. Collector, 36 Phil. 472; In re Testate Estate of Suntay,
expenses incurred in the printing of the record on appeal; or to 95 Phil. 500.
allow him to adopt the briefs filed by his sisters — but this Court
resolved to deny the motion.

---------------------------------------------------------------------------------------------------------------------------------------

FIRST DIVISION

G.R. No. 139868 June 8, 2006

ALONZO Q. ANCHETA, Petitioner,

- versus -
CANDELARIA GUERSEY-DALAYGON, Respondent.

DECISION

Spouses Audrey ONeill (Audrey) and W. Richard Guersey (Richard) were American citizens who have resided
in the Philippines for 30 years. They have an adopted daughter, Kyle Guersey Hill (Kyle). On July 29, 1979,
Audrey died, leaving a will. In it, she bequeathed her entire estate to Richard, who was also designated as
executor.[1] The will was admitted to probate before the Orphans Court of Baltimore, Maryland, U.S.A, which
named James N. Phillips as executor due to Richards renunciation of his appointment.[2] The court also named
Atty. Alonzo Q. Ancheta (petitioner) of the Quasha Asperilla Ancheta Pena & Nolasco Law Offices as ancillary
administrator.[3]

In 1981, Richard married Candelaria Guersey-Dalaygon (respondent) with whom he has two children, namely,
Kimberly and Kevin.

On October 12, 1982, Audreys will was also admitted to probate by the then Court of First Instance of Rizal,
Branch 25, Seventh Judicial District, Pasig, in Special Proceeding No. 9625.[4] As administrator of Audreys estate
in the Philippines, petitioner filed an inventory and appraisal of the following properties: (1) Audreys conjugal
share in real estate with improvements located at 28 Pili Avenue, Forbes Park, Makati, Metro Manila, valued
at P764,865.00 (Makati property); (2) a current account in Audreys name with a cash balance of P12,417.97; and
(3) 64,444 shares of stock in A/G Interiors, Inc. worth P64,444.00.[5]

On July 20, 1984, Richard died, leaving a will, wherein he bequeathed his entire estate to respondent, save for his
rights and interests over the A/G Interiors, Inc. shares, which he left to Kyle.[6] The will was also admitted to
probate by the Orphans Court of Ann Arundel, Maryland, U.S.A, and James N. Phillips was likewise appointed
as executor, who in turn, designated Atty. William Quasha or any member of the Quasha Asperilla Ancheta Pena
& Nolasco Law Offices, as ancillary administrator.

Richards will was then submitted for probate before the Regional Trial Court of Makati, Branch 138, docketed as
Special Proceeding No. M-888.[7] Atty. Quasha was appointed as ancillary administrator on July 24, 1986.[8]

On October 19, 1987, petitioner filed in Special Proceeding No. 9625, a motion to declare Richard and Kyle as
heirs of Audrey.[9] Petitioner also filed on October 23, 1987, a project of partition of Audreys estate, with Richard
being apportioned the undivided interest in the Makati property, 48.333 shares in A/G Interiors, Inc.,
and P9,313.48 from the Citibank current account; and Kyle, the undivided interest in the Makati property, 16,111
shares in A/G Interiors, Inc., and P3,104.49 in cash.[10]

The motion and project of partition was granted and approved by the trial court in its Order dated February 12,
1988.[11] The trial court also issued an Order on April 7, 1988, directing the Register of Deeds of Makati to cancel
TCT No. 69792 in the name of Richard and to issue a new title in the joint names of the Estate of W. Richard
Guersey ( undivided interest) and Kyle ( undivided interest); directing the Secretary of A/G Interiors, Inc. to
transfer 48.333 shares to the Estate of W. Richard Guersey and 16.111 shares to Kyle; and directing the Citibank
to release the amount of P12,417.97 to the ancillary administrator for distribution to the heirs.[12]

Consequently, the Register of Deeds of Makati issued on June 23, 1988, TCT No. 155823 in the names of the
Estate of W. Richard Guersey and Kyle.[13]

Meanwhile, the ancillary administrator in Special Proceeding No. M-888 also filed a project of partition
wherein 2/5 of Richards undivided interest in the Makati property was allocated to respondent, while 3/5 thereof
were allocated to Richards three children. This was opposed by respondent on the ground that under the law of
the State of Maryland, a legacy passes to the legatee the entire interest of the testator in the property subject
of the legacy.[14] Since Richard left his entire estate to respondent, except for his rights and interests over the A/G
Interiors, Inc, shares, then his entire undivided interest in the Makati property should be given to respondent.

The trial court found merit in respondents opposition, and in its Order dated December 6, 1991, disapproved the
project of partition insofar as it affects the Makatiproperty. The trial court also adjudicated Richards entire
undivided interest in the Makati property to respondent.[15]

On October 20, 1993, respondent filed with the Court of Appeals (CA) an amended complaint for the annulment
of the trial courts Orders dated February 12, 1988 and April 7, 1988, issued in Special Proceeding No.
9625.[16] Respondent contended that petitioner willfully breached his fiduciary duty when he disregarded the laws
of the State of Maryland on the distribution of Audreys estate in accordance with her will. Respondent argued
that since Audrey devised her entire estate to Richard, then the Makati property should be wholly adjudicated to
him, and not merely thereof, and since Richard left his entire estate, except for his rights and interests over the
A/G Interiors, Inc., to respondent, then the entire Makati property should now pertain to respondent.

Petitioner filed his Answer denying respondents allegations. Petitioner contended that he acted in good faith in
submitting the project of partition before the trial court in Special Proceeding No. 9625, as he had no knowledge
of the State of Marylands laws on testate and intestate succession. Petitioner alleged that he believed that it is to
the best interests of the surviving children that Philippine law be applied as they would receive their just
shares. Petitioner also alleged that the orders sought to be annulled are already final and executory, and cannot be
set aside.

On March 18, 1999, the CA rendered the assailed Decision annulling the trial courts Orders dated February 12,
1988 and April 7, 1988, in Special Proceeding No. 9625.[17] The dispositive portion of the assailed Decision
provides:

WHEREFORE, the assailed Orders of February 12, 1998 and April 7, 1988 are
hereby ANNULLED and, in lieu thereof, a new one is entered ordering:

(a) The adjudication of the entire estate of Audrey ONeill Guersey in favor of the estate of W.
Richard Guersey; and

(b) The cancellation of Transfer Certificate of Title No. 15583 of the Makati City Registry and the
issuance of a new title in the name of the estate of W. Richard Guersey.

SO ORDERED.[18]

Petitioner filed a motion for reconsideration, but this was denied by the CA per Resolution dated August 27,
1999.[19]
Hence, the herein petition for review on certiorari under Rule 45 of the Rules of Court alleging that the CA
gravely erred in not holding that:

A) THE ORDERS OF 12 FEBRUARY 1988 AND 07 APRIL 1988 IN SPECIAL PROCEEDINGS NO. 9625 IN
THE MATTER OF THE PETITION FOR PROBATE OF THE WILL OF THE DECEASED AUDREY
GUERSEY, ALONZO Q. ANCHETA, ANCILLARY ADMINISTRATOR, ARE VALID AND BINDING AND
HAVE LONG BECOME FINAL AND HAVE BEEN FULLY IMPLEMENTED AND EXECUTED AND CAN
NO LONGER BE ANNULLED.

B) THE ANCILLARY ADMINISTRATOR HAVING ACTED IN GOOD FAITH, DID NOT COMMIT
FRAUD, EITHER EXTRINSIC OR INTRINSIC, IN THE PERFORMANCE OF HIS DUTIES AS
ANCILLARY ADMINISTRATOR OF AUDREY ONEIL GUERSEYS ESTATE IN THE PHILIPPINES, AND
THAT NO FRAUD, EITHER EXTRINSIC OR INTRINSIC, WAS EMPLOYED BY [HIM] IN PROCURING
SAID ORDERS.[20]

Petitioner reiterates his arguments before the CA that the Orders dated February 12, 1988 and April 7, 1988 can
no longer be annulled because it is a final judgment, which is conclusive upon the administration as to all matters
involved in such judgment or order, and will determine for all time and in all courts, as far as the parties to the
proceedings are concerned, all matters therein determined, and the same has already been executed.[21]

Petitioner also contends that that he acted in good faith in performing his duties as an ancillary administrator. He
maintains that at the time of the filing of the project of partition, he was not aware of the relevant laws of the State
of Maryland, such that the partition was made in accordance with Philippine laws. Petitioner also imputes
knowledge on the part of respondent with regard to the terms of Aubreys will, stating that as early as 1984, he
already apprised respondent of the contents of the will and how the estate will be divided.[22]

Respondent argues that petitioners breach of his fiduciary duty as ancillary administrator of Aubreys estate
amounted to extrinsic fraud. According to respondent, petitioner was duty-bound to follow the express terms of
Aubreys will, and his denial of knowledge of the laws of Maryland cannot stand because petitioner is a senior
partner in a prestigious law firm and it was his duty to know the relevant laws.

Respondent also states that she was not able to file any opposition to the project of partition because she was not
a party thereto and she learned of the provision of Aubreys will bequeathing entirely her estate to Richard only
after Atty. Ancheta filed a project of partition in Special Proceeding No. M-888 for the settlement of Richards
estate.

A decree of distribution of the estate of a deceased person vests the title to the land of the estate in the distributees,
which, if erroneous may be corrected by a timely appeal. Once it becomes final, its binding effect is like any other
judgment in rem.[23]However, in exceptional cases, a final decree of distribution of the estate may be set aside for
lack of jurisdiction or fraud.[24] Further, in Ramon v. Ortuzar,[25] the Court ruled that a party interested in a probate
proceeding may have a final liquidation set aside when he is left out by reason of circumstances beyond his control
or through mistake or inadvertence not imputable to negligence.[26]

The petition for annulment was filed before the CA on October 20, 1993, before the issuance of the 1997 Rules
of Civil Procedure; hence, the applicable law is Batas Pambansa Blg. 129 (B.P. 129) or the Judiciary
Reorganization Act of 1980. An annulment of judgment filed under B.P. 129 may be based on the ground that a
judgment is void for want of jurisdiction or that the judgment was obtained by extrinsic fraud. [27] For fraud to
become a basis for annulment of judgment, it has to be extrinsic or actual, [28] and must be brought within four
years from the discovery of the fraud.[29]

In the present case, respondent alleged extrinsic fraud as basis for the annulment of the RTC Orders
dated February 12, 1988 and April 7, 1988. The CA found merit in respondents cause and found that petitioners
failure to follow the terms of Audreys will, despite the latters declaration of good faith, amounted to extrinsic
fraud. The CA ruled that under Article 16 of the Civil Code, it is the national law of the decedent that is applicable,
hence, petitioner should have distributed Aubreys estate in accordance with the terms of her will. The CA also
found that petitioner was prompted to distribute Audreys estate in accordance with Philippine laws in order to
equally benefit Audrey and Richard Guerseys adopted daughter, Kyle Guersey Hill.

Petitioner contends that respondents cause of action had already prescribed because as early as 1984, respondent
was already well aware of the terms of Audreys will,[30] and the complaint was filed only in 1993. Respondent,
on the other hand, justified her lack of immediate action by saying that she had no opportunity to question
petitioners acts since she was not a party to Special Proceeding No. 9625, and it was only after Atty. Ancheta filed
the project of partition in Special Proceeding No. M-888, reducing her inheritance in the estate of Richard that
she was prompted to seek another counsel to protect her interest.[31]

It should be pointed out that the prescriptive period for annulment of judgment based on extrinsic fraud
commences to run from the discovery of the fraud or fraudulent act/s. Respondents knowledge of the terms of
Audreys will is immaterial in this case since it is not the fraud complained of. Rather, it is petitioners failure to
introduce in evidence the pertinent law of the State of Maryland that is the fraudulent act, or in this case, omission,
alleged to have been committed against respondent, and therefore, the four-year period should be counted from
the time of respondents discovery thereof.

Records bear the fact that the filing of the project of partition of Richards estate, the opposition thereto, and the
order of the trial court disallowing the project of partition in Special Proceeding No. M-888 were all done in
1991.[32] Respondent cannot be faulted for letting the assailed orders to lapse into finality since it was only through
Special Proceeding No. M-888 that she came to comprehend the ramifications of petitioners acts. Obviously,
respondent had no other recourse under the circumstances but to file the annulment case. Since the action for
annulment was filed in 1993, clearly, the same has not yet prescribed.

Fraud takes on different shapes and faces. In Cosmic Lumber Corporation v. Court of Appeals,[33] the Court stated
that man in his ingenuity and fertile imagination will always contrive new schemes to fool the unwary.

There is extrinsic fraud within the meaning of Sec. 9 par. (2), of B.P. Blg. 129, where it is
one the effect of which prevents a party from hearing a trial, or real contest, or from presenting all
of his case to the court, or where it operates upon matters, not pertaining to the judgment itself, but
to the manner in which it was procured so that there is not a fair submission of the controversy. In
other words, extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation
which is committed outside of the trial of the case, whereby the defeated party has been prevented
from exhibiting fully his side of the case by fraud or deception practiced on him by his opponent.
Fraud is extrinsic where the unsuccessful party has been prevented from exhibiting fully his case,
by fraud or deception practiced on him by his opponent, as by keeping him away from court, a
false promise of a compromise; or where the defendant never had any knowledge of the suit, being
kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or without authority
connives at his defeat; these and similar cases which show that there has never been a real contest
in the trial or hearing of the case are reasons for which a new suit may be sustained to set aside
and annul the former judgment and open the case for a new and fair hearing.[34]

The overriding consideration when extrinsic fraud is alleged is that the fraudulent scheme of the prevailing litigant
prevented a party from having his day in court.[35]

Petitioner is the ancillary administrator of Audreys estate. As such, he occupies a position of the highest trust and
confidence, and he is required to exercise reasonable diligence and act in entire good faith in the performance of
that trust. Although he is not a guarantor or insurer of the safety of the estate nor is he expected to be infallible,
yet the same degree of prudence, care and judgment which a person of a fair average capacity and ability exercises
in similar transactions of his own, serves as the standard by which his conduct is to be judged.[36]

Petitioners failure to proficiently manage the distribution of Audreys estate according to the terms of her will and
as dictated by the applicable law amounted to extrinsic fraud. Hence the CA Decision annulling the RTC Orders
dated February 12, 1988 and April 7, 1988, must be upheld.

It is undisputed that Audrey Guersey was an American citizen domiciled in Maryland, U.S.A. During the
reprobate of her will in Special Proceeding No. 9625, it was shown, among others, that at the time of Audreys
death, she was residing in the Philippines but is domiciled in Maryland, U.S.A.; her Last Will and Testament
dated August 18, 1972 was executed and probated before the Orphans Court in Baltimore, Maryland, U.S.A.,
which was duly authenticated and certified by the Register of Wills of Baltimore City and attested by the Chief
Judge of said court; the will was admitted by the Orphans Court of Baltimore City on September 7, 1979; and the
will was authenticated by the Secretary of State of Maryland and the Vice Consul of the Philippine Embassy.

Being a foreign national, the intrinsic validity of Audreys will, especially with regard as to who are her heirs, is
governed by her national law, i.e., the law of the State of Maryland, as provided in Article 16 of the Civil Code,
to wit:

Art. 16. Real property as well as personal property is subject to the law of the country
where it is situated.

However, intestate and testamentary succession, both with respect to the order of
succession and to the amount of successional rights and to the intrinsic validity of
testamentary provisions, shall be regulated by the national law of the person whose
succession is under consideration, whatever may be the nature of the property and regardless
of the country wherein said property may be found. (Emphasis supplied)

Article 1039 of the Civil Code further provides that capacity to succeed is governed by the law of the nation of
the decedent.

As a corollary rule, Section 4, Rule 77 of the Rules of Court on Allowance of Will Proved Outside the
Philippines and Administration of Estate Thereunder, states:

SEC. 4. Estate, how administered.When a will is thus allowed, the court shall grant letters
testamentary, or letters of administration with the will annexed, and such letters testamentary or of
administration, shall extend to all the estate of the testator in the Philippines. Such estate, after
the payment of just debts and expenses of administration, shall be disposed of according to
such will, so far as such will may operate upon it; and the residue, if any, shall be disposed of
as is provided by law in cases of estates in the Philippines belonging to persons who are inhabitants
of another state or country. (Emphasis supplied)

While foreign laws do not prove themselves in our jurisdiction and our courts are not authorized to take judicial
notice of them;[37] however, petitioner, as ancillary administrator of Audreys estate, was duty-bound to introduce
in evidence the pertinent law of the State of Maryland.[38]

Petitioner admitted that he failed to introduce in evidence the law of the State of Maryland on Estates and Trusts,
and merely relied on the presumption that such law is the same as the Philippine law on wills and
succession. Thus, the trial court peremptorily applied Philippine laws and totally disregarded the terms of Audreys
will. The obvious result was that there was no fair submission of the case before the trial court or a judicious
appreciation of the evidence presented.

Petitioner insists that his application of Philippine laws was made in good faith.The Court cannot accept
petitioners protestation. How can petitioner honestly presume that Philippine laws apply when as early as the
reprobate of Audreys will before the trial court in 1982, it was already brought to fore that Audrey was a U.S.
citizen, domiciled in the State of Maryland. As asserted by respondent, petitioner is a senior partner in a
prestigious law firm, with a big legal staff and a large library.[39] He had all the legal resources to determine the
applicable law. It was incumbent upon him to exercise his functions as ancillary administrator with reasonable
diligence, and to discharge the trust reposed on him faithfully. Unfortunately, petitioner failed to perform his
fiduciary duties.

Moreover, whether his omission was intentional or not, the fact remains that the trial court failed to consider said
law when it issued the assailed RTC Orders dated February 12, 1988 and April 7, 1988, declaring Richard and
Kyle as Audreys heirs, and distributing Audreys estate according to the project of partition submitted by
petitioner. This eventually prejudiced respondent and deprived her of her full successional right to
the Makati property.

In GSIS v. Bengson Commercial Bldgs., Inc.,[40] the Court held that when the rule that the negligence or mistake
of counsel binds the client deserts its proper office as an aid to justice and becomes a great hindrance and chief
enemy, its rigors must be relaxed to admit exceptions thereto and to prevent a miscarriage of justice, and the court
has the power to except a particular case from the operation of the rule whenever the purposes of justice require
it.

The CA aptly noted that petitioner was remiss in his responsibilities as ancillary administrator of Audreys
estate. The CA likewise observed that the distribution made by petitioner was prompted by his concern over Kyle,
whom petitioner believed should equally benefit from the Makati property. The CA correctly stated, which the
Court adopts, thus:

In claiming good faith in the performance of his duties and responsibilities, defendant Alonzo
H. Ancheta invokes the principle which presumes the law of the forum to be the same as the
foreign law (Beam vs. Yatco, 82 Phil. 30, 38) in the absence of evidence adduced to prove the latter
law (Slade Perkins vs. Perkins, 57 Phil. 205, 210). In defending his actions in the light of the
foregoing principle, however, it appears that the defendant lost sight of the fact that his primary
responsibility as ancillary administrator was to distribute the subject estate in accordance with the
will of Audrey ONeill Guersey. Considering the principle established under Article 16 of the Civil
Code of the Philippines, as well as the citizenship and the avowed domicile of the decedent, it goes
without saying that the defendant was also duty-bound to prove the pertinent laws of Maryland on
the matter.
The record reveals, however, that no clear effort was made to prove the national law of Audrey
ONeill Guersey during the proceedings before the court a quo. While there is claim of good faith
in distributing the subject estate in accordance with the Philippine laws, the defendant appears to
put his actuations in a different light as indicated in a portion of his direct examination, to wit:

xxx

It would seem, therefore, that the eventual distribution of the estate of Audrey ONeill Guersey was
prompted by defendant Alonzo H. Anchetas concern that the subject realty equally benefit the
plaintiffs adopted daughter Kyle Guersey.
 Well-intentioned though it may be, defendant Alonzo H. Anchetas action appears to have breached
his duties and responsibilities as ancillary administrator of the subject estate. While such breach
of duty admittedly cannot be considered extrinsic fraud under ordinary circumstances, the
fiduciary nature of the said defendants position, as well as the resultant frustration of the
decedents last will, combine to create a circumstance that is tantamount to extrinsic
fraud. Defendant Alonzo H. Anchetas omission to prove the national laws of the decedent and to
follow the latters last will, in sum, resulted in the procurement of the subject orders without a fair
submission of the real issues involved in the case.[41] (Emphasis supplied)

This is not a simple case of error of judgment or grave abuse of discretion, but a total disregard of the law as a
result of petitioners abject failure to discharge his fiduciary duties. It does not rest upon petitioners pleasure as to
which law should be made applicable under the circumstances. His onus is clear. Respondent was thus excluded
from enjoying full rights to the Makati property through no fault or negligence of her own, as petitioners omission
was beyond her control. She was in no position to analyze the legal implications of petitioners omission and it
was belatedly that she realized the adverse consequence of the same. The end result was a miscarriage of
justice. In cases like this, the courts have the legal and moral duty to provide judicial aid to parties who are
deprived of their rights.[42]

The trial court in its Order dated December 6, 1991 in Special Proceeding No. M-888 noted the law of the State
of Maryland on Estates and Trusts, as follows:

Under Section 1-301, Title 3, Sub-Title 3 of the Annotated Code of the Public General Laws of
Maryland on Estates and Trusts, all property of a decedent shall be subject to the estate of
decedents law, and upon his death shall pass directly to the personal representative, who shall hold
the legal title for administration and distribution, while Section 4-408 expressly provides that
unless a contrary intent is expressly indicated in the will, a legacy passes to the legatee the entire
interest of the testator in the property which is the subject of the legacy. Section 7-101, Title 7,
Sub-Title 1, on the other hand, declares that a personal representative is a fiduciary and as such he
is under the general duty to settle and distribute the estate of the decedent in accordance with the
terms of the will and the estate of decedents law as expeditiously and with as little sacrifice of
value as is reasonable under the circumstances.[43]

In her will, Audrey devised to Richard her entire estate, consisting of the following: (1) Audreys conjugal share
in the Makati property; (2) the cash amount of P12,417.97; and (3) 64,444 shares of stock in A/G Interiors, Inc.
worth P64,444.00.All these properties passed on to Richard upon Audreys death. Meanwhile, Richard, in his will,
bequeathed his entire estate to respondent, except for his rights and interests over the A/G Interiors, Inc. shares,
which he left to Kyle. When Richard subsequently died, the entire Makati property should have then passed on
to respondent. This, of course, assumes the proposition that the law of the State of Maryland which allows a
legacy to pass to the legatee the entire estate of the testator in the property which is the subject of the legacy, was
sufficiently proven in Special Proceeding No. 9625.Nevertheless, the Court may take judicial notice thereof in
view of the ruling in Bohanan v. Bohanan.[44] Therein, the Court took judicial notice of the law of Nevadadespite
failure to prove the same. The Court held, viz.:

We have, however, consulted the records of the case in the court below and we have found
that during the hearing on October 4, 1954 of the motion of Magdalena C. Bohanan for withdrawal
of P20,000 as her share, the foreign law, especially Section 9905, Compiled Nevada Laws, was
introduced in evidence by appellants' (herein) counsel as Exhibit "2" (See pp. 77-79, Vol. II, and
t.s.n. pp. 24-44, Records, Court of First Instance). Again said law was presented by the counsel for
 the executor and admitted by the Court as Exhibit "B" during the hearing of the case on January
23, 1950 before Judge Rafael Amparo (see Records, Court of First Instance, Vol. 1).

In addition, the other appellants, children of the testator, do not dispute the above-quoted
provision of the laws of the State of Nevada. Under all the above circumstances, we are constrained
to hold that the pertinent law of Nevada, especially Section 9905 of the Compiled Nevada Laws
of 1925, can be taken judicial notice of by us, without proof of such law having been offered at
the hearing of the project of partition.

In this case, given that the pertinent law of the State of Maryland has been brought to record before the CA, and
the trial court in Special Proceeding No. M-888 appropriately took note of the same in disapproving the proposed
project of partition of Richards estate, not to mention that petitioner or any other interested person for that matter,
does not dispute the existence or validity of said law, then Audreys and Richards estate should be distributed
according to their respective wills, and not according to the project of partition submitted by
petitioner. Consequently, the entire Makati property belongs to respondent.

Decades ago, Justice Moreland, in his dissenting opinion in Santos v. Manarang,[45]wrote:

A will is the testator speaking after death. Its provisions have substantially the same force
and effect in the probate court as if the testator stood before the court in full life making the
declarations by word of mouth as they appear in the will. That was the special purpose of the law
in the creation of the instrument known as the last will and testament. Men wished to speak after
they were dead and the law, by the creation of that instrument, permitted them to do so x x x All
doubts must be resolved in favor of the testator's having meant just what he said.

Honorable as it seems, petitioners motive in equitably distributing Audreys estate cannot prevail over Audreys
and Richards wishes. As stated in Bellis v. Bellis:[46]

x x x whatever public policy or good customs may be involved in our system of legitimes,
Congress has not intended to extend the same to the succession of foreign nationals. For it has
specifically chosen to leave, inter alia, the amount of successional rights, to the decedent's national
Law. Specific provisions must prevail over general ones.[47]

Before concluding, the Court notes the fact that Audrey and Richard Guerseywere American citizens who owned
real property in the Philippines, although records do not show when and how the Guerseys acquired
the Makati property.

Under Article XIII, Sections 1 and 4 of the 1935 Constitution, the privilege to acquire and exploit lands of the
public domain, and other natural resources of the Philippines, and to operate public utilities, were reserved to
Filipinos and entities owned or controlled by them. In Republic v. Quasha,[48] the Court clarified that the Parity
Rights Amendment of 1946, which re-opened to American citizens and business enterprises the right in the
acquisition of lands of the public domain, the disposition, exploitation, development and utilization of natural
resources of the Philippines, does not include the acquisition or exploitation of private agricultural lands. The
prohibition against acquisition of private lands by aliens was carried on to the 1973 Constitution under Article
XIV, Section 14, with the exception of private lands acquired by hereditary succession and when the transfer was
made to a former natural-born citizen, as provided in Section 15, Article XIV. As it now stands, Article XII,
Sections 7 and 8 of the 1986 Constitution explicitly prohibits non-Filipinos from acquiring or holding title to
private lands or to lands of the public domain, except only by way of legal succession or if the acquisition was
made by a former natural-born citizen.
In any case, the Court has also ruled that if land is invalidly transferred to an alien who subsequently becomes a
citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the
transferee is rendered valid.[49] In this case, since the Makati property had already passed on to respondent who is
a Filipino, then whatever flaw, if any, that attended the acquisition by the Guerseysof the Makati property is now
inconsequential, as the objective of the constitutional provision to keep our lands in Filipino hands has been
achieved.

WHEREFORE, the petition is denied. The Decision dated March 18, 1999 and the Resolution dated August 27,
1999 of the Court of Appeals are AFFIRMED.

Petitioner is ADMONISHED to be more circumspect in the performance of his duties as an official of the court.

No pronouncement as to costs.

SO ORDERED.
[1] [26]
CA rollo, pp. 84-88. Id. at 741.
[2] [27]
Id. at 89-91. Ybaez v. Court of Appeals, 323 Phil. 643 (1996).
[3] [28]
Id. at 92. Stilianpulos v. The City of Legaspi, 374 Phil. 879 (1999).
[4] [29]
Supra, note 2. Article 1391, Civil Code.
[5] [30]
CA rollo, pp. 93-94. Rollo, p. 46, 183.
[6] [31]
Id. at 95-98. Id. at 157-158.
[7] [32]
Id. at 99-100. See RTC-Branch 138 Order dated December 6, 1991, pp.
[8]
Id. at 101. 194-198, CA rollo.
[9] [33]
Id. at 102-103. 332 Phil. 948 (1996).
[10] [34]
Id. at 104-106. Id. at 961-962.
[11] [35]
Id. at 107. Teodoro v. Court of Appeals, 437 Phil. 336 (2002).
[12] [36]
Id. at 108-109. Lao v. Genato, G.R. No. L-56451, June 19, 1985, 137
[13]
Id. at 114-116. SCRA 77.
[14] [37]
RTC Order dated December 6, 1991, CA rollo, p. 48. Llorente v. Court of Appeals, 399 Phil. 342 (2000).
[15] [38]
CA rollo, pp. 117-121. Bohanan v. Bohanan, 106 Phil. 997 (1960).
[16] [39]
Id. at 71-81. Rollo, p. 156.
[17] [40]
Penned by Associate Justice Fermin A. Martin, Jr. (retired), 426 Phil. 111 (2002).
[41]
and concurred in by Associate Justices Romeo J. Callejo, Sr. CA rollo, pp. 551-553.
[42]
(now Associate Justice of this Court) and Mariano Pael v. Court of Appeals, 382 Phil. 222 (2000).
[43]
M. Umali (retired). CA rollo, p. 48.
[18] [44]
CA rollo, p. 553. Supra., Bohanan case, note 38.
[19] [45]
Id. at 617-618. 27 Phil. 209 (1914).
[20] [46]
Rollo, p. 36. 126 Phil. 726 (1967).
[21] [47]
Id. at 174. Id. at 732.
[22] [48]
Id. at 183. 150-B Phil. 140 (1972).
[23] [49]
Reyes v. Barretto-Datu, 125 Phil 501 (1967). United Church Board of World Ministries v. Sebastian, No.
[24]
Kilayko v. Tengco, G.R. No. L-45425, March 27, 1992, 207 L-34672, March 30, 1988, 159 SCRA 446; Halili v. Court
SCRA 600. of Appeals, 350 Phil. 906 (1998); Lee v. Republic, 418 Phil. 793
[25]
89 Phil. 730 (1951). (2001).

---------------------------------------------------------------------------------------------------------------------------------------
 EN BANC

G.R. No. L-16749 January 31, 1963

IN THE MATTER OF THE TESTATE ESTATE OF EDWARD E. CHRISTENSEN, DECEASED.

ADOLFO C. AZNAR, Executor and LUCY CHRISTENSEN, Heir of the deceased, Executor and Heir-
appellees,
vs.
HELEN CHRISTENSEN GARCIA, oppositor-appellant.

This is an appeal from a decision of the Court of First Instance of Davao, Hon. Vicente N. Cusi, Jr., presiding, in
Special Proceeding No. 622 of said court, dated September 14, 1949, approving among things the final accounts
of the executor, directing the executor to reimburse Maria Lucy Christensen the amount of P3,600 paid by her to
Helen Christensen Garcia as her legacy, and declaring Maria Lucy Christensen entitled to the residue of the
property to be enjoyed during her lifetime, and in case of death without issue, one-half of said residue to be
payable to Mrs. Carrie Louise C. Borton, etc., in accordance with the provisions of the will of the testator Edward
E. Christensen. The will was executed in Manila on March 5, 1951 and contains the following provisions:

3. I declare ... that I have but ONE (1) child, named MARIA LUCY CHRISTENSEN (now Mrs. Bernard
Daney), who was born in the Philippines about twenty-eight years ago, and who is now residing at No.
665 Rodger Young Village, Los Angeles, California, U.S.A.

4. I further declare that I now have no living ascendants, and no descendants except my above named
daughter, MARIA LUCY CHRISTENSEN DANEY.

xxx xxx xxx

7. I give, devise and bequeath unto MARIA HELEN CHRISTENSEN, now married to Eduardo Garcia,
about eighteen years of age and who, notwithstanding the fact that she was baptized Christensen, is not in
any way related to me, nor has she been at any time adopted by me, and who, from all information I have
now resides in Egpit, Digos, Davao, Philippines, the sum of THREE THOUSAND SIX HUNDRED
PESOS (P3,600.00), Philippine Currency the same to be deposited in trust for the said Maria Helen
Christensen with the Davao Branch of the Philippine National Bank, and paid to her at the rate of One
Hundred Pesos (P100.00), Philippine Currency per month until the principal thereof as well as any interest
which may have accrued thereon, is exhausted..

xxx xxx xxx

12. I hereby give, devise and bequeath, unto my well-beloved daughter, the said MARIA LUCY
CHRISTENSEN DANEY (Mrs. Bernard Daney), now residing as aforesaid at No. 665 Rodger Young
Village, Los Angeles, California, U.S.A., all the income from the rest, remainder, and residue of my
property and estate, real, personal and/or mixed, of whatsoever kind or character, and wheresoever
situated, of which I may be possessed at my death and which may have come to me from any source
whatsoever, during her lifetime: ....

It is in accordance with the above-quoted provisions that the executor in his final account and project of partition
ratified the payment of only P3,600 to Helen Christensen Garcia and proposed that the residue of the estate be
transferred to his daughter, Maria Lucy Christensen.

Opposition to the approval of the project of partition was filed by Helen Christensen Garcia, insofar as it deprives
her (Helen) of her legitime as an acknowledged natural child, she having been declared by Us in G.R. Nos. L-
11483-84 an acknowledged natural child of the deceased Edward E. Christensen. The legal grounds of opposition
are (a) that the distribution should be governed by the laws of the Philippines, and (b) that said order of distribution
is contrary thereto insofar as it denies to Helen Christensen, one of two acknowledged natural children, one-half
of the estate in full ownership. In amplification of the above grounds it was alleged that the law that should govern
the estate of the deceased Christensen should not be the internal law of California alone, but the entire law thereof
because several foreign elements are involved, that the forum is the Philippines and even if the case were decided
in California, Section 946 of the California Civil Code, which requires that the domicile of the decedent should
apply, should be applicable. It was also alleged that Maria Helen Christensen having been declared an
acknowledged natural child of the decedent, she is deemed for all purposes legitimate from the time of her birth.

The court below ruled that as Edward E. Christensen was a citizen of the United States and of the State of
California at the time of his death, the successional rights and intrinsic validity of the provisions in his will are to
be governed by the law of California, in accordance with which a testator has the right to dispose of his property
in the way he desires, because the right of absolute dominion over his property is sacred and inviolable (In re
McDaniel's Estate, 77 Cal. Appl. 2d 877, 176 P. 2d 952, and In re Kaufman, 117 Cal. 286, 49 Pac. 192, cited in
page 179, Record on Appeal). Oppositor Maria Helen Christensen, through counsel, filed various motions for
reconsideration, but these were denied. Hence, this appeal.

The most important assignments of error are as follows:

THE LOWER COURT ERRED IN IGNORING THE DECISION OF THE HONORABLE SUPREME COURT
THAT HELEN IS THE ACKNOWLEDGED NATURAL CHILD OF EDWARD E. CHRISTENSEN AND,
CONSEQUENTLY, IN DEPRIVING HER OF HER JUST SHARE IN THE INHERITANCE.

II

THE LOWER COURT ERRED IN ENTIRELY IGNORING AND/OR FAILING TO RECOGNIZE THE
EXISTENCE OF SEVERAL FACTORS, ELEMENTS AND CIRCUMSTANCES CALLING FOR THE
APPLICATION OF INTERNAL LAW.

III

THE LOWER COURT ERRED IN FAILING TO RECOGNIZE THAT UNDER INTERNATIONAL LAW,
PARTICULARLY UNDER THE RENVOI DOCTRINE, THE INTRINSIC VALIDITY OF THE
TESTAMENTARY DISPOSITION OF THE DISTRIBUTION OF THE ESTATE OF THE DECEASED
EDWARD E. CHRISTENSEN SHOULD BE GOVERNED BY THE LAWS OF THE PHILIPPINES.

IV

THE LOWER COURT ERRED IN NOT DECLARING THAT THE SCHEDULE OF DISTRIBUTION
SUBMITTED BY THE EXECUTOR IS CONTRARY TO THE PHILIPPINE LAWS.

THE LOWER COURT ERRED IN NOT DECLARING THAT UNDER THE PHILIPPINE LAWS HELEN
CHRISTENSEN GARCIA IS ENTITLED TO ONE-HALF (1/2) OF THE ESTATE IN FULL OWNERSHIP.

There is no question that Edward E. Christensen was a citizen of the United States and of the State of California
at the time of his death. But there is also no question that at the time of his death he was domiciled in the
Philippines, as witness the following facts admitted by the executor himself in appellee's brief:
 In the proceedings for admission of the will to probate, the facts of record show that the deceased Edward
E. Christensen was born on November 29, 1875 in New York City, N.Y., U.S.A.; his first arrival in the
Philippines, as an appointed school teacher, was on July 1, 1901, on board the U.S. Army Transport
"Sheridan" with Port of Embarkation as the City of San Francisco, in the State of California, U.S.A. He
stayed in the Philippines until 1904.

In December, 1904, Mr. Christensen returned to the United States and stayed there for the following nine
years until 1913, during which time he resided in, and was teaching school in Sacramento, California.

Mr. Christensen's next arrival in the Philippines was in July of the year 1913. However, in 1928, he again
departed the Philippines for the United States and came back here the following year, 1929. Some nine
years later, in 1938, he again returned to his own country, and came back to the Philippines the following
year, 1939.

Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved
by this Honorable Court, without prejudice to the parties adducing other evidence to prove their case not
covered by this stipulation of facts. 1äwphï1.ñët

Being an American citizen, Mr. Christensen was interned by the Japanese Military Forces in the
Philippines during World War II. Upon liberation, in April 1945, he left for the United States but returned
to the Philippines in December, 1945. Appellees Collective Exhibits "6", CFI Davao, Sp. Proc. 622, as
Exhibits "AA", "BB" and "CC-Daney"; Exhs. "MM", "MM-l", "MM-2-Daney" and p. 473, t.s.n., July 21,
1953.)

In April, 1951, Edward E. Christensen returned once more to California shortly after the making of his
last will and testament (now in question herein) which he executed at his lawyers' offices in Manila on
March 5, 1951. He died at the St. Luke's Hospital in the City of Manila on April 30, 1953. (pp. 2-3)

In arriving at the conclusion that the domicile of the deceased is the Philippines, we are persuaded by the fact that
he was born in New York, migrated to California and resided there for nine years, and since he came to the
Philippines in 1913 he returned to California very rarely and only for short visits (perhaps to relatives), and
considering that he appears never to have owned or acquired a home or properties in that state, which would
indicate that he would ultimately abandon the Philippines and make home in the State of California.

Sec. 16. Residence is a term used with many shades of meaning from mere temporary presence to the
most permanent abode. Generally, however, it is used to denote something more than mere physical
presence. (Goodrich on Conflict of Laws, p. 29)

As to his citizenship, however, We find that the citizenship that he acquired in California when he resided in
Sacramento, California from 1904 to 1913, was never lost by his stay in the Philippines, for the latter was a
territory of the United States (not a state) until 1946 and the deceased appears to have considered himself as a
citizen of California by the fact that when he executed his will in 1951 he declared that he was a citizen of that
State; so that he appears never to have intended to abandon his California citizenship by acquiring another. This
conclusion is in accordance with the following principle expounded by Goodrich in his Conflict of Laws.

The terms "'residence" and "domicile" might well be taken to mean the same thing, a place of permanent
abode. But domicile, as has been shown, has acquired a technical meaning. Thus one may be domiciled
in a place where he has never been. And he may reside in a place where he has no domicile. The man with
two homes, between which he divides his time, certainly resides in each one, while living in it. But if he
went on business which would require his presence for several weeks or months, he might properly be
said to have sufficient connection with the place to be called a resident. It is clear, however, that, if he
treated his settlement as continuing only for the particular business in hand, not giving up his former
 "home," he could not be a domiciled New Yorker. Acquisition of a domicile of choice requires the exercise
of intention as well as physical presence. "Residence simply requires bodily presence of an inhabitant in
a given place, while domicile requires bodily presence in that place and also an intention to make it one's
domicile." Residence, however, is a term used with many shades of meaning, from the merest temporary
presence to the most permanent abode, and it is not safe to insist that any one use et the only proper one.
(Goodrich, p. 29)

The law that governs the validity of his testamentary dispositions is defined in Article 16 of the Civil Code of the
Philippines, which is as follows:

ART. 16. Real property as well as personal property is subject to the law of the country where it is situated.

However, intestate and testamentary successions, both with respect to the order of succession and to the
amount of successional rights and to the intrinsic validity of testamentary provisions, shall be regulated
by the national law of the person whose succession is under consideration, whatever may be the nature of
the property and regardless of the country where said property may be found.

The application of this article in the case at bar requires the determination of the meaning of the term "national
law"is used therein.

There is no single American law governing the validity of testamentary provisions in the United States, each state
of the Union having its own private law applicable to its citizens only and in force only within the state. The
"national law" indicated in Article 16 of the Civil Code above quoted can not, therefore, possibly mean or apply
to any general American law. So it can refer to no other than the private law of the State of California.

The next question is: What is the law in California governing the disposition of personal property? The decision
of the court below, sustains the contention of the executor-appellee that under the California Probate Code, a
testator may dispose of his property by will in the form and manner he desires, citing the case of Estate of
McDaniel, 77 Cal. Appl. 2d 877, 176 P. 2d 952. But appellant invokes the provisions of Article 946 of the Civil
Code of California, which is as follows:

If there is no law to the contrary, in the place where personal property is situated, it is deemed to follow
the person of its owner, and is governed by the law of his domicile.

The existence of this provision is alleged in appellant's opposition and is not denied. We have checked it in the
California Civil Code and it is there. Appellee, on the other hand, relies on the case cited in the decision and
testified to by a witness. (Only the case of Kaufman is correctly cited.) It is argued on executor's behalf that as
the deceased Christensen was a citizen of the State of California, the internal law thereof, which is that given in
the abovecited case, should govern the determination of the validity of the testamentary provisions of
Christensen's will, such law being in force in the State of California of which Christensen was a citizen. Appellant,
on the other hand, insists that Article 946 should be applicable, and in accordance therewith and following the
doctrine of the renvoi, the question of the validity of the testamentary provision in question should be referred
back to the law of the decedent's domicile, which is the Philippines.

The theory of doctrine of renvoi has been defined by various authors, thus:

The problem has been stated in this way: "When the Conflict of Laws rule of the forum refers a jural
matter to a foreign law for decision, is the reference to the purely internal rules of law of the foreign
system; i.e., to the totality of the foreign law minus its Conflict of Laws rules?"

On logic, the solution is not an easy one. The Michigan court chose to accept the renvoi, that is, applied
the Conflict of Laws rule of Illinois which referred the matter back to Michigan law. But once having
determined the the Conflict of Laws principle is the rule looked to, it is difficult to see why the reference
back should not have been to Michigan Conflict of Laws. This would have resulted in the "endless chain
of references" which has so often been criticized be legal writers. The opponents of the renvoi would have
looked merely to the internal law of Illinois, thus rejecting the renvoi or the reference back. Yet there
seems no compelling logical reason why the original reference should be the internal law rather than to
the Conflict of Laws rule. It is true that such a solution avoids going on a merry-go-round, but those who
have accepted the renvoi theory avoid this inextricabilis circulas by getting off at the second reference
and at that point applying internal law. Perhaps the opponents of the renvoi are a bit more consistent for
they look always to internal law as the rule of reference.

Strangely enough, both the advocates for and the objectors to the renvoi plead that greater uniformity will
result from adoption of their respective views. And still more strange is the fact that the only way to
achieve uniformity in this choice-of-law problem is if in the dispute the two states whose laws form the
legal basis of the litigation disagree as to whether the renvoi should be accepted. If both reject, or both
accept the doctrine, the result of the litigation will vary with the choice of the forum. In the case stated
above, had the Michigan court rejected the renvoi, judgment would have been against the woman; if the
suit had been brought in the Illinois courts, and they too rejected the renvoi, judgment would be for the
woman. The same result would happen, though the courts would switch with respect to which would hold
liability, if both courts accepted the renvoi.

The Restatement accepts the renvoi theory in two instances: where the title to land is in question, and
where the validity of a decree of divorce is challenged. In these cases the Conflict of Laws rule of the situs
of the land, or the domicile of the parties in the divorce case, is applied by the forum, but any further
reference goes only to the internal law. Thus, a person's title to land, recognized by the situs, will be
recognized by every court; and every divorce, valid by the domicile of the parties, will be valid
everywhere. (Goodrich, Conflict of Laws, Sec. 7, pp. 13-14.)

X, a citizen of Massachusetts, dies intestate, domiciled in France, leaving movable property in

Massachusetts, England, and France. The question arises as to how this property is to be distributed among
X's next of kin.

Assume (1) that this question arises in a Massachusetts court. There the rule of the conflict of laws as to
intestate succession to movables calls for an application of the law of the deceased's last domicile. Since
by hypothesis X's last domicile was France, the natural thing for the Massachusetts court to do would be
to turn to French statute of distributions, or whatever corresponds thereto in French law, and decree a
distribution accordingly. An examination of French law, however, would show that if a French court were
called upon to determine how this property should be distributed, it would refer the distribution to the
national law of the deceased, thus applying the Massachusetts statute of distributions. So on the surface
of things the Massachusetts court has open to it alternative course of action: (a) either to apply the French
law is to intestate succession, or (b) to resolve itself into a French court and apply the Massachusetts
statute of distributions, on the assumption that this is what a French court would do. If it accepts the so-
called renvoidoctrine, it will follow the latter course, thus applying its own law.

This is one type of renvoi. A jural matter is presented which the conflict-of-laws rule of the forum refers
to a foreign law, the conflict-of-laws rule of which, in turn, refers the matter back again to the law of the
forum. This is renvoi in the narrower sense. The German term for this judicial process is
'Ruckverweisung.'" (Harvard Law Review, Vol. 31, pp. 523-571.)

After a decision has been arrived at that a foreign law is to be resorted to as governing a particular case,
the further question may arise: Are the rules as to the conflict of laws contained in such foreign law also
to be resorted to? This is a question which, while it has been considered by the courts in but a few instances,
has been the subject of frequent discussion by textwriters and essayists; and the doctrine involved has
 been descriptively designated by them as the "Renvoyer" to send back, or the "Ruchversweisung", or the
"Weiterverweisung", since an affirmative answer to the question postulated and the operation of the
adoption of the foreign law in toto would in many cases result in returning the main controversy to be
decided according to the law of the forum. ... (16 C.J.S. 872.)

Another theory, known as the "doctrine of renvoi", has been advanced. The theory of the doctrine
of renvoi is that the court of the forum, in determining the question before it, must take into account the
whole law of the other jurisdiction, but also its rules as to conflict of laws, and then apply the law to the
actual question which the rules of the other jurisdiction prescribe. This may be the law of the forum. The
doctrine of the renvoi has generally been repudiated by the American authorities. (2 Am. Jur. 296)

The scope of the theory of renvoi has also been defined and the reasons for its application in a country explained
by Prof. Lorenzen in an article in the Yale Law Journal, Vol. 27, 1917-1918, pp. 529-531. The pertinent parts of
the article are quoted herein below:

The recognition of the renvoi theory implies that the rules of the conflict of laws are to be understood as
incorporating not only the ordinary or internal law of the foreign state or country, but its rules of the
conflict of laws as well. According to this theory 'the law of a country' means the whole of its law.

xxx xxx xxx

Von Bar presented his views at the meeting of the Institute of International Law, at Neuchatel, in 1900, in
the form of the following theses:

(1) Every court shall observe the law of its country as regards the application of foreign laws.

(2) Provided that no express provision to the contrary exists, the court shall respect:

(a) The provisions of a foreign law which disclaims the right to bind its nationals abroad as regards
their personal statute, and desires that said personal statute shall be determined by the law of the
domicile, or even by the law of the place where the act in question occurred.

(b) The decision of two or more foreign systems of law, provided it be certain that one of them is
necessarily competent, which agree in attributing the determination of a question to the same
system of law.

xxx xxx xxx

If, for example, the English law directs its judge to distribute the personal estate of an Englishman who
has died domiciled in Belgium in accordance with the law of his domicile, he must first inquire whether
the law of Belgium would distribute personal property upon death in accordance with the law of domicile,
and if he finds that the Belgian law would make the distribution in accordance with the law of nationality
— that is the English law — he must accept this reference back to his own law.

We note that Article 946 of the California Civil Code is its conflict of laws rule, while the rule applied in In re
Kaufman, Supra, its internal law. If the law on succession and the conflict of laws rules of California are to be
enforced jointly, each in its own intended and appropriate sphere, the principle cited In re Kaufman should apply
to citizens living in the State, but Article 946 should apply to such of its citizens as are not domiciled in California
but in other jurisdictions. The rule laid down of resorting to the law of the domicile in the determination of matters
with foreign element involved is in accord with the general principle of American law that the domiciliary law
should govern in most matters or rights which follow the person of the owner.
 When a man dies leaving personal property in one or more states, and leaves a will directing the manner
of distribution of the property, the law of the state where he was domiciled at the time of his death will be
looked to in deciding legal questions about the will, almost as completely as the law of situs is consulted
in questions about the devise of land. It is logical that, since the domiciliary rules control devolution of
the personal estate in case of intestate succession, the same rules should determine the validity of an
attempted testamentary dispostion of the property. Here, also, it is not that the domiciliary has effect
beyond the borders of the domiciliary state. The rules of the domicile are recognized as controlling by the
Conflict of Laws rules at the situs property, and the reason for the recognition as in the case of intestate
succession, is the general convenience of the doctrine. The New York court has said on the point: 'The
general principle that a dispostiton of a personal property, valid at the domicile of the owner, is valid
anywhere, is one of the universal application. It had its origin in that international comity which was one
of the first fruits of civilization, and it this age, when business intercourse and the process of accumulating
property take but little notice of boundary lines, the practical wisdom and justice of the rule is more
apparent than ever. (Goodrich, Conflict of Laws, Sec. 164, pp. 442-443.)

Appellees argue that what Article 16 of the Civil Code of the Philippines pointed out as the national law is the
internal law of California. But as above explained the laws of California have prescribed two sets of laws for its
citizens, one for residents therein and another for those domiciled in other jurisdictions. Reason demands that We
should enforce the California internal law prescribed for its citizens residing therein, and enforce the conflict of
laws rules for the citizens domiciled abroad. If we must enforce the law of California as in comity we are bound
to go, as so declared in Article 16 of our Civil Code, then we must enforce the law of California in accordance
with the express mandate thereof and as above explained, i.e., apply the internal law for residents therein, and its
conflict-of-laws rule for those domiciled abroad.

It is argued on appellees' behalf that the clause "if there is no law to the contrary in the place where the property
is situated" in Sec. 946 of the California Civil Code refers to Article 16 of the Civil Code of the Philippines and
that the law to the contrary in the Philippines is the provision in said Article 16 that the national law of the
deceased should govern. This contention can not be sustained. As explained in the various authorities cited above
the national law mentioned in Article 16 of our Civil Code is the law on conflict of laws in the California Civil
Code, i.e., Article 946, which authorizes the reference or return of the question to the law of the testator's domicile.
The conflict of laws rule in California, Article 946, Civil Code, precisely refers back the case, when a decedent
is not domiciled in California, to the law of his domicile, the Philippines in the case at bar. The court of the
domicile can not and should not refer the case back to California; such action would leave the issue incapable of
determination because the case will then be like a football, tossed back and forth between the two states, between
the country of which the decedent was a citizen and the country of his domicile. The Philippine court must apply
its own law as directed in the conflict of laws rule of the state of the decedent, if the question has to be decided,
especially as the application of the internal law of California provides no legitime for children while the Philippine
law, Arts. 887(4) and 894, Civil Code of the Philippines, makes natural children legally acknowledged forced
heirs of the parent recognizing them.

The Philippine cases (In re Estate of Johnson, 39 Phil. 156; Riera vs. Palmaroli, 40 Phil. 105; Miciano vs. Brimo,
50 Phil. 867; Babcock Templeton vs. Rider Babcock, 52 Phil. 130; and Gibbs vs. Government, 59 Phil. 293.)
cited by appellees to support the decision can not possibly apply in the case at bar, for two important reasons, i.e.,
the subject in each case does not appear to be a citizen of a state in the United States but with domicile in the
Philippines, and it does not appear in each case that there exists in the state of which the subject is a citizen, a law
similar to or identical with Art. 946 of the California Civil Code.

We therefore find that as the domicile of the deceased Christensen, a citizen of California, is the Philippines, the
validity of the provisions of his will depriving his acknowledged natural child, the appellant, should be governed
by the Philippine Law, the domicile, pursuant to Art. 946 of the Civil Code of California, not by the internal law
of California..
WHEREFORE, the decision appealed from is hereby reversed and the case returned to the lower court with
instructions that the partition be made as the Philippine law on succession provides. Judgment reversed, with costs
against appellees.

---------------------------------------------------------------------------------------------------------------------------------------

THIRD DIVISION
G.R. No. 149177

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

- versus –
MINORU KITAMURA, Respondent.

DECISION
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the April 18,
2001 Decision[1] of the Court of Appeals (CA) in CA-G.R. SP No. 60827, and the July 25, 2001
Resolution[2] denying the motion for reconsideration thereof.

On March 30, 1999, petitioner Nippon Engineering Consultants Co., Ltd. (Nippon), a Japanese consultancy firm
providing technical and management support in the infrastructure projects of foreign governments,[3] entered into
an Independent Contractor Agreement (ICA) with respondent Minoru Kitamura, a Japanese national permanently
residing in the Philippines.[4] The agreement provides that respondent was to extend professional services
to Nippon for a year starting on April 1, 1999.[5]Nippon then assigned respondent to work as the project manager
of the Southern Tagalog Access Road (STAR) Project in the Philippines, following the company's consultancy
contract with the Philippine Government.[6]

When the STAR Project was near completion, the Department of Public Works and Highways (DPWH) engaged
the consultancy services of Nippon, on January 28, 2000, this time for the detailed engineering and construction
supervision of the Bongabon-Baler Road Improvement (BBRI) Project.[7] Respondent was named as the project
manager in the contract's Appendix 3.1.[8]

On February 28, 2000, petitioner Kazuhiro Hasegawa, Nippon's general manager for its International Division,
informed respondent that the company had no more intention of automatically renewing his ICA. His services
would be engaged by the company only up to the substantial completion of the STAR Project on March 31, 2000,
just in time for the ICA's expiry.[9]

Threatened with impending unemployment, respondent, through his lawyer, requested a negotiation conference
and demanded that he be assigned to the BBRI project. Nippon insisted that respondents contract was for a fixed
term that had already expired, and refused to negotiate for the renewal of the ICA.[10]

As he was not able to generate a positive response from the petitioners, respondent consequently initiated on June
1, 2000 Civil Case No. 00-0264 for specific performance and damages with
the Regional Trial Court of Lipa City.[11]

For their part, petitioners, contending that the ICA had been perfected in Japan and executed by and between
Japanese nationals, moved to dismiss the complaint for lack of jurisdiction. They asserted that the claim for
improper pre-termination of respondent's ICA could only be heard and ventilated in the proper courts
of Japanfollowing the principles of lex loci celebrationis and lex contractus.[12]
In the meantime, on June 20, 2000, the DPWH approved Nippon's request for the replacement of Kitamura by a
certain Y. Kotake as project manager of the BBRI Project.[13]

On June 29, 2000, the RTC, invoking our ruling in Insular Government v. Frank[14]that matters connected with
the performance of contracts are regulated by the law prevailing at the place of performance,[15] denied the motion
to dismiss.[16] The trial court subsequently denied petitioners' motion for reconsideration,[17] prompting them to
file with the appellate court, on August 14, 2000, their first Petition for Certiorariunder Rule 65 [docketed as
CA-G.R. SP No. 60205].[18] On August 23, 2000, the CA resolved to dismiss the petition on procedural
groundsfor lack of statement of material dates and for insufficient verification and certification against forum
shopping.[19] An Entry of Judgment was later issued by the appellate court on September 20, 2000.[20]

Aggrieved by this development, petitioners filed with the CA, on September 19, 2000, still within the
reglementary period, a second Petition for Certiorari under Rule 65 already stating therein the material dates and
attaching thereto the proper verification and certification. This second petition, which substantially raised the
same issues as those in the first, was docketed as CA-G.R. SP No. 60827.[21]

Ruling on the merits of the second petition, the appellate court rendered the assailed April 18,
2001 Decision[22] finding no grave abuse of discretion in the trial court's denial of the motion to dismiss. The CA
ruled, among others, that the principle of lex loci celebrationis was not applicable to the case, because nowhere
in the pleadings was the validity of the written agreement put in issue. The CA thus declared that the trial court
was correct in applying instead the principle of lex loci solutionis.[23]

Petitioners' motion for reconsideration was subsequently denied by the CA in the assailed July 25,
2001 Resolution.[24]

Remaining steadfast in their stance despite the series of denials, petitioners instituted the instant Petition for
Review on Certiorari[25] imputing the following errors to the appellate court:

A. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE TRIAL COURT
VALIDLY EXERCISED JURISDICTION OVER THE INSTANT CONTROVERSY, DESPITE THE FACT
THAT THE CONTRACT SUBJECT MATTER OF THE PROCEEDINGS A QUO WAS ENTERED INTO BY
AND BETWEEN TWO JAPANESE NATIONALS, WRITTEN WHOLLY IN THE JAPANESE LANGUAGE
AND EXECUTED IN TOKYO, JAPAN.

B. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN OVERLOOKING THE NEED TO

REVIEW OUR ADHERENCE TO THE PRINCIPLE OF LEX LOCI SOLUTIONIS IN THE LIGHT OF
RECENT DEVELOPMENT[S] IN PRIVATE INTERNATIONAL LAWS.[26]

The pivotal question that this Court is called upon to resolve is whether the subject matter jurisdiction of
Philippine courts in civil cases for specific performance and damages involving contracts executed outside the
country by foreign nationals may be assailed on the principles of lex loci celebrationis, lex contractus, the state
of the most significant relationship rule, or forum non conveniens.

However, before ruling on this issue, we must first dispose of the procedural matters raised by the respondent.
Kitamura contends that the finality of the appellate court's decision in CA-G.R. SP No. 60205 has already barred
the filing of the second petition docketed as CA-G.R. SP No. 60827 (fundamentally raising the same issues as
those in the first one) and the instant petition for review thereof.

We do not agree. When the CA dismissed CA-G.R. SP No. 60205 on account of the petition's defective
certification of non-forum shopping, it was a dismissal without prejudice.[27] The same holds true in the CA's
dismissal of the said case due to defects in the formal requirement of verification[28] and in the other requirement
in Rule 46 of the Rules of Court on the statement of the material dates.[29] The dismissal being without prejudice,
petitioners can re-file the petition, or file a second petition attaching thereto the appropriate verification and
certification as they, in fact did and stating therein the material dates, within the prescribed period[30] in Section
4, Rule 65 of the said Rules.[31]

The dismissal of a case without prejudice signifies the absence of a decision on the merits and leaves the parties
free to litigate the matter in a subsequent action as though the dismissed action had not been commenced. In other
words, the termination of a case not on the merits does not bar another action involving the same parties, on the
same subject matter and theory.[32]

Necessarily, because the said dismissal is without prejudice and has no res judicata effect, and even if petitioners
still indicated in the verification and certification of the second certiorari petition that the first had already been
dismissed on procedural grounds,[33] petitioners are no longer required by the Rules to indicate in their
certification of non-forum shopping in the instant petition for review of the second certiorari petition, the status
of the aforesaid first petition before the CA. In any case, an omission in the certificate of non-forum shopping
about any event that will not constitute res judicata and litis pendentia, as in the present case, is not a fatal
defect. It will not warrant the dismissal and nullification of the entire proceedings, considering that the evils
sought to be prevented by the said certificate are no longer present.[34]

The Court also finds no merit in respondent's contention that petitioner Hasegawa is only authorized to verify and
certify, on behalf of Nippon, the certiorari petition filed with the CA and not the instant petition. True, the
Authorization[35] dated September 4, 2000, which is attached to the second certiorari petition and which is also
attached to the instant petition for review, is limited in scopeits wordings indicate that Hasegawa is given the
authority to sign for and act on behalf of the company only in the petition filed with the appellate court, and that
authority cannot extend to the instant petition for review.[36] In a plethora of cases, however, this Court has
liberally applied the Rules or even suspended its application whenever a satisfactory explanation and a subsequent
fulfillment of the requirements have been made.[37]Given that petitioners herein sufficiently explained their
misgivings on this point and appended to their Reply[38] an updated Authorization[39] for Hasegawa to act on
behalf of the company in the instant petition, the Court finds the same as sufficient compliance with the Rules.

However, the Court cannot extend the same liberal treatment to the defect in the verification and certification. As
respondent pointed out, and to which we agree, Hasegawa is truly not authorized to act on behalf of Nippon in
this case. The aforesaid September 4, 2000 Authorization and even the subsequent August 17, 2001 Authorization
were issued only by Nippon's president and chief executive officer, not by the company's board of directors. In
not a few cases, we have ruled that corporate powers are exercised by the board of directors; thus, no person, not
even its officers, can bind the corporation, in the absence of authority from the board.[40] Considering that
Hasegawa verified and certified the petition only on his behalf and not on behalf of the other petitioner, the
petition has to be denied pursuant to Loquias v. Office of the Ombudsman.[41] Substantial compliance will not
suffice in a matter that demands strict observance of the Rules.[42] While technical rules of procedure are designed
not to frustrate the ends of justice, nonetheless, they are intended to effect the proper and orderly disposition of
cases and effectively prevent the clogging of court dockets.[43]

Further, the Court has observed that petitioners incorrectly filed a Rule 65 petition to question the trial court's
denial of their motion to dismiss. It is a well-established rule that an order denying a motion to dismiss is
interlocutory, and cannot be the subject of the extraordinary petition for certiorari or mandamus. The
appropriate recourse is to file an answer and to interpose as defenses the objections raised in the motion, to
proceed to trial, and, in case of an adverse decision, to elevate the entire case by appeal in due course. [44] While
there are recognized exceptions to this rule,[45]petitioners' case does not fall among them.

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

Asserting that the RTC of Lipa City is an inconvenient forum, petitioners question its jurisdiction to hear and
resolve the civil case for specific performance and damages filed by the respondent. The ICA subject of the
litigation was entered into and perfected in Tokyo, Japan, by Japanese nationals, and written wholly in the
Japanese language. Thus, petitioners posit that local courts have no substantial relationship to the
parties[46] following the [state of the] most significant relationship rule in Private International Law.[47]

The Court notes that petitioners adopted an additional but different theory when they elevated the case to the
appellate court. In the Motion to Dismiss[48] filed with the trial court, petitioners never contended that the RTC is
an inconvenient forum. They merely argued that the applicable law which will determine the validity or invalidity
of respondent's claim is that of Japan, following the principles of lex loci celebrationisand lex
contractus.[49] While not abandoning this stance in their petition before the appellate court, petitioners
on certiorari significantly invoked the defense of forum non conveniens.[50] On petition for review before this
Court, petitioners dropped their other arguments, maintained the forum non conveniens defense, and introduced
their new argument that the applicable principle is the [state of the] most significant relationship rule.[51]

Be that as it may, this Court is not inclined to deny this petition merely on the basis of the change in theory, as
explained in Philippine Ports Authority v. City of Iloilo.[52]We only pointed out petitioners' inconstancy in their
arguments to emphasize their incorrect assertion of conflict of laws principles.

To elucidate, in the judicial resolution of conflicts problems, three consecutive phases are involved: jurisdiction,
choice of law, and recognition and enforcement of judgments. Corresponding to these phases are the following
questions: (1) Where can or should litigation be initiated? (2) Which law will the court apply? and (3) Where can
the resulting judgment be enforced?[53]

Analytically, jurisdiction and choice of law are two distinct concepts.[54] Jurisdiction considers whether it is fair
to cause a defendant to travel to this state; choice of law asks the further question whether the application of a
substantive law which will determine the merits of the case is fair to both parties. The power to exercise
jurisdiction does not automatically give a state constitutional authority to apply forum law. While jurisdiction and
the choice of the lex fori will often coincide, the minimum contacts for one do not always provide the necessary
significant contacts for the other.[55] The question of whether the law of a state can be applied to a transaction is
different from the question of whether the courts of that state have jurisdiction to enter a judgment.[56]

In this case, only the first phase is at issuejurisdiction. Jurisdiction, however, has various aspects. For a court to
validly exercise its power to adjudicate a controversy, it must have jurisdiction over the plaintiff or the petitioner,
over the defendant or the respondent, over the subject matter, over the issues of the case and, in cases involving
property, over the res or the thing which is the subject of the litigation.[57] In assailing the trial court's jurisdiction
herein, petitioners are actually referring to subject matter jurisdiction.

Jurisdiction over the subject matter in a judicial proceeding is conferred by the sovereign authority which
establishes and organizes the court. It is given only by law and in the manner prescribed by law. [58] It is further
determined by the allegations of the complaint irrespective of whether the plaintiff is entitled to all or some of the
claims asserted therein.[59] To succeed in its motion for the dismissal of an action for lack of jurisdiction over the
subject matter of the claim,[60] the movant must show that the court or tribunal cannot act on the matter submitted
to it because no law grants it the power to adjudicate the claims.[61]

In the instant case, petitioners, in their motion to dismiss, do not claim that the trial court is not properly vested
by law with jurisdiction to hear the subject controversy for, indeed, Civil Case No. 00-0264 for specific
performance and damages is one not capable of pecuniary estimation and is properly cognizable by the RTC of
Lipa City.[62] What they rather raise as grounds to question subject matter jurisdiction are the principles of lex loci
celebrationis and lex contractus, and the state of the most significant relationship rule.

The Court finds the invocation of these grounds unsound.

Lex loci celebrationis relates to the law of the place of the ceremony[63] or the law of the place where a contract
is made.[64] The doctrine of lex contractus or lex loci contractus means the law of the place where a contract is
executed or to be performed.[65] It controls the nature, construction, and validity of the contract[66] and it may
pertain to the law voluntarily agreed upon by the parties or the law intended by them either expressly or
implicitly.[67] Under the state of the most significant relationship rule, to ascertain what state law to apply to a
dispute, the court should determine which state has the most substantial connection to the occurrence and the
parties. In a case involving a contract, the court should consider where the contract was made, was negotiated,
was to be performed, and the domicile, place of business, or place of incorporation of the parties. [68] This rule
takes into account several contacts and evaluates them according to their relative importance with respect to the
particular issue to be resolved.[69]

Since these three principles in conflict of laws make reference to the law applicable to a dispute, they are rules
proper for the second phase, the choice of law.[70] They determine which state's law is to be applied in resolving
the substantive issues of a conflicts problem.[71] Necessarily, as the only issue in this case is that of jurisdiction,
choice-of-law rules are not only inapplicable but also not yet called for.

Further, petitioners' premature invocation of choice-of-law rules is exposed by the fact that they have not yet
pointed out any conflict between the laws of Japan and ours. Before determining which law should apply, first
there should exist a conflict of laws situation requiring the application of the conflict of laws rules.[72] Also, when
the law of a foreign country is invoked to provide the proper rules for the solution of a case, the existence of such
law must be pleaded and proved.[73]

It should be noted that when a conflicts case, one involving a foreign element, is brought before a court or
administrative agency, there are three alternatives open to the latter in disposing of it: (1) dismiss the case, either
because of lack of jurisdiction or refusal to assume jurisdiction over the case; (2) assume jurisdiction over the
case and apply the internal law of the forum; or (3) assume jurisdiction over the case and take into account or
apply the law of some other State or States.[74] The courts power to hear cases and controversies is derived from
the Constitution and the laws. While it may choose to recognize laws of foreign nations, the court is not limited
by foreign sovereign law short of treaties or other formal agreements, even in matters regarding rights provided
by foreign sovereigns.[75]

Neither can the other ground raised, forum non conveniens,[76] be used to deprive the trial court of its jurisdiction
herein. First, it is not a proper basis for a motion to dismiss because Section 1, Rule 16 of the Rules of Court does
not include it as a ground.[77] Second, whether a suit should be entertained or dismissed on the basis of the said
doctrine depends largely upon the facts of the particular case and is addressed to the sound discretion of the trial
court.[78] In this case, the RTC decided to assume jurisdiction. Third, the propriety of dismissing a case based on
this principle requires a factual determination; hence, this conflicts principle is more properly considered a matter
of defense.[79]

Accordingly, since the RTC is vested by law with the power to entertain and hear the civil case filed by respondent
and the grounds raised by petitioners to assail that jurisdiction are inappropriate, the trial and appellate courts
correctly denied the petitioners motion to dismiss.

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

SO ORDERED.

[1] [6]
Penned by Associate Justice Bienvenido L. Reyes, with the Id. at 85.
[7]
late Associate Justice Eubulo G. Verzola and Associate Justice Id. at 121-148.
[8]
Marina L. Buzon, concurring; rollo, pp. 37-44. Id. at 166-171.
[2] [9]
Id. at 46-47. Id. at 38.
[3] [10]
CA rollo (CA-G.R. SP No. 60827), p. 84. Id. at 39-41.
[4] [11]
Id. at 116-120. Id. at 109.
[5] [12]
Id. at 32-36. Id. at 53-57.
[13]
Id. at 42-43.
[14]
13 Phil. 236 (1909).
[15]
Insular Government v. Frank, id. at 240.
[16]
CA rollo (CA-G.R. SP No. 60827), pp. 25-26.
[17]
Id. at 27-28.
[18]
CA rollo (CA-G.R. SP No. 60205), pp. 2-42.
[19]
Id. at 44. The August 23, 2000 Resolution penned by
Associate Justice Delilah Vidallon-Magtolis (retired), with the
concurrence of Associate Justices Eloy R. Bello, Jr. (retired)
and Elvi John S. Asuncion (dismissed) pertinently provides as
follows:
A cursory reading of the petition indicates no statement as to
the date when the petitioners filed their motion for
reconsideration and when they received the order of denial
thereof, as required in Section 3, paragraph 2, Rule 46 of the
1997 Rules of Civil Procedure as amended by Circular No. 39-
98 dated August 18, 1998 of the Supreme Court. Moreover, the
verification and certification of non-forum shopping was
executed by petitioner Kazuhiro Hasegawa for both petitioners
without any indication that the latter had authorized him to file
the same.
WHEREFORE, the [petition] is DENIED due course
and DISMISSED outright.
SO ORDERED.
[20]
Id. at 45.
[21]
CA rollo (CA-G.R. SP No. 60827), pp. 2-24.
[22]
Supra note 1.
[23]
Id. at 222.
[24]
Supra note 2.
[25]
Rollo, pp. 3-35.
[26]
Id. at 15.
[27]
See Spouses Melo v. Court of Appeals, 376 Phil. 204, 213-
214 (1999), in which the Supreme Court ruled that compliance
with the certification against forum shopping is separate from,
and independent of, the avoidance of forum shopping itself.
Thus, there is a difference in the treatmentin terms of imposable
sanctionsbetween failure to comply with the certification
requirement and violation of the prohibition against forum
shopping. The former is merely a cause for the dismissal,
without prejudice, of the complaint or initiatory pleading, while
the latter is a ground for summary dismissal thereof and
constitutes direct contempt. See also Philippine Radiant
Products, Inc. v. Metropolitan Bank & Trust Company, Inc.,
G.R. No. 163569, December 9, 2005, 477 SCRA 299, 314, in
which the Court ruled that the dismissal due to failure to append
to the petition the board resolution authorizing a corporate
officer to file the same for and in behalf of the corporation is
without prejudice. So is the dismissal of the petition for failure
of the petitioner to append thereto the requisite copies of the
assailed order/s.
[28]
See Torres v. Specialized Packaging Development
Corporation, G.R. No. 149634, July 6, 2004, 433 SCRA 455,
463-464, in which the Court made the pronouncement that the
requirement of verification is simply a condition affecting the
form of pleadings, and noncompliance therewith does not
necessarily render it fatally defective.
[29]
Section 3, Rule 46 of the Rules of Court pertinently states
that x x x [i]n actions filed under Rule 65, the petition shall
further indicate the material dates showing when notice of the
judgment or final order or resolution subject thereof was
received, when a motion for new trial or reconsideration, if any,
was filed and when notice of the denial thereof was received. x
xx
[30]
Estrera v. Court of Appeals, G.R. Nos. 154235-36, August
16, 2006, 499 SCRA 86, 95; and Spouses Melo v. Court of
Appeals, supra note 27, at 214.
[31]
The Rules of Court pertinently provides in Section 4, Rule
65 that [t]he petition may be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In case a
motion for reconsideration or new trial is timely filed, whether
such motion is required or not, the sixty (60) day period shall
be counted from notice of the denial of said motion. x x x
[32]
Delgado v. Court of Appeals, G.R. No. 137881, December
21, 2004, 447 SCRA 402, 415.
[33]
CA rollo (CA-G.R. SP No. 60827), p. 21.
[34]
Fuentebella v. Castro, G.R. No. 150865, June 30, 2006, 494
SCRA 183, 193-194; see Roxas v. Court of Appeals, 415 Phil.
430 (2001).
[35]
Rollo, p. 33; CA rollo (CA-G.R. SP No. 60827), p. 23. The
Authorization dated September 4, 2000 pertinently reads:
I, KEN TAKAGI, President and Chief Executive Officer of
NIPPON ENGINEERING CONSULTANTS CO., LTD., a
corporation duly organized and existing in accordance with the
corporation laws of Japan, with principal address at 3-23-1
Komagome, Toshima-ku Tokyo, Japan, hereby authorize its
International Division General Manager, Mr. Kazuhiro
Hasegawa, to sign and act for and in behalf of Nippon
Engineering Consultants Co., Ltd., for purposes of filing a
Petition for Certiorari before the proper tribunal in the case
entitled: Kazuhiro Hasegawa and Nippon Engineering
Consultants Co., Ltd. vs. Minoru Kitamura and Hon. Avelino
C. Demetria of the Regional Trial Court, Fourth Judicial
Region-Branch 85, Lipa City, and to do such other things, acts
and deals which may be necessary and proper for the attainment
of the said objectives [Underscoring ours].
[36]
Cf. Orbeta v. Sendiong, G.R. No. 155236, July 8, 2005, 463
SCRA 180, 199-200, in which the Court ruled that the agent's
signing therein of the verification and certification is already
covered by the provisions of the general power of attorney
issued by the principal.
[37]
Barcenas v. Tomas, G.R. No. 150321, March 31, 2005, 454
SCRA 593, 604.
[38]
Dated October 11, 2001; rollo, pp. 192-203.
[39]
Dated August 17, 2001, id. at 202.
[40]
San Pablo Manufacturing Corporation v. Commissioner of
Internal Revenue, G.R. No. 147749, June 22, 2006, 492 SCRA
192, 197; LDP Marketing, Inc. v. Monter, G.R. No. 159653,
January 25, 2006, 480 SCRA 137, 142; Expertravel & Tours,
Inc. v. Court of Appeals, G.R. No. 152392, May 26, 2005, 459
SCRA 147, 160.
[41]
392 Phil. 596, 603-604 (2000).
[42]
Loquias v. Office of the Ombudsman, id. at 604.
[43]
Santos v. Court of Appeals, 413 Phil. 41, 54 (2001).
[44]
Yutingco v. Court of Appeals, 435 Phil. 83, 92 (2002).
[45]
Bank of America NT & SA v. Court of Appeals, 448 Phil.
181, 193 (2003). As stated herein, under certain situations resort
to certiorari is considered appropriate when: (1) the trial court
issued the order without or in excess of jurisdiction; (2) there is
patent grave abuse of discretion by the trial court; or (3) appeal
would not prove to be a speedy and adequate remedy as when
an appeal would not promptly relieve a defendant from the
injurious effects of the patently mistaken order maintaining the
plaintiffs baseless action and compelling the defendants
 [67]
needlessly to go through a protracted trial and clogging the Philippine Export and Foreign Loan Guarantee
court dockets with another futile case. Corporation v. V.P. Eusebio Construction, Inc., G.R. No.
[46]
Rollo, p. 228. 140047, July 13, 2004, 434 SCRA 202, 214-215.
[47] [68]
Id. at 234-245. <http://web2.westlaw.com/search/default.wl?rs=WLW7.10
[48]
Dated June 5, 2000; CA rollo (CA-G.R. SP No. 60827), pp. &action=Search&fn=_top&sv=Split&
53-57. method=TNC&query=CA(+most+significant+relationship+)&
[49]
Id. at 55. db=DIBLACK&utid=%7bD0AE3BEE-91BC-4B2B-B788-
[50]
Id. at 14. 3FB4D963677B%7d&vr=2.0&rp=%2fsearch%2fdefault.wl&
[51]
Rollo, pp. 19-28. mt= WLIGeneralSubscription> (visited October 22, 2007).
[52] [69]
453 Phil. 927, 934 (2003). Saudi Arabian Airlines v. Court of Appeals, 358 Phil. 105,
[53]
Scoles, Hay, Borchers, Symeonides, Conflict of Laws, 127 (1998). The contacts which were taken into account in this
3rd ed. (2000), p. 3. case are the following: (a) the place where the injury occurred;
[54]
Coquia and Aguiling-Pangalangan, Conflict of Laws, 1995 (b) the place where the conduct causing the injury occurred; (c)
ed., p. 64. the domicile, residence, nationality, place of incorporation and
[55]
Supra note 53, at 162, citing Hay, The Interrelation of place of business of the parties; and (d) the place where the
Jurisdictional Choice of Law in U.S. Conflicts Law, 28 Int'l.& relationship, if any, between the parties is centered.
[70]
Comp. L.Q. 161 (1979). See Auten v. Auten, 308 N.Y 155, 159-160 (1954).
[56] [71]
Shaffer v. Heitner, 433 U.S. 186, 215; 97 S.Ct. 2569, 2585 Supra note 53, at 117-118; supra note 54, at 64-65.
[72]
(1977), citing Justice Black's Dissenting Opinion in Hanson v. Laurel v. Garcia, G.R. Nos. 92013 and 92047, July 25,
Denckla, 357 U.S. 235, 258; 78 S. Ct. 1228, 1242 (1958). 1990, 187 SCRA 797, 810-811.
[57] [73]
See Regalado, Remedial Law Compendium, Vol. 1, International Harvester Company in Russia v. Hamburg-
8th Revised Ed., pp. 7-8. American Line, 42 Phil. 845, 855 (1918).
[74]
Salonga, Private International Law, 1995 ed., p. 44.
[58] [75]
U.S. v. De La Santa, 9 Phil. 22, 25-26 (1907). Veitz, Jr. v. Unisys Corporation, 676 F. Supp. 99, 101
[59]
Bokingo v. Court of Appeals, G.R. No. 161739, May 4, (1987), citing Randall v. Arabian Am. Oil. Co., 778 F. 2d 1146
2006, 489 SCRA 521, 530; Tomas Claudio Memorial College, (1985).
[76]
Inc. v. Court of Appeals, 374 Phil. 859, 864 (1999). Under this rule, a court, in conflicts cases, may refuse
[60]
See RULES OF COURT, Rule 16, Sec. 1. impositions on its jurisdiction where it is not the most
[61]
See In Re: Calloway, 1 Phil. 11, 12 (1901). convenient or available forum and the parties are not precluded
[62]
Bokingo v. Court of Appeals, supra note 59, at 531- from seeking remedies elsewhere (Bank of America NT & SA v.
533; Radio Communications of the Phils. Inc. v. Court of Court of Appeals, supra note 45, at 196). The court may refuse
Appeals, 435 Phil. 62, 68-69 (2002). to entertain a case for any of the following practical reasons:
[63]
Garcia v. Recio, 418 Phil. 723, 729 (2001); Board of (1) the belief that the matter can be better tried and decided
Commissioners (CID) v. Dela Rosa, G.R. Nos. 95122-23, May elsewhere, either because the main aspects of the case
31, 1991, 197 SCRA 853, 888. transpired in a foreign jurisdiction or the material witnesses
[64]
<http://web2.westlaw.com/search/default.wl?rs=WLW7.10 have their residence there; (2) the belief that the non-resident
&action=Search&fn=_top&sv=Split& plaintiff sought the forum, a practice known as forum shopping,
method=TNC&query=CA(+lex+loci+celebrationis+)&db=DI merely to secure procedural advantages or to convey or harass
BLACK&utid=%7bD0AE3BEE-91BC-4B2B-B788- the defendant; (3) the unwillingness to extend local judicial
3FB4D963677B%7d&vr=2.0&rp=%2fsearch%2fdefault.wl& facilities to non-residents or aliens when the docket may already
mt=WLIGeneralSubscription> (visited October 22, 2007). be overcrowded; (4) the inadequacy of the local judicial
[65]
<http://web2.westlaw.com/search/default.wl?rs=WLW7.10 machinery for effectuating the right sought to be maintained;
&action=Search&fn=_top&sv=Split& and (5) the difficulty of ascertaining foreign law (Puyat v.
method=TNC&query=CA(+lex+loci+contractus+)&db=DIBL Zabarte, 405 Phil. 413, 432 [2001]).
[77]
ACK&utid=%7bD0AE3BEE-91BC-4B2B-B788- Philsec Investment Corporation v. Court of Appeals, G.R.
3FB4D963677B%7d&vr=2.0&rp=%2fsearch%2fdefault.wl& No. 103493, June 19, 1997, 274 SCRA 102, 113.
[78]
mt=WLIGeneralSubscription>(visited October 22, 2007). Bank of America NT & SA v. Court of Appeals, supra note
[66]
Id. 45, at 196.
[79]
Bank of America NT & SA v. Court of Appeals, supra note
45, at 197.

---------------------------------------------------------------------------------------------------------------------------------------
 SECOND DIVISION

G.R. No. 162894 February 26, 2008

RAYTHEON INTERNATIONAL, INC., petitioner,

vs.
STOCKTON W. ROUZIE, JR., respondent.

DECISION

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

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

Sometime in 1990, Brand Marine Services, Inc. (BMSI), a corporation duly organized and existing under the laws
of the State of Connecticut, United States of America, and respondent Stockton W. Rouzie, Jr., an American
citizen, entered into a contract whereby BMSI hired respondent as its representative to negotiate the sale of
services in several government projects in the Philippines for an agreed remuneration of 10% of the gross receipts.
On 11 March 1992, respondent secured a service contract with the Republic of the Philippines on behalf of BMSI
for the dredging of rivers affected by the Mt. Pinatubo eruption and mudflows.3

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

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

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

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

In an Order14 dated 13 September 2000, the RTC denied petitioner’s omnibus motion. The trial court held that
the factual allegations in the complaint, assuming the same to be admitted, were sufficient for the trial court to
render a valid judgment thereon. It also ruled that the principle of forum non conveniens was inapplicable because
the trial court could enforce judgment on petitioner, it being a foreign corporation licensed to do business in the
Philippines.15

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

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

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

Hence, this petition raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE

COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION AGAINST RAYTHEON
INTERNATIONAL, INC.

WHETHER OR NOT THE COURT OF APPEALS ERRED IN REFUSING TO DISMISS THE

COMPLAINT ON THE GROUND OF FORUM NON CONVENIENS.24

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

The instant petition lacks merit.

Petitioner mainly asserts that the written contract between respondent and BMSI included a valid choice of law
clause, that is, that the contract shall be governed by the laws of the State of Connecticut. It also mentions the
presence of foreign elements in the dispute – namely, the parties and witnesses involved are American
corporations and citizens and the evidence to be presented is located outside the Philippines – that renders our
local courts inconvenient forums. Petitioner theorizes that the foreign elements of the dispute necessitate the
immediate application of the doctrine of forum non conveniens.
Recently in Hasegawa v. Kitamura,26 the Court outlined three consecutive phases involved in judicial resolution
of conflicts-of-laws problems, namely: jurisdiction, choice of law, and recognition and enforcement of judgments.
Thus, in the instances27 where the Court held that the local judicial machinery was adequate to resolve
controversies with a foreign element, the following requisites had to be proved: (1) that the Philippine Court is
one to which the parties may conveniently resort; (2) that the Philippine Court is in a position to make an
intelligent decision as to the law and the facts; and (3) that the Philippine Court has or is likely to have the power
to enforce its decision.28

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

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

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

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

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

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

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

Petitioner also contends that the complaint in Civil Case No. 1192-BG failed to state a cause of action against
petitioner. Failure to state a cause of action refers to the insufficiency of allegation in the pleading.36 As a general
rule, the elementary test for failure to state a cause of action is whether the complaint alleges facts which if true
would justify the relief demanded.37
The complaint alleged that petitioner had combined with BMSI and RUST to function as one company. Petitioner
contends that the deposition of Walter Browning rebutted this allegation. On this score, the resolution of the Court
of Appeals is instructive, thus:

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

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

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

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

SO ORDERED.
23
Footnotes Id. at 44.
24
* Acting Chairperson. Id. at 18.
25
** As replacement of Justice Leonardo A. Quisumbing who Id. at 318.
26
inhibited himself per Administrative Circular No. 84-2007. G.R. No. 149177, 23 November 2007.
1 27
Rollo, pp. 42-46. Dated 28 August 2003; penned by Associate Bank of America NT & SA v. Court of Appeals, 448 Phil. 181
Justice Arsenio J. Magpale and concurred in by Associate (2003); Puyat v. Zabarte, 405 Phil. 413 (2001); Philsec
Justices Bienvenido L. Reyes, Acting Chairperson of the Investment Corporation v. Court of Appeals, G.R. No. 103493,
Special Ninth Division, and Rebecca De Guia-Salvador. 19 June 1997, 274 SCRA 102.
2 28
Id. at 47. Dated 10 March 2004. The Manila Hotel Corp. v. NLRC, 397 Phil. 1, 16-17
3
Id. at 48-49. (2000); Communication Materials and Design, Inc. v. CA, 329
4
Id. at 61-62. Phil. 487, 510-511 (1996).
5 29
Id. at 63-74. Agpalo, Ruben E. CONFLICT OF LAWS (Private
6
Id. at 75-90. International Law), 2004 Ed., p. 491.
7 30
Id. at 48-54. Heirs of Julian Dela Cruz and Leonora Talaro v. Heirs of
8
Id. at 91-99. Alberto Cruz, G.R. No. 162890, 22 November 2005, 475 SCRA
9
Id. at 94. 743, 756.
10 31
Id. at 96. Laresma v. Abellana, G.R. No. 140973, 11 November 2004,
11
Id. at 97-98. 442 SCRA 156, 168.
12 32
Id. at 100-111. See Arcelona v. CA, 345 Phil. 250, 267 (1997).
13 33
Records, Vol. I, pp. 180-238. Hasegawa v. Kitamura, supra note 26.
14 34
Rollo, pp. 127-131. Bank of America NT & SA v. Court of Appeals, supra note 27.
15 35
Id. at 130. Philsec Investment Corporation v. Court of Appeals, supra
16
Id. at 132-149. note 27 at 113.
17 36
Id. at 150-151. Bank of America NT & SA v. Court of Appeals, supra note 27
18
Id. at 162. at 194.
19 37
Id. at 163-192. Banco Filipino Savings and Mortgage Bank v. Court of
20
Id. at 191. Appeals, G.R. No. 143896, 8 July 2005, 463 SCRA 64, 73.
21 38
Supra note 1. Rollo, p. 44.
22
Supra note 2.

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 SECOND DIVISION

G.R. No. 143581

KOREA TECHNOLOGIES CO., LTD.,

- versus -
HON. ALBERTO A. LERMA, in his capacity as Presiding Judge of Branch 256 of Regional Trial Court
of Muntinlupa City, and PACIFIC GENERAL STEEL MANUFACTURING CORPORATION,

DECISION

In our jurisdiction, the policy is to favor alternative methods of resolving disputes, particularly in civil and
commercial disputes. Arbitration along with mediation, conciliation, and negotiation, being inexpensive, speedy
and less hostile methods have long been favored by this Court. The petition before us puts at issue an arbitration
clause in a contract mutually agreed upon by the parties stipulating that they would submit themselves to
arbitration in a foreign country. Regrettably, instead of hastening the resolution of their dispute, the parties
wittingly or unwittingly prolonged the controversy.

Petitioner Korea Technologies Co., Ltd. (KOGIES) is a Korean corporation which is engaged in the supply and
installation of Liquefied Petroleum Gas (LPG) Cylinder manufacturing plants, while private respondent Pacific
General Steel Manufacturing Corp. (PGSMC) is a domestic corporation.

On March 5, 1997, PGSMC and KOGIES executed a Contract[1] whereby KOGIES would set up an LPG Cylinder
Manufacturing Plant in Carmona, Cavite. The contract was executed in the Philippines. On April 7, 1997, the
parties executed, in Korea, an Amendment for Contract No. KLP-970301 dated March 5, 1997[2]amending the
terms of payment. The contract and its amendment stipulated that KOGIES will ship the machinery and facilities
necessary for manufacturing LPG cylinders for which PGSMC would pay USD 1,224,000. KOGIES would install
and initiate the operation of the plant for which PGSMC bound itself to pay USD 306,000 upon the plants
production of the 11-kg. LPG cylinder samples. Thus, the total contract price amounted to USD 1,530,000.

On October 14, 1997, PGSMC entered into a Contract of Lease[3] with Worth Properties, Inc. (Worth) for use of
Worths 5,079-square meter property with a 4,032-square meter warehouse building to house the LPG
manufacturing plant. The monthly rental was PhP 322,560 commencing on January 1, 1998 with a 10% annual
increment clause. Subsequently, the machineries, equipment, and facilities for the manufacture of LPG cylinders
were shipped, delivered, and installed in the Carmona plant. PGSMC paid KOGIES USD 1,224,000.

However, gleaned from the Certificate[4] executed by the parties on January 22, 1998, after the installation of the
plant, the initial operation could not be conducted as PGSMC encountered financial difficulties affecting the
supply of materials, thus forcing the parties to agree that KOGIES would be deemed to have completely complied
with the terms and conditions of the March 5, 1997 contract.

For the remaining balance of USD306,000 for the installation and initial operation of the plant, PGSMC issued
two postdated checks: (1) BPI Check No. 0316412 dated January 30, 1998 for PhP 4,500,000; and (2) BPI Check
No. 0316413 dated March 30, 1998 for PhP 4,500,000.[5]

When KOGIES deposited the checks, these were dishonored for the reason PAYMENT STOPPED. Thus,
on May 8, 1998, KOGIES sent a demand letter[6] to PGSMC threatening criminal action for violation of Batas
Pambansa Blg. 22 in case of nonpayment. On the same date, the wife of PGSMCs President faxed a letter
dated May 7, 1998 to KOGIES President who was then staying at a Makati City hotel. She complained that not
only did KOGIES deliver a different brand of hydraulic press from that agreed upon but it had not delivered
several equipment parts already paid for.

On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the payments
were stopped for reasons previously made known to KOGIES.[7]

On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March 5, 1997 on
the ground that KOGIES had altered the quantity and lowered the quality of the machineries and equipment it
delivered to PGSMC, and that PGSMC would dismantle and transfer the machineries, equipment, and facilities
installed in the Carmona plant. Five days later, PGSMC filed before the Office of the Public Prosecutor an
Affidavit-Complaint for Estafa docketed as I.S. No. 98-03813 against Mr. Dae Hyun Kang, President of
KOGIES.

On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally rescind their
contract nor dismantle and transfer the machineries and equipment on mere imagined violations by KOGIES. It
also insisted that their disputes should be settled by arbitration as agreed upon in Article 15, the arbitration clause
of their contract.

On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter threatening
that the machineries, equipment, and facilities installed in the plant would be dismantled and transferred on July
4, 1998. Thus, on July 1, 1998, KOGIES instituted an Application for Arbitration before the Korean Commercial
Arbitration Board (KCAB) in Seoul, Korea pursuant to Art. 15 of the Contract as amended.

On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil Case No. 98-
117[8] against PGSMC before the Muntinlupa City Regional Trial Court (RTC). The RTC granted a temporary
restraining order (TRO) on July 4, 1998, which was subsequently extended until July 22, 1998. In its complaint,
KOGIES alleged that PGSMC had initially admitted that the checks that were stopped were not funded but later
on claimed that it stopped payment of the checks for the reason that their value was not received as the former
allegedly breached their contract by altering the quantity and lowering the quality of the machinery and equipment
installed in the plant and failed to make the plant operational although it earlier certified to the contrary as shown
in a January 22, 1998 Certificate. Likewise, KOGIES averred that PGSMC violated Art. 15 of their Contract, as
amended, by unilaterally rescinding the contract without resorting to arbitration. KOGIES also asked that PGSMC
be restrained from dismantling and transferring the machinery and equipment installed in the plant which the
latter threatened to do on July 4, 1998.

On July 9, 1998, PGSMC filed an opposition to the TRO arguing that KOGIES was not entitled to the TRO since
Art. 15, the arbitration clause, was null and void for being against public policy as it ousts the local courts of
jurisdiction over the instant controversy.

On July 17, 1998, PGSMC filed its Answer with Compulsory Counterclaim[9]asserting that it had the full right to
dismantle and transfer the machineries and equipment because it had paid for them in full as stipulated in the
contract; that KOGIES was not entitled to the PhP 9,000,000 covered by the checks for failing to completely
install and make the plant operational; and that KOGIES was liable for damages amounting to PhP 4,500,000 for
altering the quantity and lowering the quality of the machineries and equipment. Moreover, PGSMC averred that
it has already paid PhP 2,257,920 in rent (covering January to July 1998) to Worth and it was not willing to further
shoulder the cost of renting the premises of the plant considering that the LPG cylinder manufacturing plant never
became operational.

After the parties submitted their Memoranda, on July 23, 1998, the RTC issued an Order denying the application
for a writ of preliminary injunction, reasoning that PGSMC had paid KOGIES USD 1,224,000, the value of the
machineries and equipment as shown in the contract such that KOGIES no longer had proprietary rights over
them. And finally, the RTC held that Art. 15 of the Contract as amended was invalid as it tended to oust the trial
court or any other court jurisdiction over any dispute that may arise between the parties. KOGIES prayer for an
injunctive writ was denied.[10] The dispositive portion of the Order stated:

WHEREFORE, in view of the foregoing consideration, this Court believes and so holds that no
cogent reason exists for this Court to grant the writ of preliminary injunction to restrain and refrain
defendant from dismantling the machineries and facilities at the lot and building of Worth
Properties, Incorporated at Carmona, Cavite and transfer the same to another site: and therefore
denies plaintiffs application for a writ of preliminary injunction.

On July 29, 1998, KOGIES filed its Reply to Answer and Answer to Counterclaim.[11] KOGIES denied it had
altered the quantity and lowered the quality of the machinery, equipment, and facilities it delivered to the plant. It
claimed that it had performed all the undertakings under the contract and had already produced certified samples
of LPG cylinders. It averred that whatever was unfinished was PGSMCs fault since it failed to procure raw
materials due to lack of funds. KOGIES, relying on Chung Fu Industries (Phils.), Inc. v. Court of
Appeals,[12] insisted that the arbitration clause was without question valid.

After KOGIES filed a Supplemental Memorandum with Motion to Dismiss[13]answering PGSMCs memorandum
of July 22, 1998 and seeking dismissal of PGSMCs counterclaims, KOGIES, on August 4, 1998, filed its Motion
for Reconsideration[14] of the July 23, 1998 Order denying its application for aninjunctive writ claiming that the
contract was not merely for machinery and facilities worth USD 1,224,000 but was for the sale of an LPG
manufacturing plant consisting of supply of all the machinery and facilities and transfer of technology for a total
contract price of USD 1,530,000 such that the dismantling and transfer of the machinery and facilities would
result in the dismantling and transfer of the very plant itself to the great prejudice of KOGIES as the still unpaid
owner/seller of the plant.Moreover, KOGIES points out that the arbitration clause under Art. 15 of the Contract
as amended was a valid arbitration stipulation under Art. 2044 of the Civil Code and as held by this Court
in Chung Fu Industries (Phils.), Inc.[15]

In the meantime, PGSMC filed a Motion for Inspection of Things[16] to determine whether there was indeed
alteration of the quantity and lowering of quality of the machineries and equipment, and whether these were
properly installed.KOGIES opposed the motion positing that the queries and issues raised in the motion for
inspection fell under the coverage of the arbitration clause in their contract.

On September 21, 1998, the trial court issued an Order (1) granting PGSMCs motion for inspection; (2) denying
KOGIES motion for reconsideration of the July 23, 1998 RTC Order; and (3) denying KOGIES motion to dismiss
PGSMCs compulsory counterclaims as these counterclaims fell within the requisites of compulsory
counterclaims.

On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration[17]of the September 21, 1998 RTC
Order granting inspection of the plant and denying dismissal of PGSMCs compulsory counterclaims.

Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998 urgent motion for
reconsideration, KOGIES filed before the Court of Appeals (CA) a petition for certiorari[18] docketed as CA-G.R.
SP No. 49249, seeking annulment of the July 23, 1998 and September 21, 1998 RTC Orders and praying for the
issuance of writs of prohibition, mandamus, and preliminary injunction to enjoin the RTC and PGSMC from
inspecting, dismantling, and transferring the machineries and equipment in the Carmona plant, and to direct the
RTC to enforce the specific agreement on arbitration to resolve the dispute.

In the meantime, on October 19, 1998, the RTC denied KOGIES urgent motion for reconsideration and directed
the Branch Sheriff to proceed with the inspection of the machineries and equipment in the plant on October 28,
1998.[19]
Thereafter, KOGIES filed a Supplement to the Petition[20] in CA-G.R. SP No. 49249 informing the CA about
the October 19, 1998 RTC Order. It also reiterated its prayer for the issuance of the writs of prohibition,
mandamus and preliminary injunction which was not acted upon by the CA. KOGIES asserted that the Branch
Sheriff did not have the technical expertise to ascertain whether or not the machineries and equipment conformed
to the specifications in the contract and were properly installed.

On November 11, 1998, the Branch Sheriff filed his Sheriffs Report[21] finding that the enumerated machineries
and equipment were not fully and properly installed.

The Court of Appeals affirmed the trial court and declared

the arbitration clause against public policy

On May 30, 2000, the CA rendered the assailed Decision[22] affirming the RTC Orders and dismissing the petition
for certiorari filed by KOGIES. The CA found that the RTC did not gravely abuse its discretion in issuing the
assailed July 23, 1998 and September 21, 1998 Orders. Moreover, the CA reasoned that KOGIES contention that
the total contract price for USD 1,530,000 was for the whole plant and had not been fully paid was contrary to
the finding of the RTC that PGSMC fully paid the price of USD 1,224,000, which was for all the machineries and
equipment. According to the CA, this determination by the RTC was a factual finding beyond the ambit of a
petition for certiorari.

On the issue of the validity of the arbitration clause, the CA agreed with the lower court that an arbitration clause
which provided for a final determination of the legal rights of the parties to the contract by arbitration was against
public policy.

On the issue of nonpayment of docket fees and non-attachment of a certificate of non-forum shopping by PGSMC,
the CA held that the counterclaims of PGSMC were compulsory ones and payment of docket fees was not required
since the Answer with counterclaim was not an initiatory pleading. For the same reason, the CA said a certificate
of non-forum shopping was also not required.

Furthermore, the CA held that the petition for certiorari had been filed prematurely since KOGIES did not wait
for the resolution of its urgent motion for reconsideration of the September 21, 1998 RTC Order which was the
plain, speedy, and adequate remedy available. According to the CA, the RTC must be given the opportunity to
correct any alleged error it has committed, and that since the assailed orders were interlocutory, these cannot be
the subject of a petition for certiorari.

Hence, we have this Petition for Review on Certiorari under Rule 45.

The Issues

Petitioner posits that the appellate court committed the following errors:

a. PRONOUNCING THE QUESTION OF OWNERSHIP OVER THE MACHINERY AND FACILITIES AS A

QUESTION OF FACT BEYOND THE AMBIT OF A PETITION FOR CERTIORARI INTENDED ONLY FOR
CORRECTION OF ERRORS OF JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OF (SIC) EXCESS OF JURISDICTION, AND CONCLUDING THAT THE TRIAL COURTS FINDING
ON THE SAME QUESTION WAS IMPROPERLY RAISED IN THE PETITION BELOW;

b. DECLARING AS NULL AND VOID THE ARBITRATION CLAUSE IN ARTICLE 15 OF THE

CONTRACT BETWEEN THE PARTIES FOR BEING CONTRARY TO PUBLIC POLICY AND FOR
OUSTING THE COURTS OF JURISDICTION;
c. DECREEING PRIVATE RESPONDENTS COUNTERCLAIMS TO BE ALL COMPULSORY NOT
NECESSITATING PAYMENT OF DOCKET FEES AND CERTIFICATION OF NON-FORUM SHOPPING;

d. RULING THAT THE PETITION WAS FILED PREMATURELY WITHOUT WAITING FOR THE
RESOLUTION OF THE MOTION FOR RECONSIDERATION OF THE ORDER DATED SEPTEMBER 21,
1998 OR WITHOUT GIVING THE TRIAL COURT AN OPPORTUNITY TO CORRECT ITSELF;

e. PROCLAIMING THE TWO ORDERS DATED JULY 23 AND SEPTEMBER 21, 1998 NOT TO BE
PROPER SUBJECTS OF CERTIORARI AND PROHIBITION FOR BEING INTERLOCUTORY IN
NATURE;

f. NOT GRANTING THE RELIEFS AND REMEDIES PRAYED FOR IN HE (SIC) PETITION AND,
INSTEAD, DISMISSING THE SAME FOR ALLEGEDLY WITHOUT MERIT.[23]

The Courts Ruling

The petition is partly meritorious.

Before we delve into the substantive issues, we shall first tackle the procedural issues.

The rules on the payment of docket fees for counterclaims and cross claims were amended effective August 16,
2004.

KOGIES strongly argues that when PGSMC filed the counterclaims, it should have paid docket fees and filed a
certificate of non-forum shopping, and that its failure to do so was a fatal defect.

We disagree with KOGIES.

As aptly ruled by the CA, the counterclaims of PGSMC were incorporated in its Answer with Compulsory
Counterclaim dated July 17, 1998 in accordance with Section 8 of Rule 11, 1997 Revised Rules of Civil
Procedure, the rule that was effective at the time the Answer with Counterclaim was filed. Sec. 8 on existing
counterclaim or cross-claim states, A compulsory counterclaim or a cross-claim that a defending party has at the
time he files his answer shall be contained therein.

On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against KOGIES, it was
not liable to pay filing fees for said counterclaims being compulsory in nature. We stress, however, that
effective August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 04-2-04-SC, docket fees are now
required to be paid in compulsory counterclaim or cross-claims.

As to the failure to submit a certificate of forum shopping, PGSMCs Answer is not an initiatory pleading which
requires a certification against forum shopping under Sec. 5[24] of Rule 7, 1997 Revised Rules of Civil
Procedure. It is a responsive pleading, hence, the courts a quo did not commit reversible error in denying KOGIES
motion to dismiss PGSMCs compulsory counterclaims.

Interlocutory orders proper subject of certiorari

Citing Gamboa v. Cruz,[25] the CA also pronounced that certiorari and Prohibition are neither the remedies to
question the propriety of an interlocutory order of the trial court.[26] The CA erred on its reliance
on Gamboa. Gamboa involved the denial of a motion to acquit in a criminal case which was not assailable in an
action for certiorari since the denial of a motion to quash required the accused to plead and to continue with the
trial, and whatever objections the accused had in his motion to quash can then be used as part of his defense and
subsequently can be raised as errors on his appeal if the judgment of the trial court is adverse to him. The general
rule is that interlocutory orders cannot be challenged by an appeal.[27] Thus, in Yamaoka v. Pescarich
Manufacturing Corporation, we held:

The proper remedy in such cases is an ordinary appeal from an adverse judgment on the merits,
incorporating in said appeal the grounds for assailing the interlocutory orders. Allowing appeals
from interlocutory orders would result in the sorry spectacle of a case being subject of a
counterproductive ping-pong to and from the appellate court as often as a trial court is perceived
to have made an error in any of its interlocutory rulings. However, where the assailed interlocutory
order was issued with grave abuse of discretion or patently erroneous and the remedy of appeal
would not afford adequate and expeditious relief, the Court allows certiorari as a mode of
redress.[28]

Also, appeals from interlocutory orders would open the floodgates to endless occasions for dilatory
motions. Thus, where the interlocutory order was issued without or in excess of jurisdiction or with grave abuse
of discretion, the remedy is certiorari.[29]

The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the issuance of
the two assailed orders coupled with the fact that there is no plain, speedy, and adequate remedy in the ordinary
course of law amply provides the basis for allowing the resort to a petition for certiorari under Rule 65.

Prematurity of the petition before the CA

Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari. Note that
KOGIES motion for reconsideration of the July 23, 1998 RTC Order which denied the issuance of the injunctive
writ had already been denied. Thus, KOGIES only remedy was to assail the RTCs interlocutory order via a
petition for certiorari under Rule 65.

While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC Order relating
to the inspection of things, and the allowance of the compulsory counterclaims has not yet been resolved, the
circumstances in this case would allow an exception to the rule that before certiorari may be availed of, the
petitioner must have filed a motion for reconsideration and said motion should have been first resolved by the
court a quo. The reason behind the rule is to enable the lower court, in the first instance, to pass upon and correct
its mistakes without the intervention of the higher court.[30]

The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant, equipment, and facilities
when he is not competent and knowledgeable on said matters is evidently flawed and devoid of any legal
support. Moreover, there is an urgent necessity to resolve the issue on the dismantling of the facilities and any
further delay would prejudice the interests of KOGIES. Indeed, there is real and imminent threat of irreparable
destruction or substantial damage to KOGIES equipment and machineries. We find the resort to certiorari based
on the gravely abusive orders of the trial court sans the ruling on the October 2, 1998 motion for reconsideration
to be proper.

The Core Issue: Article 15 of the Contract

We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It provides:

Article 15. Arbitration.All disputes, controversies, or differences which may arise between the
parties, out of or in relation to or in connection with this Contract or for the breach thereof, shall
finally be settled by arbitration in Seoul, Korea in accordance with the Commercial Arbitration
Rules of the Korean Commercial Arbitration Board. The award rendered by the arbitration(s)
shall be final and binding upon both parties concerned. (Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.

Petitioner is correct.

Established in this jurisdiction is the rule that the law of the place where the contract is made governs. Lex loci
contractus. The contract in this case was perfected here in the Philippines. Therefore, our laws ought to
govern. Nonetheless, Art. 2044 of the Civil Code sanctions the validity of mutually agreed arbitral clause or the
finality and binding effect of an arbitral award. Art. 2044 provides, Any stipulation that the arbitrators award
or decision shall be final, is valid, without prejudice to Articles 2038, 2039 and 2040. (Emphasis supplied.)

Arts. 2038,[31] 2039,[32] and 2040[33] abovecited refer to instances where a compromise or an arbitral award, as
applied to Art. 2044 pursuant to Art. 2043,[34]may be voided, rescinded, or annulled, but these would not denigrate
the finality of the arbitral award.

The arbitration clause was mutually and voluntarily agreed upon by the parties.It has not been shown to be
contrary to any law, or against morals, good customs, public order, or public policy. There has been no showing
that the parties have not dealt with each other on equal footing. We find no reason why the arbitration clause
should not be respected and complied with by both parties. In Gonzales v. Climax Mining Ltd.,[35] we held that
submission to arbitration is a contract and that a clause in a contract providing that all matters in dispute between
the parties shall be referred to arbitration is a contract.[36] Again in Del Monte Corporation-USA v. Court of
Appeals, we likewise ruled that [t]he provision to submit to arbitration any dispute arising therefrom and the
relationship of the parties is part of that contract and is itself a contract.[37]

Arbitration clause not contrary to public policy

The arbitration clause which stipulates that the arbitration must be done in Seoul, Korea in accordance with the
Commercial Arbitration Rules of the KCAB, and that the arbitral award is final and binding, is not contrary to
public policy. This Court has sanctioned the validity of arbitration clauses in a catena of cases. In the 1957 case
of Eastboard Navigation Ltd. v. Juan Ysmael and Co., Inc.,[38] this Court had occasion to rule that an arbitration
clause to resolve differences and breaches of mutually agreed contractual terms is valid. In BF Corporation v.
Court of Appeals, we held that [i]n this jurisdiction, arbitration has been held valid and constitutional. Even before
the approval on June 19, 1953 of Republic Act No. 876, this Court has countenanced the settlement of disputes
through arbitration. Republic Act No. 876 was adopted to supplement the New Civil Codes provisions on
arbitration.[39] And in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc., we
declared that:

Being an inexpensive, speedy and amicable method of settling disputes,arbitrationalong with

mediation, conciliation and negotiationis encouraged by the Supreme Court. Aside from
unclogging judicial dockets, arbitration also hastens the resolution of disputes, especially of the
commercial kind. It is thus regarded as the wave of the future in international civil and commercial
disputes. Brushing aside a contractual agreement calling for arbitration between the parties would
be a step backward.

Consistent with the above-mentioned policy of encouraging alternative dispute resolution

methods, courts should liberally construe arbitration clauses. Provided such clause is susceptible
of an interpretation that covers the asserted dispute, an order to arbitrate should be granted. Any
doubt should be resolved in favor of arbitration.[40]
Having said that the instant arbitration clause is not against public policy, we come to the question on what
governs an arbitration clause specifying that in case of any dispute arising from the contract, an arbitral panel will
be constituted in a foreign country and the arbitration rules of the foreign country would govern and its award
shall be final and binding.

RA 9285 incorporated the UNCITRAL Model law

to which we are a signatory

For domestic arbitration proceedings, we have particular agencies to arbitrate disputes arising from contractual
relations. In case a foreign arbitral body is chosen by the parties, the arbitration rules of our domestic arbitration
bodies would not be applied. As signatory to the Arbitration Rules of the UNCITRAL Model Law on International
Commercial Arbitration[41] of the United Nations Commission on International Trade Law (UNCITRAL) in the
New York Convention on June 21, 1985, the Philippines committed itself to be bound by the Model Law. We
have even incorporated the Model Law in Republic Act No. (RA) 9285, otherwise known as the Alternative
Dispute Resolution Act of 2004 entitled An Act to Institutionalize the Use of an Alternative Dispute Resolution
System in the Philippines and to Establish the Office for Alternative Dispute Resolution, and for Other
Purposes, promulgated on April 2, 2004. Secs. 19 and 20 of Chapter 4 of the Model Law are the pertinent
provisions:

CHAPTER 4 - INTERNATIONAL COMMERCIAL ARBITRATION

SEC. 19. Adoption of the Model Law on International Commercial Arbitration.International

commercial arbitration shall be governed by the Model Law on International Commercial
Arbitration (the Model Law) adopted by the United Nations Commission on International Trade
Law on June 21, 1985 (United Nations Document A/40/17) and recommended for enactment by
the General Assembly in Resolution No. 40/72 approved on December 11, 1985, copy of which is
hereto attached as Appendix A.

SEC. 20. Interpretation of Model Law.In interpreting the Model Law, regard shall be had to its
international origin and to the need for uniformity in its interpretation and resort may be made to
the travaux preparatories and the report of the Secretary General of the United Nations
Commission on International Trade Law dated March 25, 1985 entitled, International Commercial
Arbitration: Analytical Commentary on Draft Trade identified by reference number A/CN. 9/264.

While RA 9285 was passed only in 2004, it nonetheless applies in the instant case since it is a procedural law
which has a retroactive effect. Likewise, KOGIES filed its application for arbitration before the KCAB on July
1, 1998 and it is still pending because no arbitral award has yet been rendered. Thus, RA 9285 is applicable to the
instant case. Well-settled is the rule that procedural laws are construed to be applicable to actions pending and
undetermined at the time of their passage, and are deemed retroactive in that sense and to that extent. As a general
rule, the retroactive application of procedural laws does not violate any personal rights because no vested right
has yet attached nor arisen from them.[42]

Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are the
following:

(1) The RTC must refer to arbitration in proper cases

Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of arbitration
pursuant to an arbitration clause, and mandates the referral to arbitration in such cases, thus:
 SEC. 24. Referral to Arbitration.A court before which an action is brought in a matter which is the
subject matter of an arbitration agreement shall, if at least one party so requests not later than the
pre-trial conference, or upon the request of both parties thereafter, refer the parties to arbitration
unless it finds that the arbitration agreement is null and void, inoperative or incapable of being
performed.

(2) Foreign arbitral awards must be confirmed by the RTC

Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final and binding
are not immediately enforceable or cannot be implemented immediately. Sec. 35[43] of the UNCITRAL Model
Law stipulates the requirement for the arbitral award to be recognized by a competent court for enforcement,
which court under Sec. 36 of the UNCITRAL Model Law may refuse recognition or enforcement on the grounds
provided for. RA 9285 incorporated these provisos to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus:

SEC. 42. Application of the New York Convention.The New York Convention shall govern
the recognition and enforcement of arbitral awards covered by said Convention.

The recognition and enforcement of such arbitral awards shall be filed with the Regional
Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court.
Said procedural rules shall provide that the party relying on the award or applying for its
enforcement shall file with the court the original or authenticated copy of the award and the
arbitration agreement. If the award or agreement is not made in any of the official languages, the
party shall supply a duly certified translation thereof into any of such languages.

The applicant shall establish that the country in which foreign arbitration award was made
in party to the New York Convention.

xxxx

SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the
New York Convention.The recognition and enforcement of foreign arbitral awards not covered by
the New York Convention shall be done in accordance with procedural rules to be promulgated by
the Supreme Court. The Court may, on grounds of comity and reciprocity, recognize and enforce
a non-convention award as a convention award.

SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign arbitral award when
confirmed by a court of a foreign country, shall be recognized and enforced as a foreign arbitral
award and not as a judgment of a foreign court.

A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced
in the same manner as final and executory decisions of courts of law of the Philippines

xxxx

SEC. 47. Venue and Jurisdiction.Proceedings for recognition and enforcement of an

arbitration agreement or for vacations, setting aside, correction or modification of an arbitral
award, and any application with a court for arbitration assistance and supervision shall be deemed
as special proceedings and shall be filed with the Regional Trial Court (i) where arbitration
proceedings are conducted; (ii) where the asset to be attached or levied upon, or the act to be
enjoined is located; (iii) where any of the parties to the dispute resides or has his place of business;
or (iv) in the National Judicial Capital Region, at the option of the applicant.
 SEC. 48. Notice of Proceeding to Parties.In a special proceeding for recognition and
enforcement of an arbitral award, the Court shall send notice to the parties at their address of record
in the arbitration, or if any part cannot be served notice at such address, at such partys last known
address. The notice shall be sent al least fifteen (15) days before the date set for the initial hearing
of the application.

It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment of a foreign
court but as a foreign arbitral award, and when confirmed, are enforced as final and executory decisions of our
courts of law.

Thus, it can be gleaned that the concept of a final and binding arbitral award is similar to judgments or awards
given by some of our quasi-judicial bodies, like the National Labor Relations Commission and Mines
Adjudication Board, whose final judgments are stipulated to be final and binding, but not immediately executory
in the sense that they may still be judicially reviewed, upon the instance of any party.Therefore, the final foreign
arbitral awards are similarly situated in that they need first to be confirmed by the RTC.

(3) The RTC has jurisdiction to review foreign arbitral awards

Sec. 42 in relation to Sec. 45 of RA 9285 designated and vested the RTC with specific authority and jurisdiction
to set aside, reject, or vacate a foreign arbitral award on grounds provided under Art. 34(2) of the UNCITRAL
Model Law. Secs. 42 and 45 provide:

SEC. 42. Application of the New York Convention.The New York Convention shall govern
the recognition and enforcement of arbitral awards covered by said Convention.

The recognition and enforcement of such arbitral awards shall be filed with the Regional
Trial Court in accordance with the rules of procedure to be promulgated by the Supreme Court.
Said procedural rules shall provide that the party relying on the award or applying for its
enforcement shall file with the court the original or authenticated copy of the award and the
arbitration agreement. If the award or agreement is not made in any of the official languages, the
party shall supply a duly certified translation thereof into any of such languages.

The applicant shall establish that the country in which foreign arbitration award was made
is party to the New York Convention.

If the application for rejection or suspension of enforcement of an award has been made, the
Regional Trial Court may, if it considers it proper, vacate its decision and may also, on the
application of the party claiming recognition or enforcement of the award, order the party to provide
appropriate security.

xxxx

SEC. 45. Rejection of a Foreign Arbitral Award.A party to a foreign arbitration proceeding
may oppose an application for recognition and enforcement of the arbitral award in accordance with
the procedures and rules to be promulgated by the Supreme Court only on those grounds
enumerated under Article V of the New York Convention. Any other ground raised shall be
disregarded by the Regional Trial Court.

Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed upon by
the parties, still the foreign arbitral award is subject to judicial review by the RTC which can set aside, reject, or
vacate it. In this sense, what this Court held in Chung Fu Industries (Phils.), Inc. relied upon by KOGIES is
applicable insofar as the foreign arbitral awards, while final and binding, do not oust courts of jurisdiction since
these arbitral awards are not absolute and without exceptions as they are still judicially reviewable. Chapter 7 of
RA 9285 has made it clear that all arbitral awards, whether domestic or foreign, are subject to judicial review on
specific grounds provided for.

(4) Grounds for judicial review different in domestic and foreign arbitral awards

The differences between a final arbitral award from an international or foreign arbitral tribunal and an award
given by a local arbitral tribunal are the specific grounds or conditions that vest jurisdiction over our courts to
review the awards.

For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds for setting
aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of the UNCITRAL Model Law.

For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of RA 876[44] and
shall be recognized as final and executory decisions of the RTC,[45] they may only be assailed before the RTC
and vacated on the grounds provided under Sec. 25 of RA 876.[46]

(5) RTC decision of assailed foreign arbitral award appealable

Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in cases where the
RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award, thus:

SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the Regional Trial
Court confirming, vacating, setting aside, modifying or correcting an arbitral award may be
appealed to the Court of Appeals in accordance with the rules and procedure to be promulgated by
the Supreme Court.

The losing party who appeals from the judgment of the court confirming an arbitral award
shall be required by the appellate court to post a counterbond executed in favor of the prevailing
party equal to the amount of the award in accordance with the rules to be promulgated by the
Supreme Court.

Thereafter, the CA decision may further be appealed or reviewed before this Court through
a petition for review under Rule 45 of the Rules of Court.

PGSMC has remedies to protect its interests

Thus, based on the foregoing features of RA 9285, PGSMC must submit to the foreign arbitration as it bound
itself through the subject contract. While it may have misgivings on the foreign arbitration done in Korea by the
KCAB, it has available remedies under RA 9285. Its interests are duly protected by the law which requires that
the arbitral award that may be rendered by KCAB must be confirmed here by the RTC before it can be enforced.

With our disquisition above, petitioner is correct in its contention that an arbitration clause, stipulating that the
arbitral award is final and binding, does not oust our courts of jurisdiction as the international arbitral award, the
award of which is not absolute and without exceptions, is still judicially reviewable under certain conditions
provided for by the UNCITRAL Model Law on ICA as applied and incorporated in RA 9285.

Finally, it must be noted that there is nothing in the subject Contract which provides that the parties may dispense
with the arbitration clause.

Unilateral rescission improper and illegal

Having ruled that the arbitration clause of the subject contract is valid and binding on the parties, and not contrary
to public policy; consequently, being bound to the contract of arbitration, a party may not unilaterally rescind or
terminate the contract for whatever cause without first resorting to arbitration.
What this Court held in University of the Philippines v. De Los Angeles[47] and reiterated in succeeding
cases,[48] that the act of treating a contract as rescinded on account of infractions by the other contracting party is
valid albeit provisional as it can be judicially assailed, is not applicable to the instant case on account of a valid
stipulation on arbitration. Where an arbitration clause in a contract is availing, neither of the parties can
unilaterally treat the contract as rescinded since whatever infractions or breaches by a party or differences arising
from the contract must be brought first and resolved by arbitration, and not through an extrajudicial rescission or
judicial action.

The issues arising from the contract between PGSMC and KOGIES on whether the equipment and machineries
delivered and installed were properly installed and operational in the plant in Carmona, Cavite; the ownership of
equipment and payment of the contract price; and whether there was substantial compliance by KOGIES in the
production of the samples, given the alleged fact that PGSMC could not supply the raw materials required to
produce the sample LPG cylinders, are matters proper for arbitration. Indeed, we note that on July 1, 1998,
KOGIES instituted an Application for Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15 of the
Contract as amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.

Corollarily, the trial court gravely abused its discretion in granting PGSMCs Motion for Inspection of Things
on September 21, 1998, as the subject matter of the motion is under the primary jurisdiction of the mutually
agreed arbitral body, the KCAB in Korea.
In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection made on
October 28, 1998, as ordered by the trial court on October 19, 1998, is of no worth as said Sheriff is not technically
competent to ascertain the actual status of the equipment and machineries as installed in the plant.

For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to the grant of the
inspection of the equipment and machineries have to be recalled and nullified.

Issue on ownership of plant proper for arbitration

Petitioner assails the CA ruling that the issue petitioner raised on whether the totalcontract price of USD 1,530,000
was for the whole plant and its installation is beyond the ambit of a Petition for Certiorari.

Petitioners position is untenable.

It is settled that questions of fact cannot be raised in an original action for certiorari.[49] Whether or not there was
full payment for the machineries and equipment and installation is indeed a factual issue prohibited by Rule 65.

However, what appears to constitute a grave abuse of discretion is the order of the RTC in resolving the issue on
the ownership of the plant when it is the arbitral body (KCAB) and not the RTC which has jurisdiction and
authority over the said issue. The RTCs determination of such factual issue constitutes grave abuse of discretion
and must be reversed and set aside.

RTC has interim jurisdiction to protect the rights of the parties

Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for PGSMC to dismantle
and transfer the equipment and machineries, we find it to be in order considering the factual milieu of the instant
case.
Firstly, while the issue of the proper installation of the equipment and machineries might well be under the
primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285 has jurisdiction to hear
and grant interim measures to protect vested rights of the parties. Sec. 28 pertinently provides:

SEC. 28. Grant of interim Measure of Protection.(a) It is not incompatible with an arbitration
agreement for a party to request, before constitution of the tribunal, from a Court to grant such
measure. After constitution of the arbitral tribunal and during arbitral proceedings, a request for
an interim measure of protection, or modification thereof, may be made with the arbitral or to the
extent that the arbitral tribunal has no power to act or is unable to act effectivity, the request may
be made with the Court. The arbitral tribunal is deemed constituted when the sole arbitrator or the
third arbitrator, who has been nominated, has accepted the nomination and written communication
of said nomination and acceptance has been received by the party making the request.

(b) The following rules on interim or provisional relief shall be observed:

Any party may request that provisional relief be granted against the adverse party.

Such relief may be granted:

(i) to prevent irreparable loss or injury;

(ii) to provide security for the performance of any obligation;
(iii) to produce or preserve any evidence; or
(iv) to compel any other appropriate act or omission.

(c) The order granting provisional relief may be conditioned upon the provision of security or any
act or omission specified in the order.

(d) Interim or provisional relief is requested by written application transmitted by reasonable

means to the Court or arbitral tribunal as the case may be and the party against whom the relief is
sought, describing in appropriate detail the precise relief, the party against whom the relief is
requested, the grounds for the relief, and the evidence supporting the request.

(e) The order shall be binding upon the parties.

(f) Either party may apply with the Court for assistance in implementing or enforcing an interim
measure ordered by an arbitral tribunal.

(g) A party who does not comply with the order shall be liable for all damages resulting from
noncompliance, including all expenses, and reasonable attorney's fees, paid in obtaining the orders
judicial enforcement. (Emphasis ours.)

Art. 17(2) of the UNCITRAL Model Law on ICA defines an interim measure of protection as:

Article 17. Power of arbitral tribunal to order interim measures

xxx xxx xxx

(2) An interim measure is any temporary measure, whether in the form of an award or in another
form, by which, at any time prior to the issuance of the award by which the dispute is finally
decided, the arbitral tribunal orders a party to:

(a) Maintain or restore the status quo pending determination of the dispute;
 (b) Take action that would prevent, or refrain from taking action that is likely to cause, current or
imminent harm or prejudice to the arbitral process itself;

(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or

(d) Preserve evidence that may be relevant and material to the resolution of the dispute.

Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim measures:

Article 17 J. Court-ordered interim measures

A court shall have the same power of issuing an interim measure in relation to arbitration
proceedings, irrespective of whether their place is in the territory of this State, as it has in relation
to proceedings in courts. The court shall exercise such power in accordance with its own
procedures in consideration of the specific features of international arbitration.

In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit that even
the pendency of an arbitral proceeding does not foreclose resort to the courts for provisional reliefs. We explicated
this way:

As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to the courts
for provisional reliefs. The Rules of the ICC, which governs the parties arbitral dispute, allows the
application of a party to a judicial authority for interim or conservatory measures. Likewise,
Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law) recognizes the rights of any
party to petition the court to take measures to safeguard and/or conserve any matter which is the
subject of the dispute in arbitration. In addition, R.A. 9285, otherwise known as the Alternative
Dispute Resolution Act of 2004, allows the filing of provisional or interim measures with the
regular courts whenever the arbitral tribunal has no power to act or to act effectively.[50]

It is thus beyond cavil that the RTC has authority and jurisdiction to grant interim measures of protection.

Secondly, considering that the equipment and machineries are in the possession of PGSMC, it has the right to
protect and preserve the equipment and machineries in the best way it can. Considering that the LPG plant was
non-operational, PGSMC has the right to dismantle and transfer the equipment and machineries either for their
protection and preservation or for the better way to make good use of them which is ineluctably within the
management discretion of PGSMC.

Thirdly, and of greater import is the reason that maintaining the equipment and machineries in Worths property
is not to the best interest of PGSMC due to the prohibitive rent while the LPG plant as set-up is not
operational. PGSMC was losing PhP322,560 as monthly rentals or PhP3.87M for 1998 alone without considering
the 10% annual rent increment in maintaining the plant.

Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the preservation or transfer
of the equipment and machineries as an interim measure, yet on hindsight, the July 23, 1998 Order of the RTC
allowing the transfer of the equipment and machineries given the non-recognition by the lower courts of the
arbitral clause, has accorded an interim measure of protection to PGSMC which would otherwise been irreparably
damaged.

Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on the
contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted before the KCAB, the
award of which can be enforced in our jurisdiction through the RTC. Besides, by our decision, PGSMC is
compelled to submit to arbitration pursuant to the valid arbitration clause of its contract with KOGIES.

PGSMC to preserve the subject equipment and machineries

Finally, while PGSMC may have been granted the right to dismantle and transfer the subject equipment and
machineries, it does not have the right to convey or dispose of the same considering the pending arbitral
proceedings to settle the differences of the parties. PGSMC therefore must preserve and maintain the subject
equipment and machineries with the diligence of a good father of a family[51] until final resolution of the arbitral
proceedings and enforcement of the award, if any.

WHEREFORE, this petition is PARTLY GRANTED, in that:

(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE;
(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117
are REVERSED and SET ASIDE;
(3) The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and differences
arising from the subject Contract before the KCAB; and
(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if it had not done
so, and ORDERED to preserve and maintain them until the finality of whatever arbitral award is given in the
arbitration proceedings.

No pronouncement as to costs.

SO ORDERED.

[1] [23]
Id. at 58-65; signed by KOGIES President Dae Hyun Kang Id. at 16-17; original in boldface.
and PGSMC President Honorio Santiago.
[2] [24]
Id. at 94. SEC. 5. Certification against forum shopping.The plaintiff
[3]
Id. at 208-218; signed by PGSMC President Honorio or principal party shall certify under oath in thecomplaint or
Santiago and Worth President Wilson L. Chua. other initiatory pleading asserting a claim for relief, or in a
[4]
Id. at 95; signed by KOGIES President Dae Hyun Kang and sworn certification annexed thereto and simultaneously filed
PGSMC President Honorio Santiago. therewith: (a) that he has not theretofore commenced any action
or filed any claim involving the same issues in any court,
[5]
Id. at 207. tribunal or quasi-judicial agency and, to the best of his
[6]
Id. at 221. knowledge, no such other action or claim is pending therein; (b)
[7]
Id. at 222. if there is such other pending action or claim, a complete
[8]
Id. at 47-51; dated July 1, 1998. statement of the present status thereof; and (c) if he should
[9]
Id. at 66-82. thereafter learn that the same or similar action or claim has been
[10]
Id. at 97. filed or is pending, he shall report that fact within five (5) days
[11]
Id. at 83-89. therefrom to the court where his aforesaid complaint or
[12]
G.R. No. 96283, February 25, 1992, 206 SCRA 545. initiatory pleading has been filed. (Emphasis supplied.)
[13]
Rollo, pp. 108-111.
[14]
Id. at 98-100. Failure to comply with the foregoing requirements shall not be
[15]
Supra note 12. curable by mere amendment of the complaint or other initiatory
[16]
Rollo, pp. 101-105. pleading but shall be cause for the dismissal of the case without
[17]
Id. at 113-115. prejudice, unless otherwise provided, upon motion and after
[18]
Id. at 120-146; dated October 9, 1998. hearing. The submission of a false certification or non-
[19]
Id. at 119. compliance with any of the undertakings therein shall constitute
[20]
Id. at 116-118. indirect contempt of court, without prejudice to the
[21]
Id. at 266-268. corresponding administrative and criminal actions. If the acts of
[22]
Id. at 40. Penned by Associate Justice Elvi John S. Asuncion the party or his counsel clearly constitute willful and deliberate
and concurred in by Associate Justices Ma. Alicia Austria- forum shopping, the same shall be ground for summary
Martinez and Portia Alio-Hormachuelos.

dismissal with prejudice and shall constitute direct contempt, as
well as a cause for administrative sanctions.
[25]
G.R. No. L-56291, June 27, 1988, 162 SCRA 642.
[26]
Rollo, p. 45.
[27]
La Tondea Distillers, Inc. v. Ponferrada, G.R. No. 109656,
November 21, 1996, 264 SCRA 540; Mendoza v. Court of
Appeals, G.R. No. 81909, September 5, 1991, 201 SCRA
343; MB Finance Corporation v. Abesamis, G.R. No. 93875,
March 22, 1991, 195 SCRA 592; Quisumbing v. Gumban, G.R.
No. 85156, February 5, 1991, 193 SCRA 520.
[28]
G.R. No. 146079, July 20, 2001, 361 SCRA 672, 680-681,
citing Go v. Court of Appeals, G.R. No. 128954, October 8,
1998, 297 SCRA 574.
[29]
I Regalado, REMEDIAL LAW COMPENDIUM 502
(2002).
[30]
Id. at 721 (8th rev. ed.).
[31]
Art. 2038. A compromise in which there is mistake, fraud,
violence, intimidation, undue influence, or falsity of documents
is subject to the provisions of Article 1330 [voidable] of this
Code.
However, one of the parties cannot set up a mistake of fact as
against the other if the latter, by virtue of the compromise, has
withdrawn from a litigation already commenced.
[32]
Art. 2039. When the parties compromise generally on all
differences which they might have with each other, the
discovery of documents referring to one or more but not to all
of the questions settled shall not itself be a cause for annulment
or rescission of the compromise, unless said documents have
been concealed by one of the parties.
But the compromise may be annulled or rescinded if it refers
only to one thing to which one of the parties has no right, as
shown by the newly-discovered documents.
[33]
Art. 2040. If after a litigation has been decided by a final
judgment, a compromise should be agreed upon, either or both
parties being unaware of the existence of the final judgment, the
compromise may be rescinded.
Ignorance of a judgment which may be revoked or set aside is
not a valid ground for attacking a compromise.
[34]
Art. 2043. The provisions of the preceding Chapter upon
compromises shall also be applicable to arbitrations.
[35]
G.R. No. 161957 and G.R. No. 167994, January 22, 2007,
512 SCRA 148; citing Manila Electric Co. v. Pasay
Transportation Co., 57 Phil. 600 (1932).
[36]
Id. at 603.
[37]
G.R. No. 136154, February 7, 2001, 351 SCRA 373, 381.
---------------------------------------------------------------------------------------------------------------------------------------
[38]
102 Phil. 1 (1957).
[39]
G.R. No. 120105, March 27, 1998, 288 SCRA 267, 286.
[40]
G.R. No. 141833, March 26, 2003, 399 SCRA 562, 569-
570; citations omitted.
[41]
Adopted by the UNCITRAL on June 21, 1985 (United
Nations Document A/40/17) and recommended for enactment
by the General Assembly in Resolution No. 40/72, approved
on 11 December 1985. Subsequently amended on July 7, 2006.
[42]
In the Matter to Declare in Contempt of Court Hon. Simeon
A. Datumanong, Secretary of DPWH, G.R. No. 150274, August
4, 2006, 497 SCRA 626, 636-637; citing Calacala v. Republic,
G.R. No. 154415, July 28, 2005, 464 SCRA 438, 446.
[43]
Id. Art. 35(1) provides:
Article 35. Recognition and enforcement
(1) An arbitral award, irrespective of the country in which it was
made, shall be recognized as binding and, upon application in
writing to the competent court, shall be enforced subject to the
provisions of this article and of article 36.
[44]
An Act to Authorize the Making of Arbitration and
Submission Agreements, to Provide for the Appointment of
Arbitrators and the Procedure for Arbitration in Civil
Controversies, and for Other Purposes (1953).
[45]
RA 9285, Sec. 40.
[46]
Id., Sec. 41.
[47]
G.R. No. L-28602, September 29, 1970, 35 SCRA 102.
[48]
See Lorenzo Shipping Corp. v. BJ Marthel International,
Inc., G.R. No. 145483. November 19, 2004, 443 SCRA
163; Subic Bay Metropolitan Authority v. Universal
International Group of Taiwan, G.R. No. 131680, September
14, 2000, 340 SCRA 359; Philippine National Construction
Corp. v. Mars Construction Enterprises, Inc., G.R. No. 133909,
February 15, 2000, 325 SCRA 624; Cheng v. Genato, G.R. No.
129760, December 29, 1998, 300 SCRA 722; Goldenrod, Inc.
v. Court of Appeals, G.R. No. 126812, November 24, 1998, 299
SCRA 141; Adelfa Properties, Inc. v. Court of Appeals, G.R.
No. 111238, January 25, 1995; 240 SCRA 565; Bowe v. Court
of Appeals, G.R. No. 95771, March 19, 1993, 220 SCRA
158; Lim v. Court of Appeals, G.R. No. 85733, February 23,
1990, 182 SCRA 564.
[49]
Suarez v. NLRC, G.R. No. 124723, July 31, 1998, 293
SCRA 496, 502.
[50]
G.R. No. 146717, May 19, 2006, 490 SCRA 14, 20-21.
[51]
Cf. Article 1173 of the Civil Code.
 SECOND DIVISION

G.R. No. 104235 November 18, 1993

SPOUSES CESAR & SUTHIRA ZALAMEA and LIANA ZALAMEA, petitioners,

vs.
HONORABLE COURT OF APPEALS and TRANSWORLD AIRLINES, INC., respondents.

Disgruntled over TransWorld Airlines, Inc.'s refusal to accommodate them in TWA Flight 007 departing from
New York to Los Angeles on June 6, 1984 despite possession of confirmed tickets, petitioners filed an action for
damages before the Regional Trial Court of Makati, Metro Manila, Branch 145. Advocating petitioner's position,
the trial court categorically ruled that respondent TransWorld Airlines (TWA) breached its contract of carriage
with petitioners and that said breach was "characterized by bad faith." On appeal, however, the appellate court
found that while there was a breach of contract on respondent TWA's part, there was neither fraud nor bad faith
because under the Code of Federal Regulations by the Civil Aeronautics Board of the United States of America
it is allowed to overbook flights.

The factual backdrop of the case is as follows:

Petitioners-spouses Cesar C. Zalamea and Suthira Zalamea, and their daughter, Liana Zalamea, purchased three
(3) airline tickets from the Manila agent of respondent TransWorld Airlines, Inc. for a flight to New York to Los
Angeles on June 6, 1984. The tickets of petitioners-spouses were purchased at a discount of 75% while that of
their daughter was a full fare ticket. All three tickets represented confirmed reservations.

While in New York, on June 4, 1984, petitioners received notice of the reconfirmation of their reservations for
said flight. On the appointed date, however, petitioners checked in at 10:00 a.m., an hour earlier than the scheduled
flight at 11:00 a.m. but were placed on the wait-list because the number of passengers who had checked in before
them had already taken all the seats available on the flight. Liana Zalamea appeared as the No. 13 on the wait-list
while the two other Zalameas were listed as "No. 34, showing a party of two." Out of the 42 names on the wait
list, the first 22 names were eventually allowed to board the flight to Los Angeles, including petitioner Cesar
Zalamea. The two others, on the other hand, at No. 34, being ranked lower than 22, were not able to fly. As it
were, those holding full-fare tickets were given first priority among the wait-listed passengers. Mr. Zalamea, who
was holding the full-fare ticket of his daughter, was allowed to board the plane; while his wife and daughter, who
presented the discounted tickets were denied boarding. According to Mr. Zalamea, it was only later when he
discovered the he was holding his daughter's full-fare ticket.

Even in the next TWA flight to Los Angeles Mrs. Zalamea and her daughter, could not be accommodated because
it was also fully booked. Thus, they were constrained to book in another flight and purchased two tickets from
American Airlines at a cost of Nine Hundred Eighteen ($918.00) Dollars.

Upon their arrival in the Philippines, petitioners filed an action for damages based on breach of contract of air
carriage before the Regional Trial Court of Makati, Metro Manila, Branch 145. As aforesaid, the lower court ruled
in favor of petitioners in its decision 1 dated January 9, 1989 the dispositive portion of which states as follows:

WHEREFORE, judgment is hereby rendered ordering the defendant to pay plaintiffs the
following amounts:

(1) US $918.00, or its peso equivalent at the time of payment representing the price of the tickets
bought by Suthira and Liana Zalamea from American Airlines, to enable them to fly to Los
Angeles from New York City;
(2) US $159.49, or its peso equivalent at the time of payment, representing the price of Suthira
Zalamea's ticket for TWA Flight 007;
 (3) Eight Thousand Nine Hundred Thirty-Four Pesos and Fifty Centavos (P8,934.50, Philippine
Currency, representing the price of Liana Zalamea's ticket for TWA Flight 007,
(4) Two Hundred Fifty Thousand Pesos (P250,000.00), Philippine Currency, as moral damages
for all the plaintiffs'
(5) One Hundred Thousand Pesos (P100,000.00), Philippine Currency, as and for attorney's fees;
and
(6) The costs of suit.

SO ORDERED. 2

On appeal, the respondent Court of Appeals held that moral damages are recoverable in a damage suit predicated
upon a breach of contract of carriage only where there is fraud or bad faith. Since it is a matter of record that
overbooking of flights is a common and accepted practice of airlines in the United States and is specifically
allowed under the Code of Federal Regulations by the Civil Aeronautics Board, no fraud nor bad faith could be
imputed on respondent TransWorld Airlines.

Moreover, while respondent TWA was remiss in not informing petitioners that the flight was overbooked and
that even a person with a confirmed reservation may be denied accommodation on an overbooked flight,
nevertheless it ruled that such omission or negligence cannot under the circumstances be considered to be so gross
as to amount to bad faith.

Finally, it also held that there was no bad faith in placing petitioners in the wait-list along with forty-eight (48)
other passengers where full-fare first class tickets were given priority over discounted tickets.

The dispositive portion of the decision of respondent Court of Appeals3 dated October 25, 1991 states as follows:

WHEREFORE, in view of all the foregoing, the decision under review is hereby MODIFIED in
that the award of moral and exemplary damages to the plaintiffs is eliminated, and the defendant-
appellant is hereby ordered to pay the plaintiff the following amounts:
(1) US$159.49, or its peso equivalent at the time of the payment, representing the price of
Suthira Zalamea's ticket for TWA Flight 007;
(2) US$159.49, or its peso equivalent at the time of the payment, representing the price of Cesar
Zalamea's ticket for TWA Flight 007;
(3) P50,000.00 as and for attorney's fees.
(4) The costs of suit.

SO ORDERED.4

Not satisfied with the decision, petitioners raised the case on petition for review on certiorari and alleged the
following errors committed by the respondent Court of Appeals, to wit:

I.
. . . IN HOLDING THAT THERE WAS NO FRAUD OR BAD FAITH ON THE PART OF RESPONDENT
TWA BECAUSE IT HAS A RIGHT TO OVERBOOK FLIGHTS.

II.
. . . IN ELIMINATING THE AWARD OF EXEMPLARY DAMAGES.

III.
. . . IN NOT ORDERING THE REFUND OF LIANA ZALAMEA'S TWA TICKET AND PAYMENT FOR
THE AMERICAN AIRLINES
TICKETS.5
That there was fraud or bad faith on the part of respondent airline when it did not allow petitioners to board their
flight for Los Angeles in spite of confirmed tickets cannot be disputed. The U.S. law or regulation allegedly
authorizing overbooking has never been proved. Foreign laws do not prove themselves nor can the courts take
judicial notice of them. Like any other fact, they must be alleged and proved.6 Written law 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 with a certificate that such officer has custody. The certificate may be made by a
secretary of an embassy or legation, consul general, consul, vice-consul, or consular agent or by any officer in the
foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated
by the seal of his office.7

Respondent TWA relied solely on the statement of Ms. Gwendolyn Lather, its customer service agent, in her
deposition dated January 27, 1986 that the Code of Federal Regulations of the Civil Aeronautics Board allows
overbooking. Aside from said statement, no official publication of said code was presented as evidence. Thus,
respondent court's finding that overbooking is specifically allowed by the US Code of Federal Regulations has
no basis in fact.

Even if the claimed U.S. Code of Federal Regulations does exist, the same is not applicable to the case at bar in
accordance with the principle of lex loci contractus which require that the law of the place where the airline ticket
was issued should be applied by the court where the passengers are residents and nationals of the forum and the
ticket is issued in such State by the defendant airline.8 Since the tickets were sold and issued in the Philippines,
the applicable law in this case would be Philippine law.

Existing jurisprudence explicitly states that overbooking amounts to bad faith, entitling the passengers concerned
to an award of moral damages. In Alitalia Airways v. Court of Appeals,9 where passengers with confirmed
bookings were refused carriage on the last minute, this Court held that when an airline issues a ticket to a passenger
confirmed on a particular flight, on a certain date, a contract of carriage arises, and the passenger has every right
to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a suit for
breach of contract of carriage. Where an airline had deliberately overbooked, it took the risk of having to deprive
some passengers of their seats in case all of them would show up for the check in. For the indignity and
inconvenience of being refused a confirmed seat on the last minute, said passenger is entitled to an award of moral
damages.

Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 10 where private respondent was not allowed to board
the plane because her seat had already been given to another passenger even before the allowable period for
passengers to check in had lapsed despite the fact that she had a confirmed ticket and she had arrived on time,
this Court held that petitioner airline acted in bad faith in violating private respondent's rights under their contract
of carriage and is therefore liable for the injuries she has sustained as a result.

In fact, existing jurisprudence abounds with rulings where the breach of contract of carriage amounts to bad faith.
In Pan American World Airways, Inc. v. Intermediate Appellate Court, 11 where a would-be passenger had the
necessary ticket, baggage claim and clearance from immigration all clearly and unmistakably showing that she
was, in fact, included in the passenger manifest of said flight, and yet was denied accommodation in said flight,
this Court did not hesitate to affirm the lower court's finding awarding her damages.

A contract to transport passengers is quite different in kind and degree from any other contractual relation. So
ruled this Court in Zulueta v. Pan American World Airways, Inc. 12 This is so, for a contract of carriage generates
a relation attended with public duty — a duty to provide public service and convenience to its passengers which
must be paramount to self-interest or enrichment. Thus, it was also held that the switch of planes from Lockheed
1011 to a smaller Boeing 707 because there were only 138 confirmed economy class passengers who could very
well be accommodated in the smaller planes, thereby sacrificing the comfort of its first class passengers for the
sake of economy, amounts to bad faith. Such inattention and lack of care for the interest of its passengers who are
entitled to its utmost consideration entitles the passenger to an award of moral damages. 13

Even on the assumption that overbooking is allowed, respondent TWA is still guilty of bad faith in not informing
its passengers beforehand that it could breach the contract of carriage even if they have confirmed tickets if there
was overbooking. Respondent TWA should have incorporated stipulations on overbooking on the tickets issued
or to properly inform its passengers about these policies so that the latter would be prepared for such eventuality
or would have the choice to ride with another airline.

Respondent TWA contends that Exhibit I, the detached flight coupon upon which were written the name of the
passenger and the points of origin and destination, contained such a notice. An examination of Exhibit I does not
bear this out. At any rate, said exhibit was not offered for the purpose of showing the existence of a notice of
overbooking but to show that Exhibit I was used for flight 007 in first class of June 11, 1984 from New York to
Los Angeles.

Moreover, respondent TWA was also guilty of not informing its passengers of its alleged policy of giving less
priority to discounted tickets. While the petitioners had checked in at the same time, and held confirmed tickets,
yet, only one of them was allowed to board the plane ten minutes before departure time because the full-fare ticket
he was holding was given priority over discounted tickets. The other two petitioners were left behind.

It is respondent TWA's position that the practice of overbooking and the airline system of boarding priorities are
reasonable policies, which when implemented do not amount to bad faith. But the issue raised in this case is not
the reasonableness of said policies but whether or not said policies were incorporated or deemed written on
petitioners' contracts of carriage. Respondent TWA failed to show that there are provisions to that effect. Neither
did it present any argument of substance to show that petitioners were duly apprised of the overbooked condition
of the flight or that there is a hierarchy of boarding priorities in booking passengers. It is evident that petitioners
had the right to rely upon the assurance of respondent TWA, thru its agent in Manila, then in New York, that their
tickets represented confirmed seats without any qualification. The failure of respondent TWA to so inform them
when it could easily have done so thereby enabling respondent to hold on to them as passengers up to the last
minute amounts to bad faith. Evidently, respondent TWA placed its self-interest over the rights of petitioners
under their contracts of carriage. Such conscious disregard of petitioners' rights makes respondent TWA liable
for moral damages. To deter breach of contracts by respondent TWA in similar fashion in the future, we adjudge
respondent TWA liable for exemplary damages, as well.

Petitioners also assail the respondent court's decision not to require the refund of Liana Zalamea's ticket because
the ticket was used by her father. On this score, we uphold the respondent court. Petitioners had not shown with
certainty that the act of respondent TWA in allowing Mr. Zalamea to use the ticket of her daughter was due to
inadvertence or deliberate act. Petitioners had also failed to establish that they did not accede to said agreement.
The logical conclusion, therefore, is that both petitioners and respondent TWA agreed, albeit impliedly, to the
course of action taken.

The respondent court erred, however, in not ordering the refund of the American Airlines tickets purchased and
used by petitioners Suthira and Liana. The evidence shows that petitioners Suthira and Liana were constrained to
take the American Airlines flight to Los Angeles not because they "opted not to use their TWA tickets on another
TWA flight" but because respondent TWA could not accommodate them either on the next TWA flight which
was also fully booked. 14 The purchase of the American Airlines tickets by petitioners Suthira and Liana was the
consequence of respondent TWA's unjustifiable breach of its contracts of carriage with petitioners. In accordance
with Article 2201, New Civil Code, respondent TWA should, therefore, be responsible for all damages which
may be reasonably attributed to the non-performance of its obligation. In the previously cited case of Alitalia
Airways v. Court of Appeals, 15 this Court explicitly held that a passenger is entitled to be reimbursed for the cost
of the tickets he had to buy for a flight to another airline. Thus, instead of simply being refunded for the cost of
the unused TWA tickets, petitioners should be awarded the actual cost of their flight from New York to Los
Angeles. On this score, we differ from the trial court's ruling which ordered not only the reimbursement of the
American Airlines tickets but also the refund of the unused TWA tickets. To require both prestations would have
enabled petitioners to fly from New York to Los Angeles without any fare being paid.

The award to petitioners of attorney's fees is also justified under Article 2208(2) of the Civil Code which allows
recovery when the defendant's act or omission has compelled plaintiff to litigate or to incur expenses to protect
his interest. However, the award for moral damages and exemplary damages by the trial court is excessive in the
light of the fact that only Suthira and Liana Zalamea were actually "bumped off." An award of P50,000.00 moral
damages and another P50,000.00 exemplary damages would suffice under the circumstances obtaining in the
instant case.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals is hereby
MODIFIED to the extent of adjudging respondent TransWorld Airlines to pay damages to petitioners in the
following amounts, to wit:

(1) US$918.00 or its peso equivalent at the time of payment representing the price of the tickets bought by Suthira
and Liana Zalamea from American Airlines, to enable them to fly to Los Angeles from New York City;
(2) P50,000.00 as moral damages;
(3) P50,000.00 as exemplary damages;
(4) P50,000.00 as attorney's fees; and
(5) Costs of suit.

SO ORDERED.
7 Salonga, Private International Law (1979), pp. 82-83.
Footnotes 8 Rollo, p. 300.
1 Penned by Judge Job B, Madayag. 9 G.R. No. 77011, 187 SCRA 763 (1990).
2 Rollo, pp. 47-48. 10 G.R. No. 61418, 154 SCRA 211 (1987).
3 Penned by Associate Justice Venancio D. Aldecoa, Jr. and 11 G.R. No. 74442, 153 SCRA 521 (1987).
concurred in by Associate Justices Jose C. Camps, Jr. and 12 G.R. No. L-28589, 43 SCRA 397 (1972).
Filemon H. Mendoza. 13 TransWorld Airlines v. Court of Appeals, G.R. No. 78656,
4 Rollo, p. 38. 165 SCRA 143 (1988).
5 Rollo, p. 15. 14 TSN, August 12, 1985, p. 19.
6 The Collector of Internal Revenue v. Fisher and Fisher v. The 15 Supra.
Collector of Internal Revenue, 110 Phil. 686 (1961).